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Noble Lords: Hear, hear!

The Earl of Mar and Kellie: My Lords, that may depress others. I thank my noble friends for their support. I am pleased with the White Paper and Mr. Jenkins's analysis. I commend it to the people of Scotland.

7.50 p.m.

Lord Gray: My Lords, the historical references introduced by the noble Earl are always interesting. I shall not, however, follow his arguments. I have never been a politician. I sit here, but I am not sure whether the Conservative Whips look upon me as a cross to bear or a mixed blessing. I choose to preface my remarks in that way to make it clear that my opposition to the Scottish White Paper proposals is the product of debate between my heart and my mind.

Like my noble friend Lord Campbell of Croy and the noble Lord, Lord Kirkhill, I have cantered around the devolution course in this House before. The three of us are probably the only people who spoke on a similar occasion who are speaking tonight. The noble Lord, Lord Kirkhill, was kind enough to come and say to me, "I am sorry that I didn't notice that you were sitting there, or I should have mentioned you". It is probably just as well that he did not, because I might have reminded him that on more than one occasion we induced him to shoot himself in the foot.

Lord Kirkhill: My Lords, on many occasions!

Lord Gray: My Lords, I oppose devolution. I opposed devolution then. That does not mean that I have approached the present scheme with a closed mind. That would be foolish. The few minutes for which I can reasonably detain the House at this hour dictate that I select from the many items which demand scrutiny and which have been referred to during the course of the debate. I choose to fasten on finance. At the end of

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the day, money (revenue and expenditure) is the core issue and the motor which will keep the wheels of the Scottish parliament turning.

Like my noble friend Lord Mackay of Ardbrecknish, the wording of the second referendum question troubles me. As the noble Lord, Lord Sewel, who is not in his place at the moment--

Lord Sewel: My Lords, yes he is.

Lord Gray: My Lords, the noble Lord said yesterday that the Government intend to overturn my noble friend's amendments which inserted the word "income" into the second referendum question. I make no apology for returning to the subject nor for reinforcing what has been said about it in this debate. Since it was an open secret that the Government proposed only an income tax-varying power, it was initially puzzling that they opposed the suggestion that the second referendum question should include the word "income". Was it obdurately obstinate resistance for resistance's sake on the part of the noble Lord, Lord Sewel, or was it something else?

I detect a more likely motive. If one sets the alternative wordings side by side, one recognises immediately that the version which omits the word "income" opens the door to other tax-varying powers. If such are introduced later, and Scots protest, the retort will be, "You voted for them". I cannot quote exactly the noble Lord, Lord Mackie of Benshie, but the gist of what he said was that if the Scots were foolish enough to elect people who would impose extra tax on them it would be their own fault. It is not just a question of extra tax that we are talking about, it is the variation of tax, where the burden will fall, what effect there will be on the block grant, and what implications there will be for economic management.

In addition, we have to contemplate what is set out in paragraph 5 of Chapter 6 of the White Paper, which deals with local government. It clearly opens the door to tax variation by proxy and perhaps to the creation of new taxes. I do not need to spell them out. Noble Lords will have got my point.

My noble friend Lord Hamilton of Dalzell drew our attention to paragraphs 7.22 and 7.28. I think I have said all that is necessary on that subject. There are others which worry me, but I shall have to neglect them tonight.

I should like to ask one question which concerns the proposed scheme for proportional representation. In view of the number of additional members, to which the attention of the House was drawn earlier, what will happen if there is a significant number of independents? How on earth do such disparate characters achieve a list? What will happen?

I have properly used up as much time as I should. I do not know whether the noble Earl, Lord Buchan, missed me off his list of Peers in the last Scots parliament, but it may interest the House to know that whether or not one of my forebears sat at that moment, two were qualified to do so--a father-in-law and a son-in-law. That was an unusual situation. Perhaps that is why they stayed away.

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It might behove us to remember that we are not talking about the creation of a parliament, we are talking about the creation of a government. A very worrying aspect must be the potential for quarrelling, for mischief and for divisiveness between a government in Westminster and a government in Edinburgh. If one looks at the whole scene, at the triangle of local government, the Edinburgh government and the Westminster government into which one then chucks the European element, that is a worrying scenario. I am sad that England does not yet seem to have woken up to what these proposals portend. There are representatives in Parliament who should speak up for them and their interests. That is all I think that I can reasonably say tonight.

8 p.m.

The Earl of Onslow: My Lords, I congratulate the noble Duke, the Duke of Montrose, on his excellent maiden speech. It may explain why your Lordships' House has a continual place in the affections of the nation. One member of his family was executed for being a little too pally with Charles II after the Battle of Dunbar and was forced to be executed by the Covenanters. An even closer relation tended to support Ian Smith. Therefore, one cannot exactly say that the Montrose family has been the loyalest of subjects to the Crown during all those years. However, it would be impossible not to welcome such a good speaker.

Cromwell imposed the first union of England with Scotland. That union prospered. In 1660 it was abolished with the Restoration. In 1686 the Scots wanted a union but the English would not have it. In 1689 William III managed to reach agreement with the Covenanters and banished the prospect of the episcopalianism of Bishops in Scotland and therefore the Church problem went away. Again, a few years later, the Scots wanted a union with England. But they did not get it because the English said they were too poor. The reason they asked for it was that the Scottish Parliament refused to vote supply to William III saying that he was not doing what it wanted him to do. William III said, "I couldn't care a fig about the Scottish Parliament because it gets lots of money from the English Parliament". Therefore, he paid no attention to the Scottish Parliament.

Finally, in 1707 the Act of Union was passed, a magic Act of Union. It produced a grandeur in Scotland. It made two and two make five. There was the Edinburgh Enlightenment, Hume, Locke, Adam Smith, Carlisle and even Macaulay. We know how Macaulay was such fun, because when he was aged five his aunt said to him, "Young Thomas Babington, how is your toothache?", to which he said, "Madam, the agony is somewhat abated." Why someone did not kick his little bottom after that, I do not know! However, as I am sure your Lordships know, he went on to create the Indian penal code which has stayed with us to this day.

Those people from Scotland were great intellects and they thrived in the Union. The pathetic thing about the people who are proposing devolution today is that they

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are inward looking and are complaining, "We Scots do this and we Scots do that." There does not seem to be a grandeur of vision which previously existed in Scotland.

There is reason to complain about the overcentralisation of British government. That is true without any shadow of a doubt. Before the abolition of the business rate--and here I totally disagree with my noble friend Lord Nickson--the local authorities produced between 50 per cent. and 65 per cent. of their own revenue. In Scotland it is less than that. The local authorities are rigidly controlled in everything they do and in any money they can raise. On top of that, they are capped. Of course, local people feel aggrieved about that. I do not deny that the blame is to be laid solely at the door of Conservative governments. The previous Conservative government were the most centralising government there has been. I submit that that caused the argument and plea for devolution.

If one is going to devolve one should do it properly and allow the Scots to raise any tax they like. Then they will say, "Yes, we are responsible for corporation tax, local business rates and the rates of VAT. That is up to us." One then reduces the block grant to a minimum in order to cover defence and foreign affairs and there can be no friction between England and Scotland.

Let us consider the fact that England represents 85 per cent. of the Union. As regards the 3p variation either side of the income tax norm, let us assume that a Scottish parliament wants to put up the rate of income tax by 3p. It will say that it is doing so because of those mean so-and-sos at Westminster. It will say, "They will not give us enough of our Scottish money and we need to spend more." That is in spite of the fact that spending on the Scottish National Health Service is 12.5 per cent. higher per head than it is in England. A complaint will follow as night follows day.

In the light of the extra 12.5 per cent. that is spent on the Scottish National Health Service, let us assume that the Scots say, "Right, we are going to reduce income tax by 3p in the pound." In that event the English will get cross and say, "Why should we go on paying more money to the Scots who then can live off us even more?" If that is not a recipe for a disaster I do not know what is. The devolution is half baked. Either you do it properly and give everything away or you go down to local authority level and keep the Union. The Union has made two and two make five, and that is what has been so magic about it.

The idea that in a devolved Scotland the English will accept a Member of Parliament for Edinburgh saying, "No, you can't have a Salisbury bypass", while he can say nothing about what happens on the A.9 between Lockerbie and the Border is crazy. The English will get cross and that will ruin the Union.

Do we really believe that the English or the Union will accept seven out of 21 Cabinet Ministers from Scottish constituencies? Do we believe that the English will accept in our Cabinet Scottish Members of Parliament when England represents 85 per cent. of the Union? Of course they will not. This is the one way to

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ensure that the Scots will not have Ramsay MacDonald or Alec Home and the Welsh will not have Lloyd George.

I accept that Sir Robert Peel sat for Trim when he was Home Secretary. That was only because it was in the Protestant interest. The moment Irish Members of Parliament failed to be part of the British Parliament and acted only as an Irish lobby they were marginalised with all the terrible consequences that occurred. As night follows day, that is what will happen to a devolved Parliament. It happened to the Ulster Parliament; Stormont.

Finally, I have checked with someone cleverer than I that devolution of criminal justice to Scotland will allow the Scots to re-impose the death penalty. However, because of the politically correct feminist lobby, they will not be allowed to touch abortion. I find that sad if not amusing.

The present administration are in the process of turning this country's constitution upside down. It is producing one form of government for Scotland, one form of government for Wales and one form of government for Northern Ireland. All will be different. Suddenly, England will be piled higgledy-piggledy in the middle. Then, for fun, the Government will have an elected mayor of London who will be different from the Lord Mayor of Chester, or wherever. That cannot be a sensible approach to constitutional affairs.

The Government also say, "We do not like the idea of quangos in Wales or Scotland. However, we love the idea of Members of these Benches sitting on quangos. We want to appoint everybody here". If that is not a quango, I do not know what a quango is.

The Government are in danger of turning the United Kingdom into a hotch-potch of a Holy Roman Empire, without the assistance of Richelieu, Joseph II and the Papacy, all of whom made Germany ungovernable. They are doing it for themselves without any outside help whatever.

8.10 p.m.

Lord Taylor of Gryfe: My Lords, I have always been agnostic on the subject of devolution. I campaigned against it on the last occasion and I have never felt that it was the first priority of a Labour Government in their first year of office to effect this legislation because it affects only 10 per cent. of the population of the United Kingdom and a whole host of important legislative measures are being held up until we get this through.

But having said that, I must admire the commitment of the Prime Minister and the present administration, who promised that there would be Scottish and Welsh devolution Bills in the first year of office. If there is one thing that this Government have done, they have fulfilled their promises. That is refreshing in British politics.

The White Paper addresses a problem which is really an international problem. Someone said in the Economist this week that the nation state has become too small for big problems and too big for small problems. That is the issue at which we are looking.

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We have a highly centralised nation state. Now we must adjust the constitution to make sure that there is a greater decentralisation and a more effective democracy.

The White Paper addresses that problem. As regards the House of Lords, I have always been impressed by the persuasive speeches of the noble Lord, Lord Mackay of Ardbrecknish. But he has really lost the battle. We shall have a referendum and the "Yes" vote will carry. Anyone who knows Scottish politics will accept that. The Labour Party, the Lib Dems and the Scottish Nationalists all support the "Yes" vote. I attended the General Assembly of the Church of Scotland this year and the Church and Nation Committee recommended to the assembly without dissent that there should be a "Yes, yes" vote. I do not know what is the theological justification for that decision but, nevertheless, it expresses a Scottish view. I notice that the Scottish convention, of which my noble friend Lady Ramsay is vice-chairman and which worked hard on this subject, is presided over by an Anglican priest. Therefore, we have the Church of Scotland, an Anglican priest, the Lib Dems and the Scot Nats all in favour of a "Yes" vote, and that is what will happen.

It is the duty of the House of Lords to make sure that that constitutional revolution gives birth to a good, effective and sensible parliament. In the spirit which has been expressed from the Front Bench of consensus politics, I hope that my noble friend Lord Sewel and his colleagues will accept a good deal of the criticism and advice which have been offered in the course of today's debate.

The West Lothian question has not been solved. The mere fact that the noble Lord, Lord Sempill, and the noble Earl, Lord Mar and Kellie, are both to stand for the Scottish parliament is a good sign. I congratulate them both. But it is totally indefensible on the part of Scottish MPs to assume that they can carry on with 72 MPs. There may be a possible reduction (without commitment) to 57. But that will not take effect immediately and not before the next election. It will be subject to review by the Boundary Commission. It is the job of politicians to make political decisions; it is the job of the Boundary Commission to draw maps. Therefore, there should be a firm commitment on the part of Scottish MPs that they accept the logic of reducing the number of MPs in the House of Commons.

There has been a good debate on tax-raising powers. That must be clarified. Like the noble Lord, Lord Nickson, I have fought hard in this House and elsewhere for the equalisation of Scottish business rating because we have always been at a disadvantage in the rating system. Therefore, we must see to it that the tax-raising powers which are now to be given to the new Parliament will not in any way impede Scottish industrial development and investment.

There are one or two other issues which must be faced. In the enthusiasm of my friends who support devolution and in the excitement and emotion of this great change, I should warn them not to claim too much for a Scottish parliament. If one looks at the spending departments, as regards the spending department for

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health I notice that Sam Galbraith, the Scottish Health Minister, said the other day:

    "A Scottish parliament would be a gateway to a healthier future".
In one of the documents of the convention it said that we could have the greatest health service in Europe. Health service expansion and efficiency depend not only on good organisation but on money. I notice that the secretary of UNISON in Scotland welcomed that statement on the part of Sam Galbraith.

Those issues must be faced. Those in favour of a Scottish parliament should not claim too much. The Transport Secretary said the other day:

    "The totality of the Scottish executive's powers will enable them to implement a fully integrated transport strategy".
Again, that is a high spending department. Again the relationship between the present contractors and railways must be defined by the new Scottish assembly. A Scottish integrated transport system cannot be invented without an acceptance of the existing commitments and the role of the regulator.

As regards education, assuming that the Dearing proposals affecting university education are approved before the implementation of the Scottish parliament, will the Minister tell us just what are the implications for the Scottish parliament of the Dearing Committee and the expenditure involved in higher education? Will the Scottish assembly be able to withdraw from Dearing or will it have to implement the proposals?

Those are important issues which must be faced in the areas of transport and health. I should like to comment on the fact that for some reason or other abortion is not to be devolved. I should have thought that abortion was part of the provision of a general health service. But apparently it is not to be. I wonder what will be the powers of the parliament in relation to euthanasia, now that we have solved the problem of abortion.

Those problems must be faced. Do not let us expect too much from this highly dramatic change. It is an important change about which there are divided views. One side believes that it is the end of the United Kingdom and the other side believes that it will strengthen it. I hope that the latter is true and that there will be a basis of consensus politics and not confrontational politics in the new assembly. I wish it well.

8.20 p.m.

Lord Rowallan: My Lords, this is probably the first time since I joined the House that my speech will have been so eagerly anticipated, as I am last speaker on the list before the concluding speeches.

The noble Lady, Lady Saltoun, said in this debate that we cannot stand still. I said that last night. In the constitutional reforms that we are making at present, there is no possibility of standing still. We have to go somewhere: we must move on, the reason being that, to a very great degree, the Scots people have felt for the past 18 years that they have been returning a Labour government, while Britain as a whole has been returning a Conservative one. As a true Scot, I have been delighted to see a Conservative government returned,

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the Scots people have not. That is the basic difference between the devolution of 1978-79 and devolution today and the likely outcome of the referendum vote. The Scottish people really want a change; they want more involvement in their own affairs.

However, the White Paper is frightening. It is not frightening in what it tells us, because it is very well written and easy to understand, but it is frightening in what it does not say. It mentions that Scottish representation in Westminster will be reviewed. By whom, by how much and when? It does not say. That is left to the imagination of someone else later on. It says that a suitable site for the parliament will be found. Again, by whom and when? Perhaps I may suggest that far more beneficial than the lovely millennium dome that we are to have in London would be a millennium parliament in Edinburgh. That would be a very good project for the millennium, and the present Government could feel that they had made an enormous contribution to the whole of Britain.

There is to be no upper house, as has already been mentioned by the noble Lord, Lord Kirkhill. It is very dangerous to allow any parliament to come into existence and not have a brake on its powers; indeed, that is something that should always be considered most carefully.

Moreover, we are told that it will be up to the House of Commons to consider its future arrangements for Scottish business. Again, we have another situation where something might or might not happen. We do not know. We are being asked to vote in a referendum and we do not know exactly what the House of Commons will say because it has not been spelt out for us.

We are told that it will cost £5 a head to run, plus £5 to set up a parliament building. Only £5 per head to fund 200 staff--129 Members of the Scottish parliament and the running of a parliament building? I do not think so. I believe that it will end up costing a good deal more. That is why the question of the tax-varying power becomes so important.

A very interesting point was raised by the noble Lord, Lord Monson, about the two categories of Member of Parliament in the Scottish parliament--the one who has his constituency to look after and the one who has nothing to look after but his own self-interest, or that of his party because he will have been elected by proportional representation. Can we really pay those people the same rate? Moreover, will we get the same calibre of person for both positions? It is an interesting conundrum about which I had not even thought until today's debate started.

We are also to create a "First Minister". What a ghastly title! It is a terrible name. Surely we could come up with something a little better. Indeed, it stinks somehow of a banana republic. It really is a dreadful idea. We are also to ruin completely the eminent position of the Secretary of State for Scotland, who has a very good place in the Cabinet. It strikes me that he will become a political eunuch, which is not a very good situation to be in. We are told that he will be in a position where he can promote communications

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between the Scottish parliament and the Scottish executive and between the UK Parliament and government. He will also be likely to meet with the Scottish executive. However, he cannot meet the Scottish parliament to discuss Scottish matters. He will be in a very difficult situation.

So much has already been said on the tax-raising powers that I shall make just one comment and leave the matter there. On the one hand, the White Paper says that it is inappropriate to vary taxes other than income tax as this would place an unreasonable burden on companies operating in Scotland. It also says that tax will be collected by the Inland Revenue, with PAYE costing employers £10 to £20 per employee for a small firm or £5 for a large firm. Again, businesses in Scotland will be used as unpaid tax collectors, as is already the case with VAT. However, they will now have to collect not only the new PAYE they will also have to pay for the privilege of establishing the new system.

The noble Lord, Lord Nickson, very succinctly suggested that perhaps it would not actually be collected through PAYE because--and I believe that he made a good point here--the unions and the employees will not settle for being paid 1p, 2p, or 3p less than their counterparts in England, in Ireland or in Wales. He is absolutely right; they will not. So who will end up paying for it? Of course, it will be the good old employer again. If we want to encourage employment in this country, as I am sure the Government do, is that the right way to go about it? They should seriously consider the matter.

Under the federal system, which I have promoted again and again in this House until I have almost become a bore on the subject, that would not happen; indeed, we would all have the same system. Everyone would be paying the same tax rate and everyone would be receiving the same. However, that is not so. We are getting this hotch-potch where Ireland has its little parliament, Scotland will have its parliament with tax-raising powers, which Ireland does not have, and Wales will just have an assembly. I dare, rather rudely, to call the latter a talking shop; indeed, Wales will have nothing else, while England will have nothing at all except for the mother Parliament in London. The situation can only lead to problems.

I am delighted that at long last the noble Earl, Lord Mar and Kellie, has finally realised that this is a liberal policy. Indeed, one member of the Liberal Party on those Benches has finally said, "federalism". I cannot understand why they have been so quiet about this. Is it because they are desperate to get to those other Benches, or what? There is something peculiar about the fact that they have kept so quiet on the subject. The federal system is the only way forward.

I am so frightened about the situation. The constitutional changes that we propose to make are so enormous that, if we are not very careful, we could end up with the complete breakup of the UK. I do not want that to happen; neither do the Government. However, it could happen because we cannot go back. Indeed, once

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we have given these powers to Scotland, we cannot say, "Whoops, terribly sorry, we made a mistake. We want to go on to something different". That just would not work.

Under this proposal the Scottish people and Scottish businesses will pay more than the rest of the country. Why is Scotland to have a parliament with tax-raising powers and Wales only an assembly? What is the difference? In his opening remarks, the noble Lord, Lord Sewel, told us that it was because of the diversity of cultural beliefs--hence two different assemblies. I very much respect the Minister but I am sorry to say that that is an absolute load of cobblers. Of course we have different ideas, but there is no reason why one should have a talking shop and the other a parliament with tax-raising powers. We are human beings all together. We are all members and, indeed, proud to be members of the British nation. Why are we putting Scottish people and Scottish businesses at such an unfair advantage? I do not understand it.

Finally, I turn to the relationship between the Scottish parliament and local councils. I believe that that could become very fraught as the parliament tries to cap excessive spending. We know that that has happened in the past in that far distant place--London--where such spending has tended to occur. However, the new parliamentarians will be in a very different position because if they increase taxes to pay for the extravagances of local authorities, the full electorate, especially in areas where the local authorities behave with due decorum, will be rather upset. On the other hand, if they do not raise taxes and they cap councils to stop such wanton extravagances, they will also get into trouble. My noble and learned friend Lord Fraser introduced an interesting point regarding the reserve functions and mentioned especially insolvency. Of course, Scots law is very different in that respect. It seems to be peculiar that that power is reserved.

I have two further points to make. The noble Baroness, Lady Ramsay, spoke at length about how keen she was on the Scottish parliament because of the women's rights that it will give. I say may the best person, of whatever sex, win. Why have we suddenly decided in this life that we must have equality for women, equality for colour and equality for religion to such an extent? Of course there must not be bias against anyone, but surely we should work towards establishing a free country where people can do what they want. I say may the best person win. All we are doing at the moment with this emphasis on equality is creating inequality because now the position has gone too far the other way. We have almost reached the opposite end of the spectrum.

The noble Baroness also said that with responsible government one does not have to increase powers to pay for vast local authority expenditure. I am sorry to say that Glasgow Council has just allocated a £225,000 budget to one councillor to produce pamphlets to promote gay rights and women's rights. I find it quite extraordinary that women's rights and gay rights should be allocated such a vast amount of money to enable posters to be put up to persuade us that being gay is

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perfectly acceptable. What is wrong with being heterosexual? Why does money have to be spent to promote these rather peculiar notions?

I say again that we must be careful about where we go from here. If we make a mistake we cannot alter it. I plead with your Lordships again to think carefully before we take these last steps. Federalism is the way forward. We cannot stand still but we must not go forward and then come back two steps which would cause even more chaos than there is at present.

8.31 p.m.

Lord Lyell: My Lords, I apologise to the House that because of the organisation of various duties of your Lordships' House I was unable to be in my place when I was due to speak earlier. Therefore I am afraid I have deprived my noble friend Lord Rowallan of the post that I always love to occupy, that of tail end Charlie. However, tonight I am happy to occupy that position again.

I speak tonight with a tinge of sadness--I shall concentrate my remarks on Chapter 7 of the White Paper--as three days ago your Lordships lost a good and noble friend, Lord Goold, who was the archetype of a Scottish accountant from Glasgow. He taught me a great deal. If there is one body of people in Scotland who have shaped and influenced my life more than any other it is the chartered accountants of Scotland. I pay tribute to them and to Lord Goold this evening.

I am delighted that the Minister is back in the Chamber. He may have one or two comments to make to the Celtic fringe. The noble Lord, Lord Sewel, points to his noble friend. I shall address one or two points to the Minister later in my remarks.

Chapter 7 of the White Paper concerns financial arrangements. Paragraph 7.1 is charming. It states,

    "by means of a defined but limited power to vary income tax".
I paid considerable attention to the opening remarks of the Minister. I congratulate him on saying "We shall be clear" only five times. That is quite a record. Whenever a Minister says that he will be perfectly clear, I know that we are about to get a re-run of "Yes, Minister". However, as I said, the Minister only used the expression five times. My noble friend Lord Mackay knows that I keep a fairly close score of such things. I am afraid that I was not able to award the Minister a half century tonight. I should be interested to know whether anyone can tell me who will define this power. Will it be the United Kingdom Parliament through the UK tax system, the Inland Revenue? Or will it be defined by the Scottish parliament? As regards limits, will those be applied by the United Kingdom through the Inland Revenue, or by the Scottish parliament?

Paragraph 7.2 concerns objectives. They are broad but that is fair enough. Paragraph 7.5 concerns the assigned budget. We have heard much about the Barnett formula. I hope only that that can be preserved. Enthusiasm has been expressed for devolution. I refer to events such as those witnessed on Thursday night at Edinburgh Castle. Either this is one of the greatest events that has ever occurred and therefore the accompanying tax powers of this institution will be widened, or there will be no

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major change in the tax arrangements, as I think the Minister would wish, in which case one has to ask how that will be squared with all the celebrations and dancing that have apparently been taking place in Edinburgh? In Kirriemuir, on Saturday, all was peaceful. One would not have known that anything unusual was happening. The people there were quite sober. I shall not regale your Lordships with what happened when the noble Lord, Lord Mackie, took a dive in the air and was incapacitated. It was rather cruel to mention that.

I refer to paragraph 7.11 and tax varying powers. Perhaps the noble Lord, Lord Williams of Mostyn, can assist me. He will see that paragraph 7.12 states that income tax,

    "is broadly based and easy to administer".
The very next sentence states that,

    "Income tax is relatively simple and easy to understand".
I say "Ho, ho" to that. Of course, it is easy to collect. Can the Minister possibly explain to me in simple words--perhaps he will give me an alpha for clarity--why there are those two sentences in paragraph 7.12?

An organ of the Scottish press which will be known to all Angus Peers, The Courier, had as its headline on Friday, 25th July:

    "Dewar's devolution tax bombshell".
The newspaper referred to a controversial proposal which would cause a complete reprint of paragraph 7.13. On Saturday--surprise, surprise--there was half a page of script with the Secretary of State supposedly replying to that controversial proposal. The speech reflected virtually word for word what the noble Lord, Lord Sewel, has said. I should be grateful if the noble Lord, Lord Williams of Mostyn, could explain that to me because I think that our mutual friend, Mr. Neville Southall, in all his glory would not be able to.

The first sentence of paragraph 7.13 is as clear as a bell. I do not wish to saddle the noble Lord, Lord Williams, with the performance of the Scottish Constitutional Convention, let alone with the acrobatics that occurred in the summer of 1996. I had thought that the noble Lord, Lord Sewel, might reply to this debate. Noble Lords may have read the interview with the noble Lord in one of the Scottish broadsheets. No one could accuse him of acrobatics as regards the Scottish Constitutional Convention.

Paragraph 7.13 states that it is possible that the tax rate could be varied. It adds that the parliament's,

    "ability to raise ... £450m through the tax system will be preserved".
I want to find out about the tax system because 3p. on the basic rate will amount, apparently, to £450 million. However, if that is narrowed, one will not raise £450 million. Where is that money to come from through the tax system? The Secretary of State did not answer that question. Haply, the noble Lord, Lord Sewel, will not answer it. I look to the noble Lord, Lord Williams of Mostyn, and to Mr. Neville Southall.

Paragraph 7.15 states:

    "Savings and dividend income under current arrangements".

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What on earth does that mean? Do "current arrangements" refer to what we have now or to what may be proposed by the Scottish parliament? If the Government mean that savings and dividend income will not be liable to this tax, one does not need the words "under current arrangements". The following sentence is as clear as a bell; namely, that we do not want distortions. That is fine but I still do not understand the significance of the words "under current arrangements". I should be grateful for guidance on that now or in the future.

Paragraph 7.16 concerns residence. I am only a simple accountant but I understand that we are looking at differences of residence in Scotland and in England within one United Kingdom tax structure. I shall not go into the concept of taking a sleeper and deciding whether at midnight one is south of Carlisle or whether one is in Scotland. We can do so when we come to the Bill. I look forward to great fun. The noble Lord, Lord Williams, may think that "residence" is simple. I find it hard.

Paragraph 7.19 refers to additional costs for employers. My noble friend Lord Nickson pointed out that some of the mathematics are difficult. Paragraph 7.19 states:

    "An employer with 5 Scottish resident employees, (most cases in practice) would typically face setting-up costs in the range £50--£100".
Later it states that a larger company will spend only £5 per employee. However, in most cases £20 will be spent per employee setting up the system to satisfy the tax-raising power. That is a minimum figure. On top there will be many other aspects, including what the Inland Revenue will have to do. That is enough from me on the tax system. Others have dealt with local government expenditure and the rest.

I conclude by wondering whether the noble Lord, Lord Sempill, and the noble Earl, Lord Mar and Kellie, thought hard before declaring with enormous enthusiasm that they wish to stand for this putative Scottish parliament. I paid particular attention to, and took pleasure in listening to, the noble Baroness, Lady Ramsay of Cartvale. The noble Baroness used the phrase--it is beginning to trickle through to me, a simple man from Angus--gender balance. It goes down big in Glen Clova, Kirriemuir and, above all, at Station Park on Saturdays. It is very good and wonderful. But I look forward to my noble colleagues putting their names forward and being told, "Tough luck, lads. In this constituency it is women only. On the list it is women only." Do your Lordships really think that those two noble colleagues in your Lordships' House--first, there will be naughty, wicked guidance--will become a gender bender, a transvestite, or, far worse, really go the whole hog of a sex change in order to join the Scottish parliament? Not even I would consider it. I believe that we are on to a dangerous thing. Before those noble Lords leap with enthusiasm towards the Royal High School, they might ponder what gender balance involves.

I am sorry that when I sat in a slightly warmer place than now, I mildly barracked my noble neighbour Lord Mackie of Benshie, when he said that all good Scots

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should remain in Scotland, by asking what he was doing here. In all seriousness, my noble neighbour's contributions throughout his career in your Lordships' House prove that there is enormous merit in Kirriemuir and Angus, and in Scots coming to your Lordships' House. If my noble friend went through a sex change, or whatever, and stood for the Scottish parliament, your Lordships' House, Parliament and public life in this country would be much the poorer. I apologise, but I believe that these points should be made.

Perhaps the noble Lord, Lord Williams, or someone, will in due course help me regarding paragraph 7.13 and the doings of Mr. Neville Southall.

8.42 p.m.

Lord Thomas of Gresford: My Lords, I do not propose to follow the remarks of the noble Lord, Lord Lyell.

First, from these Benches, I congratulate the noble Duke, the Duke of Montrose, on his thoughtful and amusing speech. We hope that we hear a great deal more from him. The noble Earl, Lord Onslow, referred to his family's connection. The noble Duke will know that the McThomas clan of Glenshee came out with Montrose in 1650 and were scattered to the four winds at Dunbar. Whether a branch made it to North Wales is a matter of hot dispute with my wife whenever I put on my McThomas kilt which clashes with her tartan.

Your Lordships are familiar with the painting opposite the Bishop's Bar depicting the Marquess of Salisbury speaking. He was addressing this House on 8th September 1893. Liberals would argue that the defeat of the Government of Ireland Bill yet again paved the way for further unrest in Ireland, the Easter Rebellion of 1916 and ultimately the creation of the Irish Free State in 1922--certainly a break-up of the United Kingdom. What, as he leans on the Dispatch Box, was Lord Salisbury saying? In his peroration, he quoted Macaulay:

    "The repeal of the Union we regard as fatal to the Empire and we will never consent to it ... never, though another Bonaparte should pitch camp in sight of Dover Castle, never till all has been staked and lost, never till the four quarters of the world have been convulsed with the last struggle of the great English people for their place among the nations".
Having quoted Macaulay, Lord Salisbury then concluded:

    "I read that as the motto which I hope the Unionist Party will adopt ... if you allow this atrocious, this mean, this treacherous revolution to pass, you will be untrue to the duty which has descended to you from your splendid ancestry, you will be untrue to your highest traditions, you will be untrue to the trust that has been bequeathed to you from the past, you will be untrue to the Empire of England".
The Liberal Government were defeated by 419 votes to 41 on that occasion and the Tory Peers were greeted outside the House by crowds singing "Rule Britannia" and letting off fireworks. How times have changed. Today the crowds of young cosmopolitan people who sit in the Gallery or who crowd outside this House are more likely to be singing the Beethoven European anthem.

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I suppose that most of us were in school somewhere around the halfway point between 1893 and today. Those who were educated in English schools imbibed imperial values with their school milk. In Wales, Empire Day was quietly forgotten. It is not surprising that noble Lords from Wales and Scotland who were educated in England cling to the concept not so much of conservatism as of unionism. Of the 20 noble Lords who have spoken today against this White Paper, it is interesting to note that, while all of them have contributed of course to their localities and to public life in many ways, in their formative years 11 of the 20 went to a well-known school not far from Windsor. That may be a remarkably good advertisement for Eton, but it does not say much when we are told what is happening in Wales or Scotland. It indicates that at a formative time in their lives they received that kind of education.

We know the Ulster Unionist cry of "No Surrender". Salisbury called it the "no nonsense policy" towards Ireland. He underestimated the Irish. In 1886, in addressing the National Union of the Conservative Party, he declared that the Hottentots, Indians, Greeks, Russians and Irish were unfitted for self-government. He declared that only the Teutonic races were so fitted. It might be thought that the Unionist credo is now just a little out of date, if not thoroughly discredited. But in 1997 the Conservative Party manifesto said that only a Conservative Government will stand up for the Union and oppose a Welsh assembly. A Welsh assembly will begin the process of unravelling the Union and could lead to the break-up of the United Kingdom.

In the debate today the noble Lord, Lord Rees, has declared himself to be a Welsh Unionist. The noble Lord, Lord Mackay, asked: what does the referendum do for the Union?

Many sensible and thinking Conservatives both in Wales and Scotland have rejected already the Unionist concept, notably in Wales, the noble Viscount, Lord St. Davids, and a former long-serving Minister of State, Sir Wyn Roberts.

There are still some antediluvian Labour Members of Parliament in another place who, having won their seats on the promise of a Welsh assembly, now argue against it. Your Lordships may think that the honourable thing is for them to resign and fight a by-election as independents. Those who were elected on that platform should realise that the prestige of their Government and the credibility of their Prime Minister rely upon the delivery of this first major piece of constitutional reform.

What is the emotional drive that elevates the United Kingdom above all else? The noble Lord, Lord Rees, referred to the invasion of the Tudors. In 1536 the formal extension to Welsh people of the rights and privileges of English people was a major reforming step from which Welsh people benefited. Wales, although it had been conquered by Edward I, was not looked upon as part of the realm of England. Its old constitution had been destroyed; the importation of arms was prohibited; offenders were dragged from Wales into England for trial in the English language; the Welsh were prevented from using fairs and markets; they were not even

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allowed to enter the walled cities and castles that had been planted among them in Wales. It did not make for good government. That was the context in which a Welsh-speaking Tudor king, Henry VIII, passed an Act for laws and justice to be administered in Wales in like form as in England.

The preamble to that Act stated:

    "because that in that same Country, Principality and Dominion, divers Rights Usages Laws and Customs be far discrepant from the Laws and Customs of this Realm and also because that the People in the same Dominion have and do daily use a speech nothing like, ne consonant to the natural Mother Tongue used within this Realm, some rude and ignorant people have made a Distinction and Diversity between the King's subjects of this Realm and his Subjects of the said Dominion and Principality of Wales whereby great Discord Variance Debate Division Murmur and Sedition hath grown between his said Subjects".
It sounds rather like the proceedings in this House from time to time. By that Act, Wales was annexed to England, and Welsh people had the right to enjoy the freedoms, liberties, rights, privileges and laws as other subjects of the King.

In a tribute to timely constitutional reform, Edmund Burke, referring to parallels between Wales and America, commented that,

    "From that moment in Wales, as by a charm, the tumults subsided; obedience was restored; peace order and civilisation followed in the train of liberty--When the day-star of the English constitution had arisen in their hearts, all was harmony within and without".
Would that that harmony had continued. But history moves on. Things change.

The noble Lord, Lord Rees, said that the White Paper was long on cliche but short on analysis. In the past 25 years, the contraction of the Welsh economy and the erosion of the Welsh language and the Welsh way of life have led to a call for new and sensible constitutional arrangements. There was first administrative devolution, followed by an attempt in 1978 to set up a Welsh assembly.

In the Second Reading debate in 1978, the Conservative spokesman, the noble Lord, Lord Cullen of Ashbourne, outlined to the House what was then the policy of the Conservative Opposition towards Wales. It was that the structure of administrative devolution should be enhanced by the extension of the role of the nominated Welsh council. The noble Lord said:

    "We believe that by introducing an elected element into this Council from Local Government, we would create a much more independent and worthwhile forum for Welsh opinion".
Of course, that never happened over 18 years. The Welsh council was abolished. The Secretary of State for Wales exercised the powers of a colonial governor.

The noble Lord, Lord Crickhowell, told the House today that the noble Baroness, Lady Thatcher, gave him complete discretion as to how he should spend the resources that were put his way. The number of quangos proliferated to the point where the appointed members exceeded the number of elected councillors--there were 1,400 members of quangos in Wales, as opposed to 1,273 elected councils. There were in later years, as was commented on, a disproportionate number of Conservative supporters among those quango appointees.

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In no other part of the United Kingdom is such a high proportion of public expenditure authorised by non-elected bodies as in Wales. Two-hundred quangos control a budget of £2 billion, one-third of Welsh Office spending and equal to the amount spent by local authorities throughout the Principality.

That problem, that lack of democratic control over the way in which money was spent in Wales, was exacerbated by the appointment of English Members of Parliament as Secretaries of State for Wales--perhaps the latter two on their way to greater things. Since Conservative representation was reduced in 1992 to only six out of the 38 seats, the Select Committee and the Welsh Grand Committee were supplemented by English Members of Parliament whose knowledge of Wales was by definition limited. At the same time the number of Conservative councillors elected in Wales dwindled as the party in Wales was voted out of power.

That perceived lack of democratic control, the perception that the Conservative Party controlled Wales through quangos, was the reason that the Conservative Party was rejected in the recent election in Wales as a force in the House of Commons. If there should ever be a Conservative Government again, it is unthinkable that the same control through non-elected representatives could ever be re-introduced.

There is a remarkable consensus in Wales among all the political parties as to the way to proceed. There is little quarrelling. There is a grandeur of vision. The development of indigenous industry; the improvement of communications; the reform of agricultural policies; the development of a positive relationship between Wales and the institutions of the European Union; the development of the Welsh language and its culture; education and skills training; a responsive health service--there is much for the proposed assembly to consider.

My plea to the opponents of these proposals is to think why they oppose sensible devolution as proposed in the White Paper. I shall not go into the details. The noble Lord, Lord Elis-Thomas, outlined my view of the White Paper. They are modernising proposals. As the noble Baroness, Lady Ramsay, said, they create excitement. The noble Baroness, Lady Smith, talked of the tangible feeling of expectation in Wales, as in Scotland.

As the noble Lord, Lord Sewel, said in opening the debate, it is the withholding of power that causes fragmentation. That is the lesson to be learnt from that debate in 1893 which your Lordships can see portrayed outside the Bishop's Bar. I support this White Paper.

8.57 p.m.

Lord Lucas: My Lords, I am not sure that that was the most inspiring speech that I have heard this evening. That prize probably goes to the noble Lord, Lord Mackie of Benshie, for his soliloquy on the Potato Marketing Board. However, I must not allow myself to become adversarial. I am sure that the noble Lord, Lord Sewel, would get upset if I did so.

I therefore begin by thanking the noble Lord, Lord Williams of Mostyn, most warmly for his extensive and well-phrased letter which he took such

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trouble to get to me yesterday, answering points that I made when we debated the Statement on the White Paper.

The noble Lord, Lord Sewel, opened his remarks with a plea for inclusiveness and non-adversarial politics. If that is a course that the Government intend to pursue, there may be some changes that they should make in the way that they are proceeding. The noble Lord portrayed the two White Papers as part of a wider plan. But what wider plan? They are not letting us in on the secret. As several of my noble friends said, what if these two elements of the wider plan do not fit in with what is eventually proposed for England? What if the English do not want to fit in with this plan but would prefer something different? Why are we being presented with a bit of it? Why are this Government following the course of action that they criticised so much? As my noble friend Lord Hamilton of Dalzell said, they are "trying it on the dog" in terms of trying it out on Scotland to see whether it works there; then they will apply the proposals to England--

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