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Lord Mackie of Benshie: Under which government?

Viscount Weir: My Lords, certainly under a Labour government. No doubt the somewhat opaquely described powers to develop other methods of tax to finance local government expenditure will also emerge. I do not want to exaggerate the actual economic effect. Higher income tax will reflect itself in some higher pressure on wages, and increased rates will not help, particularly for smaller businesses. As for the other taxation possibilities, they are hardly likely to be encouraging.

The overall effect may be somewhat marginal, but even marginal cost increases, at a time when competition is so intense, are difficult. However, it is perhaps the impression given by marginal increases in taxation which is more economically damaging than increases themselves. I think it is the potential damage to business confidence and the business climate in Scotland which concerns me most. It could distinctly change for the worse.

I am half Canadian and I am much involved in business there. I dread a situation emerging analogous to that which now prevails in Quebec. I remind noble Lords that there are the same ingredients there. Independence or separatism is a live issue there, actively promoted by a strong party, and may well become the subject of a further referendum. The effect on Quebec has been most unfavourable. Montreal is no longer the business centre of the same importance as Toronto that it once was. Many leading Canadian companies have moved their headquarters out of Montreal. Investment in the province has been poor. All this is not because of actual independence, but simply because the possibility is so endlessly discussed and debated there. Why should the results of a similar political situation in Scotland be any different? The external perception of Scotland, particularly by potential inward investors, would undoubtedly suffer, as it has in Quebec.

In practice I believe all noble Lords know well that whenever there are problems in Scotland, the SNP will simply say that it would all be quite different if only Scotland had independence, and a full control of its destiny. That will be fed by the simple, regular and popular expedient of blaming England or Westminster. If the Barnett arrangements are changed so that Scotland ceases to be disproportionately favoured, it will all be far worse. Such, then, are some of the ways in which dissent and friction will in practice be fostered.

There is a different and a fundamental question which the Bill raises. There must be minimum requirements for any state to continue to be defined as a unitary one. Is it possible that, in spite of the reserved powers, a Scottish parliament could legislate for change in such a way, and on such a range of subjects, that eventually the accepted definition of a unitary state no longer applied to the United Kingdom? For example, many

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people would accept that one of the required definitions of a unitary state is that common rights to property exist across the breadth of the state, and to the equal benefit of everyone in it. If that is so, beyond what point might legislation by a Scottish parliament on rights to property effectively breach this unitary principle? Perhaps it is better and more simply expressed by just asking whether in our United Kingdom it would ever be reasonable that a Scotsman enjoyed lesser property rights than an Englishman or a Welshman, or vice versa.

Clearly there are other examples of this kind which might occur to your Lordships. However, the basic question remains of how far a Scottish parliament should be properly allowed to go on legislating change, so that gradually, over time, we lose the features of a unitary state, and we drift into becoming, de facto, a federal one? There are other shortcomings of this Bill worth mentioning. I happen to think that the United States' system where people of ability can be brought into the Cabinet, although they have not been elected, has much to commend it. When a Scottish administration will have to draw its Ministers from a fairly small number of people, it seems to me that a good chance to introduce better talent has been missed.

I also have some difficulty with the question of the element in the parliament who will be elected by proportional representation. I am not so much against the principle as a whole--with which I have much sympathy--but against the undemocratic opportunity which it gives parties to stuff their lists with the more amenable of their supporters. The suggestion is that that is already happening.

I conclude with two or three questions that the Government need to ask themselves. First, as an English backlash develops, and will develop further, how do they propose in practice to deal with Scotland's disproportionate share of funding? Secondly--and this is perhaps not such a serious question--in a few years' time will it be acceptable to the English to have a Scot as Prime Minister? Thirdly, does the current level of support for the Scottish Nationalists indicate that we have at last started down the slippery slope? Finally, if the Government had had the foresight to envisage today's political situation in Scotland, would they ever have started down this road in the first place?

In trying to answer such questions, I commend to the Government this story. When St. Peter showed the Scottish sinner the stairway down to Hell, the sinner said, "But I didnae ken, I didnae ken". St. Peter said: "Ah weel, ye ken noo".

6.20 p.m.

Lord Hughes of Woodside: My Lords, I rise to give my support to this Bill. It is undoubtedly historic and is a brave measure to change the constitution of the UK. I say that immediately since, as many noble Lords will know, I was not always in favour of devolution. In fact, in the other place during the 1970s I opposed the initial proposals when they were laid before Parliament and campaigned for a "No" vote in the referendum at that time.

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My objections were twofold. The powers in the first Bill were far too narrow and limited. Secondly, the absence of revenue-raising powers meant that the body that would have been produced would have had fewer powers than a major local authority in Scotland. I was concerned not so much by the apparent rise of the SNP, but by its vicious anti-English rhetoric, its election tactics and its philosophy. I certainly did not want to make any concessions to the SNP.

I recall one election when members of the SNP were fondly under the delusion that they would beat me in my North Aberdeen seat. I was approached with mock sympathy. I was told that they were very sorry to see me go because we were really brothers under the skin; we were really all socialists--the only difference was that they were national socialists. The kindest thing I can say is that those comments were made out of gross ignorance. However, they sent a chill down my spine, and still do.

I do not resile in any way from my words and actions in the 1970s. However, I do not approach this Bill with the excessive zeal of a new convert. In the 20 years that have passed, I have become increasingly concerned at the relentless accretion of power to central government which was the hallmark of each of the Conservative administrations during their all too long period in office. Throughout a whole Parliament, the Scottish Office could not be scrutinised by the Select Committee on Scottish Affairs because the then Tory Back-Benchers from Scotland refused to serve on it. When they did finally agree to serve on the committee, they showed very little independence. They slavishly followed the Conservative Party line and voted down every proposal that was critical of government, even though the evidence was overwhelmingly in favour. I shall not go into detail. Anyone who wishes to look up the record of the Select Committee will find that the Division lists are there and the record is clear.

During that period of centralisation of power, local decision-making was squeezed, and that drove local government councillors to distraction. It is easy to criticise local government and to make local councillors the whipping boys. Heaven knows, they have made mistakes. I do not know whether those mistakes are large in comparison with those of central government. However, I believe that, properly organised and properly funded, local government can probably do more for the people in the localities than we can, either in the other place or in this House. We destroy local government at our peril.

Therefore my approach to devolution has evolved over the years in a pragmatic and practical way. The Bill before the House solves the problem of lack of power. The reserved powers are defined, and the rest is left to the Scottish parliament. The Bill is a powerful tool. It is an engine for change. I fully support the tax revenue powers contained in the Bill. It was always essential, in my view, to have rights and responsibilities enshrined in statute. Whether or not the proposal to vary by 3 per cent. is adequate, or whether it is the right mechanism, is beside the point at this stage. No doubt

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the matter can be debated seriously in Committee. In any event, once the parliament is up and running, that debate will continue.

I say in passing, although the matter is not for us to decide, that I do not think it would be wise for the political parties in Scotland to state as a manifesto commitment at the first election that they will not use this power during the lifetime of the first parliament. The people of Scotland voted overwhelmingly in the referendum for both the parliament and the tax-raising measures. They want a parliament which is innovative and which will produce visible signs of improvement in education, health, social services, the environment and so forth. I concede at once that money by itself does not necessarily guarantee progress. However, it seems to me inconceivable that progress can be made without spending money. For a new parliament to put itself in a straitjacket of that kind does not make much sense.

One of the issues that have dominated the debate on devolution was raised by the noble Earl, Lord Buchan, and the noble Lord, Lord Lang of Monkton. The question at the centre of the debate has always been: will the establishment of a Scottish parliament inevitably lead to the break-up of the United Kingdom? At one stage I frankly thought that it would. While I believe that it is not inevitable, much depends on how the new parliament functions and how it behaves.

My own view is that for a nation state to survive, it must have social cohesion. The 18 or 19 years of Conservative government did much to damage the social cohesion of the United Kingdom. If there is no social cohesion, then frankly a nation state cannot survive; nor does it deserve to survive. The problem is--and this is a message that we must send out loud and clear--that when modern nation states disintegrate because of a lack of social cohesion, social cohesion in the individual constituent parts often disintegrates even faster. So there are perils. Separatism frequently brings its own problems.

The rhetoric of the SNP has been somewhat toned down, at least in public, and its members deny that they are separatist. It is inescapably a separatist party. Its attitude towards a Scottish parliament clearly demonstrates that. It will give no promise to work constructively within the parliament for the good of the Scottish people. Its stated aim is that, if it gets control, there will be a referendum on independence. I am not entirely a fan of referenda, but they seem popular at present. Many claim that it is a respectable position. I recall, as my noble friend Lord Ewing will remember only too well, the late Norman Buchan, myself and some others arguing that a referendum should put three questions, including that of independence. In a sense there is nothing disreputable about holding a referendum on independence. What is disreputable is that the SNP will accept only one result.

I saw one of its spokesmen on television about 10 days ago. He was asked: "If there was a referendum on independence, would you accept a 'No' result?" "Certainly not", he said. "We will continue to have referenda until we get a 'Yes' vote". So if every year for the next 99 years we have a referendum to which

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the answer is always "No", the party will not accept it. But if there is one referendum vote saying "Yes", everyone else must accept the result. That is arrogance in the extreme and it is to the detriment of the Scottish people. Anything and everything is grist to the SNP mill.

Those of us who are politicians need to start blowing the trumpet of the good which is being done by government. I will not say that I agree with everything that has been done, but perhaps politicians are like this: we tend always to criticise and never praise. It is time we had some praise.

For example--the grist to the SNP mill--there is the reasonable proposition that the present Government should look at oil revenues and oil taxation. What is wrong with having a look at it? But it is presented by the SNP as an anti-Scottish measure, made worse, it says, by the fact that the Chancellor is a Westminster MP and a Scot.

The SNP will brook no opposition. I ask the people of Scotland this. I do not suppose they will bother to read the debate but I hope some people may mention it to them in passing. I shall not name the company because I do not believe in free advertising. But an insurance company spoke its mind and said that it was prepared to speak out in terms of the economic effects of independence. What did the SNP do? It said that what was necessary for Scottish people was to boycott that institution and withdraw their funds. It was conveniently glossing over, even if it had ever thought of it, that people who draw their money out of insurance policies before they mature lose a lot of money. So that was detrimental to the Scottish people, but the SNP did not bother about that. Of course, it back-tracked: it was the office boy who was employed to make the tea who wrote this little thing by accident. It is strange with parties and governments--and this applies to all governments--that whenever there is something patently bizarre, it is always the office boy who did it.

However, there is a serious point here--the back-tracking did not come immediately, nor was the suggestion denounced immediately. There are sinister forces around. Some people are extremely gloomy about the prospects of the result of the first elections, especially since the voting system under the Bill guarantees or intends to guarantee that no one party can govern on its own. I cannot say that I am or ever have been a great supporter of proportional representation, but there is some merit in a system which will not lead to the elective dictatorship which characterised the Thatcher years.

Any voting system is only effective if the parties taking part show responsibility once they are elected. I am not pessimistic at all about the first elections. I believe that the present public opinion polls are false. All that matters is the real election itself.

There were many in Scotland 18 months ago, especially in the media and even some within the ranks of the Labour Party in Scotland, who did not believe that the manifesto commitment on a strong and vibrant Scottish parliament would be delivered. They have been

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proved wrong. The Bill does precisely that. I give it a fair wind and hope that your Lordships' House will also give it a fair wind.

The eyes of the nation will then turn from the Westminster Parliament to those elected to serve in the new parliament. They will have an immense responsibility which I trust they will discharge effectively.

6.33 p.m.

Baroness Linklater of Butterstone: My Lords, this Second Reading of the Scotland Bill is a truly historic moment for anyone who is a Liberal, a Democrat and a Scot, as I am. As a Liberal, I believe that it represents the realisation of a policy and a principle which, as we all know, we have held dear ever since Gladstone first enunciated his big idea of "Home Rule all round" in 1879 to the good citizens of Dalkeith during his Midlothian campaign.

I am neither well qualified enough, nor is there time in this enormously long debate to indulge in too much historical scene-setting. But I am proud to recall the words of my grandfather, Sir Archibald Sinclair, in a debate in the Commons in 1932, shortly after he had ceased to be Secretary of State for Scotland. He said:

    "There is a demand growing insistently from the Scottish people that they should be given the right, which they believe is theirs inalienably, to control their own domestic affairs".

Further, prophetically, he said:

    "if this demand is frustrated the extremists will seize and exploit their opportunity".

Not only does that illustrate the settled long-standing wish of the Scottish people to control their own domestic affairs, but he foresaw the dangers which accompany procrastination and delay which could become an issue for us today.

The Bill is the realisation of this essentially Liberal policy and the Government are to be congratulated on having followed our lead and presented a Bill which reflects so closely the recommendations of the Constitutional Convention's proposals and the subsequent White Paper which the Scottish people endorsed so unequivocally and resoundingly in the referendum last year.

It is as a Scot who lives in Scotland that I welcome it too. The need for the Scots to have more control over their own lives and affairs is very real and rule from Westminster has, perhaps unwittingly, over the years, eroded Scottish self-confidence. So many talented people have gone away to spread their wings and realise their potential, while others at home feel frustrated or inadequate. By the end of the Tory era, we were being governed by a party which had no mandate in Scotland and who apparently could not heed or hear Scottish wishes or needs.

As the only party with a narrow unionist policy the Tories were, as a result, wiped out politically last year in Scotland. They have, of course, done a 180 degree turn, having been forced to face the new reality of both the Scottish decision and their own political situation. Having done such a U-turn, it behoves them to be as

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constructive and positive as possible, so that what is delivered to Scotland through the Bill is the best possible system.

As a Democrat, I also welcome the Bill. Indeed, like the noble Lord, Lord Mackay of Ardbrecknish, who was in his wiser youth a Liberal as well, in particular I welcome the proportional system of representation that is at the heart of the selection and election procedures to the Scottish parliament. This is another of the long-held beliefs of my party. I am delighted that MSPs will be elected as both first-past-the-post candidates from the current constituencies and on a proportional basis from regional lists. There are issues that we will want to raise at a later stage in the passage of the Bill on the detail of the arrangements, particularly on the question of open lists, to avoid the risk of political placemen on the lists, but the principle is there and greatly to be welcomed.

Indeed, it is as a Democrat that I also welcome the fact that it is through this system, and this system alone, that the Conservative voice will be heard again in Scotland. I did not feel happy that after the last election some 20 per cent. of the electorate in Scotland had no voice in Westminster. It is only right that they too should be represented.

This Bill is a good one. It is a good constitutional document which is, by and large, comprehensive, well structured and clear in its terms. That view is endorsed by distinguished constitutionalists and the Law Society of Scotland, among others, with no political axe to grind. That is not to say that it is perfect as a document and it should be improved. Senior professionals too in Scotland, such as those in education and the criminal justice system with which I have been involved over the years, look forward with positive anticipation to what a devolved parliament can bring in those fields. They already have their own distinctive Scottish character, but they welcome the opportunity to bring a better coherence and a new strategic approach to the enactment of policies, with more time for proper, informed discussion and decision making.

In the entire last Session of the previous Parliament, only 13 hours were devoted to debating Scottish education on the Floor of the other place. In future, such vital matters can be fully and openly addressed in a Scottish context, with the needs of our own children and young people in mind--avoiding sectoral politics. I am currently involved in a Scottish Office committee that is examining post-school provision for young people with special needs. That committee intends to have recommendations ready for the new parliament's consideration at an early stage, and with the chance of proper consideration this is exciting for all concerned. There is the chance for a fresh look at the criminal justice system and proper parliamentary time for modern criminal justice legislation--perhaps a 21st century Prisons Act to underpin a 21st century system could be considered. We already have the children's panel system to address the problems of young people in trouble, which is second to none. In future, its view will be addressed by a government who are familiar with and understand the system better than it has ever been

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understood by Westminster legislators. The optimism of the top people in all those fields is hugely important, and it is something upon which we can and must build.

Of course there are technical and practical concerns. It would be extraordinary if that were not the case, where major constitutional change is involved. I know that the Bill will receive the closest possible scrutiny. We will have our part to play. One clearly articulated fear is of over-centralisation by the Scottish parliament and the squeezing of local authorities in education, for example. Those issues must be addressed. Given the openness and accountability built into the new structures, I trust that they will be addressed.

People with fundamental concerns about the Bill--and I have no doubt how deep and genuine many of them are--take the view that almost any change from the status quo is wrong and that the Union unchanged is, ipso facto, best. Their attitude is, "Never leave a hold of nurse for fear of finding something worse." But for most of us, holding on to nurse is the one thing worse than leaving hold of her. She no longer offers what is needed and the status quo is no longer acceptable--as the ballot box has demonstrated. Fears of the slippery slope to separation from the UK that many noble Lords mentioned are exaggerated. Current support for the Scottish National Party is a concern and cannot be ignored, but it has everything to do with disillusionment in Scotland with the new Labour Government. It has little to do with separation or the break-up of the UK, as recent polls have also shown. Whose judgment are we to trust? The realistic optimists or the messengers of doom?

The Scottish people at Holyrood are at least as capable of managing their domestic affairs as the Parliament at Westminster. As a Scottish Liberal Democrat, I believe that the Scots with their own parliament as defined in the Bill can leave nurse behind and will emerge strongly and confidently from under the skirts of Westminster. Scotland is indivisibly part of the family of the United Kingdom and must ever remain so. With its identity properly asserted through the Bill, the whole family will be strengthened and the integrity of the United Kingdom assured.

6.44 p.m.

The Earl of Kintore: My Lords, I will begin my speech back in time, but possibly not as far back as my noble friend Lord Buchan. A forebear of mine and forebears of a number of other noble Lords taking part in this debate were so opposed to the Act of Union that they voted against it and generally showed dissent whenever they could. My forebear--I am indebted to the Library for this information--was,

    "very wild, inconstant and passionate. Does every things by starts. Hath abundance of flashy wit. Hath good interest in the himself liberty of talking when he is not pleased with the Government".

Those dissents and protests were genuinely felt but they probably had a lot to do with perceived loss of influence. My forebear was still hereditary Earl Marshal of Scotland, our Jacobite indiscretions still being a few years ahead. If my forebear was protesting because he

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thought the Union would not work, he was wrong. Apart from the Jacobite rebellions, the Union has been a considerable success. But we must move on.

Scotland is to have a parliament in Edinburgh with some power devolved to it and some reserved at Westminster, with the judicial committee the final arbiter that the Scottish parliament is acting within its powers. At present, Scots enjoy over-representation at Westminster. Under the Bill, provided that a constituent knows whether a matter is reserved or devolved, he can have both an MP and an MSP working for him in place of just one Member of Parliament. If some or all of the regional members can be called upon, the over-representation will be overwhelming. One solution could be to reduce the numbers of MSPs. However, assuming that more powers are devolved than are reserved and that we are trying to establish a successful Scottish parliament, the answer is probably to reduce quite significantly the number of Scottish seats at Westminster--leaving of course enough to preserve the Union.

Following exchanges in debates on the Government of Wales Bill, I am a little nervous of my next point. I understand that the Westminster Parliament should not direct the Scottish parliament as to how it should work, but I hope that it is in order to inquire whether there has been consultation regarding the working of the new parliament. Given its location in Edinburgh, quite a few of its members will be involved in a great deal of travelling, particularly from the north. I assume that activities on Mondays and Fridays will allow for that. I envisage a very busy first parliament for MSPs, but once the parliament is up and running MSPs may find that they can meet in parliament less often, thereby giving them more time to work in their constituencies.

When the results of the referendum for a Scottish parliament were announced I was in America, involved in Scottish work as the Chieftain of the New Hampshire Highland Games. An estimated 40,000 visitors, mostly American, came to admire my knees. Americans, who feel strong kinship with Scotland, told me that they thought the referendum was a vote for separation. I disagreed and said that the vote was a strong signal from the Scots for their own parliament in Scotland but with Scotland remaining an integral part of the United Kingdom. I hope sincerely that my interpretation of events is correct.

6.48 p.m.

Baroness Young: My Lords, I rise as the first English person to speak in this debate. I make no apology for that because there is an important English dimension to this issue and it is a matter that affects the whole United Kingdom.

The Bill is one of four constitutional Bills in this Session of Parliament but it is the most far reaching and important and it takes us, as the noble Lord, Lord Sewel, said, into uncharted waters. We have not been down the devolution route in this form before.

Constitutional Bills are different from other Bills. They are about making long-lasting settlements--one hopes settlements that are stable and enduring;

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settlements that cannot be easily changed or altered, unlike, for example, the education Bill, in which I have been recently involved. That again is an important Bill that can be changed, but constitutional Bills fall into a different category.

I believe, therefore, that it is extremely important that we take great trouble to get it right. We have had some warning recently from overseas experience. If we look to New Zealand, it had extensive debate and a referendum, but is now having second thoughts on proportional representation which has not worked out as it was thought it would.

Many noble Lords referred to the question of Quebec in Canada. I recognise that independence for Scotland is not the point of the Bill but, as almost every speaker referred to independence, the warning from Quebec is a real one. It has dominated Canadian politics; it occupies a great deal of national debate and national time and, as my noble friend Lord Weir said, it has had devastating economic consequences and a satisfactory solution has not yet been found. I suspect strongly that when the Government introduced this Bill in another place, they never expected that a few months on the Scottish National Party would be leading in all the polls in Scotland. These matters can have unexpected outcomes and it is important that we recognise that and face up to it as the Bill proceeds through your Lordships' House.

I turn next to the English dimension. The Bill applies to the whole of the United Kingdom and I hope that in Scotland there is no doubt that that is the case. No one will argue about the outcome of the referendum--certainly I shall not--even if none of the important issues raised in the Bill was actually put to the Scottish people when they voted. Now that we have the Bill, we must all want to make devolution work for the benefit not only of the Scots, but also for the benefit of the United Kingdom. But the Bill must be seen to be fair to all parts of the United Kingdom if it is to endure.

The English dimension is serious. For the first time in my political life I have heard English people say that we would be better off if Scotland became independent. I would not be entirely surprised if the issue were raised during the London mayoral elections next year. It would be an easy argument to advance. Why should so much more money go to Scotland--we had the figures set out earlier--instead of being used on the poorer parts of London? I have heard it said, nearer to where I live, why should we spend the money on the Scots when we could put it into our local hospital? What worries me in relation to some of the comments being made today is that the more the Scottish nationalist feeling is hyped up, the more we will get a contrary feeling in England ready to be hyped up when anyone wants to do that.

I do not subscribe to those views. But I share the view so well put by my noble friend Lord Lang of Monkton that we could, as a country, spend a lot of time tearing ourselves apart when, for hundreds of years, Celts, Anglo-Saxons and now newcomers, have lived together amicably. We have prospered together. We have had an influence on the world in which the Scots have played an enormous part, far greater than either our population or geographical size would suggest. In modern parlance

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I believe it is called "boxing above our weight". What I hope we will not do is simply turn that to boxing one another. The English dimension, though still relatively quiescent, if not dealt with, could damage not only our country but our standing in the world as a whole.

I want to turn to the role of the House of Lords because the Bill is before us and we are predominantly a revising Chamber. I accept, and believe that my noble friends do also, in the principle of the Bill and wish for a successful devolution. I hope that, as a revising Chamber, we may make improvements, as my noble friend Lord Mackay made clear in his remarks earlier this afternoon.

We must then consider the West Lothian question, which cannot be left aside. The noble Lord, Lord Steel, said "Quite frankly, we have no answer to that". But that is not good enough and a lot of people will feel that it is not good enough. If they are quiet now, they will not be quiet next year or the year after. No one has stated more clearly and more consistently the West Lothian question, the whole question of the Scottish block grant and the Barnett formula, than the honourable Member, Mr. Tam Dalyell. When the English wake up to what they are spending on the Scots, I can see how the arguments could come into play in a most unhappy way.

I want to make one further point in relation to the whole West Lothian question. It may be thought that having English regions can be a substitute for dealing properly with the West Lothian question, but that is a complete non-starter. Only in the North and South West is there any sense of regional allegiance. There is no demand for regions and, in any event, they would not have anything like the comparable powers of the Scottish parliament.

The Bill raises other enormous problems. The relationship of the Scottish parliament and the European Union was touched on briefly as well as the list that my noble friend Lord Mackay read out. They are big issues. They cannot be brushed aside. We must address ourselves to finding a solution if we are serious about wanting to make this work and wanting to keep the Union. We must recognise that, should we fail to keep the Union, it would be not only Scotland that would be diminished; England, Wales and Northern Ireland would also be diminished. If we look at our standing in the world, where would we be in the United Nations? Where would we be in the European Union and in the Commonwealth? Those are all big, international organisations in which we have, and always have had, an influence. The stakes for which we are playing therefore are extremely high.

My final point is that I hope that the noble Lord, Lord Sewel, and his colleagues will listen to the arguments put forward in this House. And perhaps I can offer a general piece of political advice. I have found that governments do better when they listen to the House of Lords than when they just listen to their own parties. That applies both to the present Government and to my own party when we were in power. There is a great deal of wisdom and experience in your Lordships'

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House. There is a great will to try to resolve those questions. Unless we resolve them, we will be faced with a doubtful and possibly dangerous situation ahead.

6.59 p.m.

Baroness Carnegy of Lour: My Lords, it is a very great pleasure to follow my noble friend Lady Young. Over many years, with her great experience of the political life of the whole of the United Kingdom, she has been a good friend of Scotland. I agree with every word she said, although I shall speak from a somewhat different perspective.

The noble Viscount, Lord Weir, asked whether the Government would have started down the route they are now going down if they had known what was going to happen. When I first entered the local government political scene, the Lord Provost of Dundee at that time gave me a good piece of advice. He told me, "In politics, the golden rule is never to get yourself on a hook you cannot get off". It has always seemed to me that this Bill is the result of the Labour Party in Scotland forgetting that golden rule. When all those years ago, fearing the Scottish National Party, it set up with the Liberals its Scottish Constitutional Convention and told it to invent a devolution scheme and sell that scheme to the people of Scotland--there was not mention of the United Kingdom at the time--that was done. It was done with great efficiency. The noble Lord, Lord Ewing, who is not in his place at the moment, has, alas, taken his name off the list. I hoped that he was going to tell us his views about that. But it was done and the effect of a lengthy and well-publicised exercise was such that, as the years went by, there was no escape.

It was all right for a party in opposition but then, come May last year, it was not possible, I suspect, for Labour to implement its new and more up-to-date instincts. This Bill was virtually unavoidable. The Government were impaled on a hook and they could not get off. Now, as other noble Lords have said, the law of unintended consequences has taken over. The SNP is high in the polls, Donald Dewar's personal rating has collapsed and the Liberals share bottom place with my party in the polls.

The noble Lord, Lord Steel, said that the new parliament would improve the economic climate. I imagine that he has observed, as I have, that businesses based in Scotland are becoming somewhat unnerved. General Accident has merged with Commercial Union and is moving its headquarters south. Scottish Widows and Standard Life, both based in Edinburgh, have expressed grave anxiety. Policy holders of Scottish Widows, as the noble Lord, Lord Hughes of Woodside, told us, have been receiving rather unpleasant letters. Watson and Philip has added its warning. The chairman of the Bank of Scotland has said a good deal over the years about his fears for what higher taxes would mean in Scotland. Yesterday a survey was published of 150 small businesses. Three-quarters of them expect higher taxes under a Scottish parliament and 83 per cent. are concerned about the effect on their business.

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In these circumstances, how should noble Lords view the Bill? We have heard a number of angles on this. I agree with my noble friend Lord Mackay of Ardbrecknish who said in his opening speech that it would be easy for some of us to shrug our shoulders and say "I told you so" and take little interest in the proceedings from now on. It would be easy for some--we have already heard a few voices talking in that way--to feel that amendments are likely to make little difference, that the Scots are heading for separation anyway and that the rest of the United Kingdom may be better off without us. If I may say so, I believe that is totally unjustified pessimism. I firmly agree that this House should put a lot of energy and its best skill into looking carefully at the Bill, particularly at the parts that are likely to lead to most controversy, and that we should do all we can to get the parliament to work as smoothly and fairly as possible so that it becomes stable and works to the satisfaction of all concerned. I agree with my noble friend Lady Young that that must surely be in the interests of every United Kingdom citizen, not just the Scots.

There are a number of controversial areas. Noble Lords have already said a good deal about them and much more will be said. I would simply refer to two aspects of the Bill which have not yet been mentioned. There is the obscurity of the drafting of Part IV of the Bill, which deals with the parliament's tax varying powers. The original simple idea of plus or minus 3 per cent. has now become very complicated indeed as the Bill attempts to cater for every possible change in tax structure that the Treasury might invent. There is also a complicated arrangement for the Scottish parliament setting a percentage tax variation and then having to change it. How will business, how will individuals and how will charities which depend on covenants understand this and plan ahead with any certainty? The Association of Chartered Accountants in Scotland is very concerned about the lack of clarity of these clauses and thinks that Clause 71, which defines who is a Scottish taxpayer, must be removed and totally rewritten or the Bill will not work at all. We must look carefully at that.

Another point which has not been completely covered is that the proposed procedure for the drafting and consideration of Bills is somewhat incomplete without some kind of second chamber. The potentially controversial mechanisms for ensuring that they are within the parliament's competence and do not contravene existing or impending UK or European legislation are somewhat difficult to understand. We must be very sure that they are foolproof. I believe that the noble and learned Lord, Lord Hope, may have interesting things to say on this point when he comes to speak. I hope that noble Lords will pay great attention to what he says.

There are many other key aspects that need our careful scrutiny. We must indeed all hope, as my noble friend Lord Mackay said, that the Bill does not prove to be another own goal for Scotland but that it operates reasonably smoothly and fairly, to the advantage of us

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all. I believe that your Lordships, if you put your shoulder to the wheel--and the Government willing--can ensure that.

7.7 p.m.

Lord Gray of Contin: My Lords, the Bill we are considering today is probably the most important that we shall study in the life of this Parliament. It has the most far-reaching implications for the future of the United Kingdom and, as such, it must be examined not only as a means of devolving power from the centre but as providing a ready-made jumping-off point from which Scotland could become independent. I found myself almost in complete agreement with what my noble friend Lord Lang and my noble friend Lord Mackay of Ardbrecknish on the Front Bench had to say. The only excuse I can make for repeating many of the points which they made is that I feel that they are of such importance that they cannot be uttered too often.

Thus it could well be that the break-up of the United Kingdom could become a reality in something less than a decade. Let us make no mistake. Once this parliament is operating, its frustrations, when it is unable to achieve certain of its desires, will lead it to blame Westminster, and the constant bickering which will follow will set up a very dangerous relationship between it and Westminster from which only nationalists will take comfort. Indeed, it is arguable--and it is likely that the nationalists would use such an argument--that any future long-term relationship between Scotland and England might actually benefit from Scotland becoming independent sooner rather than later thus avoiding the niggling arguments and resentments which could sour relationships over the next decade, making the eventual settlement of terms, in the event of independence, much more acrimonious than might otherwise be the case.

Then there is the demand, which has been mentioned by a number of speaker this afternoon, for a referendum on Scottish independence. After all, the Government were very happy to stand shoulder to shoulder with the Scottish National Party in order to obtain a yes vote in the devolution referendum, so why are they so bashful about trying to find out if the people of Scotland wish to proceed further along this path? If the Government feel squeamish at the thought of this, then the new parliament may well make it a priority itself, particularly if the nationalists win a majority of seats as seems quite possible. For all those problems and uncertainties the Government have nobody to blame but themselves. Everything which is happening was predictable. Labour has let the genie out of the bottle and it must take the consequences.

I have never argued the case against nationalism on the basis of Scotland not being able to survive on its own, but purely on the basis of the Union being much more beneficial to Scotland. My fear is that attitudes in Scotland will harden against the Union. I was very interested in what my noble friend Lady Young had to say about some of the attitudes which are developing in England as far as concerns the Scots.

In my view the Scottish parliament will stimulate resentment rather than pacify feelings. I doubt very much if there still remains within Scotland a majority to

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retain the Union; a situation brought about largely by those who have been preaching for some years now the gospel of devolution and playing right into nationalist hands. But what is certain is that pretending that the setting up of the Scottish parliament will change everything is quite wrong and is really another way of putting off the evil day and at very great cost.

Perhaps the only way left to save the Union is by creating a parliament in England for the English and establishing a federal parliament for the whole of the United Kingdom, for which the Liberals have been asking for ever and ever. Perhaps they are simply accepting this measure as a stepping stone. However, that seems to me a most costly and over-elaborate way of resolving a problem brought about principally by a failure adequately to explain and highlight the enormous advantages of the Union to all its members. In any event, it is doubtful whether even that will satisfy--

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