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Lord Mackie of Benshie: My Lords, is not the noble Lord being a little defeatist? If the advantages of the Union are such, surely he can explain them to the people of Scotland.

Lord Gray of Contin: My Lords, the noble Lord did not have a lot to contribute. I am sorry that I gave way. In any event, it is doubtful whether even that will satisfy the appetite for independence, which wells up not very far below the surface in Scotland today. The polls indicate a massive swing to nationalism which, had it been reflected in the heavily populated central belt in the way in which it flourished in rural areas in 1974, might have given the SNP power in Scotland at that time. Now, for the first time, nationalism is reflected in the central belt of Scotland. That situation, taken along with sleaze oozing from Labour-controlled councils at an alarming rate, is causing a degree of panic in Labour circles in Scotland which is quite understandable.

My noble friends on our Front Bench have indicated that we must accept the reality of the situation and move forward to ensure that the new parliament is a success, and I accept their judgment. Of course, when the Bill receives Royal Assent and becomes an Act of Parliament, it will be the duty of all law-abiding citizens to respect its integrity, but that should not inhibit us from criticising it at this stage or at the later stages, but particularly at Second Reading.

I profoundly dislike any legislation which endangers the Union and I dislike this Bill in particular because I disagree with the philosophy behind it. I am undoubtedly one of a minority in Scotland at the moment, but a sizeable minority which does not relish what this Bill will do eventually. It gives us no pleasure to see our predictions of a couple of years ago beginning to happen already as far as nationalism is concerned.

I doubt very much indeed if this legislation will provide the people of Scotland with anything more than they already have through the Scottish Office and it is open to question whether those functions will be provided in as acceptable a form as at present. We already have a wealth of devolution in Scotland administered by a Secretary of State and his Ministers. The Scottish Office is the envy of many UK

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departments because so many problems can be resolved within the Scottish Office itself without constant reference to other departments, which is the lot of UK ministries. And what of the Secretary of State? He or she will become a very minor voice in Cabinet and a nonentity in Scotland.

The costs of establishing and operating a Scottish parliament are as yet uncertain, but if the initial costing of the creation of a parliamentary building is anything to go by, they will be much higher than forecasts indicate at present and that is merely a foretaste of what lies ahead.

Regarding the details of the Bill, we shall have ample opportunity to debate them in the months ahead. Much remains still to be questioned despite the scrutiny already given in another place. However, there are three areas which give cause for particular concern. The first was referred to by the noble Lord, Lord Hughes. It is not very often that I find myself in agreement with the noble Lord, but tonight I do. That is--

Lord Hughes: My Lords, I am glad that we do not often agree with each other.

Lord Gray of Contin: My Lords, that was well said. The first is the fact that Scottish Bills are to be denied the benefit of scrutiny by a second chamber. This is a mysterious decision since in principle the Government must agree with the existence of a revising chamber or they would simply do away with the House of Lords in its entirety. Also, since new members of the Scottish parliament are likely to include a large proportion of inexperienced members, it is particularly inappropriate for there not to be any method of having a second look at Scottish legislation.

The second problem relates to the method of election. It seems to me that having a mixture of constituency members and listed members will create two classes of member. The listed non-combatant, as I care to call him, will always be the poor relation. He or she is unlikely to command the same authority as a constituency member. Furthermore, if he or she becomes a Minister without any parliamentary or constituency experience, life will be difficult in the extreme for that individual.

The third area which gives me cause for concern is the preference that the Government have shown in Committee in another place for concordats. There is really no substitute for writing in requirements on the face of the Bill. Concordats at best are vague and at worst they are merely provided to get the Bill through Parliament, appeasing Members for the time being.

Finally, I am concerned about the status and the future of the Lord Advocate and the Solicitor-General for Scotland. A third Law Officer is to be appointed. I think that the Government owe us a more detailed explanation in due course of how the relationship between the Lord Advocate and the new Law Officer will be regarded. Who is to be the senior? Is the Lord Advocate still to be the senior Law Officer, or is the Scottish Law Officer who will be operating at Westminster to be senior to him, or to be considered senior to him? I do not propose

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to dwell on those or other legal subjects because there are distinguished luminaries in the legal profession who will no doubt look into those matters in much greater detail and who have much more knowledge of the subject than I do.

I look forward very much to the further stages of this Bill, but I shall need a lot of convincing that it will one day be to the benefit of Scotland.

7.21 p.m.

Lord Russell-Johnston: My Lords, I have three things to say. First, I want to pay homage to a man who was a Member of your Lordships' House and who would have been very happy to be present on this day. For all his political life, in much less sympathetic times than now obtain, he fought for home rule. As a tribute to him, I shall quote from the end of his maiden speech, which he made, unusually, on the day of his Introduction, 6th December 1967. But then, John Bannerman, Lord Bannerman of Kildonan, was an unusual man. He said:

    "there can be nothing surer in this life than the truth which we Liberals proclaim; and that is that the growth in stature of man depends on the extent to which he can control his own destiny. This is equally true of nations; and Scotland is a nation. That is why Liberals advocate federalism to replace the present form of centralised ... government in Britain, so that all parts of Britain may be helped ... That is not a selfish ambition. This is an ambition which we are determined is better for the United Kingdom".--[Official Report, 6/12/67; cols. 708-9.]

John followed a long Liberal tradition, to which reference has already been made, which was rooted, as we are reminded by the exhibition in Westminster Hall, in Gladstone's efforts for home rule in the last century, continued in the federal United Kingdom Bill of the Asquith Government, which, as my noble friend Lord Steel said, fell only because of the outbreak of World War I. As my noble friend Lady Linklater reminded us, between the wars Sir Archibald Sinclair held the torch. The Covenant Movement, after the Second World War, was the natural heir to that tradition. Its driving force, John MacCormick--"King John", as many people will remember--was of course a Liberal candidate in Roxburgh, Selkirk and Peebles, the seat formerly represented by my noble friend Lord Steel of Aikwood.

I am proud to have made my little footnote in that record when, on 30th November 1966, in the other place I introduced the first home rule Bill since the war under the ten-minute rule. I said:

    "we are not seeking separation from the United Kingdom, but sensible and effective devolution within it".

I was barracked for that and the Speaker had to intervene. That is most unusual on a ten-minute rule Bill. Now I have heard from the noble Lord, Lord Sewel, almost exactly the same words--and from the same Government Benches, and so the wheel turns. I went on to say:

    "Nor is there any contradiction or conflict between wishing to see this and wishing to see the United Kingdom join the European Economic Community. Indeed, I would aver that the larger the grouping the greater the need for devolution within it".--[Official Report, Commons, 30/11/66; col. 458.]

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I say all this mainly because I happen to continue to think--although I suspect that it is not a general view--that consistency in politics, which seems these days to be a very rare commodity, as pragmatism, often linked to opportunism, conquers ideology, is a merit, a virtue and a valuable thing. On these matters, Liberal Democrats have stood up for what they believed in foul weather and fair. Those who have toiled long and hard in the vineyard have contributed to the quality of the fruit.

My other two points are relatively brief, but they are related to "the quality of the fruit". I refer secondly to the West Lothian question. My noble friend Lord Steel of Aikwood said frankly that there was no clear answer to this question and that although there are weaknesses here, they are less than the weaknesses of the existing system.

After all, the Government's proposals worked out, as my noble friend Lord Steel said, consensually in conjunction with the Scottish Constitutional Convention, are founded in the belief that in Scotland a co-operative approach can now work and that it is unquestionably better than the confrontational approach which is the essence of the Westminster system. I very much hope that that is so; I want it to be so although some of the speeches that we have heard do not entirely suggest it. However, I continue to believe that in the end, as the noble Lord, Lord Gray of Contin, suggested, the only sensible and logical answer to Tam Dalyell is federalism--a clear division of entrenched powers in a constitutional frame. Federalism remains a clear option, which may solve future problems, but I recognise that we are not talking of it now.

Thirdly, unlike the noble Lord, Lord Mackay of Ardbrecknish, who has vanished, with whom I worked long ago in the Scottish Liberal Party--

    "Bliss was it in that dawn to be alive, But to be young was very heaven"--

I strongly and warmly support the Government's acceptance of a proportional element in the voting system. It is, as the noble Lord, Lord Sewel, said, "fair". The noble Lord, Lord Thomson of Monifieth, put the argument against one-party domination on a minority vote. But the essence is the desire to produce in the legislative assembly a fair reflection both of the distribution of political opinion within the country and the interests of the different regions, such as the north-east, the Highlands and the Borders. That is something which is accepted pretty well all over the rest of Europe.

I get tired and angry with those who pomp and prate about democracy, but who are, and have been, happy to sustain a system which is blatantly unfair; with those who governed Scotland without a mandate and without very much regard for what the Scottish people felt--the noble Lord, Lord Thomson of Monifieth, mentioned the poll tax--yet listening to the speech of the noble Lord, Lord Gray of Contin, it is clear that the Conservatives still do not realise that they have been quite the best recruiting sergeants for the nationalism that they condemn. Indeed, they have produced the nationalism that they condemn.

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I was saddened by the speech of the noble Lord, Lord Lang of Monkton. I hope that that did not reflect general Conservative views. I believe that it was the former Lord Provost of Dundee who remarked that perhaps Sir Malcolm Rifkind was a better guide to what was going on in the Conservative Party. The noble Lord, Lord Lang, sounded like a man with a closed mind which was continuing to close. He seemed never to have heard of Catalonia and Bavaria or regional developments in France and Italy. It is true that for this change to work we need open minds, tolerance, a commitment to success and patience with one another. That is what Scottish people want and also deserve from their politicians.

7.30 p.m.

Lord Nickson: My Lords, I have listened with great attention, as have all other noble Lords present, to the debate tonight. I wish to speak to a fairly narrow business point having worked all my life in Scottish companies in Scotland. For much of that time I had some responsibility for disbursing taxpayers' money to industry through various government bodies.

I have been struck by the unity on all sides of this House on one point: concern about the Union. That has come through from every single speech. If that unity is reflected outside this House in the political parties and in Scotland it should start to influence Scottish public opinion during the debates and in the run-up to the Scottish parliament and those who are persuaded by a populist, perhaps a "Braveheart", point of view. I suggest that collectively through all three political parties and the independents we must put across the facts. I believe that in business terms the Scottish national case is a dud prospectus. The balance sheet does not add up, nor could it. If Scotland went into that situation it would be the equivalent of a business going into receivership.

I shall finish with four brief light-hearted points. I ask noble Lords to attend to a little arithmetic. I apologise for elaborating these facts but they are true. As a percentage of GDP, public expenditure in the UK is about 42 per cent. Scottish expenditure as a percentage of Scottish GDP is 50 per cent. The overall Scottish GDP is about 8.5 per cent. of the UK figure. The population of Scotland is about 8.8 per cent. and public expenditure exceeds 10 per cent. Scottish expenditure exceeds the revenue collected from taxes in Scotland by about £7.4 billion. Even if one allocated all the oil revenues--it is inconceivable that any government would be willing to do so--that deficit would still be about £5 billion. The Scottish block vote is just over £14 billion.

This leads me to my second point. Of that £14 billion, about 40 per cent. (£5.2 billion) goes to finance local authority expenditure. The balance of local authority expenditure comes from self-financing. Most of that comes from the council tax. That produces about £1.2 or £1.3 billion and adds up to total local authority expenditure of £6.3 billion.

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I am sorry to bore noble Lords with those figures. However, all of us who believe in the Union should try to get across in the manifestos and the process that leads up to the parliament the fact that the nationalist separatist policies do not add up. Scotland would be infinitely the poorer. If the budget were to break even taxes would have to go up by a fantastic amount. I suggest that all of us need to put across that point because it is not understood by the 52 per cent. of people who voted for this proposition.

That leads me to my concerns about the financial arrangements under the Bill. I believe that 3p in the pound resulting in £450 million is of mind-boggling irrelevance in relation to the potential gap in taxation. This is entirely covered in Part VI of the Explanatory and Financial Memorandum:

    "Self-financed public expenditure--i.e. spending not financed by UK taxpayers as a whole--may increase or decrease depending on how the Scottish Parliament elects to use its tax-varying powers and how it decides to treat self-financed spending by Scottish local authorities".

I suggest that there is the rub. If, as we have heard from so many noble Lords, there is a belief that the Westminster parliament is extremely unlikely under tight public expenditure control to increase the block grant--it could be decreased and would be very unlikely to go up--and the Scottish parliament is to work as it must for Scotland and Scottish business, there will be a great appetite for programmes and policies that require cash. The cash will not be there. In another context we have heard about "leaving nurse". There is perhaps a feeling that the effect of the thumbscrews applied by both the present and previous administrations to local authority expenditure may be less under a Scottish parliament. There will be a great appetite for local authority expenditure.

If the Scottish parliament has discretion and in its wisdom decides to pass responsibility for non-domestic rates to local authorities, the amount raised by that means will be £1.4 billion. That is equal to the amount raised by council tax and is included in the £5.3 billion. That would be subject to great pressure. There would be no more money from central government. The council tax could not be raised because the parliament would have to report to the electorate. Once again the tax would fall back on business. That is a major concern to business. I hope that the Government will consider an amendment to place some form of cap on the tax to be raised on business.

On Monday I attended a conference in Edinburgh to hear what the political parties had to say about business. The Labour view was put by Henry McLeish, the Liberal Democrat view by a distinguished industrialist and the SNP view by one of the Ewing dynasty. Perhaps I may run through those views quickly. Labour said that there was no point in having a parliament if it disadvantaged business and the economy; business must be involved; business policies must have priority; there must be a stable economic framework; inward and domestic investment were of equal importance; there should be strong emphasis on small companies etc. The Liberal Democrat Party spoke about wealth creation and

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investment in people and capital; there must be a sensible structure for business rates; tax stability was essential in the first four years; and there should be lower taxes if possible, certainly not higher than the rest of the UK. Well done to both of them.

The SNP said that a favourable business climate was essential; Scotland would succeed only if business succeeded; the Government created work and business created jobs; and no power should be given to local authorities to raise non-domestic rates above the English level. I point out that the SNP is saying to the public and to business something I wanted to hear.

I have spoken long enough. However, I express my concern that if there is no further amendment to the Bill the power that will be reserved to the Scottish parliament and ultimately to the Treasury to cut local authority expenditure if it becomes too high is not enough. Some further amendment at Committee stage of the Bill will be needed if business confidence is to rise. It is important that business plays its part.

Perhaps, with the greatest respect, I may correct my noble friend Lady Carnegy. I was deputy chairman of General Accident. My noble friend Lord Lang of Monkton is a director. On Tuesday we shall both be at the same dinner saying farewell to General Accident. We were both heavily involved in all those discussions. I have to say that that decision had absolutely nothing to do with devolution or a Scottish parliament. It was entirely about the ability to create a UK champion in the insurance industry which can compete worldwide and to protect Scottish jobs and investment in Scotland.

The Scottish parliament will sit where I had my office in Scottish and Newcastle. I hope that when they have a spare moment, all the MSPs will enjoy looking out, as I used to do, at King Arthur's seat and seeing the fulmars nesting.

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