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Viscount Thurso: I was pleased to hear the intervention of the noble Lord, Lord Gordon of Strathblane, in relation to the tourist tax, and grateful to him for explaining that Mr. Geddes' proposals were for a hypothecated tax. In my role as my party's tourism spokesman, I have spent considerable time looking into various types of hypothecated tourism taxes around the world. Without wishing to come down on one side or the other of the argument, it is clear that in many areas there is great merit in it. The headlong attack on the principle by the noble Lord, Lord Mackay of Ardbrecknish, was wide of the mark. I commend him to look, among others, at the State of Florida as an example of a hypothecated tourist tax which works well. What is dangerous is any form of taxation on a tourism activity
which is not hypothecated and which is reserved to the central treasury. We do not have to look far to find a devastating example of that. It is called the airport tax.
Lord Selkirk of Douglas: I support the points made on the UBR by my noble friend Lord Mackay of Ardbrecknish. For a short time I was responsible for local government finance in Scotland. We had many representations, especially from smaller businesses, which stressed the unfairness of having different rates charged for comparable businesses in different parts of the country. Over a period of years, we resolutely transferred hundreds of millions of pounds from the Scottish block to make the UBR a successful reality. As my noble friend said, we were able to save businesses in Scotland approximately £1.1 billion a year. If that level playing field were thrown away overnight, it would make businesses a great deal less competitive and cause job losses in certain parts of the country. Whether or not my noble friend presses the amendment, the principle that he has asserted is one that should be remembered.
Lord Desai: First, I apologise to the noble Lord, Lord Mackay, for not being in my place when he started, but I can well guess what he said. I am astonished that the Conservative Party is such a centraliser. It hates any diversity or experimentation and it does not trust legislators of any kind. It somehow feels that there should be a single tax. It tried that. It was called the poll tax. We know what happened to that.
It is a good thing to let people devise their own little fiscal constitutions and take the consequences. If Glasgow charges too high a business rate and loses business, that is Glasgow's lookout. If businessmen move outside the limits of Glasgow, local authorities outside Glasgow will gain. I say, "good". Let there be lots of uneven playing fields because centralising uniformity is bad. We have succeeded in killing local initiatives by the policies on local authority finances. A substantial part of local authority revenue comes from the centre. That has a huge effect on any local authority innovation. That means that we do not have local authorities with any semblance of independence. With devolution we have a chance to let not a thousand flowers bloom but perhaps 15. Let them bloom. If it turns out badly, the Scottish people will punish those they do not like.
Lord Dixon-Smith: My Lords, it is somewhat historic that when President Ford was obliged to take over from President Nixon, he called for a report on the American economy. A fortnight later his staff produced 1,000 A4 pages, closely typed and with a few graphs and pie charts. He took one look and said, "I cannot study all that. I shall never absorb it all. Summarise it". His staff took it away, and two weeks later back came one line: there is no such thing as a free meal.
Whatever else we like to say, that will be the situation. I have spent a lifetime dealing with local authority finance. For once I find myself in some agreement with the noble Lord, Lord Desai. It has been
unfortunate that controls over local authority expenditure have been over centralised. However, worse than that and more insidious--it is less of a party point in a way--has been the way in which over the years central government have constantly stepped in to bail out local government when local government has found itself in trouble. I have always argued, and I say now, that local authorities should not have full Treasury backing; they should be allowed to go bankrupt and face the consequences of their own irresponsibility. So I would impose a much harsher discipline on local government than has existed in this country for a very long time.When considering what should or should not be on the face of the Bill, there is a case for arguing that there should be no possibility of raising the uniform business rate to a rate different from the domestic council tax. The noble Lord, Lord Gordon of Strathblane, has a margin of right on his side when he says that business contributes a great deal to local government--of course it does--and that it does not have sufficient say in the decisions that force up that expenditure. I disagree profoundly with the noble Lord when he says that business is not represented. If business is not represented in local government, there is a simple reason: that by and large business will not become involved in local government even though it has every opportunity to do so. We should remember that. There should be a linkage between the uniform business rate and the council tax so that they cannot be lifted at separate rates; otherwise the democratic impact will be diminished if business can be taxed at a higher rate.
As regards a Scots authority making itself uncompetitive, I would say, "Let it". If people move out of one city in Scotland into another area, that is fine. If they move over the Border into England--as I gather from what is happening to property prices in the north of England, is beginning to occur--well and good. I do not have too many worries about that.
At the end of the day these matters will be controlled through the Scottish block which comes under the Chancellor of the Exchequer who may not always be as generous as the present one. Because of that, there will not be enormous opportunity for fiscal transfers from a Scottish parliament to local government greater than they are at present because the absolute volume of money is constrained.
4.15 p.m.
Lord Lyell: Before the Minister replies in his usual excellent style, perhaps he will clarify this in my mind. As regards the wicked calumny against Councillor Geddes of Edinburgh, I heard the wise words of the noble Viscount, Lord Thurso, who has experience of tourism. I enjoyed his comments on hypothecated tax. I am a simple Angus man, not an expert, let alone from Caithness. It does not matter what one calls it. "Hypothecated" is a rather long word. I use a word with two syllables: is it extra cash? I think that it probably is. The tax may be called hypothecated; it may be diverted to making Caithness or Angus more beautiful. But every person who spends the night there will spend £2.
The noble Lord, Lord Mackie, said that business rates or local government taxation might be reduced. If that is the policy of the Liberal Democrat Party, I am sure that bells will be rung all round Scotland. Local authorities will leap, as noble Lords tend to leap in winter time.
The noble Lord, Lord Hughes of Woodside, regaled us with stories of Aberdeen City Council. The noble Lord, Lord Mackie, introduces a sensible note into the debate.
Lady Saltoun of Abernethy: Following the comments of the noble Viscount, Lord Thurso, and the noble Lords, Lord Gordon of Strathblane, and Lord Mackay of Ardbrecknish, I should be very sorry to see any kind of rate or tax which added to the costs of accommodation for visitors. Already in this country the cost of hotel rooms and overnight accommodation is very high indeed compared with a great many other countries. For example, when I ask Canadian friends if they are coming over this year, the answer I receive is, "We should love to come but your hotel rooms are so expensive compared with ours that we cannot afford to come for at least another two years".
Lord Sewel: It is nice to know that we have put the early start to such good use. That absolute gem of a distinguished chartered accountant among us, the noble Lord, Lord Lyell, claims no knowledge of what a hypothecated tax is. Pull the other one, my Lords!
Lord Lyell: Perhaps I may stress to the Minister that we have debits and credits, not hypothecated items. The meaning of a hypothecated tax is not necessarily what I was taught between 1962 and 1967. Perhaps the Minister can answer whether hypothecated tax is extra cash. That is what I want to know.
Lord Sewel: I do not wish to engage in a debate between the noble Lord, Lord Lyell, and the noble Viscount, Lord Thurso. They may be able to take the matter further somewhere else. I shall certainly not be a participant in that little dispute.
Let us return to the main issue. The noble Lord, Lord Mackay of Ardbrecknish, is a recent and, I sometimes suspect, a reluctant convert to devolution. Most of the time he does quite well. The new script comes out persuasively. But every now and then his nerve fails him. He sees all sorts of horrors and disasters looming ahead, backs off and tries to put controls and constraints in the way of the Scottish parliament.
His approach seems to be based on the perverse idea that almost as soon as a Scottish parliament is elected it will deliberately implement policies which would have as their primary objective the inflicting of damage on the Scottish economy. That is the argument we are being asked to buy. That argument may spring from the deep lack of confidence of the noble Lord, Lord Mackay of Ardbrecknish, in the ability of the parliament, or even his own party's representatives in that parliament, to take wise and prudent decisions. I am prepared to trust
them and if they get it wrong they will simply suffer the judgment of the electorate. It is as simple and straightforward as that.Amendment No. 181 would remove a fundamentally important power from the Scottish parliament; an important building block of devolution. The Bill provides for the full devolution of an extremely important area relating not only to local government but to local government finance, too. The idea is that control of local government finance will rest wholly in Scotland. Non-domestic rates are part of the local government finance system and the devolution of them represents a key part of ensuring that accountability for local finance lies with the Scottish parliament rather than Westminster. We are deliberately transferring that responsibility to the Scottish parliament and ensuring that the proper lines of accountability run from the Scottish parliament to the Scottish people. We are not reserving the power to the Parliament of the United Kingdom.
Concerns were expressed that expenditure in Scotland will increase almost out of control as a result of this power. There is no basis on which that judgment can be made. But let us return to what was stated in the White Paper, because it tried to deal with the arguments that we have heard from the noble Lord, Lord Mackay of Ardbrecknish. It states that if its expenditure growth relative to England became excessive and was such as to threaten targets set for public expenditure as part of the management of the UK economy, and the Scottish Parliament chose not to intervene or to take any action, it would be open to the UK Government to take that excess into account in considering its level of support for expenditure in Scotland. That is right, because in that respect control is not being exercised in order to constrain or limit the activities of local government. Control is being exercised in order to protect the reserved matter of macro-economic policy. That is absolutely and understandably the way forward.
In dealing with the nature and perhaps future reform of local taxation, the White Paper--and the White Paper was endorsed in the referendum--dealt at some length with the possibility of changes in the local government taxation system. With the leave of the House, I shall quote from paragraph 7.26 on page 25 of the White Paper. It states:
- "The Scottish Parliament will be responsible for determining the form of local taxation, both domestic and non-domestic, which local authorities will be permitted to levy. It will therefore be able to alter the form of the council tax, or replace it if it so decides. Non-domestic rates are also an important part of the local finance system and, they too will be a devolved matter. It will be for the Scottish Parliament to decide whether to retain the power to set the non-domestic rate poundage within its own control or to devolve that responsibility to local councils. It will clearly need to consult business interests before making any changes".
I believe that that is the right way forward. It shows a proper, mature and sensible approach to the relationship between the Scottish parliament and local government. Of course, the amendment as it stands is totally
incompatible with that proposition. I hope that on that basis the noble Lord will feel able to withdraw his amendment.
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