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My final plea would perhaps come from recognising that I know some quite sensible people in the SNP. I disagree with them but they are not madmen; they are people who immediately realised, with the huge majority that they got last May, "Hold on-this independence thing-what are we going to do?", so they have now dreamt up independence-lite. I fully accept the strictures that have been made already. They have not spelt out

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what it is, because the honest truth is I do not think that they know but they perhaps recognise that what might be traditionally thought to be independence is neither possible not desirable. We have to help them reach a conclusion which the rest of us would find acceptable. Independence-lite and devo-max, to use chattering-class lingo, are probably not all that far apart. I am quite happy to have a sensible dialogue with the SNP and listen to a reasoned case for further devolution of tax-raising powers. I do not think it possible but I am very happy to listen.

12.24 am

Lord Browne of Ladyton: My Lords, I am delighted to stand at this Dispatch Box for the first time, with the sound of the words of my noble friend Lord Gordon ringing in my head. He has treated us to 10 minutes of quite profound common sense.

I think I can reassure my noble friend-I am sure that the noble and learned Lord the Advocate-General will support me in this-and, indeed, the noble Viscount, Lord Younger, that there is no possibility of the Bill leaving this House with excise duty powers transferred to the Scottish Parliament or indeed any taxation powers that would contravene or raise the sorts of problems and concerns that have been identified. We can, at least at the beginning of this summing up, reassure Members of the House that that is not a possibility, though it may be part of the debate that we have.

When I agreed to do this, I had not imagined that I would make my maiden speech at the Dispatch Box at this time in the morning. However, it has been a privilege to be here. It is traditional to say that we have had a varied and informed debate when one is in this position, but it has genuinely been a privilege to listen to this debate. I regret that we were denied the forensic flourishes of the noble and learned Lord, Lord McCluskey, which I was looking forward to hearing, and I regret that my noble friend Lady Liddell could not be tempted to give us a deep and serious explanation of the Australian tax system. Despite that, there have been a number of very valuable contributions from all sides of the House. The depth and range of experience contained within this place in relation to Scotland is impressive and it has been reflected in the quality of this debate. Indeed, we heard from voices beyond Scotland. The noble Lord, Lord Wigley, and my noble friends Lord Morgan and Lord Soley contributed to the debate. I share the regrets expressed by the noble Baroness, Lady Linklater of Butterstone, that there was a lack of English voices here. I hope that the absence of those English voices was to leave room for the Scots, because there were so many that wished to contribute and we were restricted in the time that we had. However, I suspect that that is not the whole of the explanation. The issues we have been debating affect not just Scotland but the United Kingdom quite profoundly and they will not be resolved with the certainty and stability that many noble Lords crave unless there is a significant and informed contribution from the rest of the United Kingdom to try to settle them. I will come back to that in a moment.



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Before moving on, I would like personally to express my gratitude to the noble Baroness, Lady Linklater of Butterstone, for her words of approval and support, giving credit to Donald Dewar, whom I had the privilege to serve as Parliamentary Private Secretary at just about-though not all of-the time that the Scotland Bill was passing through the other place. His name has been mentioned occasionally in this debate, but I know that there is a sense and knowledge around this House of the contribution that he made to the modern Scotland. It is a matter of great regret that he died prematurely and was not able to make the contribution that we all know he would have continued to make for many years, in Scotland and beyond.

I thank the noble and learned Lord the Advocate-General for his introductory remarks. This is not an easy Bill to make a Second Reading speech about, in a way that captures and retains the audience, but he introduced the comprehensive nature and complexity of the Bill well, and set the scene for the debate. I want to take this opportunity to thank him personally for the gracious and helpful way in which he and his fellow Ministers in the Scotland Office have extended the help of their Bill team to me, and to other members of our Front Bench, in order that we can be assisted in understanding some of the complexity of this legislation. We have had but a small reflection of that complexity in the debate that we have had tonight and it will unfold over the days of the Committee stage. That sense of continuing co-operation is characteristic of the whole process that started, as we have heard from noble Lords, in 2007. The process has been co-operative and transparent, with the discussion and testing of these issues through the Calman process and thereafter through the White Paper and the other documents, discussions and consultations. I am grateful to the noble and learned Lord.

Today he has heard speeches of support from all sides of the House, with one or two minor exceptions. In a sense, the tone of the debate has been summed up by the contribution of the noble Viscount, Lord Younger of Leckie, in which he gave qualified support to this legislation. I sense that there is quite a lot of qualified support around the House. That is a perfectly healthy position for a piece of legislation of this nature; it requires to be tested, teased out, explained and understood, but I am certain that the House will be persuaded to support it and send it back to the other place in substantially the same form as we received it. There are reasons why it might be important to do that, although we can have other debates.

The Opposition's intention is to support the Bill, but we will of course scrutinise and review its contents in as much detail as necessary and, when appropriate, table amendments that we believe will enhance the Bill for the benefit of the people of Scotland. I gently chide the noble Earl, Lord Mar and Kellie. I understand his desperation to find something that he can claim as a Lib Dem contribution to the success of the Government, but he cannot have this Bill. As noble Lords have made clear from all sides of the House, this process, which started as an initiative of the Scottish Parliament on 6 December 2007, is owned by all of the devolution parties of this House-although not all the members of those parties. I see the noble Lord, Lord Forsyth of

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Drumlean, moving his head in a particular direction; it is not supportive of the remarks that I am making, and I understand that. The initiative was born in another time and we are now having to deal with it in changed circumstances, but that does not mean we should not make the best of this process to make a contribution to the ends that we see for the Scottish people.

With regard to the way in which Scotland is governed, it is important that we see this as a progressive step, or a series of progressive steps, to the opportunities that the Scottish Parliament has to govern for the benefit of the Scottish people. I hope that we will approach our debates in Committee by testing the legislation and asking all the difficult questions that we have heard rehearsed today and more, but always with a view to trying to make our contributions pass the test that my noble friend Lord McConnell posed for us-that is, "Is this for the benefit for the people of Scotland and, more broadly, will it be for the benefit of the United Kingdom?".

There was support for the Calman process. Indeed, there was support for an independent review of the powers of the Scottish Parliament from all but one of the parties in the Scottish Parliament. I was Secretary of State for Scotland at the time when the Calman commission was set up and this report was commissioned. The commission's terms of reference, to which a number of noble Lords referred, were the responsibility of the UK Government, particularly in consultation with the other devolution parties. It is no criticism of the Calman commission that it may or may not have done certain things. It did the job that it was asked to do and it did it in an exhaustive, painstaking, positive and engaging way. We have heard from the noble and learned Lord the Advocate-General, the noble Lords, Lord Selkirk, Lord Elder and Lord Stephen, my noble and learned friend Lord Boyd of Duncansby and the noble Earl, Lord Lindsay, about the care and detail that have gone into the process. I commend the Calman commission report to all Members of the House. Indeed, I also commend the report of the expert group which informed the decisions relating to financial provisions. Many of the questions asked about why decisions were made, why certain percentages are favoured rather than others, or where the evidence was to support certain conclusions, are contained in a very accessible form, both in the report of the Calman commission and in the evidence of the expert group. There are additional documents that have been published in the processes that had led to this Bill, and they also inform the debate, but I commend those two reports. I recognise that the commission was instructed in a different set of circumstances and it would be unrealistic not to admit that the decision of the Scottish Parliament and the election of May last year have changed those circumstances significantly. However, it does not follow from that that these recommendations or this legislation are irrelevant to the future of the Scottish people.

As regards scrutiny of these provisions, I share the concerns expressed by my noble friends Lord McAvoy, Lord Foulkes and Lord Soley, and by the noble Lord, Lord Forsyth of Drumlean, that this debate appears to have been pushed to the end of the day. It will be

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presented and perceived by some as having pushed Scotland to the end of the day and to the back of the minds of the Members of this House and this Parliament. Of course, those people will not have taken the trouble to consider the terms of the debate, the knowledge that has been revealed, or the level of scrutiny that is being applied to this legislation even at this early stage. It is a pity that this was done, and as my noble friend Lord O'Neill points out, on a day that Scotland's football team played and won; this is perhaps the ultimate offence to the Scottish people. I trust that for a Bill of this importance we will not see a repeat of what happened in the other place when insufficient notice was given of quite significant changes to the Bill before Third Reading to allow them to be properly debated. I am sure I will be reassured by the noble and learned Lord, Lord Wallace, when he concludes the debate this evening, that this will not be the case.

I am pleased the Committee stage will take place when the maximum amount of information is available on how these provisions will be implemented, in particular the taxation provisions. I understand that at least two bodies in government are looking in more detail at the implementation and are resolving some of the issues that have been raised, such as the definition of a Scottish taxpayer. I think there is a joint Treasury or Exchequer group of some description and there is a high-level group of some description. I hope that in winding up the Minister will indicate exactly what stage these groups are so that we can judge whether there will be sufficient time to absorb their conclusions and to incorporate them into a debate. For a start, I would like to know if these two committees that have been set up have actually met, and if they have met, what their role is.

We devoted some time, though not an inordinate amount, to the issue of referendums. We have heard calls, variously, for a referendum on the implementation of these tax powers and for a debate on the provisions that are necessary for a referendum on the separation of Scotland from the United Kingdom. Indeed, at one stage we heard a contribution about the possible combination of these two referendums.

I look forward to the promised amendments from my noble friend Lord Foulkes of Cumnock and, perhaps, the noble Lord, Lord Forsyth of Drumlean, and others in relation to these issues so that we can tease out the necessary matters. When my noble and learned friend Lord Davidson of Glen Clova introduced the Opposition's position on the Bill at the beginning of this debate, he indicated an interest in the legal issues associated with such a challenge. There is an important debate to be had. It will be a debate worth having, provided it is focused on the arguments for a 21st century Scotland within the United Kingdom.

I am conscious of the time but I want to make this point: it is very important that Members of this House pay significant attention to the speech that was made at Second Reading by my noble friend Lord McConnell of Glenscorrodale. There are Members of this House who have held office in both the Government here and the Government of Scotland, as we shall come to call it properly and legally when the Bill is enacted. However, my noble friend Lord McConnell is the longest serving Scottish First Minister. He has served in government

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with Members of this House and has significant experience and knowledge of Scotland. He exhorted us to approach this from the point of view of what is best for the people of Scotland. He exhorted us, in the context of the challenges that we face and the ambitions that we have, to retain the union; to provide the best for the people of Scotland in that diverse union; and to do so in the context of an argument that shows Scotland's position in a diverse, modern United Kingdom, and that it is best for Scotland and the United Kingdom if it stays there.

I as much as anybody enjoy the cut and thrust of politics-taking on one's opponents directly and attacking them-both in Scotland and in the United Kingdom. However, the message of the Scottish Parliament election in 2007 was that the Scottish people are no longer responding as they once did to that type of politics in Scotland. There are those of us who believe in the union and devolution, in the social and economic union that is the United Kingdom, and in all the positive things that were described in a generic sense in contributions from across the House. Those of us who believe in all those things need to develop a narrative that sets them in a modern 21st century Scotland so that we engage with the Scottish people in a way that says, "We have a message for your future". It should not just be a message that stops with, "Certain people are doing something with the constitution of your country that we do not think is in its best interests".

We have the beginnings of such an argument. We have heard it set out in parts of this debate in contributions from all sides of the House. It is as incumbent on those of us who believe in devolution and that Scotland's future lies within the United Kingdom to spend time developing those arguments in the context of the Bill and its powers, no matter how challenging that might be, as it is incumbent on us to point out the errors and flaws in the approach of the party that wants to separate Scotland from the United Kingdom. It is only if we get that combination right that we will succeed in what we seek to do for the future of Scotland.

I intend now to wind up, and I apologise to all who have contributed to this debate in such an informed, witty, entertaining and engaging way. There has been insufficient time today, but we will have plenty of time in Committee to go back and pick up on some of these issues, and to attribute to those who have made a contribution to the debate the rightful acknowledgement that they deserve. Whatever one's view of devolution, the Scottish Parliament has become a permanent fixture in Scottish political and civic life. It is here to stay. Secondly, Calman has done us a great favour in spelling out why this is the case. Devolution has been good for Scotland and is settled with the Scottish people. The cross-party consensus in Scotland, with the depressing and repeated exception of the SNP for some alleged reason of principle that it abandons when it suits it and picks up again when it does not, has been sustained over last year's election and will continue throughout the passage of this Bill.

We on this side of the House will of course carefully scrutinise this Bill as the tenor of today's debate reveals that there are a number of very difficult questions

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that need to be asked and, more importantly, need to be answered. Your Lordships' House is rightly respected for its approach to the scrutiny and review of legislation, and that approach will continue for this legislation. In Committee we will look closely at the individual clauses. We will pick them apart and put them back together again, and we will explore what further measures can be added to this Bill for the benefit of the people of Scotland. On this side of the House, the test that we will apply to each and every clause, as set out by the Scottish Parliament when it initiated this process in 2007, is: does it enable the Scottish Parliament to serve the people of Scotland better, to improve the financial accountability of the Scottish Parliament, and to continue to secure the position of Scotland within the United Kingdom? It is on this basis that we support the Scotland Bill and we look forward to debating it further in the coming months

12.46 am

Lord Wallace of Tankerness: My Lords, first I welcome and congratulate the noble Lord, Lord Browne of Ladyton, on his maiden speech from the Dispatch Box. He has had a very distinguished ministerial career in the other place and I am sure that the House looks forward to hearing him further from the Dispatch Box, not least in the many hours in Committee that have been clearly flagged up during our deliberations-and quite properly. As I indicated in my opening remarks, a number of contributors to this debate have said that this Bill should be properly scrutinised, as was the original Scotland Bill back in 1998.

I believe that we have had a very well informed, worthwhile debate. Noble Lords have contributed with great passion but with great knowledge, bringing to bear expertise in many different ways, having been informed by their experience of civic life in Scotland and, in the case of the noble Lords, Lord Wigley, Lord Morgan and Lord Soley, in Wales and England. They have all made a contribution as part of the United Kingdom and Members of this Parliament in the United Kingdom and have brought their experience to bear.

The general tenor has been one of welcome for the Bill, albeit with varying degrees of enthusiasm. My noble friend Lord Mar and Kellie described it as a mild measure. The noble Lord, Lord Elder, said that he fundamentally and enthusiastically embraced it. In between those views there has been qualified welcome, and, I think quite properly, people have put down markers as to where they wish to examine these provisions further. Like the noble Lord, Lord Browne, I find it impossible to pick up all the points that have been made. I think there will be time in Committee to develop some of them if I do not get the opportunity this evening.

However, I disagree with my noble friend Lord Lang, who saw this Bill as an admission of failure, following on from the failure of the 1998 Act, as he alleged. The findings of the Calman commission, as I think my noble friend Lord Selkirk of Douglas indicated, was that the Scottish Parliament was overwhelmingly judged a success. Clearly some people would not have wished us to go down that road. We do not have a parallel universe so we cannot work out what would

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have happened if the Labour Government, having come to power in 1997, had said, "We are not actually going to do any of the things that we have done, and we are not going to have a Scottish Parliament". For my view, I suspect that it would have hastened the day when we would have had an even greater upsurge of the SNP if the promises made prior to 1997 had been broken. We do not know; we have a Parliament in Scotland. As has been said, it is part of the scene. It has been generally supported by the people of Scotland. In the Bill, we have set out to build on the foundations laid and improve our Parliament.

I turn to some of the specific points raised. The noble Lord, Lord Sewel, and my noble friend the Duke of Montrose raised the question of the Sewel convention. The passage of the Bill through your Lordships' House may be interesting if we have the noble Lord, Lord Sewel, talking about whether the Sewel convention should apply and in Committee the noble Lord, Lord Barnett, discussing whether the Barnett formula should apply. That would be novel.

The devolution guidance note established by the previous Government and adhered to since 1999 has been supported and endorsed by the present Government. It states that legislative consent Motions apply in three cases: where we are legislating on devolved matters; to amend powers of the Scottish Parliament; or to amend the powers of Scottish Ministers. I would be more than happy to make available devolution guidance note 10, which sets all that out. No doubt the noble Lord, Lord Sewel, will be more than familiar with the various provisions in the Scotland Act that allow powers to be transferred. In a number of those circumstances, that would have to be approved by the Scottish Parliament as well as by both Houses of this Parliament. Where that is done by other primary legislation, it seems right, and it was thought right in 1999, in the spirit of the convention, that if there is no order-if it is being done by primary legislation-there should be a legislative consent Motion.

Lord Sewel: Do I take it from that that if, ultimately, the Scottish Parliament decides that it does not accept the proposals, the Government would not proceed with them?

Lord Wallace of Tankerness: That is a highly hypothetical question. The Scottish Parliament has already approved the proposals by 121 votes to three. It remains to be seen what the committee of the new Parliament will do with any amendments, but the Scottish Parliament has already approved the proposals.

With regard to the specific powers on the boundary between devolved and reserved matters, I know that there has been comment that the Bill does not contain a substantial number of powers. As I said earlier, that is probably a reflection of the fact that the balance struck and judgments made in the initial Scotland Act were basically right, but we should not belittle or minimise the changes being made. They have been well thought through. In the case of Antarctica, there was clearly an oversight, but that is not an academic argument-well, in some respects it is an academic argument because if anyone wishes to undertake research

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in Antarctica, they require a permit or licence, and I am sure that Scottish academic institutions will wish to do so. It is only right that we ensure that the proper regime is in place for them to do so with certainty.

My noble friend Lord Shrewsbury asked about air weapons. The question here is not so much about the devolution of the power; some of his points reflected the fact that the Calman commission did not go beyond air weapons because the advantage of having a common system for other firearms throughout Great Britain was well understood. Many of the issues he raised are not so much about the devolution of the power but how the power might be used by the Scottish Parliament. Clearly, we will come back to that in Committee, and I look forward to looking at that in greater detail.

My noble friend Lord Forsyth suggested that we should not get too excited about a change to drink-driving. He might want to note the evidence provided by the Association of Chief Police Officers in Scotland to the Scotland Bill Committee of the Scottish Parliament. It stated that ACPOS welcomes the proposals contained in the Bill relating to drink-drive limits, which it would consider a step towards helping save lives and preventing serious injury on Scotland's roads. That is not a trivial matter at all. It is an important point. If, by exercising the power, the Scottish Parliament is able to pass legislation that would have that positive effect, then we welcome it.

Lord Forsyth of Drumlean: Is that not rather anticipating that the Scottish Parliament would choose to reduce the level rather than to increase it? Is that not a gross assumption?

Lord Wallace of Tankerness: The indications that have been given to us by those pressing the case for the change are that, to address the serious problems of alcohol misuse in Scotland, it was more likely that the level would be reduced rather than increased. I take the point that that could be a presumption but it is one that is fairly well based.

The noble and learned Lords, Lord McCluskey and Lord Boyd of Duncansby, and the noble Baroness, Lady Kennedy, all mentioned Clause 17 and the role of the Lord Advocate. Whatever differences there might be in terms of the detail of that particular clause, there was a general agreement that issues relating to convention rights and European Union law should ultimately be litigated in the Supreme Court. That is certainly the conclusion of the expert group, which was set up under Sir David Edward's chairmanship. Clearly, there will be an opportunity to go into the detail of how that will work in Committee.

The noble and learned Lord, Lord Davidson of Glen Clova, also raised the important point about whether the roles of the Lord Advocate should be split. As was said, this issue has been around for some time. I was rather surprised for it to be raised from the Front Bench at this stage of the proceedings. No doubt, we will again have an opportunity to debate that. As I indicated, the position of the Secretary of State-and the Government-is that, if novel proposals are to come forward at this stage, the tests are that

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they should be very detailed in their presentation, command a consensus and not only be for the benefit of Scotland but not prejudice other parts of the United Kingdom.

My noble friend Lord Caithness asked what other powers there might be. The noble Lord, Lord Wigley, raised the issues that the Scottish Government have raised. Again, those tests will apply. We hear a lot of rhetoric from the Scottish Government but we await with some interest more detailed proposals. We are still awaiting any submission from them on excise duty. I certainly found the points made by the noble Lord, Lord Gordon of Strathblane, and my noble friend Lord Younger of Leckie very persuasive in the context of the Calman commission, which did not recommend any devolution of excise duties. The tests that I have already outlined will apply to any of these proposals coming forward from the Scottish Parliament, including for example on corporation tax.

In the Government's mind, the only other taxes which could be devolved are the two which were recommended by Calman but are not in the Bill: aggregates tax, which we did not proceed with because of litigation that is currently in place, and air passenger duty-on the basis that the whole question of aviation taxation was being looked at. Did it make sense to devolve something which was under a much wider consideration?

The noble Lords, Lord Morgan and Lord Wigley, asked about the position in Wales. It was announced back in July that an independent commission will be established in the autumn to look at the financial accountability of the Welsh Government and the National Assembly for Wales. It will examine the issues of fiscal devolution and accountability, and take into consideration the work of the Holtham commission, mentioned by a number of contributors including my noble friend Lord Maclennan of Rogart. The Government are currently discussing the terms of reference and the commission members with the Welsh Government.

Important points were made by my noble friends Lady Linklater of Butterstone and Lord Lindsay about the recommendations within the Calman commission relating to non-legislative but important matters regarding links between parliaments and governments in Scotland and at Westminster. I can assure your Lordships that we take this matter seriously. Since the Government came to office in May 2010, we have committed ourselves to upholding an agenda of mutual respect and engagement with all the devolved Administrations.

We have successfully resolved some disputes under the new dispute resolution procedure that had been put in place by the previous Government: there have been two joint ministerial committees in plenary session since May 2010; the joint ministerial committee on Europe continues to meet regularly; the joint ministerial committee (domestic) has met twice; and, consistent with the Calman commission recommendations, we have issued communiqu├ęs after plenary meetings and made an annual report on the work of the JMC. I will be happy to give further information to my noble friends, but one other thing which I remember the Calman commission was keen on was attendance of

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Ministers at respective parliaments. We support the attendance of Ministers before committees of the Scottish Parliament. I think I am right in saying that the Chief Secretary to the Treasury has given evidence; I certainly gave evidence, along with the Secretary of State and Parliamentary Under-Secretary of State, to the previous Scotland Bill Committee in the Scottish Parliament, and I intend to do so again with regard to the new committee.

The electoral system was mentioned by the noble Lord, Lord Foulkes. When the Calman commission looked at this, it noted that the Arbuthnott committee said it should be looked at again after the 2011 elections. Therefore, we did not think it appropriate as Calman commissioners to make a recommendation on that. There is an acceptance, following the Arbuthnott committee report and the Calman commission report, that some form of review of the electoral system for the Scottish Parliament is required. The matter is under consideration, and the Government will confirm our intentions at a later stage.

It is clear that the key provisions in this Bill relate to finance. I rather thought when I heard my noble friend Lord Forsyth mounting his arguments against the tax-varying powers, as usual with great gusto, that they were very similar to the arguments we had in 1997 against tax-varying powers, so I will not rehearse all of these now. What the commission was faced with was trying to get a proper balance between the efficiency of the tax system and proper accountability. At the core, a number of noble Lords who have contributed to this debate have pointed out the importance of trying to ensure that there is a link between spending money and raising money. I think it was the noble Lord, Lord Morgan, who talked not only about "no taxation without representation" but also about "no representation without taxation". That link is very important.

What we did within the Calman commission, and which the Government accept, was to look at different international systems. I do not agree with my noble friend Lord Forsyth, who compared income tax to the poll tax. As the noble Lord, Lord McConnell, pointed out, the thing about the poll tax was that it had no link to income at all, which was one of its problems and its criticisms. Income tax, however, we were advised, was one of the taxes, perhaps more than any other, which actually impacted not only in reality but in perception upon individuals. We thought that in terms of identifying a tax which was most likely to accentuate accountability, income tax was the appropriate tax.

My noble friend Lord Caithness asked, "Why the 10p?". Clearly we are trying to achieve a balance between the Scottish Parliament having responsibility, while recognising that Scottish taxpayers contribute to the United Kingdom as well to a whole range of services which are provided at a United Kingdom level.

The question of the Scottish taxpayer was put very graphically by my noble friend Lord Lyell, with tributes to Andy Stewart. There is a different test from that which applied to the Scottish variable rate, and indeed

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Clause 32 of this Bill, for such time as the Scottish variable rate will continue, is brought into line with what is proposed in future.

For most people, determining whether or not they are a Scottish taxpayer will be a straightforward matter: it will be whether their sole or main place of residence is in Scotland. If it is in Scotland, they will be Scottish taxpayers. It is not an unusual thing to use a sole or main place of residence for capital gains tax purposes. I think it is also used for when we have to register as Members of this House as to where our transport links will be. So it is not a novel concept. One of those individuals who are UK resident but do not have a close connection with any part of the United Kingdom will need to establish the number of days they have spent in Scotland. Again, I suspect that this is a matter that we will look at in great detail in Committee.

Lord Forsyth of Drumlean: I know that the hour is late but that is not what the Bill says, unless I have misread it. It says that if you have more than one residence you count the number of days that you have spent in those residences.

Lord Wallace of Tankerness: I do not think that my noble friend has that right. The principal point will be whether it is your sole or main residence. As I have just indicated, it is only if you are an individual who does not have a close connection with any part of the United Kingdom that the number of days spent in Scotland will be relevant. We can clearly debate that, as we no doubt will, in greater detail when we come to Committee, but I seek to reassure my noble friend on that. He also said that the SNP would take the power to have new taxes and would implement them willy-nilly. However, the provisions in the Bill make it very clear that the power to have any new taxes will have to be passed not only by the Scottish Government but by both Houses of this Parliament. An order would not be brought forward to this Parliament unless it had the agreement of the UK Government. Therefore, there would have to be negotiation between the UK Government and the Scottish Government before such an order could be brought forward, and it would be subject to an affirmative resolution of both Houses of Parliament.

The noble and learned Lord, Lord Davidson, wished the borrowing powers to be accelerated. My noble friend Lord Younger put his finger on the matter: there is a pragmatic reason for delaying such powers in the context of the current spending review period. The borrowing of the Scottish Parliament would be aggregated with UK borrowing and, given that the borrowing limits have been clearly identified in the current spending review period, we do not think it right to move at this stage to extend the borrowing powers to the Scottish Parliament before 2015. The exception to that-it is perhaps not a proper exception although it is an important point-is that, in response to representations from the Scottish Parliament and the Scottish Government, we have made prepayments, or a sort of cash advance, in terms of the money required to do the preliminary work for the building of the new Forth road crossing. That has been widely welcomed and it is a pragmatic response to the situation.



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The noble and learned Lord, Lord Davidson, asked about the administrative burden and cost of income tax powers. Employers and software providers have already made changes to payroll software so that they can operate the existing Scottish variable rate of income tax. Therefore, the existing payroll software provides for a different rate to operate. Additional compliance costs and burdens may arise if the Scottish Government seek to adapt the existing process-for example, to introduce a greater degree of transparency-by requiring the Scottish rate to be separately identified on payslips and P60s. Further costs and burdens could also arise in relation to the treatment of certain tax reliefs.

The noble Lord, Lord Browne, asked about the working group. There is a high-level implementation group, which involves a number of bodies and organisations with an interest in the detailed implementation of the tax reliefs. It has already met three times and is due to meet again in the autumn. There is also a joint Exchequer group involving Ministers in the Scottish Government, the Secretary of State and the Parliamentary Under-Secretary of State. The group will look at the negotiation of the detailed implementation of these plans. I think that it is due to meet again shortly in the autumn. In addition, separate groups have been looking at issues such as tax on charitable giving and other such detailed issues. These groups have already met, and I assure the House and the noble Lord, Lord Browne, that those meetings will continue.

Finally on finance, the noble Lord, Lord Hughes, asked about the workings of the Scottish rate. He asked, as with chicken or egg, which would come first-the reduction or the block grant. Unlike the Scottish variable rate, the Scottish rate of income tax will require an annual decision from the Scottish Parliament. The proportionate amount will be deducted from the block grant and, if the Scottish Parliament does not set a rate, it will not get the money. It will be obliged to set the rate and to do so in good time before the start of the tax year-again, giving proper notice in terms of collection and to businesses which will have to administer the system.

Related to that, the question of bond issuing was raised by the noble Baroness, Lady Liddell. Although the Bill makes provision for that to be implemented-not by having further recourse to primary legislation but by secondary legislation-it will be dependent on the outcome of a consultation, which is either under way or is about to get under way, regarding the merits of going down that road, taking into account some of the points which the noble Baroness raised.

Linked to this is the question of the Barnett formula, raised by a number of noble Lords, including my noble friends Lord Maclennan, Lord Forsyth, Lord Caithness and Lord Younger, and the noble Baroness, Lady Ramsay. Under the proposals in the Bill, as I have indicated, the Scottish rate of income tax will be reduced by 10p. It will then be for the Scottish Government to decide to levy in Scotland. I am sure a number of noble Lords will wish to debate this further. The Government have made clear in the coalition agreement that we recognise the concerns about devolution funding, but the priority has to be to reduce the deficit and to stabilise the public finances.



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The noble Lord, Lord Sewel, said that something should be in the Bill about the formula. The position is that the Scotland Act contains nothing about it and that the Bill, if implemented, is neutral about its future. There will be a block grant but the formula to determine it can be done externally to the provisions in the Bill. We have been duly warned by at least one if not two noble Lords that we will have amendments on this. I note that the noble Lord, Lord Foulkes, and others are liable to bring forward amendments on the question of a referendum. A number of noble Lords have pressed a case for the United Kingdom Government holding a referendum on independence. Their argument is that it is in Scotland's interests to end the constant constitutional uncertainty and that a clear-cut question will produce a clear-cut endorsement of Scotland's place in the United Kingdom.

I understand the motivation of those who have argued that case. Many, including the Government, would like nothing more than to see an end to the manoeuvring of separation, which for so long has distracted Scotland from the many other opportunities and challenges on which we might more fruitfully and productively focus. As this debate broadens out beyond this Chamber to the political classes, more questions will be put to the SNP Government, as we saw last week, with important speeches by representatives of the CBI. The dangers of continued uncertainty will become more obvious to people across Scotland if the SNP-"rather coy", was how the noble Lord, Lord Hughes, described it- carries on ducking questions. It will need to be clear about its plans and its timings.

Perhaps it is too ambitious to hope that tomorrow, when he announces his programme for government, the First Minister will start to say something about that. As noble Lords have indicated, there are crucial questions about the euro or the pound, and about whether it would be the European Central Bank or the Bank of England that would have responsibility. My right honourable friends the Secretary of State and the Chief Secretary to the Treasury raised these questions last week. We will continue to press the Scottish Government on these issues. I take the point made by the noble Lord, Lord McConnell of Glenscorrodale, about the importance of all us waking up to the challenges and positively making the case for the United Kingdom, and for Scotland being part of that.

Lord Soley: Will the Minister say what his thinking is about the Electoral Commission's involvement in any referendum?

Lord Wallace of Tankerness: That is an important issue. Under present legislation, the Electoral Commission could be involved in a limited way only if the Scottish

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Government wished to proceed on their own. The commission is building up an expertise in referendums and has much to contribute, not least in helping to frame questions. In making the case for the union, as the noble Baroness, Lady Liddell of Coatdyke, said, we must challenge the independence case, because you cannot be a little bit pregnant and cannot be a little independent-the independence-lite or devo-max, which seems to be somewhat undefined. The noble Lord, Lord Soley, made an important point, saying that in the United Kingdom we have the most effective political and economic union that the world has ever seen. If we had not had it, today's debate would be about creating it. When you have peoples bound by a common language in one island or closely proximate islands, why would you not want to come together and be a union, certainly when you look around the world and see other islands or peninsulas that are divided? The thoughtful speech by the noble and learned Lord, Lord Boyd of Duncansby, set out the economic, social and cultural cases for union, which are, indeed, set out in the first volume of the first report by the Calman commission. It was a very good exposition of the positive reasons why Scotland should remain part of the United Kingdom, and I entirely endorse what he said: that we cannot frighten people into supporting the United Kingdom and have to give people an aspirational and inspirational reason for why we believe that this valuable union has served Scotland well over the past 300 years and will serve us well into the future.

I conclude by saying that the genesis of this was in co-operation among parties. I believe and hope that that will continue. I have every confidence that it can continue into the future. My noble friend Lord Sanderson said that the test of this Bill would be whether its passing would help or hinder the cause of the United Kingdom. He is absolutely right. That reflects the terms of reference of the Calman commission. They were referred to by the noble Lord, Lord Browne, and were:

"To review the provisions of the Scotland Act 1998 in the light of experience and to recommend any changes to the present constitutional arrangements that would enable the Scottish Parliament to serve the people of Scotland better, improve the financial accountability of the Scottish Parliament, and continue to secure the position of Scotland within the United Kingdom".

Those were not only the guiding lights of the Calman commission but are the guiding lights of this Government and, I believe, of this House as we approach this Bill. I believe the Bill delivers on that and that in our deliberations in Committee, we can ensure that it does. I commend the Bill to the House.

Bill read a second time and committed to a Committee of the Whole House.

House adjourned at 1.17 am.


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