Scotland Bill
The next item of business is a statement by Fiona Hyslop, on the Scotland Bill. The minister will take questions at the end of her statement, therefore there should be no interventions or interruptions during it.
14:05
The United Kingdom Government published its Scotland Bill yesterday. The Scottish Government welcomes many aspects of the bill and the further devolution that it provides. However, it is no secret that the proposals in the bill do not meet the ambitions that the Scottish Government and many people in Scotland have for Scotland.
The proposals for additional devolution are limited. For example, the bill would give the Scottish Parliament limited additional legislative competence in matters such as landfill tax, stamp duty and air guns. It would take away legislative competence in three other areas, including insolvency and the health professions. It does not even implement fully the recommendations of the Commission on Scottish Devolution.
The key test for the Scotland Bill is whether it will help the Scottish economy to grow, protect jobs and ensure that our public services have the investment that they need. With that in mind, the legislative consent memorandum that we lodge today provides a first detailed analysis of the proposals in the bill.
As all parties have recognised, proper scrutiny of the bill is essential. The Minister for Parliamentary Business has lodged a motion on behalf of the Parliamentary Bureau to establish an ad-hoc committee with the remit:
“To consider the Scotland Bill and report to the Parliament on any relevant Legislative Consent Memorandum”.
The Scottish Government will work constructively to assist the committee. The bill and accompanying documents leave many unanswered questions. Our aim is to support the Parliament in the thorough scrutiny of the proposals, identify improvements and ensure that the Parliament is able to take an informed decision on consent.
At the heart of the bill are the financial provisions. Unfortunately, as drafted, they are at best a missed opportunity and, at worst, potentially damaging to Scotland’s economy. The proposals on income tax have the potential to embed a long-term deflationary bias in Scotland’s budget. We estimate that they would have cost Scotland £8 billion since 1999. Under the proposals, the Scottish budget would also remain at the mercy of UK changes to tax policy and we would not have adequate levers to mitigate volatility in our budgets.
There are people who feel that the Treasury has long wanted to cut the Scottish budget and that the measures are effectively a trap amounting to budget cuts by the back door. The Scottish economy needs a Parliament with full financial responsibility and full economic, tax and benefit powers, but the bill fails to provide Scotland with any significant new levers to boost its economy. Responsibility for key taxes—including corporation tax, green taxes, fuel duty, North Sea revenues and excise duties—would remain outwith the Scottish Parliament’s control, and around 80 per cent of Scottish revenues would continue to flow to the UK Government.
There are big unanswered questions about the costs to the Scottish budget in reductions to the block grant and in implementation and running costs. The command paper that was published yesterday sets out the uncertainties before saying on page 35:
“a definitive statement on the correct reduction to the block grant”
is
“inappropriate at this time.”
The UK Government’s regulatory impact assessment says that accurate estimates of costs will not be available until implementation policies are determined, but gives indicative costs of £45 million for the one-off costs of setting up the systems in Her Majesty’s Revenue and Customs, plus £4.2 million per year thereafter.
It is clear that the UK Government expects the Scottish Parliament to pick up the costs. The Scottish Parliament is thus being asked to agree to the proposals with, at present, no clear explanation of how the permanent reduction to the block grant would be calculated and with only indicative estimates of the implementation costs.
It is not entirely clear how long it will take to put the new financial measures in place. The command paper describes a phased approach. It says on page 25:
“there will be a period from 2016 for which transitional arrangements will apply.”
I suggest that, in considering the bill, the Parliament will want to have a clearer indication of what the transitional arrangements will be, over what period they will apply and whether it will be possible to adjust the provisions in the light of experience and any unintended consequences.
The bill deals with non-financial issues, too. We are happy to support many of them and, in broad terms, we welcome their inclusion in the bill. However, the Scottish Parliament will want to look closely at those provisions, particularly where they do not fully implement the commission’s recommendations or leave important matters reserved. For example, the Scottish ministers would be able to set speed limits for cars on motorways, but not for heavy goods vehicles. They would be able to set drink-driving limits, but the Parliament would not be able to legislate to introduce random breath testing. The bill devolves control over some air guns, but the UK Government will be able to exclude “specially dangerous” ones. Responsibility for the regulations that govern Scottish parliamentary elections will be split between Scottish and UK ministers, perpetuating the complexity that was criticised by the Gould report on the 2007 elections.
There are other parts of the bill that we do not support. For example, the proposed additional reservations of matters that are currently devolved to the Scottish Parliament: the regulation of all health professionals and court procedures on insolvency. We believe that improved intergovernmental working, not the clawing back of control to Whitehall, is the correct way to ensure that there is proper integration of procedures across the UK. In those areas, and elsewhere, the Scottish Government has suggested improvements that could be made to the proposals to achieve the objectives of the bill more effectively or to provide greater benefit to the people of Scotland. I invite the committee to continue that consideration with us.
Some recommendations of the commission have not been included at all—for example, on welfare, the marine environment, the aggregates levy, air passenger duty, the Health and Safety Executive, immigration, food, research councils and animal health. The Scottish Government welcomes some of the omissions, particularly the proposed reservation of food content and labelling and charities law. On others, we are unconvinced by the UK Government’s case for not proceeding. For example, the UK Government has cited its planned review of air passenger duty and the current European Union litigation in relation to the aggregates levy. We do not consider those reasons to be substantive barriers to devolving those taxes now.
As long ago as 2008, this Parliament passed a motion agreeing that Scotland should have responsibility for marine spatial planning, fisheries and marine nature conservation out to 200 nautical miles. The Scottish Government is therefore extremely disappointed that the bill contains no proposals to devolve legislative responsibility for the marine environment beyond the 12-mile limit.
The bill contains no provision to take forward the devolved role in welfare benefits that was proposed by the commission. The UK Government command paper states that the specific proposals have been “overtaken by events”, but it promises a role for the Scottish Government in due course in aspects of the new benefits system. It is clear that this is a complicated area, which the Parliament will want to explore in detail. We regret that these and other recommendations are not addressed in the Scotland Bill, and invite the Parliament to consider whether that is justified.
I am confident that the committee will undertake full scrutiny of the proposals. Given the importance of these issues to the people of Scotland, we urge the committee to conduct as full an inquiry as possible and to look to wider Scotland for evidence in that consideration. The Scottish Government will support that process fully for the purpose of strengthening and improving the bill.
The Scottish Government invites the committee to begin its consideration of the Scotland Bill and accompanying paper and to report and make its recommendations to the Scottish Parliament. The Scotland Bill is an important matter for both this Parliament and the people of Scotland. Together, we can work to make this a better bill that is truly in Scotland’s interests.
The minister will take questions on issues that were raised in the statement. We have around 20 minutes for such questions.
Yesterday was truly an historic day for devolution. The UK Government laid the statutory blueprint for our Scottish Parliament to have the most radical transfer of fiscal powers since 1707 and, crucially, set out the financial framework that will ensure that the Parliament is more accountable for what it spends. Does the Government agree that the accusation that we are a pocket money Parliament can no longer be levelled at the devolution settlement, because the Scotland Bill achieves a direct link between the political decision makers and the economy?
Will the Government publish the information that led to the making of the unfounded claim that, had the proposed plan been in place, Scotland would have lost £8 billion? Surely the test of the proposed new powers is how they are exercised by the Government of the day. Given that we will have control over 35 per cent of our own finances, the new arrangement can make a difference to ordinary Scots, and when it is coupled with our existing powers over education, skills and health, the renewed settlement is surely Scotland’s future.
Scottish Labour is proud to have been centrally involved in making the bill happen, and we congratulate the Tories and the Liberal Democrats on their consensual approach. I welcome the approach that the minister has outlined, but can she assure me that she will join that consensus for the duration of the bill’s passage? Does the Government welcome the fact that the Scottish Parliament will begin to acquire powers on borrowing to fund capital expenditure as early as 2013, which will be followed by the acquisition of fuller borrowing powers? Surely the Government acknowledges that that will have a huge impact on Scotland’s finances and is best for the people of Scotland.
Pauline McNeill raises a number of points. I reassure her that by lodging the legislative consent memorandum and making a ministerial statement to Parliament the day after the Scotland Bill’s publication, we have demonstrated that, as a Government, we will engage fully in Parliament’s scrutiny of the bill.
In response to the member’s questions on finances, I point out that although the bill proposals would improve accountability with regard to certain aspects of the Scottish block budget, only 15 per cent of Scotland’s revenue would be affected. After the bill’s implementation, 85 per cent of the revenues raised in Scotland would still proceed directly to the UK Treasury.
I most definitely welcome the progress that has been made on borrowing, which is one of a number of issues that we have raised consistently in the 14 meetings that we have had with the Treasury. I am sure that other questions will come back to that.
The member asks us to publish the information that we relayed about the deflationary pressures and the impact that would have been felt had the Scotland Bill proposals been in place since 1999, whereby we would have lost out on £8 billion-worth of investment. This morning, I and a number of other ministers have spent a considerable amount of time being questioned by parliamentary committees as part of their scrutiny of the budget. I say most politely to the member that the information in question was published as part of the budget documentation on 17 November and has been available for scrutiny since then.
The minister’s statement comes at a time when all the polls suggest that after nearly four years of a Scottish National Party Government, support for independence has slumped while public support in Scotland for devolution and enhanced powers for the Scottish Parliament within the United Kingdom has increased. That is what the Scotland Bill will deliver for Scotland, building on the work of the Calman commission, which was set up on the initiative of the majority parties in the Parliament. I am proud of the fact that it is being taken forward by a Conservative-Liberal Democrat Government at Westminster, with very welcome support from the Labour Party.
In her statement, the minister talked—yet again—about full financial responsibility but, of course, Ireland has full financial responsibility and it is being bailed out by the UK Treasury as a result of pursuing the very policies that the SNP told us that we should adopt here.
The bill’s publication marks the day on which devolution has won the argument, so will the minister confirm that not one penny piece more will be spent on the so-called national conversation, which has died a death? Will the SNP Government join the mainstream of Scottish public opinion and back the bill’s general principles?
I think that somewhere in that question was a welcome for the Scottish Government’s constructive attitude.
David McLetchie raised a number of issues. He questioned the benefits of full financial responsibility, but those benefits have been and will continue to be set out by the Scottish Government. He mentioned bail-outs. It is not as if the UK Government has ever had to be bailed out by anyone—however, I distinctly remember hearing about the International Monetary Fund in 1976 or so, although that was in my childhood. Of course, George Osborne has also put on record his support for the Irish approach to economic growth in the past.
The member raises an important point that comes to the nub of the issue, and which I hope the committee will address. There is a difference between accountability and responsibility for economic growth. As presented, the bill will shift the balance towards providing greater accountability.
The real challenge of where we can go with full financial responsibility and powers for the Parliament is in the economic growth test. Where would the benefits be? If the Scotland Bill restricts the Government’s opportunities to collect taxes, or restricts it to collecting income tax alone, or if it restricts the higher rate of income tax and the benefit that we would get from it, that would not provide an incentive for economic growth.
Over the past 10 years, the greatest element of growth in revenues for the UK Government has come not from income tax, but from the plethora of other taxes. The previous UK Labour Government decided to restrict the amount of revenue that it received from income tax and saw growth in revenues from other areas. That is the pressure that is inherent in the Scotland Bill, and I urge the committee to give full scrutiny to those aspects of it.
The Scotland Bill was asked for by this Parliament in the resolution that it passed last year on the Calman commission report. It was supported at the ballot box in May by parties that represented 80 per cent of the Scottish electorate. Yesterday, the Secretary of State for Scotland said that it shaped a more confident Scotland and a more secure United Kingdom. However, all that we have heard from the First Minister and his ministers on the Scotland Bill is carping and nit-picking, denigration and sarcasm, and an extraordinarily muted welcome.
If Scotland had been independent these past two or three years, the loss to HMRC, in terms of all taxes, would have been £2.5 billion; I ask the minister to confirm that figure. Can the minister bring herself to welcome without qualification the generous borrowing powers that are to be made available to the Parliament? [Interruption.]
Order. We do not need to hear other conversations, particularly from the front bench, if I may say so.
Why was the minister’s statement completely silent on an issue that could help to build the Forth crossing, pay for more schools, or support more investment in housing? Can the minister cast some light on the principles that she thinks should govern how much the Scottish Government could afford to borrow? Is it not time that the SNP Government recognised that Scotland has no magic bail-out in the real world, and that nations require to pay their debts and pay back their loans? Is it not time that the SNP Government began to speak for Scotland and for Scotland’s interests?
We are delighted to speak for Scotland’s interests and to support any measure that improves the lot of the Scottish people. That is why I said quite deliberately in my statement that we welcome a number of the aspects of the proposals in the Scotland Bill. We probably welcomed more of the commission’s original recommendations than did the previous UK Government in its white paper.
The member raises an important point about borrowing. I agree that it is very important, particularly because we are facing a 36 per cent reduction in our capital over the next few years. I recognise the importance of responsibility in borrowing, which is why I am concerned that the borrowing limits that are proposed by the UK Government’s bill would provide for less borrowing for capital spend than the Scottish Government provides annually. The Government has already made £3 billion investment in capital on an annual basis. The £2.2 billion that is to be provided under the bill’s proposals is less than we provide in one year, but it is still welcome.
On being able to pay for that investment, the powers and restrictions in the Scotland Bill would mean that the Scottish Government would be more restricted in borrowing than local authorities, which have far more provision for prudential borrowing and what they can pay for.
On the question of amounts, in 2006, Birmingham City Council raised £260 million in bonds and other things that are not available to us; under the Scotland Bill, this Government would not be able to do that.
I welcome the provisions for borrowing, although they can be improved, and I look forward to working with the member to ensure that we can do that.
We come to open questions. We have less than 10 minutes, so please keep questions and answers short.
I welcome the statement and the extension, however modest, of additional powers to Scotland. Sadly, it still means that the Scottish Parliament post Calman will have fewer fiscal powers than Jersey, Guernsey or the Isle of Man, such is the lack of trust and faith that the unionist parties have in the Scottish people. Does the minister agree that it is deeply disappointing that, while Northern Ireland, with a third of our population, has borrowing powers of £3 billion, Scotland will be limited to the £2.2 billion in capital that she has mentioned and £500 million in cash, only 10 per cent of which can be drawn down in any given year—a restriction that is not applied to Scottish local authorities?
The member reflects on a number of points that I raised in reply to Robert Brown’s question. I will meet midway: I think that there are possibilities in the borrowing. We welcome the fact that there has been a shift in thinking that has allowed the borrowing provisions to be in the bill. More can be made of the borrowing powers, and we should scrutinise them carefully.
I welcome the minister’s comments in her statement that the Scottish Government will work constructively to assist the committee and that the Government’s aim is to support the Parliament in the thorough scrutiny of the proposals. Given those undertakings, the special constitutional character of the bill and the fact that its implementation will continue over at least two further sessions of Parliament, will she agree to make the chief economic adviser and the experts in finance and economics in St Andrew’s house available to support directly the work of the committee and to provide any economic advice or modelling work that the committee might wish to undertake in the interests of Scotland? Making available—
I must hurry you.
Making available expert independent advice with no strings attached is a test of the Government’s commitment to proper scrutiny in the interests of Scotland.
I certainly do not want to pre-empt the scope of the committee in establishing the evidence that it wants to take, and I do not want to usurp the role of the Parliament in deciding what support it gives to the committee or to pre-empt the support that the Scotland Office might give. However, we will consider the member’s proposals once the committee has met and set out the terms of its inquiry and the areas that it wants to discuss.
The minister will appreciate that the powers to grow Scotland’s economy are essential. Does she therefore share my disappointment at the comments made earlier today by the Secretary of State for Scotland when he ruled out the possibility of further tax powers being included in the bill, including power over corporate taxation? Will the minister press the London Government to ensure that it improves the Scotland Bill so that it includes the powers that are necessary to promote economic growth?
I have not heard the secretary of state’s remarks. On corporation tax, I would be disappointed that he is ruling out so quickly any proposal that might come from the deliberations of the committee once it is established. He should reflect on the terms in the Scotland Bill. There are some clauses that could be interpreted as enabling future transfer of powers, but we will need further scrutiny on that. Indeed, I should make it clear that although we have lodged a detailed legislative consent memorandum today, there will be opportunities for supplementary information when some of the terms of the provisions, which were published only yesterday, are looked at and clarified properly.
The minister was critical of the cost of tax collection arrangements under the current settlement. To allow proper comparison of the UK proposals, will she set out fully for Parliament and publish details of how much it would cost to initiate a collection system and an enforcement system in Scotland under the Government’s proposals for greater fiscal autonomy?
It is important that we encourage the committee to consider all aspects of fiscal responsibility—or fiscal autonomy, to use Peter Peacock’s phrase. If the committee chooses to examine all the aspects, I think that it will be good for the Parliament to conduct a thorough scrutiny and make a comparison of the opportunities and costs of the different systems that could be set out under the proposals in the Scotland Bill, for full financial responsibility and for other provisions, such as independence. I hope that there is an opportunity for the Parliament and the committee to consider all aspects: pros and cons, costs and opportunities.
Given the Government’s new-found concern about the volatility of income tax revenues, can we take it that the Government will not bring back to the Parliament any proposals to replace the stable council tax with the volatile local income tax? Not, of course, that it had the guts to bring those proposals to the Parliament in the first place.
That was unusually churlish from Mr Brownlee. He raises an important point about volatility. The prudential borrowing arrangements for local authorities allow some stability of planning for them. On the volatility of income tax, a central element of the Scotland Bill would allow borrowing of up to £500 million a year to address the volatility of forecasts from the Office for Budget Responsibility but would not allow for borrowing to counter volatility in income tax receipts in relation to global market changes. That is a central point. I hope that Mr Brownlee will join me in encouraging the parliamentary committee that will scrutinise the bill to examine the question of volatility thoroughly.
Does the minister agree that this is the most radical transfer of new powers ever from Westminster to the Scottish Parliament? The Calman commission, supported by the Scottish Parliament and the UK Government, was consistently criticised and opposed by the SNP but it has now delivered change on a scale that was, frankly, unimaginable back in early 2007. Does the minister agree that the new tax and borrowing powers are crucial to the growth of the Scottish Parliament, and does she recognise that the new powers are strongly supported by a large majority of people in Scotland? The Liberal Democrats strongly support those measures and will strongly support the bill. My simple final question is this: will the SNP vote for the bill or against it?
Nicol Stephen asks a number of questions. We have supported many of the non-financial aspects for some time. Indeed, we drafted legal provisions that could have been implemented by order in council and gave them to the previous UK Government some time ago. On the financial aspects, he talks about the tax proposals as being radical; however, the problem with the tax proposals is that they are not radical enough. They might provide accountability but they do not provide responsibility in relation to achieving economic growth.
If the test for the bill, at a time when we are coming out of a recession, is what it does to protect jobs, to improve economic growth and to protect the interests of the public services that we rely on, the bill as it stands will fail. We must improve the bill to ensure that Nicol Stephen and I can join in welcoming a provision that will really make a difference to the people of Scotland. Once the parliamentary committee has thoroughly scrutinised the bill and we can resolve some of the challenges that we have laid out in our memorandum, the Parliament will be in a better place to support the bill.
If the Government wants to argue for more and better powers for the Scottish Parliament—either the powers in the bill or an improvement on them—surely, we must say what we would use those powers for. Is it not about time that we put an end to the great lie that has dominated UK politics for decades, that we can have European-style public services and pay American levels of tax? Does the Government not have a responsibility to use existing powers to end that lie if it wants to be taken seriously on the case for more powers?
One of the questions that I frequently get asked—I have been asked it in the past few weeks—is how the Government has managed to provide for services such as the abolition of tuition fees, the cuts in prescription charges and the provision of more police officers within the powers that we already have. We have done that by effectively and competently providing for public services using the resources that we have. The member is correct to look at that analysis, but there are two sides to it. We must be responsible with the taxes and the levers that we have, but we must also deploy them effectively to improve the economy.
That brings me back to my central point. There are different ways to produce and provide for sustainable economic growth—I know that the member has a particular perspective on that. If we are to pursue sustainable economic growth, we need all the levers of power; then, across a range of areas, not just in a limited, one-tax solution of income tax, we can truly serve the people of Scotland.
I apologise to the member whom I was unable to call, but we must move to the next item of business.