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Page 1, line 6, after ("and") insert ("income").

The noble Lord said: My Lords, at the Committee stage of the Bill we discussed the question of what taxation-varying powers the Scottish Parliament might have and what relevance that would have to the question which is to be put to the Scottish public. I was not in the least convinced by the arguments put forward by Ministers on this subject.

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The puzzle is quite simply put. The Scottish Constitutional Convention's final document made it perfectly clear that the limited powers would be to vary the basic rate of income tax. It said:

    "The parliament will be financed on a stable, long-term basis. This objective will be attained by basing the financial settlement for the parliament upon a continuation of the principle of equalisation of expenditure within the UK; upon autonomy for the parliament in respect of its expenditure; and upon the limited power of the parliament to vary the basic rate of income tax".

That position has been in all the speeches and publications I have read from the Labour Party except, I suspect, in the manifesto, which, as your Lordships know, is my nightly reading to ensure I do not infringe against this holy text, if I may call it that. There, the limited financial powers were just to vary revenue. They were not about income tax.

I looked at statements made by the Secretary of State for Scotland, Mr. Donald Dewar, who said on BBC Radio Scotland, as reported in the Scotsman, that there was no retreat. At the time there were some question marks over whether or not the tax-varying powers would be allowed or whether people in, for example, the Treasury had decided there were fundamental defects surrounding that. Mr. Dewar added, when he had said that the Scottish Parliament would have a very substantial budget:

    "We think it should be able to vary that budget if the needs of Scotland and electoral opinion makes that sensible".

He went on to say:

    "There is no retreat. We hold to our commitments and we will deliver. The parliament will have the power to vary income tax around the basic rate--the defined financial powers promised in the manifesto".

In a long article in the Financial Times of 11th June, Mr. Henry McLeish, the Minister responsible for devolution, made it clear that it was income tax-raising powers they were discussing.

It is difficult to pick out a particular quotation because almost every paragraph shows and underlines the fact that they are suggesting to the Scottish people that they are referring to income tax-raising powers and, of course, income tax-lowering powers. I should not keep saying "raising" because there is the potential to lower them, though, as your Lordships know, I managed to drag out from the Government--they were very reluctant to answer--what would happen if income tax were lowered by, say, 3p. in the pound. The answer I received was that the Treasury would drop the block grant to Scotland by £450 million. Given the way the current Government, local authorities and so on are always telling us how under-funded everything is in Scotland, I find it hard to believe that they would welcome £450 million being removed from their budget. But that is what will happen if they decide to reduce taxes. If they decide to increase them by 3p. in the pound they will have £450 million more to spend. I imagine that there will be a whole queue of people saying where they want the money spent.

All these quotations--from the article I referred to concerning Mr. McLeish, the quotation from Mr. Dewar and the quotation from the constitutional convention--make it clear that they are talking about income tax. My

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question again--I did not receive a suitable answer at Committee stage--is why not put "income" on the face of the Bill. It is a very small amendment; very, very small indeed. It simply means that I and my fellow Scots will look at a question which says, "I agree that a Scottish Parliament should have income tax-varying powers" or "I do not agree that a Scottish Parliament should have income tax-varying powers".

I know I should not be suspicious of the party opposite but I am afraid that the habits of a lifetime cannot be set aside easily. I am suspicious. I do not see any difficulty with adding the word "income". It makes clear on the face of the Bill and on the face of the ballot paper what Mr. Dewar has said, what Mr. McLeish has said and what the Scottish Constitutional Convention has said. So why do we not have a clear question? Why is the word left out?

The suspicious part of me says that it is left out because at some time in the future this Scottish Parliament may want to vary other taxes. The Government could then go back to this ballot paper and say, "The Scottish people agreed that the Scottish Parliament should have tax-varying powers. It did not specify income tax-varying powers". They may say--we shall come to it later--that the White Paper will say "income tax-varying powers". But that is not on the face of these questions either. The Government are not committed to sticking to the White Paper. Why is the word "income" not on the face of the Bill? Why are the promises which Ministers are making and the constitutional convention made about income tax being the tax that is to be varied not on the face of the Bill?

The noble Lord, Lord Sewel, will have to work very hard, unless he accepts my amendment, to convince me and, I suspect, a fair number of my fellow Scots that the wide-ranging nature of this question is so that it will be open-ended; so that it will not tie a future Scottish parliament to income tax only, so that it will be able to look at value-added tax, excise duty and perhaps airport tax, and at all kinds of other taxes that are in the power of the Exchequer.

If the noble Lord does not accept my amendment, I can only conclude that the only reason why he will not accept it is in order to give this parliament, if it comes into being, a much more open-ended arrangement on taxation. I have little doubt that, for a year or two, if it happens, income tax is what will be varied, but then they will find that 3p. in the pound does not add up to much--£450 million in expenditure of £14 billion or £15 billion. Then they will say, "But we were not committed. No, you did not sign up, oh great Scottish public, just to income tax-varying. You signed up only to tax-varying. So perhaps we shall just vary a little more. We shall vary the other taxes". I hope that the noble Lord can set my suspicious mind at rest. However, short of accepting the amendment, I have to say to him that my suspicious mind will remain. I beg to move.

Lord Desai: My Lords, I am puzzled by this amendment. If you have the general statement "tax-varying powers" then any specific tax is included. Therefore, an income tax-varying power is covered by tax-varying powers in general. As an economist I have

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never understood the fuss people make about income tax. Why is there this great fuss about income tax? One can raise all kinds of taxes. The income tax bogey was raised by the noble Lord's colleague in another place when he was Secretary of State for Scotland. He went on calling it a "tartan tax". For a while he was worried about raising tax. Now, the penny has dropped that the tax could be reduced. What would be wrong if an airport tax were to be varied by the Scottish Parliament? If it were the wish of the Scottish people to give the Scottish Parliament tax-varying powers, so be it. It should be for the people to decide. The people of Scotland should be given a lot of choice. They should decide whether they want tax-raising powers for the parliament and then whoever is in charge in Scotland will decide which particular tax will be used because the circumstances may vary. Therefore, the broader interpretation is better than the narrower one.

Lord Renton: My Lords, although a short amendment it is a very important one. Until we have the White Paper we have no idea what the legislative powers of a Scottish parliament may be. We have no idea what taxes it may be able to impose. They may include import taxes, excise duties, entertainment duties--all kinds of things. Surely, the main intention is that the parliament should have the power to vary income tax. If that is the main intention it should be stated in the question to be put to the people and in the Bill.

My noble friend Lord Mackay of Ardbrecknish has made out a very strong case indeed whether or not we have an idea of the content of the White Paper. Frankly, until we do know its content it is very difficult to exercise a judgment which is of sufficient interest to the Scottish people and which offers sufficient protection for them. I hope that we press the amendment.

Lord Stanley of Alderley: My Lords, I intervene in this matter on the Welsh side although the amendment deals only with the Scottish side. My noble friend Lord Renton has taken the words out of my mouth. It is the problem of the vagueness on which we are being asked to try to decide. The Bill is enormously vague about what the Welsh assembly may or may not do. We hope that in the White Paper tomorrow we shall discover a little more. However, as I understand it, it may not contain what we get at the end of this legislation. The amendment illustrates exactly our situation. I live the whole time in Wales; there are many who do not. I want to know exactly what I am voting for. And the more we know that is precise, the more I will be prepared to vote for, or maybe against, a Welsh assembly.

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