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Devolution in Scotland and Wales

3.30 p.m.

The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel) rose to move, That this House take note of the Government's proposals for devolution in Scotland and in Wales, as set out in the White Papers Scotland's Parliament (Cm 3658) and A Voice for Wales--the Government's proposals for a Welsh Assembly (Cm 3718).

The noble Lord said: My Lords, the publication of the two White Papers and today's debate mark the second stage in the process of establishing devolved government in Scotland and Wales. Our proposals are part of a wider package to revitalise and modernise our democracy throughout the United Kingdom. Increasingly there has been a recognition that people are comfortable and confident with the idea that decisions which more directly impact on their daily lives and the lives of their communities are best made at a local level, below that of the national government. In the recent past while so many countries have developed forms of regional government, in the United Kingdom we have become an increasingly centralised state--the people feel removed and detached from the process of government, government itself becomes more incapable of responding to local priorities and local values, there is a lack of identity with and confidence in our political structures.

I appreciate that some Members of your Lordships' House are sincerely of the view that devolution poses a threat to the Union--that it is somehow the first step on

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the slippery slope to separation. If I believed that I would oppose devolution with as much vigour as I now support it. Surely all the evidence is that it is the withholding of power, and a failure to recognise regional identities and aspirations, that cause states to fragment. We have just to look around this building to see the evidence of that.

I have said on a number of occasions in your Lordships' House that I am firmly of the view that devolution is the means of strengthening the Union. As someone who was born and brought up in England, pursued part of my education in Wales and has lived most of my life in Scotland--I value the Union. But the enduring value of the Union is its diversity. What we are doing is to establish structures of government that not only recognise that diversity but encourage it to flourish.

I have said that our proposals are about revitalising democracy. We want to revitalise democracy in Scotland and Wales. We want a new politics--a more inclusive, consensual politics. That is why we have devised an electoral system that will ensure the fair representation of different points of view. That is why we place great emphasis on a strong committee system and ideas like pre-legislative scrutiny.

While many of us enjoy the theatre of this House and of Parliament generally, we must recognise that many of our fellow citizens are deterred from making a contribution to public life by the adversarial and confrontational style of our politics. We want to change that. We want a parliament and an assembly in which a much wider range of people will wish to participate. And I say quite frankly that that is going to be a challenge to the political parties and their selection processes, but we need it. The two countries--the UK--need a change in their approach to politics. It needs a more inclusive legislature.

I do not intend to repeat all the details of our proposals in my opening remarks. That ground was well covered in the Statements last week, and in any case many noble Lords will have read the White Papers--some no doubt in fine detail! I should instead like to make some general comments and to pick up in general terms some of the key issues which were raised in this House last week and subsequently in the press.

Since we are debating both White Papers today, let me explain first why our proposals for Scotland and Wales differ. The Government were elected several weeks ago on a manifesto to modernise the constitution of the UK and to put devolution at the heart of that programme of reform. But we were clear while in opposition and remain clear in government that it would not be right to force every part of the UK into a common mould. As I said, the great value of the UK is its diversity, and our structures of government should recognise that.

We believe that each part of the UK and each region of England should be offered a scheme tailored to its needs and which takes account of its unique history and circumstances. Scotland and Wales differ in many respects. So, we believe, do the wishes of the people in the two countries. We are thus offering Wales and

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Scotland measures that are appropriate to their own circumstances and aspirations. It will be for the people of Wales and Scotland to decide on our proposals in the September referendums, subject, of course, to the referendums Bill receiving Royal Assent tomorrow. We shall see then whether we have interpreted their wishes correctly.

There has been a great deal of reflection since the publication of the White Papers on the whole question of sovereignty, particularly in Scotland. That is clearly an important subject but I believe that some of the reaction has been a little over-excited. People appear to have been looking rather too closely for some hidden meaning. I can assure noble Lords that there is none. The position is in fact quite straightforward. Since we are proposing devolution rather than separatism, Westminster will remain sovereign, but the Government are proposing that sovereignty should be exercised in a new way--in a devolved way.

If the referendums result in votes in favour of our proposals, and the legislation is enacted, the people of Scotland and Wales will be given the opportunity to have a bigger say in their own affairs. If the parliament and the assembly prove effective and popular I do not believe that a future UK Government would seek to force through changes to the terms of the settlement, still less to abolish them. Indeed, the remarks by the Leader of the Opposition last weekend suggest that even opponents of devolution now accept that endorsement of our proposals in the referendums will represent a moral entrenchment much more effective than any attempt at statutory entrenchment.

There has been a great deal of comment, some of it misinformed or alarmist, about the tax-varying powers we are proposing for the Scottish parliament. Let me--I hope for the last time--put the record straight. What we are proposing is that the Scottish parliament will have the power to increase or decrease the basic rate of income tax set by the UK Parliament by a maximum of 3p. This would currently allow the parliament to levy or reduce income tax in Scotland by up to around £450 million, which is about 3 per cent. of the Scottish Office budget.

That may sound a small proportion, but the power will be an enormously important counterpart to the parliament's law-making powers. It means that the Scottish parliament will have to make real financial choices. Does it increase income tax, decrease it or keep it the same? Or, put another way, does it increase public expenditure in Scotland, decrease it or make no change? It is because the Scottish parliament will have to address those questions alongside its legislative proposals that it will be more directly accountable to the people it serves.

We decided that the power should be limited to varying income tax because there was no practical alternative. All the other options presented serious difficulties. And our proposal strikes a balance. On the one hand, the power needs to be sufficient to make a difference; on the other, it must not put Scotland's people and Scotland's industry at an unfair disadvantage compared with the rest of the United Kingdom. I am convinced that we have got that balance right.

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We have also built two specific safeguards into the system. First, any Scottish tax variation will not affect income from savings and dividends. Secondly, if the Scottish parliament's power to raise £450 million--index-linked to preserve its real value--were eroded by future changes to the UK tax structure, its ability to raise or forgo this sum through the tax system would be preserved. But we have made it clear that if or when such conditions did arise we would expect the £450 million to be levied or reduced in broadly the same way as our current proposals for 3p, on the basic rate.

The White Paper made it clear, by ruling out other tax options, that the power would remain restricted to income tax. There is no hidden agenda; just the delivery of our manifesto commitment to give the Scottish parliament a defined and limited tax-varying power. That is precisely what our proposals achieve.

There have been a number of questions about our proposals for giving the Scottish parliament and the Welsh assembly a say in European Union affairs. The Scottish executive and parliament and the Welsh assembly will have important roles in relation to European Union issues. Both will have the fullest and most direct possible involvement in policy formation within the United Kingdom. The Scottish and Welsh voices must be heard in relevant negotiations on policy at all levels, up to and including the Council of Ministers, including the scope to speak directly on behalf of the UK in those negotiations. Both Scotland and Wales will gain from an input to the position of one of the European Union's largest and, under this Government, most influential member states. The United Kingdom gains from the more thoroughly considered and debated nature of that input compared to the present.

If the Scottish executive is to participate as fully as the Government believe it should in EU matters, we propose that Scottish executive Ministers should attend relevant Council of Ministers' meetings in Brussels. The Secretary of State for Wales will attend relevant meetings on the same basis. Policy is planned in the UK but settled in Brussels in negotiation with our European partners. Without involvement in Brussels, Scotland and Wales would be absent from what can be the most important part of the process. We will safeguard that.

We intend that Scottish executive Ministers and the Secretary of State for Wales will have a role to play in the UK team at relevant meetings of the Council of Ministers, working within the UK lead Minister's dispositions of the team to secure the best outcome for the United Kingdom in negotiations. This could involve being able to speak for the UK in appropriate cases. In addition, where appropriate on devolved matters, executive members of the Welsh assembly may make their separate contribution within the UK delegation, as agreed by the lead UK Minister. There is no constitutional problem here, as some have claimed. Whoever speaks does so to an agreed UK line. The UK lead Minister is accountable to this Parliament for that line. I must remind some Members opposite that when we talk about the UK Parliament post-devolution we are

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talking exactly about that: a Parliament which is still the Parliament of the United Kingdom, not the parliament of England.

It is self-evident that the Scottish executive is accountable to the Scottish parliament for whatever it has agreed to. The assembly will want separate reassurance on its implication for Wales.

The Scottish executive will also have a representative office in Brussels, unless for some reason it unexpectedly decides otherwise. The Welsh assembly will be free to decide on its own arrangements. This is already the norm for regions within the European Union. It is a recognition that there is much more business transacted in Brussels than the formal core which is dealt with in the Council of Ministers and, prior to that, through COREPER. Separate offices for Scotland and Wales would not cut across the work of UKREP, to which Scotland and Wales will contribute staff just as they do now. What is proposed is not, as some parts of the press have luridly described it, a Scottish embassy in Brussels. As with many other regional governments, detached offices with a team of civil servants can act as a convenient link between the Scottish executive, the Welsh assembly and the many relevant interests in Brussels which will be part of that regional network of influence and policy. That is not, in essence, very different from the team of civil servants which the Scottish executive is likely to have based in London for day-to-day liaison.

I would like to turn in more detail to the Welsh Office proposals. In Wales, a £7,000 million budget for public services is decided by the Secretary of State without responsibility to or debate in an elected Welsh forum. The exercise of these decisions in accordance with the priorities of London and not of Wales has led to a widespread dissatisfaction with the political process.

The immense power and influence of unelected quango boards has caused a groundswell of resentment at a system which over the years has taken powers away from democratically elected tiers of government, both local and central. There is widespread agreement that too much control has been vested in an administrative state with tenuous links to the needs and preferences of the people of Wales.

There are those in Wales who are impatient that we have not been seen to move further to tackle the shortcomings of quango government. The White Paper highlights the action we propose to take before the assembly is set up: notably, by merging the three overlapping economic development agencies; reducing the number of training and enterprise councils and NHS trusts; and absorbing Tai Cymru into the Welsh Office. And when the assembly is established, two special health authorities will be abolished and their functions transferred. These proposals have had a warm and widespread welcome.

Less noticed has been the wide-ranging power that we are proposing to give the assembly over the remaining quangos. Our starting principle is that the structure of the public agencies which deliver services in Wales should, with few exceptions, be determined by the

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elected representatives of the people of Wales. The assembly is therefore to have the power, first, to absorb functions from quangos; secondly, to delegate functions from quangos to elected local authorities; and, thirdly, to restructure, merge or abolish quangos.

That power will apply to six of the remaining executive quangos and to 18 of the 19 advisory quangos. The assembly will also have the power, if it chooses, to transfer functions to itself from the health authorities; for instance, commissioning key health services on an all-Wales basis. For all the remaining bodies, the assembly will bring to bear an open and democratically accountable control over appointments, strategic direction and funding. The Government do not want to pre-empt the assembly's decisions on how it should use these powers. That is the nature of devolved government.

This radical approach will restore a much needed public confidence to the exercise of many valuable and indispensable functions. It spearheads the way for a new look at the accountability of public bodies across the UK.

In the period since the White Papers were published last week, the public debate and scrutiny of our proposals have begun. We are heartened and encouraged by the reaction they have received. I believe they respond to the spirit of the times--they meet the aspirations of the people of Scotland and Wales and enjoy the support of the broad swathe of Scottish and Welsh opinion.

I believe that our proposals for Scotland and Wales are realistic, practical and firmly in line with a great deal of thinking throughout Europe and elsewhere about the relationships between the seat of national government and the regions. The aim of our proposals for devolution is to give the people in the constituent parts of the UK and the regions of England the opportunity to exercise more power over their affairs. That is why we are proposing that it should have more substantial powers over more areas of policy than was envisaged in 1978. Devolution will not be a panacea for either Scotland or Wales. The parliament and the assembly will certainly not solve every problem overnight. But we believe that devolution will bring significant benefits for both countries, and in so doing will strengthen the United Kingdom as we move into the 21st century.

These proposals are designed to establish a new structure of government for Scotland and Wales--firmly within the United Kingdom but giving people more say over their own affairs. I believe that our proposals lay the basis for a stable and enduring settlement for Scotland and Wales and also for the United Kingdom. They are designed to strengthen every part of the Union--I believe that they will.

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