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Lord Mackie of Benshie: I was struck by the noble Lord's praising the Conservative Government for abolishing the business rate. There were certainly some extraordinary examples of the differences in rates just over the Border. It took the Conservatives from 1979 to 1995 to do it. It took them some little time to realise what harm it was doing.

As to the noble Lord's main point, he is at his old business: that you cannot trust a Scottish parliament; that the people who are elected will be extremely foolish. If they are foolish, that is democracy. All that I have seen of the people who wish to stand is that there is a far greater desire in Scotland to do something about the ills of Scotland through the Scottish parliament than exists at the present time. There is a certain delusion about politics which the Scottish parliament will almost certainly cure.

The noble Lord is simply taking away the power of the Scottish parliament not only to raise taxes but to lower them. Often the lowering of taxes can benefit the community and the country enormously. It might attract people, more money might be invested and the revenue might rise at the end of the day.

The noble Lord can no longer go on saying that the Scottish parliament will be foolish and must be prevented from being foolish by what is on the face of the Bill. It will not work.

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As to the local taxes, the noble Lord, Lord Hughes of Woodside, is absolutely right. If there is a decent system of local democracy then the people who overburden their electorate will be put out. It is a bad amendment and I trust and hope that the noble Lord will withdraw it.

Lord Rowallan: I disagree wholeheartedly with what the noble Lord, Lord Mackie, has just said. I must declare an interest as a business rate payer in Scotland. I have always objected most strongly to having to pay a larger sum than someone who has exactly the same business as mine in England. I think rates should be uniform throughout the country.

Lord Mackie of Benshie: I think we have agreed that the business rate is very bad in Scotland. I was saying that the Conservative Government took a long time to abolish it.

Lord Rowallan: The noble Lord also went on to say that local government could always be put out by the local voters. Very few people actually pay business rates. The vast majority of voters within a local authority area do not care what the business rate is. They are slightly concerned with the domestic rate but not the business rate. Therefore rates can go up enormously, with absolutely no thought being given to businesses.

It is clear that whenever local authorities offer free rates in a particular area--as various new towns have done over the years, such as East Kilbride, Cumbernauld and Greenock--businesses have flooded in. As soon as the 10-year period of grace is over and a business rate comes back on, those businesses have moved on somewhere else where they can get a cheaper rate. There is no doubt about that. The facts prove it.

I strongly support this amendment. We should have a uniform business rate throughout the country. It will save any aggravation and, because very few people pay the business rate within a local authority, it is more democratic.

The Earl of Balfour: Once again I would ask that the Government bear in mind that there should be only one body holding the purse strings in the country, and that is the Chancellor of the Exchequer. If there is to be any variation it should be a very small one. The tax concessions given to this Scottish parliament under the provisions of the Bill are at least limited to 3 per cent.

At the very least the Government should take on board that any variation, particularly of the business rate, should be limited to no more than the 3 per cent. difference. If it is more than that I am concerned that when businesses look at their expenses--particularly those that want to set up a business--they not include within their inquiries coming to Scotland, and the Scots will miss out.

Lord Gordon of Strathblane: The noble Lord, Lord Mackay of Ardbrecknish, has kindly declared my interest for me, so perhaps I can avoid doing so again. The noble Lord's allusion to a Scottish tourist bed tax is wide of the mark. My understanding is that Councillor Geddes' proposal is for a hypothecated tax on tourism,

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which would be used by the tourist boards locally to market tourism more effectively. There is no question of the tax going to the central exchequer.

I tend to side with the noble Lord, Lord Mackie of Benshie. We really should not circumscribe the powers of the Scottish parliament. I agree, partially at least, with the noble Lord, Lord Hughes of Woodside. Scottish local authorities are well seized of the importance of attracting new businesses to Scotland. They are also well seized of the disincentive that higher taxation represents. We should leave it to their own good sense.

It may give no comfort to the Government, but it is wrong that businesses have no say in local government. Businesses contribute more in business rates than the electorate contributes locally in community charges--and yet businesses have no say. The principle of taxation without representation is something which went out with the Boston Tea Party.

Later, when the Scottish parliament looks at ways of involving people outside the parliament in pre-legislative scrutiny, the key factor will be to have business involved in making some of the decisions. In that way, as with the analogy described by the noble Lord, Lord Hughes of Woodside, business may be prepared and may want to pay more for a better service. In my area we agreed voluntarily to install a closed-circuit security system because in the long run we think it will save us money. If the local authority had said, "We will do this if you will pay a higher rate", we would gladly have agreed. It would amount to the same figure. The key point is to involve business, and that is something that the Scottish parliament will do more effectively than Westminster has done.

4 p.m.

Baroness Carnegy of Lour: I do not believe that the amendment is just about the business rate. It is an important amendment. It raises the whole question of whether the Scots parliament will find itself capable of maintaining and improving Scotland's prosperity as a whole, and maintaining its economy, which has been going well over the past few years. That is what we hope the Scottish parliament will be able to do.

The anxiety being expressed publicly by some big businesses, and by many others quietly to one another, and, I am sure, to Members of the Committee, relates to uncertainty as to what will happen to taxation in general. I do not believe that that is rooted in the conviction that more will be spent; they just want to know what is likely to happen.

Business, of course, always has doubts about what the Chancellor of Exchequer will do and what will be the level of income taxes. In Scotland there is now a double anxiety. There is anxiety as to whether income tax is likely to rise by 3p in the pound or drop. It is inevitable that the uncertainty business faces will increase. It will be built into the system. We have to accept that. The additional uncertainty relates to what other taxes it may be possible for the parliament to raise. My noble friend has explained that, as it stands, the Bill opens up a number of possibilities. The amendment would limit them, and I am sure that that is wise.

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Members of the Committee are saying that the Scots parliament will be sensible and that it will not want to raise taxes if that is disadvantageous to Scotland. I am not certain about that. A number of people who seem likely to be prominent members of the Scots parliament--of course we still do not know who they will be--have expressed views which make one feel that they would like to see higher taxes. Mr. Henry McLeish, at present Minister of State at the Scottish Office, is on record as saying a while ago that he thought that it would be necessary to raise the extra 3p. I do not know whether he still thinks that. I understand that he is standing for the Scots parliament. We do not know whether he will be elected, but it is likely that he will be a prominent member. The SNP has expressed the view that it would like to see a 50p rate on higher incomes. That does not concern us at the moment, but it gives us an idea of its view on taxation, at any rate of those who are better off, and I should have thought of business.

It seems to me that the parliament will have some problems. I understand that the Scottish Office civil servants are getting themselves well kitted up for their new role. The Minister may be able to confirm this, but it seems that the number of Scottish Office civil servants has risen from 4,550 in 1995 to 5,465 in 1997. That is a biggish rise. It excludes of course some 6,000 people who work for non-departmental public bodies, most of whom are paid for by the taxpayer.

The new parliament building and its upkeep, the new Scottish Office building at Leith, in addition to the existing St. Andrew's House in the middle of Edinburgh and Dover House in Whitehall, all have to be funded, as does the increased number of people. The temptation for the Scots parliament to find extra money by way of taxes will be great. It may even find that it needs it unless, of course, the Barnett formula is rejigged to increase money for Scotland. It may be. We do not know. We shall all be watching that with great interest.

Scotland needs an increasingly beneficial economic edge over other countries in the EU and elsewhere, even, dare one say it, in relation to the rest of the UK. That is what we hope the Scottish parliament will be able to create. It will not be possible to raise all that money through local government in order to have more to spend at the centre. I do not believe that it should be allowed to do it. I like the amendment.

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