Scotland Bill

We have had a lengthy and thorough debate. First, I intend to address the amendments and then set out in a little more detail the various tests on what constitutes a Scottish taxpayer. Finally, I hope to pick up the points that have been made in the debate and try to answer as many technical questions as possible. Whether I will be able to find the solution to the question of whether Mr Stewart senior is a Scottish taxpayer remains to be seen, but I will do my best. Amendment 68 would require the Scottish Parliament to consult such persons as Scottish Ministers consider appropriate before setting the Scottish rate. I believe that that is inappropriate, as it interferes with the accountability of the Scottish Parliament to the people of Scotland. It should not be for the UK Parliament to tell the Scottish Parliament or Scottish Ministers how they should go about setting the rate of tax. It is for them to decide and ultimately to be accountable for that decision to the Scottish people through the ballot box. There is nothing to stop the Scottish Parliament in its Standing Orders including a requirement to consult or take evidence on setting the rate if it wishes to do so. Rule 6.6 of the Standing Orders of the Scottish Parliament sets the remit of its Finance Committee, which is required to consider and report on, among other things,"““proposals for the making of a tax-varying resolution””." It will be for the Scottish Parliament to decide whether a similar provision should be made in relation to any proposal to set the Scottish rate of income tax. That is a matter for the Scottish Parliament—it is not something that we should prescribe in Westminster. Amendment 69 requires the Treasury formally to consult Scottish Ministers, the Scottish Parliament and other persons before it uses its powers to disapply or modify the application of the Scottish rate of income tax. It may help if I describe the purpose of this power. We plan to use it to set some of the detailed rules on the operation of the Scottish rate of income tax, because any changes have to operate within the UK income tax framework, which is a reserved matter. The Scottish Parliament has given its consent to the Bill through the legislative consent motion, which includes that power and the way in which it will operate. It was not raised as a concern by the Scottish Bill Committee in its extensive scrutiny of the measure. Having said that, I can confirm that HMRC will work closely with all parties concerned, and it has set up three technical groups that include representatives of business and of individual taxpayers. The Scottish Government participates in all those groups, which cover in particular how reliefs for charitable contributions and pensions will be treated. The Government will publish draft legislation in advance, giving all parties an opportunity to comment. That is very much in line with our approach outlined in ““Tax policy making: a new approach””, which was published at the time of the June Budget. Tax policy making has been criticised as piecemeal and reactive. I want a new approach, with consultation on policy design and scrutiny of draft legislative proposals as its cornerstone. I accept the motivation behind the amendment, but I hope that the hon. Member for Glasgow North (Ann McKechin) agrees that this is something we are very much doing already, so the amendment is unnecessary. Proposed new section 80G of the Scotland Act 1998 provides the Treasury with supplementary powers to allow modifications to be made at a later date. It allows, for example, certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to be able to respond to stakeholder input and the changing environment. Subsection (4) of new section 80G gives the Treasury a limited power to make any changes retrospective to the beginning of the tax year. The timing of the Budget cycle is such that many Finance Bills contain proposals that come into effect before Royal Assent. I hesitate to bring back painful memories for the official Opposition, but hon. Members might recall that the previous Government introduced a clause at Report stage of the Finance Bill 2008, increasing the personal allowance by £600 in 2008-09 in response to pressure over the abolition of the 10p rate of income tax. As is common, Royal Assent did not occur until the summer of that year—until 21 July 2008 to be precise—but that clause took effect from the start of the tax year. A more technical example is section 60 of the Finance Act 2006, which I imagine you recall well, Ms Primarolo. That redefined the income tax exemption for employer-provided mobile telephones, and removed the ability of the family or household of the employee to use such a phone tax free. The clause took effect for the tax year 2006-07, but did not receive Royal Assent until 19 July 2006. It is important therefore that, where necessary, any order made under the powers given by section 80G can take effect from the start of the tax year. The Scottish rate is to apply for a tax year, and preventing amendments under section 80G from applying for the whole of the tax year could create difficulties for individuals and businesses alike. It is also identical to the power already in section 79 of the 1998 Act introduced for the Scottish variable rate.