Scotland Bill

Not just now. However, as a result of the decisions taken by the UK Government in 2010 in the comprehensive spending review, capital budgets available to the Scottish Government are now likely to fall by some 36% in real terms. That represents a cumulative reduction in spending power of around £4.1 billion over the period of the comprehensive spending review. The speed and scale of the cuts by this Government significantly constrain the Scottish Government's flexibility in managing their infrastructure programme. It is vital that while ensuring the overall sustainability of borrowing—I agree with the Minister on that—Scotland's capital borrowing facility has sufficient scale and flexibility to enable the funding of productive investments over the long term. The proposals in the Bill state that from 2015 the controls and limits applied to capital borrowing mean that Scottish Ministers should be allowed to borrow up to 10% of the Scottish capital budget in any year to fund capital expenditure—£230 million in 2014-15—and that the overall stock of capital borrowing could not rise beyond £2.2 billion. They also state that borrowing to finance capital funded by a loan from the national loan fund would be for a maximum of 10 years, but that a longer time frame—for example 25 years—may be negotiated if that better reflected the life span of associated assets such as with the new Forth crossing. In the written statement of 13 June, the Chancellor and the Secretary of State proposed:"““bringing forward to 2011 pre-payments, a form of cash advance, to allow work on the Forth replacement crossing””" and"““introducing a power in the Scotland Bill that will enable the Government to amend, in future, the way in which Scottish Ministers can borrow””—[Official Report, House of Lords, 13 June 2011; Vol. 728, c. 58WS.]" including through the provision of bonds. Notwithstanding any of that, the £2.2 billion cumulative limit is unchanged. I am pleased that there is now established consensus among the Scottish Government, the Scottish Parliament, the House of Commons Select Committee on Scottish Affairs and a number of independent experts that the Scotland Bill's proposals for capital borrowing require substantial enhancement and improvement. That unanimity was reflected in the motion that was agreed unanimously on 9 June in the Scottish Parliament. I make this criticism of the proposals even with the changes regarding our attempt to have capital borrowing devolved so that limits, bond issuance and all these matters are agreed between the Governments on a statutory basis. At the moment, the Bill is predicated on a framework that appears to have been developed without any explicit discussion about sustainability or affordability and without offering any objective means of testing those essential criteria. The annual borrowing limit of 10% of capital departmental expenditure limit seems arbitrary and the proposed total limit on borrowing, set at £2.2 billion, is believed to be too low to make a meaningful difference. Indeed, I think that the Scottish Parliament Scotland Bill Committee in Holyrood suggested £5 billion. The UK Government have not proposed any objective criteria to determine the path of total capital borrowing capacity over time and that builds uncertainty and discretion into the framework. The arbitrary mechanism that the UK Government have proposed for revising this is inconsistent with the basic principles of devolution. The central assumption of a 10-year repayment period for capital borrowing is inappropriate, as public capital assets will typically have a useful life of perhaps more than 30 years. Although helpful, the early implementation measures will do very little to offset the cumulative £4.1 billion reduction in capital expenditure. The changes are welcome, but we believe that the UK Government's proposals still require improvement in four key areas. First, the specification of annual limits on borrowing should be agreed between the Governments and not set arbitrarily. Secondly, the methodology for determining the borrowing capacity that is sustainable in the long term needs to be agreed. Thirdly, the terms of repayment for capital borrowing need to be agreed and, fourthly, the impact of the early implementation measures that are proposed also need to be looked at and agreed properly. We believe that should be done within the framework of a statutory agreement between the two Governments, and that is the purpose of the various amendments and new clauses we have proposed. They include amendment 26, which would allow Scottish Ministers to borrow for the purpose of meeting capital expenditure without requiring the approval of the Treasury and without it being by way of loan, and amendment 27, which would mean that Scottish Ministers and the Treasury must both agree to a code of practice and framework within which these things would be agreed. Our amendment 28 would remove the measure that suggests the cumulative borrowing total should be set at £2.2 billion, so it would become redundant when an agreement was in place. Amendment 29 would remove subsection (10) of clause 32, which introduces the type E procedure. That subsection would not be necessary because the agreement on how Ministers are to determine and keep under review how much they can afford to borrow, the terms and conditions and the sums that may be borrowed and the limit on aggregate at any time outstanding in respect of the principle would be agreed. That brings us finally to commencement. [Interruption.] My hon. Friend the Member for Perth and North Perthshire (Pete Wishart) suggests from a sedentary position that I should keep going but I suspect that my speaking for close to an hour will be enough even for me. The commencement procedures cover the implementation of the Scottish rate of income tax, income tax for Scottish taxpayers, the Scottish tax on transactions involving interests in land, the disapplication of UK stamp duty land tax, Scottish tax on disposals to landfill and the disapplication of UK landfill tax. As I said on Second Reading, these provisions will come into force two months after the Bill receives Royal Assent, but they will not have any practical effect at that point because the provisions in the Bill as currently drafted include an additional step that requires the Treasury to appoint a tax year as the first year in which the income tax provisions are to operate. In the cases of SDLT and landfill tax. the Treasury will appoint a specific start date but the principle is the same. Until the Treasury does that the tax provisions will sit on the statute book without changing the current arrangements whereby the UK Parliament controls all aspects of income tax, SDLT and landfill tax. The House should also note that although the repeal by the Bill of the current Scottish variable rate provisions is similarly commenced two months after Royal Assent, that has no practical effect until the Treasury appoints a tax year as the last tax year in which SVR operates. That might have been affected by earlier amendments, and I wait to hear what the Minister says about that. That two-stage approach to commencement is highly unusual and the practical effect is that the tax proposals will operate only when the Treasury decides. The powers conferred by the Bill on the Treasury to appoint start dates are not subject to any parliamentary procedure and, indeed, will not even be publicised by means of statutory instrument, so the processes for bringing the tax provisions of the Bill into effect do not require the consent of the Scottish Parliament, Scottish Ministers or even Westminster. I believe that is a fundamental flaw. We believe that there must be a role for the Scottish Parliament in particular. The Scottish Government have outlined serious gaps that remain in the Bill, and crucial details remain unknown. It is essential therefore that the Bill includes a specific mechanism to allow the Scottish Parliament the opportunity to consider the Scotland Bill proposals before they are brought into effect. Our amendments seek to make changes to the commencement provisions of the Bill to ensure that the tax provisions cannot be brought into effect unless the Scottish Parliament has specifically consented. As I said on Second Reading, there are a number of examples in which assent from Scottish or, indeed, Welsh Ministers, Parliaments or Governments is required before all-UK legislation can be invoked or rolled out properly. These amendments are on corporation tax, excise duties, capital borrowing and commencement. The first three are part of a package of six measures that the First Minister has been discussing, and I am sure he will be making detailed responses to the UK Government. We believe the measures are important, not to deliver full fiscal autonomy, not to deliver independence but, as we said on Second Reading and beyond, simply to make the Bill better and to remove some of its inherent flaws and weaknesses. I have been a long time speaking and others want to contribute. I commend our amendments to the House.