Scotland Bill

The noble Lord may be surprised to hear that I agree with him. I am deeply concerned about what is going to happen to jobs and public services in Scotland as a result of the impact of the Bill. If he is saying that this is the wrong time to fiddle around with the Barnett formula, I would say that this is absolutely the wrong time to introduce tax-raising powers in Scotland that are limited in scope, with an Administration that appear to spend money without any idea of where the resources will come from. The Scottish budget is very stretched—the promises that have been made are on a very large scale and the revenue that can be raised from the income tax provisions is very limited. Despite that, the damage that will be done will be considerable. Earlier in our proceedings, people said that I seemed to think that politicians were just going to keep putting up taxes, even though they have to get elected. However, it is not just about tax but about preserving our public services: our schools and so on. It is a fact that spending per head on health and education is very much higher in Scotland than in England and in Wales, but that spending has not produced the same levels of productivity. The noble Lord is absolutely right that despite all the bluster, the Brigadoon economics and the Braveheart talk, the nationalist Administration have singularly failed to deliver on any of the outputs that they promised. Among the real concerns are the rising levels of unemployment and youth unemployment. The noble Lord may be surprised that I agree with him on this. I personally would take this Bill, put it on the shelf and get on with deciding whether Scotland wishes to remain part of the United Kingdom—and then have a proper look at the consequences that follow from the Bill. This Bill is from another time. Its genesis or midwife was an attempt by the unionist parties to avoid the nationalists getting a majority. It failed, and the world has moved on; the senior civil servant in the Scottish Office writes blog posts to his colleagues saying that it is lost in the mists of time and is irrelevant. No one who spent even a quarter of an hour listening to our proceedings this afternoon—whichever side of the argument they were on—could say that the Bill was not a huge constitutional change. It is taken for granted and people do not know what is happening. If we are going to go down this track—and I certainly would not want to—and if the idea is to make the Scottish Parliament accountable, the basis on which it is funded from Westminster should be one that is fair and is seen to be fair by the rest of the United Kingdom. I return to the Barnett committee, which took a huge amount of our time, and on which there were some real experts, such as the noble Baroness, Lady Hollis. I am sorry that she is not here, and I think that she must be the only person who understands local government finance as well as welfare finance—as with the Schleswig-Holstein question, which only three people understood. She was tremendously helpful in the deliberations on how to create a needs-based system of funding that would work and be fair. One argument that was put was that this could not be done for Scotland because it has large geographical areas and particular problems. The interesting thing is that when the block grant lands in Edinburgh, hey ho, who are the biggest recipients? They are health and education, distributed by means of a needs-based formula. So it is okay to have such a formula to give out and allocate money but not to decide how much you receive. There is a very good reason for that, which comes to the noble Lord's point. Again, we had serious academic evidence showing that the consequences of the Barnett formula were that Wales was severely underfunded and Scotland overfunded on the basis of need. The frightening thing is that the numbers are very large. Professor Bell at Stirling University reckons that it is of the order of £4 billion to £4.5 billion—which would mean quite a lot on Scottish income tax just to stand still. Clearly, it would be absolutely impossible to make the adjustment overnight. The Select Committee recommended moving to a needs-based formula over a period of 10 years and that there should be an independent commission, as they have in Australia, to deal with federal funding—an independent commission to work out the formula, free of any political input and seen to be independent. The commission would be responsible for the basis on which the funds were allocated. This is not rocket science; it is done all over the world. The proposals in the Bill on tax do not come into effect until 2014. In answer to the noble Lord's question, ““Why now?””, we need to get a stable basis for the funding so that the accountability of those who advocate the principle is there. I have my doubts about accountability. It reminds me of the argument that we used to have on local government, when people would say, ““Get rid of rate-capping because you'll have more accountability””, which eventually morphed into, ““Let's have a poll tax, because that will produce accountability; everyone will pay, which will make local authorities more responsible””. That did not quite work out as intended, because the level of the tax was too high. My concern about this whole project is that the level of the tax will have to be very high indeed to deal with the consequences of Barnett, which already favours Scotland. I would have left things as they were, but the voters decided otherwise. We are now in territory which, as the noble Lord, Lord Browne, reminded us, we should look at in the context of the independence debate. Some people might say that the last thing we should do is interfere with Barnett, because that will mean Scotland will get less money, the nationalists will argue that Westminster is responsible for the tax increases, and we will end up with independence. Every time we have discussed this in this Chamber, there have been no speeches at all in favour of retaining Barnett apart from those of the Minister on the Front Bench, whose words seem to turn to ashes in his mouth as he reads out the brief from the Treasury. There is no constituency for it down the Corridor; in fact, there is a considerable constituency of people who have an exaggerated view of how generous Barnett is. I say to the Government that if they are to achieve their objectives, which I think are misguided, of having an accountable Scottish Parliament which raises its own revenue and is held to account for its policies, it would be more than sensible—indeed it would be essential—for the Government to have a funding basis that is uniform and seen to be fair throughout the United Kingdom. I believe that is the genesis of the amendment, and why my noble friend Lord Barnett was so concerned to table it. It seems a particularly cruel thing to saddle a Treasury Minister with a formula named after him, in which everything he believes in and stands for is offended. There is a bit of a conspiracy here. We all know that the Barnett formula is unfair and not sustainable in the long term. However, it is a bit like my noble friend's attitude towards the aggregates levy: ““Not yet, but this is something we will turn to””. Even Calman acknowledged that the Barnett formula would have to be dealt with, and that in time we would have to move to one that was based on need. I say to my noble friend that if we are going to do this, it will take at least two years for a commission to work out what should be done, and how it could be done. It will need to be phased in over a very long period. It can be phased in gently and we can take the heat out of the argument that says that Scotland gets too much money. We can do something that is generous considering the considerable patience and forbearance which other parts of the United Kingdom have shown, most notably the Welsh, in terms of their deal in the United Kingdom. As we move into the phase where the future of the United Kingdom itself will be debated, and decided in Scotland on a referendum, it will be essential to address the matter. If, by the way, we are going to go down the track of devo-max, as some people suggest, there will have to be a referendum in the rest of the United Kingdom on that issue. In moving the amendment on behalf of my noble friend Lord Barnett, I ask my noble friend to consider it very carefully indeed. I understand of course the superficial reasons why people might recoil from it, but quite honestly an argument—from a Government who are introducing a Bill to create a Scottish income tax and invent completely new taxes in Scotland—that says, ““We can't deal with the formula because we are concentrating on reducing the deficit””, is not really one which sustains much scrutiny. It is essential to the future of the United Kingdom, and I believe to the Government's own declared policy of making the Scottish Parliament responsible for the political decisions that it takes and for having to raise its revenue, that the basis on which any allocation is made that is not covered by the tax-gathering powers of the Parliament is done on a fair and sensible basis. I beg to move.