Speech in the Scottish Parliament

10 March 2011

I regard it as a privilege to have served on the Scotland Bill Committee in the past three or four months.

The committee did a very thorough piece of work and its report stands as a clear statement and analysis of the arguments of the day.

That will be seen in the years to come.

I have said before in the chamber that it would be strange if the Scotland Act 1998 was perfect in every respect and would last for all time.

It was, as we now know, mostly right in the way it divided the devolved and reserved functions between the Parliaments, but the Calman report and the bill that followed from it formed the first major review of the workings of devolution in more than a decade.

The bill addresses the big weakness of the 1998 act, which others, in particular Murdo Fraser, have mentioned—the weakness that not enough financial responsibility or accountability for what we spend was invested in the Parliament.

That will be rectified by the bill, in a major adjustment to devolution.

Significant new powers will come to the Parliament, and what is more, the bill sets a framework for the further devolution of powers, which undoubtedly will happen in the years to come.

The bill places Scotland firmly within the broad family of devolved Administrations of quasi-federal or federal nations, and in the mainstream of the constitutional arrangements worldwide.

I make that point because we have been fed a diet for a long time, both in the chamber and more widely in Scotland, that somehow we are not a normal country.

Well, we are.

What is more, we have also been fed a diet—I am afraid that Brian Adam added to it just a few moments ago—that we have no significant economic levers at our disposal.

The evidence to the committee—I stress that it was evidence—gave the lie to that.

The evidence shows that we have highly devolved spending autonomy in Scotland.

We have near total autonomy, and more than almost all other federal or quasi-federal nations.

The evidence is also that making good use of that autonomy over spending is almost always more significant in creating economic growth than is having devolved tax powers per se.


Fiona Hyslop: The member makes an important point about the degree of spending autonomy that we have in Scotland. Does he agree with the bill’s proposals on the proportion of revenues?

Currently, Scotland has 7 per cent.

The bill will take it to only 15 per cent of the revenues of Scotland being under the control of this Parliament.

Does he believe that that is sufficient or, like Wendy Alexander, does he believe that the proportion should grow to include, for example, excise duty and other arrangements?


Peter Peacock: I do not think that Wendy Alexander said anything about excise duty, but I will deal with the very points that Fiona Hyslop makes.

The bill’s provisions will add to our existing powers over spending—which are important for economic growth—a wider basket of tax powers.

We already have powers over council tax and non-domestic rates.

Contrary to what has been said, with income tax coming to us, we will have a stable and buoyant tax that grows in line with growth in the economy as a whole.

In addition, stamp duty and the landfill tax will be devolved to us.

We have asked for the aggregates levy to come to us now, and the air passenger duty is to come to us in the future.

We will have increased borrowing powers, and the committee has argued for the UK Parliament to include the issuing of bonds in that framework.

The bill also contains a framework for the further devolution of new taxes in the way that Wendy Alexander described, which we could use in relation to climate change and so on.

In addition, the committee has not ruled out our having access to the higher tax bands in the future.

That would not come without challenges—increased risk and volatility come with that—but we have not ruled it out for the future.

Neither has the committee ruled out, in specific circumstances and under clear rules, our having limited access to corporation tax.

Corporation tax is no magic bullet for promoting economic growth, as it is sometimes portrayed.

It is complex in its administration, and the proposal raises fundamental competition issues between the rest of the UK and Scotland, in that it could create a race to the bottom in taxation rates.

Cannibalising our tax income would be to no one’s benefit.


Margo MacDonald: Will the member give way?


Peter Peacock: I am afraid that I cannot, because I am short of time.

If the UK wants to look at that as part of wider UK regional policy, Scotland should be at the table in the discussions and we should keep that option open.

Overall, the bill will result in our having a growing basket of tax powers and will improve the governance of this country and our accountability over time.

As others have said, the committee has sought to scrutinise and improve the bill.

That has come as a surprise to some people, who thought that we would simply rubber-stamp its proposals.

There are still some extremely tricky issues to resolve, not least of which is the grant reduction mechanism that Fiona Hyslop mentioned, which will apply when Scottish income tax kicks in.

How much better it would have been if the Scottish Government had engaged in the dialogue on that and had used the resources of the civil service to help us work through the complex issues to which the mechanism gives rise, but we are still awaiting a single bit of evidence from the Scottish Government on how to improve that set of highly technical and complex measures.

The committee was not put off by that and has drawn up key principles, which the next Scottish Government will have to address in great detail to ensure that the arrangements that are introduced are fit for purpose.

While the Scottish Government sat on the sidelines, the committee engaged with the real issues.

I could go on at great length about the deflationary bias, which does not exist, and the exaggerated claims that have been made about economic growth, but I do not have time to do so.

I want to conclude by paying tribute, as others have done, to Wendy Alexander for the huge effort that she has put into the process.

She has led by example in the rigorous scrutiny that has been undertaken. It is fitting that her final speech to the Parliament should be on the Scotland Bill. She has played a hugely significant part in shaping the current governance of Scotland.

I hope that the arrangements that will be put in place from today will help to shape the future governance of Scotland.

She is to be congratulated. I hope that the Parliament will support the motion.

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