Scotland Bill

David Gauke leads for the Government on amendments to the Scotland Bill which will implement recommendations made in the Calnan Report and make changes to the finances of the Scottish Parliament including powers to set a new Scottish rate of income tax.

Mr Gauke: It gives me great pleasure to return to the House to discuss the Scotland Bill after the Committee debate in March.

The first group of amendments on today’s selection list is fairly extensive and addresses several different aspects of the Bill’s finance package. I will set out why we have tabled Government amendments and why we will not accept the non-Government amendments.

In Committee, we debated the definition of a Scottish taxpayer for the Scottish rate of income tax. I said that the Government would table a new clause to apply the same definition to the Scottish variable rate, in response to one of the recommendations of the Scottish Parliament’s

Scotland Bill Committee. The reworked definition of a Scottish taxpayer for the new Scottish rate of income tax is a significant simplification. I appreciate that it is unlikely that the Scottish variable rate will ever be invoked. Nevertheless, without the amendment, there would be two separate definitions of a Scottish taxpayer in place at the same time. There is potential for practical difficulties for taxpayers, employers and their professional representatives, who might need to familiarise themselves with one definition for the years up to 2015-16, only to have to switch to a different definition for subsequent years. That is entirely unnecessary.

Applying the definition of a Scottish taxpayer that has been developed for the Scottish rate of income tax for the purposes of the Scottish variable rate will help smooth any transitional issues, and will also make it easier for people to understand whether they are classed as a Scottish taxpayer. The Scottish Parliament’s Scotland Bill Committee rightly recommended the change, with which the UK Government very much agree, and I commend the new clause to hon. Members.

On a previous occasion, my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised a particular query. He has tabled amendment 24, about which he intends to speak later. I will respond to the issues that he raises after he has had an opportunity to set out his thoughts on that.

Government amendment 31 would make a small, technical change, to which I hope the House can agree. Section 989 of the Income Tax Act 2007 contains several definitions, which apply for the purposes of income tax legislation. It includes definitions of the basic, higher and additional rate of income tax. They refer to the rate of income tax set by the UK Parliament in the year in question. Government amendment 31 would extend those definitions to include the rates applicable to a Scottish taxpayer. As I said, it is a minor drafting amendment, and I do not anticipate its proving too controversial.

The purpose of Government amendment 15 is to correct a technical fault with the Bill so that it is consistent with the Government’s policy intentions as set out in the Command Paper, which states that the Scottish Government will be able to borrow to manage the difference between forecast and outturn tax receipts. However, as I explained in our Committee debate on 14 March, the Bill as it currently stands enables the Scottish Government to borrow to manage this difference only for fully devolved taxes, and not the Scottish rate of income tax. That is a technical fault, which the amendment corrects. I hope that it will be accepted.

Let me deal with Government amendments 32 to 35. The purpose of Government amendment 32 is to introduce a power, which will enable the Government to amend in future the way in which Scottish Ministers can borrow, including by way of bond sales, without the need for further primary legislation. The Bill gives Scottish Ministers a new power to borrow, by way of loan, from 2015-16 up to £2.7 billion of total debt, £2.2. billion of which can be used to fund capital expenditure.

The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably because, although interest paid on any loans will be funded from the Scottish budget, it will be included in the UK fiscal aggregates. The Bill therefore gives Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans fund, as recommended by the Calman commission. In addition, should Scottish Ministers so choose, the Bill gives them the power to borrow by way of commercial loan where that represents value for money.

Reports on the Scotland Bill by the Scottish Affairs Committee and the Scottish Parliament have recommended that Scottish Ministers should be granted additional borrowing powers—specifically, the power to issue bonds. The First Minister made the same points in his discussion with my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Scotland. The reports and discussions have highlighted the discrepancy between the powers of Scottish Ministers and local authorities, which already have the power to issue bonds.

So far, the main evidence that has been provided to the Government in support of Scottish Ministers issuing bonds is “because other bodies can do it”. However, with the exception of Transport for London, the vast majority of local authorities have not exercised those powers in recent history, not least because local authorities judge that they have access to more efficient and sustainable forms of borrowing.

The Government continue to believe that the case against bond issuance is clear cut, particularly in the medium term, given the uncertain outlook and challenging fiscal mandate. All the evidence suggests that further bond issuance would have a negative impact on the UK’s fiscal position.

In the context of the highest deficit since world war two, the Government would consider allowing Scottish Ministers to issue bonds in future only when that does not undermine the overall fiscal position, or have a negative impact on total UK borrowing. If a case is made that Scottish Ministers’ borrowing powers could be extended without undermining the overall UK fiscal position or increasing UK borrowing, the amendment that I am tabling today would allow changes to the borrowing powers of Scottish Ministers to take effect swiftly, by way of an order.

The Government have committed to conducting a review of the costs and benefits of bond issuance over other forms of borrowing to help inform any decision. The amendment would have the effect of, first and foremost, protecting the UK’s fiscal position by continuing to allow Scottish Ministers to access the most efficient and sustainable source of borrowing.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): After the Bill has been passed, the Welsh Government will be the only political entity in the British state unable to borrow. Will the Exchequer Secretary address that matter quickly, rather than awaiting some prolonged Calman process, which the Government currently envisage?

Mr Deputy Speaker: Order. I am not sure that that is relevant to the debate.

Mr Gauke: I want to make it clear that Government amendment 32 would not grant the power of issuing bonds to the Scottish Government. However, it would enable us to move more quickly should that decision be made in future The Welsh Assembly Government are not alone in their status, although the amendment would enable us to move more quickly should we decide to proceed in that direction.

Amendment 2, which was tabled by Her Majesty’s Opposition, would bring forward the introduction of the capital borrowing requirement set out in clause 32 from April 2015 to April 2012. Amendment 26 would remove the role of the Treasury in approving capital borrowing and the restriction that such borrowing must be by way of a loan. Amendment 27 would introduce a new statutory code of practice, to be agreed between the Treasury and Scottish Ministers, to govern capital borrowing permitted by section 66(1) of the Scotland Act 1998. Amendment 28 would remove the £2.2 billion aggregate limit on capital borrowing by Scottish Ministers. Amendment 29 is consequential on amendment 28. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those with the approval of the House, clause 32(10) would no longer be necessary, because there would be no such secondary legislation.

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All amendments would have the effect of altering the time scale for capital borrowing and the conditions on capital borrowing. I shall first deal with the timetable for implementing the borrowing powers. The Government believe that the capital borrowing powers are an important part of the package to increase the financial responsibility of the Scottish Parliament. The Bill enacts that new power at the point when Scottish Ministers have the necessary fiscal levers to support borrowing. From 2015-16 onwards, Scottish Ministers will have control over devolved taxes and the Scottish rate of income tax. The new borrowing powers come into effect at the same time, when Scottish Ministers can support such borrowing.

The House should be aware that, if the borrowing powers were introduced earlier in this spending review period, the UK’s spending plans would be altered—plans which the International Monetary Fund recently endorsed, and plans from which I am sure hon. Members would not want to deviate and put the recovery of the UK public finances at risk and undermine the credibility of the Government’s spending plans. The Command Paper allows Scottish Ministers to access partial borrowing powers in 2013, before the rest of the Bill comes into force, with the consent of the Treasury. That power can be used to make pre-payments to fund large capital projects such as the construction of the replacement Forth crossing. On 13 June, my right hon. Friends the Chancellor and the Secretary of State for Scotland confirmed that partial borrowing powers would be introduced two years earlier than originally intended to help Scottish Ministers to begin large capital projects as soon as possible.

The Bill contains borrowing limits for important reasons, which I set out in Committee. I should place today’s debate in context. First, the new £2.2 billion borrowing power is additional to the capital budget that Scottish Ministers will receive through the next spending review process. To give a sense of the magnitude of that sum, at the end of this spending review period, the Scottish Government’s capital budget will be £2.3 billion.

Secondly, Scottish Ministers have an unfettered power to switch resource spending to capital. Their borrowing does not represent free money. Those who pay the Scottish rate of income tax must pay the debt interest, but UK borrowing will increase as a result of increased Scottish borrowing. It is therefore surely right that the limit is determined by this House—first through its considerations of the Bill, and subsequently through the approval of any order to alter the limit. The Calman commission and the Scottish Parliament recognised the case for Scottish Ministers receiving new borrowing powers as part of their increased responsibility and accountability. Both recommended that the Treasury should have the ability to set conditions and a cap on the amount that Scottish Ministers can borrow in a year.

The limit in the Bill is set initially at £2.2 billion, because that represents an acceptable risk for the UK finances that does not crowd out other priorities in the next spending review period.

Andrea Leadsom (South Northamptonshire) (Con): If that debt must be consolidated with the UK’s national debt, it should surely be considered as quasi-UK Government debt. Does the Minister therefore agree that if the Scottish National party goes ahead with its vote on independence, it will need to consider very carefully the increased cost of borrowing that would ensue?

Mr Gauke: We must certainly understand the wider UK consequences of that. That is why there is a cap. In the Government’s judgment, £2.2 billion is the appropriate level at this point.

Stewart Hosie (Dundee East) (SNP): For the sake of clarity, will the Minister confirm that that £2.2 billion is a cumulative sum, and that the annual amount is £230 million?

Mr Gauke: Yes, that is the case, but we must consider the consequences of that borrowing for the UK’s debt position. That is the level that we believe is right.

As I set out in Committee, the £2.2 billion represents a floor, not a ceiling. The Bill provides for the limit to be increased to more than £2.2 billion with the approval of the House, but not for it to be reduced to less than £2.2 billion.

David Mowat (Warrington South) (Con): A few moments ago, the Minister mentioned the pre-payment amount for the Forth road bridge. Did the Treasury consider a toll on that bridge, in much the same way as a toll was considered for the Mersey Gateway bridge next to my constituency? If not, is that not asymmetric governance?

Mr Gauke: The decision on whether to put a toll on the Forth road bridge will be one for the Scottish Government. The Treasury has therefore not considered that proposal. Perhaps my hon. Friend should ask Scottish National party Members what consideration was given to such a toll. I suspect that the answer will be, “Not a lot.” The expression on the face of the hon. Member for Dundee East (Stewart Hosie) is probably confirmation that no consideration was given to my hon. Friend’s suggestion. Asymmetry is inherent in such devolved matters.

The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably, because although interest paid on any loans will be funded from within the Scottish budget, it will be included in the UK fiscal aggregates.

Andrea Leadsom: For the sake of clarity, the Minister tells my hon. Friend the Member for Warrington South (David Mowat) that the decision on whether there will be a toll on the Forth road bridge is a devolved matter, and yet also says that any Scottish Government borrowing would be included in the British national debt. How can that toll be a devolved matter? The UK is involved in keeping the cost of funds to the Scottish Government down so that they can afford to fund a bridge that people in England are unable to afford without charging a toll.

Mr Gauke: We must remember that any debt service will be financed by the Scottish taxpayer—that is the context.

We should move on. As I said, any loans will be funded from within the Scottish Budget and included in the UK fiscal aggregates. The Bill therefore continues to give Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans funds, as recommended by the Calman commission. In addition, should Scottish Ministers choose to do so, the Bill gives them the power to borrow by way of a commercial loan when that represents value for money.

The Government continue to believe that Scottish Ministers should be able to borrow only by way of a loan, but because overall macro-economic policy will continue to be a reserved matter, and because Scottish borrowing will impact on the UK fiscal position, it is right that this House agrees the limits and conditions of borrowing. I therefore ask Opposition Members to not to press amendment 2 and amendments 26 to 29 to a Division.

Stewart Hosie: The Minister suggests that various Opposition Members from various parties do not press their amendments. Is it not normally in order to hear the arguments for them before jumping to such a strange and presumptuous conclusion?

Mr Gauke: I do not think it an unprecedented statement. I am sure that the hon. Gentleman and I have served on many a Committee where that has been suggested. I wait to hear how persuasive the case is, but I suspect that I will not be persuaded, and that, to some extent, the amendments may be probing. We await the arguments, and I look forward to them.

New clause 8, tabled by the right hon. Member for Birkenhead (Mr Field), has two purposes. First, it seeks to legislate for the Chancellor, within six months of the day on which the Bill is passed, to

“lay before the House a report on the formula for allocating funds from the Consolidated Fund to the Scottish Government, and the alternative ways of calculating the sums to be paid.”

Secondly, it would require that within

“six weeks of laying that report…the Chancellor…lay before the House proposals for a new…formula which would ensure that the funds allocated to the Scottish Government are no more than 5 per cent. below or above the equivalent figure for each of the other nations of the UK.”

As hon. Members know, the formula for allocating funds from the Consolidated Fund to the Scottish Government is known as the Barnett formula, and as hon. Members will recall, the Bill seeks to increase the accountability of the Scottish Parliament to its people by devolving fiscal powers from Whitehall to Holyrood, and deducting a corresponding amount from Scotland’s block grant.

The Bill does not change the level of funding for Scotland. Future decisions taken by Scottish Ministers will affect the overall funding for Scotland’s public services, because Scottish Ministers will decide whether to increase or decrease devolved taxes relative to the UK. Reforming the Barnett formula is an entirely separate issue from those we are considering in the Bill, and one that the Calman commission did not make any recommendations on. The current formula is an administrative procedure and does not appear in legislation. It is not specific to Scotland, but is a mechanism for allocating funding across all four countries of the UK, so it would not be appropriate to legislate to alter it for Scotland in isolation. The Bill would not be an appropriate place for that

Kate Hoey (Vauxhall) (Lab): I understand why the Minister does not think that discussion of the Barnett formula is appropriate for this evening’s debate, but my constituents feel strongly about the fact that Scotland gets so much more than they do generally. What mechanism could we use to have the Barnett formula looked at?

Mr Gauke: Partly following the strictures of the hon. Member for Dundee East, I would say that I am loth, at this stage of the debate, to make strong recommendations to the House about which new clauses should be accepted and which should be withdrawn and so on. I simply want to provide the context and argue why the Barnett formula should not be addressed in the Bill. I appreciate that there is a wide range of views on this issue, and that there are strong feelings throughout the UK. I dare say that a number of those views will be expressed this evening—indeed, this debate provides an opportunity for it. At this stage, however, I just want to draw the House’s attention to some of the difficulties with trying to address the matter in the Bill. I shall turn to the substance of the debate in a moment, but that is what I am seeking to do at the moment.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I am sure that the hon. Gentleman will want to confirm that if my hon. Friend the Member for Vauxhall (Kate Hoey) got the reorganisation of the formula that she seems to want, the parts of the UK that would lose the most—the ones that are most overfunded by her definition—would be London, where she is an MP, and Northern Ireland, which I know she has a close interest in. If we are going to debate the matter, let us debate the facts rather than the myths.

Mr Gauke: As I said, I appreciate that there are strong views on this issue, and that they will be expressed this evening. Little did I know, though, that such strong views would be expressed quite so quickly among hon. Members in such close proximity to each other.

Mr Russell Brown (Dumfries and Galloway) (Lab) rose —

Mr Gauke: And now I will hear another perspective.

Mr Brown: The Minister mentioned the four nations, but I am sure he will want to correct that, because not only are there variations between the four nations, but there are regional variations within England as well.

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Mr Gauke: Of course, and there are regional variations within all the four nations. The point is that there are strong views on this issue. I am making the case for why it is difficult to address it in the Bill. Reforming the Barnett formula is an entirely separate issue from those we are considering in the Bill, and from the matters that the Calman commission looked at. As I said, the formula does not appear in any legislation as such, and there would be disadvantages in trying to come up with a legislative answer. However, I appreciate that this is an opportunity to debate the matter.

Mr Frank Field (Birkenhead) (Lab) rose —

Mr Gauke: I am sure that the right hon. Gentleman will continue this debate.

Mr Field: Might the Minister tell the House whether he thinks that the Barnett formula is now fair? If it is not, when do the Government intend to do something about it?

Mr Gauke: The Government understand the concerns expressed about the devolved funding arrangements, but we have also made it clear that the priority now must be to reduce the deficit, and any change to the current system and Barnett formula must await the stabilisation of the public finances. The Bill does not rule out or rule in reform of the formula in the future, but we do not believe that now is the right time. A change in the Barnett formula is not the purpose of the Bill, and it would not be appropriate to legislate for it here. As I said, I look forward to this debate, as right hon. and hon. Members will clearly take the opportunity presented by the Bill to express their views on this particular point.

David Mowat: Will the Minister give way?

Mr Gauke: And I know that there is one hon. Member in particular who will take that opportunity.

David Mowat: I understand that the Exchequer Secretary does not want to spend too long now talking about the Barnett formula, so I will be quick. He said that we are too busy sorting out the deficit to address the Barnett formula, which I think is a fair and reasonable point. That is why many of us think that we should put in place a process to ensure that by 2015, when, as I understand it, the structural deficit will be eliminated, we can put in place a fair and transparent policy.

Mr Gauke: I understand the views expressed by my hon. Friend. There are a number of changes and developments in this area, not least the powers in the Bill. I agree with him that this will continue to be a live issue, but at this stage I am not in a position to make any promises to him. However, I am sure that this issue will continue to be debated, and strong views will be expressed. I can understand the points he makes, but this is not the time for a legislative solution.

Amendment 23, tabled by the right hon. Member for Birkenhead, is consequential on new clause 8 and would delay the financial provisions in part 3 of the Bill coming into force until two months after the House passes a resolution approving the Chancellor’s proposals for a new funding formula. It would then automatically bring part 3 into force two months after such a resolution. I set out why I did not consider it appropriate to debate at this time a new funding formula for Scotland when I discussed new clause 8. The Government are clear that this is a UK-wide administrative procedure and therefore has no place in the Bill. The Government’s priority is to stabilise the public finances and reduce the deficit before making any changes to the Barnett formula, as I have said.

Even were we able to accept new clause 8, the manner of commencement set out would be problematic because it would create technical problems by potentially bringing in consequential amendments relating to the Scottish variable rate before that itself had been repealed. I am sure that that is not what the right hon. Gentleman intends. The new clause would have other consequences, however. It would mean that clause 32, on borrowing provisions, could not be brought into force until an agreement had been reached on a new funding formula for Scotland. As I have set out, the changes introduced by the Bill are not contingent on a new funding formula being agreed to replace the Barnett formula, so I do not see the need to wait to introduce the borrowing clauses until such a new formula has been agreed.

Amendments 25 and 37, and new clauses 9 and 19, relate to corporation tax and alcohol duties. These amendments propose to increase the power in the Bill to provide for an Order in Council specifying corporation tax and alcohol duties as devolved duties. The Scottish Government have publicly requested that six additional powers be included in the Bill, including powers over corporation tax and alcohol duties. I understand that the First Minister has met colleagues in the Government to highlight those requests. In those meetings, the First Minister agreed to provide detailed written analysis of the benefits to both Scotland and the UK of devolving those powers. No such papers have yet been provided. We await them with interest, because we have yet to hear the case made in detail.

As hon. Members will recall, the Government are committed to implementing the recommendations of the Calman commission, which considered the merits of devolution for a wide range of taxes and decided that neither corporation tax nor alcohol duties were suitable candidates for devolution. Calman concluded that the potential administrative impact of devolving either tax would be significant. The creation of compliance costs for businesses operating on either side of the border, as well as the increased collection costs for the Government, would be undesirable, especially in the present economic climate. The risks of tax avoidance and arbitrage could also be increased, with additional costs to the Government and the UK Exchequer. These arguments apply to both corporation tax and alcohol duties.

Calman also noted that if comparable levels of public services were to be maintained, the scope for substantive reductions in the rate of corporation tax in Scotland would be limited, unless the Scottish Government were willing significantly to increase revenues from other sources, such as income tax. The figures involved could be significant. For instance, if we take the Scottish Government’s estimate of the corporation tax base, published in their “Government Expenditure and Revenue Scotland” report, and apply the methodologies developed for the Government’s paper on rebalancing the Northern Ireland economy, the cost of reducing Scottish corporation tax to 12.5%—the current rate in the Republic of Ireland—would be just over £2 billion. However, the Scottish economy is very different, not least in the presence of many large multinationals, particularly from the financial sector, whose current activity is unlikely to be adequately covered in the gross value added estimate, but whose profits are additionally likely to be attributable to Scotland with regard to corporation tax.

Provisional HMRC analysis has indicated that losing payments from large Scottish-domiciled groups could add £600 million to the direct costs. Such tax cuts would have to be funded, either by significantly reduced levels of public spending in Scotland or by tax rises in other areas. It is worth noting that these are initial estimates, and are likely significantly to underestimate the scope for profit shifting to Scotland. The model uses similar assumptions to those applied to the costing for Northern Ireland. However, given the geographic proximity of England and Scotland, the integrated infrastructure, the large number of big GB-owned groups with a substantive presence on both sides of the border, and the relatively large and complex nature of the Scottish economy, there are likely to be greater opportunities for groups to shift profits there than may be the case for Northern Ireland.

In addition, corporation tax is a very volatile tax, and would create much more revenue risk for the Scottish budget. For instance, corporate tax receipts fell by 16% from 2008-09 to 2009-10, while income tax receipts fell by 5%. Such a large volatile income stream would place great risk on the Scottish budget. Income tax, which is more predictable and less volatile, is a much more suitable candidate for devolution. The commission based its decision on the strong evidence that it received from the independent expert group and the alcohol retailing and production sector. The evidence identified increased compliance costs and significant scope for tax avoidance, given the mobility of goods such as beer, wine, cider and spirits.

Dr Eilidh Whiteford (Banff and Buchan) (SNP): My recollection is that the Calman commission refused to rule out devolving corporation tax, should that happen in other parts of the UK. Perhaps my recollection is wrong, but it would be a mistake to misrepresent in this debate what the Calman commission actually said.

Mr Gauke: The Calman commission did not recommend devolving corporation tax as substantial practical profit shifting issues would arise, and we cannot ignore the fact that it would need to be paid for. This is not something that we could all sit round in a room negotiating, before coming up with a number. To comply with the Azores judgment, made under European law, it would be necessary to identify the precise number. I should also make it clear that the cost of any reduction in corporation tax would have to be met by increased alternative taxes or a reduction in the block grant.

Dr Whiteford: It is important to differentiate the substantive point of whether this Government support devolving corporation tax from what the Calman commission report actually said. Having found it—I think—I can tell the Minister that the Calman commission recognised that

“changes to Corporation Tax can be a tool for economic development,”

and did not

“rule out a scheme for devolving Corporation Tax in the future as part of wider reform across the devolved nations.”

Does the Minister accept that that is actually what was in the Calman commission report?

Mr Gauke: But the Calman commission did not say that that was the right way forward at this point. As I have said, some very substantial issues would need to be addressed, not least the opportunity for profit shifting and the impact on the UK Exchequer were Scotland to have a lower rate of corporation tax, as businesses operating in Scotland and England would shift their profits to Scotland, which would disadvantage the UK as a whole.

Stewart Hosie: A number of businesses moved to Ireland in the last Parliament to take advantage of lower corporation tax. A number of others moved to continental Europe, to the Netherlands. One of the drivers for this Government reducing corporation tax was to send out that signal. That change will not necessarily be paid for by changes to allowances or spending cuts; it will be paid for in the medium and long term by increased economic growth, which is a consequence of a lower business tax regime. Why has the Minister excluded the potential of growth in Scotland from it having lower corporation tax, and merely highlighted the payment in other ways?

Mr Gauke: Let me be clear: I am not making the case against lower corporation tax per se; I am saying that if Scotland had a lower rate of corporation tax, that would have an impact on the Exchequer, and Scotland and the Scottish Government would have to pick up that cost. I do not believe that that is a matter of dispute or that the hon. Gentleman disagrees with that. Indeed, we are not even talking about something that we could pursue under European law—I am sure that he will be aware of the details of the Azores judgment. [ Interruption. ] That point is clear, so I am surprised that there are so many mystified faces on the Opposition Benches.

Mr Ian Davidson (Glasgow South West) (Lab/Co-op): This relates to the Minister’s point about the Azores judgment—people in my constituency speak of little else. I want to clarify the important question of transparency. Have the Government provided the Scottish Government with the figures that the Minister has quoted, in order that they can challenge them or produce any additional information? It is important that this debate is conducted not just at the level of rhetoric, but that firm proposals are made with numbers attached. Will the Minister therefore clarify whether there has been an inter-governmental dialogue on these matters?

Mr Gauke: We are talking about preliminary numbers, which I have put forward on the basis of early estimates produced by the Treasury this week. We are keen to engage with the Scottish Government, just as we have with the Northern Ireland Executive. I am sure that there will be exchanges of correspondence, meetings, discussions and a full examination of both the numbers and the methodology used in producing them. We are more than willing to engage in that process, but we are also waiting for the Scottish Government to offer their analysis of the impact of devolving corporation tax, of what the costs would be, and of the economic advantages and disadvantages. We know that the Scottish Government take a great interest in this—they make this point on a regular basis—but we await their analysis.

Ann McKechin (Glasgow North) (Lab): I think I am correct in saying that the Minister for Culture and External Affairs in the Scottish Government wrote to Members before the Easter recess suggesting clauses to be added to the Bill, including one on corporation tax. On that basis, is the Minister saying that the Scottish Government provided no information on their analysis of the impact of this tax? Since first requesting the information, how long has he waited for it?

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Mr Gauke: I look to others for inspiration on the precise details, but we are certainly talking about months. The hon. Lady is right to say that the detailed analysis has not been provided. I am sure that the Scottish Government are working very hard to produce it, but we have not received it. It could have been helpful for this evening’s debate, but so be it.

Mr Mike Weir (Angus) (SNP): It might have been difficult for the Scottish Government to provide that information during the purdah period, and they were re-elected only a matter of weeks ago. It is perhaps no surprise, therefore, that those weighty documents have not yet arrived on the Minister’s desk.

Mr Gauke: I have to make a confession to the House: I have come only relatively recently to these issues. My understanding, however, is that the Scottish National party has been interested in this policy for some years. I am sure that if it is a priority, and I understand that it is, we will receive the paper very soon. I look forward to receiving it.

Mr Russell Brown: Perhaps I should be directing this question not to the Minister but to the Secretary of State for Scotland, because he has been engaged in this process. Has there been any indication of how long we can expect to wait for these figures?

Mr Gauke: No, there has not, but I am sure that it is a priority and that they will arrive shortly.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Perhaps the reason the Scottish Government have not yet been able to produce the figures is that some of the international studies are not to their liking because they show that lower rates of corporation tax do not necessarily lead to higher growth rates.

Mr Gauke: The hon. Lady may speculate about the reason, but it is not for me to do so. Perhaps I have done enough speculating as it is—

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP) rose—

Mr Gauke: Or am I going to be encouraged to do some more? I give way to the hon. Gentleman.

Mr MacNeil: The Minister talks about the Scottish Government justifying why they should have this power, but have the UK Government given any justification for why they should hold on to the power over corporation tax in Scotland?

Mr Gauke: It was about five minutes ago when we last set out the reasons that corporation tax remains a reserved matter. The Bill provides for a substantial devolution of tax powers to the Scottish Government, but corporation tax has always been a matter for the United Kingdom. We are exploring this matter in the context of Northern Ireland, but if there is a case to be made for a radical change in this area, we would like to hear it and we look forward to doing so soon.

Mr Davidson: Did not the Minister say earlier that the Government had produced their latest estimates only about seven days ago? In the circumstances, this criticism seems a trifle unfair, even though the Scottish Government have had a long time to produce theirs. Surely they would benefit from this Government sharing their figures. If the Treasury undertook to pass on its figures to the Scottish Government, I am sure that a response would soon be forthcoming, enabling us to conduct this debate properly and not simply on the level of transitional demands.

Mr Gauke: The hon. Gentleman is clearly anxious to move the debate on, and he makes a perfectly reasonable point. The Treasury and the Government would be quite happy to share our analysis with the Scottish Government, and if that would assist them in their work, we would be pleased to be of assistance.

Stewart Hosie: Speaking of sharing information, the Minister has raised the spectre of the Azores ruling, but a comparable and permanent reduction to the block grant in place of the devolution of corporation tax would certainly meet all the state aid rules. The Azores judgment smokescreen that the Minister has thrown up is quite irrelevant.

Mr Gauke: The point I was making was that the cost would have to be borne by the Scottish Government, through either increased taxes or a reduction in the block grant. We would clearly have to enter into discussions with the Commission, but I think that he is right in principle, and that such a proposition would comply with the Azores judgment. I am merely making the point that, although the final cost would have to be determined, it would be substantially higher than £2 billion if it was the Scottish Government’s policy to bring the rate of corporation tax down to the level that pertains in the Republic of Ireland.

I shall move on to amendment 18, which seeks to make the date for commencement of all the taxation provisions in the Bill—those relating to the Scottish rate of income tax, the Scottish tax on land transactions and the Scottish tax on disposals to landfill—contingent on the consent of the Scottish Parliament. The process to be used to provide consent is not detailed in the amendment, but I assume that the hon. Member for Dundee East has in mind something akin to the legislative consent motion convention to which the Bill is subject. I consider this amendment to be unnecessary. Similar amendments were tabled by the hon. Gentleman in Committee. We have committed to working closely with the Scottish Government as we move towards full implementation of the measures in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time.

As hon. Members will be aware, the Scottish Parliament voted on the Bill in March, with 121 of the 129 Members voting in favour; this included the Scottish Government. Following the election in May, the Scottish Parliament established a new Scotland Bill Committee to consider amendments to the Bill. This will ensure a further opportunity for the Scottish Parliament to vote on changes to the Bill.

As I said on Report in relation to the taxes to be fully devolved, we made it clear in the Command Paper accompanying the Bill that if the Scottish Parliament was not ready to introduce the smaller taxes in April 2015, we would consider delaying the switch-off of the UK-wide versions of the taxes in Scotland. Should the Scottish Government and Parliament decide that they do not wish to put in place a Scottish version to cover the existing tax base, we will not leave the current landfill tax or stamp duty land tax in place. It will be for the Scottish Government to decide what, if any, arrangements they wish to put in place, once the matter is devolved to the Scottish Parliament. I consider this additional requirement to be unnecessary and I am therefore minded to urge the hon. Gentleman to withdraw his amendment, but of course I shall wait with interest to hear his arguments. This has been a somewhat lengthy speech, for which I apologise to the House, but I have attempted to deal with a large number of new clauses and amendments. I hope that that has been helpful, and I look forward to the forthcoming debate.

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