Mark McDonald, MSP for Aberdeen Donside addresses Scottish Parliament regarding Scotland's future. Watch his speech below and click "read more" to view the text in full.
With regard to Tavish Scott’s remarks, I will say only that I certainly never used the phrase, “Once in a lifetime,” mainly because I hope that I will have quite a long lifetime yet. Beyond that, it is important that we look at the genesis of today’s debate and where we have got to. It was interesting that Lewis Macdonald said that we should not judge the vow on the basis of what is in the Scotland Bill. If we took the progression from the vow giving birth to the Smith commission to the Smith commission giving birth to the Scotland Bill, we could argue that a longer gestation period would perhaps have been beneficial. We cannot rub out the very clear lines between those processes. As my colleague Bruce Crawford said, the UK Government is today asserting again that it is delivering on its promises to Scotland. Most objective analyses of the legislation that is before the Westminster Parliament would tend to disagree with that. I note the comments from the Tories and Labour about Scotland having one of the most powerful sub-national legislatures. I point them to the graph on page 26 of the unanimously agreed Devolution (Further Powers) Committee report on the UK Government’s proposals, which demonstrates that around 38 per cent of the taxes that are raised in Scotland will be devolved or assigned to Scotland. The figure for the Basque Country and Navarre is over 50 per cent, for Quebec it is over 70 per cent and for the other Canadian provinces it is over 60 per cent. We should bear in mind that comparison when members make such statements. Lewis Macdonald: Will the member take an intervention? Mark McDonald: I want to make progress on the issues that I want to highlight, which have been highlighted in the discussions and deliberations on the two committees that I sit on—the Finance Committee and the Devolution (Further Powers) Committee. There is a question about the completeness of the taxation elements and the suite or basket of taxes that are being devolved. The Parliament is to receive powers over income tax, but there will not be powers over national insurance contributions, which strike me as something that would provide completeness. We are not being given powers over the personal allowance, but we will—apparently—be able to set a zero rate of income tax, which seems to be a bit of a faff when, in essence, that is an instrument through which personal allowance alterations can take place. A zero rate will apply if Scotland wishes to increase the personal allowance beyond that which Westminster sets. However, if Westminster decides to increase the personal allowance, that will have an impact on tax income for the Scottish Parliament. It will be interesting to see how that issue will be resolved should such a decision be taken. It would have a material impact on the Scottish Government’s projections of the income that will be available to it. Another issue is dividend income. The Institute of Chartered Accountants of Scotland said that, if a decision was taken in the Scottish Parliament that resulted in individuals moving income into dividends, that would reduce the tax income for the Scottish Parliament but boost the tax income for the UK Exchequer, which would receive the benefit of the dividend income. That is another issue that needs to be examined, particularly in terms of how it relates to the no-detriment principle. On the breadth of options that are available, the Royal Society of Edinburgh said that the taxes that are being devolved are “a narrower basket of taxes than is usually the case”. The Chartered Institute of Housing in Scotland said that, although “the Scottish Government may appear to have the power to make changes to the social security system”, it would “lack sufficient fiscal levers to put changes into practice.” Those comments are worth noting. Labour has called for full assignment of VAT. I caution it against saying that that would result in additional revenue, because it would result in a block grants adjustment. There would simply be an offset, and there would not be revenue over and above what Scotland would otherwise receive. That is why the point that I have made about production versus consumption is important. Attaching VAT to production would create an incentive to boost economic activity in Scotland, because we would see the benefits of that. Attachment to consumption would not necessarily carry the same incentive. If, as the Labour Party suggests, we want benefits from increased economic activity, that should perhaps be pursued by attaching VAT to production. Borrowing and the fiscal framework are critical elements. We need detail on exactly what the borrowing powers will entail. There has been talk that the borrowing powers will replace the powers that are in place in the Parliament, which raises the question of how effective the new powers can be if they are replacing rather than supplementing what the Parliament has available to it. There is also a wider consideration. When the Secretary of State for Scotland came before the Devolution (Further Powers) Committee on 25 June and was asked about the flexibility for the Parliament within the fiscal framework, he said: “it is not the intention that the fiscal framework should constrain the powers that are being devolved in the bill.”—[Official Report, Devolution (Further Powers) Committee, 25 June 2015; c 33.] However, paragraph 2.2.5 of the command paper from the UK Government states: “In the context of Scottish devolution, the fiscal framework must ensure that Scotland contributes proportionally to the overall fiscal consolidation pursued by the UK Government.” Those two statements do not tally. Either the Parliament will have flexibility—that has a knock-on effect on the definition points around welfare, which some of my colleagues will speak about—which is what devolution should entail, or it will be constrained. That will be the acid test of whether the fiscal framework matches the aspirations that were outlined in the vow and the Smith commission report and which the Scottish people expect to be met.