Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:36 pm on 7th July 1997.

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Photo of John Swinney John Swinney Scottish National Party, North Tayside 8:36 pm, 7th July 1997

I congratulate the hon. Member for North-West Norfolk (Dr. Turner) on his maiden speech. I suspect that the Prime Minister will read the Official Report tomorrow morning with some trepidation, given the family history of some of the hon. Gentleman's constituents. However, I am sure that the Prime Minister has nothing to fear from the hon. Gentleman's supportive remarks.

There have been many changes in the House of Commons as a result of the general election. We shall see later the congestion in one Lobby and the lack of congestion in the other, if I may put it so delicately. I am sure that people expected enormous changes from the Budget. Instead, from what we heard last Wednesday and from what we have seen as the debate has unfolded over the weekend and today, we have a Budget steeped in a remarkably Conservative tradition. Tory spending targets have been not only maintained, but intensified by the decisions taken by the Chancellor of the Exchequer and his Treasury team. People around the country must be asking themselves what was the point of having a change of Government, given that the new Labour Government are maintaining the Conservative tradition. There have been many soundbites and initiatives since the election, but it is difficult to get hold of the substance of change.

Much has been made of the enthusiasm with which Order Papers were waved last Wednesday. In the resource-saving drive that the House of Commons should be undertaking, we should be a little more sparing with the number of Order Papers that are given out so as to minimise such behaviour when Budget euphoria dies down after a mere couple of days.

The Government received a substantial proportion of their mandate from Scotland. Hon. Members will not be surprised to hear that I want to deal with the Budget's relevance and significance for Scotland. Tomorrow, in the Scottish Grand Committee, courtesy of a debate initiated by the Liberal Democrats, we shall have an opportunity to debate specifically the impact of the Budget on Scotland. I welcome that opportunity to go over the points in more detail.

I want to concentrate on three points about the Budget and its relevance to Scotland which I believe are of enormous importance. Much has been made of the overheating of the economy. There have been sustained attempts to get answers from Opposition Front Benchers on whether they agree with the Government that the economy is overheating. Some of the indications of the overheating of the economy are quite clear. House prices in the south-east of England and in London have increased by 17.4 per cent. in the past year, compared with an increase of only 2 per cent. in Scotland, which does not even represent a real-terms increase. The economy of the south-east of England is driven by consumer spending while the economy in Scotland is much more dependent on exporting and investment.

One of the consequences of the Chancellor's Budget is, undeniably, higher interest rates. A nod was given quite clearly in that direction to the Bank of England's monetary policy committee on Wednesday. That is of course dismal news for the Scottish economy, where interest rate increases are the last thing on earth that our economy is looking for. Indeed, on Radio 5 on Thursday the chief economist of the Royal Bank of Scotland was quoted as saying that if monetary policy were set on Scottish conditions, substantially lower interest rates would be required.

The chief economist of the Scottish Council (Development and Industry), Mr. Ian Duff, made the point that overheating is a factor of the south-east of England and not of economies in other parts of the United Kingdom—not just Scotland. Intense economic activity in one part of the United Kingdom causing enormous economic hardship in other parts has bedevilled us for the past 25 years. The Government have done absolutely nothing in the Budget to stop that pattern being repeated.

It is interesting that prestigious economists in Scotland are now taking the view that UK economic policy is harming and penalising the Scottish economy. We desperately need an economic strategy focused on growth and certainly not one focused on engineering deflation.

My second point concerns the increase in petrol prices, to which the hon. Members for North-West Norfolk and for Dumfries (Mr. Brown) referred in their maiden speeches. I must express the strongest possible concern about the proposed increase in petrol duty announced by the Chancellor under the guise of environmental concerns—which we all share. The increase does not just mean an extra £60 a year—which is what we calculate will be the impact on rural users in Scotland as a result of the Budget. There is also the additional £300 increase that the right hon. and learned Member for Rushcliffe (Mr. Clarke), the previous Chancellor, had already put in place. When one considers that those increases have been implemented less than nine months apart, one realises that the burdens increasingly falling on rural communities are enormous.

In many parts of my large, rural constituency in Scotland, there is absolutely no alternative to using a car as an essential lifeline because we fall into the category defined by the hon. Member for North-West Norfolk where buses may appear once or twice a week. The increase in petrol duty is therefore a penalty for rural areas and shows no imagination whatever in trying to tackle the real problem of urban congestion and energy use in an appropriate and effective way without jeopardising the essential interests of rural communities.

My third point relates to the enthusiasm in the form of waving Order Papers in response to the bounty of new spending announced. During the election campaign, the economic arguments that my party advanced were somewhat ridiculed by many of those who sit on the Treasury Bench these days, including the Minister for Education and Industry, Scottish Office, the hon. Member for Cunninghame, North (Mr. Wilson), who conveniently announced that one of the central points of our arguments concerning the new Government's belief that abolishing the assisted places scheme would enable class sizes to be reduced to an appropriate level in Scotland was based on a fraudulent or deficient calculation on the back of an envelope. Although our arguments were rebutted by the hon. Gentleman, we have of course now found out that the savings cannot quite generate the achievements for which the Government were looking. That leads me on to examine some of the other alleged increases in spending in the Budget.

The real-terms increase of 1.6 per cent. in health spending in Scotland is welcome, but far from enough to meet the growing problems in the health service there. On education, there is an increase of £1 per pupil per week in Scottish schools. At least six or seven schools in my constituency could benefit from complete refurbishment in a programme which can hardly afford the refurbishment of one primary school in each constituency in Scotland.

I am glad that the hon. Member for Gordon (Mr. Bruce) is in the Chamber. It is clear from this morning's newspapers that he was very busy over the weekend with his calculations about the £5 billion hole in the Government's finances. We have been busy calculating on the strength of his calculations, and our calculation is that the Secretary of State for Scotland will have to find about £80 million merely to ensure a standstill budget—despite the very laudable commitments given by the Government on Wednesday. If he were to find that amount, although there would be increases in health and education spending, there would also be cuts in industry and enterprise, housing, law and order, social work—one can take one's pick of the services there to be cut.

Not only are the Government prepared to accept the previous Government's spending targets—they are determined to intensify the squeeze on certain services. As though the council funding crisis were not bad enough just now in Scotland, how much more severe must it become before public services are undermined to an irreconcilable level?

The Government have also announced changes to advance corporation tax, on which many Conservative Members have concentrated. We should not lose sight of the impact that that will have on the distinctive Scottish financial community, where many of the pension fund schemes mentioned in debates over the past few days carry out many of their investment decisions.

We now have a Chancellor, a Chief Secretary to the Treasury and an Economic Secretary who represent Scottish constituencies. Despite all that presence in the high offices of the Government, we do not seem to have a Budget that is particularly appropriate for Scotland. It leaves us wondering whether the Westminster system can ever deliver a Budget which meets the needs of the people of Scotland and presents an economic package that will work for our community rather than always serving the interests of the south-east of England.

I noticed in the rather handy pocketbook which was distributed last week the Government's commitment to moving towards a fairer tax system. I find that a rather bewildering remark when, on reading all the announcements made on Wednesday, people like Mr. Cedric Brown, the former chief executive of British Gas, will end up paying no more income tax than before the Budget.

Undoubtedly, the services in our communities will suffer as a result of the Budget. That is the price of following very restrictive spending targets which are totally inappropriate to the needs of a modern and developing society. I suspect that many people in Scotland will be left wondering what on earth was the point of voting Labour when all they get is the worst of the Tory spending targets.