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Growing Scotland's Economy

– in the Scottish Parliament at 9:30 am on 16th September 2004.

Alert me about debates like this

Photo of George Reid George Reid None 9:30 am, 16th September 2004

Good morning. The first item of business is a debate on motion S2M-1695, in the name of Jim Wallace, on growing Scotland's economy and building on progress, and three amendments to the motion.

Photo of Jim Wallace Jim Wallace Liberal Democrat

I very much welcome the opportunity in what are still our very early days in this splendid new debating chamber to open the debate and allow the Parliament another opportunity to discuss Scotland's growing economy. Indeed, I also welcome the opportunity again to emphasis the Executive's commitment to growth as our top priority.

Twelve months ago, I was able to give the Parliament an assessment of the state of the economy. It was a mixed picture, with tentative signs of recovery in some areas, but weaknesses and worrying fragility in others. Twelve months on, I believe that the picture is clearer and improved. I remain highly sceptical of those who latch on to individual reports—or, more precisely, elements of them—to peddle messages of doom and gloom. They are as misguided and irresponsible as those who selectively grasp at other reports to suggest that everything in the garden is rosy. However, I believe that the evidence—indeed, the trend—that we are witnessing is broadly positive. That is certainly backed up by anecdotal evidence, which all too often we overlook.

I believe that there is cause for optimism about our economic performance, but let me put in context where I believe the Scottish economy currently stands and, equally important, what I believe we can expect in going forward. Over the period 1998 to 2000, there was a clear gap in gross domestic product growth between Scotland and the United Kingdom. That gap remains, but it has been a lot closer for most of the period from 2001 to 2003. Since 2001, our growth performance has broadly matched that of the UK, with the most recent annual GDP growth figure for 2003 putting Scotland at 1.7 per cent, compared with a UK figure of 1.9 per cent.

Predictions of what will happen next year vary, but there is a reassuring unanimity among economists that Scotland can expect to continue enjoying GDP growth for 2004—and, indeed, into 2005—that is above trend. It will come as no surprise to members that our service sector has been the main driver of GDP growth over recent times, growing by 2 per cent over the year to the first quarter of 2004.

Photo of Jim Mather Jim Mather Scottish National Party

I am very interested in what the minister said about GDP, but how can we be confident that that gap will narrow and close when the competitive indices show that we are so far behind the rest of the UK? We are 36 th on the International Institute for Management Development survey and the UK is 22 nd . We are a full 16 percentage points behind. How can that gap close?

Photo of Jim Wallace Jim Wallace Liberal Democrat

I will obviously come on to that report. However, I referred earlier to selective reporting and we should remember that the IMD report also says that Scotland ranks sixth for export and commercial services and second for exchange rate stability. Moreover, we are top ranked for stock market capitalisation and, for the illiteracy rate of adults over 14 as a percentage of the population, we are ranked as having the least illiteracy and the best approach to tackling illiteracy.

I do not run away from Mr Mather's point because that, indeed, is why we have undertaken work such as that outlined in "The Framework for Economic Development in Scotland" and the smart, successful Scotland strategy. We have identified that there are, going back over many years—generations, possibly—structural problems, not least in research and development in business and in productivity. That is what the Administration's proposals and policies are intended to address.

Photo of Murdo Fraser Murdo Fraser Conservative

The most interesting aspect of the IMD report is the section on the extent to which Government policies are conducive to competitiveness. In that area, our rank is the lowest: we are down at number 39 out of 60. In fact, we are 10 points behind the rest of the UK. What Executive policies does the minister think are contributing to that lack of competitiveness in the Scottish economy?

Photo of Jim Wallace Jim Wallace Liberal Democrat

First, Mr Fraser might want to reflect on the fact that there are another 21 countries below us in that ranking. However, some of the IMD report is done not by objective economic analysis but subjectively. That is a part of the report that we want to look at. As I indicated, the whole thrust behind "The Framework for Economic Development in Scotland" and the smart, successful Scotland strategy is to identify the areas where we are weak competitively and to ensure that policies are put in place that can address those areas.

Looking forward to the remainder of 2004 and 2005, we believe that the prospects for our economy generally appear to be positive. A series of business surveys of the Scottish economy predict that output and employment in the service and manufacturing sectors will continue to expand. In the meantime, as HBOS's latest figures, which came out yesterday, bear testimony, our labour market remains remarkably robust. Employment continues to rise and is already at its highest level since records began. Unemployment is low by historical standards, despite recent rises, and, although unacceptably high levels of economic inactivity still prevail, there are more participants in the Scottish labour market than ever before.

In the IMD report to which members have referred, we score very well in degree of employability, but we get marked down because of the absolute numbers of people in employment. As long as we have a population of around 5 million, we are never going to have the same number of people in employment as the rest of the UK or, for that matter, other large countries such as Japan. Therefore, there are contradictions in the IMD report, which do not give a fair test of what any Government can do. It is unlikely, by any stretch of the imagination, that any Government could raise our population from 5 million to 55 million in any period.

Photo of Jim Wallace Jim Wallace Liberal Democrat

No. I want to make progress.

As I said, we need to take forward what we are trying to do in encouraging enterprise, developing skill levels, promoting research and development and innovation and providing the physical and electronic infrastructure that will help to deliver continuing and sustainable economic growth. I accept that those are medium-term to long-term endeavours, but it is important that we start now. Part of the problem is that Governments in the past did not make those kinds of investments and did not address those issues.

Last week, much was made of the findings in the IMD "World Competitiveness Yearbook". While recalling what I said about individual surveys, I accept that Scotland lags behind where we should be in terms of our overall level of competitiveness. Raising our game requires action, which we intend to take right across the Government.

Our rates of productivity are too low, as is business spend on R and D and innovation. Our skills and transport infrastructure need further investment, which has already been earmarked. The health of our population is unacceptably poor; the focus on health improvement as much as on health treatment is a way of securing sustainable, long-term change. We also accept that our planning system is in need of major, root-and-branch reform.

Recognition of those facts predates the IMD report and requires from Government a considered response and a consistent approach over the medium to long term. Short-term soundbites no doubt grab headlines, but they do not answer the serious challenges that our economy faces, which must be tackled if we are to move Scotland up the league table of competitiveness. I am sure that members in all parts of the chamber share that objective.

Globalisation means increasingly fierce competition for foreign investment and export markets. European Union enlargement and the continued rapid growth of the Asian economies, notably China's, means that our Scottish businesses face not only many new challenges, but new opportunities.

The second FEDS document—FEDS 2—which was published after a lengthy period of consultation, underscores our on-going commitment to raising productivity in the private and public sectors. It identifies that, as before, we must encourage the development of basic education and skills and support R and D and innovation, which are the foundations for improvements in productivity and sustainable global competitiveness. We must encourage a positive, ambitious, risk-taking enterprise culture and continue to improve our electronic and physical infrastructure.

FEDS 2 also identifies our response to a number of the new challenges that have emerged or come into sharper focus since 2000. There is the challenge of an ageing and falling population, to which we are already responding through our fresh talent initiative. There is also the challenge of ensuring that our growth is sustainable and that we capitalise on the real wealth and job opportunities that exist in Scotland from the development and manufacture of processes or products in areas such as renewables, recycling and waste. There are also the challenges of reforming Scotland's planning system so that it is fit for purpose in the 21st century and of making efficient and effective use of public services and investments.

Of course, having a framework or strategy that commands widespread support is all very well, but I accept that delivery is also important. Let me remind the Parliament that considerable progress has been made since 2000. For example, a £3 billion programme of investment on new transport infrastructure over the 10-year period 2002 to 2012 is now under way. Moreover, we have exceeded our target of extending broadband coverage to at least 70 per cent of Scotland's population. We are now working to ensure that every community in Scotland will have access to, and make effective use of, broadband services by the end of next year.

Photo of Alex Fergusson Alex Fergusson Conservative

I welcome the Deputy First Minister's announcement, but will he tell us which of the 27 definitions of "community" that exist for rural Scotland he will use?

Photo of Jim Wallace Jim Wallace Liberal Democrat

We have seen that British Telecommunications has listed the exchanges that it is prepared to enable for broadband. We will ensure that the exchanges that do not appear on the BT list will be broadband enabled in a supplier-neutral and manner-neutral way. The procurement process for that is already under way.

We are driving lifelong learning by paying tuition fees for all full-time Scottish students in higher education. Starting this year, educational maintenance allowances will be rolled out across Scotland. The new individual learning accounts scheme is to be launched in the next few weeks.

To encourage R and D and commercialisation activity, we are putting in place a pipeline of support: the proof of concept fund; the three intermediary technology institutes, which will receive £450 million over the next 10 years; and a range of funds that are aimed at small and medium-sized enterprises and universities. In addition, we are encouraging entrepreneurship through, for example, the business gateway, business start-up funds, the enterprise in education initiative and the business growth fund, which provided £4.7 million to 63 companies in 2003-04.

In the past 12 months alone, great strides have been made in creating the right conditions for growth. Take-up of our air route development fund has been impressive. Furthermore, some £24 million has been injected into the Scottish co-investment fund, which is our innovative venture capital scheme. The effectiveness of our public-private match-funding approach is reflected in the fact that that partnership has concluded 36 deals, many of which have been in the life sciences sector.

Our new business start-up grant is supporting young entrepreneurs to take that crucial first step into business. However, in looking to exciting future opportunities, we are showing that economic growth and job creation can go hand in hand with sustainability through our green jobs strategy consultation. Our support schemes are keeping pace with business needs through R and D support schemes such as R and D plus. Some £27 million has been invested with the aim of increasing Scotland's revenue from tourism by 50 per cent over the next 10 years.

Those schemes and ideas have attracted national and international attention, even emulation. They give the lie to the suggestions of those who say that nothing has been done. Of course I accept that there is more to be done. That is why I am prepared to listen to constructive suggestions about where else we can make effective interventions and deliver appropriate support.

Photo of John Swinburne John Swinburne SSCUP

As the minister is looking for constructive suggestions on how we can further improve the economy, may I suggest that he attack the problem of ageism? Teachers and nurses are compulsorily retired at the age of 60 when they have a life expectancy of a further two decades beyond that. If they were allowed to continue contributing, that could add greatly to the economy of our country.

Photo of Jim Wallace Jim Wallace Liberal Democrat

I am not sure of the accuracy of that specific point, but I accept the general point about the importance of tackling ageism and age discrimination. Given the demographics, the contribution that our older citizens could make is very welcome and, indeed, necessary for economic development.

When I visit businesses throughout Scotland, I find them a source of much encouragement. There is no shortage of creative ideas or of talented and inspirational people. I firmly believe that a key success of devolution is the way in which it brings government closer to Scotland's business community by delivering a more regular and detailed dialogue between ministers, parliamentarians and officials on the one hand and business, academics, unions and the voluntary sector on the other.

That sense of shared responsibility and vision was evident during the business in the Parliament conference in April, which proved a valuable addition to our on-going programme of engaging business in helping to drive Scotland's economic growth. Today, we publish a summary of the issues that the conference participants identified as key to helping to deliver a strong, diverse and thriving economy. We are also publishing our response on each of those key issues. That is an on-going process that will focus on charting progress against delivery over time. I am grateful to the Presiding Officer and to the Enterprise and Culture Committee for agreeing to hold a similar event in these impressive surroundings in about 12 months' time. Appropriately, the committee will then be once more under the convenership of Alex Neil—although all credit and thanks are due to Alasdair Morgan for all his work—and I look forward to engaging with him on that committee.

My dialogue with business has been stimulating and creative. It is characterised by its constructive nature, whereby both sides listen and seek to make progress so that ideas and solutions that emerge can be taken forward. From a variety of discussions, it has become clear to me that business feels that more could be done to provide assistance with various aspects of marketing. That point and related points have been made to me on several occasions, so I have asked my department to examine whether a Scottish institute of marketing would be the most effective means of delivering appropriate marketing support to business. The department is working on that at present and I hope to say more about the proposal in the near future.

Another suggestion—in this case, from the manufacturing steering group—was that manufacturing support should be examined. Today, I can announce to the chamber that we will create a new manufacturing advisory service to support Scotland's small and medium-sized manufacturing companies. The aim is to provide high-quality, tailored advice to help SMEs to grow and to exploit new business opportunities, thereby generating greater wealth.

I could say much more but, as time is not available, I am sure that issues will be picked up by other colleagues. In conclusion, our commitment to growth does not rest solely with the enterprise and lifelong learning portfolios but extends to all Government portfolios. Transport, tourism, education, health and communities all have a contribution to make. I believe that growing the economy will also be a theme in our upcoming spending review. Our policy focuses very much on the medium to long term, as we believe that the short fix often does not sort out the problem in the long run. I commend the motion to members.

I move,

That the Parliament welcomes the publication of the Scottish Executive's response to the issues raised at the Business in the Parliament Conference 2004; welcomes the input of the business community into the current revision of A Smart, Successful Scotland and welcomes this opportunity for members to influence that revision; notes the broad consensus in support of the Executive's recently published framework for economic development in Scotland for addressing Scotland's historically low rate of economic growth by working to deliver improved productivity, and believes that improved economic growth is key to generating first-class public services for the people of Scotland.

Photo of Jim Mather Jim Mather Scottish National Party 9:46 am, 16th September 2004

In an ideal world, given the support in the chamber and in the country at large for the idea that we need to acquire the power to manage our own economy, the Executive's contribution to today's debate would have reflected the urgency and importance of that idea for Scotland. As usual, that did not happen. Instead, we have heard the minister talk about long-termism and the need to keep faith with failing and incomplete policies.

In response to the FEDS 2 announcement, Alf Young said that the Executive's

"own policy prescriptions will not be delivered in one Holyrood term or even two."

Like the majority of Scotland's population, I have a problem with that. In the 21st century, people will not wait seven years for results. This week's Allander lecture proved the point: the current fiscal mismatch does not provide a basis for growth, savings or efficient government. None of our competitors is sitting around waiting for failed policies to work. Where will Estonia and Poland be in 2011?

Photo of Wendy Alexander Wendy Alexander Labour

Can the member name one devolved country or federal country anywhere in the world that exhibits fiscal autonomy?

Photo of Jim Mather Jim Mather Scottish National Party

I had thought that Wendy Alexander would keep her head down today given that, essentially, she made the case earlier this week for full-blown independence. Let us not get involved in semantics or play the vocabulary game. What Wendy Alexander did this week was wonderful and material. First, she proved that the current system will not work. Secondly, she admitted that fiscal federalism will have a negative or at least ambiguous effect on growth. She made the case for independence as eloquently as anybody on the planet. Well done, Wendy. We have heard enough.

Another seven years of the Executive's false-hope syndrome will not undo the untold damage to hard-working families and the fabric of Scotland. In short, the current Executive will not be in power in 2011. That is why I speak primarily to the vast majority of people—including some members in the chamber—who recognise the truth when they see it. It is time to call the Executive firmly to account by exploding some of the myths that it peddles and by proving that the current system must be remedied.

First and foremost, any criticism of the Executive repeatedly produces the accusation that we are talking Scotland down. For the avoidance of doubt, let me say that our party's hard-wired objective is the furtherance of all Scottish interests. We promote Scotland and its potential in every speech, presentation and manifesto. We are simply exposing the atrocious mismanagement that, despite all our great attributes and potential, produces perennial low growth, a declining population and an array of gaps in incomes, employment and life expectancy between us and our neighbouring competitors. We only ever talk down the minister's methods and his performance in the management of the Scottish economy—we would be guilty if we did not do that. The core problem that the Executive faces is that it does not control our economy. If the Executive is genuinely to control our economy, it needs tax powers.

Photo of Lewis Macdonald Lewis Macdonald Labour

Mr Mather says that he is innocent of the charge of talking Scotland down. In that case, in commenting on the Deputy First Minister's speech, will he say whether he welcomes the rate of 70 per cent broadband coverage, the £3 billion of investment in transport and the highest employment rate in Scotland's history?

Photo of Jim Mather Jim Mather Scottish National Party

Of course I welcome those figures, but I ask Lewis Macdonald to consider the Royal Bank of Scotland report, "Wealth Creation in Scotland: A Study of Scotland's Top 100 Companies", which tells us that, apart from privatisations, not one major company has been created in Scotland in 30 years. Thank goodness for Cairn Energy—I hope that the deputy minister has intimated to that company his appreciation of its performance.

The self-evident truth of what I am saying gained further endorsement last month when the Fraser Institute of Canada listed the attributes of economic freedom as being personal choice, voluntary exchange, security of privately owned property and the freedom to compete. In line with that, we can state that what prevents Scotland from achieving a full, proper and fair return on our many attributes and massive potential is our lack of economic freedom.

Photo of Jim Mather Jim Mather Scottish National Party

I have taken enough interventions.

The Fraser Institute list of the impacts of low levels of economic freedom include two features of Scotland today: first, countries that are not economically free grow less rapidly, as we are doing, and, secondly, such countries attract less investment and have lower productivity than countries with more economic freedom. That explains the differences between Scotland and the rest of the UK and between Scotland and, for example, Estonia, which is 28th in the IMD survey, compared with our 36th place.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

Will the member give way? I will be constructive.

Photo of Jim Mather Jim Mather Scottish National Party

The member has nothing to say to me.

The First Minister has decided to make productivity the key issue after economic growth, but to achieve better productivity he must understand that we need to create autonomous, competitive conditions to attract more headquarters that spend on research and development, which is a prerequisite for productivity. I am sure that the First Minister's colleagues will explain that to him if he is in difficulty. We will certainly be counting the score on productivity.

The Executive's management of the economy is typified by there being no top-level targets, poor data, outcomes and international comparisons and a crushing, damaging reality for many people in Scotland.

Photo of Jim Mather Jim Mather Scottish National Party

I have taken enough interventions. Let me crack on.

Photo of George Reid George Reid None

You have about a minute, Mr Mather.

Photo of Jim Mather Jim Mather Scottish National Party

I will still crack on through this part of my speech.

Photo of George Reid George Reid None

I am sorry, you have three minutes, Mr Mather.

Photo of Jim Mather Jim Mather Scottish National Party

Let me make this point.

The Executive has a delusional approach to the results. It distorts our position—as we have seen yet again today—and desires to appoint its co-conspirators in economic mismanagement throughout the post-war years, the Tories, as its auditors by talking them up as the potential Opposition. Good try, but no chance.

Photo of George Lyon George Lyon Liberal Democrat

Will the member take an intervention and have a debate?

Photo of George Lyon George Lyon Liberal Democrat

We have heard the member's litany of doom and gloom, but how does he explain that, out in the real world, house prices rose by 19.3 per cent last year, new car registrations are at an all-time high, retail sales are powering ahead—the latest figure is up 7.3 per cent—and we are close to having full employment? How can Mr Mather portray this country as one that is going down the plughole?

Photo of Jim Mather Jim Mather Scottish National Party

Scotland is playing catch-up in the union. Gaps exist on all the features that the member mentioned. He should look for 54 registrations in Rothesay the next time he is there—he will not find many. What he says is absolute rubbish because gaps exist and they are widening. He knows it, I know it and the people of Scotland know it.

The people of Scotland are on the case. The recent Joseph Rowntree Reform Trust state of the nation poll shows that 66 per cent of people want more power for the Parliament. An Ernst & Young report has shown that 46 per cent of the business community want more power for the Parliament, with 26 per cent neutral on the issue and able to be swayed, and that 73 per cent have actively considered voting for the SNP, although we are not satisfied with that figure and we will work harder to increase it.

I make an appeal for more powers for the Parliament not to the Executive and other opponents, who have a terrible and worsening record, but to the majority of MSPs and people in Scotland who want Scotland to compete and thrive. We simply want to do what the Irish did in 1986: stop doing what does not work any more. The people of Scotland are getting wise to the Executive and its facile style of governance; they are increasingly aware that there is no such thing as a free lunch or a Government that can deny the facts on international economic life. We have international data to prove that. Robert Huggins Associates forecasts that the Scottish GDP position compared to other European nations and regions will drop from 36th to 49th in the period to 2010, whereas London and the south-east will move from 14th to 10th. On top of that, the huge gap between GDP and the real wealth of people in Scotland is material.

A more revealing and indicative sign of future outcomes is the IMD "World Competitiveness Yearbook", in which Scotland is 36th, Estonia is 28th and the rest of the UK is 22nd. The gap in the rankings between Scotland and the rest of the UK is 16 per cent, while the gap between London and the south-east and the Highlands is even greater. The Government's macro policy is holding us back in 39th place and on micro policy we are in 38th place. How long will the Executive let the matter go? The minister's speech today is yet another statement that historians will doubtless pore over to discover why ministers, perversely, sat on their thumbs and were willing to watch wealth, skills and opportunity transfer out of Scotland to competitors who are cracking on in their national self-interest. That negligence and apathy are part of the Executive's problem and they will come back to haunt it.

I move amendment S2M-1695.2, to leave out from "notes" to end and insert:

"in the belief that the case has now been made and popularly acclaimed at home and internationally-proven in recent competitiveness indices for more powers for the Parliament, which are needed in order to reverse Scotland's historically low rate of economic growth and generate both the wealth required to provide world-class public services and infrastructure and the high quality employment opportunities needed to retain and develop fresh talent in Scotland."

Photo of Murdo Fraser Murdo Fraser Conservative 9:56 am, 16th September 2004

I welcome the opportunity to speak for the Conservatives in today's debate on growing Scotland's economy. It is more than a year since the previous full Executive debate on the economy and, given that we are always told that the subject is the Executive's top priority, I am a little surprised that it has taken so long to get round to the debate. However, I am glad that we are having it at the start of the new term.

During a lecture given in 1755, the great Scottish economist Adam Smith, who is buried just up the road in Canongate kirkyard, said:

"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things."

The Executive must learn some lessons from one of Scotland's greatest sons. It is noticeable that Adam Smith did not say that what was required was a central economic strategy running to 32 pages, with a supporting document of some 106 pages that is updated every few years, no doubt at great public expense.

Sadly, we are a long way from the "highest degree of opulence" to which Adam Smith referred. Despite the fact that the Executive subtitled today's debate "Building on Progress", there has been precious little progress in the past five years on which to build—or so people in business in Scotland are forever telling us. On almost every conceivable level, we lag behind the rest of the UK. Economic growth was just 1.6 per cent in the year to quarter 1 of 2004, which trails the UK rate of 2.3 per cent. That is even with the Executive's recalibrated figures. New business VAT registrations are at 28 per 10,000 of the population, compared with 37 per 10,000 in the UK as a whole; 3.1 per cent of Scottish adults are trying to start their own business, compared with 4.1 per cent in the UK; and whereas 10.9 per cent of adults in the UK call themselves business owners or managers, the figure in Scotland is only 9.1 per cent.

Photo of Jim Wallace Jim Wallace Liberal Democrat

I share Murdo Fraser's concern about the number of business start-ups and the fact that people do not necessarily think of themselves as entrepreneurs, but does he accept that we cannot change a culture overnight? Does he endorse our enterprise in education strategy, which, it is intended, will be rolled out to every school to make young people more creative and more willing to take responsible risks?

Photo of Murdo Fraser Murdo Fraser Conservative

The enterprise in education strategy is an element in turning round our performance, but the Executive could be doing many more things, to which I will come in a moment.

Another factor that has been referred to is population decline. We have a net loss of people aged 16 to 34 to the rest of the UK and the population is due to dip below 5 million by the end of the decade.

It is clear that something is wrong and that we suffer from a competitive disadvantage. Much of the blame for the sorry state of affairs lies squarely with the Executive, whose policies have done little to help and much to hinder economic competitiveness. The findings of the IMD "World Competitiveness Yearbook" are absolutely crucial because, in the category of the extent to which Government policies are conducive to competitiveness, Scotland ranks 39th out of 60, which puts us behind countries such as Estonia, Ireland and China—which we might expect—but also behind the Slovak Republic, Columbia and Jordan, which are hardly economic giants. Most worrying of all, the IMD report ranks Scotland some 10 places behind the rest of the UK in that category. That is illuminating because we have the same macroeconomic factors and the same corporate tax regime as the rest of the UK. Therefore, it can only be the Executive's policies that are leading to Scotland's comparatively poor position. We in the Scottish Conservatives have been saying that for years and it gives me no satisfaction to see our opinions confirmed by independent international observers.

Photo of Lewis Macdonald Lewis Macdonald Labour

Will Murdo Fraser accept that, in the section of the report to which he refers, out of the 10 criteria on which that assessment is made, eight are based on subjective survey material, with only two being based on objective criteria?

Photo of Murdo Fraser Murdo Fraser Conservative

If that report is not acceptable to Mr Macdonald, perhaps he will listen to the recent report from the University of Glasgow, which measures Scotland's economic performance against the Executive's strategic objectives. It says:

"The overall picture which emerges is of a relatively low output, high emissions economy characterised by ... business sector underperformance".

It goes on to say, politely:

"much remains to be done to achieve the vision of A Smart, Successful Scotland."

To go back to the IMD report, I was interested to note that the SNP amendment says:

"the case has now been made ... and internationally-proven in recent competitiveness indices for more powers for the Parliament".

I read the IMD report and I saw nothing in it that argues for constitutional change. The report argues for a change of policy and for the Executive to be more competitive, but that does not make a case for more powers to be granted to the Parliament.

Photo of Jim Mather Jim Mather Scottish National Party

The common denominator among the countries that Murdo Fraser mentioned as outperforming Scotland is that they are all independent countries. How will he close the gap without independence?

Photo of Murdo Fraser Murdo Fraser Conservative

I have visited many countries in the world and I have visited regions such as Catalonia and Bavaria, which have very successful economies without being independent countries. To say that somewhere can only have a successful economy if it is fully independent is absolute nonsense and it is not borne out by the factors used in the report. We need a change of policy, rather than a change of passport, which is what the SNP is offering.

Photo of Murdo Fraser Murdo Fraser Conservative

I am sorry—I need to make some progress. I will perhaps give way in a moment if I have time.

The Executive needs to start listening to the people who know best: the hard-working people of Scotland. They have made it clear that they want action. On the FEDS document, which is yet another glossy document bursting with rhetoric yet bereft of substance, the Scottish Chambers of Commerce remarked:

"The good intentions in this document are somewhat undermined by other policies which have added to the regulatory burden and costs on business."

The Executive's motion refers to the broad welcome for the FEDS update. For that, the Minister for Enterprise and Lifelong Learning deserves to win this week's Peter Peacock award for having the brightest brass neck in the Executive.

The time has surely come to move beyond trite statements such as those made in the framework document. It is plainly absurd to call for economic growth "through greater competitiveness", as the document does, without taking action to reverse those policies that have made us uncompetitive. It demeans the Executive to talk about

"the creation of new enterprise and a positive, risk-taking attitude to enterprise" when its policies actually hamper business growth.

What is to be done? First, as the Institute of Directors, the Confederation of British Industry and the Scottish Chambers of Commerce have made clear, we need to start reducing the burdens on business. Business rates must at least be cut to the level that applies in England. If we speak to anybody in the business community, the first thing that they say is that we need to cut the taxation rate to make businesses more competitive. That would reverse the inexcusable competitive disadvantage that is crippling Scottish business.

Photo of Jim Wallace Jim Wallace Liberal Democrat

Given that those businesses that had an average increase in their valuation at the time of the last revaluation, in 2000, are now paying lower business rates in real terms than they were in 1995, when Murdo Fraser's party was in power, does he believe that his party was crippling business in the way in which he is now accusing us of doing?

Photo of Murdo Fraser Murdo Fraser Conservative

Surely the point is that, when we were in power, we had a level playing field with the rest of the United Kingdom. The Executive has created a system whereby we now have a competitive disadvantage compared with the rest of the UK. That applies not just to business rates, but to water charges. On the whole, water charges for business are substantially higher in Scotland than they are south of the border. We must move Scottish Water out of the public sector so that it can start being responsive to its customers and start reducing bills.

Businesses cannot understand why it should be the role of the Executive, via Scottish Enterprise, to pick winners. Let us refocus Scottish Enterprise on providing skills, vocational training and business advice and use some of the savings from its budget to cut business rates and improve the transport infrastructure.

There is much more that I could say about the size of the public sector, but I will close by saying that we can only guess what Adam Smith would have made of this new Parliament building of ours. I am sure that he would have been deeply ashamed of the way in which the first Scottish Government in 300 years and a so-called Liberal enterprise minister have done so little to promote economic growth.

Surely it is time for the Executive to re-embrace the teachings of Adam Smith, which have been adopted the world over, yet have been shunned here in his homeland. It is time to concentrate not on glossy strategies but on the simple recipe that Adam Smith identified 250 years ago, which is still appropriate today:

"peace, easy taxes, and a tolerable administration of justice."

I move amendment S2M-1695.1, to leave out from first "welcomes" to end and insert:

"notes the continuing underperformance of the Scottish economy relative to the United Kingdom as a whole, despite the economic strategies of the Scottish Executive over the last five years; further notes with concern that Scotland was ranked 36th out of 60 countries in IMD World Competitiveness Yearbook 2004, some 14 places behind the United Kingdom as a whole; recognises the broad consensus of the business community in response to the Executive's recently published framework for economic development in Scotland, that action rather than words is required from the Executive to grow the Scottish economy, and calls upon the Executive to take immediate steps to create a more business-friendly environment by reducing business rates and water charges and cutting red tape, thereby encouraging business development and boosting Scotland's economic competitiveness."

Photo of Shiona Baird Shiona Baird Green 10:05 am, 16th September 2004

This is a new Parliament in a new building in a new century, so surely this is the time to start thinking in new ways. Economic growth at all costs ignores the fundamental links with social and environmental issues. For too long, that has been the accepted mindset. It ignores the opportunities for real economic progress, a better quality of life and an environment that is cared for.

We applaud the rhetoric of the Executive. Ministers say that they do not want growth at any cost, yet their words ring hollow when we consider the facts that are in front of us all. The CAG Consultants report spells it out:

"The most significant weakness emerged in relation to the perceived need for economic growth and the failure to acknowledge the negative environmental impacts of such policies."

The M74 extension, the Aberdeen bypass, the pursuit of more and more air travel and support for genetically modified crops tell the real story of the Executive's dinosaur approach to economic growth—an approach that is apparently alive and well in modern Scotland. The Executive says that it wants sustainability to be a green thread running through all its policies, yet the contradictions are glaring—it does not add up.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

In London, the Green Party's policy is for utilities in Scotland to be renationalised, paying compensation at a cost of anything upwards of £20 billion. How could public services be sustained in a bankrupt Scotland under a Green Administration?

Photo of Shiona Baird Shiona Baird Green

There are a lot of policies that really need to be examined with respect to their true environmental impact. What we are looking at all the way through our policies is their effect on the climate and the environment. That is what matters to us.

GDP is useless for measuring a sustainable economy. It measures the money that changes hands within an economy for good or ill. Money spent on cigarette advertising or terrorist protection is given equal weight to money that genuinely benefits society. Money spent on clearing up after landslides is good for GDP, while using low-energy light bulbs is deemed bad for GDP, because it means that less energy is used and because they last for about five years.

Economic growth is strongly linked to energy use. The fact that so much of our energy use is dependent on oil can only mean more climate change, leading to an eventual economic crash. We must decouple genuine economic growth from oil-based energy demand. No matter how much or how little oil is left for us, we cannot afford to burn it if we are at all serious about carbon dioxide emissions.

The opportunities are available if we could only persuade the Executive to turn away from its present dead-end path. It is imperative that such a change of route is taken, as Tony Blair said this week with some urgency. We cannot afford to be as short-sighted as the SNP, which is quite happy to extract oil for another couple of generations without any concern about the possible impact of climate change on those same generations. We should all consider future generations. That is what sustainability is all about.

The positive opportunities for sustainable economic growth are huge if we invest in them now. Marine energy is the most obvious example. The job opportunities from this emerging industry are huge, with a potential for 7,000 jobs. I have heard concerns from the industry that the Executive is placing too much emphasis on onshore wind development in the route planning for upgrading transmission lines. Not enough regard has been given to emerging marine renewables and their requirements in the appropriate placing of transmission routes.

Photo of Lewis Macdonald Lewis Macdonald Labour

Will Shiona Baird accept that the vast majority of our marine energy potential lies off the north and west coasts of Scotland, and that it is connecting the Highlands and Islands to the rest of the UK that will provide the biggest possible support for the development of marine energy?

Photo of Shiona Baird Shiona Baird Green

Yes, I was aware of that and I took it on board. However, when I spoke to a couple of potential developers in the north-west, they expressed concerns that the routes are not going to serve their needs adequately. Perhaps the minister needs to talk to them and resolve the problem. If that is what they are feeling, the industry is not being given the confidence that is vital for it to proceed.

There is no coherent national strategy for onshore wind development, just a multitude of haphazard planning applications, which are stoking up community fears and playing into the hands of the pro-nuclear lobby. Does that demonstrate whole-hearted support for renewables or a sleight-of-hand welcome for a nuclear future, which some Labour MSPs seem to be in favour of?

Photo of Shiona Baird Shiona Baird Green

Do I need to say more? My goodness—what a future.

There are jobs in creating a more energy-efficient society, which would have a massive impact on climate change, but climate change does not figure in any present-day calculation of GDP. Zero waste is about creating jobs as well as conserving natural resources. We Greens have a clear picture of the economic growth that this country needs. It is achievable without trashing the planet or compromising future generations. Surely, that is what all members want too.

I urge all members to support my amendment, which is about our future.

I move amendment S2M-1695.3, to leave out from first "welcomes" to end and insert:

"acknowledges that Scotland's economy, society and environment are interlinked and cannot be treated in isolation; notes that prioritising economic growth, above all else, contradicts the Scottish Executive's stated commitment to human and environmental welfare, and that GDP growth alone is not a measure of improvement in people's quality of life and environmental sustainability; notes the revelation in the recent report to the Environment and Rural Development Committee by CAG Consultants, Is The Scottish Executive Structured and Positioned to Deliver Sustainable Development? that the most significant weakness emerged in relation to the perceived need for economic growth and the failure to acknowledge the negative environmental impacts of growth policies, and calls on the Executive to place quality of life as its number one priority, supported by the development of a sustainable economy that does not undermine social and environmental justice."

Photo of Mike Watson Mike Watson Labour 10:11 am, 16th September 2004

Since our re-election in May 2003, Scottish Labour has been unequivocal that the number 1 priority is to grow Scotland's economy. Of course it is self-evident that the major means of delivering first-class public services and improving the lives of Scots must be sustainable and actions must cut across all departments of Government. Although growing Scotland's economy involves, at its core, delivering basic education skills, building entrepreneurial dynamism and investing in the electronic and physical infrastructure, it also embraces environmental issues as well as the cultural agenda in its widest sense.

The Executive has a twin-track approach to developing Scotland's economic performance with "The Framework for Economic Development in Scotland"—referred to as FEDS—which was updated two weeks ago, and "A Smart Successful Scotland", which was published in 2001 and is to be updated, or refreshed as the jargon has it, fairly soon. At its most basic, FEDS is the economic strategy and "A Smart Successful Scotland" is the enterprise strategy. "A Smart Successful Scotland" is in effect the Executive's strategic direction for the enterprise networks and is meant to build on FEDS.

What should a refreshed "A Smart Successful Scotland" say? I believe that it must remain the policy direction for Scottish Enterprise and Highlands and Islands Enterprise and that it must explain how the enterprise networks can deliver against FEDS, with FEDS as the overarching document. The refreshed "A Smart Successful Scotland" must take into account the central messages of FEDS. FEDS must also lie at the heart of "A Smart Successful Scotland", which must respect the central vision of maintaining a commitment to the idea that economic opportunity exists for all Scotland's people. Delivering on FEDS means ensuring that everyone in Scotland benefits, which should be an important feature of the refreshed "A Smart Successful Scotland." FEDS has balanced objectives, which I want "A Smart Successful Scotland" to have as well.

FEDS retains its four strategic objectives of economic growth, regional development, social justice and sustainable development. Economic growth is fairly rated as the priority, as we need strong growth to secure at least two of the other three objectives. However, it is fundamental that social justice, regional development and sustainable development retain their importance in the face of some of what I could describe as more conservative—with both a small c and a large C—voices that would advocate that we concentrate solely on economic growth, leaving distribution of benefits to trickle-down theory. Trickle down simply does not work; special measures are needed to help the less well-off both to contribute to and to enjoy the fruits of economic growth. That help remains especially important in the parts of Scotland that are still suffering from the consequences of industrial and economic change. That means that the refreshed "A Smart Successful Scotland" must lay out a programme of actions that tackle economic growth, regional development, social justice and environmental sustainability together. The original document was fairly strong on economic growth, limited on regional development and social justice and almost silent on environmental sustainability. It is essential that "A Smart Successful Scotland" does not encourage the enterprise networks to reduce their efforts to bring the excluded into the economy and that it moves even further towards full employment.

Since 1998 Scotland's performance on jobs has been good. We now have historically high levels of employment and unemployment has been steadily reducing, which is testament to the Executive's initiatives to date. However, the job is not yet done. In Glasgow, Dundee, Inverclyde, Lanarkshire, Ayrshire and many parts of the Highlands and Islands, unemployment and high rates of economic inactivity persist. A report by the Institute for Public Policy Research states:

"if the government's targets for eradicating child poverty by 2020 are to be achieved, full employment will be key."

That applies no less to Scotland as a whole and to Glasgow in particular. The cities review, which was published last year, showed that Scotland's biggest city—the city with the highest number of poverty indices—needs another 40,000 to 50,000 jobs if it is to close the jobs gap with the UK average.

It is perhaps even more significant that striving for full employment is not just an equity issue; there are efficiency gains too. Getting more people into work not only increases economic growth but helps to limit the labour shortages that we still face in Scotland. Improving the rate of employment was part of the current "A Smart Successful Scotland". This is not the time to move away from that commitment.

Economic growth is the number 1 priority and FEDS makes it clear that improving productivity is the most important measure. The First Minister stressed that a fortnight ago when he launched FEDS mark 2, highlighting that that measure applies to the public and private sectors. The refreshed "A Smart Successful Scotland" should also emphasise the importance of productivity.

Productivity improvement depends on measures being taken to invest in human capital through education and skills, the national infrastructure and our capacity to innovate. The Organisation for Economic Co-operation and Development demonstrates the extent to which the UK lags behind the United States of America. Perhaps that is not unexpected, but we also lag behind some of our main European competitors, which is simply not good enough. FEDS shows that we fall about 5 per cent below UK performance. That demonstrates clearly why raising productivity is the key challenge that Scotland's economy faces.

In the pursuit of improved productivity, enterprise networks have an enviably wide range of powers in relation to skills and support for new and existing businesses. In comparison, the regional development agencies in England have to pull together several bodies to match the powers that our networks have. The refreshed "A Smart Successful Scotland" should retain the strength that Scotland has in its enterprise networks. Business support, skills, training and physical regeneration should all remain part of the enterprise network's remit.

It is widely accepted that Scottish businesses just do not invest widely enough in research and development—that has been a historical problem—and we are not creating enough new businesses. That is why the intermediary technology institutes are so important, as they focus on digital media, energy and life sciences. I welcome the fact that the Executive recently doubled resources for the Scottish co-investment fund to help small and growing businesses.

Finally, the new version of "A Smart Successful Scotland" must acknowledge the different economic opportunities in and needs of the regions of Scotland. Economic networks have structures in the local enterprise companies that are designed to ensure that Scotland's economic development acknowledges local differences. However, "A Smart Successful Scotland" currently says very little about the distinctive needs of each local enterprise company area. Surely we should expect "A Smart Successful Scotland" to acknowledge the geography of Scotland. The acknowledgement of the resurgent role of Scotland's cities as growth hubs should surely be warmly welcomed, especially given that, in the cases of Glasgow and Dundee, much could be done to help to address persistent pockets of economic inactivity and dereliction by linking explicitly programmes of regeneration with employment initiatives and skills programmes. However, we should also expect the enterprise networks to exploit their local enterprise companies to make it clear that every part of Scotland has its role to play in helping the country's economy to grow.

We have the levers available to us in Scotland to drive Scotland's economy forward, backed up by a stable and supportive macroeconomic environment at UK level. The past years have seen sustained growth, even if at a rate below the UK level.

What is important now is the next stage. FEDS sets out a coherent strategy and needs a complementary approach from "A Smart Successful Scotland" to build on it. I hope that that is what the refreshed document will provide.

Photo of Linda Fabiani Linda Fabiani Scottish National Party 10:19 am, 16th September 2004

I am sorry to have immediately to disagree with Mr Watson. Andy Kerr, the Minister for Finance and Public Services, has already stated:

"There is no point in my setting targets for things over which I have no control or influence ... we do not always have the direct levers of control." —[Official Report, Finance Committee, 27 April 2004; c 1299.]

Mike Watson spoke about jargon and I agree that too often we get into jargon when we talk about these issues. "A Smart Successful Scotland" could be viewed that way. I would like to think of it as a vision, and as part of the vision for "The Framework for Economic Development in Scotland." The vision that is written down early in the document is

"to raise the quality of life of the Scottish people through increasing the economic opportunities for all on a socially and environmentally sustainable basis."

That is quite a vision. However, to achieve a vision we have to have a strategy. I am not convinced at all that, in the FEDS document, we have a strategy for achieving any of that. I do not think that there is any real thinking about changing the face of Scotland and driving forward the ambitions that we should have in this modern country.

There is a commitment early in the document to nurturing the education system, especially higher and further education, which leads on to the research and development that we have heard about. However, that commitment comes from an Executive that imposes tuition fees on students in the form of a graduate endowment—an Executive that has failed to address student poverty and graduate debt. Let us have some big thinking on that issue and a recognition that the system that is being used here is not working. While we are at it, we should have a serious reconsideration of the use of the private finance initiative in Scotland. The evidence from Audit Scotland two years ago told us that the use of PFI to build schools is having a seriously detrimental effect on education budgets and, therefore, on provision.

While we are waiting for the nurturing of education to start, we had better hope that we do not have to travel anywhere fast. Our road network is crumbling, having suffered years of neglect; our railways are among the slowest in Europe; and our airways are underutilised. The original FEDS—"The Way Forward: Framework for Economic Development in Scotland"—states that infrastructure underpins economic success. We have to get that infrastructure right. Someone can have the best product in the world, but if they cannot get it to their customers they cannot sell it.

The same applies to the communications framework. Of course, we welcome the aim of achieving 70 per cent broadband coverage; but would it not be better for the Executive to aim for 100 per cent coverage and give us some details on when it is going to achieve that, how it is going to bring the Highlands and Islands in and what criteria it is going to use, about which Alex Fergusson asked earlier?

Photo of Lewis Macdonald Lewis Macdonald Labour

Jim Wallace has said that we will achieve broadband access for every community in Scotland by the end of next year.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

We look forward to the Executive achieving that target—unlike so many targets that we never hear about again.

The best that we have heard recently about how we are going to achieve all this has been from the First Minister, who is going to cut civil service jobs and sort out the public sector. That is what we have heard about how the Executive is going to go forward with "A Smart, Successful Scotland". Scotland's economic outlook is really bad. We need an awful lot more than targets that are easy to hit when we look for reasons for the failure that the Executive has achieved by its lack of vision, its lack of firm objectives to achieve and its lack of admission that, without the real levers and the powers that Scotland needs to move forward, it will never achieve anything. We need the levers over fiscal and monetary policy.

I was heartened when Wendy Alexander and her colleagues at the Fraser of Allander institute came round to the SNP's way of thinking on a move towards fiscal federalism. I am convinced that that will move us on. Other members—even the Tories—have talked about the need for fiscal federalism and more powers. Susan Deacon has talked about it, and the late—of this chamber—lamented John McAllion has come round to our way of thinking on it as well. I think that the Executive will move forward and agree with us that, without independence, it cannot really make a difference for the people of Scotland or raise their quality of life through all the things that it aims to do.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

No, thank you.

Some things in the framework document are the germs of good ideas; the problem is that the Executive does not have the ability to carry them forward. Look at what an independent Scottish Government could do with the Inland Revenue and the Department for Work and Pensions. We could co-operate with banks and financiers to encourage business birth and support small businesses that are facing difficulty. We need business support and we need to encourage business birth rates. I cannot find much in the FEDS document about encouraging business start-ups. Perhaps we will get a surprise when the minister sums up.

I suggest that, instead of allowing Scotland's wealth to be stripped away by the Executive's policies and the policies of the Government at Westminster, the Executive should really have a vision and look towards it. Let us look at growing the economy so that it filters down and really achieves something for social justice in Scotland. Only in that way can it realise the vision that it sets out in its statement about raising the quality of life in Scotland.

Photo of Alex Fergusson Alex Fergusson Conservative 10:25 am, 16th September 2004

As this is the first opportunity that I have had to speak in the new chamber, I wish to add my sincere congratulations to those who have worked long and extremely hard to make the building ready for occupation—and I do not refer to any members in saying that. I vividly recall Enric Miralles saying, during one of the early briefing sessions that he gave members in the former committee room 1, that he felt sure that his debating chamber would be a wonderful chamber for discussion. I dare say that it will be, but whether it will prove to be a wonderful chamber for debate—which is a very different thing from discussion—remains to be seen. I hope that it will be. Whatever happens, I look forward to continuing to represent the electorate of Galloway and Upper Nithsdale in what I do not think that anyone will deny is a strikingly impressive arena.

It is upon the economy of Galloway and Upper Nithsdale that I will concentrate. I make no apology for repeating what I have said on many occasions. It is a traditional rural economy that still depends on the old faithfuls of farming, fishing and forestry, now combined with tourism, for the bulk of its gross domestic product. The major employers by a long way are the council and the health board, and the dependency on the public purse is, at times, almost alarming. Although I would not want that to put Tavish Scott off announcing, any day he likes, which public sector jobs will be relocated to Newton Stewart or Stranraer—a matter about which he has assured the council's convener by letter—it is an economy that is ready for expansion, ripe for innovation and raring for investment. However, before that can happen a kick start needs to be administered, and the only Administration that can provide that boost is the Scottish Executive.

The private sector in my constituency, as in many other similar constituencies in rural Scotland, comprises a broad spectrum of the small and medium-sized enterprises to which Jim Wallace referred in his speech this morning. Those are the very businesses that have been hammered hard by Scottish Water, which has imposed increases in water rates of up to 700 per cent in my constituency. Those businesses could and should be able to benefit—some such businesses have been able to benefit for some time—from broadband technology. If that facility was more widely available, it would undoubtedly attract new businesses to rural areas such as mine.

When I questioned the Executive's commitment to rolling out broadband across the South of Scotland, in a speech to the Parliament on 9 January 2002, I was verbally roasted by Jim Wallace for not hailing the benefits of the pathfinder project, which would help to do just that. He asked where I had been over the past year

"when we announced that on the broadband strategy the pathfinder project would cover the whole of ... Scotland".—[Official Report, 9 January 2002; c 5184.]

Perhaps I am now entitled to ask where the Deputy First Minister has been for the past three years, during which time not one individual connection to broadband has taken place due to the pathfinder project. That probably explains why, having made no progress under the careful management of the Scottish Executive, that project has been handed over lock, stock and barrel to Scottish Borders Council and Dumfries and Galloway Council to administer.

It has been left to private initiatives to bring broadband to the remoter areas of my constituency—initiatives that are now facing a quandary since the Executive's rather belated announcement that it will ensure that every community in Scotland is connected by 2006. Nevertheless, I welcome the minister's assurance that every exchange will be connected by that date. That assurance will bring comfort to many of my constituents.

It is not only the information superhighway that needs to be upgraded. I make no apology for highlighting yet again the need for, and the economic benefit that would be achieved by, a significant upgrading of the transport infrastructure of the region. Recently, the Minister for Transport helpfully informed me by letter that trans-European network funding could provide a 50 per cent grant for studies. I urge the Scottish Executive to consider undertaking an in-depth study into the economic impact that a major upgrade of the A75, which is a trans-European network route, would have. That would not only accrue benefit to the south-west of Scotland; it would provide relief for the central belt, the infrastructure of which is already creaking at the seams.

Finally, I mention the greatest current constraint on development—Scottish Water. Scottish Water has effectively become a second tier of planning procedure, and one from which it is considerably harder to gain approval for any proposal than that run by the local authority. Scottish Water now asks any developer to pay for the modelling costs and alterations required before connection to the sewerage system is granted. If a developer is building 500 or more homes, that cost might be bearable and sustainable. However, in my constituency, developers usually talk of building three, four, five or six houses. When the cost is split between that number of structures, the project becomes impossible. In every village throughout my constituency there is a burning need for such small developments of local affordable housing, yet, time after time, Scottish Water stops them happening. The Scottish Environment Protection Agency will not allow septic tanks where it believes that there is a possibility of connection to the mains. We have ended up with a moratorium on development.

There we have it in a nutshell. We have to sort the roads, provide the information technology and bring Scottish Water to book, then Galloway and Upper Nithsdale will give us an economy to be proud of—one that will build on progress and help to grow the economy for all of Scotland. Sadly, I have little faith that this Government has either the desire or the ability to deliver those much-needed improvements.

Photo of Wendy Alexander Wendy Alexander Labour 10:31 am, 16th September 2004

I should perhaps say to Parliament that I will not shirk any matters of interest in my remarks this morning. We are here to talk about growth.

The update of FEDS is an excellent document; it is superior to the one that was published when I was in the cabinet. It rightly puts the focus squarely on productivity in the public and private sectors. Above all, it identifies the right problems and provides many of the answers. Asking the right questions goes to the heart of the debate about the Scottish economy; if we ask the wrong questions, we are unlikely to come up with the right answers.

I start by talking about Scotland's economic performance. Less than a week ago, the Chancellor of the Exchequer went to the economic and financial affairs council in Brussels and produced some interesting statistics about economic performance. During the past three years, our European neighbours—the countries of the euro zone—have grown at 3 per cent. During the same three-year period, the United States grew at 5.5 per cent and the United Kingdom grew at 6 per cent. There is not much evidence there of the UK dragging Scotland down.

I asked the Scottish Parliament information centre—which is ever attendant to my many queries—to analyse how Scotland had performed compared to all the other countries in Europe, and to the United States. SPICe came back with what we in our trade call a killer fact. During the past three years, the euro zone grew at 3 per cent, but Scotland grew at 5.2 per cent, which is almost double the growth in the euro zone and only a whisker behind the US economy. That all happened while Scotland was creating more jobs than in recent times and the US was shedding jobs.

Photo of Wendy Alexander Wendy Alexander Labour

That was my introduction. Let me move on to the matter that I believe Jim Mather wants to ask me about.

It would be remiss of me not to talk about the Scottish budget as there was something on which the Allander lecture series had rather interesting things to say earlier this week. It should come as a surprise to no one that a lecture series that was considering the economy decided to consider fiscal autonomy—an idea that has generated rather a lot of heat, if not much light, in the chamber.

Let me share what the Allander economists discovered. For all the talk of the past, our experts came up with a fascinating discovery—or another killer fact, if I can put it that way—which is that there is no federal or devolved country anywhere in the world where fiscal autonomy exists. I will reinforce that point. It does not exist in the United States, which has had two and a half centuries to perfect its federalism. It does not exist in Canada, which has the most devolved finances in the world. It does not exist in Germany, Australia or Italy, nor does it exist in Spain, although the SNP might try to drag up one obscure autonomous province. I look forward to taking on the SNP on that issue. After two centuries of experience, nowhere on the face of the earth do we see the solution that the SNP is touting for Scotland.

Photo of Wendy Alexander Wendy Alexander Labour

No; let me finish. In the light of the bruising conclusions in the Fraser inquiry report, we might think that there would be a case for relying on tried and tested methods rather than using something that does not exist anywhere in any devolved country. We await the SNP's answers on their flagship policy.

That brings me to the implications for the rest of us. The Barnett formula under Labour during the past five years has delivered to Scotland the most generous funding that the nation has ever seen, and it has started to deliver a step change in public services. During the summer, the spending review that we promised gave three more years of growth in public spending. We in Scotland now know what our budget will be until April 2008. Many households in Scotland would give their right arm for that degree of certainty.

It would be madness to say no in any way to that committed cash. Equally—as I say this, I am fully conscious of what Lord Fraser has told us about keeping abreast of good practice—it would be daft not to stay abreast of good practice around the world.

That is exactly what the Treasury does. Last year, when assessing the case for Britain's participation in monetary union, the Treasury produced a fascinating paper on US federalism and monetary union. I recommend it to everyone. It is a fascinating assessment of the risk and possibilities of fiscal federalism in the US. If the Treasury can produce such assessments of experience elsewhere, surely Scottish think tanks should be allowed the space to do the same.

A coalition that has delivered the highest employment, is strengthening growth and providing the most generous investment ever in public services has the right to have that discussion. It is time to stop peddling myths and start talking economics, not politics.

Photo of Murray Tosh Murray Tosh Conservative

The member is in her final minute.

Photo of Wendy Alexander Wendy Alexander Labour

In California, Connecticut and Colorado—all fiscally federal states—no one is talking about fiscal autonomy because no one sees it as the economic answer.

In conclusion, I say to the convention parties that when we argued for devolution in the 80s and 90s, the Tories and the SNP told us that it was the slippery slope to independence. What nonsense that has proved to be.

Those of us who have delivered a Parliament, more jobs than ever before, stronger growth than in the rest of Europe and the best public services are the people who have earned the right to look to the future. Just as delivering a Parliament was not a slippery slope, having a mature discussion about best practice around the world is not a slippery slope. It is about being true to ourselves and true to our history, and about living up to the hopes that people have vested in us.

Photo of Frances Curran Frances Curran SSP 10:38 am, 16th September 2004

I will pursue the debate about the influence that Parliament can have on economic growth. Wendy Alexander said that Scotland's growth was 5.2 per cent during the past three years. That is fine, but the question is this: how much of that was down to the policies of the Executive and the influence of Parliament? We need to take a reality check while we have this discussion.

Scotland is a country of 5 million people on the northern tip of Europe and it is locked into the global economy; our economic fortunes are much more to do with decisions that are made in the boardrooms of transnational companies, in the euro zone, in the G8 and in the World Trade Organisation. The influence of the Scottish Parliament is extremely limited.

As we heard in today's debate, the Deputy First Minister's big idea is about productivity and the need to increase it. For the past 20 years, I have been involved in a debate about productivity through the three stages of the restructuring of the Scottish economy. We have never had the productivity levels of Germany or other countries in Europe and we have never been able to drive our productivity levels up, despite the measures that have been taken to follow the US model.

We talk about the need for productivity, but what influences productivity? It is capital investment, not our working harder or our skills—although both are factors. Capital investment influences productivity, but how are we going to get capital investment in the Scottish economy? The key issues are new technology, new development and new processes. How will the Executive influence those?

We have had the restructuring, or rather the death, of manufacturing industry, but UK politicians—we did not have a Scottish Parliament then—were unable to influence that process. We then had the new bright idea for Scotland of inward investment, which was followed by the collapse in south-east Asia of electronics and new technology. We stood by and watched that happen on the international markets and there was no way politicians could influence that process.

Photo of Frances Curran Frances Curran SSP

If the minister wishes to intervene, I will ask him a question. We have had a further restructuring, towards service jobs, which are now the main part of the economy. In the next 10 years, the big question will be this: how, in this global economy, will Scotland hang on to those jobs?

Photo of Lewis Macdonald Lewis Macdonald Labour

Frances Curran made the point that capital investment is critical to competitiveness and productivity. In what is clearly a global market for capital investment, what are her proposals for attracting private capital to Scotland?

Photo of Frances Curran Frances Curran SSP

I do not believe that the minister's model works. My model is socialism and public investment. We cannot rely on transnational companies to decide that they will invest in Scotland. We have no control over such development.

The minister talked about competition and competitiveness. However, when it comes to the restructuring of the economy and to service sector jobs—especially jobs in the finance sector, which makes up only 4.5 per cent of the economy—competition is about wage levels. We have what the minister calls flexibility, but which I call insecurity. The number of temporary contracts in the work force in Scotland has gone through the roof. There is no security, because we have so-called flexibility. However, most people in Scotland—75 per cent, or three quarters of the population—still earn less than £25,000 a year and many are in jobs for which they have temporary contracts. How will the Executive prevent jobs from being exported to China and to India or to other countries in the euro zone? Those are not manufacturing jobs, but service sector jobs.

We have seen Helen Liddell and others trying to persuade Boots not to move its manufacturing to Poland. We have seen the same thing happen time and again with Motorola, IBM—the list goes on. We have been through that phase, but the next phase will involve Abbey National, HBOS and similar companies. Where will those jobs go? Where is the policy to prevent them from leaving? What powers will the Executive have to stop those jobs being exported to places where people will do them for a tenth of the salary that people would be paid in Scotland, which is not a highly paid society?

The other agenda that gives the Executive fewer powers is the wholesale privatisation of public services. In those services, at least, the Executive has a tiny and very limited lever to influence the direction of the Scottish economy. However, once the Executive has privatised them, it and Parliament will not control decisions that are taken in America, Holland or other countries, because the Executive will have given away the levers of power. I will not go into what that will mean for the public sector, because this debate is about the economy. However, it will not place the Executive in the position of being able to raise wages, to create efficiencies or to influence the economy.

The Executive should take the bull by the horns on renewable energy and set up a public finance model. In the next 10 years, renewable energy will be a huge technology. Let Scotland show the way ahead—we cannot rely on the venture capitalists coming in to finance renewable energy.

The other issue is oil. Last year, oil revenues were £20 billion, but only £8 billion of that sum came into Britain, never mind into Scotland. At $30 a barrel—never mind $50 a barrel—public ownership of oil would yield the entire annual budget for Scotland. There is an enormous source of wealth in this country, but those who benefit from it are the big transnational companies. Let us do what Norway and Venezuela have done and have public ownership of oil.

Photo of Jamie Stone Jamie Stone Liberal Democrat 10:44 am, 16th September 2004

In today's debate I would like to touch on two points. I echo Mike Watson's comments on sustainability, to which Shiona Baird also referred. Besides sustainability, I would like to mention corporate social responsibility, to which sustainability is inextricably linked.

Members have already asked how sustainable our economy and Scottish businesses are. Coming from Caithness, Sutherland and Easter Ross, naturally I view tourism as one of the most sustainable sectors of our economy. As long as Scotland remains—to use the composer Hamish MacCunn's term—the "Land of the Mountain and the Flood", and as long as we have Edinburgh castle and this fine building, people will come from all over the world to visit us. We have an image that is instantly recognisable and we have a singular nature, which I view as great strengths. However, if we trash and foul up the land that God has given us, the citizens of the world will not be quite so keen to come and see us.

Although tourism can and should be sustainable, there are many other sectors of the economy that are not. The Greens are right to talk about the trail of rubbish that we leave behind, from BLT wrappers to toppling oil rigs in the middle of the North sea. Only last week, Tony Blair talked about the threat of climate change, and he was right to do so. The Executive is making great strides in the renewable power sector, but I would like to share something with Parliament. This week the cross-party group on tackling debt had a meeting with the power companies. I asked them what they were doing to encourage energy saving using the low-wattage light bulbs that have been mentioned and insulation, for example. I received the impression that I was not quite on their radar. After all, these companies are interested in making a profit out of selling energy.

However, the picture is not quite so glum when we turn to corporate social responsibility. Some members may be aware of Scottish Business in the Community, which has produced the publication "Excellence in 2003". The contents of the brochure are most encouraging. It describes initiatives by corporations such as BT, the Scottish Nappy Company, the Royal Bank of Scotland, Standard Life, Rolls-Royce and many others. Those initiatives are educational and environmental, and the companies are contributing a huge amount.

Another example of corporate social responsibility, which I mentioned in our previous chamber, is FareShare Edinburgh and Lothians, which redistributes food from supermarkets that is about to pass its sell-by date to some of the poorest and most needy people in our society. That is a move towards sustainability, because it means getting rid of landfill and it contributes a great deal. Much is coming from business for altruistic and high-minded motives. It is not all bad out there.

The crux of my point is this: we are apt to talk a wee bit too much about a green threat—I am as guilty as the rest of us of doing that—instead of concentrating on delivery. We could use the tools that we have at our disposal slightly better than we do at the moment. Government can regulate, enforce and bind everything in red tape, but it also has the power to encourage and to reward—to offer carrots, so to speak. The challenge for all of us is to build on the strengths that we have already developed and to examine what more we could do via the enterprise networks—Scottish Enterprise and Highlands and Islands Enterprise—to encourage companies to take the corporate social responsibility route. That would benefit companies, in that it would inspire loyalty and affection, which always helps the trading position.

Photo of Shiona Baird Shiona Baird Green

There are many questions that I would like to put to Mr Stone. I wanted to ask him about where air travel fits in, but he has raised the issue of corporate social responsibility. I am concerned that corporate social responsibility is a panacea that allows companies to feel good about themselves. Does the member agree that what we really need from companies is social responsibility in the attitude that they take to running their businesses?

Photo of Jamie Stone Jamie Stone Liberal Democrat

I have been polite about the Greens so far, but the trouble with the Green party and with the Scottish Socialist Party is that they would smash private business on the anvil of their political dogma. That is why their approach will not work. I say to Shiona Baird and to Parliament that we should go with the thread of business and offer companies inducements to accept corporate social responsibility. In that way, we can deliver for our society and deliver sustainability in the longer term, which will benefit us all.

Photo of Christine May Christine May Labour 10:50 am, 16th September 2004

To drive economic growth is the most important challenge that faces the country today. Without growth, we will not improve health, we will not improve education and Scotland will not become a better place to live. I commend the Executive on what it is doing, on the documents that underpin the strategy and on the initiatives that have been announced by the minister today.

The minister asked Parliament for constructive suggestions; he will not be surprised to know that I have some. Two of the most important issues for the economy are transport and energy. Transport can either be a barrier or a boost to economic growth, but too often it has been a barrier so the Executive is doing what has needed to be done for many years by making significant investment. As others have said, Scotland has such a great opportunity to exploit the energy industry to its gain. Without a secure, affordable and sustainable supply of energy, economic growth becomes virtually impossible.

Photo of Alex Neil Alex Neil Scottish National Party

I agree with Christine May, but does she agree that the recent British electricity trading and transmission arrangements will do enormous damage to the renewable energy sector in Scotland unless they are changed radically?

Photo of Christine May Christine May Labour

No, I do not agree. I have great confidence in the discussions that the current minister with responsibility for energy is having with his counterpart down south to ensure that Scotland does not suffer from the arrangements and that they create a single market, which will be good for Scotland.

The Executive has made a huge amount of investment in rail, bus and road transport with more to come in station improvements, trams and crossrail developments. Other than the Rosyth ferry and some investment in passenger ferries for peripheral areas however, little long-term thought appears to have been given to strategic uses of our inshore coastal waters. I commend the approach that has been taken to development of container traffic at Scapa Flow and Hunterston, but the time has come for the development of an east of Scotland maritime transport strategy. It has been discussed briefly on the fringes of policy making, but has not been treated as a serious alternative to road or rail. It is a resource on our shores to be used, as it was in the past; it has the potential to take freight and passengers on a new generation of barges and fast ferries that might link, for example, Rosyth, Dundee and Aberdeen. Investment has already been made in the canal network so that freight can move from west to east. Why not invest in moving north to south as well? I will write to the minister to ask for a meeting to discuss that proposal further.

The renewables debate has taken place and there is a strategy in place to encourage and support the development of renewable energy in the future. However, as I—and others—have said, there is still a need for conventional sources of energy, not just for power generation but for large-scale industrial users. Representatives from Tullis Russell and Company Ltd and Smith Anderson & Company Ltd paper mills in central Fife have already met me to discuss the problems that have been caused by the 50 per cent rise in the price of gas in the past six months. They are not alone. Members know about my support for alternative forms of energy and their economic potential for Scotland, but they also know about my firm belief that this country will need to use coal as a source of energy for many years to come.

Scotland used 40 million tonnes of coal in 1999. The figure is now 50 million tonnes and will soon rise to 60 million tonnes. The indigenous supply is 20 million to 25 million tonnes per annum, which means that we import more than half our coal, mostly from Russia. Whatever happened to the proximity principle? One reason why a lot of our coal comes from Russia is its sulphur content, which is 0.4 per cent—similar to the coal that was mined in Fife. The sulphur content of Scottish opencast coal is 1 per cent. The supplies that currently exist under Fife and the Forth will need to be exploited.

Photo of Patrick Harvie Patrick Harvie Green

Does the member accept that, in discussing trends of ever-increasing demand, she is really making the case for reducing consumption? If the energy gap exists, we need to reduce consumption before we start looking at increasing the amount of coal that we are using, the amount of fossil fuels that we are burning or even the nightmare of new nuclear stations.

Photo of Christine May Christine May Labour

We need to do both simultaneously and that is what the Executive is doing.

The spot price of coal is currently £39 to £45 per tonne, up from a low of £16 per tonne. If the price goes any higher, there exists the realistic economic prospect of a return to deep mining. The coal industry in Scotland supports 3,500 jobs directly and indirectly: think of the economic potential if we were to use those resources.

Security of supply and the questionable stability of some of the regions of the world from which we currently source, or might need to source, our energy requirements in the future, means that we need to give serious consideration to uses for coal. Coal firing and the development of biofuels for that and other uses, clean coal technology and gasification, CO2 sequestration and storage are all relatively environmentally friendly and are all referred to in various energy documents. It is time to develop serious policies for their use, so I ask the minister to discuss with his counterpart in Westminster the development of their potential.

Our vision for Scotland needs to be discussed in a coherent and planned manner; not by ad hoc groups, but in a committee of Parliament. I look forward to the day when the Executive agrees to set up a committee of the future such as has been developed in Finland, to develop policies for the long-term future of Scotland.

Photo of Richard Lochhead Richard Lochhead Scottish National Party 10:56 am, 16th September 2004

Given that this is my first opportunity to participate in a debate in our spectacular new building, I pay tribute to the many people who contributed to the building as well as to the staff who made sure that it was ready in time for us to convene a few days ago. It is a truly outstanding building. It feels like a Parliament and it looks like a Parliament, so the challenge that faces us all is to act like parliamentarians and to earn the trust and respect of the people who put us here. We have moved in and it is now time to move on. We have to change Scotland because that is what the people out there want. To do that, we will have to abandon the mediocrity that we have produced in great quantities over the past few years and replace it with a culture of ambition and radicalism.

Huge challenges face this Parliament, many of which are key to today's debate. They include the deep-seated social problems in Scotland, the declining population—which has already been mentioned—the widening gap between the rich and the less well-off in our society and our record of low economic growth in comparison with the rest of the UK and many other countries.

We have finally built a Parliament and we have finally got here, but the task that now faces us all is to build a nation; it is the biggest task that we face in the coming years. To do that, we need more powers; all parties must accept that. There is a huge gulf between the expectations of the people who elected us and what we can deliver with our lack of powers. The sooner we recognise that, the sooner we can move on as a nation.

The well-worn phrase, "raising our game", must apply to all politicians in Parliament and not to one particular party. The First Minister was quick to send out that message when he launched his legislative programme, but it has to be a two-way process. As opposition parties, we have a duty to take on good ideas from the Executive and to support it. Likewise, ministers, the Government and the Government parties have to accept good ideas from the Opposition and to accept that they might have got it wrong sometimes. We have to adopt new strategies and attitudes to move on.

I paid close attention to the debates that have been spurred by Wendy Alexander and others about fiscal federalism this week, although that is a bit of a red herring because one cannot have fiscal federalism alone—one has to have federalism in energy, trade, competition and many other policies and not just in relation to taxation and the fiscal system. I will try to clear up the confusion that Wendy Alexander caused when she talked down to Parliament. We hear talk about talking down Scotland, but Wendy Alexander always seems to talk down to Parliament—she does not engage in debate or take interventions.

We must bear it in mind that the only way we can have true financial independence is to be an independent nation state. The problem with federalism is that the rest of the UK does not want it, so we will not go down that route anyway. We could wait 20 years to try to persuade the rest of the UK to go for federalism, but Scotland cannot afford to wait that long. When one considers many of the small nations that are competitive and which have fiscal autonomy in their independent states, we see that they are much higher up the competitive index than is Scotland. According to the 2004 world competitive index, Denmark, Finland, Ireland and Sweden—which have true financial independence—are in the top 11 countries while Scotland, which does not, is down at number 36.

Photo of Richard Lochhead Richard Lochhead Scottish National Party

I will lead by example and show Wendy Alexander how to conduct a debate by accepting her intervention.

Photo of Wendy Alexander Wendy Alexander Labour

I thank Richard Lochhead very much. I appreciate that he is whole-heartedly committed to independence. However, we would be interested if he could tell us his plans for the economy under devolution.

Photo of Richard Lochhead Richard Lochhead Scottish National Party

Under devolution, we will continue to fight for Scotland's best interests. If that means gaining more powers short of full independence, we will—of course—support such a move. The SNP is a progressive party and we want Parliament to have more powers so that we can change Scotland's economic and social fabric. We cannot do that with our existing powers. Because we do not have any genuine powers, we will continue to dance on the head of a pin and tinker around the edges of issues.

We can publish as many glossy documents as we like; indeed, ministers—enterprise ministers in particular—are very efficient at bringing out such documents. However, they contain only the same words time and again. We need more powers to deliver some of the objectives that are outlined in those documents.

It is important that Parliament punch its weight—and above its weight—on the international stage if we are to boost the Scottish economy. After all, many things that are happening overseas will impact on it. For example, proposed changes to regional funding could cost us hundreds of millions of pounds if we do not fight our corner. Moreover, we must grasp the economic opportunities that have been presented by European Union enlargement.

A couple of weeks ago, I spoke to some Irish people who told me that they have completed air links to all 10 accession states that joined the EU on 1 May. Scotland has only one such direct air link. Although tens of millions of people and huge economic opportunities are involved, we have done absolutely nothing to exploit the situation. Ireland of course has been proactive and is miles ahead of Scotland. Among the other federal or devolved Governments, the Flemish have started up 77 offices around the world to exploit economic opportunities for their country. Scotland, which has virtually the same economic powers as the Flemish Government, has only 21 overseas offices.

Photo of Murray Tosh Murray Tosh Conservative

I am sorry. The member is now over his time.

Photo of Richard Lochhead Richard Lochhead Scottish National Party

As I said, we must not only punch our weight, but punch above our weight.

We all agree that we in Parliament have to change our attitudes. However, we also have to change Parliament's powers if we want to bring genuine change to Scotland.

Photo of Richard Baker Richard Baker Labour 11:02 am, 16th September 2004

The keys to continuing sustained growth in the Scottish economy are enterprise, innovation and skills. Those themes were central to the renewed economic strategy that the First Minister and the Deputy First Minister unveiled two weeks ago. Because of that emphasis and Labour's determination to be Scotland's party of enterprise, we are debating how to build on progress. Predictably, we have heard baleful pronouncements on the Scottish economy, but those ignore the progress that has been made. Such pronouncements echo the great soothsaying of doom a couple of years ago when people were predicting a significant recession. Instead, today's debate is not on whether we can achieve economic growth but on whether we can achieve even greater economic growth. As Wendy Alexander pointed out, growth has been strong and significant.

We can now be confident about much in our economy. For example, retail sales last month rose by 3.9 per cent in Scotland but rose by only 0.6 per cent in the rest of the UK. That trend is continuing. We all want more research and development; however, figures reveal that R and D in Scotland—

Photo of Jim Mather Jim Mather Scottish National Party

Does the member not agree that there is a double standard at work here? While we are being criticised for using short-term statistics, most Labour MSPs are citing the same kind of figures. The fact of the matter is that, for 30 years, this country had average growth of 1.6 per cent while such growth in the rest of Europe was 2.5 per cent. The big question is: what is the Executive going to do to close the gap?

Photo of Richard Baker Richard Baker Labour

My figures for the increase in expenditure on research and development are over a six-year period, which is not the short term. In any case, we are talking about long-term strategies. As a result, I reject the member's point.

The Executive is investing to create a more successful economy. For example, it is investing in infrastructure, particularly in transport projects; in a skilled work force through such successful schemes as modern apprenticeships; and in innovation through our universities and colleges and our technology institutes. I would fervently hope that those institutes would be spared from the cuts in the Scottish Enterprise budget that the Opposition parties recommend.

I was pleased to find that the refreshed economic development strategy places an emphasis on ensuring that all regions enjoy the same economic opportunities. The intermediary technology institutes in Dundee and Aberdeen are key to the north-east's prosperous future and it is vital that we turn Scotland's world-class expertise in research and skills into commercial success. In Aberdeen, ITI Energy will turn skills in the oil and gas sector into new business for Scotland and will help to sustain and renew that vital industry. It will also help us to capitalise on the city's academic expertise in renewable energy development, which is a key area for future industrial success. Moreover, I hugely welcome the news over the summer that £50 million Government support will be made available for developing renewable technology, as it will help to develop wave and tidal power. That said, I again urge the Executive to consider a more generous renewables obligation certificate for wave and tidal power to help to create a market stimulus for an industry that could create 20,000 jobs in this country.

Our universities and colleges must also be at the heart of our economic development strategy. However, they now face the challenges created by the introduction of top-up fee income for universities in England. Although we do not want to go down that route in Scotland, our universities and colleges must be able to compete. I hope that that issue will be addressed in the short term when we hear the outcomes of the spending review.

We must also be aware that our universities face competition from further afield. For example, graduate numbers in India are expanding at a huge rate. Indeed, we face such challenges not only in the higher education sector but in the service sector, in which certain jobs, particularly those in call centres, have been offshored to countries where costs can be lower. I know that the Executive is doing something about that situation and, in that respect, I welcome the establishment of the financial services group to work on the issue with trade unions and employers. Moreover, I welcome the Executive's establishment of a manufacturing advisory service, which I trust will also involve key partners including the trade unions.

Such actions and the economic strategy as a whole show that our Executive has been working to build our economy and that it already has the ability to introduce important measures to encourage growth. Inevitably, these debates focus on what the Executive can or cannot do to stimulate our economy and this particular debate has focused on fiscal autonomy. I welcome the recent calls for further examination of what fiscal autonomy would involve, because I do not think that we have heard enough about how it would be administered, which powers should be devolved and what it would mean for business. I do not accept it as a foregone conclusion that we should focus on fiscal autonomy as a means of delivering growth. We must be clear that any decision to go down that road must be based on hard economic facts and not on a political desire to give the Parliament greater powers. No doubt some would be tempted by that not simply as an economic argument, but as a step to separation. However, that would mean separation from economic partnerships that have served us well.

At a time when economies across Europe are seeking to harmonise, we in Scotland need to be cautious about seeking greater divergence on strategy. By being part of our UK economy, we are benefiting from low inflation, still low interest rates and the lowest unemployment for a generation. We also need to put a health warning on giving greater tax-varying powers to this Parliament. Of course, we are perfectly able to manage such powers, but those who might be tempted to support fiscal autonomy because they want lower taxes must be aware that taxes can go up as well as down. It can never be a foregone conclusion that future Scottish Administrations will always seek to cut them.

I am puzzled by those who say that only by having such powers would the Parliament feel accountable for spending decisions. I am sure that we are all well aware that we not only feel accountable for such decisions but are—and are held—accountable for them. We already have important powers to enable us not just to form the right economic strategy for Scotland but to build our economy in other key areas such as health, transport and education. Let us not focus on debates about the Parliament's powers at the expense of making our economic strategy deliver for Scotland. It is the right strategy for growth; it will help us to achieve a more prosperous economy; and it is already working for Scotland.

Photo of John Scott John Scott Conservative 11:08 am, 16th September 2004

First, I declare an interest as a modest businessman and refer members to my entry in the register of members' interests.

I endorse my colleague Murdo Fraser's comments about the lack of growth in the Scottish economy. It is a matter of record and shame that the Scottish economy consistently underperforms in the UK economy as a whole. It is an indisputable fact that business rates remain 7 per cent higher in Scotland than they are in England and that high water charges are putting excessive burdens on our small businesses in particular. It is also a matter of the greatest regret that so many of our talented young people are moving to England or elsewhere in the world.

The Executive makes much of giving young people and the younger population transferable skills. The reality is that transferable skills are just that and are being transferred out of Scotland. Such migration is nothing new—historically, it has been known as the brain drain—but its consequences for a devolved Scotland are becoming more damaging by the day. The Executive is doing nothing to stem the exodus at a time when, if our economy is to grow, it is essential that Scottish firms are in a position to set up, expand and compete in an environment that is conducive to their success.

In my constituency, business start-ups fell by 17 per cent in the April to June quarter of 2004, compared with the same quarter of 2003. Business start-ups are proportionately fewer across Scotland than in England. In addition, that was the second consecutive quarter in which we saw a drop in business start-ups in and around Ayr, Prestwick and Troon, but that should not come as a surprise, given the economic climate across Scotland.

If I were a younger man—I wish I were—without ties, would I consider either working in Scotland or setting up a business in Scotland now? The answer is that I would not. I would not set up a business where I knowingly put myself at a competitive disadvantage to similar businessmen in England. I would not set up a business in Scotland, where business rates are higher than in England and where water rates are penalising businesses young and old alike.

What further compounds the position is the lack of self-esteem in our Scottish population, and that must be urgently addressed. We must restore the can-do attitude that is so evident in Scots abroad and so lacking in Scotland. It is not that the genes of Scots abroad are any different from those of us at home, but the upbringing, the business environment and the fiscal climate do not all conspire to keep Scots abroad from fulfilling their potential as they do in Scotland. We must start in our schools and give our young people the appropriate skills and confidence to equip them for life in a competitive world. We must make it easier for school pupils aged 14 and over to access business-led vocational training at FE colleges instead of bribing them to stay at school to collect their education maintenance allowance. We must support our distinguished universities and colleges in producing an annual crop of highly trained graduates, and we must keep those graduates in Scotland.

To keep our young in Scotland, we must make it a more exciting place—a destination of choice, as it were—to be enjoyed rather than deserted, as happens now. To that end, we must have better communication links with the outside world. Better roads, better rail connections and better airport links not only help businesses and the business establishment, but they allow people to travel easily and, crucially, to return, rather than encouraging them to buy a one-way ticket out of Scotland as they currently do.

We must encourage mentoring and business angels. We have to develop co-operation and collaborative organisations, which are often the spawning ground for new businesses. Mentoring and co-operation build confidence and self-esteem, and that vital bridge between ideas and delivering shining new businesses is something that we have not yet explored closely enough.

More and better housing must be made available by reforming our outdated planning practices.

Such improvements in our infrastructure require leadership, political will and example—things that are not currently on display in the Executive. Encouraging and rewarding excellence in the private sector, rather than promoting political correctness in the ever-growing public sector, will create the vibrancy and excitement that we are missing in Scotland and which many seek elsewhere. We need a determination from the Executive to do everything possible to keep our young in Scotland, to create the right business climate, to foster new businesses, to use the levers of power that are currently available to create new businesses and to encourage our young to stay here. Until we get that determination, coupled with action, nothing will change and further decline will be our future.

We have to up our game. What needs to be done is self-evident, but people are asking whether the Executive has either the ability or the will to do the strikingly obvious. Indeed, many businessmen feel that they achieve what they do in spite of rather than because of the policies of the Scottish Executive. Needless to say, the Conservatives are, as ever, happy to point the Executive in the right direction, and for that reason I urge members to accept the Conservative amendment as the only sensible way forward.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat 11:14 am, 16th September 2004

I welcome the debate and I also welcome the framework, which clearly states that improving productivity in the economy and the public sector is the key aim. Through the commitment in the Executive's programme for skills and education, through research and development, through universities, through the welcome commitment on universal broadband and through the work on efficient government, the Executive is addressing the real issues.

As Mr Watson and other members have said, human infrastructure is the key to that success. In this chamber, we are often too free in making international comparisons, but I noted the foreword on the Swedish Prime Minister's website, where he says:

"Continued good economic development requires a broad base of support for two major tasks, both of which are of key importance for the future of our country. In the first place, we must make working life more human and reduce the level of absence from work due to illness. The Government's aim is to halve the number of sick leave days by 2008. The other major task is to increase the access of immigrant Swedes to the labour market. These two social problems—the high rate of illness and the exclusion of many immigrants—overshadow all other tasks in this period of office."

I look forward to the Finance Committee's cross-cutting review of economic development and I hope that health issues in this country, such as alcohol and drugs misuse, stress, psychological issues and injuries at work, are all part of that review.

I am pleased that the Executive is also working hard to attract inward labour. Recent statistics from the Registrar General for Scotland showed that the number of people coming to Scotland from overseas exceeded the number of emigrants in 2002-03 and that 2,400 fewer people left Scotland to go to the rest of the UK. It is interesting to note that Future Skills Scotland has said that it is unlikely that by 2020 the working population in Scotland will have decreased by more than 1 per cent.

We have heard from Opposition members in the debate and over the summer that the Executive is not willing to discuss the levers that could really deliver positive change. What hypocrisy! For seven years now, the alleged official Opposition has not published a single shadow budget or explained how it would use the levers that are currently open to us. Where is the promise to cut income tax, if it is a tax-cutting party? Which SNP councils have slashed council tax, if it is the tax-cutting party? Where are the alternative proposals for spending the Scottish budget? Not once has the SNP said what it would do differently. It is simply not credible.

Photo of George Lyon George Lyon Liberal Democrat

We also heard the newly-elected SNP deputy leader, in her first speech in this new Parliament, committing her party to a further £8.3 billion of spending. It will be interesting to hear how the official Opposition intends to pay for that, given its finance spokesman's commitment to cut taxes in Scotland.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

Indeed. I absolutely agree that the SNP's whole platform for financing independence—its only hope—is North sea oil. Since 1970, according to the United States Government's Department of Energy, there has been—

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

If the member will forgive me, I wish to make progress with my speech. If I have time later on, I shall give way. It is worth noting that Mr Mather did not give way to me.

According to the US Government's Department of Energy, there have been only five years in the 30 years since 1970 when the price of oil has fluctuated by less than $3 a barrel. In the past five years alone, the price of oil has fluctuated from $17 to $33 per barrel. There is no way that the SNP could provide a spending review statement similar to the three-year spending announcement that this chamber will hear.

We go from the sublime to the ridiculous. As George Lyon said, the Salmond-Sturgeon dream team has so far clocked up £8 billion of spending commitments. I know that election campaigns are expensive, but there was no holding back this dream team over the summer. Dualling roads, European championships and bullet trains all added up to £8 billion of spending commitments, plus there was £300 million-worth of tax cuts if corporate taxation in Scotland was reduced by only 5 per cent.

Members will know that earlier this summer I started the debate about taking a real look at the fiscal system that funds this Parliament. My pamphlet, which is available from my website and which I warmly recommend to the chamber, was endorsed by the Federation of Small Businesses, which said:

"After five years of political point scoring on the fiscal powers of the Parliament, Jeremy Purvis' analysis of greater fiscal devolution is to be welcomed."

The Allander report adds weight to my view that fiscal autonomy as proposed by the SNP is a sham. Let us be honest and call independence independence. No country in the world, federal or unitary, operates fiscal autonomy, and there exists no academic study that supports the argument that Scotland has a sustainable fiscal surplus.

Catalonia, which operates under a system of fiscal federalism, has not chosen to secede from Spain—members should consider why that is the case. In my paper on fiscal federalism, I propose new powers for the Parliament. I would welcome a debate on the matter, but such a debate would have to be followed by a debate about policy platforms, the levers that the Opposition parties would use, the choices that they would make and the policies that they would present at elections. The Opposition parties have been woefully inadequate at offering any alternatives in relation to the powers that they would use and the policies that they would present. I welcome the debate, but there must be substance from other parties if it is to be meaningful.

Photo of Duncan McNeil Duncan McNeil Labour 11:20 am, 16th September 2004

Given some of the contributions that we have heard from the Scottish Socialist Party and others, it is no wonder that some people think that a debate in the Scottish Parliament about business is akin to a debate in the British National Party about equal opportunities. It is surprising that when we debate business and enterprise, there are still members to whom we need to make the case for wealth creation, which would be regarded anywhere else as a statement of the obvious. A strong economy creates jobs; having a job gives people dignity; and having money improves people's quality of life. However, that should not be allowed to overshadow the fact that, for the second week running, the Scottish Parliament is debating real issues for Scotland. Long may that continue.

In the partnership agreement, the Executive makes the commitment to

"reduce the gap in unemployment rates between the worst 10% of areas and the Scottish average by 2006", and to

"regenerate those communities where there are persistently high levels of unemployment."

That is of particular interest to me, because I represent Greenock and Inverclyde. In his statement to the Parliament last week, the First Minister made clear his commitment to reach out to people who are still unemployed and to give them the tools that they need to take up the jobs that are there. The First Minister continued:

"To do that, we must help to create the conditions in which our companies can grow."—[Official Report, 7 September 2004; c 9880.]

It has been pointed out that we must also rise to the productivity challenge. That seems to make sense, but how should we do that? As we have said before, in similar debates, the regeneration game is a package deal. In communities like Greenock and Inverclyde, where the scars that were left by the industrial vandalism of the 1970s and 1980s are compounded by a downturn in electronics, we need a larger number and a greater variety of employers and jobs. The economy cannot be rebuilt on the foundation of low-pay, low-skilled, temporary jobs, so the quality of jobs is as important as the number.

It is about more than that, of course. If we are to attract talent, families and businesses, we need to make places such as Greenock and Inverclyde places of choice, where the general quality of life is high. We need to provide affordable, quality housing in areas in which people want to live. Parents need to know that their children will be well educated in a warm, comfortable classroom that is fit for teaching in the 21st century. The environment must be improved and brownfield sites must be redeveloped. Crime—and perceptions and fears of crime—must not be allowed to drive people out of Inverclyde and to deter newcomers. Progress has been made on some of those issues locally and some of the developments on reclaimed waterfront land will be nothing short of spectacular, but more needs to be done.

I welcome some of the recent plans—

Photo of Trish Godman Trish Godman Labour

You have one minute left.

Photo of Duncan McNeil Duncan McNeil Labour

Okay, I take the point.

I am glad that the Executive acknowledges the importance of the issue and recognises—even though some people choose to look away—that enterprise and a business-friendly environment are essential if we are to have healthy, prosperous communities in a successful Scotland. The Executive also recognises that, just as every public service depends on a successful economy, a strong economy depends on just about every public service. We, too, need to recognise that everything that we do in the Parliament can contribute to the creation of that successful Scotland.

Photo of Trish Godman Trish Godman Labour

We move to winding-up speeches.

Photo of Patrick Harvie Patrick Harvie Green 11:24 am, 16th September 2004

I want to relate a little anecdote from the European elections, which took place earlier this year. At most of the hustings that I attended and in most of the media coverage that I saw, whenever the economy was mentioned, every party bar the Greens talked about the need for GDP growth and about how Scotland performs. At one hustings, which was organised by Scottish Environment LINK, every party joined us in calling for a sophisticated analysis of growth and for a recognition that there are downsides to growth and that we need new measurements of economic activity. In short, every party knew that the audience would not swallow the growth stuff, so instead of discussing how to grow Scotland's economy, they joined us in talking about whether we need growth and about how much and what kind of growth we need. They talked about economic development rather than economic obesity. Today, Jim Wallace stood up and told us that what is required from politicians is a consistent response. I agree. The Green response is certainly consistent, and it is distinctive. I will make the case that it is also irresistibly credible.

However, first I will consider the motion and the amendments. The Executive's position displays glaring inconsistencies, if we want to hand on a better Scotland in relation to transport, renewables, waste, housing and aviation—I mention aviation in particular. Several members have referred to Tony Blair's speech on climate change. It is not possible to take seriously the local, national or global impacts of climate change while wanting to grow ever more aviation. The contradiction between an obsession with GDP growth and the social and environmental aspirations that we must prioritise drives through all the Executive's inconsistencies. Instead of a focus on those aspirations, there are a few decorative, green-thread policies—enough to allow ministers to say that they are doing something.

I agree with the Scottish National Party that the Scottish Parliament could do more if it had more powers. That is undeniable. In an independent Scotland, we would have our hands on more of the levers of power. I support that, but what really matters are the hands that are on the levers and the controlling mind that is behind them. If the controlling mind remains obsessed with growth, nothing meaningful will change. I perceive no interest or advantage in swapping growth-obsessed government in London for growth-obsessed government in Scotland.

I was disappointed that the Scottish Socialist Party joined the SNP in calling for an economy that is based on oil. Public oil does not pollute the planet any less than private oil does.

There were few surprises in the Tory position. The main difference between the Tory growth addicts and the Executive growth addicts is that the Tories are a bit more ambitious about how they might find the cash to pay for the next fix.

Only the Green amendment recognises that growth carries social and environmental costs, acknowledges the inherent flaws in the old thinking and calls for the focus on GDP growth to be abandoned. Economic growth is irresponsible in the context of the vast majority of our environmental problems. It is utterly facile to try to solve those problems with the same mindset that caused them. The Executive is trapped in an economic orthodoxy and every other party, bar the Greens, seems to accept much of its agenda. We need to cast off those blinkers and seize the opportunities that an economy based on social and environmental justice would offer.

Economic growth is strongly linked to energy use. The obsession with growth feeds into ever-higher carbon emissions and ever-higher demand for energy that is derived principally from fossil fuels. We must break that link. The economy is inextricably linked to social and environmental issues and it is absurd to treat any of those matters in isolation, yet the Executive does exactly that, month after month and year after year.

GDP is useless as a measure of a sustainable economy. It measures the money that changes hands in the economy, whether that happens for good or ill. Money that is spent on cigarette advertising increases GDP as much as money that is spent on recycling does. Every car crash or family break-up contributes to GDP. GDP also ignores non-monetary transactions, such as the vital services in the home and in communities that form the social fabric of society. An increase in GDP might have some benefits in some aspects of the economy, but it also undermines and decreases the strength of our social fabric. We must ask ourselves whether we are heading in the right direction.

GDP also treats the depletion of natural resources as income: when parkland is tarmacked over to make a car park, that boosts GDP; and when old forest growth is cut for cheap timber, that boosts GDP too. Those events should be treated as depreciation; they should be in the debit column, not the credit column.

Photo of Patrick Harvie Patrick Harvie Green

I am sorry, but I am in my last minute.

Everlasting GDP growth is, of course, impossible—even if it were desirable—because the resources destroyed to fuel GDP growth will not last for ever. However, there are alternatives, and the Green position outlines them. The sustainable economic welfare index, developed by the New Economics Foundation, is a useful way of moving forward. I urge members to support the Green amendment and to support new and radical thinking.

Photo of George Lyon George Lyon Liberal Democrat 11:30 am, 16th September 2004

Unfortunately, this debate has followed its usual pattern. The coalition and the Tories have engaged in a discussion on the economic policy choices that lie before us, and the official Opposition—the SNP—has engaged in its usual constitutional navel gazing. Every SNP speaker so far has failed to address the economic policy choices. I have great respect for Alex Neil and I expect him to address those choices when he sums up.

Too often, the real debate about Scotland's current economic performance is bedevilled by out-of-date statistics and poor-quality information. The Executive, to its credit, is now trying to tackle that problem—a welcome example being its recent rebasing of GDP figures to bring us into line with how the UK measures GDP. The figures reveal that Scotland outperformed the UK in 16 of the last 23 quarters, to the end of 2003. Those figures are reinforced by the work done by SPICe on behalf of Wendy Alexander.

That information is rather at odds with the picture painted by some in the debate. In the real world, house prices in Scotland rose by 19.3 per cent last year; car registrations are at an all-time high; and retail sales figures this week show 7.3 per cent total growth—outperforming the rest of the UK. That seems to be a picture of growing individual wealth among ordinary Scots.

Photo of John Scott John Scott Conservative

Would Mr Lyon accept that the figures also paint a picture of growing national debt, and that much of what he claims as a success is a huge debt for future generations?

Photo of George Lyon George Lyon Liberal Democrat

Is the member referring to Scotland's debt or the UK's debt? I am not quite sure. Anyway, to move on—

Photo of George Lyon George Lyon Liberal Democrat

That may well be and the issue is certainly of some concern. However, all that I am trying to say is that the experience of ordinary Scots does not chime with what some members have been saying in the debate.

We must not be complacent. Rightly, there are concerns about Scotland's economic performance.

We still need to improve on that performance and create the wealth to fund good public services. That is fundamental and it is the Executive's current priority.

The Executive has been listening to business. The 2003 manifesto of the big five—the Confederation of British Industry, the Institute of Directors, the Scottish Council for Development and Industry, the Federation of Small Businesses, and Scottish Financial Enterprise—listed priorities. The top priorities are investment in skills, which, with "Determined to Succeed" and modern apprenticeships, we are delivering; investment in our infrastructure—as the minister said, £3.2 billion is going into transport over the next few years; and investment in broadband. As Lewis Macdonald said, broadband will be delivered for all communities by the Executive in 2005. The Executive is delivering on the business sector's key priorities, which are firmly embedded in the Executive's policies for a smart, successful Scotland.

Photo of George Lyon George Lyon Liberal Democrat

I have to make some progress, but I might take an intervention later.

I want to turn to the Opposition party's policy positions. Jim Mather outlined his usual simplistic solution—more powers for the Parliament to solve all our economic problems. However, his speech was quite unusual, because it did not contain the phrase "fiscal autonomy". As Wendy Alexander said, fiscal autonomy is really a smokescreen for independence, which the SNP knows the Scottish people have rejected many times before.

Photo of Jim Mather Jim Mather Scottish National Party

In this significant week, during which Wendy's study has vindicated our view on the need for independence, I want to ask George how far down the international league table Scotland has to fall before he will ask for more powers for the Parliament? By IMD standards, we are 21 st out of 30 small countries.

Photo of George Lyon George Lyon Liberal Democrat

I hope that Mr Mather will listen to what I say. Powers are not the answer; policies are the answer. The SNP has so far absolutely failed to address the policies. It may well be that, as a result of a debate on policies, we move on to a debate on the powers of the Parliament, but it should not be the other way round. That is the fundamental mistake that the SNP keeps making.

Photo of Jim Wallace Jim Wallace Liberal Democrat

Would George Lyon acknowledge that, in the same league table, Hong Kong is sixth? Can he tell us when Hong Kong was last independent?

Photo of George Lyon George Lyon Liberal Democrat

I acknowledge the point that the minister makes; he has answered the SNP's point.

The notion that giving the Parliament more powers will, in itself, guarantee economic growth is clearly wrong. It is not credible. Ireland is a classic example of independence, in itself, not guaranteeing economic success. Ireland gained independence in 1921, yet languished at the bottom of the economic league table until 1986, when the International Monetary Fund was forced to help to bail the country out because it was insolvent. As Wendy Alexander points out in her pamphlet, it was only when all the social partners and the political parties agreed that economic growth should take priority over all other policies that spectacular growth was delivered—albeit from a low base—for Ireland. As Murdo Fraser points out, it is policies, not powers, that count. The SNP is unwilling or unable to engage in that debate.

The coalition is right to reject the competitive tax-cutting approach that Murdo Fraser and the Tories present. The notion that we should try to compete with the Chinas and the Indias for low-wage, low-tech jobs is the road to ruin. We are right to reject that notion. I support the motion in Jim Wallace's name.

Photo of Alex Johnstone Alex Johnstone Conservative 11:37 am, 16th September 2004

In opening his speech, George Lyon said that he thought that this was the same old debate again, and I suppose that it is, to a large extent. We have become used to people taking the same positions. However, we used to be reasonably agreed that growth was a good thing. That is no longer the case; the consensus appears to have been lost. It is a surprise to me to find members—from the Green benches in particular—taking the view that growth is somehow the cause of the problem rather than the solution to it.

Photo of Alex Johnstone Alex Johnstone Conservative

No, thank you. Over the past five years, the Greens have become to some extent the green conscience of the Parliament. However, their success in the recent election appears to have given them the confidence to become a little more than the conscience. They have tried to introduce some new ideas, but they will find little support for them among the vast majority of those involved in political life in Scotland.

It is interesting, too, that the Scottish Socialist Party should come up with some fairly unique positions. I am not entirely familiar with the raison d'être of the SSP, but the idea that we should shut out external investment and then legislate to prevent a competitive Europe from delivering success to countries such as Poland is quite extraordinary. I do not know about other members, but I wish every success to Poland and I welcome that country to the European Union. We must accept that we will succeed by competing and trading with Poland, not by placing barriers between us and Poland and similar small countries in Europe. The idea that we should drop out of the world economy is not one that is shared by the major parties here.

I agree with George Lyon's view that, as yet, the Scottish National Party's contribution has been limited to the same view that we have heard often before—that independence is the answer to Scotland's problems. However, the argument that is beginning to develop between SNP front-bench members and members such as Wendy Alexander on the Executive benches appears to concern the definition of what financial independence, or financial federalism, will ultimately mean.

What I want, in the long term, is not necessarily a contribution to the economic development of Scotland, but genuine accountability for Scotland's politicians, which will be delivered not through any sense of justice among politicians but through genuine accountability for fiscal policy at the ballot box. Ultimately, that will produce politicians who will deliver for Scotland's economy.

Photo of George Lyon George Lyon Liberal Democrat

Will the member define "fiscal flexibility"?

Photo of Alex Johnstone Alex Johnstone Conservative

Did I use the phrase "fiscal flexibility"? I tried to avoid it. The phrase that I will use now—and will continue to use—is fiscal accountability for all Scotland's politicians, delivered at the ballot box by electors who will judge the performance of their politicians in fiscal matters.

Moving on to the Executive, I think that Jim Wallace talks a good game and I congratulate him on a great deal of what he had to say. However, I will criticise him on the way in which he seeks to deliver some of his policy priorities. I greet the significant investment in infrastructure, but the message has not yet dropped adequately with the Executive that that infrastructure requires yet more investment in specific areas. I am glad that the Executive now has a road-building programme that is beginning to approach that which the Conservatives had in Scotland prior to 1997. However, unless the Executive understands that the way to solve Scotland's economic problems is to improve our road networks still further, the Conservatives will continue to argue for individual road developments. There are those in the chamber who believe the old adage that new roads just create new traffic. I assure them that one man's traffic is another man's economic expansion, which is what, by improving transport links, I want to happen in Scotland.

Yet there are other elements of infrastructure that continue to give trouble in Scotland and they demonstrate how the Scottish Executive is perhaps beginning to drift off the mark. We have a problem in the fact that Scottish Water has become the de facto planning authority over large areas of Scotland. That is, in effect, caused largely by the fact that we in Scotland continue to try to exert political power in areas that are best led by the market. A demand-led water system would be much more desirable than one that is led exclusively by policy from the centre. That is an example—there are many others—of the fact that the Executive talks a good game on markets, yet is afraid to deliver decisions into the hands of the marketplace and continues to restrict the development of the Scottish economy.

We need look no further than the discussion that took place at the start of the debate. An argument developed over the comparative rate of growth in the Scottish economy, yet the distinction was not made between growth in the Scottish economy that is delivered through private enterprise and that which is funded directly through Government expenditure on the provision of services. The latter, we must remember, is largely funded through a disproportionate transfer of resources from the Westminster Parliament via the block grant. We must always remember that, in the Scottish economy, we tax at a proportionate rate to the rest of the UK, yet we spend well in excess of that. Unless we can wean ourselves off that disproportionate contribution to our economy, we cannot take the figures for growth in Scotland as representing like for like. The Conservatives will happily agree with the Executive that it is important that we continue to judge our economy against that of our nearest neighbours and partners south of the border but, unless the Executive is willing to accept our amendment, it is difficult for us to accept its motion.

Photo of Alex Neil Alex Neil Scottish National Party 11:44 am, 16th September 2004

I thank the Deputy First Minister for his best wishes—assuming that I win the vote in the Enterprise and Culture Committee on Tuesday. I look forward to working with him and my comrades from the five parties on the committee on promoting the enterprise, culture, tourism, sport and lifelong learning agenda for Scotland. I welcome his announcement of the second business in the Parliament conference next year. As the convener of the Enterprise and Culture Committee, I will work with him and others to make a success of that.

There is clearly a wide consensus throughout the chamber on the problems facing the Scottish economy, although there are differences in the solutions offered. Before I offer some solutions of my own, I wish to take issue with three points that have been made this morning. First, I take issue with the comparative growth figures given by Wendy Alexander. Not for the first time, Wendy was ingenious with which figures she selectively chose for the comparison, so much so that, in a past age, she would have made Houdini look positively arthritic. Wendy compared the growth rates of the Scottish and UK economies with the growth rates in the euro zone and the United States economy. We all know that, since George Bush took over, with his version of voodoo economics, the growth rate in the US has collapsed. We also know that, because of the particular problems of the German economy, the euro zone has experienced much lower growth than it had done previously.

Photo of Alex Neil Alex Neil Scottish National Party

I will let Alex Johnstone in later, but I want to finish a point.

I will draw a comparison, this time comparing apples with apples, rather than apples with oranges. Let us consider the figures that Wendy Alexander got from SPICe for the growth rate in the period that she mentioned, and compare Scotland's fairly miserable growth rate—barely touching 2 per cent on occasion and now forecast to go slightly over—with the growth rates in similar-sized economies. The Norwegian rate, for example, has been about 50 per cent higher than the Scottish rate. The Irish rate has been twice the Scottish rate. The rates in Finland, Sweden and Luxembourg have been one and a half times the Scottish rate. When we compare what is happening in Scotland with what is happening in similar economies, the picture is not nearly as rosy as Wendy Alexander would have us believe. In general terms, big economies have been underperforming in comparison with small economies, not only in Europe but throughout the world.

That does not apply only to the growth rate. If we consider GDP per head, on 16 July this year, the United Nations Development Programme published a league table on human development throughout the globe; the UK ranked only 12th. On the specific measure of GDP per head, the Norwegians had £5,500 more, not than the figure for Scotland, but than the higher figure for the UK as a whole. Norway was substantially ahead of the UK. Seven of the 11 countries that were ahead of the UK are of the same size as Scotland. In other words, the evidence is clear that small economies are achieving higher performance rates in growth and GDP per head than larger economies. That is why Scotland needs to raise its game, not only in productivity but in GDP per head—which is a measure of living standards—and in economic growth.

Photo of Jamie Stone Jamie Stone Liberal Democrat

If we took away the fig leaf of fiscal autonomy—or whatever it is called—and went down the independence route, we would not have the Barnett-Goschen cash and we would be bust, would we not?

Photo of Alex Neil Alex Neil Scottish National Party

Quite frankly, if Scotland had access to its own oil and other resources, far from being bust, we would be one of the fastest-growing economies in the world.

That neatly brings me on to the second point with which I take issue. If we examine the paper that was produced by the two so-called professors who lecture at the Fraser of Allander institute for research on the Scottish economy—

Members:

Oh.

Photo of Alex Neil Alex Neil Scottish National Party

Yes, they must be dishing out professorships like confetti in some of the institutions.

When the two professors come to oil in their analysis, they say, "Oh, we cannot allocate the oil to Scotland, because it is volatile." Can members imagine the Norwegians saying, "We don't want that money, because it's not the same this year as last year"? Let us suppose that Wendy Alexander was a punter who did the lottery and that last night the jackpot was £2.8 million, although last week it was £3.3 million. If Wendy checked her numbers this morning and found that all her six numbers were up, she would have won £2.8 million. The professors' comment would be like her phoning Camelot and saying, "Thank you very much. I've won the jackpot, but I don't want the jackpot because it's volatile."

Photo of Trish Godman Trish Godman Labour

Mr Neil is in his last minute. I am sorry, Ms Alexander.

Photo of Wendy Alexander Wendy Alexander Labour

You do not win the lottery if—

Photo of Trish Godman Trish Godman Labour

Ms Alexander, sit down.

Mr Neil, you are on your last two words.

Photo of Trish Godman Trish Godman Labour

You will have to sit down now.

Photo of Alex Neil Alex Neil Scottish National Party

I will go now and hold a press conference to tell members my third point.

Photo of Lewis Macdonald Lewis Macdonald Labour 11:52 am, 16th September 2004

I cannot predict what Alex Neil's third point would have been, but I will seek to respond to those that he made and other points that were made in the debate.

I am delighted that we have had such a wide-ranging debate on the Scottish economy this morning. As was pointed out at the outset, we had a similar debate 12 months ago, but it is also worth noting that we have had numerous debates on the economy at the Executive's initiative over those past 12 months. To name just a number of them, we have had debates on enterprise in education, the economy of the Highlands and Islands, renewable energy development and learning and skills. Those are all critical aspects for achieving growth in the Scottish economy.

In our previous parliamentary chamber, we also held the business in the Parliament conference, which was a unique collaboration between the Executive and the Parliament to engage with representatives of Scotland's business community. Jim Wallace announced the publication of the Executive's response to the main issues that were raised at the event. I affirm that business in the Parliament was extremely productive in focusing the debate on enabling business to talk directly to ministers and MSPs and I look forward to the next such event to be held here in our new Parliament building in the course of the next year.

One of the things that I heard from business people was that Scottish business recognised Scotland's strengths and wanted politicians to recognise that there was little point in business talking Scotland up if Scottish politicians were determined to talk Scotland down. Therefore, it was disappointing, although not surprising, to hear Tory front-bench and SNP members highlight one report from the Swiss International Institute for Management Development to try to find evidence to let them talk Scotland down. I have looked at that report and, like Murdo Fraser, I am happy to quote a selection of its findings. As an antidote to his pessimism, I will mention some of the positives: Scotland is number 6 in the world on exports of commercial services, number 5 in the world on country credit rating, number 4 in the world in value traded on stock markets and, according to the report of which Mr Fraser is so fond, second to none in stock-market capitalisation.

However, like other members, I admit that the points that I have quoted from that report are selective—it is always possible to be selective. Jim Mather suggested that we should look instead to the Royal Bank of Scotland for an indication of our real economic strength. I am happy to do that. The Royal Bank's "Purchasing Managers' Index Scotland Report" for August 2004 says that

"growth of private sector output was maintained for a fourteenth successive month"; service sector activity remained "robust";

"For the fourteenth successive month" growth in the manufacturing sector was "sustained", with output growth still "solid" over the period; and

"private sector employment expanded for a ninth successive month".

Therefore, there are grounds for optimism.

Photo of Jim Mather Jim Mather Scottish National Party

I suggest to the minister that a closer look at the Royal Bank study will show that we are overdependent on five major sectors. However, it is more important to consider the international report. I know that the minister will put the date of the IMD's next report—31 July 2005—in his diary, but where does he expect Scotland to be in the IMD's league table in 2005?

Photo of Lewis Macdonald Lewis Macdonald Labour

There is a range of economic analyses, many of which have been examining Scotland for a great deal longer than the IMD in Switzerland has been doing, and they all point towards continuing growth over this year and next year and to continuing competitiveness in the years ahead.

Scotland is indeed growing under devolution. Wherever we look at the Scottish economy, devolution is making a difference. The signs of progress are to be found in the economic stability that we enjoy, the increased number of doctors, nurses and hospitals and the increased attainment in our schools. Devolution gives us the advantage of macroeconomic stability that is provided by the United Kingdom economy and Government, which the SNP could never match. That advantage provides us with a sound macroeconomic position on which we can build, a strong labour market, a strong service sector and encouraging signs of growth in manufacturing. We have fewer unemployed people and more jobs in Scotland than we have had for a generation.

However, there are no grounds for complacency. We realise that our economy and the global economic climate are constantly evolving, which is why we have sought to bring up to date our framework for economic development in Scotland. That is why we are determined that the smart, successful Scotland strategy, with which we direct the efforts of the enterprise networks, will reflect the principles that are laid out in the framework.

Our approach is, of course, about more than having the right strategies and plans in place. It is also about taking action to help to deliver economic growth, such as strengthening the transport infrastructure to a degree that has never happened before, extending broadband coverage, promoting enterprise in education in all our schools, providing more than 30,000 modern apprenticeships throughout Scotland, promoting excellence in further and higher education and supporting business start-ups by young people.

John Scott seems to have missed the announcement on business start-up support that was made during the summer, so I will remind him of it. We will provide £6.6 million for grants to young entrepreneurs aged 18 to 30 and additional support for business start-ups through Highlands and Islands Enterprise and the Prince's Scottish Youth Business Trust.

In those and a range of other areas, we are taking action to deliver on our ambitions to grow the Scottish economy.

Photo of John Scott John Scott Conservative

If that scheme is so successful, why are business start-ups in my constituency so reduced over the past quarter?

Photo of Lewis Macdonald Lewis Macdonald Labour

I know that the Executive works well and works fast, but as the announcement was made only on 28 July, even I would not expect a tremendous difference in the rate of business start-up success over the past six weeks. If Mr Scott looks ahead, I am sure that he will see the benefits coming through not only in his area but throughout Scotland.

Christine May put the case for coal in the context of our targets for reducing CO2. We recognise the potential of new technologies in power generation and the potential of co-firing and other methods. I met the new UK minister of state with responsibility for energy, Mike O'Brien, earlier this week, and I am happy to undertake to continue our dialogue with the Department of Trade and Industry on the whole range of energy issues. I would welcome a positive approach to the British electricity trading and transmission arrangements from all members and recognition that giving Scottish power generators access to English markets is an enormous benefit, no matter the outcome of the current consultation on transmission charges.

Looking ahead, we anticipate taking action on a range of other areas in the next period. We look forward to confirming the competitive position and advantage of Scottish higher and further education and to producing our detailed green jobs strategy to help to position Scotland as a world leader in that field and exploit the enormous economic opportunities that exist. We also look forward to our intermediary technology institutes, which are funded through Scottish Enterprise, beginning to produce the benefits that we expect of them.

We believe that Scotland's people need opportunities for good jobs, for entrepreneurship, for lifelong learning and to achieve their ambitions. We believe that economic growth is fundamental to achieving those ambitions by enriching life for everyone and working to the benefit of the many, not the few. That is why economic growth is and will remain our top priority, to ensure that we generate that prosperity and that it is shared by more people throughout Scotland. Those are the right ambitions and I commend them to Parliament.