Scottish Economy

– in the Scottish Parliament at 2:15 pm on 29th October 2009.

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Photo of Trish Godman Trish Godman Labour 2:15 pm, 29th October 2009

The next item of business is a debate on motion S3M-5071, in the name of John Swinney, on the Scottish economy.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

On a point of order, Presiding Officer. I understand that documents providing an update on the economic recovery plan are being placed at the back of the chamber. That information is germane to the debate, but members have not had an opportunity to see it, as the documents are only now being presented to the chamber.

In response to previous points of order, the Presiding Officer indicated that the Presiding Officers have had discussions about best practice on publication of material. Have subjects such as this been raised in those discussions? What conclusions have been reached with regard to courtesy to Parliament?

Photo of Trish Godman Trish Godman Labour

We will reflect on the points that you have made and respond to them later this afternoon.

Photo of John Swinney John Swinney Scottish National Party 2:56 pm, 29th October 2009

I welcome this opportunity to lead a further debate in Parliament on the Scottish economy.

It is now more than a year since the Scottish Government first took action to support the Scottish economy through the downturn. We have taken a comprehensive approach to the implementation of a programme that ensures that Scottish individuals, households, communities and businesses are equipped to weather the storm and emerge successfully from recession. We have begun to see the first signs of recovery, but last week's news of a continued contraction in the output of the United Kingdom economy in the third quarter of 2009 is a salutary reminder of the fact that we need to continue to implement a range of key measures in the coming months to support a recovery that is clearly fragile at this stage.

This has been a recession on a significant scale. However, let us not forget that our skilled workforce and world-class business environment continue to make Scotland an attractive location for new investment. We must support and build confidence in the Scottish economy at this critical time. What matters most is how strongly we emerge from the downturn. For that reason, the Government is correct today to provide information updating our economy recovery plan for Scotland. The Government is focused on recovery. Our plan is a platform for the future growth of our economy, maintaining our focus on the Government's unifying objective: sustainable economic growth in our country.

In common with countries across the globe, Scotland entered recession in the middle of 2008. What we have seen in the past year is unprecedented—a synchronised, global recession, prompted by crisis in the financial sector but now felt in every sector of our economy, most acutely in our industrial sector. The origins of the recession are the financial crisis, which restricted the growth of our economy by constraining the availability of finance. We have worked hard to address that issue over the past year.

Since the middle of last year, there has been a cumulative contraction in Scotland's output of 6 per cent, which is in line with that in the rest of the United Kingdom. However, we have not faced the catastrophic collapses in output that have faced some of our neighbours.

Photo of Margo MacDonald Margo MacDonald Independent

Before the cabinet secretary develops his point, I would like to backtrack to the effect of the recession on our financial services sector. Has the Government given any thought to the recommendations of the governor of the Bank of England on restructuring those banks that are more or less nationalised and owned by us?

Photo of John Swinney John Swinney Scottish National Party

That is a live issue. I discussed it when I was in Brussels the other week—I am not sure whether it offends anyone that I was there—as the issue is live on the European Commission's agenda. The Administration wants any action to restructure the banks in line with European Commission requirements to be taken in a fashion that is compatible with the long-term financial interests of Scotland and with ensuring that we have a diversity of financial provision in our country. The announcement that was made earlier this week of the acquisition of Standard Life Bank by Barclays brings another substantial player into the Scottish market, and the Government welcomes Barclay's participation in the Scottish market.

Aside from the significant factors that are affecting the financial services sector, the situation is dominated by economic conditions, and the conditions in the global economy have improved since the end of the first quarter of 2009 as financial markets have stabilised and optimism about a global economic recovery has increased.

Scotland has begun to look towards growth again. The rate of decline in Scottish output eased in the second quarter, with gross domestic product falling by 0.8 per cent. There is now a general improvement in business and consumer confidence in the global economy, which suggests that the economic performance of many advanced economies will improve in the second half of the year. The latest business surveys indicate a marked improvement in optimism across the Scottish economy, which suggests that growth will return to parts of our economy in the third quarter of 2009.

We must understand the lessons of previous recessions in Scotland. Growth will return to the Scottish economy, but the impacts of recession will be felt for some time afterwards. Our prime focus in that respect must be on employment. After GDP turns positive, we can still expect a continued rise in Scottish unemployment in the coming months as overall demand in the economy remains low.

The Scottish unemployment rate has already risen sharply in the first half of 2009, but the Scottish economy demonstrates a number of resilient characteristics, and I have been encouraged by the easing in the rate of increase in recent months. Our current level of unemployment, at 7.1 per cent, remains below that of the rest of the United Kingdom and many other advanced economies such as those of the United States, Germany, France and Spain.

Photo of Gavin Brown Gavin Brown Conservative

I concur with the cabinet secretary's comments on unemployment. Does he share my concern that the rate of increase in unemployment is now higher in Scotland than it is in the rest of the UK?

Photo of John Swinney John Swinney Scottish National Party

I think that that was the case earlier in the year. According to the most recent figures, there has been a tempering in the pace of the increase in unemployment in Scotland, which I welcome. I would be the first to concede and accept that we must be very careful about the judgments that we make based on statistical information and on numbers from one particular period. However, that recent tempering in the rise of unemployment gives the Government confidence that we will retain our advantage in relation to the rest of the United Kingdom. It also informs our attitude to the response to the situation, which is why the Government has made such a strong plea for a further tranche of accelerated capital expenditure—I will deal with that in a moment.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

Under the heading "Jobs and communities", the Scottish National Party's European Parliament election manifesto stated that the economic recovery plan will create 20,000 more jobs. Will the update that the Government has published today detail the 20,000 new jobs that the Government claimed to be in place?

Photo of John Swinney John Swinney Scottish National Party

The Government's economic recovery plan document provides an update on the initiatives that the Government has taken, and I am just about to set out a number of them.

The update puts in context how the Government's use of public expenditure has supported the development of employment and communities. In that respect, we have taken measures to ensure that accelerated capital expenditure at national and local levels has supported direct employment at the local level. We are spending almost £3.8 billion on capital investment this financial year, which includes the acceleration of £293 million. That spending is providing a significant stimulus to the construction industry, and it will ultimately support nearly 37,000 jobs in the construction sector alone. The accelerated capital expenditure, which is a proportion of that, has been enormously valuable in supporting economic recovery, and I welcome the statements that have been made today by the Labour Party, which believes that, at this stage in the economic cycle, we should secure another tranche of accelerated capital expenditure. I hope that that approach is supported by the Chancellor of the Exchequer when he makes his pre-budget report statement to the House of Commons in due course.

Photo of John Swinney John Swinney Scottish National Party

I ask Margo MacDonald to forgive me, but I must make further progress.

At this stage in the recovery, and particularly bearing in mind that last Friday's GDP statistics suggest that recovery is fragile, the case for increasing capital investment is clearer than ever.

In addition to the support for capital expenditure and the acceleration of many investments through the European social fund and the European regional development fund, the Government's economic strategy rests on capitalising on Scotland's greatest comparative advantage: its people. A healthy, well-trained and well-educated workforce is pivotal to shaping the long-term success of our economy. The ScotAction programme, which the Cabinet Secretary for Education and Lifelong Learning launched, represents a major package of measures to meet the challenges and help individuals and employers. With an extra £16 million, we have funded an additional 7,800 apprentices in this financial year, which represents a 73 per cent increase on normal funded apprenticeship places. Yesterday it was announced that a successful bid for ESF moneys means that we can further extend the apprenticeship scheme. The cabinet secretary today visited one of the companies that will take part in the new scheme to provide a golden hello of £2,000 to 16 to 19-year-olds in the manufacturing, textiles, food and drink and energy sectors. The approach will provide much-needed assistance.

The Government's economic recovery plan also focuses on investing in innovation and industries of the future. We have set out various interventions that we are able to make to ensure that the best possible advisory services are available to businesses and individuals, to help them to manage the impact of the downturn. Services such as the expanded Scottish manufacturing advisory service and the Scottish Government's website on help through the downturn exist to provide assistance to companies, in addition to well-supported initiatives such as public contracts Scotland, which has attracted a significant amount of public sector business for the purposes of contracting with companies in the Scottish economy.

In the field of innovation and industries for the future, there is a great opportunity for us in the context of what we can achieve in the renewables sector and as part of the creation of a low-carbon economy. Scotland's future rests on the development of innovative technology and we are determined to ensure that we deploy our resources and provide the support that is necessary to ensure that we can create tens of thousands of green jobs during the next decade in diverse generation systems and in energy management, energy efficiency, renewables, biomass and recycling.

The Government is focused on ensuring that we deliver economic recovery in Scotland. We must operate in a challenging climate. We will press the argument for further accelerated capital expenditure to assist us, and we pledge our commitment to working with all aspects of the Scottish economy to deliver the prosperity that our people require.

I move,

That the Parliament recognises the impact of the recession on Scotland and notes the actions that the Scottish Government is taking to support jobs and communities, strengthen education and skills and invest in innovation and industries of the future to ensure that the nation is both protected from the worst of the downturn and well placed to take advantage of any recovery.

Photo of Andy Kerr Andy Kerr Labour 3:08 pm, 29th October 2009

Well, well, well. What a difference a year makes to the Government's economic strategy. After all those meetings and prawn cocktails, and after all those mind-numbing mind maps from Mr Mather, there is total condemnation of Scotland's economic strategy from Scotland's business community.

Iain McMillan, of the Confederation of British Industry Scotland, said:

"What is happening now seems to directly contradict the SNP's stated primary aim of growing the Scottish economy. At the moment there are more harmful things for business than positive ones from the Scottish Government."

That is a damning comment indeed. David Watt, of the Institute of Directors Scotland, said:

"It also seems completely wrong to cancel infrastructure projects ... when we should be building as much as we can to support the economy and prepare it for the recovery."

The issue is not just that businesses are disappointed with the lack of policy coming through all the discussions. The decisions of the Government are having a direct effect on our ability to come through the recession. The credibility of the economic team hangs in the balance and the budget will be the test of its ability to listen to the Scottish business community and wider civic Scotland, to ensure that we put the Government's tools and resources to good use for the purposes of economic recovery.

I look forward to Mr Swinney scoring his hat trick today. This is the man who brought us the local income tax—and had to ditch it; the fiasco of the Scottish Futures Trust; and now an economic strategy that has been condemned by our business community. He also thinks that, during a recession, it is clever to signal the end of infrastructure projects such as the Glasgow airport rail link, which was a project of national importance. The CBI put it better when it said:

"The SNP is talking the talk, but not walking the walk".

Although I welcome some of the cabinet secretary's statements and announcements, there needs to be a fundamental review of his budget and his Government's flimsy strategy for economic recovery. Part of that process is our support for accelerating capital; we have supported that approach in the past and will continue to do so, if a number of conditions are met.

It is a pity that the Government's previous capital acceleration programmes have largely been failures. According to the Government's track record on capital acceleration, only a quarter of the funding had a direct impact on jobs.

Photo of Andy Kerr Andy Kerr Labour

The Deputy First Minister verified that in committee. Spending money on houses that are already built does not stimulate economic growth, and she said that only a quarter of the previous accelerated funding had had a direct impact on jobs. When we support the Government in its requests for more capital acceleration, we want to be sure that the money will be spent more effectively than it has been in the past. Of course, we also want more attention to be paid to making the budget support our economy through the recession.

I say to Mr Swinney that it is hardly the best way to conduct negotiations to ask the United Kingdom Treasury for capital acceleration, get it, expound its virtues, and then blame or condemn the UK Treasury and Government for cutting the budget.

The bigger and more substantive issue in the debate is this: the Scottish Government has been caught in the headlights of the global economic recession. The UK Government took swift, effective and continued action with impacts and interventions that a separatist, independent Government could only dream of using during the current economic climate. I am talking about the £50 billion to save the banks, the £2 billion in tax cuts, the £500 million in support for the Department for Work and Pensions in Scotland, and the measures taken to delay tax from business. All those were effective measures that countries such as Iceland and Ireland could only dream about. We do not hear much about them any more.

Of course, we intend to make sure that the Government's budget seeks to address the recession in a way that is based on morals, values and effective economic interventions. I reflect on the value-free zone of Thatcher's response to the previous recession and the long-term damage that her Government did to our economy.

Photo of Margo MacDonald Margo MacDonald Independent

Does the member agree with what the governor of the Bank of England said about restructuring the banks in Scotland? That is such an important sector in our economy.

Photo of Andy Kerr Andy Kerr Labour

Yes, it is a very important section of the economy, and I believe that those ideas require further examination. I would like to have greater engagement before pronouncing unequivocally on the point.

The First Minister called it all wrong at the time of our banks' difficulties, and I believe that the Government's economic response to the recession also calls it wrong. When the Scottish budget is growing by £600 million in real and cash terms, the Government chooses to make cuts in many of the budget areas that are specifically designed to stimulate economic growth. The budgets for Highlands and Islands Enterprise, Scottish Enterprise, housing, infrastructure, regeneration and tourism have all been cut by the Government. I remind the chamber again that the budget has grown by £600 million and has benefited from the inflation bonus: the £880 million additional spending power that we have in Scotland.

The disgraceful decision to end the GARL project was, I believe, cooked up by Mr Salmond and Mr Swinney in consultation with nobody, particularly not—probably—the Minister for Transport, Infrastructure and Climate Change. The project was not about Glasgow and the west of Scotland, but about Scotland. It was not about taking folk on their holidays, albeit that they would have benefited from that rail link, but about bringing much-needed conference business and other business to Glasgow and the west of Scotland. We will ensure that, through the 2010-2011 budget process, we bring that project back into the Scottish budget and ensure that it is delivered.

Photo of John Swinney John Swinney Scottish National Party

Can Mr Kerr share with us in the remaining two minutes that he has available what his alternative vision is? We have heard the usual negative rant from him. Can we perhaps hear some of his ideas about what he would do differently?

Photo of Andy Kerr Andy Kerr Labour

With due respect to Mr Swinney for his comment about negative rants, we are here to hold him to account for his actions. I am holding him to account for the Government's inaction in addressing our economic ills. I have not mentioned yet the Scottish Futures Trust, which has cost the Scottish economy thousands of jobs over two and a half years and has led to a loss of skills in the economy. I had not mentioned that, but Mr Swinney reminded me that I should do.

I have not said much either about the arc of prosperity and the economies of Ireland and Iceland, to which the cabinet secretary and the First Minister aspire. Let us look at the situation in which those countries find themselves—and in which we would find ourselves if Mr Swinney's vision for Scotland of independence and separation from the rest of the UK was realised. His whole economic case for independence has been destroyed by the perfect storm of the collapse of the banks in Scotland, the fluctuation in oil prices and the global economic recession. One need only consider the case of those nations that previously Mr Swinney used as examples to follow—clearly, they are examples with which we do not now wish to associate. Being part of the UK has allowed us to respond much more effectively to the challenges.

I am disappointed that the Government's economic levers are not being used. We will come back to the Government about regeneration, training, skills, support for small and medium-sized enterprises, cuts to Scottish Enterprise and HIE, and other matters. However, we understand and share the optimism that should be around in Scotland about our economy's ability to work and the crucial role that banking and finance will play, along with biosciences, the low-carbon economy, the environment, energy and tourism, in the sound future that it should have. The Scottish Government is undermining all those areas through its budget.

I move amendment S3M-5071.3, to leave out from "recognises" to end and insert:

"notes the concern of Scotland's business organisations that the Scottish Government's budget fails to prioritise sustainable economic growth, as the Scottish Government has made substantial cuts to the enterprise, tourism, regeneration and housing budgets and has decided to cancel the Glasgow Airport Rail Link, a decision that was taken without prior consultation, despite the fact that it is an infrastructure project of national importance; believes that all of these decisions compound the failure of the Scottish Futures Trust to deliver capital investment, to the detriment of jobs and infrastructure, and calls on the Scottish Government to bring forward new proposals to create jobs, increase infrastructure investment and grow the Scottish economy."

Photo of Derek Brownlee Derek Brownlee Conservative 3:17 pm, 29th October 2009

As the longest recession in British history continues, with rising unemployment across Scotland and the rest of the UK and continuing economic uncertainty, the announcement of the Government's updated economic recovery plan is at least timely. However, no one would know that there was a recession, let alone the longest one in British history, if they were to look at the Labour and Liberal Democrat amendments to the motion, which would remove all reference to the existence of the recession. If only tackling the recession were as easy as that.

We have said before that the Scottish Government and the First Minister in particular regularly overstate the capacity of the devolved Government to tackle the recession's consequences. We have seen positive moves from the Scottish Government, but the reduction in or abolition of business rates for small and medium-sized businesses would not have been in place until next year, when even this recession will be over, had Parliament supported the SNP Government's original budget plans. The Conservatives were therefore right to push for early implementation of that measure, and no one should be in any doubt that it has saved businesses and protected jobs. We should also not forget the positive local impact of the £60 million town centre regeneration scheme, which features to a large extent in the updated document. Again, that measure was implemented after pressure from the Conservatives. In addition, the abandonment of the discredited local income tax was welcomed across the business community.

Although we accept that the Government is undertaking some measures with a view to improving skills or supporting jobs, we do not necessarily agree with everything in the economic recovery plan or with the view that the Scottish Government has sufficient powers to deal with the recession in a way that contrasts with the approach of the UK Government. The economic levers are, to a significant extent, in the hands of politicians at Westminster, and the options there are constrained by public finances and a significant structural deficit that compounds the cyclical budget deficit. We have the longest recession and the highest national debt in British history, while the British Government is significantly constrained in its options.

Further accelerated capital funding, as requested by the Scottish Government, can be delivered only if it is affordable within the constraints of UK public finances. It is far from obvious to me that it is affordable, particularly given the sharp declines in tax receipts and the lengthening of the recession since the UK budget in April. We will find out soon enough in the pre-budget report whether the current UK Government believes that such acceleration is affordable.

However, we must assume that the Scottish Government's request for additional capital will be granted, given that Iain Gray has now demanded that that happen. Today, the Labour leader introduced a fairly novel concept: he wants accelerated capital funding to be provided by the UK Government only if the Scottish Government spends the money on certain things. That would seem to undermine the very principle of devolution, as it would in effect mean the UK Government introducing ring fencing of funding in Scotland. The UK Government has no business telling the Scottish Government how it should spend its budget. The Labour Party would do well to remember that.

In the update of the economic recovery plan that it published today, the Scottish Government appears to want the UK Government to spend more and tax less. Compounding our public debt cannot be the answer to our current economic difficulties. If the Scottish Government had the greater powers over taxation and borrowing that it seeks, such a proposal would be inconceivable. The Scottish Government's call for increased spending appears designed more to cause conflict with the UK Government than to tackle the problems in our public finances. Conflict between our Governments will not help us to get out of recession.

Photo of Andy Kerr Andy Kerr Labour

Let me just clarify the point. I have said that we on the Labour benches will support the Government in its call for increased acceleration of capital funding if we are assured that the capital will actually make a difference. That is the condition that is being attached.

Photo of Derek Brownlee Derek Brownlee Conservative

That is a helpful clarification, but it is certainly not what Iain Gray said at First Minister's question time.

I also heard an intervention request from behind me. I give way to Margo MacDonald.

Photo of Margo MacDonald Margo MacDonald Independent

I am intrigued by Derek Brownlee's explanation of the Scottish Government's attitude to taking on more borrowing, which will increase debt and prolong the agony. He suggested that the reason was to annoy the UK Government. I think that the Scottish Government wants to try to persuade the Scots that they are not as badly off as they think they are, because it believes that only optimism and determination will get us through. I think that that is wrong.

Photo of Derek Brownlee Derek Brownlee Conservative

We certainly will need a lot of optimism and determination to get us through.

We need all levels of government to work together. That is why we propose that the Scottish Government should give new incentives to local authorities to encourage business start-ups locally by allowing local authorities to retain the additional business rate receipts that are generated if such start-ups are successful. That could operate in tandem with the new national insurance incentives that a Conservative UK Government would introduce for new start-ups in their first two years. That fiscal incentive at the UK level could be backed by support at the Scottish level, with the Scottish Government and local authorities pulling in the same direction as the UK Government. That would help to create new businesses and new jobs.

A long-standing and serious problem has been Scotland's failure to match the new business start-up rate that is achieved elsewhere in the UK. Tackling that is part of the Scottish Government's economic strategy, but the data on the Scotland performs website still refer to 2007. As the technical note explains, the recent increase is a result of tax changes rather than any underlying improvement. More recent evidence suggests that we are falling further behind. If we are to get out of the recession with a sustainable recovery, jobs must be created in the private sector rather than in the public sector for the years to come. We need to improve our business creation rate.

That is why our focus today is on the need for the Scottish Government to work with the business community to introduce measures that will allow new businesses to flourish. That will allow us to tackle the problem that has compounded Scotland's economic performance for too long: namely, the failure to generate sufficient new businesses to create the growth in economic wealth that ultimately underpins all the public services that we value.

I move amendment S3M-5071.1, to insert at end:

"; further recognises the need to support existing and new businesses to create jobs; regrets the historic underperformance of the Scottish economy in new business creation; welcomes the positive and timely impact of the significant business rate reductions for small and medium-sized businesses and the Town Centre Regeneration Fund, and calls on the Scottish Government to work with all other levels of government and with the business community to do more to help raise the level of new business start-ups in Scotland."

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat 3:24 pm, 29th October 2009

Before Scotland was hit by the recession—or economic storm, as the cabinet secretary described it—the Liberal Democrats warned that the changes to the enterprise network would not provide more focus but instead create confusion. We said that the establishment of new quangos with models that the Government knew would not deliver on expectations—I refer to the Scottish Futures Trust—and the real reductions in the delivery of the enterprise budgets were the wrong things to do for the economy. In a recession, they are catastrophic things to do because they provide no focus for strong recovery. The economic recovery plan that the Government put in place was simply not sufficient for Scotland to grow.

We share the view that has been expressed on the growth of Scottish GDP. We can have little confidence that the Government is grasping the issue. On its Scotland performs website, the Government claims that it is meeting its target of matching the GDP growth of the UK, but when I ask parliamentary questions about whether that is really happening, I am simply told that our economy is falling at the same rate as the UK economy, and that that is an achievement for the Scottish Government. That is not the type of debate that the Parliament needs when we discuss how we will come out of the recession.

One of the critical aspects is our banking sector, as Margo MacDonald and others have said. Exactly a year ago, we debated a motion, in Liberal Democrat time, that raised concerns about competition in the banking sector in Scotland. In particular, the motion focused on lending to small businesses. A year later, not one business group is saying that its priority is not access to finance and the cost of that finance. That is why, unashamedly, we know that banking competition is inextricably linked with the country's problems in the recession. We do not need to state it.

We ask those who opposed that motion last year to reflect on that and to support the comments of the Government's chief economist to the Economy, Energy and Tourism Committee that he wants more competition in the banking sector in Scotland. We ask them to agree with the governor of the Bank of England, who says that he wants monolithic banks to be broken up. We ask them to agree with the European commissioner who believes that it cannot be good for Scottish businesses to have two state-funded near monopolies running Scottish banking. We ask them to support the Federation of Small Businesses, which says that Scottish businesses have only one choice when it comes to lending by the banking system—take it or leave it. That is not good enough.

When we debated the issue last year, the Office of Fair Trading predicted that the takeover of HBOS by Lloyds would lead to a "substantial lessening of competition". We have seen that; it is happening. It is simply not good enough for elected representatives from the Conservative party to continue their laissez-faire attitude. Last year, Derek Brownlee said:

"The Conservatives do not believe that politicians should interfere in commercial decisions taken by financial institutions and shareholders unless there is no other option. Others may take a different view. That is their right, but they ought to remember that it is as easy to lose business confidence as it is to win headlines."—[Official Report, 30 October 2008; c 11879.]

George Osborne obviously was not listening, given that he called last week for caps on bonuses in the financial sector. He said in a Canary Wharf speech that they should be capped at £2,000. The critical issue for our economy is not £2,000 bonuses but how we will get, over the next five to 10 years, an appropriate level of competition in our banking sector in Scotland. Given that 95 per cent of businesses in Scotland are small businesses, it is critical that we have a vibrant financial sector.

Photo of Gavin Brown Gavin Brown Conservative

The member mentioned the Office of Fair Trading report. Is he suggesting that, if the takeover of HBOS by Lloyds had not happened, businesses in Scotland would have greater access to finance today?

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

As the member will realise, there was no capitalisation offer on the table for the Bank of Scotland. He knows that the OFT's competition concerns were set aside by Lord Mandelson and that no capitalisation offer was on the table. The member forgets that point.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

I am sorry; I am afraid that I do not have time.

On the Government's economic plan, there has been assertion and rhetoric, no more so than with regard to the Scottish Futures Trust, where the farce continues. This week, the Cabinet Secretary for Finance and Sustainable Growth wrote to me to say that the official Government employment figures for the past three quarters indicated that the Scottish Futures Trust had no one working for it. A letter of clarification that was provided to me last night says that that was incorrect and that

"the figures should have indicated that SFT had one full-time member of staff" as at quarter 2 of 2009. The letter continues:

"This anomaly arose as a result of a return from SFT not being included in the published figures."

Presumably, the member of staff was in the toilet when the Government asked who was working for the Scottish Futures Trust. It is becoming a joke, and that is the problem.

The latest year-on-year construction figures for new orders show that construction contracts have fallen by 17 per cent in England and 47 per cent in Scotland. That is shocking. Without the level of finance that we need for the economy, things will not get better. We do not have enough competition. Without a real Government focus on infrastructure investment as opposed to what the CBI described this week as the "farce" of the Scottish Futures Trust, we have concerns about the future recovery of our economy.

I move amendment S3M-5071.2, to leave out from "recognises" to end and insert:

"; believes that it is in the best interests of the Scottish economy to encourage a vibrant and competitive banking sector by separating the investment and retail functions of the biggest banks and giving customers and businesses the choice of smaller and more secure banks, for example by bringing the Bank of Scotland home to Scotland as a low-risk high street bank that serves the needs of local people and businesses."

Photo of Patrick Harvie Patrick Harvie Green 3:30 pm, 29th October 2009

It is natural in our debate on responding to the recession to expose various political stances on the causes of that recession before we can understand the responses. Greens have argued for years about the unsustainable nature of the growth-obsessed, market-dominated economy. The parties that have served their time in government in Scotland and the UK have for years courted the favours of big business, made speeches about encouraging the risk takers, and pursued policies that have been entirely consistent with Lord Mandelson's intense comfort with some people becoming extremely rich.

Photo of Andy Kerr Andy Kerr Labour

I would like to draw others into our company. Is it not the case that the First Minister of Scotland, Alex Salmond, said that regulation was gold plated and that it should therefore be reduced?

Photo of Patrick Harvie Patrick Harvie Green

That is precisely why I referred to all the parties that have served their time in government in Scotland and the UK.

We have taken a different view. We believe that it is not enough to put a nominal safety net at the bottom while the richest handful in society pull ever further away. We have argued for a fundamentally more just and equal economy. We have challenged the complacency about an economy that has been built on flimsy foundations. We have done so as debt has spiralled out of control, largely to fuel wasteful consumption by the wealthy, not to provide the essentials of life for those who lacked them.

When I spoke about the problems of sub-prime debt before the 2007 election, I did not do so because I had a crystal ball or insight into the future credit crunch; I was more concerned with the impact on households in Scotland burdened with exploitative levels of debt than with the United States housing market. I did so because of a basic principle that such levels of debt are inherently unhealthy. I am not talking about only financial debt, whether it is owed by a householder to a money lender, a credit card company or a mortgage company, or owed by Governments to an international bank or a private finance initiative consortium; I am also talking about the ecological debt that our generation owes to the next generation. There can be no doubt that we have been living beyond our means economically and ecologically for far too long, and that there were always going to be consequences of that. Living beyond our means can be fun for a while, but it cannot last.

The consequences that we are now living with are partly the result of political failure and partly the result of market failure. It is sickening that the debate has moved on so swiftly to arguments about which public services should be cut first and when to start cutting. Sadly, we in Scotland are faced with the consequences of continuing political and market failure.

A very gloomy economic and social outlook was presented at the Poverty Alliance annual general meeting in Glasgow the other weekend. There is the prospect of cuts that will have an impact on people living in poverty, and the need to fight the immediate threat from those cuts versus the need to keep up the long-term challenge to the values of our unequal and unfair society is an issue. The evidence has never been clearer or more objective. A more equal society is happier, healthier, safer and more sustainable. I am sorry to say that the political emphasis has not caught up with that, and that costs opportunities.

For a recovery—however we might define that word—to be truly sustainable, it must be political as well as economic. It must be a recovery of values that were lost from the political establishment at least 30 years ago—indeed, probably twice that long ago. Those values will challenge the absurd idea that what matters in our lives can be measured in GDP terms alone, that people's worth is determined by what they consume, and that the fetishisation of extreme wealth is harmless.

Photo of Margo MacDonald Margo MacDonald Independent

Does the member agree that we could summarise the change for which he asks as

"From each according to his abilities, to each according to his needs" and that we could transfer power and wealth along the way?

Photo of Patrick Harvie Patrick Harvie Green

Each generation puts it in its own words.

Where would that leave a Scottish Government programme? It would end the contradictions that still exist between Government policy and commitments on climate change, sustainable development and green jobs and the policy and spending decisions that are made when the economy is the main focus. For far too long, those have been seen in opposition to one another. Carbon targets are set, but aviation can apparently expand forever. Commitments are made on public transport, but road traffic levels continue to rise. Commitments are made on renewables, but the level of wasted energy continues to rise. The potential of marine renewables excites everybody, but the level of Government investment in it has gone down. The green jobs agenda took hold at first, but it has stalled at simply counting how many jobs are green jobs rather than thinking about how we can green all aspects of employment.

The need to upgrade the energy grid is abundantly clear, yet we have seen interminable delay in approving the work that needs to be done. The Beauly to Denny transmission line is only the most obvious example of that. We will need further changes to accommodate marine renewables as well as decentralised energy. Nevertheless, the Beauly to Denny line is a vital project, and if the Government attaches too many conditions to the approval of the project, it will risk years more delay and I can only imagine what the impact will be on the confidence for investment in marine renewables in Scotland.

Beyond the infrastructure, the economic debate must become one with the social and ecological priorities that we all claim to hold dear. We must come to understand that the economy is a wholly owned subsidiary of the environment. Living within our means will demand that we learn to measure and value everything that matters in life, not simply the narrow concept of material wealth that dominates our decision making and will continue to serve best those who already have most.

I move amendment S3M-5071.4, to insert at end:

"; believes that the Scottish Government should be supporting only those projects that can promote true sustainability in the long term such as public transport, energy efficiency, low-carbon technologies, including renewable energy and its required infrastructure such as vital grid upgrades, and accepts that the benefits of a low-carbon economy must be achieved in a manner that ensures fairer distribution of wealth and opportunity and promotes wellbeing in the broadest sense, instead of continuing to promote an economy that is still based on ever more unsustainable levels of ecological and financial debt."

Photo of Rob Gibson Rob Gibson Scottish National Party 3:37 pm, 29th October 2009

The context of the debate is well served by the words of the Confederation of British Industry in a submission on the Government's draft budget. It states:

"The constrained spending growth for 2010/11 is merely a harbinger of far tougher spending limits ahead. As such they"— the Government—

"will have to cut their cloth accordingly, though there are different opinions as to the nature, scale and timing of the measures required."

In this debate, we should consider the Government's options and some of the constraints that it has had to face.

The Labour Party's amendment seeks to portray the Glasgow airport rail link as a major national project. Let us be clear. The Government has a lot of support in Glasgow—perhaps more per head of the population there than in other areas. However, when questioned in the discussions in the Transport, Infrastructure and Climate Change Committee, the British Airports Authority saw the business case for GARL as woolly. There are no figures for where people would go or how people would get to the airport. There is no information about whether most people would go to Glasgow rather than other parts of Scotland. Those were all unanswered questions in the committee, and I suggest that the Labour Party read the Official Report of that meeting.

Photo of Andy Kerr Andy Kerr Labour

Does the member share the view of the First Minister, who said that GARL is a project of national significance? Does he share the view of the business community that GARL would have a great multiplier effect that would boost our economy?

Photo of Rob Gibson Rob Gibson Scottish National Party

I am interested in looking at it in the round. It could be a national project if the connectivity within Glasgow was built in; however, it has been suggested that it is more a regional project without all those parts to it. People want to know that the commitment is there to consider its potential for the future. If the Labour Party is saying that the project is essential, what does it suggest that we cut in the meantime?

I turn to the Liberal Democrats' amendment, which talks about banking. In the inquiry that the Economy, Energy and Tourism Committee is conducting, we will find out a lot of information about that subject. Indeed, I echo the information about the European Competition Commission's view of the break-up of the banks. It is important to note that the Scottish Government believes that we need to have a wider range of banking. Already, examples such as the banking exercises involving Tesco and Virgin show that we are supporting that. In this recession, we are looking to help business by seeing that that happens.

The events of the past year raise fundamental questions about the structure of our financial sector and the role of Governments. The questions about smart regulation, liquidity and so on will all have to be answered. I believe that, as we move into the spring, the Economy, Energy and Tourism Committee will be able to help the debate in this Parliament by getting some of those answers.

People have been saying, "Ha ha. We don't hear much about Ireland and Iceland at the moment." Well, is that not strange? I point out that, at the moment, their GDPs per head are far higher than that of the UK, and they will come out of recession faster than we will.

Photo of Alex Johnstone Alex Johnstone Conservative

Does the member acknowledge that the Irish economy has one tremendous advantage over ours, which is that it is two thirds private sector and one third public sector?

Photo of Rob Gibson Rob Gibson Scottish National Party

I might suggest that the fact that Ireland is in the euro zone might have been a more important factor in that economy's survival than the one that Mr Johnstone suggests.

It is important to recognise that a number of advanced economies, both large and small, have recorded a return to a positive quarterly GDP and that Britain is coming out of the recession more slowly. The rates of recovery of Japan, Portugal and Sweden are increasing, as are those of France and Germany. Above all, the same is true of our nearest neighbours across the North Sea, the Norwegians, with their vast oil fund that they are able to use for investment at this time.

Now that we have consensus about the need to get accelerated capital spending, I hope that London is listening to the will of the Parliament because we have been deprived of the ability to use our own resources to take us out of the problems that we are in. That is why I hope that, when we pass the motion today, that issue will form a central part of our message.

The CBI said that it wants legislators to "behave collegiately" and pass the budget in a timely fashion. That will be an aid to getting our country on its feet. As part of that process, we ought to be hearing the kind of positive remarks from parties that we could do with a bit more of today.

We are told that business organisations are opposed to the way in which the Government is going about things. However, the Scottish Council for Development and Industry is happy about the small business bonus, as is the Federation of Small Businesses, which called for more modern apprenticeships. From the answer to my parliamentary question this afternoon and from statements that have been made, we have learned that there will be European social fund incentives of £2,000 for companies to take on a new 16 to 19-year-old apprentice. That shows that the Scottish Government is making the effort to get the sector moving.

Photo of John Park John Park Labour

Does the member agree that it is disappointing that, since the apprenticeship guarantee was agreed during the previous budget process, more than 1,200 apprentices have been made redundant and the Scottish Government has been able to place only 400 of them?

Photo of Rob Gibson Rob Gibson Scottish National Party

In the difficulties in which we find ourselves, the minister who responds to the debate might well be able to deal with that point in detail.

The approach to apprenticeships that I have discussed has been welcomed by business, so that is another aspect that shows that this Government is a business-friendly organisation.

In my area, we can see the investments that are starting to be made in the renewable energy industries. It is interesting that bodies such as Scottish Renewables can see that issues concerning our need for suitable, skilled people—lack of such people has been one of the main barriers to our getting out of this recession—are beginning to be addressed. A lot of young people with energy will be able to get involved in the business of helping us to reap that huge renewables harvest.

The motion provides us with the way forward but the amendments are, perhaps, a distraction. We should go forward, united, with a message that we need accelerated capital spending so that we can move forward with recovery.

Photo of Wendy Alexander Wendy Alexander Labour 3:45 pm, 29th October 2009

I welcome the Government-sponsored debate on the economy. This year it has taken only eight weeks after the summer for the Government to get round to debating the economy. Last year, despite the financial crisis raging around us, we had to wait 10 weeks after we came back before the Government could find time for a debate on the economy. Today there is a new document at the back of the chamber. It was published at 2.55—so timed, I presume, to ensure that members could not read it in advance of the debate.

It is almost two years since the Government's economic strategy was launched, yet it has been debated in the chamber only once. Surely once every two years is not too often to debate the Government's economic strategy. When the cabinet secretary sums up, will he commit to finding Government time before Christmas to debate the Government's economic strategy, which was published in November 2007 and has so far been debated only once?

I turn to today's motion. Let me begin by acknowledging that to govern is to choose. No one denies that the cabinet secretary had choices to make in his budget—he had to manage a less than 1 per cent decline in his budget next year in real terms—but Scottish businesses want answers about the choices that he has made. With just 1 per cent less to play with, why did he choose to cut the enterprise, energy and tourism budget by 13 per cent in real terms? The enterprise budget was hit 13 times harder and deeper than the overall cut in the budget. Yesterday, the chief economic adviser provided a paper to the Economy, Energy and Tourism Committee. The paper, which is on the committee's website, provides the plans for all the 24 different budget lines that fall within the enterprise, energy and tourism budget. It reveals that 21 of those 24 lines face a deeper cut than the 1 per cent cut in the budget overall. Scottish businesses want an explanation of why those choices have been made. They want to know why, months after visionary legislation on climate change was passed, the budget for next year proposes a bigger than average cut in the energy efficiency budget. If skills are at the heart of recovery, why is the education and skills budget overall being cut by 6.5 per cent? That is six times more than the reduction in the overall budget.

In his two committee appearances this week, the cabinet secretary did not remain cool and collected, as he often does, in defence of the choices that he has made. I invite him to offer us, in his summation, a cool, rational defence of his choices about where the axe should fall, because we tend to find that the shakier the case the shriller the rhetoric. I do not think that that helps, given the scale of the crisis that we are facing.

I will use my remaining time to touch on another area in which we need some candour about where the Government stands. In the recovery plan that was published a few moments ago, which is now available at the back of the chamber, there is barely a mention of the banks.

Photo of Wendy Alexander Wendy Alexander Labour

I see Margo MacDonald rising, but let me deal with the banking issue.

On 24 September, I asked the Scottish Government whether it stood by

"the First Minister's previously stated view that spivs and speculators caused the demise of HBOS."

Thirty days later, I still do not have any answer. That is a small point but, much more important, I asked in writing what the Scottish Government was doing about the lack of competition in Scottish financial services—back came the answer that it had carried out a survey. I challenge the cabinet secretary to confirm that, over the past 12 months, the Scottish Government has made no written representations whatever to the OFT asking it to carry out an inquiry into the lack of competition in banking services in Scotland or elsewhere in the UK.

I come to another matter on which the Government is not dealing with the realities of the banking crisis.

Photo of Wendy Alexander Wendy Alexander Labour

Let me come to the point.

I asked the Scottish Government what views it had offered the European competition authorities on breaking up banks in this country—back came the answer that the Government had not been asked for evidence, so it had provided none. Thirdly, I asked the Government what its views were on bankers bonuses—back came the response that no representations had been made by ministers to the UK Government, the European Union or the Financial Services Authority. The Government has had nothing to say to Europe or the OFT and nothing to say on bonuses. No wonder the Government dislikes debates on the economy. It must start offering a view on the tough issues of the day. Do ministers have a view or do they just want to keep their heads down and their mouths shut? Scotland deserves better.

Photo of Alex Johnstone Alex Johnstone Conservative 3:51 pm, 29th October 2009

Many people, including the cabinet secretary, have described the current predicament as the perfect economic storm. That has been said often enough, but it stands repeating once again. If the timing of the debate has any significance, I suggest it is that we might look back on this time and see it as the very eye of the storm. We have entered recession and, as the recently published figures show, we continue to be in economic decline. We now know how deep the recession is, but we still have to face in the other direction and consider how we will emerge from it.

Scotland has suffered badly. We were perhaps slower to enter recession than other parts of the United Kingdom, but that is largely because we were lucky enough to have a proportionately higher level of public expenditure than the rest of the UK. That predetermined expenditure reinforced us on the way into the recession but, as a consequence of the need for spending cuts, we will find it harder to climb out.

Photo of Margo MacDonald Margo MacDonald Independent

Does the member share the opinion that was voiced by the previous speaker, Ms Alexander, that we were in a crisis?

Photo of Alex Johnstone Alex Johnstone Conservative

I will decline to answer that, because we would have to consider carefully what we mean by a crisis. The situation has been called a crisis and a storm, but it is a recession—the deepest recession since world war two, and one that we are all in together. Some of us like to pass blame around, while others look for a way out.

To return to Scotland's position in the recession, on unemployment, Scotland is now suffering more than the rest of the United Kingdom. As we move forward, we might struggle to return to the rates of growth that are achieved in other parts of the United Kingdom. That is why I once again repeat my call to the cabinet secretary that, whatever he chooses to do, he should ensure that all public expenditure is used to maximise the recovery in the private sector, to increase the creation of wealth and to change the balance of our economy. That will mean that, as the private sector-fuelled recovery arrives, Scotland will, with each day that passes, be in a better position to take advantage of it.

We need to be in that better position because, let us face it, Scotland might be a wealthy nation, but it has always had its problems and it still has them. We have areas of poverty in Scotland. We talk repeatedly about difficulties relating to the quality of housing. We need to fight further against child poverty. We have problems associated with fuel poverty, which we all know so well, as a result of increases in fuel prices. That is why I am fundamentally committed to the concept that the redistribution of wealth is important. However, too many people in the Parliament and across the political divide concentrate too much on the redistribution of wealth without understanding that the creation of wealth is at least as important, if not more so. That is why, unlike some members, I will say today and repeatedly, that growth is essential to our recovery.

We have heard that there has been a 6 per cent contraction of the UK economy since the middle of last year. Although we know that the rate of decline has slowed recovery, the definition of recovery is difficult to achieve. In fact, once we have returned to growth, recovery will only just have begun. Not until we make up the drop that we have suffered over the past 18 months and begin to go into net growth over that period will we see the benefits of redistribution once again. My primary demand is that the Government ensures that money spent helps to change the balance of the economy and protects us from the damage that we have suffered.

In the final moments available to me, I will reflect on some comments from other parties. It was interesting to hear Jeremy Purvis criticise the Government on the areas in which it has decided to cut expenditure. There are some short memories in politics. Jeremy Purvis, who is good at taking the spend, spend, spend approach to politics, is the same man who less than a year ago proposed an £800,000 million cut in Scottish expenditure. There is a wholly inconsistent element in his position that simply takes away credibility from the demands that he has made and continues to make.

My final remarks must be for the Labour Party. I have sincere sympathy for those on the Labour front bench in the Scottish Parliament. They can criticise, carp and complain about the way in which resources are distributed in Scotland, although they often make constructive suggestions about how it might be done better. However, what they cannot and must not acknowledge—because they have been told not to—is that this recession is Gordon Brown's and Labour's recession. The recession is worse here than in any other country in Europe and it is now longer than in any other country in Europe. Above all, this country needs a change of Government.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

We do not have enough time to finish the debate, so members must not exceed their time limit.

Photo of Tricia Marwick Tricia Marwick Scottish National Party 3:57 pm, 29th October 2009

I welcome the opportunity to take part in the debate. It gives me the chance to thank the Scottish Government for its continued support for the Fife energy park in Methil. I was pleased to welcome the Minister for Enterprise, Energy and Tourism, Jim Mather, to the energy park a couple of months ago, when he announced that money would be made available by Scottish Enterprise to continue to improve the infrastructure of the energy park and the companies that work in it, including BiFab. I also welcome the recent regional selective assistance grant awarded to Stevenson Grantech in Glenrothes that will protect existing manufacturing jobs.

I mention those two facilities in particular because the manufacturing industry in my constituency is important for the jobs that it provides and its contribution to the local, Scottish and wider UK economy. The manufacturing industry sells abroad and attracts foreign money into the country; it is important that we continue to support it. Much is said about the financial services industry, but it is important that we continue to support the manufacturing industry for constituencies, such as mine, that rely so heavily on it. I welcome the Scottish Government's efforts in that regard.

Photo of Tricia Marwick Tricia Marwick Scottish National Party

If I get a chance, I will let the member in.

I will concentrate most of my comments on the relationship between small and medium-sized companies, the banks and Her Majesty's Treasury. I have had the most frustrating summer. I visited medium-sized companies in my constituency to ask about their difficulties, what they were doing in the recession and whether they were having any difficulties with the banks. There were times during the summer when I felt that I was in a parallel universe. Companies were telling me about the unreasonable conditions placed on them by the banks while Lord Mandelson and the Treasury were telling me that HM Government was supporting companies and instructing the banks to support them.

Qualtronic, which had been in Glenrothes for 25 years and employed 35 people, was experiencing cash-flow problems because of a delay in placing orders by its major customers. Everybody recognised that it was only a delay and that the orders were never going to be cancelled because they were working for the aerospace industry—the blue-chip companies. Qualtronic approached its bank because it had been advised that it was eligible for the UK Government's loan guarantee scheme. HBOS told it that, regardless of whether it was eligible for the UK Government's scheme, it did not meet HBOS's own criteria and HBOS would not assist it.

I wrote to Lord Mandelson on 22 May and on 8 July to ask what the point was of a Government scheme when the banks were just doing what they wanted to do anyway. I finally received a reply on 26 August, which offered an apology for the delay in responding, which was

"caused by the exceptionally high volume of correspondence to the department on similar issues".

I am not surprised. The letter went on to say:

"The EFG exists to help viable businesses during an unprecedented period of tightened credit conditions, and is not designed for the majority of viable businesses to whom banks should lend; nor is it intended for businesses who are not viable and that banks are rejecting on that basis. Decision-making on individual loans is fully delegated to participating lenders and is done on commercial grounds. ... Where there is public sector investment in financial institutions these stakes are managed at arm's length and on an independent basis."

So much for the UK Government's support for businesses. Despite the fact that the public have bailed out the banks to the extent that our grandchildren will still be paying off that debt, the banks are thumbing their noses at the UK Government and forcing companies such as Qualtronic out of business. Qualtronic went into liquidation and 35 workers were paid off. It was a successful business that was forced to the wall by the banks. The good news is that, with private money, Qualtronic has been bought out and the core staff have been rehired.

I also met a company that has been in business for more than 100 years, which pays its way and employs significant numbers of local people. Last year, its bank slipped a new clause into its agreement. The bank decided unilaterally that, in future, a charge of 1.5 per cent would be applied to the unused balance of the overdraft—that is right: the portion of the overdraft that the company does not use is charged at 1.5 per cent.

I wrote to Alistair Darling, the chancellor, and received a reply from a Mr Ian Pearson, which concentrated on personal overdrafts, not business overdrafts.

I wrote again to the chancellor on 4 August, following his public declaration that he had instructed banks to ease lending to small businesses. I pointed out the difficulties of yet another company in my constituency and challenged him on what instructions he had been giving the bank. I received a reply from yet another junior minister who confirmed that the banks were doing very little. It stated:

"Decisions about the pricing, terms and conditions of loans to specific business cases remain commercial decisions for the banks and building societies. The Government expects to see banks offer competitively priced loans."

In fact, the Government did nothing to instruct the banks to get on with it and help businesses in my constituency.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I am sorry, but the member's time is up.

Photo of James Kelly James Kelly Labour 4:03 pm, 29th October 2009

I will start by taking on the charge that we often hear in these debates from the Tory party, which we heard from Alex Johnstone, that this is a Labour recession or Gordon Brown's recession.

Let me take us back to September 2008, when, as a result of an international crisis and weak business models, two banks in particular—HBOS and the Royal Bank of Scotland—were on the verge of collapse, which would have threatened jobs in the financial sector in Edinburgh and throughout Scotland. At that time, we saw swift action from the UK Government with the investment of £37 billion to shore up those banks and save Scottish jobs. In addition, we had a £20 billion investment package in the pre-budget report—again, that was swift and urgent action. Throughout all that, the Tories dithered one way or the other about whether they were going to support those policies. We had direct action and we are now able to see the effects of it on the economy.

Photo of James Kelly James Kelly Labour

I will develop my points. I acknowledge that the economy is still contracting, but the evidence shows that Scottish households' discretionary income is £12 a week higher than last year; that mortgage approvals are at their highest level in 18 months; and that car sales have increased by 11.4 per cent. Those factors demonstrate that the actions of last September, October and November are beginning to bear fruit.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

Does the member recognise that the banks have ploughed £40 billion into the Labour Government's coffers in the past decade? Will he acknowledge that the UK Government did not somehow find £37 billion from its own back pocket but had to borrow the money from world money markets?

Photo of James Kelly James Kelly Labour

Perhaps Joe FitzPatrick should explain his intervention to the thousands of employees not just in banking but throughout Scotland whose jobs were saved by the UK Labour Government's swift action.

The cabinet secretary complained that people were not presenting solutions, so I will concentrate on the Scottish situation and consider three ways in which the Scottish Government has been lax and slow to react. The document that has just been released and which was made available at the back of the chamber before the debate started makes little mention of energy. Before the recess, we had a constructive debate on the Economy, Energy and Tourism Committee's report about energy. The new document refers to

"green opportunities for sustainable ... growth", but we heard at First Minister's questions today that the Beauly to Denny line will not be decided on until the end of the year. It is crucial to put that in place if we are to maximise proper renewable opportunities. We wait and wait on the Beauly to Denny line; it is time for action.

The Council of Economic Advisers produced a report on all aspects of energy policy that Mr Mather told us three weeks ago was still in his in-tray. Perhaps the cabinet secretary will say in his closing speech whether Mr Mather has got round to reading that report.

As others have said, the Scottish Futures Trust—its budget has been doubled in the draft budget—has failed to deliver anything in two and a half years. It will be post-2011 before any of the schools that were announced a couple of weeks ago come to fruition. When 8,500 construction workers have been made redundant, the Scottish Futures Trust is an abysmal failure and a white elephant that the Government must bear.

The scrapping of six-month sentences and the creation of community payback orders will cost about £28 million. We are not only telling prisoners that prison is "a skoosh", as the Cabinet Secretary for Justice said, and scrapping six-month sentences, but costing the public purse money in due course. That is not good enough.

I endorse the actions of the Labour Government at Westminster. I warn against the Tory approach of rushing to public spending cuts and I call for the SNP to move more quickly on energy policy and on creating construction jobs. Scotland needs progress to move the economy forward.

Photo of Ross Finnie Ross Finnie Liberal Democrat 4:09 pm, 29th October 2009

Much of this afternoon's debate on the economy and the means by which we might be able to stimulate it and guide it through the recession is predicated on the view that there needs to be a banking sector that can facilitate the way in which business operates. The point was made in interventions, particularly from Margo MacDonald, as it was in Jeremy Purvis's opening remarks. As he said, the Liberal Democrats are disturbed that such a banking model is not in place. We think that its absence inhibits the way in which we can progress.

In his book, "The Storm: The World Economic Crisis and What it Means", Vince Cable, the Liberal Democrat shadow chancellor drew attention to the way in which the banking crisis has elevated the economic term "moral hazard" to a new and unsustainable level. For banks to take risks that result in large dividends and remuneration payments when things are alleged to be going well, but which result in losses for taxpayers when reality strikes, is not only an extreme version of moral hazard but poses serious questions about whether such institutions should be supported by political parties as deserving of public support.

Such institutions have been described as "too important to fail". At the time of the crisis, they were too important to fail because they were the only structure of banking institution in town. The Government and the Bank of England had to act to prevent a collapse of the whole banking system. I say to Gavin Brown that that is the point that we are trying to make. As my colleague Jeremy Purvis said, we expressed our doubts about the system at the time. Now, having had time to reflect on where we should be, we say that this is the time to question the present model of banking and look to a different one.

The Scottish economy is as dependent as any other economy on having a sound and dependable banking system, one that provides companies and households with a ready means to make payments for goods and services and a channel for savings to fund investment. That is a fundamental and essential part of banking, one that is far removed from the higher-risk elements of investment banking that have developed in recent years and whose trading has brought such financial instability.

Liberal Democrats are clear on the matter: if economic recovery is to be achieved on a sustainable basis, an essential building block of recovery is a fundamental restructuring of our banking system—hence the Liberal Democrat amendment.

Photo of Margo MacDonald Margo MacDonald Independent

The Parliament cannot restructure the banks. Does the member have any idea how it can influence the powers that be at Westminster?

Photo of Ross Finnie Ross Finnie Liberal Democrat

Unless, as part of the debate, the Parliament signals very clearly its support for reform of the banks, it will be in dereliction of its duty. The Parliament must indicate the broad thrust of where we want to go.

It is interesting to note that, while Liberal DemocratsVince Cable in particular—were in the vanguard of calling for banking reform, the governor of the Bank of England is now calling for reform of both the structure and regulation of our banking system. Margo MacDonald alluded to that at the outset of her earliest intervention.

The governor posited two possible solutions to the issue of banking structures, the first of which is—to be fair—merely a refinement of the current situation. I refer to his proposal to impose capital requirements on banking and financial institutions. The problem for Liberal Democrats in terms of that proposition is that it still leaves us with institutions that are "too important to fail" but which contain elements of business that involve a high degree of risk-taking that does not warrant public support.

His second solution is to separate out financial institutions into those that provide core banking services and those that create risky assets. The governor refuted the suggestion that such separation was impractical on the ground that existing prudential regulation makes a distinction between different types of banking activities when determining capital requirements. Liberal Democrats have expressed concerns about lack of competition. It is interesting to note that the governor also supports that stance. He observed that, even by international standards, the UK banking sector is highly centralised, with only four major banking groups, two of which are now largely in state ownership.

Liberal Democrats do not believe that simply breaking up the banks will of itself resolve the whole problem. Root-and-branch reform of banking regulation would still be required. We seek support across the chamber for our proposition on the following grounds. First and foremost, it would restrict the moral hazard category of "too important to fail" to those banks that supply core banking functions. If we were to do that, it would radically reduce taxpayer exposure to risk.

Secondly, the break-up of the banks would not preclude the continuation or creation of risk-taking institutions, but they would be wholly dependent on market support and not taxpayer support. Thirdly, in Scotland, in particular, the break-up would provide the basis for the creation of much-needed competition, to the benefit of individual customers and businesses. Last, but by no means least, it would provide the basis for the repatriation of the Bank of Scotland as a core retail bank in the "too important to fail" category, restoring the bank to its rightful place in the Scottish economy.

For those reasons, we seek support for reform of the banks and ask Parliament to signal to the relevant authorities that this is a vital matter that is integral to how we—

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I am sorry, but the member's time is up.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party 4:15 pm, 29th October 2009

I am pleased to take part in the debate, keeping the economy at the top of our agenda, where it belongs.

This recession has affected families and businesses in ways that we have not seen in a generation, and it is far from over. In times such as these, it is crucial to feed money back into the economy. That is why I fully support the cabinet secretary's plans to accelerate spending. I am pleased that Iain Gray and Scottish Labour appear now to be echoing the SNP's calls—it is better late than never.

The cabinet secretary has used every lever available to him to help Scotland through these rough times. However, instead of being able to get the funding that he needs to continue his efforts, he must ask Westminster to throw Scotland a few crumbs. Rather than providing Scotland with acceleration of funding to enable us to get out of the recession and to support recovery, Westminster has reduced our budget by £500 million this year, when we are still in recession, and a further £500 million next year, when we are hoping to be in the early stages of recovery. It is exactly the wrong time to cut Scotland's budget.

If Scotland were independent and had the powers of a normal nation, it would be able to recover from recession at a much faster rate. We are not independent, so we are reliant, at least in part, on Westminster ministers making the correct decisions to support recovery. However, both Gordon Brown and Alistair Darling continue to battle from the bow of their sinking ship and are dragging Scotland down with them by refusing to grant the stimulus funds that she is in dire need of. In fact, the UK is the only nation in the G20 that does not have a fiscal stimulus plan for next year.

The International Monetary Fund has forecast that Norway will be shielded from the worst parts of its recession due largely to its oil fund—something that could exist in an independent Scotland.

Photo of Andy Kerr Andy Kerr Labour

Is the SNP's economic strategy based on that of Ireland, where unemployment is 14 per cent, there has been a 7.5 per cent cut in public sector wages and children are told to take toilet rolls to school, because there is no budget for that, or on that of Iceland, which is now in debt to the IMF and Russia and whose economy is essentially bankrupt? That is the solution that the member is proffering.

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

The SNP's economic solution is that the Parliament should have the full range of economic powers so that it can make the best decisions for our nation and people. The member will note the recent IMF findings that Iceland, Ireland and Norway are all still wealthier per head of population than the United Kingdom and that those countries are expected to get out of recession more rapidly than the United Kingdom.

Clearly, Scotland's potential for recovery is stifled by Labour's failed economic policies. The video games industry is one of the few industries that have continued to thrive globally despite bleak economic conditions. Last year, video games outsold DVD movies for the first time, with £22 million in global sales. The industry is particularly important to Scotland, nowhere more so than in my constituency in Dundee. Edinburgh-based Rockstar North created the best-selling video game of all time, the Grand Theft Auto series. Dundee-based Realtime Worlds produced the highly successful game Crackdown. However, countries such as France, Germany and Canada are willing to give those companies generous tax breaks if they agree to move their operations.

Now Ireland has its sights on Scotland's video games industry and is considering what tax incentives it could offer to entice our businesses to relocate there. Do not be mistaken—the companies love being in Scotland, especially in Dundee, where the University of Abertay Dundee has a top-notch programme to produce highly-skilled graduates attuned to the needs of the industry. However, Ireland's proposed five-year tax holiday might be just too good an offer to pass up. Relocating from Dundee to Montreal might be a step too far, but Dundee to Dublin might not. It is vital that such companies receive similar tax breaks in Scotland in order to level the playing field.

Photo of Jeremy Purvis Jeremy Purvis Liberal Democrat

The member knows that the digital media remain a responsibility of Scottish Enterprise. Why has his Government slashed the budget of Scottish Enterprise?

Photo of Joe FitzPatrick Joe FitzPatrick Scottish National Party

The SNP Government has supported the video games industry in Scotland in the way that it can, providing the skills that ensure that we have the best graduate base for companies. Abertay university in particular is working very closely with the industry to ensure that its graduates have exactly the tools that the industry requires.

I had the opportunity to host a panel discussion yesterday among more than 75 members of the video games industry. There were loud calls for tax breaks. Unfortunately, the only thing that Mike Russell and I could say was that we did not have the power, and that they would have to ask Westminster.

There are signs, however, that a concerted effort, co-ordinated by the Dundee-based UK Independent Game Developers Association—TIGA—is starting to pay off, and UK ministers appear finally to have acknowledged the importance of the games industry. TIGA has produced a relatively modest culture-based tax break for games development, and has delivered its proposals to the UK Government. It has the potential to generate 3,500 good-quality graduate jobs, and the signs are positive. Several UK ministers have come to Dundee to see at first hand the centre of excellence that has developed around Abertay university's collaboration with Dundee's games industry.

If we are to prevent the loss of thousands of jobs, the chancellor urgently needs to announce the early introduction of tax breaks for games development in his pre-budget report next month.

Photo of Margaret Curran Margaret Curran Labour 4:21 pm, 29th October 2009

Last autumn, the world's financial system stood on the precipice. Without action, we would have faced a collapse of the banks and possibly the implosion of the financial system, with catastrophic consequences for the global economy. We are told that, ultimately, all politics is local, but to miss the global dimensions of the experience—as the Tories have done this afternoon—and not to appreciate the global action that is required is fundamentally to misunderstand what actually happened and what must be done.

This afternoon, however, we are focusing on the work of the Scottish Government and the Scottish Parliament, and on what we can and should do in these particularly challenging circumstances. I will argue that, in the face of this situation, we in the Scottish Parliament should have three priorities: jobs, jobs and jobs again. As the banks attempt to regroup and recover, it is essential that they understand that Government action was not intended to enable them to return to old habits. In return for assistance from the taxpayer, the public have clear expectations—we want a return for hard-earned cash input. Banks need to get moving. They must prioritise jobs and the public interest.

The debate that is whirling around us about the global economic crisis has allowed British politics to be seen again in primary colours, as one commentator recently put it. We have seen that in Scotland, too. In the blue corner, we have the once again not-so-modern Tories. There is to be no more engagement with huskies and hoodies—we are now back to the raw attack beloved of the Reagan and Thatcher era. There is no mention of market failure in the Tories' analysis and there is no appreciation that it was only the intervention of Government that avoided economic and financial catastrophe.

Bizarrely, the SNP has tried to say that there is no difference between Labour and Tory. It is as if SNP members can will themselves away from one of the most fundamental dividing lines of modern politics across the world: the role of Government in the economy. They are so desperate for a Tory Government that they cannot bring themselves to say that Gordon Brown and the Labour Government got it right and took the right action.

Photo of Margaret Curran Margaret Curran Labour

I do not have time.

As Wendy Alexander said, when are we ever going to find out what the SNP actually thinks about the economic analysis and what its response to the situation would have been? The SNP always tries to face two ways. As we are beginning to understand, those who do that finally become unstuck. We know—especially those of us who have been around in Scottish politics for a wee while—that the appeal to business is only skin deep. A long-held commitment to bus re-regulation was dropped—allegedly—when Brian Souter got involved. We witnessed the spectacle of John Swinney voting for a third-party right of appeal on the eve of an election and running for cover thereafter. No wonder people questioned his stewardship of planning reform. When the SNP faces a different audience it retreats to the tired, crude analysis that Labour did so much to eradicate: private always bad, public always good.

What we have had from the SNP Government is just not good enough. Instead of looking for alibis, which Joe FitzPatrick did most shamefully, and instead of peddling misinformation, the Government needs to get its priorities right. The fact is that its budget is increasing by £600 million. Whether the Government likes it or not, we will hold it to account on how it uses that money to promote and protect jobs, particularly for the people who need them most.

What have we had from the Government? There is the cancellation of the Glasgow airport rail link project, which has caused widespread outrage and insulted Glasgow again—after the insult of last year's budget. There are deep cuts in transport and tourism, there are cuts in enterprise and housing, and there is no coherent plan for industry and skills. Despite representations and serious questions being asked about Skills Development Scotland and the intervention that we need on training, there has been no action at all.

At this time of unprecedented economic difficulty, the Parliament must do all that it can. I hope that for once the Government will pay attention to the different voices in the Parliament.

Surely we can try to unite around a programme for jobs and economic recovery. At least let us reinstate the GARL project. The Government should let the Scottish Futures Trust go the way of the local income tax and admit that it does not deliver. The Government should waste no more time or money on the SFT. It should stop taking a marginal and indulgent position in the debate on housing and get to the heart of the issues. It should get investment and work under way. It should prioritise the needs of young people. It is vital that we expand apprenticeship schemes. I do not know the details of what the cabinet secretary announced today in that regard, because I have not had time to read the update on the economic recovery plan, but we all know that much more work needs to be done.

It is time for SNP members to stop congratulating themselves. They must start to play their part more effectively and more assertively. Much more needs to be done if we are to help our people. There is great worry and concern throughout Scotland. The Government needs to sharpen its focus. We need an infrastructure investment plan that helps all our cities, leaving none behind, and we need to do much more on jobs. Perhaps then the budget will be worthy of support.

Photo of Patrick Harvie Patrick Harvie Green 4:27 pm, 29th October 2009

What an interesting speech from Margaret Curran. She articulated well some fair criticisms of the SNP but completely ignored the fair criticisms that should be levelled at the UK Labour Government. On one hand she demarcated the dividing line in politics around the role of the state; on the other she lambasted the SNP because its desire to placate big business is not sincere enough. Is it not clear that the UK Government's desire to placate business interests during the past decade and more was one of the factors that led to the failure of regulation and allowed the failure in markets?

Photo of Margaret Curran Margaret Curran Labour

We need more time to go into the issue in greater depth, but I was trying to argue that in the past decade Labour has taken us into new territory, where it is possible to create an honest partnership between business and public services, and that Government intervention is at the heart of that. The SNP Government is deceitful about that.

Photo of Patrick Harvie Patrick Harvie Green

I agree that the UK Government took us into new territory. With its business partners, it carefully constructed a house of cards.

The Labour amendment focuses on GARL. It is known that I am a lukewarm supporter of the project. If we were willing to limit the growth of aviation and use the rail link to improve the experience of using the airport and displace more polluting forms of surface transport, that would be all well and good, but I am sad to say that I do not think that the Labour Party would support those limits on aviation growth any more than the SNP would do. We might need to rely on rising oil prices to bring the number of flights down to a sustainable level. Labour's position seems to confirm that the UK party still has a business-as-usual mentality, just as Scottish Labour does—as if I did not already know that.

Although I might have expected a more broad-ranging amendment from a party that should be jumping up and down with excitement at the prospect of coming to power in a few months, Derek Brownlee made at least one important point about accelerated capital spending. If such spending becomes a regular tussle between the UK and Scottish Governments, and if any settlement comes with strings attached, it will indeed be a form of ring fencing, although I am a wee bit surprised that we have not seen such ring fencing already. If Mr Brownlee's comments can be taken as a commitment that such strings will never be attached if his party comes to power in the UK, they are worth hearing.

Understandably, much of the debate has focused on the short term and the immediate impact on our constituents today, whether in relation to the economy or the impact of cuts on public spending. Those cuts will hit hardest those who are already in poverty and who have suffered most during the recession. We should ensure that we have a longer-term focus as well. It is not as if there are no other options to protect public spending, or at least to ensure greater equity in the face of cuts.

At the UK level, there has been no consideration of ending the tax loophole that allows major banks to offset their previous losses against future taxation as they return to profitability, ensuring that some of them will not pay tax at all for many years to come, despite Adair Turner warming to the idea of options like a Tobin tax to curb the efforts of the mega-rich to line their pockets further through speculation.

Why has there been no crackdown on those who evade and avoid tax, or on the obscene salaries and bonuses in the banking sector? The usual answer that we get to that question is that we must retain the talent. Those clever, clever people who are so talented at shafting the rest of us must be rewarded, otherwise they might leave the country and start shafting someone else instead. I say, let them go. Just as our political landscape needs to face up to fundamental economic change, many parts of our private sector could do with a purge of the casino capitalists instead of yet another attempt to flatter them and indulge their whims.

I say to the Labour members, and to their Westminster colleagues, the Tories will not do those things; this is Labour's last chance. Of course Labour members will not do it, any more than they will take our nationalised banks' money out of the arms trade or tar sands. They will not do those things because they have spent so long pretending to have abandoned any radical left-wing agenda that it has become the truth.

Jeremy Purvis made an important contribution on breaking up the banks. I want to add to that the argument about changing the banks' culture. It is important that we change their structure, and I was disappointed to hear the cabinet secretary respond by welcoming the merger of another bank. That leads not to more diversity but to less, and to the agglomeration of banks into megabanks. If we want diversity in the banking sector and in other financial services, such as building societies, credit unions and co-operatives, we need to be willing to do the job fully, so as well as breaking up the structure of the banks, we need to consider breaking open their culture. A Government that had the nerve to do that would not only stand a chance of getting re-elected, it could lay the foundations of a new social contract that is fit for the 21st century.

Photo of Iain Smith Iain Smith Liberal Democrat 4:33 pm, 29th October 2009

In such an important debate on such an important subject, it is a disgrace and discourtesy to the Parliament that the Government published the economic recovery plan update this afternoon without first advising Parliament and MSPs that it would be published and without making it available to Opposition spokespersons in advance of the debate, and only sneaking it in to the back of the chamber as the debate began. I look forward to hearing the Presiding Officer's response to Jeremy Purvis's point of order at the start of the debate.

In the limited time that I have had to scrutinise it, I am slightly surprised that in the economic recovery plan update I see no reference to the economic recovery plan, which was announced in a great blaze of publicity—to the media, not the Parliament, of course—last October as a six-point plan that would somehow be our saviour and get us out of our economic disaster. I would have thought that the glossy document that the Government has published today would refer to that plan, or maybe even have a point-by-point analysis of what the Government has done to implement it, indicating the impact of its action, but no. Instead, we have a "third iteration", which is apparently

"rooted firmly within the Government Economic Strategy".

That strategy was published in 2007, which was before the recession and even before the Council of Economic Advisers was established. It is therefore slightly surprising that the strategy has not been revised to take account of the very different economic world in which we live. We might have thought that after nearly two years, the Council of Economic Advisers, that highly paid and wonderful body—or highly expensed, I should say, rather than paid—might have come up with something in relation to a new economic strategy for Scotland.

However, fear not folks, and do not worry, because business breakfasts continue between ministers and business leaders across Scotland, with bacon, sausage and a large side-helping of scrambled thinking. The simple truth is that business does not want more breakfasts; it wants more action. The love affair between Scotland's business community and the minority SNP Government is now over. The CBI has said:

"Scottish Ministers ... response to date is inadequate".

The Federation of Small Businesses has said:

"more concerted action will be necessary to kick-start the economy."

The Scottish Council for Development and Industry said in its budget response to the Economy, Energy and Tourism Committee:

"The Scottish Government has stated that its purpose is higher sustainable economic growth ... Overall ... we do not consider that the draft Scottish Budget displays this long-term prioritisation".

I note that the Scottish economic recovery plan update refers to the importance of the accelerated capital spending. It states:

"This spending is expected to provide a significant stimulus to the construction industry at a time when private sector demand has fallen. The Government's capital budget for this year will ultimately support approximately 57,000 jobs in the Scottish economy, including nearly 37,000 in the construction sector alone."

That would certainly be welcome, but we have yet to see the evidence to back up that assertion. We look forward to seeing it. In his evidence on the budget to the Economy, Energy and Tourism Committee, Michael Levack, from the Scottish Building Federation, raised serious concerns that a large part of the advance capital money had gone not to new building and housing projects but to measures such as buying up existing housing stock and adding to land banks, and had not created any new jobs.

There is also serious concern about how the Government is monitoring the effect of the accelerated capital spending. In answer to a parliamentary question from Jeremy Purvis recently, the Government said that it was monitoring the spend but would know whether the advance capital expenditure had created any new jobs only when the accounts were published next summer. The Government will therefore not know the position for another year. However, the SNP's European elections leaflet managed to state this summer that the Government's economic recovery plan was creating 20,000 more jobs. Where is the evidence for that? What information or statistics does the Government have to prove that that is the case? It claimed last summer that there would be 20,000 new jobs, but it cannot tell us until next summer whether any new jobs have been created or whether any jobs have been saved. I say to the cabinet secretary that that is simply not good enough on such an important issue.

The Government could do a number of things to create jobs, and it could refocus some of its budget to do so. For example, the economic recovery plan update refers to energy efficiency and states that the

"job creation opportunities are significant. Estimates of job creation in one recent programme to promote energy efficiency at the UK level showed it sustained 11 direct and 60 indirect full equivalents for every £1 million invested by Government."

Many parliamentary committees have demanded that the Government invest more in energy efficiency programmes, yet we have no extra money in the budget for them. Indeed, we have not been able to identify a single penny that the Government has provided to implement its responsibilities under its Climate Change (Scotland) Act 2009, which the Parliament passed before the summer recess and for which the Government claims great things.

For Tricia Marwick's benefit, I say that if the Government had followed the example of the National Assembly for Wales and done something about getting hold of some funding from Europe through JEREMIE—joint European resources for micro to medium enterprises—some of the issues to which she referred might have been addressed. However, the Government failed to take action on that particular source of income.

The reality is that we are in the deepest recession for some time, yet Scottish Enterprise's budget is being cut, as are the budgets of Highlands and Islands Enterprise and VisitScotland, and Scottish Development International's budget is frozen, so it is being cut in real terms. In addition, despite all the talk from Joe FitzPatrick and John Swinney about the importance of innovation, Scottish Enterprise's innovation and commercialisation budget is being cut significantly this year. The Government has got its priorities wrong. It needs to take action to change them if it is to create an economic recovery rather than just another document.

Photo of Gavin Brown Gavin Brown Conservative 4:39 pm, 29th October 2009

Members of all parties will have been disappointed with the recent GDP figures. Despite underlying hope of a return to positive—albeit very small—growth, the recent figures make it clear that that has not happened yet. Although the decline was not as sharp as in previous quarters, it was a decline nonetheless. In quarter 2, the economy contracted by 0.6 per cent in the UK and by 0.8 per cent in Scotland, which means that the UK has experienced six successive quarters of negative growth. As has rightly been pointed out, countries such as France, Germany and Japan have moved into growth and are technically out of recession. However, I add a minor word of warning that growth from such a low base—and from such a desperate position—might not be particularly positive and could be extremely fragile. We need to be aware of that as we move forward.

As we have heard from all sides of the chamber, the unemployment statistics make for depressing reading. Some 192,000 people in Scotland are now unemployed, and it is quite likely that the number will continue to rise over the next couple of quarters. When I intervened on the cabinet secretary to voice my concern about the faster rate of increase in unemployment in Scotland, he retorted that the situation had improved slightly. However, the figures for quarter 2 show that the rate of increase in unemployment in Scotland was almost double the rate of increase in England. I accept that that relates only to one quarter, but if that trend were to continue, it would be deeply worrying, because Scotland's unemployment rate would then be in danger of overtaking that of the UK. I ask the Scottish Government to examine that issue closely as we move forward.

Other miscellaneous points arose during the debate, including Mr Kelly's claim that increased discretionary spending has been available to families throughout Scotland. However, it must be borne in mind that much of that increase could be due to the fact that interest rates are currently at 0.5 per cent. Although the statistic that Mr Kelly mentioned might sound nice, it is not one that I recognise. If interest rates were to increase to 3 or 4 per cent, there could be a dramatic decrease in the discretionary spend of families in Scotland. Also on the horizon is a climbing oil price—it was over $70 a barrel yesterday—and the danger that the effects of quantitative easing could lead to inflation. The dangers on the horizon are possibly greater than they have ever been.

Photo of Margo MacDonald Margo MacDonald Independent

I apologise for introducing a more philosophical note at this stage in the debate, but does the member accept that, if we controlled all the levers of economic management, we would not fear a rise in oil prices?

Photo of Gavin Brown Gavin Brown Conservative

Whether or not we have such control, oil is a global commodity that is generally traded in dollars, so even if we were independent, I am not sure that we would have greater control. However, I take the point, as that is probably the first and perhaps the last time that Margo MacDonald will give me an apology during a debate.

I want to focus the rest of my remarks on issues over which the Scottish Government and Scottish Parliament have powers, especially those items that are mentioned in the economic recovery plan update. First, as Derek Brownlee did well to point out, we need to start putting more emphasis on our business start-up rate and on growing our smaller businesses into medium-sized enterprises. I gently point out that the Scotland performs website indicates that we have made progress in that regard, but almost all of the recent increase—the rate was flat for about 10 years—could be attributed to the change in VAT law, which meant that many companies became eligible for VAT and were given a commercial reason for becoming so. It would be interesting to know whether the 2008 figures are available, given that the latest figures on the website relate to 2007.

The updated economic recovery plan also refers to

"reducing the business costs of regulation", which all Conservatives want to see. However, the document gives the impression that that has already happened. I would be interested to know from the Minister for Enterprise, Energy and Tourism or from the Cabinet Secretary for Finance and Sustainable Growth—whichever of them will sum up today's debate—whether he feels that those costs have been reduced. Setting up the regulatory review body was a good piece of work, but it seems to me that not much of its work has been put into practice thus far. I do not think that I have yet seen a piece of legislation for which a business impact assessment has been produced.

On energy, the Council of Economic Advisers expressed a big concern, as did most of the business community, about the Government's energy policy. Now that the independent report has been produced, I ask the cabinet secretary whether we can see it so that we can produce our own analysis and determine whether the independent experts also had concerns about the policy.

The Scottish Investment Bank was announced in April. The economic recovery plan update tells us that it has now been incorporated as a legal entity, but that takes approximately one day and is an extremely simple process. Where is the Scottish Investment Bank going, when will it happen on the ground and, most important, what difference will it make?

Photo of John Park John Park Labour 4:46 pm, 29th October 2009

I welcome this afternoon's debate. It has been a difficult year, particularly for people outside the Parliament who have been dealing with the real consequences of the economic recession that we face. We might have a knockabout here in the Parliament, but in opposition we have tried to make constructive suggestions to aid economic recovery. Initially, we made some suggestions through our 15-point plan last October, and our approach to the budget for this year focused on skills and redundancy support. In our approach to the budget for next year we are again calling for a targeted approach to boost economic performance, and we offer our support for accelerated capital spending in this year's PBR, which would have a positive knock-on effect for Scotland. We are keen to continue to make such contributions.

There are a number of key issues, including in particular apprenticeships, investing in our people, supporting our manufacturing sector and, most important, considering ways in which to stimulate economic growth. Much of the discussion has been about capital acceleration. Our position is clear, but I will make it clear again this afternoon. We support such measures as long as they lead to shovels hitting the ground and to employment.

In the debate, there was a bit of discussion about the extra 7,800 apprenticeships that were agreed in the budget last year. I remind members that if the Greens and Labour had not voted down the original budget—the two votes from the Greens were ultimately very important—we would not have had those 7,800 apprenticeships in the budget. The vote enabled the Parliament to discuss the issues again. Although we welcome the extra apprenticeships and the announcements that have been made, my deliberations with training organisations and employers suggest that we need to continue to pursue the issue over the next year. There is capacity in both the training sector and the employment sector to have many more apprentices in future.

The main problem is that apprentices are facing redundancy, despite the guarantee that is in place. Rob Gibson gave me an opportunity to raise the matter during his speech. Some 1,200 apprentices have been made redundant in the past seven or eight months and most of them have not found alternative employment. Although I welcome any announcement on the expansion of apprenticeship training—we heard about that from both John Swinney and Fiona Hyslop this afternoon—we need to address the particular problem that we have at the moment and ensure that the years of training that have gone in for hundreds of apprentices are not lost to our industry and to them as individuals. They must get the opportunity to play a positive role and contribute to the economy in future.

We also need to think about how we support smaller businesses to take on apprentices. In a helpful contribution two weeks ago, Andy Willox of the FSB said:

"Apprenticeships are good for the apprentice, good for the business and good for the economy. But too many small firms wouldn't even know where to start in recruiting one."

That is an important point. I understand that the Cabinet Secretary for Education and Lifelong Learning will make an announcement to the Parliament next week about apprenticeship expansion. I hope that the issue of small businesses will be addressed as part of that.

Tricia Marwick spoke about support for the manufacturing sector, and I agree 100 per cent. The proportion of service sector employment that we have in Scotland—four jobs out of every five—is probably unsustainable in the long term. I hope that the Parliament can agree some form of manufacturing strategy for the future. I know that Mr Mather has spent a lot of time speaking to employers and mapping out their concerns over the past couple of years, but we now need to see a little more action. I would like us to focus directly on the manufacturing industry and find out what we can do for it. There are many sub-sectors in that industry that we could support. That would provide brilliant opportunities for people in our communities whom we seek to represent. The Scottish Government needs to take direct action, and I would like it to bring forward a strategy as a matter of urgency.

Iain Smith mentioned the ProAct scheme in Wales. As well as considering a wider manufacturing strategy, we need to deal with issues that we face now. ProAct, which provides support for businesses that are on short-time working, is a very good Welsh Assembly Government initiative; such an initiative here would help businesses now. The expansion of the Scottish manufacturing advisory service has put companies in Scotland's manufacturing sector on a positive footing, but we still need a wider strategy.

Jeremy Purvis made some excellent points about PFI and PPP. The impact of not having a funding mechanism in place for the types of projects that PFI and PPP supported in the past will be felt for years to come in terms of infrastructure projects and skills shortages. It is not just the pipeline of infrastructure projects that is drying up; the pipeline of individuals is drying up too.

On Jeremy Purvis's comments about the HBOS-Lloyds TSB situation, I would be careful not to be too critical of the HBOS-Lloyds TSB merger. We must look to the future and consider what the banking framework, not only regulation, will look like. At the time of the merger, most people recognised that the HBOS banking model was defunct. Immediate action had to be taken to stabilise the whole system. It was not only capital injection that was required; structural changes were required.

I say to Rob Gibson and Joe FitzPatrick that we must be careful when we make comparisons with other countries. No one would seriously suggest that global banks that are based in Scotland and have their roots here, such as HBOS and the Royal Bank of Scotland, could have been supported in an independent Scotland. I do not think that any serious economist in or outside the Parliament would even suggest that.

Alex Johnstone spent the final minute of his speech criticising the Labour Government. I will return the favour. What would the Tories have done in the situation that we faced last year? At the start of the crisis, they were still calling for the deregulation of the mortgage market. The Tory party was the only political party in the G20 countries to oppose the fiscal stimulus measures that all those countries were pursuing, and the Tories want to cut back on spending now, when every G20 country and all the business organisations are saying that it is far too early to remove support. They keep on using terminology that they get from Conservative central office—they talk about "Labour's recession", for example. Under them, there would have been a Tory depression. The Tory recessions of the 1980s and 1990s fractured communities throughout Scotland. I assure Alex Johnstone and his colleagues that no one in Scotland will forget that.

Photo of John Swinney John Swinney Scottish National Party 4:53 pm, 29th October 2009

Mr Park made the fair point that Opposition parties have made suggestions that the Government has accepted and which have been reflected in budget priorities. That is exactly what we have done. We did that last year. I have made no secret of the fact that the Government has accepted a number of suggestions that the Labour Party has made to deal with the economic difficulties that we have faced. As Mr Park rightly said, if we had not had a budget rematch, there would not have been the extra support for apprentices. That is crystal clear, but the consequence of that, of course, was that we did not quite have enough support for as extensive a programme of home insulation as the one that Mr Patrick Harvie talked about at that time. I say that simply to illustrate clearly that choices have to be made. I am regularly on the receiving end of many demands for more expenditure, but I am never on the receiving end of many demands for reductions in expenditure.

Photo of John Swinney John Swinney Scottish National Party

Mr Harvie's suggestions do not always command universal support in the Parliament, but I will give way to him in a moment.

As we go through a budget process, we must observe that maxim. The discipline and the rule that apply to the Cabinet Secretary for Finance and Sustainable Growth must apply throughout the Parliament.

Photo of Patrick Harvie Patrick Harvie Green

The point has been made that at least some of us are willing to propose that cuts should be made to the most damaging, polluting and wildly overbudgeted projects, Forth road bridges included.

Photo of John Swinney John Swinney Scottish National Party

I thank Mr Harvie for his further constructive contribution to the debate on choices. I am sure that we will continue it in due course.

Photo of John Swinney John Swinney Scottish National Party

I ask Mr Smith to forgive me, but I have a number of points to respond to.

Wendy Alexander asked why we have not had a further debate on the Government's economic strategy. The Government's economic strategy was published in November 2007 and had at its heart a focus on delivering increased sustainable economic growth. Not for the first time in the Parliament, I make the point that the economic circumstances have not forced the Government to change its economic strategy but have simply increased the scale of the challenge that we face. We believe the foundations of our economic strategy to be the correct foundations based on investment in the human capital of Scotland and the creation of Scotland as a competitive place in which to do business.

The different updates that I have provided to Parliament on the economic programme and the economic recovery plan have been given in the context of the economic strategy. I am regularly in the chamber to debate the economy, and I would be happy to have a debate on the Government's economic strategy, but it is unclear to me whether that request has ever been made at the Parliamentary Bureau. Whenever Mr Crawford receives a request for a debate at the Parliamentary Bureau, he is the first to come to me and demand that I turn up for the debate, and I always do what Mr Crawford tells me. I simply make the point that I would be very happy to debate the issue.

There has not been due acknowledgement in the debate of the direct support that has been given to a range of businesses to support employment creation. Only yesterday, the First Minister made a series of announcements in Ayrshire regarding the creation or safeguarding of 530 jobs in consequence of decisions of the Government. In August, 300 new jobs were announced at Scottish and Southern Energy's centre of engineering excellence for renewable energy, and there was also the announcement of jobs at Tesco Personal Finance. It would have been fairer if those announcements of good news had been mentioned in the debate.

Photo of Margo MacDonald Margo MacDonald Independent

I thank the cabinet secretary for taking an intervention at this late hour. I fully appreciate the Government's attempts to protect the Scottish economy. However, I am unable to support the Government's motion tonight because it asks us to recognise the Government's actions

"to ensure that the nation is ... protected from the worst of the downturn".

To "ensure" means to guarantee, and the Scottish Government does not have the fiscal powers to do anything like that. Therefore, I shall not support the motion.

Photo of John Swinney John Swinney Scottish National Party

We will use and are using every lever that we have at our disposal to support economic recovery. Of course, I would like the Scottish Government to have a fuller range of powers—I have spent my entire adult life trying to secure that, and I will continue to do so.

Wendy Alexander also asked me about the work that the Government has done on access to finance. I say to her and to other members that the Government has regular discussions with the banks in Scotland—including Lloyds TSB, RBS, HSBC and Barclays—about their approach to lending. I met HSBC over the past few days and I will meet RBS again shortly. Wendy Alexander cited a written parliamentary answer that I gave to her on the access to finance survey. If she had given the full explanation, members would have understood that the survey was put together to assess the impact on the Scottish market—the lack of competition—of our having two dominant banks. I dutifully submitted the findings of the survey to the Chancellor of the Exchequer as the person who is responsible for regulation. The Labour Party could have criticised me for spending public money to undertake that survey—and I am sure that it would have—but it is complaining that I have not shared it with enough people. Well, I shared it with the Chancellor of the Exchequer to advise him of the issues.

Photo of John Swinney John Swinney Scottish National Party

I am afraid that I must draw my remarks to a conclusion.

Photo of Alex Fergusson Alex Fergusson None

No. The minister is in his last minute, Ms Alexander.

Photo of John Swinney John Swinney Scottish National Party

I suggest that Wendy Alexander show a little bit more respect to the strictures of the Presiding Officer, as Mr Crawford and I always do.

Andy Kerr's contribution to the issue of the choices in the budget did not take account of the fact that the Government is investing £2 billion in skills and further and higher education and £1 billion in our transport infrastructure and is helping small businesses by maintaining the small business bonus scheme.

Those are the things that the Government is doing. We are taking forward an agenda that delivers for the Scottish economy. We have done that since we came to office and we will continue to do so.

Photo of Alex Fergusson Alex Fergusson None

Before we come to decision time, I would like to give an answer to the point of order that was raised earlier by Jeremy Purvis.

It is, obviously, a matter of good practice that all material that is relevant to debates in the Parliament be made available to members in sufficient time. If the relevant material is Government information, the responsibility for ensuring that that happens lies with the Government. However, I understand that, on Tuesday morning, the Minister for Parliamentary Business made all business managers aware of the arrangements for the distribution of the document that accompanied today's debate on the Scottish economy. Further, the minister has confirmed that, as agreed, a copy of the document was made available to either the business managers or the resource teams of the parties at 8 o'clock this morning. I can suggest only that, if Mr Purvis wishes to take the matter further, he does so with his own business manager.