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I am grateful for the opportunity to set out to the Parliament Scotland’s economic strengths, our resilience to the economic challenges that we undoubtedly face and the opportunities that we are creating to grow and strengthen our economy for the benefit of all in our society.
Since coming to power, the Government has supported an improvement in Scotland’s economic performance during a uniquely challenging economic period that has been dominated by global financial crises and the United Kingdom Government’s austerity programme. Since 2007, over that very difficult period, the number of registered businesses has risen by 15 per cent; business research and development expenditure has increased by over 40 per cent in real terms; our international exports have increased by 41 per cent; and productivity has risen by 7.5 per cent, whereas it has stagnated at a UK level.
There are also over 80,000 more people in employment, and Scotland’s labour market has been remarkably resilient in the face of the challenges that we have encountered. The latest statistics, which were published this morning, show that the unemployment rate continues to fall and now stands at a record low of 4 per cent. The UK figure is 4.6 per cent, which is the same as it was previously, so it is stagnating. Our unemployment level is below that of the UK as a whole and below those of most other Organisation for Economic Co-operation and Development countries. Indeed, the previous quarter was only the second quarter in the past 25 years in which unemployment has been that low.
We, too, welcome the fall in unemployment that has been announced today. However, like the Scottish Chambers of Commerce, we are concerned about the fact that Scotland has experienced a significant rise in the number of people who are dropping out of the labour market altogether. The inactivity rate in Scotland is one full percentage point above the rate in the rest of the UK. Can the cabinet secretary explain why inactivity levels in Scotland are increasing?
I am happy to do so. The member will find that much of the explanation lies in the number of students who are going into higher education, who are, of course, economically inactive. There are 30,000 more of those than there were previously, and the rate is higher than the rate in the rest of the UK.
“The Scottish Government must explain why unemployment rates north of the border are now significantly higher than the rest of the UK”.
Does that mean that the UK Government should now explain why unemployment is much higher in the UK than in Scotland? It will be interesting to see whether that issue is addressed in the Tory speeches.
It is 4.6 per cent, which is the same as it was in the previous quarter.
I know that it is disappointing to the Conservatives and the Labour Party that the numbers are so low, but today’s encouraging numbers reflect the importance that the Government attaches to getting on with the day job of supporting our economy and creating jobs.
It is those strengths that continue to make Scotland one of the most attractive locations for inward investment. The latest Ernst & Young attractiveness survey shows that, in 2016, Scotland attracted 122 foreign direct investment projects, which was more than any other part of the UK outside London. It is particularly welcome that Scotland attracted more R and D projects than anywhere else in the UK and was, again, second only to London in securing software projects. All three of Scotland’s largest cities—Glasgow, Edinburgh and Aberdeen—are in the UK’s top 10 for numbers of FDI projects secured. Again, we wait for congratulations from the other parties for the people who have secured that investment.
The publication today of the Scottish Government’s chief economist’s state of the economy report provides a timely analysis of the economic opportunities and challenges that the Scottish economy faces. I note that 2016 was a challenging year for the economy, with gross domestic product growing just 0.4 per cent over the year and contracting marginally in the final quarter. As the chief economist’s report mentions, that slowdown stemmed principally from the continued challenges that the oil and gas sector faces. That is why we are continuing to support that sector both through the work of the energy jobs task force and by supporting innovation and ensuring that Scotland can maximise the economic opportunities that decommissioning presents.
That commission is not related to the Government. It is not part of the Government, so we do not report on it to the Parliament. I know that Murdo Fraser knows that, but I do not know why he failed to take the opportunity to ask the UK Government to explain why its unemployment figures are so much worse than Scotland’s. That was his first chance to do that, and he has failed.
As I said, the chief economist’s report points to the challenges that the oil and gas sector faces, which are why we continue to support it. Nevertheless, we are seeing encouraging signs that conditions are improving for oil and gas companies. Yesterday’s oil and gas survey by Aberdeen and Grampian Chamber of Commerce shows that confidence is rising among North Sea oil and gas firms and now stands at its highest level since 2013, while the Bank of Scotland purchasing managers index for May signalled growth across manufacturing and services sectors.
However, it is clear that the UK faces economic challenges. At 0.2 per cent, UK GDP growth in the first quarter of 2017 was lower than that of any other country in the EU, and rising inflation is squeezing household incomes. Those pressures are particularly acute for families that are being hit by the UK Government’s benefits freeze.
It is also time to look again at the pay restraint that is faced by the public sector. I recognise that the pay restraint has been hard for public sector workers. It has been in place at a time of UK Government-imposed austerity in order to protect jobs and public services, but, at a time of rising inflation—with the Tories failing to control inflation and failing to control debt, having added £100 billion to the UK’s debt every year since they took office—it is clear that the restraint is putting pressure on public pay. We will take a fresh look at next year’s pay policy in order to address that issue. We must ensure that pay rises are affordable now and in the future, but they must also reflect the real-life circumstances that people face.
That brings me to the main risk that is facing Scotland’s economy: the UK Government’s continued determination to impose a hard Brexit on Scotland. I will reflect particularly on the significant contribution that European structural funds and European territorial co-operation make to Scotland’s economy.
European structural funds programmes are worth around £828 million to Scotland over the period from 2014 to 2020, which is a very significant investment at a time when public sector budgets are under pressure. To date, more than 200 projects have been approved, committing over £383 million of European structural funds across Scotland to boost small and medium-sized enterprise growth as well as to support innovation and skills and reduce poverty and social exclusion. I am pleased to have been able to make a number of announcements in that regard over the past year, including our investment in the £250 million SME holding fund, which is projected to support innovation in 500 businesses and create 2,000 jobs.
Alongside that, the European territorial co-operation activities complement and strengthen the investments that are made through structural funds to support growth and jobs in Scotland and across Europe. Many organisations in Scotland benefit from working on projects with organisations from different countries to tackle common challenges and develop shared opportunities. Those investments include the €3.2 million award to the funding ocean renewable energy through strategic European action—or FORESEA—project, which is led by the European Marine Energy Centre in Orkney, to develop ocean energy technology and the €3.5 million award to allow our enterprise agencies to work alongside Invest Northern Ireland and InterTradeIreland to support innovation co-operation between SMEs and research institutions.
Such projects demonstrate the vital role that European funding plays in supporting sustainable and inclusive growth in Scotland, which is why it is essential that the UK Government commits to replacing that funding in full following Brexit. Will the Conservatives guarantee that Scotland will retain the equivalent amount of money in the longer term if they are successful in dragging Scotland out of the EU—
I am sorry, but I do not have much time left.
Will the Conservatives guarantee that money if they are successful in dragging Scotland out of the EU and the single market against the wishes of the Scottish people? I look forward to the Conservatives proving that their MPs are going to work in Scotland’s interests at Westminster by making that commitment on behalf of their party here and now.
The funding that is provided by structural funds also complements the wider actions that we are taking to drive productivity and to create opportunities for growth through investment, innovation, inclusive growth and internationalisation as set out in Scotland’s economic strategy. We are making significant investments to support businesses and to drive productivity growth. For example, we are investing billions in transforming Scotland’s infrastructure—a key driver of long-term productivity growth—with many projects that have been neglected for decades under the Conservative and Labour parties. If members do not believe me, they should listen to Patrick McLoughlin, the former Conservative Secretary of State for Transport, who said that, for decades, the problem in Scotland was that there was not the requisite investment in transport infrastructure.
“garner support” and that
“a new proposal is urgently needed to protect the economy and bring people together.”
Does that not also apply to independence and the Scottish National Party?
I have not mentioned independence in today’s debate, yet Willie Rennie, who is utterly obsessed with it, has once again sought to hoover it into the debate.
It was interesting that, on the morning after the election, Jeremy Purvis—elected by nobody, but speaking on his platform—said that it was time that the SNP dropped its commitment. He was immediately asked whether he would drop his commitment to another referendum and he could not answer the question. As for Christine Jardine’s appalling statement on Sunday, I do not know what to say. Once again, the Opposition parties are obsessed with independence. Let us get back to the economy, which is what we should be talking about.
As I mentioned, the funding that is provided through structural funds complements the wider actions that we are taking to drive productivity. The investment in infrastructure includes projects such as the Queensferry crossing, the dualling of the A9, the dualling of the A96, the Aberdeen western peripheral route and the M8, M73 and M74 improvement project. Furthermore, the Scottish growth scheme will provide £500 million to support innovative SMEs with high growth potential that struggle to obtain finance through conventional means. We are also investing more than £1 billion in our universities this year alone, and we are supporting collaborations between universities and businesses through our innovation centres.
Inclusive growth is at the heart of our actions to grow the economy as we equip our young people for the future, which is why we are increasing the number of modern apprenticeship opportunities to 30,000 per year by 2020 and expanding funded childcare to improve young children’s outcomes and reduce barriers to parents’ participating in the economy. We are also driving internationalisation by boosting Scotland’s trade and international connections.
Scotland’s economic fundamentals remain strong, but we face economic challenges from, in particular, the damage that will be caused by the UK Government’s desire to take Scotland out of the EU and the single market. I have set out a range of actions that we are taking to grow and strengthen our economy for the future. We must continue to invest for growth by promoting and supporting innovation, investment and internationalisation, as is set out in Scotland’s economic strategy. I urge members to support the motion in my name.
That the Parliament recognises that Scotland’s economic fundamentals remain strong with opportunities for growth; welcomes the fact that Scotland has closed the gap in productivity performance with the UK as a whole, the continued attractiveness of Scotland’s economy for inward investment and, in particular, the recent analysis by Ernst and Young, which shows that Scotland attracted more research and development foreign direct investment projects than anywhere else in the UK in 2016; recognises and acknowledges the challenges facing Scotland’s economy, in particular from the downturn in the oil and gas sector and the damage that will be caused by the UK Government taking Scotland out of the EU and the single market; believes that Scotland must continue to invest for sustainable and inclusive growth by promoting and supporting innovation, investment and internationalisation, as set out in Scotland’s Economic Strategy; highlights the important contribution that European structural and investment funds make to support sustainable and inclusive growth in Scotland, and calls on the UK Government to commit to ensuring that it replaces this funding in full following Brexit.
The Government has today presented a wide-ranging motion on the economy, which is a subject that it was curiously silent on before the election. Nonetheless, I will start with some areas of consensus.
We agree that there are opportunities for growth in Scotland’s economy. We have a world-class workforce, world-class universities and world-class cities. With the right Government and the right policies in Holyrood, Scotland’s full economic potential could be realised.
We also agree that the economy in Scotland faces a number of challenges that need to be addressed. However, despite what the Government motion says, those challenges reach far beyond the oil and gas sector and they existed well before Brexit. In fact, Scotland’s economy has suffered below-trend growth for the past 10 years under the SNP, with average annual growth of 0.7 per cent. Last year, growth in Scotland was only 0.4 per cent, while growth for the rest of the UK was almost five times faster.
It is no wonder that Ernst & Young described Scotland’s economy as
“being stuck in the slow lane” with Scotland halfway to recession and forecast that, for every year until 2020, Scotland’s economy will continue to underperform the rest of the UK.
At this stage, the cabinet secretary usually intervenes to tell me that I am talking Scotland down. I will save him the bother by saying that I am not. Rather, I am identifying the economic challenges that the country faces. Those challenges are evident across a range of other indicators. For example, innovation and productivity levels continue to lag behind OECD averages; foreign direct investment jobs declined by 47 per cent last year, despite a small increase in FDI projects; and Scotland’s export base is too small, according to Scottish Enterprise, with only 50 companies accounting for 50 per cent of exports. Further, according to EY, we need to diversify our sector base, as recent economic growth has been overreliant on public sector construction, which declined last year by 3.3 per cent, according to the “State of the Economy” report that was issued by the Scottish Government today—of course, I have to say that the construction sector has contributed to the Scottish economy for a bit longer than expected, due to the delays on the Queensferry crossing.
Despite those challenges, there are real opportunities to improve economic performance in Scotland, but only if there is a corresponding real change in the substance and direction of economic policy in Scotland. As the cabinet secretary said himself in this chamber less than three months ago,
“the status quo will not deliver the economic step change that is necessary”.—[
, 30 March 2017; c 82.]
We agree with that. If the Scottish Government wants to deliver that step change in the economy, it must listen to key stakeholders across Scotland who have been calling for economic policy to change in a number of areas.
I am interested to know the member’s feelings about the post-study work visa. The issues with that are stopping us recruiting people from other parts of the world, when our universities are investing in them. When I have spoken to university leaders, they have raised that as an important issue.
We recognise that that is an issue, and it will be involved in the Brexit negotiations.
I will address the areas in which stakeholders across Scotland have been calling for a change in policy.
First, the Scottish Government should work more closely with the UK Government to capitalise on opportunities that are available under the UK-wide industrial strategy. For example, the Scotch Whisky Association says:
“The UK Industrial Strategy presents an opportunity for ... the Scotch Whisky industry to Flourish as a flagship manufacturer and exporter.”
However, it goes on to say that the industrial strategy will only serve the interests of all the nations of the UK if the devolved Administrations play an active role in its implementation. We agree. The industrial strategy can also act as a policy framework to expand key sectors in Scotland such as life sciences and financial technology.
Let me make a bit of progress; I will take an intervention later.
The UK Government has appointed two fintech envoys to explore how Scotland can capitalise on this critical area for the Scottish economy. A recent report from Strathclyde business school has warned that the Scottish financial sector could face a loss of 14,000 jobs if it fails to embrace fintech. I look forward to the cabinet secretary or the minister telling us of their plans for working with the UK Government on the industrial strategy.
Not right now; let me just finish this point.
Stakeholders are also calling for a more competitive tax system in Scotland. Thirteen leading business organisations across Scotland have called on the Scottish Government to abolish the large business supplement, which adversely affects 20,000 businesses across Scotland and penalises them with higher rates than are applied to their counterparts elsewhere in UK. My colleagues will expand on that during the debate but, with that unfair tax in place, it is not surprising that the rate of shop closures in Scotland is the highest of any part of the UK.
Stakeholders have also called on the Scottish Government to expand support for Scotland’s exporters and to boost trade with the rest of the UK. Indeed, that was a key finding of the recent report by the Economy Jobs and Fair Work Committee on the economic impact of leaving the EU. Evidence that was provided to the committee informed us that, in 2016, 65 per cent of our trade was with our domestic UK market, 20 per cent was with the rest of the world and 16 per cent was with the EU single market, and that the fastest growing areas of trade were with the rest of the UK and with the rest of the world. Reflecting those trading patterns, the committee heard evidence from a number of witnesses that more needs to be done to support Scottish businesses in exporting across the world, including to the emerging markets, and that Scotland’s number 1 trading priority must always be to keep the trading relationship with the rest of the UK open and fluid. The committee also heard evidence that Scottish businesses want the fullest possible access to the EU single market, which is exactly what the UK Government’s objectives have been and will continue to be in the Brexit negotiations.
I will give way now.
I thank the member for giving way; I think that it was to me rather than to Ms Martin.
Dean Lockhart talked about a competitive tax rate, by which I think he meant a low one. Does he not accept that that would be a risk and that public services would suffer, our workforce would be less well educated and we would have less money for infrastructure?
I do not have time to go into the Laffer curve right now. However, we just need to look at the high streets across Scotland to see that the large business supplement is putting people out of business and that local and central Government are getting less tax revenue as a result of that misguided policy.
The final key policy message for the Scottish Government comes from the most important stakeholders of all—the people of Scotland. In last week’s general election, they were told by the First Minister that independence was
“at the heart of this election”.
The people of Scotland listened, they thought long and hard about that and they voted. The result was once again an overwhelming rejection of independence, with more than 63 per cent of votes being cast for parties in support of Scotland remaining part of the UK. So it is now time for the SNP to listen to the people of Scotland and to abandon the policy that has most damaged Scotland’s economy: the SNP’s constant campaigning for independence.
It is time for the SNP to remove the uncertainty of a second independence referendum and to get on with the day job.
I move amendment S5M-06045.1, to leave out from “that Scotland’s economic” to end and insert:
“opportunities for growth in Scotland’s economy; welcomes the continued attractiveness of Scotland for inward investment; acknowledges the many challenges facing Scotland’s economy, including negative economic growth and low business confidence; considers that these can be addressed by the introduction of a more competitive tax system in Scotland and by the Scottish Government removing the uncertainty of a second referendum on independence; believes that Scotland can best achieve sustainable and inclusive growth, and increase innovation, investment and internationalisation through active cooperation and participation in a UK-wide industrial strategy, and supports the objectives of the UK Government in achieving the maximum possible access to the European single market while maximising the opportunities afforded by fostering stronger trading relationships with the rest of the world.'”
Complacency and denial are the twin problems facing the SNP in relation to the economy: complacency on the state of the economy and denial over a second independence referendum, which, aside from Brexit, is the biggest threat to our economy.
I see the Cabinet Secretary for Economy, Jobs and Fair Work laughing, but perhaps he would do well to listen. In debate after debate, Opposition parties come to the chamber only to hear from the Scottish Government that there is nothing wrong with the economy and that what we are doing is simply talking Scotland down. The cabinet secretary has recently taken to hiding behind businesses, using them as some sort of human shield so that he does not have to answer for challenges in the economy.
So let us be clear: the Scottish Labour Party supports businesses. We recognise their central role in growing the economy. The challenge, of course, is for the Government to provide them with the right support at the right time. That is not rocket science. Business leaders—whether the Scottish Chamber of Commerce, CBI Scotland or the Federation of Small Businesses—are not shy about coming forward and telling us what they want. They tell us that they want involvement with the Government in setting the strategy for economic growth, investing in infrastructure, maximising the opportunities for SMEs in procurement and investing in skills. None of these should come as a surprise to us.
They also tell us that they want certainty, yet both Governments have given them exactly the opposite. First we have Brexit—on the back of a referendum pushed by the Tories to settle their internal divisions on the EU—and now, after the general election, the Tories are in complete disarray about the way forward.
Then we have the issue of independence that was rejected by the people of Scotland in 2014—the cabinet secretary may laugh, but I suggest that he listens—and rejected again one week ago, in the general election. While the First Minister might be in denial and, judging from the noise emanating from the back benches, the rest of the SNP is too, none of her cabinet has enough backbone to stand up to her—
—in a minute— and the rest of us think that she had a calamitous election. Dropping from 50 per cent of the vote to 36 per cent is part of a pattern of decline: losing the SNP majority in this Parliament, staggering falls in her personal popularity and, of course, declining support for independence. We have passed “peak SNP” and “peak Nicola Sturgeon”.
On the question of last week’s election, as long as the Scottish Labour Party is content to be third—with the worst result that it has had since 1918—we will be content to be first.
.] Would she agree that the Scottish Government has the right priorities, given the unemployment results?
Thank you very much, Presiding Officer. I am always in your good hands.
I say to the SNP that its priorities are entirely wrong. Frankly, anybody who can describe a reduction in their share of the vote from 50 to 36 per cent as a victory needs to look at doing their sums again.
The SNP now has an opportunity to put the economy first and to set aside—clearly, with no fudging—the pursuit of independence and restore business certainty. That is what our economy needs and what the country needs.
The truth is that there are mixed reviews on the economy. Today’s positive statistics on employment and unemployment are to be welcomed, but the rise in economic inactivity remains a problem that the cabinet secretary simply brushes aside. There are 776,000 people of working age in that category, and the figure increased by 12,000 in the most recent quarter. Overall, the figure is 1 per cent higher than it is in the rest of the UK.
If confirmation is needed, members need only look to Tony Mackay of Mackay Consultants, who says that the true level of unemployment is 4.4 per cent, which is much higher than the claimant count of 2.4 per cent, or to Professor Brian Ashcroft, who pointed to the fact that real unemployment was rising more than five years ago. Indeed, the Scottish Trades Union Congress has previously expressed the concern that the official statistics do not show the real condition of our jobs market. I suggest that, instead of trying to invent an explanation about students, the cabinet secretary should recognise that the present situation is not good for our economy and do something about it.
The statistics also show that wages are declining in real terms. With inflation rising, there is less spending power and less consumer demand, which has an impact on business. Not surprisingly, the Scottish Retail Consortium is concerned about the future and, not for the first time, we have called on the Government to develop a retail strategy with the sector. I hope that the Government eventually gets round to agreeing.
If we want to make a real difference to workers and increase their spending in the economy, we need to pay them a living wage of £10 an hour, ban zero-hours contracts and provide them with the skills that businesses need for the future. In other words, we need to invest in people to drive growth in the economy.
The Government’s chief economist tells us that the Scottish economy grew in 2016. Yes it did, but only by 0.4 per cent, which was well down on expectations, and it is on a downward trajectory. In the most recent quarter, the economy shrank by 0.2 per cent, and the fear is that we could be heading for a recession. No one wants to see that happen, but instead of rising to the challenge of reversing that trend and growing the economy, the SNP has been spending its time working on its rebuttal. In advance of the next quarter’s GDP stats coming out, which will happen soon, the SNP has shifted how it analyses the measurement. It has simply stripped out London, so that we do not look so bad in comparison with the rest of the UK; then, everything is marvellous. That is the limit of the SNP’s ambition: reinterpreting and spinning the figures instead of focusing on growing the economy.
No—I do not have time.
Our economy has lost out on money and jobs as a result of the SNP’s mismanagement. If we look at the growth sectors that our enterprise agencies are charged with focusing on, we see that five out of six of them had not recorded any growth at all by the end of 2016. When we look at the rate of job creation, we see that the rest of the UK has grown jobs in those sectors three and a half times more quickly than we have since 2009. The cabinet secretary is shaking his head, but those are facts that have been provided by the Government’s own statisticians. That is huge potential that we are not tapping into.
I turn to foreign direct investment. The EY report notes the increase in the number of projects, which is welcome, but the number of jobs that are being created is much lower. In 2016, the number of foreign direct investment jobs that were secured fell by 47 per cent, and let us not forget that in 2014, before the independence referendum, foreign direct investment slowed noticeably. Companies delayed making decisions until they knew that it was all over. That is another reason to take indyref 2 off the table if we want our economy to grow.
Internationalisation, innovation, investment and inclusive growth are all laudable headlines, but the Government’s strategy takes no account of Brexit and no account of what it needs to do to change. The Fraser of Allander institute said that it needs to be urgently reviewed. It is simply not credible to continue as normal.
Let me make one final observation.
I move amendment S5M-06045.3, to leave out from “economic fundamentals” to end and insert:
“economy remains fragile, with no growth in the fourth quarter of 2016 and that growth in Scotland has lagged behind the UK for a number of years; further recognises the challenges Scotland faces in particular from the downturn in the oil and gas sector; considers that the previous UK administration’s approach to a hard Brexit is a major challenge to the Scottish economy and should be abandoned; believes that the Scottish Government’s Economic Strategy must be urgently reassessed, and notes the Fraser of Allander Institute comments that ‘all of the [Scottish] government’s economic strategy priorities - internationalisation, innovation, investment and inclusive growth - have been turned on their head by the decision to leave the EU. It is simply not possible to continue as normal. An urgent review of current policy initiatives is needed’; further believes that the growth of Scotland’s economy should be inclusive so that everyone benefits and people and jobs are put first; considers that the Scottish Government should accelerate investment in infrastructure, innovation and research to nurture business growth, stimulate the economy and create jobs; further considers that the Scottish Government should ensure that a real living wage of £10-an-hour is paid in all public procurement and commissioning contracts; regrets that the Scottish Business Pledge has not been widely taken up; considers that the Scottish Government’s continued priority of a second independence referendum, which was rejected at the General Election, creates uncertainty for business and households, and therefore commits the Scottish Government to abandon its plans for a second independence referendum.”
Let me also say, Presiding Officer, that if the SNP wants the economy to grow—
I feel that I must begin with an apology because, in drafting an amendment for the debate, I regret to say that I looked only at the title of the debate as it is written, so I have written an amendment about the economy rather than the constitution. The unspoken and unwritten title of the debate—given the huge appetite of the political parties that would like us not to talk about independence for talking about independence all the time—is something that I will come to, but I hope that I can beg members’ indulgence and talk about the economy just a little bit first.
As is my normal style, I recognise that there is some agreement across all political parties. The motion and most of the parties’ amendments—although I will not be able to vote for the motion or any other amendment tonight—recognise some balance between opportunity and challenge in our economy. Even the Conservatives’ amendment talks about the need for an industrial strategy, and it is good that our country, the UK, which went for so long with Government after Government taking a hands-off approach and assuming that the market would fix every problem, now has some consensus that the Government needs to have at least an industrial strategy.
I disagree with the Conservatives about what that strategy would be, just as I disagree with the Scottish Government. Greens will continue to make the case for investment in the transition to a low-carbon economy, while the UK Government and the Scottish Government remain unwilling, so far, to abandon their continued tax breaks and subsidies to the big polluters in our economy. As has been shown in the past couple of months in leaked documents from the UK Government, the subsidies to oil, coal and gas companies since 2000 amount to some £6.9 billion, most of which has been awarded since 2010, when the Tory coalition was formed. Through our work on jobs in the new economy, the Greens have advocated that there is far more to be gained than to be lost in the transition away from fossil fuels, but that will happen only if we invest in it instead of continuing to subsidise the cause of the problem.
I agree with the commitment in the Labour amendment to a real living wage of £10 an hour. Naturally, we support that—of course we do. It was in our 2015 election manifesto and I am pleased that the Labour Party has taken it up.
As for the importance of Europe, the SNP motion refers to the importance of structural funds and investment in infrastructure, and Keith Brown gave a long list of the road building projects that he is keen on. It is a shame that he could not list any sustainable infrastructure projects, because they are urgently needed.
The Lib Dem motion references skills shortages. They are a challenge in many industries and in our public services, which are an important part of our economy in their own right and which also create the conditions that our whole economy depends on. We have seen recently that there has been a 96 per cent drop in the number of nurses from the rest of the EU who are registering to work in the UK—the figure is down from 1,304 in July last year to just 46 in April this year. The challenges that will come from skills shortages as a result of the UK Government’s insisting so far on abandoning and scrapping the right of free movement are a huge and long-lasting threat.
In its amendment, Scottish Labour quotes the comment from the Fraser of Allander institute that
“all of the [Scottish] government’s economic strategy priorities—internationalisation, innovation” and so on
“have been turned on their head by the decision to leave the EU”, and it also says that
“the previous UK administration’s approach to a hard Brexit ... should be abandoned”.
I certainly agree with that commitment, and I wonder whether it means that the Labour Party now supports staying inside the single market. I hope that it does.
We must question again what the Conservatives actually mean by “maximum possible access” to the European single market, which is a phrase that we hear so often from them. Will a worker have maximum access to the single market if they cannot decide where they wish to move for work, whether it be to or from this country? Will a family have maximum access to the single market if they cannot stay together and if they face, as so many do, the threat of deportation?
Although there is common ground in the debate and agreement across the political spectrum on some issues, I also argue that critical issues are being missed by all the other parties. The chamber will be familiar with the Greens’ argument on growth. We reject the idea that narrow metrics such as GDP represent a meaningful assessment of the economy’s health.
Our overreliance on fossil fuels that we cannot afford to burn is an incredible source of vulnerability. If we want an area such as the north-east to have the prospect of a brighter future, we need to invest in that transition instead of kidding people on that business as usual will continue.
The SNP motion mentions increasing productivity, and the Greens agree in principle with that. In that respect, I mention in particular the UK Government’s obsession with reducing public debt; the fact is that, if we do that without increasing productivity, we will only increase the much greater stock of private debt in the economy, which is already a bigger problem.
We also need to consider how we measure productivity. After all, it is quite possible that the future wave of automation might increase productivity by reducing employment or the quality of employment. Who will share in the proceeds of that increased productivity? It will not be the affected workers.
I move on to the constitutional question that others are so keen to discuss. I challenge the leave campaign’s conceit that the UK can be treated as a unitary state in the Brexit process; that conceit is now being challenged, and it will fail. I also challenge the idea that the UK Government has any kind of mandate for a hard Brexit; it sought and was refused that.
I challenge the idea that Scotland has consented at all to the Brexit process—it has not. Unless the UK Government changes its position, we will still have UK ministers—with the support of their new best friends among the climate change deniers, creationists, misogynists and homophobes of the Democratic Unionist Party—negotiating a deal with the EU institutions, after which every other EU member state will have its say and the outcome will be imposed on us.
Earlier this year, the Scottish Parliament voted in favour of seeking a section 30 order to give the people who live here their own say in their future.
If the UK Government wants to change that position, the ball is clearly in its court. I urge it as the Government that triggered an unnecessary referendum and lost it, and which then triggered an unnecessary election and lost its majority, to think again, to drop its plans for an extreme hard Brexit and its arrogant approach to imposing a deal on us and to work collaboratively with others in every part of these islands—most particularly with those who recognise the need to protect our place inside the single market and the rights, freedoms and social protections that it gives us.
I move amendment S5M-06045.4, to leave out from “economic fundamentals” to end and insert:
“economy must serve the needs of citizens now and in the future by respecting the limited resources of the planet; notes Scotland’s continued overdependence on the fossil fuel industry and considers that this is a source of significant vulnerability; considers that the GDP growth of an economy is a poor indicator of the wellbeing of its citizens or the health of the ecosystem that sustains them; urges the Scottish Government to build on the steps that it has taken with the National Performance Framework and develop a comprehensive approach to measuring meaningful economic progress instead of continuing to place undue emphasis on GDP growth, and considers that economic development must focus on creating well-paid work, building local economies, ensuring fair redistribution of wealth, and developing low-carbon industries as a replacement for, rather than an addition to, the role of fossil fuels in Scotland’s economy.”
Turning away from our strong relationship with our European partners will damage our economic progress. All but a handful of MSPs agreed with that statement last year. Trade barriers in the form of differing regulatory systems, tariffs and workers’ rights will cost jobs and growth; indeed, the Fraser of Allander institute reckons that 80,000 jobs in Scotland could be at stake because of a hard Brexit.
Most agree that turning away from our neighbours would damage us—except when it comes to England, which is our closest neighbour. Apparently, turning away from England will have the opposite effect: it will boost trade, jobs and growth. That is curious if we consider the relative economic importance of the UK and Europe. Scotland’s exports to the UK are worth four times as much as those to the EU. Scottish sales to England, Wales and Northern Ireland were worth about £50 billion in 2015, compared with sales of about £12 billion to the EU internal market.
No—not just now.
That is the nonsense of the SNP’s position. It parades the value of partnership to accelerate us forward, except when it comes to the UK, which is apparently holding us back. The issue should never be an either/or one. We should seek to grow exports to the rest of the UK and exports to the rest of Europe. We must break down barriers, not build them up.
There is an opportunity to turn away from a damaging hard Brexit. Theresa May called the general election to get an overwhelming mandate for her Brexit plan, but she failed. That is why I support calls for a cross-party Cabinet committee to prepare a new plan that can secure the maximum support possible across the UK.
“During the election you sought a mandate for your proposals to leave the European Single Market. That proposal failed to garner support, it is now clear that a new proposal is needed urgently to protect the economy and bring people together.”
The cabinet secretary did not take the opportunity to respond to that. I argue that, on 37 per cent of the vote, such a position equally applies to the SNP and its plans for independence. However, a different standard is somehow to be applied in Scotland.
I will decide on my own interventions, thanks very much.
Will Willie Rennie answer a question? One of his colleagues said that, as a newly elected MP, it is important that she should be allowed to continue to put the arguments that she successfully put before the electorate to be elected. Does that apply to all MPs?
On the way that interventions work, when I made a point earlier, he was supposed to reply to it, and when I asked him to reply to it now, he had a second chance to do that. However, he does not want to answer the questions that I pose to him. We are holding the Government to account, and he should at least have the grace to answer the question. I will therefore not be gracious in answering his bizarre question in response.
Thank you very much—I will do that.
Our best interests are served by remaining in the EU. However, close observers might have noticed that the Liberal Democrats did not win the election, either. We are constructive and reasonable people who will work with others on a new plan that gets all the benefits of a close relationship with our European partners, even if that relationship is not what I would ultimately want. That is reasonable and pragmatic.
It is not reasonable and pragmatic to use Brexit for the sole purpose of winning independence. Brexit is the latest excuse from the SNP in its relentless independence campaign. It is absurd that the SNP seeks to use Europe to get an independence referendum that cannot guarantee European Union membership in return. We could end up not just being outside the UK but being outside Europe. We would certainly be isolated then.
The voters are not buying it. If the election failed to endorse Theresa May’s plan for Brexit, it certainly failed to endorse Nicola Sturgeon’s plan for independence. The loss of big political creatures such as the SNP’s former leader Alex Salmond and its former Westminster leader Angus Robertson requires an appropriate response. To carry on regardless would be failing to understand what just happened. To paraphrase Oscar Wilde, to lose one leader may be regarded as a misfortune; to lose two looks like carelessness.
Something strange is going on in Scottish politics and in the SNP. Once upon a time, Alex Neil was a fundamentalist who demanded independence without delay and Nicola Sturgeon was the gradualist. The roles are now reversed, and Nicola Sturgeon has gone from arch-gradualist to neo-fundamentalist in just two years.
Nicola Sturgeon’s carelessness is not just harming the SNP; it is harming the economy, too. Official figures show that Scotland is on the brink of a recession. Ernst & Young reports that the Scottish economy is
“stuck in the slow lane”.
The EY Scottish ITEM club has predicted “below par” GDP growth of 0.9 per cent in 2017, which is half that expected for the UK.
Our economy is set to lag behind that of the UK, with consumer and company confidence falling. The employment level in Scotland is forecast to fall this year. It is expected to drop by 0.1 per cent in 2017, followed by further decreases of 0.5 per cent and 0.3 per cent in the following two years. Consumer spending is to rise by just 1 per cent in 2017 and by less than 1 per cent from 2018 through to 2020. That compares with an average annual rate of 2.3 per cent over the past five years.
Scotland today is set to be behind. Brexit affects us all, but independence plans and the Government’s failure to perform and deliver are hitting us, too. The SNP Government should abandon its plans for independence and focus on what it was elected to do.
Liberal Democrats have big plans to invest in our people, through education and mental health services. We have plans for a close relationship with Europe to boost trade and jobs. We have plans that will open up and advance our country—not close it off and hold it back.
I move amendment S5M-06045.2, to leave out from “welcomes the fact” to end and insert:
“however, recognises that official figures show Scotland on the brink of a recession while Ernst and Young reports that the Scottish economy is ‘stuck in the slow lane’; believes that repeated warnings about the fragility of the economy and business confidence have been dismissed; recognises and acknowledges the challenges facing Scotland’s economy, including the threat of another divisive independence referendum, a hard Brexit and skills shortages, and believes that a long-term plan to build a strong economy must include the removal of the threat of a referendum on Scottish independence and avoiding a hard Brexit, combined with transformative additional investment in education and a step-change in mental health to help people achieve their potential and enable businesses to find the skills they need.”
Presiding Officer, I stand before you as someone who has worked at the sharp end of businesses across the globe. I have seen economies boom and bust, and I have witnessed the decisions of policy makers as they impact on people’s lives. Because of that, and in my role as parliamentary liaison officer to the Cabinet Secretary for the Economy, Jobs and Fair Work, I know just how lucky we are to live in Scotland, one of the world’s most prosperous countries, being in the top 20 of OECD nations for income per head. I recognise the responsibility that we have as politicians to protect it.
Scotland is lucky to have an expanding food and drink sector and a globally recognised tourism industry. We are lucky that research and development investment has gone up 41 per cent in real terms over the past nine years. We are lucky to have world-class universities and gold-standard research, and even a blossoming space industry. We are lucky to have lower unemployment and higher productivity growth than the rest of the UK.
Those things did not happen by chance. They have happened because the SNP Government has worked hard to ensure that Scotland’s place in the world is an outward-looking, international one and has ensured that the fundamental drivers of growth have been strong over the past decade.
The member will know that growth in the UK is now collapsing as a consequence of Brexit. That is the situation. If he looks back over the years 2014-15 and 2015-16, he will see that growth per head in Scotland was higher than that across the UK, and UK growth is higher because of immigration and significant increases in population. The forecast, with population coming down because of the Brexit policies, shows a collapse in UK growth going forward.
As they say in business, you make your own luck. The SNP Government is committed to Scotland’s economic future.
Growing Scotland’s economic and business base is a key priority. We have cut taxes for businesses. The small business bonus scheme has saved 100,000 businesses more than £1.2 billion in rates. We are supporting Scottish businesses on the international stage, with the Scottish growth scheme providing £500 million in investment guarantees for companies to grow and export more.
We have worked hard to make Scotland an attractive place to do business, with record foreign direct investment into Scotland representing the best performance in the UK outside of London for the fifth year running. We have grown productivity, the long-term key to economic success, at four times the rate of the UK. Scotland has the highest average pay anywhere in the UK outside of London and the south-east.
The SNP Government is not just investing in business; we are also investing in people. We have one of the most highly educated workforces in Europe. I am proud that our Government values education and innovation, investing £1 billion per year in higher education and funding research and innovation to keep our economy competitive. An educated population benefits us all. Most of all, I am proud that our Government values inclusive growth, which is fundamental to our advancement as a society and imperative to our economic growth.
However, there is no denying that there are challenging times ahead. Of course, the biggest threat to our economy right now is Brexit. We need to do all we can to protect our economy from the Tory Government’s insane decision to leave the European single market and implement a hard Brexit. Since that decision was taken, inflation has risen, wages have been squeezed and businesses have been losing confidence. The pound fell again this week as the Prime Minister formed a coalition of chaos with the DUP in the aftermath of a wholly unnecessary general election.
The cracks are showing in our economy because of the reckless actions of the UK Government. The fact that, for example, applications from EU nurses to work in the UK are down significantly is storing up future problems for our public services.
Today sees the publication of the latest unemployment statistics. Once again, Scotland leads the way, with unemployment now down to a record-beating 4 per cent, which is much better than the UK’s performance. Particularly pleasing is the fact that Scotland’s youth unemployment rate is almost 3 percentage points lower than that of the UK. That is a consequence of the Scottish Government’s focus on positive destinations for our young people.
The coherent focus of the Scottish Government is on what matters—getting on with the day job. It is focused on further improving positive destinations for our young people and delivering highly effective and targeted interventions to save and grow key sectors, while the UK Government obsesses with doing as much damage to the economy as possible through the pursuit of a chaotic Brexit, which is now not just hard but shambolic.
These are difficult times. Uncertainty, which is not of our making but was created in another place, is driving growth rates down and inflation up across the UK. We are at the start of a rocky ride. At some point reality will intervene and the illusion of fortress UK isolating itself from our European neighbours will be revealed as the economic idiocy that it is.
In the meantime, the Scottish Government is focused on doing what it can, with the limited powers that we have, to protect and build Scotland’s economy and to make the case strongly and coherently for Scotland’s future as a European trading nation that understands that the benefits of membership of the single market are critical to the future success and prosperity of this country.
Thank you, Presiding Officer. I thought so.
Two years ago, the Scottish Government set out a new economic strategy. I believe that most of us in the chamber would agree with the strategy’s general assessment of Scotland’s economy back then:
“Scotland is a wealthy and competitive economy by international standards. However, many similar-sized economies perform better, not just economically, but also on measures of equality, wellbeing and sustainability.”
Two years on, little progress has been made. In fact, on many indicators, Scotland’s economy has fallen further. The economy is halfway towards recession. The job creation rate is 2.7 per cent, against a UK rate of 9 per cent. Ernst and Young forecast a year of stagnation and below-par growth.
As we all know, the Scottish Government will take no lessons from anyone in the chamber, but perhaps it will take a lesson from itself. In particular, it could revisit page 7 of “Scotland’s Economic Strategy”, which states:
“Boosting competitiveness is key to supporting long-term economic growth.”
I agree, so why make Scotland uncompetitive, with a high-tax, low-growth economy that acts as a drag?
In the shortened time allotted to me, I will focus on two areas. First, the Scottish Government needs to reconsider the business rates system. The current system is not fair; it is a disincentive to success. In the words of Jerry Schurder, head of rating at property consultancy Gerald Eve:
“When judged against the criteria of effectiveness, efficiency, fairness and transparency, it is clear that the business rates system is failing on all grounds. It has become a cumbersome, opaque albatross around the neck of businesses, stifling growth and placing too much of the burden on the shoulders of those who can least afford it.”
I know that the Scottish Government introduced the small business bonus scheme. I know that because I write to Mr Mackay almost weekly at the moment on behalf of yet another business that has pleaded with me to try to get him to do something about business rates because it made the mistake of growing too big for the exemption—a business that, on being hit by perhaps a 200 per cent rates rise, faces the choice between laying off a couple of staff and diminishing its offering or deciding that it is just not worth it and closing its doors altogether.
Mr Mackay writes back to me to tell me again about the small business relief scheme, regardless of whether there is any possibility of my constituent availing himself of it. Sometimes Mr Mackay tells me about capping certain industries’ rates at 12.5 per cent, but even if my constituent’s business can use that, it is only for one year; it is a sticking plaster solution, which does not resolve the problem of the punishingly steep increases that some businesses face.
Uncertainty is the nemesis of investment. A long-term solution is needed to boost business confidence in the rates system. The Federation of Small Businesses has said clearly that the business rates system needs reform, and I agree.
The second issue, which is particularly relevant to the north-east, is the land and buildings transaction tax, which Bill Corbett, of McEwan Fraser Legal, describes as “punitive”. According to Rettie & Company, Scotland’s housing market has lost 10 per cent of sales of homes valued at more than £425,000. Aberdeen, Aberdeenshire and Edinburgh are disproportionately affected by the land and buildings transaction tax, as the value of the average family home typically exceeds £325,000. Savills recently showed that sales of properties over £400,000 have fallen by 51 per cent—and no wonder: a buyer at the higher end in Scotland pays 27 per cent more in tax than they would do south of the border. Retired people cannot sell their large homes to downsize to something more manageable. Expanding families cannot buy larger homes, because they are priced out by taxes.
LBTT does not even maximise tax revenues. The Scottish Property Federation found that LBTT generated revenues of £481 million in 2016-17—some £57 million less than forecast.
If the Scottish Government is serious about boosting economic growth, it must design a tax system that maximises growth, maximises revenues and does not act as a drag on growth. Businesses must have confidence in the taxation system if they are to invest, innovate and grow.
Businesses also need to be confident that the Scottish Government will not be the cause of economic uncertainty. The best way to provide that confidence is to shelve any plans for a second independence referendum. We have had endless referendums and elections over the past few years, and in each one the people of Scotland gave the Scottish National Party a clear message: no more. The people want the Scottish Government to focus on skills, jobs, taxation systems and the stimulation of Scotland’s sluggish economy.
The Scottish economy continues to be a magnet for investment from abroad. Last year, 2016, was another good year for foreign direct investment in Scotland, with FDI projects at a 10-year high. I am proud that Scotland’s economy continues to succeed, in spite of the UK Government’s austerity actions and last year’s potentially toxic decision to leave the EU, which has had an impact on the UK’s reputation across the world as an outward-looking country.
The UK Government continues to put political games—Brexit, and the political misjudgment of last week’s snap general election—ahead of what is best for the people of Scotland. However, Scotland’s success in attracting foreign investment increasingly looks like a testament to the benefits of an altogether different approach by this Government and our agencies.
I was particularly pleased to see in Ernst & Young’s report that between 2016 and 2017 Aberdeen moved from being the 10th most attractive place in the UK for FDI to being the seventh most attractive place, the number of projects having doubled since 2015. That shows the resilience of the north-east economy in very testing times.
There has long been innovation in the north-east in the oil and gas industry. In yesterday’s meeting of the Economy, Jobs and Fair Work Committee, it was interesting to hear evidence from National Grid, the Office of Gas and Electricity Markets, Energy UK and the UK energy research centre, on Scotland’s leadership and reputation on renewable energy.
From the roots of its oilfields in the North Sea and our onshore gas plants, the north-east of Scotland has a strong and established supply chain and infrastructure that can support a renewables industry. Renewables-related research and testing at our universities, and growing port infrastructure developments, mean that Scotland can be at the centre of the renewables industry.
I live in an area that has a very high concentration of engineering talent and resource, so I am at great pains to ask the Government to capitalise on that resource at a time when many people in oil and gas are facing uncertainty as a result of the global oil price.
I urge those who are looking at the city region deal for Aberdeen and Aberdeenshire to have procurement processes in place that favour local companies, such as Primarc Engineering that I met the other week when campaigning. It has long relied on oil and gas for a great deal of its business and needs assistance on how to apply for contracts outwith that area. I urge the Government to give more guidance to small and medium enterprises on how to do that, as they have transferable skills that could benefit from that guidance.
The Scottish Government’s energy strategy lays out a target for powering our country by 50 per cent renewables in the next 10 years. We are already ahead of the game, and it is a huge area of growth. The fossil fuel future will be diverted into manufacturing, and chemicals, and there will not be one thing in the chamber that is not touched by a by-product of oil. That will not change any time soon, but the future of light, heat and power is with renewables and that is an area in which we can make an impact.
In 2016, Vattenfall confirmed that it will construct a £300 million 11-turbine wind farm off the Aberdeenshire coast; that European offshore wind deployment centre will be a test and demonstration facility and the largest of its kind in Scotland. Aberdeen and Aberdeenshire’s infrastructure—the port, airport and helicopter facilities—make it a natural place for investment. Keith Brown mentioned the investment in the AWPR that will make the area even more attractive as the road nears completion.
The renewables and oil and gas industries build on Scotland’s existing strengths, but in my final minute I want to consider how we can encourage Scotland’s new businesses to seek investment and innovate. Business angel investing is one way in which that can be done, by providing support for a large number of early stage and start-up businesses. However, very few business angels in Scotland are women—about 3 per cent—and investors tend to invest in people who remind them of themselves. If the vast majority of business angels are men, the vast majority of recipients will be men—I am sorry, but that is a fact.
When we promote growth, we should consider what is growing and what is being invested in. In these uncertain economic times, we should work to develop an inclusive and fair economy. One way to do that would be to develop a women’s business angels network; I have come across that idea in my work with Women’s Enterprise Scotland. One such business is that of Leah Hutcheon, from Appointedd, who is a WES ambassador. She was initially supported by a Scottish Government EDGE grant, then expanded her appointment booking software company to a wide variety of small businesses; she now has 12 staff and is recruiting. If we take what Leah has done and replicate that across a lot of other women-led businesses, we will be able to tap into a massive resource.
This debate has been wearingly familiar: from the SNP, we have heard the story that all is rosy and that the couple of things that are wrong are all the fault of other people. From the Tories, we have heard about the Laffer curve again.
To be frank, the debate is not good enough—the Scottish economy deserves better. We need a frank and honest assessment. Of course the Government cannot control every aspect of the economy, but it must take responsibility for preparing the economy and it must be honest about the opportunities and the threats that are before us. It is disappointing that Keith Brown’s opening remarks mentioned that it is right to celebrate that unemployment is down, but failed to mention that inactivity is up. He was right to celebrate productivity, but he was completely wrong to fail to mention that it is lagging behind that of the rest of the UK.
It is disgraceful that it took Keith Brown a full eight minutes to talk about anything that the Scottish Government is doing to improve the economy and 10 minutes to talk about anything that it will do in the future. That is not good enough. We need a frank assessment of Scotland’s economy. If we have that, the conclusion is clear: Scotland’s economy is not performing well—it is fragile and it lags behind that of the rest of the UK. Scottish growth is a third of that of the UK and it has lagged behind the UK in every quarter, bar one, since 2014. We are on the edge of a technical recession.
There are strengths: we have strengths in industry, for example in financial services and technology. A responsible Government has to view our strengths and weaknesses, and our opportunities and threats in the round. It is not good enough to just point to Brexit and the oil price. Brexit is only a partial explanation, because it affects the whole United Kingdom, not just Scotland, but it does not explain our lag. The oil price has gone from being a one-off shock to a persistent and stubborn trend in the economy. To be frank, as the Greens have highlighted, that exposes the weaknesses and the failure of the Scottish Government to pursue a diversification strategy.
The member raises the issue of the balance between the low-carbon economy and oil and gas. Will he at least acknowledge that we have, in the energy strategy, set out a clear role for the oil and gas industry in the low-carbon transition, and that we have set the extremely ambitious goal for 2030 that 50 per cent of our energy requirements are to be served by renewables?
Of course I welcome the strategy. However, as with much since we came back to Parliament this time last year after the election, we have seen strategies, objectives and goals, but very little in the way of how they will be achieved or on implementation.
Today’s debate and the motion are very characteristic of the Scottish Government. Although it is willing to trumpet good news, it ignores the bad and makes vague promises that it will do something in the future. Indeed, the motion is something of a tale of two EY reports. The Scottish Government is very happy to hold up the “EY’s Scotland Attractiveness Survey 2017: Standing strong in uncertain times” report, which celebrates foreign direct investment, but it completely fails to recognise the other recently report published by the EY Scottish ITEM club on Scotland’s “stagnating” growth.
After 10 years of SNP Government, that should come as no surprise. It is selective in the presentation of its facts and it fails to be clear on the challenges. It is far too quick to blame others, which prevents it from being proactive on the issues that we need to face. Therefore, we should be totally unsurprised that it is vague in setting out actions and reluctant to use the powers that it has.
No, thank you.
The overarching issues that the economy faces are risk and uncertainty. The one decision that is completely within the Scottish Government’s control and that it could take now to de-risk the economy would be to rule out a second independence referendum.
It is ridiculous to hear SNP member after SNP member say that it is the other parties that are talking about a second independence referendum. Maybe their televisions were off, but it was the First Minister on 13 March who announced that there would be a second independence referendum. Maybe they have not been paying attention. Maybe they should be checking their phones, because I think that she was tweeting about the issue today.
The true tragedy is that this is not just about headline figures or the economy, because there are key issues about underemployment, people’s ability to advance and gain employment, in-work poverty and the hollowing out of mid-tier, mid-wage jobs.
Employment is down by 20,000. This is the only part of the UK in which economic inactivity has risen. The level of job-to-job moves—that is, people getting new opportunities—is two thirds of the peak figure and below the UK average. In reality, the promise of work is being undermined. Work should be able to provide security, the means for a person to provide for themselves and opportunity for the future. This Government’s actions are failing on that promise.
We face a number of issues, including automation and increasing self-employment. This Government’s inactivity is completely failing to deal with the challenges that lie ahead. Above all else, we must rule out a second independence referendum in order to give back certainty and stability. Frankly, this Government is undermining that with every step that it takes towards a second independence referendum.
When we examine the statistics on Scotland’s economy, we see both the strength of its foundations and the improvements that have been made in recent years. It is true that our gross domestic product has grown at a slower rate than that of the UK as a whole. That is in large part due to the global slowdown in the oil and gas sector, but it has been counterbalanced by continued impressive foreign direct investment and our low unemployment rates. However, with financial uncertainty due to Brexit looming large in the near future, there is no guarantee that the situation as it stands will be spared volatility.
I am sure that my colleagues across the chamber today would agree that public sector investment can strongly enhance a country’s economic performance. Such investment helps to develop long-term growth enablers including schools, transport and communications, and it plays a key part in improving quality of life.
Despite cuts in Scotland’s capital budget—it is estimated that the budget will be £600 million lower in real terms in 2019-20 than it was a decade previously—the Scottish Government will take steps to maximise investment through a range of measures including capital borrowing powers, revenue funded investment through the non-profit distributing programme, rail regulatory asset base funding and capital receipts.
The planned investment over 2015-16 and 2016-17 is estimated to support over 30,000 full-time equivalent Scottish jobs in the wider economy. That comes on top of the many projects that the Scottish Government has invested in over the years prior to 2015. Many of those projects are intended to provide benefits for the whole of Scotland. The digital Scotland superfast broadband programme, for example, was one of the most ambitious infrastructure programmes undertaken by any Government, and has clearly been a tremendous success. The initial target of providing fibre broadband access to 85 per cent of premises by March 2016 was reached six months ahead of schedule, and we are on track to hit our overall target of 95 per cent by the end of this year. Given that more and more our daily lives rely on some form of internet access, a fast and reliable connection is more important than ever.
Close to my constituency is the reinstatement of the Borders railway, which has proved to be an outstanding success. In the six months following its opening, almost 700,000 passengers used the service—22 per cent more than had been forecast. At the end of last month, a report was published by the campaign for Borders rail which examines the advantages of extending the line via Hawick to Carlisle. That extension could provide innumerable benefits to people in the south of Scotland and beyond. I look forward to seeing the conclusions that arise from the Scottish Government’s project review, into which that report will feed.
Energy is another area that has benefited from investment. In 2014, the Scottish Government created an energy expert group to examine the potential for expansion of geothermal energy. As a result of that group’s work, the low-carbon infrastructure transition programme invested £185,000 in four geothermal projects. In April it was announced that the Natural Environment Research Council is to invest in a geoenergy observatory in central Scotland that will focus on geothermal energy.
Parents and children across Scotland have benefited from investment in schools. In my constituency alone there has been investment over the past few years in new or rebuilt schools, including Newbattle high in Dalkeith and primaries in Wallyford, Roslin, and Paradykes in Loanhead. Beyond that, the Scottish Government has provided £10 million to the University of Edinburgh to support construction of the Roslin innovation centre at Easter Bush.
All those examples are before we even consider the Scottish Government’s successes: in housing, in which we have exceeded our target to build 30,000 affordable homes by late 2015; in regeneration, with over £372 million having been directly invested in related activity up to 2015-16; and in health, which has seen substantial investment in a wide range of new hospitals and care projects.
However, the steps that it is proposed will be taken in future years need to be filtered carefully through the prism of Brexit. The result of last week’s general election has made it clear that voters across the UK have no interest in a hard Brexit, but given the current uncertainty over who will actually be involved in the negotiations from the UK, and possibly even who the Prime Minister will be, we are no nearer achieving clarity.
What we do know is how a range of likely outcomes are expected to affect Scotland’s economy. The EU market provides access to about 500 million people, and Scotland’s exports are now worth more than £11.6 billion annually, which equates to about 42 per cent of our international exports. It is estimated that there are roughly 1,000 EU-owned companies in Scotland employing more than 115,000 people. Approximately 173,000 EU citizens live in Scotland, providing a range of skills and expertise that help to encourage productivity growth. Regardless of the outcome of the Brexit negotiations, all those benefits will be heavily affected one way or another.
The state of the economy is rightly considered to be a gauge by which to rate the success or otherwise of any Government. That being so, the Scottish Government clearly has nothing to crow about. It presides over an economy that is performing badly and which by many factors is considered to be halfway to recession. Output was down by 0.2 per cent in the fourth quarter of 2016 compared with growth of 0.7 per cent in the rest of the UK. It is a flatlining economy, compared with an increasing economy elsewhere in the UK. The respected Fraser of Allander institute has said that the Scottish economy “remains fragile” and EY has said that Scotland faces a year of “near stagnation”.
Although Brexit will be challenging, the real threats to the Scottish economy are indyref 2 and higher tax.
Compared to the rest of the UK, Scotland has lower employment, higher economic inactivity and lower jobs growth. That is the SNP’s record on the economy. The SNP might attempt to use Brexit as a fig leaf to cover its failures, but Professor Graeme Roy, who is the director of the Fraser of Allander institute, has warned against making that linkage. He has said:
“Scotland’s economic challenges and underperformance predate that vote”.
He has also stated:
“With any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s weaker performance can be explained by the outcome of the EU referendum.”
Let us look at some of the real factors that contribute to the poor growth in Scotland’s economy. There is a failure to invest in the future. Up to 2015, the SNP cut the number of college places by 152,000. That is 152,000 students who could have done much to reduce the skills gap and boost future productivity. Educational standards in schools are slipping backwards, and Scotland is falling down the programme for international student assessment—PISA—rankings. Scottish Government figures confirm that attainment in numeracy and literacy is down on its watch. The Government is failing our children on the most basic of skills—the lack of which will be a drag on economic growth in years to come.
There is a failure to innovate. Research and development funding here continues to lag behind that in the rest of the UK, and entrepreneurial activity remains substantially below that in the other home nations. Scotland continues to suffer from lower productivity and we sit well down the rankings of innovation-driven countries.
As the perception has increased that the Scottish Government is more interested in the upheaval of a second referendum than in providing the basis for a successful economy, business has taken note. EY says that Scotland is lagging behind in attracting new companies to invest and to set up headquarters in Scotland. China and India rank among the UK’s top inward investors, but they are not even in Scotland’s top 10. “EY’s attractiveness survey Scotland 2016” reveals that only 4 per cent of investors rank Scotland as the most attractive UK area for investment. Lloyds Bank has shown that confidence among Scottish companies is the lowest of that in any home nation. To cap it all, the leading investor Alasdair Locke, who is the chairman of Motor Fuel Group, says that until the uncertainty that is being caused by the prospect of another referendum is cleared, he will not be investing in Scotland. Sadly, he is not alone.
Along with the political uncertainty, the additional tax burden that is being imposed by the Scottish Government will do nothing to turn around our economy. Johnston Carmichael has warned that higher taxes in Scotland could see businesses move elsewhere in the UK, and Martin Bell, who is the head of tax at BDO UK, highlights the difficulty for Scottish businesses that are struggling in the competition to attract and retain the very best talent.
The four pillars on which the Scottish Government set out its economic strategy are all based on shaky foundations. Investment is underutilised, we are lagging behind in innovation, we are stagnating in internationalisation and we have stalled on inclusiveness. The SNP Government needs to start listening to experts and businesses and, most of all, to the voters of Scotland, who are demanding that it get back to the day job.
The way to turn round Scotland’s struggling economy is for the Government not only to listen and to take proposals for a second referendum off the table, but to recognise the need to keep taxes in line with those in the rest of the UK, in order not to deter jobs and investment. The way to increase growth and boost the economy is to have a competitive economy and to make Scotland a more attractive destination in which to do business by improving enterprise, innovation and skills.
I support the Conservative amendment.
The Brexit chaos, crisis and uncertainty were caused by the Tories’ EU referendum last year. One aspect of that is the 90 per cent reduction in the number of EU nurses registering to work in the UK. There is also the fact that, according to the British Medical Association, 42 per cent of doctors from EU countries are considering leaving the UK. Yesterday, we heard that London will potentially lose its EU euro clearing role, which would cost it hundreds of millions or billions of pounds every year.
That highlights once again the Brexit chaos and the crisis that the Tories have caused for the economy, which not only Scotland but the rest of the UK is facing. To top it all off, the Tories are now going to be marching to the beat of a DUP drum. Where is that going to lead us—in terms of the economy—in the months and years ahead?
Alison Harris finished by saying that we should keep taxes in line with those in the rest of the UK. I am sure that other members will join me in asking whether the point of devolution was not that a Scottish Parliament, irrespective of who was in power, would be able to do things a bit differently if it so wished.
If Mr Kelly wants to make the poorest pay, that is something that he will have to argue for, but the SNP certainly does not want to make the poorest people in Scotland pay.
There is another aspect, because 2016 was a record-breaking year for foreign direct investment in Scotland and the 2017 EY Scotland attractiveness survey shows that Scotland has retained its position as the top location in the UK outside London for foreign direct investment. That gives a clear indication that Scotland remains established as a location of choice for investors.
Also, today’s excellent employment statistics—
I have already taken one and I have only five minutes. I am sorry.
Today’s excellent employment statistics highlight that unemployment in Scotland is now at a 25-year low. I do not think that any member in the chamber is complacent, as there is still a lot more work to do, but the fact that Scotland attracted more R and D projects than any other UK nation or region in 2016—[
Thank you, Presiding Officer.
In 2016, Scotland attracted more R and D projects than any other UK nation or region including London. In addition, Scotland was second only to London in securing software projects, and all three of Scotland’s largest cities—Glasgow, Edinburgh and Aberdeen—are in the UK’s top 10 for numbers of FDI projects secured. However, as I said a few moments ago, we cannot be complacent.
Liam Kerr talked about taxation and business rates. A “TravelGBI” report stated:
“The Conservative manifesto promises a full review of business rates with more frequent revaluations and Labour promises a review of the entire system in the longer run.”
That tells me that business rates elsewhere in these islands are a shambles and an absolute mess. When it comes to the economy, Mr Kerr should look at his own party and its failings in power rather than at anybody else.
In my Greenock and Inverclyde constituency, we have a huge opportunity to grow the tourism business base as well as the marine and renewables sectors. On Monday night, I held a tourism summit at the Beacon arts centre—a centre that has been funded partly by the Scottish Government as well as by many other folk including Inverclyde Council—and the point was made there that it is important to bring together many people, partners and organisations that have a genuine interest. For the Scottish economy to continue to improve and prosper, we need those areas that have sometimes been considered to be not as successful—Inverclyde is certainly one of them—to step up to the plate, and that tourism summit reflected one of the ways in which we will improve and add to Scotland’s economy.
It has been a hectic time on the election trail, and opponents in the chamber traded a lot of blows in the election debates, so this afternoon I want to be helpful to the Scottish Government. I have no doubt that Keith Brown wants to promote the Scottish economy and see it go from strength to strength, so I will make some reasonable and practical suggestions.
I will start with the second independence referendum. If I was making a speech that was based on narrow political advantage, I would not mention the second independence referendum and I would not call for the SNP to scrap it because, as each day goes by, it is quite clear that more and more people are becoming disillusioned by the SNP due to it sticking with the second independence referendum.
I am coming on to the economy and I will frame it along those lines.
The reality is that the SNP is tying itself in knots trying to explain the election result and why the second independence referendum should be on the table, so it is not able to concentrate on the issues that matter to people. Ensuring that we have skilled workers, that businesses are growing and that people are being paid fairly are the key components of growing the Scottish economy, but the SNP is not able to concentrate on those issues because, as a Government, it is being distracted by the second independence referendum.
The SNP should do itself a favour and take the second independence referendum off the table.
It would also be useful to make more use of the powers of the Scottish Parliament and to increase the Scottish budget. I understand the argument that the SNP Government advances, which is that, to an extent, it is a victim of austerity from Westminster, but that is not an excuse for simply passing the cuts on to local communities, as happened in the recent budget with £170 million-worth of cuts. If the Government had made full use of its powers, it could have alleviated those cuts and there were good reasons for doing that.
One of the interesting aspects of the recent election was the debate about fair pay. Those who have had a pay cap for the past eight years, including those in the Scottish public sector, have seen their wages rise by less than inflation, so they are worse off. In Scotland, there are 467,000 people who earn less than the living wage. Not only is that a scandal, it is not good for the economy. Surely it is better to have money in the pockets of those workers who earn less than the living wage so that they will spend it supporting local businesses and companies in their communities, rather than having money lying in the bank accounts of people who are high earners and who will not spend it. As well as being fair, it makes good economic sense to give workers a pay rise—that will help the economy.
The other reason why taxation is good for the economy is that it can be used to support skills and education. The Scottish Government has reduced the number of teachers by 4,000 over the past 10 years. That can only be to the detriment of the education that children get in school, so it undermines Scotland’s ability to produce kids to go into courses such as information technology and engineering, which are key to the economy.
In all honesty, I am trying to give good, practical advice to the Government: take indyref 2 off the table, increase the budget, support fair pay, support economic growth and prioritise education and skills. Those are good points that would help the Government.
There are a lot of positives in the Scottish economy, which we must not forget. We have a higher GDP per head than anywhere else in the UK outside London; our exports rose by 41 per cent from 2007 to 2015; and we have the highest foreign direct investment outside London. The food and drink sector, to take just one sector, has been a success story, with a turnover of around £14.4 billion and ambitions to double that to £30 billion by 2030. Clearly, we need to be at the higher end of that sector and others. Our fish, beef, whisky, beer and soft fruit—the list goes on—are quality products that command a premium price, and we should focus on that part of the market.
I think that the buyers look at all Scottish salmon as being at the higher end of the market, but there are clearly issues around how salmon are kept and so on, which the committees that Mr Wightman and I are involved with are looking at.
The SNP Government has made major investments to benefit the economy, including investments in the Queensferry crossing, in the M74/M73/M8 development near my constituency and in the field of rail, among other things. Modern apprenticeships continue to be a success, and we are building towards having 30,000 per year by 2020. The small business bonus scheme has been a huge boost for business, and I note that the FSB, in its briefing for the debate, reckoned that one fifth of businesses would close without that scheme. This Government and this party are business friendly. We aim to get the balance right between the Conservatives, who crush ordinary people, and Labour, which has traditionally owned and run everything at a loss.
However, the UK is far from perfect. It is worth pointing out that the UK is far too centralised a country. Some people would say that London is the driver of the economy, but others have clearly said that it is a black hole that is sucking wealth out of the rest of the country—it depends how one looks at it. I was a bit surprised that Jackie Baillie did not seem to acknowledge that point in her statement when she criticised some of the figures that we are dealing with. I find it interesting that the SNP can be accused of centralisation when Labour and the Conservatives have failed to tackle the challenge of London centralisation over many decades.
The Economy, Jobs and Fair Work Committee has been doing a lot of interesting work recently. On Monday, a group of us went to Fife, where we visited the University of St Andrews’s Guardbridge centre, which is involved in a district heating system. That reminds us that universities are a huge and successful part of our economy. People at the centre told us that the investments that the university had made in district heating were having a positive impact on climate change and were protecting people from volatile oil and gas prices.
We also went to Methil to see the 7MW wind turbine there, which was the largest in the world when it was erected. Scotland was at the forefront of that technology at that time, but did not take advantage of that fact, leaving others to profit. I note that the Institute of Physics says that physics-based industries contribute £15 million annually to the economy.
Finally, we visited the hydrogen office project, which has a wind turbine that produces electricity for eight buildings, one of which is used by East Fife Football Club, and produces hydrogen for the local bin lorries. The experiments that are being done there are cutting edge and demonstrate that hybrid technology, using diesel and hydrogen, is probably the best way ahead rather than using pure hydrogen. Some of the processes are not commercially viable at this point, but they are an indication of what Scotland can do and where the Scottish economy can go.
The Economy, Jobs and Fair Work Committee has also been examining the gender pay gap and we will, I hope, publish our report on that fairly soon. The issue is important not just because it is about treating women more fairly, which is, obviously, good in itself, but because the evidence is that the economy loses out if we are not using our workforce to its full potential. Scotland’s economy can do better if we have more women in leadership positions and if more women are represented in all sectors, such as science, technology, engineering and mathematics.
Brexit has already led to a weaker pound, with a rise in inflation—now at 2.9 per cent—that is probably linked to that. The dithering of the Conservative Party has not helped. I agree that the weak pound can give a temporary boost to exports but, in the longer term, a weak currency reflects a weak economy—that is, the UK economy. Brexit could also lead to a skills shortage, as others have said. There is already a shortage of workers in some sectors, and the Economy, Jobs and Fair Work Committee and the Rural Economy and Connectivity Committee have heard from organisations that are highly dependent on EU workers, including businesses that are involved in agriculture and food processing, and universities and the national health service. That issue is a key concern for Scotland.
I see that I have run out of time. I support the motion.
Today’s debate takes place in the chamber of the most powerful Parliament of its kind in the world. It is one in which we can now scrutinise the use of the extensive economic levers that the Scottish Government has at its disposal in order to influence the Scottish economy positively.
Sadly, what we have seen in recent months and years has been an economy in Scotland that has been flagging in relation to that in the wider UK. This afternoon, we have heard figures from other members—I shall not repeat them—that show that Scotland’s economy has been underperforming. It has been doing so not just relative to the UK economy in general but in comparison with the economies of English regions such as the northern powerhouse. How do we turn that around and use the levers that we have to encourage growth in Scotland?
There is much that the Scottish Government could be getting on with that would ensure that Scotland sent a positive message to the rest of the world that we are open for business, but it is how we approach the challenge of the coming years that will determine our success. Lyndon B Johnson said:
“Yesterday is not ours to recover, but tomorrow is ours to win or to lose.”
At the start of his speech, the member said that he believes that this is the most powerful non-state Parliament in the world. In Canada and Australia, the state Parliaments have power over regional immigration policy. Does he believe that this Parliament should have power over such policy?
Scotland can win in the world if it seeks out positive trading relationships with partners across the globe. In the coming months and years, we will, no doubt, continue to maintain good trade links with our European partners, for whom good relations are equally important. At the same time, the rest of the world offers significant growth potential. If we can sell brand Scotland to those places, there will be few limits to our growth potential.
This year, GDP growth in the euro area is projected to sit at 1.5 per cent and GDP growth in emerging and developing markets is projected to be 4.6 per cent. However, the growth rate in China is expected to be 6.2 per cent, and in India it is forecast to be 7.6 per cent. Only 0.7 per cent of our exports go to China and only 0.3 per cent go to India. Given that neither country has a trade agreement with the EU or, by extension, with the UK, the growth potential arising from our building deeper relationships with those countries could be significant for Scotland.
Earlier this year, the Economy, Jobs and Fair Work Committee heard evidence about the impact of leaving the EU, including on the potential for greater trade beyond Europe. Furthermore, Scotland Food & Drink previously gave evidence that there is
“potential for us in premium markets and tapping into consumers’ desire for quality, authenticity and provenance”.—[
Official Report, Economy, Jobs and Fair Work Committee
, 8 November 2016; c 34.]
I fully agree with that statement. We have a lot to be proud of in this country, and we have a global reach that is the envy of many. We must harness that potential, and the Government needs to play its part in making sure that Scottish businesses have the help that they need to increase their exports.
First, we must ensure that we play a positive role in trade negotiations rather than a negative one that focuses only on risk.
Not at this stage.
We can do ourselves a favour—to use James Kelly’s phrase—and be positive about leaving the EU because of the opportunities that will arise. For example, the UK intends to bring back the power to negotiate its own trade deals. Those can be ones in which our interests are not watered down or held up for years on end because of negotiation as a consequence of a complex block of 28 different countries seeking to further their own interests. Scotland will be able to have a much greater input into such deals, and ensuring that our voice is heard will be of paramount importance.
Secondly, the Scottish Government and its agencies must do more to encourage growth in exports. Larger companies can manage the complexities but others cannot. We must improve on our current situation.
Scotland has always been an outward-looking country. I believe that, by embracing that approach, many opportunities for growth will be presented by the circumstances that we now face.
The debate has been varied and wandering—it has certainly not been just about Scotland’s economy. I will touch on some of the issues that have been raised.
When Gillian Martin challenged Mr Lockhart on the post-study work visa, he said that that was an issue for the Brexit negotiations. If there was ever anything that was not to do with the Brexit negotiations, it is the post-study work visa, because it applies to non-EU students. We supported the post-study work visa, which was introduced by Labour, because it brought great advantages for Scottish universities, yet it was snatched away by a Tory Government. I ask Mr Lockhart to explain to the principals of Scotland’s universities why Oxford and Cambridge universities merit a special arrangement but our universities do not. It is extremely damaging to our economy that the post-study work visa has been taken away.
In an intervention on Daniel Johnson, Mr Wheelhouse mentioned our transition to a low-carbon economy. Mr Johnson said that, although he welcomes strategies, he cannot see any benefits from them. He needs to open his eyes a bit more. Only this week, Scotland met its emissions reduction targets six years early, with emissions down by 46 per cent. We are working towards a low-carbon economy; what a great advantage that is for Scotland’s standing in the world.
I am sorry. I am tight for time, so I will not take any interventions.
Scotland’s economy is something of which we should all be proud. The oil and gas sector is starting to recover and to show signs of growth, and the labour market has remained resilient despite the pressures on it. Scotland also continues to be the most attractive part of the UK outside London for foreign direct investment. In the five years from 2010, Scotland’s GDP growth was in line with the UK average and Scotland’s GDP growth per head was above the UK average when the figure for London is excluded.
No. I am not taking interventions.
Let us look at the situation in particular sectors. I declare an interest as a member of the British Computer Society. Every year, ScotlandIS, which is the body of the software industry in Scotland, carries out a survey among the software companies in Scotland. Its most recent survey, which is from 2016, shows that they are very positive about the way forward for software in Scotland. It also shows that there has been an increase in the uptake of modern apprenticeships in the IT sector, which are a fantastic alternative route into the industry to the more traditional routes of higher and further education. That increase is welcome, and I thank the Data Lab for its briefing for today’s debate.
The Data Lab has been working with companies to demonstrate the value of big data and the internet of things and the positive benefits that those could have for the Scottish economy. That reminded me that I recently visited CENSIS, one of our centres of excellence, which is a place that works on the internet of things—the cabinet secretary mentioned it. It is important that we continue to invest in such areas, because Scotland is world leading in some IT areas and in financial technology. Colin Beattie also spoke about the life sciences innovations in his area. We should be extremely proud of the benefits that those sectors bring to Scotland.
Ivan McKee mentioned the productivity level in Scotland, which is very important. As many members have said, a higher productivity level means that we have fewer of the low-value types of employment that seem to be favoured by the UK Government. The fact that productivity is better in our economy means that people are better paid and there are fewer zero-hours contracts. I declare an interest as a real living wage employer. We support the real living wage, not the pretend one that was introduced by the Tory Government, which does not meet the needs of a modern economy.
I ask Conservative members to speak to their colleagues at Westminster about the post-study work visa. Perhaps they could speak to them about VAT, too. Today, Liz Cameron of the Scottish Chambers of Commerce is calling on the UK Government to look at the help with inflation that could be provided by a reduction in VAT. While they are at it, Conservative members could also ask their Westminster colleagues whether they could return the money that has been picked from the pockets of our police and fire services.
There have been several revelations in the debate. James Kelly wants to be helpful to the SNP, and John Mason has been to Fife and is raving about it, as he should. John Mason’s revelation was followed by other speakers saying that there are a lot of positives about the Scottish economy. Gillian Martin said that it was a success and a magnet; Clare Adamson just said that it is world leading; and Stuart McMillan talked about Scotland being record breaking. Colin Beattie admitted weaknesses but blamed someone else, and John Mason said that Scotland was the best in the UK as long as we ignored a large part of the UK. Paul Wheelhouse blamed the oil industry—the very industry that the independence white paper and the case for independence were based on. He made all those claims, and it is quite right for SNP members to be cheery, because that is their job, but we need to point out that there are some weaknesses in Scotland’s economy, even if SNP members choose to ignore them.
The FSB published in April its most recent business confidence index, for the first quarter of 2017.
That FSB report suggested that confidence in Scotland is still in negative territory, at -9.6, and is behind the UK average of 20. According to the Institute of Physics, Scotland spends about 1.4 per cent of GDP on research and development, compared with the UK average of 1.68 per cent, and Scotland spends about 0.6 per cent of GDP on business R and D, compared with the UK average of 1.11 per cent. Those problems are long standing, but the SNP Government is hardly making any difference on moving in the right direction in those areas.
If Scotland wants to be a high-technology, high-productivity and high-prosperity economy in the future, it must tackle that stubborn performance gap. Scotland has lagged behind the rest of the UK and many other modern economies for far too long. If it were not for the funding from the UK research councils, we would be even further behind. A renewed plan to boost research and development is essential, with more tax breaks and incentives for companies to invest in R and D.
We need a long-term plan to build a strong economy that is based on investing in the best asset that we have—the people who live and work here—and I want to make common cause with Clare Adamson on a point that she made about Scottish universities and the post-study work visa. Scottish universities have seen a 60 per cent drop in Indian students since 2012, which risks the £800 million that overseas students contribute to the Scottish economy. The Scottish Government should be able to sponsor new post-study work visas, which will support Scottish universities to be the best in the world.
We should guarantee the rights of EU citizens in this country, and that guarantee should extend to the rights of EU staff and students in our universities. At the University of St Andrews, which John Mason visited, a large proportion of student numbers, staff numbers and grant volumes of cash comes from the European Union. That is incredibly important and we should seek to protect that.
A transformative additional investment in education and a step change in mental health provision would help people to achieve their potential, too, and it would enable businesses to find the skills that they need. As we all know, the performance of Scottish education has dropped down the international rankings. To get it back up to the best in the world, we need to invest. We say that a modest penny on income tax would allow us to invest £500 million in nurseries, schools and colleges. Others may have other ideas, but colleges have lost 152,000 places, which has especially affected older people and women. Lifelong learning has been abandoned by the Government, but it should be a priority again and should give people the skills and retraining that they need for work.
Schools are struggling and the OECD report is a cause for great concern. In reading, science and maths, we have been falling behind other competitors in the past 10 years. The pupil equity fund is six years late and falls short of the equivalent fund in England—the pupil premium—which has closed the attainment gap by 5 percentage points.
We also need to invest in nursery education. It is the best educational investment that we can make, but the signs are that the SNP Government is struggling to roll out its programme. According to the annual survey of the nursery sector, only half of private and state nurseries plan to offer the places that are needed to achieve the expansion.
We also want a focus on mental health, given its critical importance to a healthy workforce. We want new mental health services in every general practice, accident and emergency department, police division and school, and a new five-point plan for offering mental health support to young mothers.
That is the Liberal Democrat plan for investing in people, attracting the best to our country and, through those people, generating growth and opportunity. Our plan is to use a modest increase in taxation to invest in education—nurseries, schools and colleges—and in mental health services in all sectors of the health service.
Theresa May must avoid a damaging hard Brexit. Her plan was rejected at the ballot box; she needs to revisit what she plans to do now, and a new cross-party approach is required. However, the real threat to the Scottish economy comes from the SNP and its plans for another divisive independence referendum. Public opinion has swung away from that party and those plans; given that it is the biggest shift in public opinion away from the SNP ever, we deserve more than this.
The last time that I spoke—indeed, we spoke—in a debate on the economy was on 19 April, which was the day after the Prime Minister called a general election. Although this is a debate on the economy, it is perhaps not surprising that other parties have chosen to use it to raise questions about the constitution.
The result of the Tories’ decision to have a general election is even greater chaos. It follows the 2015 general election, when the Tories, including some members who are present, stood on a manifesto that promised voters in the UK that they could vote Conservative and not only preserve the UK’s place in the single market but strengthen and expand that market. The reality is that it is the Conservatives who have made much of the constitution to deflect from their own disastrous actions—first, in calling a referendum on the EU and, secondly, in causing the chaos that the country now faces in the wake of the general election.
Our amendment focuses solely on the economy, because that is what the motion is about. As members will know—and as my colleague Patrick Harvie indicated at the beginning of the debate—the Greens take a very different view on matters to do with the economy. As I highlighted back in April, our party is part of an international movement that has been developing green economics over decades and which recognises that endless growth is not possible on a finite planet. Green economics also recognises that the climate crisis is leading to growing instability, unrest and economic decline, and we recognise that, to stay within the Paris climate targets, we need to keep in the ground the majority of the hydrocarbons that other parties in the Parliament often tout as part of Scotland’s economic future.
The North Sea oil and gas industry has clearly been an asset to the Scottish economy in the past, but it is not part of the future. The faster we can transition away from a hydrocarbon economy to a renewables economy, the better.
We have heard explanations as to why GDP figures are as they are in the United Kingdom and in Scotland. It is worth highlighting that the majority of the GDP growth across the UK lies in private consumption. In March 2015, private debt stood at over £1.5 trillion, which means that most of the so-called growth that others have welcomed is in fact just more debt as a result of people buying things that they do not need with money that they do not have.
Liam Kerr and other members talked about non-domestic rates. I agree that we need non-domestic rates reform; indeed, we need reform of a suite of taxes that relate to land and property. I look forward—as I am sure that Liam Kerr and other members do—to the Barclay review reporting on that issue soon. I hope that it questions why no rates have been paid for more than 90 per cent of land in Scotland in 50 years, for example, and that it questions the small business bonus scheme among other things.
Back in April, I talked about some of the scheme’s failings and about a small business in East Lothian that was happy that it was paying no rates because of the increase in the threshold for the scheme. However, the rent for the empty shop next door was being increased in recognition of the fact that the occupier would no longer need to pay rates, so that occupier would be no better off as a consequence. The tax breaks were being capitalised into rent.
We will soon publish research that shows the losses, which run into tens of millions of pounds, to councils across Scotland and particularly in Edinburgh as a result of the rent-seeking behaviour of landlords, which are increasingly using property for short-term lets. As a consequence of the thresholds that have been set for the small business bonus scheme, some landlords are paying absolutely no tax to the City of Edinburgh Council and other councils, which provide the essential services on which their business is based.
If the Government was interested in investment in a sustainable economy, the cabinet secretary would not have been so enthusiastic in reeling off in his opening remarks the list of the A96, the A9, the M8 and the big bridges, which are supposedly part of the sustainable economy. Although we agree with much of the Government’s economic strategy, including much of the good work that it has done on renewables—John Mason mentioned the fascinating work that is being done across the country; we visited some of that on Monday—its economic strategy is fundamentally misconceived by having at its core the notion of sustainable economic growth.
The economy is not judged by growth; it is judged by how well the people of Scotland are housed, what savings and investments are being made in sustainable technologies, the state of the natural environment—the air, water, soils and seas—and the health of the population. With a healthy society, we should be able to reduce spending on the national health service rather than increase it. The economy is also judged by the strength of our democracy—particularly our local democracy.
The Scottish Green Party has done a lot since its establishment in 1990 to argue that we need a very different economic model. We can begin to achieve that with devolved powers, but we cannot fully realise the transformation without fundamental change in how the UK economy is run, from its financialisation of the housing market and its isolationist approach to Europe to the rise in public and private debt. The Green amendment highlights the challenges that the Scottish economy faces and I commend it to members.
It is all very well for the cabinet secretary to declare in his opening speech that our labour market is “resilient”, but he should have a look again at the extent of low pay, underemployment and zero-hours contracts in Scotland. It is true that, year on year, zero-hours contracts are down slightly, but more than 50,000 workers in Scotland are still on them. It is also true that the living wage is slightly up in Scotland, but the facts remain that one in five workers in Scotland is paid below the living wage and that many of them are low-paid women workers in social care, contract catering and cleaning, and retail. They are on poverty pay.
It is no good saying that the plight of the working poor is statistically worse in parts of England or Wales, or that 2 or 3 per cent more of the working poor are surviving in abject poverty in Bridgend than are doing so in Coatbridge. There is no crumb of comfort in that for the people whom I represent across Central Scotland.
Ivan McKee spoke of limited powers. The cabinet secretary has chastised members for not having original thoughts. Here is an original thought: why does the Government not use the powers that it has over industrial policy, manufacturing policy, taxation policy—which James Kelly mentioned—planning policy, housing policy, education policy, skills policy and training policy to start to plan the economy?
In the debate, we have once again witnessed complacency rising from the SNP and self-congratulation rising as a result of the Government motion. There is a lack of understanding of what is going on out there in the real world. I sometimes wonder whether that is because of a wilful lack of understanding or because it is the inevitable consequence of a chauffeur-driven lifestyle—or maybe it is simply that it is not the political priority of nationalism.
The cabinet secretary can rhyme off EY attractiveness surveys, but what matters out in the real world is that wages are being squeezed harder than ever, while prices are rising. We wake up to headlines that price inflation is now running at 2.9 per cent. Real inflation, including housing costs—from the retail prices index—now stands at 3.7 per cent, which is why, in our amendment, we demand a living wage for all, and it is why the cabinet secretary, in his opening remarks, acknowledged the need to remove the cap on public sector pay.
My message to the Government on productivity is that people are not commodities or units of production. They are not simply wage earners. They are human beings. Scottish productivity may have grown, but if that is a result of cuts in hours, especially in offshore oil and gas and in manufacturing, it represents a pyrrhic victory.
I will now say a word or two about investment, which is featured in the Government motion. On 11 April this year, just a few days into the start of the new financial year, an email was sent out to the staff of Scottish Enterprise from Kerry Sharp, who is director of the Scottish Investment Bank, in which she warned—I will quote her at length, because this is what is happening out there in the real world—that
“We have insufficient budget to meet anticipated demand for everything we are being asked to consider under enhanced SIB ... New investments, the level of follow on expected, support for FDI ... We therefore need to prioritise our funding and people resource ... which will ultimately mean us investing in some companies and not others, even when they might be strong investment propositions ... As funding this year is more constrained than to date ... We will continue to support the pipeline of new investment opportunities but this may be at a reduced rate than last year”.
So, the head of the Scottish Government’s key agency for industrial investment finds it necessary to warn operational staff in the Scottish Government’s key agency for economic development that the Government’s provision in the teeth of Brexit and in the face of a growing investment gap is not to increase funding, but to cut funding. That is a damning indictment of a Government that claims to be stronger for Scotland.
I cannot close without reflecting on two lessons from last week’s election. The first lesson—I hope that the SNP from the top to the bottom understands this—is that people from right across Scotland are saying—[
The first lesson from last week is that people are saying that they have already given an answer to the question whether we want a separate Scottish state, and the answer was a resounding no. The Government now needs to remove the threat of that second divisive referendum.
The second lesson from last week is that nearly 13 million people voted Labour on a manifesto pledging an extension of public ownership, an end once and for all to the economics of austerity, a shift in power in the direction of working people, with a new generation—of young people, of older people, of working people—voting not just for a party but for an idea. That is a platform upon which we can build, so that we have an economy working for the people rather than people simply working for the economy. That means an economy with different priorities, providing people with hope and a vision for a better society—not just a narrow vision of a better Scotland, but the grander vision of a better society for all, underpinned by an economy that is run for the many, not the few.
This has been a wide-ranging debate, with the inevitable party and constitutional battle lines being drawn. T he background to it is the overall performance of the Scottish economy—an issue that we have discussed in the chamber on numerous occasions.
As we have heard again in the debate, we know that, during the latest quarter, the output of the Scottish economy contracted, whereas it grew strongly across the UK. Over the past 12 months, the economy in Scotland flatlined, whereas it grew at a rate of 1.9 per cent across the UK.
Although the unemployment rate in Scotland is lower than the rate in the UK as a whole—I confirm, for the benefit of the cabinet secretary, that we welcome that progress—the employment rate is lower and economic inactivity is higher, as Dean Lockhart reminded us. We are simply not doing as well as we should.
We are still waiting for the Scottish Government’s explanation for this state of affairs. The Cabinet Secretary for Finance and the Constitution, who is not here today, previously blamed it all on Brexit, but surely any Brexit impact would be the same across the whole United Kingdom and would not specifically affect Scotland. There are surely other issues at stake, but we did not hear much about those this afternoon from the SNP.
I ask Murdo Fraser to consider not just my statement or Derek Mackay’s statement on this, but the statement from the Organisation for Economic Co-operation and Development and the International Monetary Fund that
“the major risk for the UK economy is the uncertainty surrounding the exit ... from the European Union” which could damage “domestic and foreign investment”.
I thank the cabinet secretary for that intervention, but it does not answer my point. Why is Scotland alone seeing a downturn in the economy that is not affecting other parts of the United Kingdom? If it was down only to Brexit, we would see that impact across the whole UK.
We know that the Scottish Government does not like criticism from the Conservative Party or from other Opposition parties, so let us look at what some others are saying. We know that the Scottish National Party feels that it does not have many friends in the media, so I will not quote the
Daily Mail or
. Rather, I will quote the SNP’s house journal,
—which is a favourite read of mine. An article that it published last month stated:
“Since Nicola Sturgeon took over, I’m sorry to say, Scottish economic policy has become a bit of a shambles. She herself appears ignorant of and indifferent to economics. The man who might have looked after these things for her, John Swinney, unwisely shifted himself into the quagmire of Scottish education, where he is in danger of sinking. So the Scottish economic shop is being minded by two men, Derek Mackay and Keith Brown, for whom the term clueless would be a compliment. While fatuously claiming the economy is resilient, they have in fact exposed its fragility.”
Those are cruel and unkind words. I would never use them myself; I am merely quoting directly Michael Fry, the well-known yes supporter and supporter of the SNP, writing in
The National just last month. If that is what their friends say about them, are they surprised that they get criticism from other parties?
We agree with the Scottish Government that there are a number of strengths in the Scottish economy. In key sectors including energy, tourism and higher education we continue to perform well, although there are challenges.
The Scottish Government has set out its four priorities: investment, innovation, internationalisation and inclusiveness. In all those, there is a mixed picture. When it comes to investment, we are still doing relatively well in relation to foreign direct investment, although figures are lower than they have been previously—they are down 9 per cent on last year. We continue to struggle to attract migrants to Scotland compared with other parts of the United Kingdom. In education, our standards are falling against international competitors.
No, thank you. I want to make some progress.
When it comes to innovation, our productivity levels lag behind those of other economies. The Scottish Government trumpets in its motion the recent increase in productivity compared with the rest of the UK, but according to the Fraser of Allander institute, that has been driven by a reduction in the number of hours worked, not by an increase in output per hour. The reality is that we are in the fourth quartile of innovation-driven countries—behind Norway, Ireland and Sweden, while the UK as a whole ranks above them. Our entrepreneurial activity rate is 5.5 per cent and the UK’s is 8.6 per cent. Our rate decreased 19 per cent from the previous year, against a rise of 18 per cent for the UK.
What do we need to do to get better? First, we accept that we have to get Brexit right. We have to get the maximum possible access to the single market for UK business. That is the very clear position of the 13 Scottish Conservative MPs who are now in the House of Commons to speak up for Scotland and articulate our interests. What is not in the interests of Scotland is for Scotland to have a differentiated deal from that of the rest of the UK.
No, thank you.
The rest of the UK is by far our biggest market for goods and services; it is worth four times as much as the EU market is. To pursue our relationship with the EU at the expense of our relationship with the rest of the UK would be to cut off our nose to spite our face. That is not a road that we should go down.
We must keep Scotland competitive, as Alison Harris said. We must not have a situation in which taxes in Scotland are higher than they are in the rest of the UK. The business community has warned of the impact of going down that route.
No, thank you. I have no time.
How can we attract the brightest and best to come and work in Scotland, where they have to pay more income tax, where they have to pay more to buy a house because of land and buildings transaction tax rates, and where businesses with larger premises are paying a business supplement at double the rate that applies elsewhere in the United Kingdom? That will not make Scotland competitive.
I was interested to hear Gillian Martin’s call for lower taxes—
I am in my last minute.
What we need is for the Scottish Government to rule out a second independence referendum. That was the clearest possible message from last week’s general election. Up and down Scotland, people turned against the SNP, which lost 21 seats and half a million votes and saw its vote share fall to just 36 per cent. People across Scotland sent Nicola Sturgeon the clearest possible message that they do not want a second independence referendum.
It is uncertainty that is hampering the ability of the Scottish economy to succeed. My friend Liam Kerr said, with a Churchillian turn of phrase:
“Uncertainty is the nemesis of investment.”
He is absolutely right. Let us reject the second independence referendum and get the Scottish economy back on track.
I welcome the opportunity to respond to some of the points that were made in the debate and to highlight the underlying strengths of Scotland’s economy—because, let us face it, none of the Opposition parties will do that.
I emphasise that Scotland’s economy is fundamentally strong. We have advantages and resources in Scotland that few nations can match. We have one of the most highly educated workforces in Europe. We have a long-standing reputation for innovation, and we have an internationally recognised brand.
The Conservative and Labour denial of the fact that inactivity numbers include the vastly increased numbers of people who go into higher education is in itself an attack on the very idea of higher education.
We are world leaders in key industries of the future such as life sciences, financial services and financial technology, creative industries and sustainable tourism.
It is important not to diminish those strengths. I agree that we must acknowledge the challenges in the Scottish economy, many of which have been mentioned in the debate. We must also recognise and build on the strengths that we have, which are part of the reason why, as the EY attractiveness survey demonstrates, Scotland continues to be the number 1 location outside London for foreign direct investment projects in the UK.
We face challenges, not least from the on-going pressures in the oil and gas industry. Willie Rennie was completely wrong to say that Paul Wheelhouse blamed the oil and gas industry—but that is Willie Rennie for you. We also face the potentially disastrous impact of a hard Brexit.
Scotland’s economy continued to grow in 2016, by 0.4 per cent, but the slight contraction in the final quarter of 2016 emphasises that there is no room for complacency. Today’s state of the economy report shows that approximately two-thirds of the slowing in growth between 2014 and 2016 in Scotland can be attributed to impacts on the oil and gas sector. That is why we continue to provide support to the sector directly, through measures such as the energy jobs task force, the transition training fund and the decommissioning challenge fund.
It is also why we continue to invest for sustainable and inclusive growth more broadly in our economy. I mentioned a number of major infrastructure projects; there is also the Borders railway, which John Mason mentioned, the huge investment of nearly three quarters of a billion pounds in the electrification of the Edinburgh to Glasgow railway line, and the huge investment that we have made around the country in Scotland’s national cycle network.
We are helping small businesses to grow, through our small business bonus scheme, which removes the business rates burden entirely from 100,000 premises.
During speeches from Conservatives, there was no mention of the record low unemployment in Scotland until Murdo Fraser’s speech at the end of the debate. Of course, unemployment used to be the key criterion on which the Tories judged the Scottish Government’s performance in relation to the economy. It no longer is, because that does not suit the Tories; they have moved on to something else. Inactivity is their preferred measure today—I explained why in many ways the results are good, because they tell us that more students are going into higher education. Of course, it was at exactly the point when Scottish unemployment levels dropped below those of the UK that the Tories thought that they had better steer away from the subject.
There has been virtually no mention of Brexit. Alison Harris’s denial of the impact of Brexit on the Scottish and UK economies beggars belief. I have quoted the OECD’s figures and its view that Brexit is the major impact and threat facing the UK economy. The OECD says that
“the major risk for the UK economy is the uncertainty surrounding the exit ... from the European Union” which could hamper foreign direct investment.
We have also seen the Institute of Directors survey, taken immediately after the election amid the shambles that is now the UK Government and the hung Parliament, that showed a 34 per cent negative swing in business confidence. Yet, there was not a mention, apart from the one that I pointed out, from the Tories about the impact of Brexit. They are determined to try to deny the fact that Brexit is a real and present danger to the Scottish economy.
No, I will not.
We do not know what the Tory position is on Brexit, because we have a roundabout Ruth. We had “no Brexit”, “soft Brexit”, “hard Brexit”, and we had something apparently called “open Brexit”, but that only lasted for 24 hours before she was told by Theresa May, “You will get behind whatever Brexit we want to give you.” I think that that Brexit is a “Shexit”, because it is a shambles and an absolute disaster. The Conservatives have no idea what they are doing—within a week of going into the discussions with 27 countries lined up ready to negotiate, they do not have a clue what they are going to say to them. That is the danger to the Scottish economy.
Labour bizarrely argued that we should not liaise with business, and then it said that we should liaise with business. The fearless class warrior Richard Leonard was too scared to take an intervention because he knew that he could not, as James Kelly could not, answer the question of what Labour’s position is on the single market. Nobody knows. Is it John McDonnell’s position, which is that we will not stay in the single market? That seems to be confirmation that they want to come out of the single market. We know that they do not support freedom of movement, which is a disastrous and wrong-headed approach from the Labour Party.
Jackie Baillie mentioned that we have to change Scotland’s economic strategy. It has changed since the last days when the Labour Party was in government, when Labour’s economic strategy was short and snappy. It was only five words: there is no money left. That is what the Labour Party left us with.
People all agree that Scotland’s economic strategy contains many of the things that the Labour Party would put in it. There has been common agreement about the direction of travel. However, faced with Brexit, the SNP Government’s previous head of policy has said that the strategy has been turned on its head. Why will the Government not review its economic strategy?
In addition to the economic strategy of “there is no money left”, we had Richard Leonard complaining that there is an insufficient budget. Why does he think that there might be an insufficient budget? Does he draw any connection with the Labour party’s disastrous management of the economy? That is why we have had seven years of austerity from the Conservatives. Labour started it and has passed it on to the Conservatives.
When Willie Rennie spoke, he obviously forgot what the debate was about. He made no mention of the economy. The obsession that the other parties have with independence! Willie Rennie got himself into a complete and comic fankle. He failed to rescue his hapless new MP, Christine Jardine, who says that only Liberal Democrats are allowed to continue to promote the policies that they stood on in the election. Nobody else is allowed to do that—that is not very Liberal and not very democratic.
The cabinet secretary is not afraid to take interventions after all. He mentioned clear and present danger. The one clear and present danger that he has not addressed this afternoon is independence. Will he give us an answer about independence? Is he for it, or is he against it?
For those who were not here during the debate, that was all that Willie Rennie talked about in his opening speech. That is why he forgot to even mention the Scottish economy. The biggest threat to Scotland’s economy is not what Willie Rennie says it is; it is a hard Brexit. Many Conservatives mentioned the Fraser of Allander institute, but they did not mention that the institute says that, after a decade, Brexit will cost us 80,000 jobs, billions of pounds and £2,000 per year for every employee. None of them mentioned that; there is no concern on the Conservative benches for the people who work in this country.
The Conservatives also refused to answer the point of whether they would replace funds lost when the EU structural funds are no longer applicable. They were asked that direct question and they failed to answer it. It is essential that the UK Government commits to replacing that funding in full following Brexit.
Scotland did not vote for a hard Brexit. We did not vote for a Brexit at all, and the Scottish Government will continue to make the case for single market membership. Whatever happens over the coming months, the Scottish Government will continue to promote and defend the Scottish economy.
Today, I have set out that Scotland’s economic fundamentals remain strong, that we are an attractive place for investment and that there are opportunities here for growth. Of course, the outlook for 2017 is finely balanced, challenges remain in the oil and gas sector and we face the prospect of a hard Brexit. We have demonstrated that the Scottish economy is well placed to meet those challenges, but we must continue to invest for sustainable and inclusive growth by promoting and supporting innovation.
The Tory record on the economy is £1.8 trillion pounds of debt—£100 billion of new debt for every year that the Conservatives have been in office—unemployment at 2.9 per cent and a massive trade deficit.
The SNP’s record, because it has been getting on with the day job—[
.]. I will repeat that: because the SNP Government has been getting on with the day job, Scots across Scotland can get on with their day job.
I support the motion.