There are really two reasons behind the Scottish Conservatives’ request for this debate. First, the 30-minute statement last week, with less than an hour prior to that in which to digest a significant amount of economic analysis, did not provide satisfactory time for parliamentary scrutiny. Secondly, we have the first projected longer-term outline of the Scottish Government’s fiscal policy since 2011—we welcome that timeline—so we believe that extended scrutiny is essential, particularly at a time of challenging economic circumstances.
I will begin by stating some key facts. The Scottish Fiscal Commission’s December 2021 statistics showed that the Scottish Government’s overall budget for 2022-23 would no longer receive on-going Covid funding as the pandemic eased. What is also correct—the cabinet secretary should know by now that all the experts’ statistics, including those from the Scottish Parliament information centre and the Institute for Fiscal Studies, confirm this—is that the block grant that was received from Westminster was the largest in real terms in the history of devolution and is set to rise in real terms during this parliamentary session; that the Scottish Government received about £15 billion of additional Covid spend for the previous two financial years; and that the Scottish Government has had £7 billion more to spend than it expected four years ago.
Here are some more facts. Income tax revenues are growing more slowly than the income tax block grant adjustment. The Institute for Fiscal Studies has predicted that income tax revenues will be about £428 million less than would have been the case if income tax had remained in the United Kingdom tax structure. From 2024-25, the UK income tax rate will reduce to 19 per cent, but there are no signs of the Scottish Government making the same commitment yet—I will come back to that. Social security spend in Scotland is set to rise from 10 to 14 per cent of the resource budget. The size of Scotland’s labour force is reducing, and the labour market participation rate is falling.
Then there is the huge black hole in the public finances, which, yet again, the finance secretary told the Finance and Public Administration Committee does not exist—[
.] On top of those facts is the backdrop to the current economic situation. As Dame Susan Rice spelled out last week, the war in Ukraine, the significant increase in global energy prices and difficulties in international supply chains—most especially those that relate to China—are creating serious challenges for every economy in the world.
It is perfectly true that there is greater uncertainty in the economy than there was in December 2021, when forecasts were published. What is also correct—I repeat a view that I have expressed in several debates in the chamber—is that aspects of the current fiscal framework exacerbate the uncertainty. It does not help that there are considerable time lags and often divergence between the forecasts of the SFC and those of the Office for Budget Responsibility, and it does not help that the framework is not inflation adjusted—two aspects that I hope will be resolved when the current negotiations on a new fiscal framework are concluded.
The long and short of it, confirmed by all economic forecasters, is that the Scottish Government is spending too much in comparison with what it is raising. If the cabinet secretary does not like the term “black hole”, let me try the term “shortfall”. I remind her that, last week, David Phillips of the Institute for Fiscal Studies said:
“A series of expensive spending commitments on top of underlying spending pressures mean that the Scottish Government faces a multi-billion budget shortfall over the next four years”.
We know that, as a result of all that, the cabinet secretary has decided to make savage cuts to public sector jobs. The
New Statesman offered the view that that will include many jobs in Government agencies and quangos—Transport Scotland, Marine Scotland, Food Standards Scotland and the Scottish Environment Protection Agency were all mentioned in its article. We will see what happens in that regard.
I am sure that the public will find it difficult to understand why on earth substantial, real-terms cuts are to be made to our police, who are on the front line of keeping our communities safe; local government services; trade and enterprise; tourism; and our universities, which the cabinet secretary admitted yesterday are integral to the realisation of the national economic transformation strategy, and which play such a vital role when it comes to research and development and innovation.
That is the same public who will see the profligacy of the Scottish National Party Government in wasting vast sums of public money on ferries that do not sail, Burntisland Fabrications, Prestwick airport and the malicious Rangers Football Club prosecution—the list goes on. Of course, there is also the £20 million for preparing for a second referendum.
I cannot believe that question—the extent of the public money that is being wasted by this SNP Government is absolutely patently obvious. It is increasing week by week and is taking away a lot of money that could and should have been used to finance the public books.
I remind members what Audit Scotland has said about parliamentary scrutiny in relation to the spending of public money—this might answer another part of the question that I have just been asked. The Auditor General said:
“The Scottish Government now needs to be more proactive in showing where and how this money was spent, and show a clearer line from budgets to funding announcements to actual spending. This will support scrutiny and transparency”.
I turn to the tax issue that is central to the problems that the Scottish Government faces in relation to the disincentives of tax policy and the weaknesses of the tax take. The cabinet secretary has said that Scotland has a progressive income tax policy, but she should heed the warnings of the Scottish Fiscal Commission, which says that, in the next five years, Kate Forbes will have 700,000 middle earners in a higher tax bracket.
Neither should the cabinet secretary forget that, in December, the Scottish Fiscal Commission dismissed her claim that the majority of Scots would be paying less tax. That is simply not borne out by the evidence. The disincentives that come from that are likely to be significant and, most important, Scotland’s divergence from the UK income tax rate threatens to damage Scotland’s competitiveness, which is why we want to see a return to parity as soon as resources allow.
Does the member accept that, through the different tax policies, we raised £240 million extra for 2018-19, which the latest figures are for? If we did not have that money, there would be further cuts to police and other things.
Mr Mason sits on the same committee as I do, which has been scrutinising Government finances, and he will know exactly what the projections are about the downturn in the tax take that we are suffering from. That is the problem that I refer to. The tax revenue situation is most worrying of all, because it reflects not only the serious challenges about the primary source of Government spending but the serious imbalances in the Scottish economy. Those imbalances—most especially those that relate to the labour force—mean that it is highly likely that we will continue to lag behind the UK on several key economic indicators. Higher tax rates are not delivering the higher tax revenues that we need, which is a serious concern.
Of course, tax revenues are up in that sense, but they are not up to the extent that the Scottish Government requires for its spending. There is a huge divergence. This morning, at the Scottish Fiscal Commission breakfast, a graph showed that to be patently obvious. That is a serious concern.
The context of that is set out by the Scottish Government’s approach to the north-east and the oil and gas sectors, which encompass a large number of well-paid and highly skilled workers whose tax contributions to the Scottish economy are extremely important. That has become a problem, because we know that the SNP wants to rip the heart out of those industries.
The committee wanted the Scottish Government to streamline and make much more coherent its policy strategies. Paragraph 97 of its report said:
“We consider that evidence showing that Scotland is lagging behind almost all other areas of the rest of the UK in key indicators of economic performance is deeply worrying.”
I have mentioned two changes that we would like the Scottish Government to deliver. They are a return to parity on income tax rates, so that Scotland is not disadvantaged, and a finance bill that would enhance the scrutiny of public spending decisions. However, the crucial element in all this is policies to enhance economic growth, even if the SNP’s partners, the Greens, do not agree with that.
Our Scottish Future was absolutely blunt in its analysis last week. It said that
“Scotland’s long-term failure to increase its growth rates relative to the UK” is
“the elephant in the room.”
Our Scottish Future told the Scottish Government to stop
“throwing good money after bad or non-productive” projects, and it cited the illogical decision to cut spending on university research as one example. We agree with that, just as we agree that the Government should ensure that there is a much simpler and more easily understood pathway through the enterprise bodies and grants that it can award. Just about everybody in business wants that change as quickly as possible, because they are keen to get on with boosting innovation and productivity without red tape, form filling and complex planning and procurement processes getting in their way. It is essential for business to feel good about itself and its future if Scotland is to achieve the growth rates that we need.
In recent weeks, several key business leaders have said that the national economic transformation strategy and the Scottish National Investment Bank do not have anything like the clarity and rigour that we need to deliver growth. Businesses also want to see Scotland’s Governments working together—not embroiled in constant bickering and constitutional rivalry, which divert attention away from the important focus. That is another unanimous conclusion of the Finance and Public Administration Committee.
Scotland has immense talent in every corner of the country. We need to mobilise that talent in every way that we can, and we need policies that support that talent, incentivise investment and support our businesses and public services. We need a Scottish Government that is wholly committed to efficiency and transparency in public finances. We do not need one that is constantly peddling grudge and grievance at every turn and not looking after our finances properly.
That the Parliament is deeply concerned by many of the trends published within the recent analysis of the Scottish economy undertaken by the Scottish Fiscal Commission; is concerned, in particular, by the revised downward growth estimates and decline in real earnings, and that the Scottish Government has imposed higher tax rates on Scotland without increasing revenues, compared with the block grant adjustment, due to the ongoing issues relating to weaker productivity and inflexibilities within the Scottish labour market; is further concerned by the real-terms cuts of more than £1 billion announced by the Scottish Government, which will affect local government, the police and higher education, among key services; calls on the Scottish Government to commit to ensuring that no one in Scotland pays more income tax compared with people in the rest of the UK, when finances allow, ensuring that policies to deliver long-term growth, including collaborative projects with the UK Government such as city deals, are a priority within Scottish Government spending plans; calls for a finance bill mechanism to be introduced to evaluate the effectiveness of public spending, and further calls for plans for a second independence referendum to be taken off the table.
This debate is really about why and how Scotland cannot afford to remain under UK Tory rule.
It is more than a little ironic that the Conservatives have initiated today’s debate on the economy when their Westminster leaders are presiding over the sharpest fall in living standards and the fastest rise in inflation for a generation. Right now, that party is the very symbol of economic mismanagement.
The true cost of Tory economic mismanagement has been laid bare by external commentators. Research by the London School of Economics and Political Science’s Centre for Economic Performance revealed that Tory Brexit has caused food prices to rise by 6 per cent, which has deepened the cost of living crisis for households across the UK.
Today, the Organisation for Economic Co-operation and Development warned that next year the UK will have the worst economic growth of any G20 country, bar Russia.
“We consider that evidence showing that Scotland is lagging behind almost all other areas of the rest of the UK in key indicators of economic performance is deeply worrying.”
Which Government was responsible for faster gross domestic product growth in Scotland in March, when there was a fall in GDP across the rest of the UK? I will come on to speak about a number of other metrics.
All that I have just detailed is happening under the leadership of the very party that lodged today’s motion. As I set out in the chamber last week, although inflation is, quite clearly, also impacting on other countries, it is not impacting on them equally. The UK currently has, under the Tory Government, the highest inflation rate of any G7 country and a rate that is almost twice the rate in France.
Under the current devolution settlement, only the UK Government has the macroeconomic levers to fully address the cost of living crisis, but it has failed spectacularly to manage our economy in a way that works for businesses and households. Poverty is rising, costs are rising, the energy price cap is rising, living standards are falling, growth rates are dropping and competitiveness is sliding, under the Conservatives.
I agree with much of what the cabinet secretary has said. The Conservatives are doing an absolutely appalling job of running the economy, but does that not make the case for why we should be doing better? Although we might not have all the levers that the cabinet secretary wants, we do have levers, which does not explain why wage growth is underperforming in Scotland in comparison to the UK average. Can she explain that?
I will come on to that, but I think that the context is important.
I recently wrote to the Chancellor of the Exchequer with a comprehensive funding package that would fully address the unprecedented rise in the cost of living. Instead of following that approach and using the fiscal headroom that was available to him to support people and businesses now, the piecemeal package that he announced makes it highly likely that more support will be needed later, when energy prices rise significantly in the autumn. In other words, while right now people sit in cold houses and turn to food banks, the chancellor is sitting on a substantial election war chest. In contrast—this relates to Daniel Johnson’s question—we are doing all that we can in response, and our amendment to the motion reflects the priorities that we have for Scotland’s economy and our public finances.
Our prudent stewardship of our finances and our careful—[
.] That and our careful and ambitious management of the economy have resulted in Ernst & Young Global Ltd’s 2021 “Continued resilience: EY’s Attractiveness Survey Scotland” finding that Scotland has been the top UK destination for foreign direct investment outside London for the past seven years. Scotland’s GDP grew 0.3 per cent in March 2022, compared to a fall of 0.1 per cent in GDP in the UK as a whole. Estimates for January show that Scotland’s unemployment rate fell to 3.2 per cent in the first quarter of this year, which is a joint record low and is below the UK rate of 3.7 per cent. Scotland has a positive trade balance in goods; in 2021 it exported goods that were worth £1 billion more than the goods that it imported.
If the cabinet secretary is willing to take credit for those selective statistics, is she prepared to accept responsibility for Scotland’s overall economic performance, which lags behind the rest of the United Kingdom’s performance? Does she accept any responsibility for that?
The irony of that question is that, although we have set out our approach to economic growth over the next 10 years and have recognised the work that needs to be done in terms of productivity, new markets and entrepreneurship, there is no way around the fact that the macroeconomic levers sit with the UK Government. If the Liberal Democrats want that situation to be different, I suggest that they join us in calling for those levers, because we have done what we have done with one hand tied behind our back.
This year alone, whatever the Conservatives say—I tend to believe independent commentators—Scotland’s budget is being reduced in real terms by 5.2 per cent.
I have taken quite a few interventions and I am probably running low on time.
If we look across the whole four-year period of the resource spending review, our real-terms funding is to grow by only 2 per cent, after accounting for devolution of social security benefits. The current fiscal settlement denies us even the most modest borrowing powers that most Governments across the world would have access to—powers that Scotland would have as an independent state.
If we need another reason why Scotland cannot afford to remain under UK Tory rule, researchers at the Glasgow Centre for Population Health found that
“Austerity is highly likely to be the most substantial causal contributor to the stalled mortality rates seen in Scotland and across the UK.”
Scottish people deserve better than that, and they also deserve informed and intelligent debate about the true nature of our financial outlook.
It is therefore disappointing to see that the Conservatives have, once again, claimed that
“the Scottish Government has imposed higher tax rates on Scotland without increasing revenues”.
That is factually inaccurate. It is contradicted—[
.]. It is contradicted by the Institute for Fiscal Studies, which stated last week:
“We are not saying the tax rises have reduced revenue. The tax rises almost certainly have raised revenue.”
In the SFC’s December 2021 forecast publication—to which, I think, Liz Smith referred—the SFC noted that the Scottish Government’s decisions on income tax since 2017-18 would add about £552 million to the Scottish budget in 2022-23.
In the past six months, we have set out our annual budget, our strategy for economic transformation, two medium-term financial strategies and a three-year resource spending review—all against the backdrop of a pandemic and the biggest economic shock in over 100 years, the most significant cost of living crisis in a generation and the illegal Russian invasion of Ukraine, which is a humanitarian crisis that is affecting the global economy.
There can be no accusation that this Government is shying away from its responsibilities in managing our public finances and Scotland’s economy. It is managing them well. Despite the funding pressures and despite macroeconomic powers remaining with the UK Government, our resource spending review prioritises our limited resources on the Scottish Government’s long-term ambitions for Scotland.
Other parties in the chamber might have different priorities, but I strongly believe that the priorities that we have set out as part of the resource spending review are the priorities of the people of Scotland: tackling child poverty, transitioning to net zero, economic recovery and helping households with the cost of living crisis. It is our job, as a mature and fiscally responsible Government, to deliver those priorities, but Parliament needs to face up to the realities of where powers lie and the realities of a budget that gets cut by the UK Government.
I move amendment S6M-04815.3, to leave out from “is deeply” to end, and insert:
“endorses the priorities set out in the Scottish Government’s spending review of tackling child poverty, addressing the climate crisis, building a stronger economy and improving public services, while supporting those people struggling with the increased cost of living; notes that the overall Scottish Budget has fallen by 5.2% in real terms between 2021-22 and 2022-23 and that the Scottish Fiscal Commission has confirmed a further 1% real-terms reduction until 2025-26; agrees that current financial fiscal arrangements between the UK Government and the Scottish Government are deeply flawed; highlights the persistent dismal failures of leadership in the UK Government, with the UK currently having the highest inflation rate of any G7 country, compounded by Brexit increasing food prices; notes recent research from the Glasgow Centre for Population Health highlighting the brutal reality of a decade of austerity under the UK Government, and believes that, with full control over the economic and financial powers, the Scottish Government could take further action to build the economy that Scotland deserves.”
It is a pleasure to open the debate on behalf of the Labour Party. I thank the Scottish Conservatives for lodging the motion. The debate is long overdue and urgently needed following last week’s demoralising spending review, when the cabinet secretary heroically attempted to spin cuts that the Tories themselves would be proud of as fiscal prudence— she has done so again today.
However, to put it bluntly, the economic outlook for the next five years is nothing but grim. We often hear warnings of economic uncertainty, and it seems as though not a day goes by without headlines about record fuel prices, record gas and electricity bills and record inflationary pressures.
Of course, those pressures all contribute to the economic forecasts that we are discussing, but the underlying vulnerabilities of the Scottish economy run far deeper than recent price spikes and the cost of living crisis, so I was dismayed to read the Government’s amendment to Liz Smith’s motion. It can only be described as showing the Government burying its head in the sand rather than addressing the failures that it has presided over.
The Scottish Government has done its usual by pointing the finger at Whitehall and highlighting the failings of the Tories—rightly, in this case, but it is also an attempt to distract from the myriad failures that it has presided over in Scotland.
I am afraid that the underlying indicators of economic performance are clear for everyone to see. The Scottish Fiscal Commission’s recent forecasts highlight the stark reality of the challenges that we all face, with productivity stalling, real wages falling and tax receipts significantly lower than previously predicted.
It is an economic forecast that many of us have been warning about for a long time, but the cabinet secretary has point-blank refused to accept it. Take productivity, for example. The SFC states that
“Productivity growth has stalled in Scotland since 2015.”
I repeat—it has stalled since 2015. The single biggest, most important factor in improving prosperity has stalled—seven years of absolutely no progress whatsoever despite repeated warnings.
The cabinet secretary can play the blame game all she likes, and the amendment in her name attempts to do just that, but it is abundantly clear that the Government has no plan for improving productivity forecasts.
We see the same scenario when it comes to average earnings in Scotland. Every year for the next five years, Scotland is forecast to lag behind the UK as a whole. That is not a recent phenomenon. Between 2016 and 2020, earnings in Scotland increased at a slower rate than in the rest of the UK, and the Scottish Fiscal Commission states that, in recent years, the gap has widened, not narrowed. Since 2016, Scotland’s average earnings have grown by 21 per cent, which is 5 per cent less than the UK average over the same period.
The member is very good at listing some of the problems that we face, but I do not think that anyone is arguing that those are not challenges. Can he give us some answers?
Given the cost of living crisis, I am happy to accept the proposal for a superannuation.
However, the key proposals are about efficiency of investments and return on investments. There are huge, endless opportunities to increase revenue and get public investments to raise more money for Scotland. There are innumerable opportunities to outline that. Instead of having multinational utilities, the Scottish Government and councils could be making big, bold moves to aim to be the main supplier of heating to all households and businesses in Scotland, with a mass roll-out of publicly owned and developed district heating networks. There is no state entrepreneurship. That is just one example that I give John Mason to take into consideration. In his constituency, in Dalmarnock, there are district heating schemes that are not being expanded and, currently, social housing is being built with gas boilers fitted into the properties. That is introducing and seeding a cost of living crisis in our midst, when we could be doing something different.
I take no pleasure in pointing out those facts, because I want nothing more than for Scotland’s economy to be prosperous, thriving and providing a solid foundation for the improvement of people’s lives. Of course I want that, but the fact is that it is not happening. Scotland’s economy is underperforming, and the Scottish Government needs to take its share of the blame. Yes, external factors have played a role. Brexit, Covid and global inflationary pressures cannot be ignored, but the problems that I have outlined existed well before any of those external factors came in, and have left our economy less resilient in the face of those shocks. The reality of what the poor economic forecasts mean in practice is stark. Last week, the cabinet secretary outlined the Scottish Government’s spending priorities. Health and social security budgets were protected, but everything else was raided. The Scottish Fiscal Commission says that, in 2023-24 and 2024-25, spending on all other areas is expected to fall in real terms. In 2025-26, only the net zero and energy and transport portfolios are expected to increase. There we have it in black and white: austerity, the very thing that the cabinet secretary spent the bulk of her speech criticising in withering terms. For the next three years, the budgets that are afforded to local government; education and skills; the economy and finance; justice and veterans; the Crown Office and Procurator Fiscal Service; net zero, energy and transport; and external affairs and culture will be hammered, and the consequences could not be clearer.
Further cuts to local government will mean further job losses, drastically reduced services, cuts to education and skills, the further widening of the attainment gap and the sacrifice of the life chances of our children. Decimated transport budgets will result in even poorer services, which will push people away from public transport—and increase the costs and subsidy dependence—at the exact time when we should be encouraging them back.
Perhaps the worst consequence of all is the admission of scathing cuts to the number of public sector jobs in Scotland. That point is perhaps the most illustrative of the short-sightedness of this Government when it comes to the economy. Instead of investing, retaining, skilling up and increasing the wages of public sector employees, it sacks them, with the profound personal and financial consequences that that decision will have on families across Scotland. It is a symptom of a Government that is run by accountants, not economists.
It does not take an accountant or economist to see the perilous state that the Scottish economy is in. People can feel it in their pockets and in their pay packets every day. Unless something fundamentally changes and the Scottish Government finally takes its head out of the sand, we will continue on that managed decline and, before we know it, it will be too late to reverse the downward spiral that we are in.
As our amendment today states,
“the failure to grow Scottish wages will also mean that hard-working people are more exposed to the pressures of the cost of living crisis.”
That needs to be at the forefront of our minds. Squabbling about constitutional arrangements, firing figures across the chamber, blaming the Tories and cutting vital budgets will not help ordinary, hard-working people. Everyone needs to be laser focused on improving their lives in the coming years. All the evidence that I have seen so far suggests that the Government is incapable of providing that focus.
I move amendment S6M-04815.2, to leave out from “is deeply” to end and insert:
“notes the recent findings of the Scottish Fiscal Commission and is deeply concerned by many of the trends identified, including that productivity growth in Scotland has stalled since 2015 and earnings growth is lagging behind the UK’s; is further concerned, in particular, by the revised downward growth estimates and decline in real earnings, and that the Scottish Government has imposed higher tax rates on Scotland without increasing revenues, compared with the block grant adjustment, due to the ongoing issues relating to weaker productivity and inflexibilities within the Scottish labour market, with the result that net Scottish income tax receipts in 2022-23 are forecast to be £428 million less than if income tax had not been devolved; considers that this is a consequence of the Scottish Government’s failure to use the taxation, borrowing and investment powers of devolution to support and grow the Scottish economy; notes that this has directly resulted in less tax revenue available to invest in Scottish public services, and is further concerned by the real-terms cuts of more than £1 billion announced by the Scottish Government, which will affect local government, the police and higher education, among key services; calls on the Scottish Government to ensure that policies to deliver long-term growth, including collaborative projects with the UK Government such as city deals, are a priority within Scottish Government spending plans; further calls for a finance bill mechanism to be introduced to evaluate the effectiveness of public spending; calls for plans for a second independence referendum to be taken off the table, and believes that the failure to grow Scottish wages will also mean that hard working people are more exposed to the pressures of the cost of living crisis.”
When the finance secretary outlined the Government’s spending review, she laid bare the price of Scottish National Party economic incompetence. The truth is that, when it comes to the economy, by almost every metric, we are falling behind. The SNP likes to take any opportunity that it can to set Scotland apart from the rest of the UK—well, when it comes to the economy, it has accomplished that mission, but there is nothing in that reality for those on the Government benches to take pride in.
In the past decade, under SNP rule, the Scottish economy has been consistently outpaced by the rest of the UK, which means that we have less money to spend on vital public services, many of which are currently in dire need of funding.
We have seen productivity growth stagnate while we fail to keep pace with earnings growth in England and Wales. I was interested to hear the cabinet secretary tell Daniel Johnson that she would come on to that in her remarks. I may have fallen asleep, but I did not hear her come on to that at all. This has all been coupled with downward growth estimates, as Liz Smith rightly said when she quoted Our Scottish Future.
Project after project has been mishandled and there are not enough workers to build even a handful of offshore wind turbine jackets at Burntisland Fabrications. Where are the 2,000 jobs that were promised to Lochaber by the SNP Government and Sanjeev Gupta in return for taxpayer backing worth hundreds of millions of pounds? Why will communities spend years more without the broadband connections that they need to do business and get on with their lives? The Government might not like it, but its fiscal incompetence is plain for all to see.
Not long ago, the word “ferry” would have conjured up images of relaxed day trips to some of Scotland’s beautiful islands, and island businesses expanding beyond their shores. Now, it is synonymous with cancellations, botched deals, missing documents and horrendous overspend. Those lifeline ferries were promised to our island communities so that people could visit family, go to work or attend hospital appointments on the mainland. They are years late and more than £150 million over budget. Tourist businesses, cafes and more must all be wondering what they pay their taxes for, when the absence of sailings costs them hundreds of pounds each day in lost earnings.
The same could be said for all those going to restaurants, bars and theatres, and shift workers and commuters, who are all staring at train timetables in disbelief. The Scottish Greens must be the only green party in the entire world to go into government, nationalise the rail sector and put a red pen through a third of the rail timetable. It has been reported that that is costing the Government and the Scottish economy £80 million each week. The Scottish Government had two years to prepare for its running of ScotRail, but it did precisely nothing to anticipate or avoid the dispute. Every day that this SNP-Green Government fails to provide core connections—whether they are ferries, broadband or trains—can be measured in lost revenue to our economy.
Does Alex Cole-Hamilton agree that transport disruption and chaos is a problem not just because of the disrupted journeys, but because it prevents people from getting to new opportunities and new jobs elsewhere in Scotland, which, given our regional inequalities, is a horrendous economic crime in itself?
I absolutely agree with Daniel Johnson. The £80 million in lost revenue that has been quoted is just the tip of the iceberg. It will represent a lost opportunity to grow our economy further, on top of all the social disruptions that I have laid out.
The Government has also been good at wasting opportunities. When he was First Minister, Alex Salmond often spoke of making Scotland the “Saudi Arabia of renewables”. ScotWind was the best chance for generations for the Scottish Government to bring serious money into the public purse, but, alas, it sold it on the cheap after inexplicably deciding to cap how much companies were allowed to pay in the offshore wind auction. That was despite comparable auctions south of the border and around the world showing that it is a fiercely competitive market. Who on earth puts a cap on something that they are selling in those circumstances?
I a m sorry, but that is a very weak area for the cabinet secretary to try to defend. Anybody who has ever been on eBay knows that, when they are selling something, they put on a reserve price, which is the lowest possible price at which they will sell the item. No one puts a cap on it. No one says, “Please don’t give us any more money than we are providing in these circumstances”, but that is exactly where we find ourselves.
The truth is that Scotland’s prized sea bed was sold at a pittance. That matters, because that income goes straight—or could have gone straight—to the Scottish Government to be spent on schools, hospitals and better pay for social care workers. However, once again, we are seeing that potential squandered.
It is well past time to remove the drag of SNP economic mismanagement. The Government has its priorities all wrong. When it comes to allocating finances, as I highlighted at First Minister’s question time last week, we have recently learned that the number of people suffering from Covid has risen to more than 150,000—that is one in 30 Scots—but the First Minister is devoting twice as much money to a divisive second independence referendum as she is to that awful condition.
The SNP-Green Government is devoting its focus, top civil servants and tens of millions of pounds to an unwanted independence referendum. We need look only at the statistics that were published in the past 24 hours to see why that is indefensible: more than 300,000 operations have been lost to Covid; delayed discharges are up 64 per cent in a year; there are dangerous levels of nursing vacancies; and thousands of children and adults are waiting more than a year for the mental health support that they desperately need.
Everyone needs SNP and Green ministers to be focused on what really matters right now. Instead—
I will conclude with this point, Presiding Officer. Instead, national health service staff, patients, islanders and hospitality businesses are all being taken for granted. That is shameful.
It is good to be discussing this important topic, because we were unable to do so last week, as my colleague Liz Smith pointed out.
The spending review highlights the SNP-Green devolved Government’s mismanagement of our economy. With the highest-ever core block grant coming from the UK Government and more investment in Scotland than we have seen previously, it is ridiculous to see an SNP minister defend their economic decisions as they did last week.
Let us be clear that the tough decisions that this devolved Government is now facing are a direct consequence of its economic incompetence. At yesterday’s Finance and Public Administration Committee, I questioned the Cabinet Secretary for Finance on public sector job cuts. At first, I was given the usual smoke and mirrors, as we would expect of the SNP, but it was eventually mentioned that figures would go back to the levels that we saw before the pandemic.
Most of the increase was for health, and the cabinet secretary said that there will be no cuts to health staff. We have more than 1,000 staff in Social Security Scotland; I presume that that number will not be cut. We are expanding early learning and childcare provision; I presume that the Scottish Government will not reverse that policy. Therefore, we can presume only that the hammer will fall on the likes of the police, firefighters, teachers, social workers, carers, refuse collectors, road workers and lecturers, whom we need to upskill our workforce.
We are in Scotland. At least there is a bit of clarity from the UK Government. All that we get from the cabinet secretary is smoke and mirrors. She gives no answers about where the jobs will be cut. She needs to come clean with our public sector workers and let them know where the planned cuts to the workforce will take place.
I want to focus on the impact of the proposed savage cuts to local government in the spending review and on the impact of the wider economic situation on our vital public services. I have spoken before in the chamber about the importance of prevention in all our public services and the need for investment in preventive services that stops greater expenditure further down the line. I would like to focus on that, which I thought was a view that many members from all parties shared.
The spending review has shown us that this SNP devolved Government is planning to cut local government’s budget by 8 per cent in real terms by 2027. The Government suggests that local government should make savings by reducing real estate, increasing digitisation and having more shared services. That advice is an insult. That is teaching your granny how to suck eggs—local government has been doing that for the past five years to balance its budget in the face of SNP austerity.
For many local authorities, the low-hanging fruit has gone and efficiencies through digitisation have been achieved. The headcount reduction, in conjunction with unions, has been done. This deal means that jobs will be lost. Bins will be collected less often. Care packages will be cut. New schools will not be built. Roads will not be repaired. Sports facilities and libraries will close. All of that is happening on this Government’s watch, and it is a disgrace.
The resource spending review affords us the opportunity to consider our spending some six months out from when the budget will be presented. Can Mr Lumsden state what total quantum he believes should be allocated to local government in the next financial year and the following financial years?
I will come on to the waste that this Government makes all over the place.
If there was more transparency around the budget process, that question might be easier to answer. We had things in the budget for this year such as a line with £620 million for things that we might see coming in, including ScotWind. Now, that has been taken out of this year’s budget and put into next year’s budget, and suddenly the £620 million has miraculously just reappeared.
Prevention is much better than trying to tackle the outcomes of such austere measures. Our sports and libraries aid health and wellbeing and prevent long-term illness. Our schools and youth clubs cut down crime. Good roads cut down accidents. New schools increase attainment and opportunities for all.
I have taken enough interventions.
Cutting investment in our local government is short-sighted and will lead to greater costs down the track.
The SNP is also cutting off investment from key sectors such as oil and gas, which will have massive implications for the north-east and Scottish economies. At the breakfast meeting with the SFC that SPICe held this morning, we heard that one of the reasons that our economy is falling behind the rest of the UK is the decline in the energy sector and the income tax take from it. It is clear that the SNP Government does not back the oil and gas industry and is driving investment away. While we still have a demand for hydrocarbons, it is better for the environment and better for jobs in the north-east that the energy industry in this country is protected and supported. This devolved Government’s outright hostility to the industry is directly related to the cuts that it is having to make to public services. The Government needs to change its tune before it is too late.
Much has been said today about the cost of living crisis. Time will not allow me to go into detail here, but the UK Government has now provided over £37 billion of support to families. However, families in Scotland will have to pay more income tax than families in the rest of the UK—a point that Liz Smith covered earlier. That is the Scottish Government’s contribution to the cost of living crisis: higher taxes.
And what is this devolved Government doing with our taxes? It has spent £250 million on ferries that do not sail, £40 million on the doomed, malicious prosecution of Rangers and £50 million on loans to BiFab, and now £20 million is being allocated for an independence referendum next year. That is £4 million more than it has allocated as an increase in the education budget. Colleagues, that is an absolute disgrace. This Government holds its obsession with having a referendum above the education of our children.
The spending review has so many areas of concern that we can only skim over today. We will have more sessions in committee—maybe—to go over it in detail. However, the SNP-Green coalition will need to put the needs of the people of Scotland at the heart of its policies—
If the past few days have taught us anything, it is that the price of dependence on the failing UK state and leaders such as Boris Johnson makes the need for Scottish independence all the more urgent.
Economics cannot be understood without a deep appreciation of society. That idea was fundamental to the work of Adam Smith. To understand
, it is best to read his earlier work
. Smith knew only too well the importance of justice, of effective administration of the law, of ethics, of human behaviour and of empathy for others—all issues that the Tory Government at Westminster shows little regard for.
I am delighted to have taken that intervention, because I will go on to reflect much more carefully on economic growth, gross domestic product and so on.
As well as a lack of morality, I notice the absence from the Tory motion of any mention of Scotland’s assets. We know about the Tories’ track record of exploiting Scotland’s resources such as those in the North Sea. Of course, Norway invested in its future and created a fund for long-term investment while successive UK Governments squandered the riches. At that point, there was no empathy with the needs or, indeed, the rights of the Scottish people, so long as the Tories’ friends in the City of London were doing all right, thank you.
Today, Scotland has the prospect of an even larger and longer-lasting asset, with the wind and seas driving a revolution in sustainable energy production. Earlier today in the chamber, I commented that Scotland’s anticipated energy production capacity far exceeds even our own 2030 target.
We need to put the needs of people and society at the heart of our economics. I ask the people of Scotland to focus on the right outcomes. Who do we trust? Is it a Government elected by Scotland for Scotland, or Boris Johnson?
The Tory motion talks of concerns about the growth estimates being revised downwards, but it fails to acknowledge the failure of UK Government policies that contributes to that.
Let us take the previous 20 years and run an international comparison of GDP growth rates.
Sorry, but I missed the member. I will come back to him.
From that comparison, we find that the UK’s growth was 68 per cent in nominal terms, while the average large advanced economy grew by 93 per cent and the average small advanced economy grew by 138 per cent, which is double the cumulative growth of the UK economy. Scotland is having to pay a heavy price for that UK failure and for being tied to the UK’s economic mismanagement, particularly in comparison with other medium-sized advanced economies, many of which have a weaker asset base than Scotland has.
I can absolutely explain it. I can refer directly back to the cabinet secretary’s comment that members on the Tory benches seem incapable of understanding the difference between micro and macro economics. I encourage them to look at exactly which powers reside in Westminster, as that is absolutely the crux of the debate.
If the Tories had a genuine concern about growth or any understanding of economics, the motion would be shouting from the rooftops for Scotland to have full economic powers. I notice, too, that the motion says nothing about the straitjacket that is imposed on Scotland by our lack of borrowing powers, which the cabinet secretary referenced. The Tories complain about highly uncertain forecasts, but they have not mentioned that UK public sector net borrowing was £151.8 billion in the financial year ending March 2022. If it is good that the Government of Boris Johnson can borrow so freely, why is the Scottish Government denied those powers?
The pseudo economics of the Tories also turns a blind eye to corruption and large-scale financial crime, which distorts markets and punishes consumers and businesses that play by the rules.
I am sorry, but I have only one minute left.
The egregious law breaking of Boris Johnson really matters, because it not only displays a disregard for our society but almost permeates into the economy. As long as Boris Johnson and, indeed, most of the Tories care not about money laundering and other forms of financial crime—the cost of which is counted in the hundreds of billions of pounds annually, according to the UK’s National Crime Agency—and as long as they care not about the distortions created in markets and the wider economy or about the people they are supposed to serve, the state capture that has taken place in the UK will continue in both our society and our economic system.
However, the most objectionable aspect of the Tory motion is the undercurrent of trying to force a feeling of helplessness and dependency in Scotland. The Tories seek to damage the Scottish people’s belief in themselves and to feed the myth that it is better to allow people such as Boris Johnson to be in charge than for us to be accountable for creating our own future. Of course, that explains the Tories’ fear of allowing the Scottish people to decide their future, but they will fail to prevent us from doing that. Scotland will be the wealthiest country ever to achieve political independence, and that will put the people of Scotland in charge of our future.
I start by directly quoting remarks that were made by the First Minister some six years ago. She said that
“excellence in education is essential to our prosperity, competitiveness, wellbeing and to our overall success as a nation.”
I could not agree more with those remarks, but last week’s resource spending review is a damning indictment of the Government and shows what its priorities truly are. The suggestion that education is by any means up there is an insult to the intelligence of the Scottish people. It was once said that education was the Government’s “defining mission” and a sacred cause, but none of that was true, was it?
In response to the cabinet secretary’s spending review, the Scottish Fiscal Commission has made it clear that there will be an 8 per cent real-terms cut in Government spending on colleges and universities. The cuts will not just devastate colleges and universities but tear through every tier of our education system, from local government and early years schooling to academic innovation and research.
At the heart of the cuts lies the SNP’s inability to reconcile itself with the reality that a strong and properly resourced education system is integral to the Scottish economy. It is, to be frank, the single greatest economic lever that we will ever have in this country. The net output of properly investing in our education system and, by extension, our young people is that our workforce and society will be strengthened and diversified. Proper investment from pre-school to PhD level is crucial in order to fill job vacancies, nurture talent and support economic development. In fact, research by London Economics shows that, for every £1 million of Scottish Government investment in university research, £8 million of economic growth is generated. As colleagues have highlighted, we could do with some more of that.
No. Mr Mason is right to highlight that it is a question of priorities. The Government has to make choices. Other colleagues have raised issues about waste and the choices that are put to the Scottish people at elections. The Government says that its priority is education, that it is a sacred mission and that it is its defining purpose, but the Government needs to back that up with action. Both things cannot be true at the same time.
The Government has made its choices, and Labour will put forward the choices that we would make.
However, the budget is not fixed in the way that some members wish to suggest it is. We can grow our economy and the amount of money in our coffers, and we can ensure that we have a better tax take in our country.
It is particularly troubling that the SNP has decided that now—when our schools, colleges and universities finally have the chance to pull back from the rubble of Covid and the resulting educational deficit that the pandemic has left behind—is the time to hit schools, colleges and universities with a further blow.
I sincerely hoped that the cabinet secretary would, at the very least, have recognised the need to invest in the cohort of students and young people who have suffered so much over recent years. They have lost a large amount of their education, and their life chances have been particularly harmed. I know that there might be talk of spending in future budgets, but the spending review has set a clear direction of travel, with trouble ahead for all those services. The incredible disruption over the past two years will have taken an immense toll on young people’s academic and mental wellbeing, with the effects being felt not just at the moment but for many years to come.
Colleges are already dealing with substantial cuts in this financial year. This morning, the Education, Children and Young People Committee heard about voluntary and, potentially, compulsory redundancies across the sector. I remind the cabinet secretary that that is the very sector that is meant to handle the energy transition in our economy. Members have mentioned the need to transition to a net zero economy, so we need to ensure that we invest in and support that sector.
In the past couple of weeks, Scottish universities have received outstanding results from the research excellence framework, but they have also been rewarded with cuts. Simultaneously, research funding in England has shot up. On the same day as the resource spending review was announced, UK Research and Innovation announced a 31.7 per cent increase for research over three years. That is the competition—that is the reality. Our universities have to compete in that marketplace, have to work to recruit the same staff—outstanding, excellent staff—from across the world and have to ensure that they can match those terms. That compounds a long-term trend.
I say to SNP members that eight of our top 10 universities in this country have progressed at a slower rate than their comparators in the rest of the UK. There are direct consequences of that. UKRI funding had been a national advantage—we had previously captured 15.4 per cent of it—but it is now reduced to 12.9 per cent. The trend is only going in one direction and the decisions that are taken today further exacerbate the situation.
All of that results in the points that colleagues have made: productivity is stalled since 2015; failure to grow wages and the direct impact that that has—
Does the member recognise that the biggest threat to research funding that the university sector in Scotland is mooting as we speak is the UK Government’s threat not to participate in the horizon programme? That is a perfect example of how the UK Conservative Government is damaging research in Scotland, which is a priority of the university sector at the moment.
I agree with the member that it is entirely irresponsible to withdraw from the horizon programme. It is a massive issue for our universities. However, proportionately, the amount of money that is brought into Scotland by the horizon programme is dwarfed by the central funding that UKRI and the Scottish Funding Council provide, which, in proportion, is just as important, if not more so.
I will conclude on this point, Presiding Officer—I appreciate the leniency. The Government has long known the challenge of demographic transition, and there has been no substantive programme of reform to address it. Michelle Thompson is keen to talk about Adam Smith, although I am not sure that he would agree with her on the idea of throwing up trade barriers across the UK. I would point to the work of Mariana Mazzucato and the idea of an entrepreneurial state that can grow our economy, invest in our people and build a better future for Scotland.
I thank the Tories for introducing the debate, which allows us to compare the policies of a UK Government that is failing Scotland with those that an independent Scotland would benefit from.
The Tory motion mentions
“downward growth estimates ... a decline in real earnings” and labour market “inflexibilities”. The main levers of economic powers are still held at Westminster, and I will mention the impact of that situation in my speech.
No. I have just started.
The Tory motion highlights the failures of the union and the negative impacts that it has on the Scottish economy.
“Boris Johnson survived a vote of confidence on Monday triggered by lawmakers in his own party. They’ve been angered by government parties that broke coronavirus rules, his handling of a deteriorating cost-of-living crisis and a dearth of clear policy goals.”
That is how others see the UK. She went on to say that the cost of living crisis had been caused in large part by global factors, but that Brexit had significantly exacerbated it.
The UK economy ground to a halt in February and started shrinking in March.
No. I have just started.
The UK economy is continuing down that route. We are heading into a recession. Retail sales fell in May for the second consecutive month. The British pound has plunged almost 8 per cent against the US dollar this year alone, losing even more than the euro. That impacts on Scotland.
I will in a second.
The pound is the third worse-performing major currency this year. Only this morning, the cabinet secretary mentioned that the OECD forecasts that the UK will have the lowest growth rate and the highest inflation rate in the developed world, apart from Russia. Stagflation, here we come.
I think that that was set out in the growth commission’s work and is there for everyone to see.
Last week, Bank of America strategists stated:
“Investors should hedge for an ‘existential’ sterling crisis as the British currency faces struggles usually seen in emerging markets”.
“Around the world, countries are facing huge economic challenges ... but the United Kingdom is in a particularly bad spot”, and:
“The knock-on effects of Brexit have led to crippling labor shortages and boosted operating costs for businesses, making the spike in prices even worse.”
UK Government policy impacts on Scotland.
Inflation in the UK reached 9 per cent last month. It is above the rate of 8 per cent in the United States and Germany’s 7.4 per cent. Japan’s economy, which was characterised as low inflation for decades, has the lowest inflation rate, at 1.2 per cent. UK Government policy impacts on Scotland.
The Tories and the Labour Party are keener than ever to talk down the Scottish economy at every opportunity. Of course, that is fuelled by the independence debate, with unionist parties feeling the need to highlight the negatives and ignore or dispute the positives when it comes to Scotland’s economy.
Last week, the University of Glasgow issued a report that highlighted that people across the UK are dying younger because of UK Government austerity. The people who are living in the poorest areas are the hardest hit. It says:
“Mortality rates, and related indicators such as life expectancy, are important markers of the health of a population. Over the past two centuries, there has been a consistent improvement in mortality rates across the UK. However, after 2012 life expectancy stopped improving and death rates among people living in the poorest areas have increased.”
Scotland spends more than £700 million a year mitigating Tory welfare policies, which impacts on our ability to spend in other areas. UK Government policy impacts on Scotland.
Let me recap. What impacts on our spending power and fixed budget? Scotland has no powers over interest rates and no ability to vary national insurance rates, and it had no say over Brexit—of course, the Labour Party supports that position. Inflation is at a 40-year high—our rate is the highest in the G7—and our currency has “emerging market characteristics”, and analysts are advising investors to hedge against it.
The growth commission said that that would be the initial position and then we would move on to our own currency, which would set rates.
Of course, we are still feeling the impact of Brexit, but the Tories have not mentioned it—not even once—during the debate. Not one Tory MSP has mentioned Brexit in this debate.
What can Scotland influence? Scotland has its own inward investment and trade agency in Scottish Development International. That organisation and its performance are very much in the control of the Scottish Government. Last week, Ernst & Young published a survey showing how well Scotland is doing on the foreign direct investment front, relative to other parts of the UK and to countries elsewhere in Europe. Funnily enough, the Tories have not mentioned that either.
Scotland outpaced UK progress significantly. Ernst & Young declared that Scotland had made
“great strides as a destination for FDI” in 2021. It stated that its findings suggest that the outlook for FDI in Scotland is exceptionally bright.
Scotland achieved a 14 per cent rise, to 122, in the number of inward investment projects secured in 2021, which put the 1 point increase in the UK in the shade, while countries across Europe saw an overall 5.4 per cent rise in attracting FDI projects. That increase in inward investment projects in Scotland was the fourth consecutive annual rise. Ernst & Young stated that, in the past year, Scotland continued to
“make further great strides as a destination for FDI, meaning we can look forward to the future with even greater confidence.”
Scotland’s record level of attractiveness is underpinned by investors rising perceptions—how others see Scotland.
Estonia regained independence in 1991. Its GDP has since increased fivefold, and today it is recognised as Europe’s Baltic tiger. After the velvet divorce from the Czech Republic, Slovakia saw its economy grow by 60 per cent in the 10 years thereafter. Denmark and Norway have GDPs of between 30 and 40 per cent—higher than Scotland’s. Are there lessons for Scotland there, or are our circumstances simply too different, as the Opposition would tell us?
The UK’s stewardship of the economy is failing Scotland. Scotland is on a journey towards independence and, like every other independent country, the right to choose its own path, run its own economy and rejoin the EU. Scotland is on that journey, and will find its way home soon. Scotland will regain its rightful place in the world.
I am grateful for the opportunity to speak in support of the motion in the name of my colleague Liz Smith.
As Scotland continues to recover from the economic damage of the past two years, careful management of the economy should be one of the highest priorities for the Scottish Government in the coming years. The debate is an important opportunity to highlight some of the SNP Government’s failures in that area. As the recent analysis by the Scottish Fiscal Commission confirms, the economy is an area in which the Government’s record is one of wasted potential and failure.
One area where such failure is abundantly clear is income tax. As with so many areas, income tax is one over which the Scottish Government has received substantial new powers only to fail to use them properly. The introduction of two additional income tax bands in Scotland was supposed to have been done to create a more progressive tax system. Regardless of the Government’s intentions, that does not justify the creation of a system that has been described by the Institute for Fiscal Studies as “unnecessarily complicated”.
Of course, the Government may claim that having a more progressive tax system means that lower-income households pay less tax than they otherwise would, but, given that analysis by the IFS finds any savings for those households to be “barely apparent”, it is clear that the current system fails to achieve that.
What does the Scottish Government have to show for all its fiscal meddling with Scotland’s tax system? According to the most recent analysis, it has more than £400 million less than it would have done if it had simply stuck with the UK tax bands. That is yet another example of the Scottish Government receiving significant new powers, only to completely misuse them. It was perhaps the IFS that best summarised the situation when it stated that the SNP’s income tax changes had achieved little more than making a “political statement”—a political statement that is affecting poor individuals the length and breadth of this country and is resulting in hard-working families paying more.
We know from all the economic statistics that there is a substantial black hole in the public finances. That is despite the UK Government’s block grant providing real-terms increases in funding for every year of the parliamentary session. While IFS analysis suggests that the deficit could turn out to be significant, we already know about the cuts that vital public services are facing as a result of that black hole.
Education and policing budgets are set to be hit with real-terms cuts over the course of the parliamentary session. Unsurprisingly, local government will, once again, bear the brunt of those cutbacks. The Scottish Fiscal Commission’s analysis suggests that local government budgets will be cut by 7 per cent in real terms by 2027. Even taken by itself, a figure of such magnitude should set alarm bells ringing for the Government.
We must not forget that that follows on from a period in which councils have had their budgets slashed. Between 2014 and 2021, funding for local government fell by 2.4 per cent in real terms, and it received a £250 million real-terms cut in the 2022-23 budget.
More and more often, the councils of communities across Scotland are faced with no choice but to provide only the services that they are legally obliged to provide. On current forecasts, I fear that that trend is set to continue, with money being removed from local government budgets, facilities being closed and families losing opportunities in their communities, despite what the Government says that it wants to achieve for those communities and our constituents.
We have now had 15 years in which to learn about the SNP’s economic priorities in Government, and it is clear that local government has never been one of them. As the spending review makes clear, disappointingly, that is unlikely to change.
This is the first opportunity that I have had to highlight such issues in my new role as shadow minister for just transition, employment and fair work, but it will certainly not be the last time that I highlight the SNP’s failures in this area. The Scottish Government has a lot of work to do to get Scotland’s economy back on track and to deliver budgets that are truly reflective of the Scottish public’s priorities.
The Scottish Government should commit to aligning income tax rates with those for the rest of the UK. It must also work alongside the UK Government to capitalise on the potential for both of Scotland’s Governments to work together. The city region and growth deals, which now cover nearly every part of Scotland, have shown what can be achieved through cross-Government co-operation, and the Scottish public will rightly expect to see more of that in the coming years.
The SNP should drop its plans for a divisive and desperate independence referendum that the Scottish public simply do not want. We had a choice and we made our choice. To put £20 million aside for another referendum is an absolute insult to hard-working families the length and breadth of the country.
I support the motion in Liz Smith’s name, and I urge members across the chamber to do likewise.
I am more than happy to take part in the debate.
We are facing challenging times financially and economically, and inflation is a major part of that. The war in Ukraine, with its impact on energy and food prices, has been very much outwith the control of the Scottish Government—and most Governments, for that matter—yet we are now having to live with the consequences.
The decline in real earnings is important, not least for those personally impacted. We discussed the matter at some length on Tuesday at the finance committee. A lot depends on not just what level inflation peaks at, but how long higher inflation continues. If it is just for one year and there is then a rapid reduction in inflation to the target of 2 per cent or thereabouts, many employees might live with that. However, if higher inflation continues longer, with a spiral of wage and price inflation, we will all face serious problems.
I would like to look a little more closely at the Tory motion, especially the suggestion that tax rates have been made higher
“without increasing revenues,”— there is a comma at the end of the phrase—which is followed by the phrase:
“compared with the block grant adjustment”.
At the very least I consider that to be poor English, but I suspect that it has been written deliberately to try to confuse both the Parliament and the wider public.
The Conservative motion attempts to conflate two or three distinct issues. First, the different tax rates in Scotland have raised more revenue than would have been raised if we had left rates the same as those in the rest of the UK. The figure was estimated at £240 million in 2018-19, so there has been real extra money to spend on health and other priorities.
Secondly, Scottish earnings—and therefore Scottish tax receipts—have not been growing as fast as UK earnings and taxes, and we are all agreed on that. There are a number of reasons for that, including the decline in oil and gas in the north-east of Scotland, where there had been many high earners and taxpayers, and the inability of most parts of the UK, including Scotland, to compete with London and the south-east. I see that our Liberal Democrat friends have left the chamber, but, as Vince Cable said in 2013, London is like a black hole,
“draining the life out of the rest of the country”.
It depends on which figures we look at. If we look at the longer term, certainly since I have been in the Scottish Parliament, we see that, although the picture changes from year to year, on the whole, Scotland compares favourably with most English regions with the exception of London and the south-east. An example that one of my colleagues gave is that, when figures on international inward investment were published recently, Scotland was doing very well.
Thirdly, the Tory motion implies the question whether we would have had more income for the Scottish budget if income tax had not been devolved at all. If that were the case, it would show that
“the current financial and fiscal arrangements between the UK Government and the Scottish Government are deeply flawed”— which is a quote from the SNP amendment. That implies that the fiscal framework is deeply flawed and needs to be looked at as soon as possible.
None of what I have said is to say that the Scottish Government or we, as the Parliament, should not be taking responsibility for what we can control. Of course, we should be seeking to grow the economy, increase productivity and achieve increasing tax revenues. However, it does mean that we have to be honest and realistic about what we can and cannot do under the present fiscal framework. It seems to me that changes to that fiscal framework need to be made as soon as possible.
Going back to the wording of the Conservative motion, I find it somewhat ironic that Conservative members frequently stand up in the chamber and make points of order about the accuracy of Government answers, yet when they produce a motion, it seems that it is clearly intended to mislead.
On the content of the resource spending review, I very much agree that our focus should be on the neediest in our society, so it makes sense to protect social security spending, even if we will have to make savings in other areas that will be clearly disappointing. However, as the cabinet secretary said, we cannot prioritise everything.
I am grateful. If the SNP is to cut budgets for local government, the police, prisons, universities and rural affairs by about 8 per cent over the next four years, while providing £20 million for indyref 2, can we take that as a sign of where the member’s priorities lie?
Frankly, that £20 million would not make much of an impact on the police, local government or a number of other issues. I will come back to that if I have time.
I think that the report of the Glasgow Centre for Population Health has been mentioned. It talks about life expectancy in Scotland between 1995 and 2019. Up to 2009, there was a general increase in healthy life expectancy for males and females, but from 2011 to 2019 there was a decrease of two years across the board and a decrease of 3.5 years in the 20 per cent most deprived areas. We must focus on the poorest people in the country.
There is inconsistency in the Labour amendment. Labour calls for long-term growth, but refuses to accept that we could get long-term growth by being independent, like other smaller countries. That is inconsistent and hypocritical of Labour.
I warmly welcome the debate and the opportunity to consider the significant announcements that were made last week.
We have heard from many members about the backdrop to the discussion. Across the UK, we have the sharpest fall in living standards, rising food and fuel prices and rising inflation. As members said, Brexit, the pandemic and Ukraine make the economic situation more challenging.
As members also said, there seem to be specific issues in Scotland around poor productivity and earnings growth. The growth forecasts are poor.
We know that, given the announcements last week, we face significant cuts in budgets for many sectors for which the Scottish Government is responsible.
I will focus on the impact of those cuts. Local government will be significantly affected by a cut of approximately 7 per cent. When the announcements were made last week, Unison’s Scottish secretary, Tracey Dalling, said:
“This is a desperate day for public services that will have catastrophic consequences for Scotland’s communities”.
I want to focus on a sector for which the impact of the cuts will be disastrous: the justice sector. The sector is already in crisis. Before the pandemic, approximately 13,400 sheriff court trials were outstanding. As the Criminal Justice Committee indicated in a report earlier this year, there are now approximately 32,400 outstanding cases in the sheriff court.
In last week’s announcements, significant real-terms cuts of at least 20 per cent over the next few years were proposed. The Crown Office and Procurator Fiscal Service budget is frozen at £170 million per year until 2026-27, the community justice budget is frozen at £47 million per year until 2026-27, and the justiciary budget is frozen at £29 million per year until 2026-27. The legal aid and Scottish Police Authority budgets are also frozen, along with the budgets for the Scottish Prison Service, the Scottish Courts and Tribunals Service and the Scottish Fire and Rescue Service.
I fully appreciate that politics is about priorities and choices, as members have said, but those real-terms cuts will have significant impacts on a sector that is already in crisis. The projected gap is £3.5 billion. The Parliament needs to debate such issues, because the impacts will be significant.
We know that there is a massive backlog in trials—43,606 as of February—and that Scotland has the highest proportion of people in prison anywhere in Europe. It has historically had very high percentages of people on remand, which rose to 30 per cent, and perhaps higher, during the pandemic. We also know that it costs £40,000 a year to keep a prisoner in prison. There are significant impacts and consequences of the types of cuts that were announced last week, which the Parliament needs to debate.
I have focused on one sector, but other sectors have similar stories. It has been said that it is a matter of choice and that other sectors have perhaps done better. The challenges that we face in the health sector and social security budgets have been mentioned.
I hope that we have a serious debate about how we make the Scottish Parliament’s budget bigger. I do not think that it is helpful to specifically focus on independence in this debate, because the Parliament can do many things with the powers that it already has. We heard a number of speeches about income tax, and we heard my colleague Paul Sweeney talk about what could be done with district heating. There is much that could be done on municipal energy production that would contribute significantly to many of the issues before us today.
We urgently need to consider what we could do on land taxes, and we need serious proposals for a land value tax, including looking at what we can do to tax the profiteers such as Amazon, which operates out of warehouses that could fall under a land tax. Those are the kinds of debate that we should be having in the chamber.
A land-based tax would be lawful, and I hope that we come back to that debate. I look forward to debating the member on that specific issue in future.
A number of reports have indicated the types of taxes that are within the powers of the Parliament. The Scottish Trades Union Congress, in a joint report with the Institute for Public Policy Research Scotland, listed a number of areas that we could be looking at, including local inheritance tax, local payroll tax, fair work supplements on business taxes, local income tax and carbon taxes.
I hope that, in coming debates, we seriously engage with those suggestions and that the Scottish Government comes forward with proposals on how we meet the massive challenges of the coming years.
There are two words that I did not expect to hear much in Conservative members’ speeches today. Those words, of course, are the two Bs: Boris and Brexit— two pretty big Bs for anybody to deal with. Boris blunders along and bungles Brexit. Meanwhile, the disastrous consequences of Brexit are swept under the number 10 carpet, no doubt alongside all the party hats and empty bottles. I am afraid that the OBR estimated that, by last year, only two fifths of the Brexit damage had yet been inflicted.
The Tories chose to title this debate “Economic Priorities”, so let us consider the priorities and choices that they have inspired. Whereas the UK Government has chosen to cut universal credit, the Scottish Government has increased the Scottish child payment. Whereas the UK Government continues to impose the bedroom tax, the Scottish Government continues to protect people from it. Whereas the Tories want to ensure that no one in Scotland pays more income tax compared with people in the rest of the UK, we, in the SNP, see the benefit in making progressive changes to the tax system, so that those who are at the bottom pay less and those who are at the top pay a wee bittie more.
The Tories are happy for the UK Government to plunder Scotland’s resources in the North Sea to make grand gestures across the UK. On the one hand, we have to use huge amounts of a limited budget to mitigate Tory policies, and on the other hand, the rest of the UK benefits from Scottish resources. What does that tell us about Scotland’s place in this union of equals?
The picture of growth is not the same across all sectors. Yesterday, I read that the industrial biotech sector in Scotland is not only exceeding growth expectations but is on track to achieve an annual turnover of £1.2 billion and more than 4,000 jobs by 2025. That is way in excess of the initial targets of the national plan for industrial biotechnology, which were set at £900 million in turnover and 2,500 employees by 2025.
I have spoken previously, and often, about the fantastic growth in the Scottish tourism and food and drink sectors over the years—which is now under threat from Brexit and the Tories—and areas such as renewable energy, which still have massive potential.
My colleague Paul McLennan talked about the growth commission, but it is worth repeating that Ernst & Young’s annual survey of foreign direct investment showed that Scotland recorded a 14 per cent increase in such projects in 2021. That is not a little bit better than the rest of the UK; it is streets ahead. That is a truly significant level of investment compared with an increase in foreign direct investment of 1.8 per cent in the rest of the UK and 5.4 per cent across Europe. If we are worried about growth figures, that is exactly the sort of thing that will turn the situation around. People want to invest in Scotland and do business here, and, according to Ernst & Young’s survey results, Scotland’s perceived attractiveness to investors now sits at a record high.
The member talked about growth figures for specific sectors, but why does he not look at the growth figures overall? Scotland’s growth figure is almost half that of the rest of the UK.
The macroeconomics sit with Westminster.
However, to go back to the point that I was making, that investment is no flash in the pan. We have been the most successful nation or region in the UK—outside London—at attracting foreign direct investment for nine of the past 11 years, and for the seventh year running. Why are we doing so well in that field? I imagine that the proactive work that is being done by the Scottish Government in offices in various major European and other cities worldwide played a large part. I will give credit where it is due and say that that programme of work began before devolution under a Tory Scottish Office, continued through the Labour-Liberal Democrat days and truly flourished under the SNP. The modern-day Tory response to that success story was that Stephen Kerr decided to write to Dominic Raab to bleat about the waste and beseech him to put the First Minister in her place and ensure that we do not see any further additions to that network. I say to Mr Kerr that he had better buckle up, because we intend to go a lot faster—not stop.
That brings me neatly to the last part of the Tory motion that we are debating. It wants us to take plans for a second referendum off the table. Well, I have news for Tory members: it was the people of Scotland who put that on the table by electing a party that decisively won the 2021 Scottish Parliament election when there was an explicit commitment in our manifesto for holding such a referendum.
The amount that was set aside for the referendum is, in relative terms, tiny, but what a powerful tiny investment it will prove to be. It will give our nation the opportunity and ability to finally operate as a normal country. It will mean that we have the power to address the economic problems that we have to face and to engage with other countries. It will allow us to build bridges rather than put ourselves behind false barricades—as the UK has decided to—and to take responsibility for our own future. That independence is priceless.
I am grateful to Liz Smith for giving us the opportunity to discuss the resource spending review and the wider financial situation that faces the Scottish Government, but I am frustrated that this afternoon’s opportunity to discuss something that is so far reaching and serious has been wasted on what I can only describe as performative ignorance, from some quarters. A number of useful contributions have been made, but alongside them we have heard what I can only assume are deliberate misunderstandings—I hope that they were deliberate—about how devolved finance works. As is the case with every budget, there have been demands for billions of pounds in extra spending and tax cuts, but without any explanation of how they would be paid for.
The first line of the Conservative motion is quite correct; we are all concerned by some of the trends in our economy that are putting a squeeze on our public finances, and by the significant decline in real earnings that is expected during the coming period. However, from there on I can characterise the Conservative motion—and the comments that Conservative members have made during the past week, since the spending review was published—only as disingenuous. That applies in relation to income tax, in particular. There has been deliberate conflation of two entirely separate issues: devolution of income tax and the fiscal framework under which that devolution has taken place, and the separate issue of the rates and bands that we set.
I will not yet, Mr Johnson.
It is quite true to say that devolution of income tax has, under the terms of the fiscal framework, been detrimental. Nobody in the chamber argues that the fiscal framework is fit for purpose, but it is disingenuous to imply that the progressive changes to income tax that were made in 2018—at the instigation of the Greens—have somehow resulted in less money being raised. As Mr Mason pointed out, for the one year that we have confirmed figures, the opposite was the case: a quarter of a billion pounds was made available to our public services as a result of making our income tax rates more progressive.
On top of that, it seems that the one key proposal that the Conservatives have is that we cut tax, particularly for higher earners. That would mean that we would have even less money for our public services—the public services that they are complaining are having spending reductions.
Labour members might demand higher spending without offering proposals for where the money should come from, but they do not demand that even less money be raised while simultaneously demanding that more money be spent. The Conservatives cannot argue for a low-tax high-spend position and expect it to be taken seriously. It is disappointing that Labour’s amendment is only cosmetically different from the Conservative motion and offers no proposal as an alternative to the savings that are laid out in the spending review.
One point of agreement that I offer, though, is to reiterate my interest in exploring changes to the budget process, potentially including the introduction of finance bills. As I have said to Liz Smith previously, that would be an appropriate issue for Parliament’s Finance and Public Administration Committee to consider, in order to build on the work that it has done in recent years to improve the budget process.
However, it bears repeating that the Scottish Government has a fixed budget: it cannot overspend, nor can it meaningfully borrow.
In the interests of accuracy, will the member at the very least acknowledge that the budget is not entirely fixed, because 37 per cent of the revenue that the Government has to spend comes directly from taxes that it sets in Scotland?
I only wish that the Labour Party would make a single proposal on any of the five core devolved taxes that we have that could be considered at budget time. Quite rightly, the Labour Party wants huge increases in public spending on a range of things, about which I completely agree with it, but in the six years of budgets that I can remember, it has not once proposed how it would actually pay for its proposals.
Even the Scottish Government’s modest borrowing powers are restricted to correcting forecasting errors, and those are arbitrarily capped. Both the overall sum of the Scottish Government’s reserves and the amount that can be drawn down in any individual year from those reserves are also arbitrarily capped. There are universities in Scotland that have reserves that are larger than what the Scottish Government is allowed to hold. Because all the caps were set in cash terms, rather than being a proportion of the overall budget, their value in real terms is far smaller than it was when the fiscal framework was agreed. If we add to that the real-terms erosion of the settlement by a 9 per cent inflation rate and the fact that the UK Government cut the Scottish budget by 5.2 per cent this year, it is quite clear why the numbers look as they do.
The most notable spending pressure on social security is an example of the Scottish Government’s success, not its failure. Establishing the Scottish child payment and raising it to £20 and then to £25 is a game-changing achievement. That will be a lifeline to so many low-income families—although, sadly for many, it will now act largely as a mitigation against the UK Government’s cuts to universal credit, rather than something that sits on top of UC in order to genuinely boost family incomes enough to lift them out of poverty.
Conservative MSPs want to talk about Government waste and avoidable spending, but not one of them can defend Westminster policies—from the bedroom tax, to the benefit cap, to the universal credit cut, on which the Scottish Government must spend hundreds of millions of pounds simply to mitigate it. That is absolutely the right thing to do, but imagine how much more Scotland could do if so much public money was not constantly being spent to limit the damage that has been caused by a Government that the country did not vote for.
If the UK Government were to take a more humane approach, or even a less nakedly inhumane one, not only would it provide some desperately needed relief to people across the UK, it would be of huge benefit to Scotland’s public finances. Even uprating its own social security payments in line with inflation would be hugely helpful on both counts.
Alongside the commitment to protect the most progressive package of social security anywhere on our islands, the spending review ensures that the Scottish Government is able to deliver on its commitment to tackle the climate emergency. We have an overriding moral obligation to play our part in reaching net zero—for the people who are already suffering the devastating effects of climate breakdown and for future generations. The economic benefits and the return on public investment are massive. For example, the £1.8 billion “Heat In Buildings Strategy” for energy efficiency will deliver thousands, if not tens of thousands, of jobs in home energy insulation, heat-pump installation and other sectors. Those decent-paying jobs will contribute to local economies, raise new revenue through tax and—if the training and skills opportunities are delivered correctly—lift families out of poverty through secure employment.
No one is pretending that the financial context of the spending review is a good one, but given the absurdly tight room for manoeuvre that the Scottish Government has, it has rightly prioritised efforts to tackle child poverty and the climate crisis. If Labour and the Tories have serious alternatives, they should have put them forward, because the motion and amendment make it look as though they have not even read the Scotland Act 1998.
I have heard today quite a lot from Tories complaining that our priorities are wrong. The SNP Government’s priorities are clear: they are to tackle the cost of living crisis, child poverty and the climate crisis.
Whether the Tories like it or not, people voted for those priorities. They voted for the party that is offering to direct public spending towards tackling poverty—
I am really glad that Douglas Lumsden has asked that, because I will come shortly to how exactly the Scottish Government is doing that, despite what his party has inflicted on this country.
Whether the Tories like it or not, people voted for those priorities and were not impressed with the Tories’ pleas for so-called economic growth to be the priority—especially as we all saw what Conservative-led economic growth actually meant during Covid. It meant that the rich got richer and the poor got poorer. It is no surprise that the Tories are here today arguing for tax breaks for the people who are on the highest wages. It meant public contracts being awarded to friends of friends, and employers being rewarded for having terrible sick-pay policies and unfair contracts. It meant billions in unjustified spending being directed to growing specific pots of money—not for the public interest but for private interests.
In her opening speech, Liz Smith complained about shortfalls. One of the reasons why the Scottish Government does not have as much money as it would like to spend is that it is having to spend more than £770 million this year alone to mitigate the impacts of harmful UK Tory policies for which Scotland did not vote. That includes the bedroom tax, the cutting of the benefits of the people who are already worst off, and the cap on the number of children in a household that the Tories are willing to ensure people have enough money to clothe and feed. That is not right and it is not sensible. One would think that it is indefensible: however, here the Tories are, trying to defend it anyway.
Using the fact that managing Scotland’s finances is a huge challenge within the union as an argument for staying in the union is like someone saying that they will not take medication because their condition is getting worse.
There is a fix. It is that we get the ability to borrow, to invest more productively and to make wider decisions about budgeting. It is certainly not to remain tied to a UK Government that has political ideologies and priorities that are fundamentally opposed to our own, and which shows no signs of giving us those powers if we hang around. The answer is independence.
Michelle Thomson referred earlier to “a lack of morality”: that was the perfect demonstration of it.
I am not interested in endless economic growth for the few; rather, I am interested in making sure that the standard of living is not at the lowest it has been since records began.
Speaking of which, for a party that insists that chat about independence is a waste of time, it is incredible how often the Tories manage to work it into debates. [
.] No matter what the SNP says or does not say, the Conservatives will continue to bang on about independence. [
.] I remember their 2017 and their 2022 council campaigns—it was independence, independence, independence—[
The Tories’ council administrations are formed based on independence; their party name has “Unionist” in it. The Tories call supporting independence “divisive”. That is misleading. It is one answer to a question that has not been answered yet—that is why we are still discussing it. Public opinion is split. Opposing independence is just as divisive as supporting it. The Tories cannot pretend that their view on the matter is the one that has consensus. [
Let us imagine, just for a moment, that Scotland was independent right now and that we were sitting in this chamber, looking at Brexit and the Covid shambles in a country that is run by a Prime Minister who does not have the confidence of the public or of even as many of his own MPs as Margaret Thatcher had. Imagine that the Tories had lodged a motion asking this Parliament to agree that we should join a union with that country. Would we think that that sounded like a good idea? I do not think so.
We have already heard that the Scottish Government has no control over UK Government spending decisions or what it gets from the block grant. It is perhaps more important to note that the people of Scotland have no control over the UK Government’s spending decisions. The election of the last Labour Government is a distant childhood memory for me, but the country that I have grown up in has not voted Tory in any election since. Scotland is not voting for tax breaks for the rich or for Tory Governments. The Tories can whinge that it is undemocratic in some way not to pander to their calls for those things here and, instead, to call for decisions about us to be made by us, but that is blatant nonsense. They just cannot remember what democracy looks like.
It is clear that the Tories and the Scottish Government have different priorities. The Tories favour what they call economic growth over tackling economic inequality, but they cannot be surprised when I and others stand up and call that out for what it means. It means abandoning the most vulnerable people to the sharpest fall in living standards since records began in the name of funnelling more money to their pals.
First, I echo the sentiments that my colleague Liz Smith expressed when she introduced today’s debate.
Last week, the cabinet secretary made a major announcement on Scotland’s public finances in the chamber, but just 30 minutes of parliamentary time was given for her to speak and take questions. That is not treating the Scottish Parliament with respect, and it is not giving even basic recognition to accountability. That is one reason why the Scottish Conservatives brought forward this debate today.
The resource spending review and the associated outlook that the Scottish Fiscal Commission provided have been a wake-up call. More than ever, a battle of priorities will shape Scotland’s immediate future, but the decisions that we make now will impact on how we rebuild the economy after the unprecedented economic shock of Covid.
That is why we should look with real concern at where the axe is to fall. The IFS noted that the areas that will suffer significant real-terms cuts are
“local government, the police, prisons, universities and rural affairs”.
However, with cuts of around 16 per cent in real terms, the enterprise, tourism and trade portfolio will be hit even harder than most. When we are lagging behind the rest of the UK in growth and productivity, it seems an unusual position for our enterprise budget to be slashed in that way.
We should ask whether this Government has come to terms with the devolution of tax powers and the creation of the fiscal framework, because no longer is the economy, in any sense, someone else’s problem.
As long as SNP and Green ministers seem content with lagging behind the rest of the UK and remain stubbornly inattentive to the needs of business and apparently untroubled by being outpaced by comparative English regions, there will be continued pressure on our finances. In March, we were presented with the national strategy for economic transformation—a lightweight document that did not live up to its name. However, when enterprise bodies are being cut to the bone, what now for the delivery of even the most modest goals of that strategy?
Sadly, the approach that the Scottish Government has taken will not only harm itself but impact yet further on local government, where councils have already been forced—for too many years—to do more with less. One of councils’ core functions is, of course, the provision of schools, and there can be little doubt that the spending review has thrown out education as a priority. At the most fundamental level, it is galling to see the Scottish Government rankle at the highest core block grant from the UK Government in its history, while passing on swingeing cuts to people’s local councils. That is particularly the case in my region, the Highlands and Islands, where local councils have a far greater ability to be responsive to local needs and to deliver effective change on the ground. However, their services seem unvalued by a Government in Edinburgh that seeks only to centralise authority.
What of the Scottish Government’s stewardship of its finances? In last week’s quick-fire question slot, I asked the finance secretary about waste in Government projects. To tell us that we face a tough economic outlook down the road is one thing, but to do so while her Government wastes hundreds of millions of pounds of taxpayers’ money on unfinished ferries and other failed or failing projects is quite another. The Scottish Government will be aware of the catalogue of weaknesses that Audit Scotland—among others—identified. Those issues cannot be branded with Covid or Brexit, because they are home-grown calamities, with the Scottish Government’s logo firmly painted on the side. It is time for SNP and Green ministers to move beyond the excuse that these things happen. They must set out concrete proposals for getting value for money from public spending, because the alternative is precisely the cutbacks that Kate Forbes set out.
Gone already, it seems, are the long-term strategies that could make a difference to people’s lives: reducing the attainment gap, boosting productivity to at least UK average levels and fighting health inequalities. This is a spending review that does little to actually review the outcomes of SNP spending. Instead, it tries to maintain vanity projects while cutting back core budgets, and it lets short-term firefighting replace reform and improvements in public services.
It is also an arrangement that hits our constituents hard in their pockets. Unless action is taken, the gulf between the tax that people in Scotland pay and the tax that people in the rest of the United Kingdom pay will grow wider still. What have we gained from this situation? A taxation system that hammers earners—one that was projected to raise an additional half a billion pounds in revenue but actually loses us £170 million due to a lack of growth in the tax base. Members on the Government benches can spare us any nonsense about the 19p band that they created. It was a fiddle that was entirely confected to create rebuttal points, and a measure that can save a taxpayer an absolute maximum of 42p a week.
If we can take any lessons from the resource spending review, it is that we cannot go on with a Scottish Government that confuses suffering with solidarity, and action with achievement. In some ways, I welcome the finance secretary’s belated conversion to economic reality because, for too long, this SNP-led Administration has played for the support of interest groups while seeing Scotland’s public services suffer.
In times like this, we see where a Government’s real priorities lie and where its choices can make a difference. Sadly, in this case, the Scottish Government has made choices that will have a devastating impact the length and breadth of this country.
Reading the Tory motion and the Labour amendment, I have to wonder what planet—indeed, what UK—they live in. Some speeches reminded me of groundhog day—2014 and “better together”, when Scots were told that, if they voted yes, they would be thrown out of the European Union. We all know what happened after that—we are out.
To state the obvious, for its spending purse, this Government depends almost entirely on the Barnett formula and any consequentials that flow from what the UK Government additionally spends on its domestic responsibilities. Our tax-raising powers are limited, and most people in Scotland pay less tax than people in England do. However, we all pay extra UK national insurance, which is a tax, and people on universal credit have lost the £40 per week that was delivered during Covid. Most of those people are working.
Reference has rightly been made to the Scottish Fiscal Commission but not to the fact that it has independently verified that our budget has decreased by 5.2 per cent in real terms between 2021-22 and 2022-23. The Scottish Fiscal Commission has also confirmed a further 1 per cent real-terms reduction in 2025-26. We are and will remain at the economic mercy of the UK Government until such time as we are independent of it.
I am not sure which newspapers Christine Grahame reads, but, in his column in
The Scotsman last Saturday, Brian Wilson said that t he SNP should check its own graph, and he referred us to the Scottish Government core resource and Covid-19 funding in real terms. When she talks about the 5.2 per cent cut, Christine Grahame fails to mention that we have the highest block grant in history, she fails to recognise that that will increase in real terms for this parliamentary session and she fails to recognise that the finance secretary has £7 billion more than she was forecasting four years ago. Can Christine Grahame explain all that?
We have had two years of Covid, years of post-Brexit—which is not concluded and which was not oven ready—the impact of the war in Ukraine and inflation, which is set to rise to 10 per cent with desperate and destructive cost of living and energy prices. I repeat that the UK has the highest rate of inflation of any G7 country, and it is almost twice France’s rate. I have noticed that the Conservatives dance round that. Who does the UK Government attack? The independent governor of the Bank of England. The UK Government criticised him, claiming that the bank had fallen “asleep at the wheel” on inflation. Mr Bailey rightly responded:
“There’s a lot of uncertainty around this situation ... And that is a major, major worry and it’s not just I have to tell you a major worry for this country. There’s a major worry for the developing world as well. And so if I had to sort of, sorry for being apocalyptic for a moment, but that is a major concern.”
The governor of the Bank of England used the term “apocalyptic”.
The increase in food and energy prices does not just impact on individuals and families; it impacts on the cost of manufacturing, the cost of running our schools and hospitals, and even the cost of filling the ambulance diesel tanks. Those bills will land at the feet of the Scottish Government.
It is as plain as a pikestaff that we, in Scotland, face the same economic challenges as other nations worldwide, except that we do not control the macroeconomy. We do not control all the other tax-raising powers, such as corporation tax, VAT and fuel duty.
Despite that, to protect the most vulnerable, we have commendable social policies. We make choices. We have free school meals for primary 1 to P5; free prescriptions; no tuition fees; free travel for all under-22s, over-60s and certain disabled people—and so on, because that is not the complete list. To that can be added the £770 million that has already been mentioned to mitigate—I hate that word—Tory policies.
I mention waste to Liz Smith specifically. UK Government waste includes the festival of Brexit, which cost £120 million; track and trace, which cost £37 billion and was criticised by the Public Accounts Committee at Westminster; high speed 2, which will cost at least £112 billion; ferries that did not exist, which Chris Grayling ordered at a cost of £81 million—[
.] I have more to come. [
.] Oh, the Conservatives do not want to hear it. Perhaps they should listen.
Nine Nimrods were scrapped in 2011 at a cost of £4.2 billion; Boris’s garden bridge when he was London mayor cost £43 million and was never built; Crossrail cost £4 billion above its £14.8 billion budget; and then there were the personal protective equipment contracts that were given to cronies. There is a great big list of waste.
I could add policies to that and an economic tsunami that Scotland did not vote for. There are six Tory MPs in Scotland, with only four wanting to toss out Boris—or is it three and a half? After all, Douglas Ross could give the Kama Sutra a run for its money. Of the UK Government’s man in Scotland, we would expect nothing less of uber-loyalist Alister Jack, who I am sure is expecting a comfy seat in the best special retirement home, the House of Lords.
Here is my message to Boris as he clings by his fraying fingernails to the door handle of number 10: grant that section 30 for a legally binding referendum. After all, with your Government’s track record, a victory for the union should be a skoosh. Go for it Boris; otherwise we will know that you fear yet another unhappy result.
I say to Katy Clark that independence is not an end in itself but the right to tax fairly and to deliver a socially just society. It is time that Labour woke up to that.
Thank you, Presiding Officer, although I think that I will need a moment to gather myself while—I hope that the member will forgive me for saying this—I expunge the picture of Douglas Ross and the “Kama Sutra”.
The spending review and the Scottish Fiscal Commission’s forecast make three things brutally clear. First, under SNP management, the Scottish economy has underperformed not just over the long term but in relation to the UK average. That would be bad enough if it just meant that Scottish workers were earning less and had fewer job opportunities than they should. However, it is even worse: income tax devolution means that there is hundreds of millions of pounds less to spend on front-line public services than would be the case if income tax had not been devolved. Next year alone, there will be £400 million less.
Secondly, after 15 years in charge, the SNP has suddenly woken up to the need for public service reform and modernisation, except that it has left it so late that it has no vision or strategy as to how the apparent efficiencies will be made. Instead, there are just four vague references to shared services and reforms. It all sounds very similar to things that are being proposed in Westminster by the Tories and which the SNP is so quick to criticise. The cabinet secretary has used the word “reset” endlessly in recent days, but, every time she says it, she means cutting jobs and public services, and passing the buck, yet again, to local councils to make those cuts.
Thirdly, let us make no mistake: the spending review means cuts—deep cuts—to critical services. There will be cuts to local services of 7 per cent over five years, so it is inevitable that class sizes will increase, local roads will deteriorate, parks will be left to rust and libraries will close. It is not just councils that will bear the brunt of those cuts; our colleges and universities will see their resources slashed, which means that we will not have the ability to grow the skills that it is so clear from the data our economy needs.
If the SNP says that health jobs will be protected, it is abundantly clear, as Douglas Lumsden pointed out in his speech, that, ultimately, there will be huge cuts to the rest. Half the job increases that came during the Covid period have been in the health service. If the cuts are to be made in places other than the health service, that means up to 8,000—a third—job losses in central Government and one in 20 jobs in local government at risk. Although the SNP has been quick to criticise the Tories—rightly—for austerity, this comprehensive spending review is nothing short of that same austerity being meted out to Scottish jobs and Scottish services throughout the country.
There has been much talk from members on the SNP benches about independence. They are absolutely within their rights to argue their opinions about what it might or might not deliver, although I urge them to read what the sustainable growth commission wrote and ask it—
I will give way in just a moment. SNP members should ask the growth commission what holding public service spending to half that of economic growth would really do to public spending.
SNP members might be entitled to their opinions on independence, but they are not entitled to their own facts, and the facts are very straightforward. Since 2016, average wages in Scotland have been below not just the UK average, but that of Northern Ireland and—apart from in east Scotland—that of Wales. Average wages in Scotland have been below the average in places such as Manchester and Cumbria.
I ask Douglas—my apologies—Daniel Johnson whether he recognises that, as an independent country, we would have a very different position. The Norwegian sovereign wealth fund is worth £2.1 million to each and every Norwegian citizen. Does he agree that there has been a massive wasted opportunity for the people of Scotland?
The oil is gone. If we had a time machine, that argument might be relevant, but we are in 2022 and we have to face facts today.
Michelle Thomson is right that we have to understand the distinction between macroeconomic and microeconomic policy. She is correct that, largely, macroeconomic policy largely rests with the UK Government. However, microeconomic policy rests with the Scottish Government. We have control over skills, enterprise support and regional economic development. In past decades, Scotland has done very well, with Scottish productivity growth that was higher than the UK average and growth in average wages in Scotland higher than the UK average. Why, when those levers have been demonstrated to work, have they been failing to work in the past decade? That is the reality.
SNP members are absolutely right to point out the dreadful context in which the UK finds itself. However, they cannot explain why, when we are up against what is obviously—in their own words—an incompetent Government, they are not able to do at least a bit better. They need to explain why, in that context, we are doing worse than the UK average instead of better. If we have those levers, surely we should be able to beat the UK average in terms of skills growth and enterprise support. Instead, we have the highest spend on enterprise support and the lowest levels of productivity growth in the UK.
The spending review lays out the Scottish Government’s priorities very clearly: they are to find money for another divisive independence referendum, while cutting and slashing its spend elsewhere.
The SNP is completely devoid of any answers as to why it has been utterly incapable of using the levers that are at its disposal to grow Scottish incomes and investment. The SNP has left Scots paying the highest level of tax in the United Kingdom, following the introduction of the 19p basic rate, while receiving less for it than they would have done prior to income tax devolution. That is a fact for which few Scots should ever forgive the SNP.
I am grateful to members across the chamber for their contributions. I am also grateful to Daniel Johnson for his revelation that the oil is gone. I always find it funny that, when the price of oil goes up, we start to hear more people saying that the oil is gone. The reality is that oil still has an important part to play in the future of the north-east, and we are committed to supporting the north-east in a just transition.
I will move on to some points of consensus. Liz Smith said that this is a time of challenging economic circumstances. We have to be realistic about the position that we find ourselves in here in Scotland as well as across the UK and in the wider world. We are not unique; we are all wrestling with these challenges.
Liz Smith also said that Scotland has immense talent in every corner of the country. Although we have a job to do to debate constructively and with passion about what we think needs to change to harness that, in doing so, we must make sure that we never risk talking down the huge potential of our country, even inadvertently. We need to recognise that talent and be able to have constructive engagement across these islands. That means being able to point out where, for example, the UK Government gets things wrong, as happened with—on the subject of a just transition—the Acorn project.
That is a central point, and it is one that Michael Marra spoke about passionately in advocating for education and that Katy Clark spoke about passionately with regards to the justice portfolio. Fundamentally, in the resource spending review, we are having to make decisions, and the fundamental reality of that is that there is an opportunity cost. We should recognise the money that is being invested in employability, and we should not forget Scotland’s performance on foreign direct investment, which members have referred to and which is a reflection of the talented workforce that we have across Scotland.
I want to pick up on the technical but important point of process that Liz Smith and Ross Greer raised about a finance bill. I inform members that we are working to re-establish the devolved taxes working group, which is an important piece of work. It is important to recognise that the devolution of taxation is, to use an oft-used phrase, a process and not an event. We need to ensure that, in debates such as this, we allow time for that detailed technical consideration of such matters.
Yes. That will be discussed as part of the process. I would not want to pre-empt what the outcome will be.
Paul Sweeney spoke about some of the causes of where we are just now. He mentioned Brexit and Covid, both of which are proximate causes, but we are still living with the legacy of 2007 and 2008. As a number of members mentioned, the Government came to power 15 years ago. It was by coincidence and misfortune that that was just as the teaser rates on sub-prime mortgages started to end across the United States, precipitating the global calamity that we faced. All the parties that were in power in the period up to that point have accountability for that, and we are still living with the reality of it, which is a rise in poverty. It was disappointing that Alex Cole-Hamilton did not recognise the contribution of austerity, which we are still living with to this day. We have to recognise that, ultimately, that was a policy decision that his party supported when in government.
I come back to the fundamental question of choices. Douglas Lumsden spoke with passion about local government, and I recognise his interest in that matter, as a former councillor. However, when I asked him what quantum he wants to be allocated to local government, he did not respond, even though that is the question that we have to grapple with. If we are to increase one budget line, that means decreasing another.
We have made a clear choice in relation to our priorities. We want to tackle child poverty and deliver a just transition, and we have put our money where our mouth is with regard to social security. If members want increased budgets in other areas, it is incumbent on them to say where the money should come from. We are not having a question-and-answer session or a stage 1 debate during the budget process; we are six months out from the budget. The RSR provides a broad framework and the parameters. Following the debate, members across the chamber have the opportunity to reflect on what they want to see in the budget, come December. If members want increased budget lines elsewhere, it is incumbent on them, as responsible parliamentarians, to say where the money should come from.
Michelle Thomson made a very important point about insufficient borrowing powers. That relates more broadly to the operation of the fiscal framework. We have to get some facts straight. Our devolved taxes are raising more revenue. John Mason made the point that issues are being conflated. We are talking about the operation of the fiscal framework. I hope that members across the chamber can unite in wanting revisions to the fiscal framework that address some of the key points, give us additional borrowing powers and expand the powers with regard to the reserve. That would allow us to more reasonably manage the volatility that Governments face in particular circumstances, especially the current circumstances.
Alexander Stewart referred to income tax and hard-working families paying more. Hard-working families are paying more; they are paying more for food, energy and a range of household goods. That is the reality. However—this is where the counterfactual involving the Tories being in power comes in—families are not paying prescription charges, university tuition fees or for eye tests, which is the reality for people south of the border. That is an important point. The reality is that, if we were to follow the Conservatives’ policy of a £500 million tax cut for the best paid in society during a cost of living crisis, most people would view that as a dereliction of duty.
I am afraid that I do not have time. I must conclude.
Fundamentally, the resource spending review is about choices. Adam Smith was mentioned a couple of times in the debate, and I want to quote one of his biographers:
“the Government seems to lack a sense of mission. It has a large majority, but no long-term plan. There is no sign, for example, that it has even begun to get to grips with the need for greater security and resilience in a range of policy areas.”
That was said by former Financial Secretary to the Treasury and Tory MP Jesse Norman talking about the UK Government, which is chaotic and is lacking in decisions, vision and mission. In contrast, the Scottish Government has a purpose and a mission: reducing child poverty and tackling the climate emergency. That is exactly what the resource spending review will deliver.
It is my pleasure to close the debate on behalf of the Scottish Conservatives. It has been a very helpful and valuable debate—in fact, it might be one of the most important debates that we will have in the chamber for a long time, because the medium-term financial strategy that the finance secretary set out last week sets the trend for Government spending for the next four years. To be frank, it is disappointing that, as there was only a half-hour statement on the subject, it was left to an Opposition party to hold the debate.
Surely, it is up to the Government of the day to allow enough time to debate in the chamber what could be the most important set of issues that the Parliament faces over the next four years.
We learned quite a lot in the debate. First, we learned that the SNP does not like the term “black hole”. What should we call it? Perhaps we should call it a mismatch between the money that comes in and the money that goes out. That black hole—that situation or mismatch—is entirely of the SNP’s making, no matter how much its members try to deflect. All the SNP speeches were characterised by deflection. They were all about trying to point elsewhere rather than taking responsibility. The fact is that it is down to them.
I am very disappointed in the finance secretary, because we heard her once again making the claim that there has been a 5.2 per cent cut in the Scottish Government’s budget. She knows that that is a dishonest claim, because she is not comparing like with like. She knows perfectly well that the previous year’s budget was inflated because of one-off Covid money. If that money is taken out, the budget for this year is the highest that it has ever been.
The commission and the cabinet secretary are not taking into account the one-off Covid money that was in the budget for last year. The reality is that the core budget is up and that the block grant is up by £4 billion on last year—10 per cent in cash terms, 7 per cent in real terms—and is the biggest block grant in the history of devolution.
We also know, because the cabinet secretary said it in her statement last week, that the budget for this year is £7 billion higher than was expected in 2018. At her predecessor Derek Mackay’s last medium-term financial strategy in 2018, he predicted a budget of £7 billion lower than her budget for this year. That is thanks to the UK Government, which provided more money in this block grant to support devolved spending in Scotland. Yet what do we see? We see cuts across the board.
I continue to wonder. When I was growing up, Scottish Conservatives would often talk about accountability and taking responsibility for creating our own future. Why is it uniquely now that the best that Scotland can hope for is to go cap in hand to Boris Johnson and ask for more money, rather than to create a better future? What on earth has happened to the Tories?
That intervention is brilliantly timed, because I will go on to talk precisely about what the SNP has done with its extensive devolved tax powers. We know that tax receipts are not performing as well as was hoped, despite the fact that the SNP’s tax changes are bringing 700,000 more Scots into the 41 per cent, higher tax rate, which makes Scotland the highest taxed part of the UK. As we have heard in the debate, we also know that income tax receipts amount to £400 million less than would have been the case under the old system.
That is the party that wanted fiscal devolution and that signed up to the Smith commission. John Swinney sat on the Smith commission and it left us in a worse position as a result.
John Mason said that the fiscal framework was deeply flawed. Why did Mr Mason and his party sign up to it if it is? Mr Arthur was similarly disparaging. That is the party that calls again and again for more economic and fiscal levers, but when it gets those levers and pulls them, it leaves us poorer and worse off. That is the answer to Michelle Thomson’s question.
Of course. However, Mr Arthur has said that the framework is—I think that he said, “fatally” or “fundamentally”—flawed. If it is that bad, why did Mr Arthur and his party sign up to it in the first place?
We now have to live with the consequences of what we have seen in relation to tax revenues and the block grant, which will be that real savings will have to be made in public spending. Swathes of departments, including justice, education, universities and local governments will see real-terms cuts of 8 per cent over the next four years. For enterprise, trade promotion and tourism, the outlook is even grimmer—cuts of 16 per cent in real terms. As Jamie Halcro Johnston reminded us, some of the axe falls in the very areas in which we would expect investment to deliver a faster growing economy, such as universities, tourism and trade, which will see the biggest reductions in spending.
Michael Marra made a very fair point about the importance of education, not only in its own right but also as a driver for economic success. However, education is cut under this budget too.
In his earlier intervention, Stuart McMillan talked about the jobs that had been saved at Ferguson Marine. What he did not say was that it has been estimated that up to 40,000 jobs could be lost under the spending review that we have seen announced, although ministers are claiming that there will be no compulsory redundancies.
There have even been suggestions that public sector staff could move to a four-day week but get their salaries cut by 20 per cent as a consequence. No wonder there has been a furious reaction from the trade unions, with Unison threatening strike action if the Scottish Government does not rethink its plans.
As we have heard from Douglas Lumsden and Alexander Stewart, local councils will be the hardest hit. Vital services such as bin collections and libraries are under more pressure than ever before. It should not surprise us that the SNP Government waited until after the local elections before announcing those plans—we might have seen a very different outcome if the voters had known what was coming down the track for them at that particular point.
We also see cuts in the capital budget. Spending on motorways and trunk roads is being cut from £411 million this year to £377 million in 2025-26. My constituents and, I am sure, those of Kate Forbes are concerned about the impact that that might have on the A9 dualling project, which is already many years behind schedule. We do not know what will come of that.
In spite of all those cuts, there is still plenty of money for the SNP’s pet project: £20 million is being ring fenced for a divisive independence referendum in 2023, despite everyone knowing that it simply is not going to happen. That says all that we need to know about the priorities of the SNP Government; it would divert precious resources to another unwanted referendum rather than support our courts, our universities or our local councils.
Scotland undoubtedly needs a different approach. We want to see a renewed focus on growing the economy at least in line with the UK average. That would increase tax revenue to fund important local services.
In her contribution, Michelle Thomson asked why the Scottish economy is not growing any faster. As the Institute for Fiscal Studies has pointed out, we are not even matching average UK economic growth. That is not an issue of macroeconomics; it is about this Government using the powers that it has at its disposal to grow the economy. There needs to be a better understanding that, if our private sector businesses do not thrive, our economy will not progress. That means tackling the productivity puzzle with a laser-like focus. There needs also to be constitutional stability, not the endless threat of another referendum hanging in the air.
The horrendous situation—and it is horrendous—that Scottish public finances now face is not the fault of Westminster but is entirely down to the actions of this SNP Government. For years, it has railed against so-called Tory austerity. Now, we have a made-in-Scotland SNP austerity and the Government simply has no one else to blame. That is the point that my colleague Liz Smith made in the motion that she moved, which I am delighted to support.