Sterling (Devaluation)

– in the Scottish Parliament at on 29 September 2022.

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Photo of Gillian Martin Gillian Martin Scottish National Party

6. To ask the First Minister how the recent fall in the value of sterling will affect the finances of the Scottish Government. (S6F-01384)

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

Potentially disastrously—and that is of deep and profound concern to me and, I am sure, everyone across the country. As the Bank of England had warned even before the recent falls in the value of sterling, a falling pound will add to inflationary pressures in the economy. With inflation already at 10 per cent, the Scottish Government’s budget is already worth about £1.7 billion less than it was when it was announced in December. The latest devaluation raises the risk of more real-terms reductions not just in the Scottish Government’s budget but in the incomes of already struggling households and businesses throughout Scotland. The spending cuts that will be required to pay for the Tories’ tax cuts for the richest also have potential implications for the Scottish Government’s budgets in the period ahead.

As a first step to restoring the United Kingdom’s badly damaged financial credibility, the Chancellor of the Exchequer should urgently reverse the unfunded and unjustified tax cuts for top earners.

Photo of Gillian Martin Gillian Martin Scottish National Party

The First Minister will know—this has been mentioned many times already today—that the International Monetary Fund is openly condemning the Tory UK Government over the reckless plans for tax cuts for the highest earners and a range of staggering decisions that will plunge millions into poverty and cause a public health crisis. I think that it is extremely ill judged for the Scottish Tories to demand that we replicate those tax cuts, which would lead to significant personal gains to them and their donors at the expense of our citizens in crisis and our public services, which they come to the chamber every week to ask us to put more funding into. What is the First Minister’s view?

The First Minister:

My view is that, when Gillian Martin says that it is “ill judged” for the Conservatives to ask the Scottish Government to emulate tax cuts for the richest that have sunk the pound, crashed the mortgage market, threatened people’s pensions and forced a bailout from the Bank of England, she is probably being diplomatic and polite. I think that people will listen to the Conservatives calling on the Scottish Government to deliver tax cuts for the richest—and, in so doing, to slash public spending for public services—and wonder what planet they are living on.

What happened last Friday, in the so-called mini-budget, was economic vandalism, and it was economic vandalism that was done knowingly and, it appears to me, deliberately.

Gillian Martin rightly mentions the IMF; it is extraordinary to hear such comments from the IMF about a G7 country. However, the comments from others are just as damning. The chief executive of the Resolution Foundation describes the mini-budget as

“the worst unforced economic policy error of my lifetime”,

while the Institute for Fiscal Studies talks about “gambling” and “betting the house”. Unfortunately, the chancellor was not betting on his own house; he was betting on the houses of people across the country.

The decisions are disastrous and need to be reversed—not because of some political or ideological debate, but for the sake of the homes, the living standards, the pensions and the security of people across this country—-and they need to be reversed now.