Public Finances (Impact of Stagnation)

– in the Scottish Parliament at on 27 March 2024.

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Photo of Gordon MacDonald Gordon MacDonald Scottish National Party

1. To ask the Scottish Government what assessment it has made of any impact that stagnation has had on Scotland’s public finances, in light of the final report of the Resolution Foundation’s economy 2030 inquiry, which found that the United Kingdom is a decade and a half into a period of stagnation. (S6O-03268)

Photo of Shona Robison Shona Robison Scottish National Party

The Resolution Foundation has found that the stagnation that we have experienced has been devastating in terms of the wealth that has been taken out of the country. Despite limited powers of devolution, we have transformed the landscape in Scotland. The Resolution Foundation report highlights that the past 15 years of lost growth mean that the United Kingdom economy is 22 per cent smaller than it could otherwise have been. That has inevitably led to significant lost revenue, for which Scotland has paid the price.

Recent budget decisions by the UK Government have compounded that, with tax cuts being prioritised over investment in public services, and up to £1.6 billion in potential consequentials for Scotland that we will not see.

Photo of Gordon MacDonald Gordon MacDonald Scottish National Party

I thank the Deputy First Minister for that answer. The Resolution Foundation found that benefit levels have not kept pace with prices, and that people who rely on benefits have had their incomes reduced by £3,000 at the same time that wealth has risen from three times to more than seven times national income since the 1980s. Given the powers that it has, what steps could the Scottish Government take to address that?

Photo of Shona Robison Shona Robison Scottish National Party

Gordon MacDonald is right to ask that question. Despite the limited powers of devolution, we have transformed social security in Scotland in comparison with the UK Government, which is steadily eroding the safety net with, for example, benefit freezes, caps and limits, and by providing inadequate levels of financial support. In contrast, we have spent more than £733 million in the past five years to mitigate the effects of UK Government policy.

As Gordon MacDonald alludes to, with full powers over social security, we would aim to eliminate poverty and to ensure that everyone has a decent standard of living through a fairer and more adequate benefits system.

Photo of Elizabeth Smith Elizabeth Smith Conservative

Does the cabinet secretary agree that the stagnation issue to which Mr MacDonald’s question refers is as much a Scottish problem as a UK one, given that the recent Confederation of British Industry-Fraser of Allander report into productivity in Scotland clearly shows that Scotland is failing in 10 out of 13 productivity metrics?

Photo of Shona Robison Shona Robison Scottish National Party

Liz Smith wants us to be held to account as if we are an independent nation when the macroeconomic levers lie with the UK Government. However, despite not having those levers, Scotland’s gross domestic product per capita has grown faster than the UK’s since 2007. Accounting for population growth since 2007, gross domestic product per person has grown by 10.8 per cent in Scotland, compared with 5.6 per cent in the UK.

Since 2007, productivity in Scotland—which Liz Smith referred to—has grown at an average annual rate of 1 per cent per year, compared with the UK average of 0.5 per cent. Earnings in Scotland grew by 8 per cent in 2023, which is faster than in any other part of the UK, including London and the south-east. Despite not having the macroeconomic levers, Scotland is doing pretty well, by comparison.

Photo of Michael Marra Michael Marra Labour

Those of us on the Labour benches agree that we need to get rid of the rotten Tory Government, which crashed the economy, left working people paying higher prices on bills and mortgages and has now led the country into recession. However, the reality is that the Scottish Government has made a bad situation worse because of its total failure to grow Scotland’s economy. A range of academics and economists have told Parliament that the recent Scottish Government budget is categorically not a budget for growth. Is it not time that we had two Governments that are focused on growing the economy, so that we can grow our tax base and fund the services that we need?

Photo of Shona Robison Shona Robison Scottish National Party

The problem with what Michael Marra said is that the shadow chancellor, Rachel Reeves, is going to emulate the same tax and spending plans of the “rotten” UK Tory Government that he cited. It is hard to distinguish between UK Labour policy and UK Tory policy.

In my answer to Liz Smith, I outlined where—despite not having control of the economic levers—Scotland’s economic performance during the past 30 years was better, including its GDP per capita, productivity growth and earnings. Foreign direct investment has grown faster in Scotland than in the UK and Europe in recent years. Those on the Opposition benches tend to try to talk down Scotland’s performance. However, despite all of the headwinds, comparable data shows that Scottish economic performance is much better than they would have us believe.