Plenary, 05 Feb 2004

Meeting date: Thursday, February 5, 2004

Official Report 753KB pdf

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Scottish Economy

The next item of business is a debate on motion S2M-855, in the name of Murdo Fraser, on the Scottish economy, and on three amendments to that motion. The timing for the debate will be very tight, and I am not sure whether I will be able to call everyone who wishes to speak.

I will move the motion in my name on the important subject of the Scottish economy with a sense of disappointment, not just because I did not make it on to the parliamentary "University Challenge" team, but because, despite the Executive telling us that growing the economy is its top priority, this is the first debate on the economy that we have had since the beginning of September, nearly six months ago. I can understand why the Executive does not want to debate the subject in Parliament. If it takes a Conservative debate to drag a minister, kicking and screaming, into the chamber to answer for the Executive's record, so be it.

I am pleased to see the Deputy Minister for Enterprise and Lifelong Learning in his chair, ready to lead the debate for the Executive. I have a great deal of respect for the deputy minister, who I believe is one of the more competent ministers in the Executive, with an excellent command of his brief. I see that the Deputy First Minister is here too, although I do not know whether he intends to participate in the debate. However, he is very welcome to this country.

The Executive amendment demonstrates its rather complacent attitude over the state of the economy. The Executive talks about Scotland's competitive position in the global economy. In fact, Scotland's gross domestic product lags behind that of the rest of the United Kingdom. In the year to quarter 2 of 2003—the last quarter for which we have the statistics—Scotland's GDP grew by only 0.5 per cent, while that of the UK as a whole grew by 1.8 per cent. That is not an unusual position; it has been the situation for some years.

The outlook is little better when it comes to our population. The Registrar General for Scotland has indicated that the Scottish population is likely to fall below 5 million by 2009. That has serious implications for us all. All the international evidence shows that population growth is inextricably linked to economic opportunity. If the Executive is serious about reversing the decline in population, it must be serious about improving our economic performance.

The Conservatives often say that the way to encourage economic regeneration and population growth is to cut taxes, because high taxes lead to a fall in population. Britain has the lowest rates of corporate and personal tax in the whole of Europe. Why is that low tax rate not leading to an increase in the population?

If Mr Sheridan were to check his facts, he would find that the population of the UK as a whole is on the increase. The problem that we have here is that the Scottish population is falling, while that of the UK is increasing. I will explain why I believe that that is because of higher tax rates, particularly on business in Scotland.

Will Mr Fraser give way?

Not at the moment, thank you.

What is to be done about the current situation? The Scottish National Party, in its amendment, comes up with its usual solution of fiscal freedom. I am not without sympathy for the idea that the Parliament needs greater financial accountability. However, the SNP is missing the point completely. What is worse, it gets the Executive off the hook completely. We do not currently have the powers for the tax cuts to which the SNP refers, and that gives the Executive a get-out clause. As usual, the SNP's approach is tactically inept.

The Executive has the powers that it needs to deal with the problem, although it will not use them. All the international evidence says that a low tax regime and economic growth go hand in hand. We should look at Ireland, New Zealand, Estonia and the United States of America: they have low taxes and high economic performance.

What does the member say to businessmen in Tallinn, Helsinki and Dublin, who would laugh hysterically at his inadequate proposals, which would do nothing to erode the competitive advantage that their countries hold over Scotland?

Mr Mather must be aware that business rates in Scotland are higher than those in the rest of the UK. That is a business tax that we could cut now. Business rates are a more effective weapon than corporation tax. Only one in four businesses in Scotland pays corporation tax, while virtually every business pays business rates. If we must choose a weapon to use, business rates are far more effective.

We have high business costs in Scotland, and we wonder why our economic performance lags behind that of the rest of the UK. Our business rates are higher; our water charges are, in some cases, excessively higher; our businesses are more strictly regulated than businesses down south; and we have a poorer transport infrastructure. We even heard a suggestion from the Executive at the weekend that business rates might have to go up to pay for higher education spending.

We do not want to hear from the Executive that we are competitive as far as business costs in Europe are concerned. We must compare ourselves with the rest of the UK, where costs are lower and economic growth is higher. Those facts speak for themselves. The Executive should be reducing business rates at least to the uniform business rate, thus restoring the level playing field with England that the last Conservative Government established. Our ambition would be to go further and to give Scotland a competitive business rate compared with the rest of the UK. We suffer because of our geography and our poor transport infrastructure. Why not compensate for that with a lower tax regime? Why not have an Executive that really fights the corner for Scottish business and wants to give it a leg-up rather than forever trying to pull it down?

Does the member agree with Robert Crawford, who described cutting business rates as nothing more than a red herring?

The member will not be too surprised to hear me disagree with Robert Crawford on that issue, as on other issues. I wonder how many businesses Mr Crawford has run. I remind the member that, at the last but one meeting of the cross-party group on the Scottish economy, Professor Sir Donald MacKay, the former chairman of Scottish Enterprise, came along with a powerful case that cutting the business rate was the most effective tool the Executive could use to increase growth in the Scottish economy.

I will touch briefly on regulation. I call on the Executive to support my proposal this week for a new test on how legislation will affect economic growth. At the very least, that would concentrate minds within Government on how its plans will impact on the economy. If the Executive is serious about its top priority being growing the economy, it should have no problem backing my proposal.

The Scottish economy underperforms that of our neighbours in England. We are losing our population, and the Executive seems unwilling to take any action to reverse the situation. The Scottish National Party is no better, being so obsessed by constitutional issues that it cannot see real solutions. In contrast, I have set out clear Conservative proposals on business rates, on regulation and on reducing water charges. Those proposals will make a real difference to the performance of our economy, and they will help to reverse our population decline. It is time for the Parliament to treat the economy seriously, and to back measures that will see Scotland flourish once more.

I move,

That the Parliament notes with concern the consistent underperformance of the Scottish economy relative to that of the UK as a whole; recognises that the burdens of higher rates, water charges and regulation faced by businesses in Scotland are factors contributing to this underperformance, and calls upon the Scottish Executive to take immediate steps to create a more business friendly environment by reducing business rates and water charges and cutting red tape, thereby encouraging business development, improving the outlook for economic growth, and contributing to a reverse in Scotland's trend of population decline.

The debate points up some important dividing lines, and provides different views of the state of the Scottish economy, of the advantages of devolution, of the way ahead to achieve long-term, sustainable economic growth and, not least, of what economic growth is for. Economic growth is the Executive's top priority, because we recognise that only by growing the economy can we close the opportunity gap, create greater wealth to be shared more widely, and give all our people the chance to do productive work and to enjoy fulfilling careers.

Growing the economy, however, is not something that Government can deliver at its own hand. It depends on businesses becoming more innovative, more productive and more competitive. The task for Government is to create the right environment for that productive economy to flourish. That is why devolution is so important. Scotland's devolved Government can focus its efforts on creating competitive advantage by investing in skills, in knowledge and in innovation. We can do that precisely because the macroeconomic levers of interest rates and wider economic and fiscal powers lie elsewhere. That division of responsibilities has helped to deliver the lowest levels of inflation, the lowest levels of interest rates and the lowest levels of unemployment in a generation.

Does the minister accept that it is essential to Scotland's economic growth and to achieving his aims that young people live and work in Scotland? What is the main reason that many young people leave Scotland to get their first job?

The Executive will lay out its plans to ensure that young people in Scotland can access the labour market and get the kind of jobs and careers that they want. It is by creating and increasing those opportunities that we can not only grow the economy, but grow the population and secure our long-term future.

Our job is to take advantage of the stable and strong macroeconomic circumstances by supporting those sectors of the Scottish economy that offer the best prospects of future growth and by ensuring that all our people have access to the labour market. Last year was challenging not only for Scotland, but for all the major global economies. As an open and globally connected economy, Scotland was not immune to those challenges. Despite that, the Scottish economy grew, even in the second quarter of last year, and employment remains at historically high levels.

The minister just mentioned growth in the Scottish economy, but we all recognise that, as Murdo Fraser commented, growth in Scotland is the lowest in the UK. Why is Scotland now at the bottom of the league, when it was among the top three or four regions for growth in the UK between 1992 and 1996?

We should focus on where we are and where we are going. This point in time, when the world economy is recovering, is our moment of opportunity. There is something peculiarly perverse about a unionist party that regards economic growth in England as proof of Scotland's failure. We benefit from economic recovery elsewhere in the United Kingdom, because the rest of the UK is our largest single trading partner. All recent surveys confirm greater business activity in Scotland in the last quarter of last year, improved prospects and expectations for this year, and renewed confidence in our manufacturing industry.

The issue is how to take advantage of those improving prospects. The Tory line is to cut public investment and support for business in order to fund cuts in business taxes. We will no doubt hear the same from the SNP. The Executive would rather maintain public investment and sharpen our focus yet further, to get better value for the taxpayer's pound.

Will the minister take an intervention?

I am afraid that I am short of time.

It is right to listen to business concerns and to act on them. That is why we have frozen business rates and introduced water charges below the rate of the retail price index this year, and introduced a new, low-user water tariff for 20 per cent of Scottish firms. When we listen to business, however, we do not just hear about taxation. We also hear that businesses want more investment in infrastructure and in addressing market failures. That is why the Executive will have a budget of more than £1 billion to invest in our transport infrastructure. It is why we will continue to invest in our skills and training agenda through the enterprise networks; in streamlining business support through the business gateway; in supporting innovative new firms through the Scottish co-investment fund; and in bringing Scottish science to market for Scottish companies through the intermediary technology institutes.

All of that is productive investment to strengthen the Scottish economy. Cutting those investments to reduce taxes—as the Tories would do—would send all the wrong signals to Scottish business. It would say, "There's nothing more for Government to do, you're on your own, and here's a few quid in your current account to help you get by." Instead, we should say to Scottish business, "We're on your side, we're in it for the long term, we'll invest in your success and we'll all benefit if you deliver." That way, we get the growth, we get the jobs, and we get the public services too.

I move amendment S2M-855.3, to leave out from "with" to end and insert:

"the evidence of an upturn in global economic activity and the opportunities for Scottish businesses and the Scottish economy to grow; rejects the proposition that increased competitiveness is best achieved by reductions in business taxation; believes instead that economic growth and wealth creation require targeted investment in skills and learning, business growth and innovation, and global connections, and supports the Scottish Executive's strategy of sustained investment in these areas to improve Scotland's competitive position in the global economy."

I welcome the debate as another chance for me to stake Scotland's claim of right to have the defining attribute of any economy: financial independence. The SNP is winning that argument, as with every passing day and every new retirement from public office, we see more and more converts to it. Those conversions are building up pressure relentlessly on those who continue to deny that most of Scotland's problems are caused or exacerbated by the Parliament's lack of power.

The Executive faces the invidious choice between accepting the logic of the SNP's economic case and continuing to produce more adverse data and yet more converts to our argument. Already a majority of MSPs are in favour of more powers, which mirrors the opinion of virtually everyone who has seen the SNP's economic case.

Will the member take an intervention?

I am going to crack on and make some progress first.

Ah.

I have only four minutes.

We are getting inexorably closer to the time described by Tom Nairn, who said that

"when things do alter, the new retrospect will make it seem that the former quiescence was intolerable—indeed almost inexplicable".

With that in mind, we are positive about the gradual migration from the Tories' previous inexplicable policies. However, today's motion from the Tories replicates the SNP's desire for lower business rates, thereby exposing an important difference between the SNP and the Tories. For the SNP, it is a declaration of intent and a signal of our perpetual commitment to improving Scottish competitiveness. Sadly though, without a vision, such as that of the SNP, for a strong, distinct Scottish economy, the Tories' proposals merely tinker with our limited powers and, as such, will never be enough. They reinforce our status as a branch economy.

Nevertheless, I refuse to paint the Tories into a corner, so I will not dwell too much on that point, or on the damage that previous Tory Administrations have done to Scotland. Instead, I look forward to the Tories' conversion on financial powers. I just hope that it comes soon, because the current Government is not delivering the results that the people of Scotland need. The only thing that the Government has delivered on the economy is more and more evidence that the status quo is not working—evidence such as its continuing record of low growth, the widening gap in average incomes within Scotland and in the rest of the UK, our declining population, the dramatic economic contraction of rural Scotland, and the rapid diminution of the private sector.

The member mentioned that a number of Tory policies were damaging to the Scottish economy. Does the member regret any of the trade union reforms that the Tories introduced?

Given the litany of such reforms, I will take some time to ponder that question, but I am sure that there are some.

It is time for us to take the advice of John Randall, the former Registrar General for Scotland, and the advice of Robert Crawford and William Baumol. We should take urgent steps to address the seriousness of the situation that we face rather than, to paraphrase the Executive amendment, crossing our fingers and hoping that other economies will create demand for Scottish goods and services and that Scottish skills and capital will stay here.

For our part, we can help; we can and must be non-proprietorial about the arguments that we have developed. We are keen for other people to share them as the basis for political consensus.

Will the member take an intervention?

On you go.

You are in your last minute, Mr Mather. You have 45 seconds left.

Right. I am sorry.

To that end, I offer our ideas as the basis for a political consensus that will withstand audit from home and abroad. We will continue to encourage the Tories to trust their commercial instincts and to appreciate the benefits of increased autonomy. We will encourage Labour to reconnect with the principles behind Scottish Labour action, and we will encourage the Lib Dems to recognise that a federalist party should not have to consult to prove that federalism is a good thing. Otherwise, we will delay the inevitable; the cause and effect of powerlessness is self-evident and its consequences for Scotland are dire. The clock is ticking and the Parliament is serving its purpose by eliciting and recording an accurate account of the eroding arguments in favour of that delay. Please support the SNP amendment.

I move amendment S2M-855.1, to leave out from "recognises" to end and insert:

"welcomes growing calls for the Scottish Parliament to enjoy the full range of tax powers available to Scotland's competitors, and recognises that only with the normal economic powers of an independent parliament will the competitive conditions be created in Scotland to reverse low growth and population decline."

A couple of references have been made this morning to reality checks. Looking at the motion and the amendments, I think that we need a reality check. The Tories and the Executive kid themselves when they talk about the growth of the economy under the pitiful powers of the Scottish Parliament. We all know that the Parliament cannot make even a marginal difference to the economy, which is controlled from Westminster, Brussels and Strasbourg. Our economy is in the hands of the Bank of England, the European Central Bank, big business, the International Monetary Fund and the World Trade Organisation. We are playing games when we talk about the economy in the chamber—that is the reality check.

Our amendment is about facing reality, being honest and not pretending. To talk about growing the economy within the straitjacket of the Scottish Parliament is like lifers in Barlinnie discussing their next holiday abroad.

Since we want to face reality, how would the Scottish Socialist Party fund any public services at all in Scotland after it had spent the whole Scottish block several times over on renationalising Scotland's banks?

The Royal Bank of Scotland and the Bank of Scotland make profits that are £10 billion greater than the national health service budget alone, so I am sure that there is plenty of money in the coffers.

Members have talked about population growth, but on the tinkering that is proposed by the main parties within the Parliament's straitjacket, I must say that I have probably contributed more to population growth through the hundreds of babies that I delivered as a midwife and through having two children of my own.

The unionist parties pretend that we can create a booming economy and deal with poverty, but the Parliament cannot increase pensions or introduce a decent minimum wage above the low-pay threshold, and the jobless have swapped the dole queue for poverty pay and huge debts. The Parliament cannot force the rich to pay even what was paid under Thatcher. The SNP might partly agree with that—I will leave the Tories, the Lib Dems and Labour to explain its conjuring tricks—but what kind of independent Scotland is it talking about?

The SNP trumpets and praises Estonia, but competitiveness means cheap labour and rock-bottom business taxes. Half the population of Estonia lives in abject poverty—that is not what I want in Scotland. The SNP worships the European Union and accepts the euro and the lock, stock and barrel transfer of economic control to the European Central Bank—that is a statement of fact. The SNP wants to compete with Estonia in a race to the bottom, with low wages and cheap public services.

Will the member take an intervention?

I do not have enough time. I have already taken an intervention.

EU countries are leapfrogging one another to reduce corporation tax to 18, 17 or 16 per cent, and the SNP proposes an even lower rate. All four of the main parties share the philosophy of giving more handouts to big business and they all adopt the begging-bowl mentality. We reject that.

Who will pay for our nurses, nursery nurses, firefighters and so on? Why do the Tories never talk about putting more money into the pockets of pensioners, women and the low paid, who would spend it and help to grow the economy? We could do that, even within the strictures of the Parliament, by scrapping the council tax and redistributing it to those who will spend it in the local hairdressers and so on. Instead, the other parties talk about increasing the wealth of those who are already wealthy. Why do they not talk about the means testing of big business? They are happy to talk about the means testing of pensioners, single parents and the low paid.

Other measures such as free child care might help; Sweden's gross domestic product is much greater than ours and it has free child care for all. Some 2.3 million working mothers in Britain take home only 10 per cent of their salaries.

The Parliament does not have the power radically to redistribute wealth, but even within the powers that we have we could scrap the council tax, introduce free child care and pay public sector workers a decent minimum wage—that is the reality.

I move amendment S2M-855.2, to leave out from "with" to end and insert:

"the complete absence of real economic powers for example in its inability to eradicate pensioner poverty by raising the state pension, its inability to raise the taxes of the rich and its inability to set a decent minimum wage rate for all workers in both the private and public sector and believes that it will only be when the Parliament has full control of fiscal and economic policy that Scotland will be able to achieve substantial and lasting economic growth."

We Liberal Democrats attach great importance to growing the Scottish economy—indeed, that is the top priority in the partnership agreement and it is backed up by action on a range of areas. Our approach recognises that there is no magic bullet for economic growth, and it is in sharp contrast to that of the Conservative party, whose one-dimensional approach to the issue is reminiscent of its economic record when it was in Government. I say to Murdo Fraser than one business going bust every three minutes of every working day and two of the worst recessions since 1945 are factual examples of boom and bust economics—I say no thank you to that.

Let us examine the substance of the Conservatives' main contention. Where is the evidence for their central claim that cutting business rates is the key to unlocking growth? Robert Crawford has been mentioned; speaking on "Newsnight Scotland" on Monday, he said that, in his view, the business rate issue was a complete red herring. He noted that if we ask people whether they want any particular tax to be cut, they will of course say yes. He raised the central issue of whether a cut in business rates would make a long-term difference to our competitiveness and he said that he had seen no evidence, anywhere in the world, that such cuts make a difference.

Alf Young, writing in the Sunday Herald on 12 October 2003, pointed out:

"Between 1990-91 and 2002-03, after allowing for inflation, the real income from non-domestic rates in Scotland and England, indexed to a common base, followed an almost identical path, with the tax income in England marginally ahead for two-thirds of the time."

The Federation of Small Businesses says that it would rather that funds were spent on key areas such as transport and skills. No less a person than John Downie said, in the Sunday Herald:

"it's about getting more bang for your buck in terms of economic development."

He also said:

"The simple truth is that lower rates cannot act as a miracle growth tonic for Scotland's economy."

Murdo Fraser told us in last week's Scotland on Sunday that he wants to cut business rates in Scotland to below the rate for the rest of the UK, and he told us about that this morning, but has he taken the opportunity to clear it with his UK colleagues? Liam Fox was certainly not aware of that policy when he indicated on Grampian TV's "Crossfire" programme that the new UK leadership disapproves of moves to deliver lower taxes in Scotland than those in the rest of the UK. If Murdo Fraser has Westminster ambitions, they are finished.

I am grateful for Jamie Stone's concern about my ambitions, but is he aware that we have devolution? Business rates are a devolved matter, and it is up to us in Scotland to decide how we fix them. What does he say to people such as Professor Sir Donald MacKay, former chairman of Scottish Enterprise, who says that cutting business rates is the most effective thing that the Executive could do to help economic growth?

Let us remember that Donald MacKay is the gentleman who was appointed by the Conservatives to run Scottish Enterprise.

Here is a key, killer fact: business rates today are lower than they were at any point under the Conservative Administration. Let us contrast that Administration with the work that the Executive is doing. We are taking action in several areas. We are committed to ensuring economic growth through "A Smart, Successful Scotland" and we are addressing the challenges that are posed in skills and higher education. We are looking at innovative ways to bring together economic activity and academic research through commercialisation in our universities and the groundbreaking ITIs; £450 million of new money will be put into research and development during the next 10 years. As Murdo Fraser knows, we are pursuing the massive opportunities that are presented to Scotland in renewable energy and green jobs.

We are listening to and acting on the legitimate concerns of business. Just this week, Jim Wallace announced that small businesses would benefit from reduced water bills through the introduction of new lower-user tariffs. That follows our introduction of the small business rates relief scheme, which the Federation of Small Businesses welcomed.

We are committed to Scotland's future. From transport to skills and training, from research and development to broadband roll-out and from promoting entrepreneurship to pursuing green jobs, the Executive is delivering economic growth through an holistic approach.

I must hurry you, Mr Stone.

We will not adopt the Conservative party's hotch-potch raggle-taggle approach.

Time is very tight for the open debate, so I must ask members to interpret four minutes as meaning four minutes.

When I read the Conservative motion and listened to Murdo Fraser's speech, I was reminded of the Conservative party's ability to reinvent itself and to repackage a product that the public have long since left on the shelf. That brought to mind the Tories' success in the middle years of the 20th century in changing their public image from that of the class warriors who delivered the mass unemployment of the 1930s to that of the Butskellite consensus seekers of the 1950s and 1960s. As members well know, the Tories are nothing if not brazen. Shamelessly, they are attempting to play the same confidence trick on the public again.

To agree to the motion, we would have to be convinced that the Tories are now and always have been the party of economic prudence, growth and stability, and the party that stands up for business, especially small business. That is Mr Fraser's pitch to members and voters, with all the genuineness of Del Boy Trotter but without the laughs. I gently remind Mr Fraser that the electorate have memories. They will not find his sales patter particularly funny.

The people of Scotland and of the rest of the UK remember only too well the true face of Britain under the Conservatives. They know that the Tory party was and remains the party of high inflation and soaring interest rates. They understand well that the Tories used mass unemployment as an economic tool. They have not forgiven and will not forgive the wanton destruction of whole industries and the communities that depended on them. They have not forgotten the heartache endured by thousands of ordinary householders who were trapped in negative equity. They are not unaware that the instability of the Tory years led to an abnormally high failure rate in the business sector, especially the small business sector. What is most damning for the Conservatives is the fact that the public know botched cosmetic surgery when they see it.

I will deal with some aspects of the Conservatives' effort this morning to reinvent themselves. Mr Fraser made great play of the necessity to reduce the burden of business rates, as he says that they contribute to what he calls

"the consistent underperformance of the Scottish economy relative to that of the UK as a whole".

What do seasoned observers make of that bold and radical proposal? Not much, it seems. We should listen to Mr Robert Crawford, who is late of Scottish Enterprise.

We have already heard from him.

This is a different quotation. He said:

"‘The question is whether or not in cutting business rates you are likely to make a long-term difference to the competitiveness of the Scottish economy.

‘Answer – there is no evidence that I've seen anywhere in the world that that makes a difference.'"

What of Mr Fraser's charge of consistent underperformance? No serious commentator doubts that our economy has problems, such as those in manufacturing. Alf Young recently noted the fact that those problems are caused largely

"by the rapid contraction of output from the silicon-based industries like computer assembly."

No serious politician in the chamber would argue that we should not strive consistently to encourage more economic growth and the jobs that would flow from that. That is the Executive's position, which is correct.

The Tory argument of consistent underperformance does not bear scrutiny. As Mr Alf Young said in his recent epistolary exchange with Mr Monteith,

"in terms of GDP per capita, Scotland is still more prosperous than Wales, Northern Ireland and six English regions. Only London, the south east and the east of England score better."

Too many people in Scotland in constituencies such as mine had their hope of a better life for themselves and their families extinguished in the Tory years. The people of Scotland will not buy the Tories' latest attempt to dress themselves up in a new political suit. What people will see is what we witnessed today—naked political opportunism. I am convinced that they will reject that at future elections, as members will surely reject it today.

There is a growing consensus in Scotland. The sooner the Executive takes its head out of the sand and gets behind that growing consensus, which has not gone far enough but is increasing, the sooner Scotland can move on. Consensus is growing behind the fact that the Scottish economy cannot continue to lag behind that of the rest of the UK and behind the fact that the decline in Scotland's population is becoming a national crisis.

Does Mr Lochhead accept that the population decline to which he has—rightly—referred is a consequence of a decline in the birth rate rather than net migration?

I agree that that is one factor.

I was told this morning that Aberdeen city, which includes the minister's constituency of Aberdeen Central, expects a decline of 40 per cent between 2000 and 2016 in the number of residents aged 30 to 44. That will cause enormous problems for the minister's city and constituency. The consensus is growing on that issue and on the fact that Scotland needs more powers to address such issues.

I would like one question to be answered. In Mr Lochhead's dream scenario of independence, with Jim Mather's attachments and all the rest of it, who would pay to decommission Dounreay?

I am thankful that some dreams come true and independence for Scotland is one dream that will come true soon. As an independent country, Scotland will be much wealthier. In the world wealth leagues, the best standards of living all belong to small independent countries in northern Europe, such as Sweden, Denmark and Norway. Surely it is ambitious of the SNP—other parties should share that ambition—to try to emulate that success.

If the Scottish Executive were not weak, it could boost the Scottish economy. We know that our fishing communities are suffering because the Executive allows the UK to lead in negotiations on fishing issues, when the Executive has full powers to take charge on those issues. Our fishing communities cannot exploit healthy fishing stocks in their traditional fishing grounds, 30 miles off their own shores.

The minister apparently takes a keen interest in the offshore industry, which is huge. It is the most valuable value-added industry in Scotland and is worth 130,000 jobs. It has capital expenditure of £3 billion a year, not to mention the multiplier effect of the 130,000 people who are employed in it. Despite that, the minister and the Executive never discuss the offshore industry in the chamber, although it faces massive challenges. The minister is vice-chair of PILOT, which is a joint industry-Government initiative, but we never have feedback on that. The subject is important.

I will give way in a second.

The minister can help the offshore industry on the huge issue of the downturn in drilling activity, which has led to considerable job losses in recent months and may store problems for the future. Of the 39 semisubmersible drilling rigs in the North sea, 19 are stacked—that means that they are not working. Of those 19, 11 are cold stacked, which means that they are blocked up for the foreseeable future and are not expected to be used. The minister is doing nothing about that huge issue and the UK Government will never do anything about it. The minister must put pressure on the London Government to introduce measures to stimulate drilling activity if we are to protect those 130,000 jobs.

The minister and his colleagues are fond of producing many glossy documents. We have never had one on the offshore industry, yet it is one of Scotland's most important industries. When will he intervene to address that? When will Jim Wallace or the First Minister, Jack McConnell, end the platitudes, demand action from the UK Government and produce a Scottish Executive strategy? After all, the Scottish Executive is responsible for economic development, education and training, all of which are big issues that can help the industry.

In a previous debate on the economy, Wendy Alexander said that the only factor that influences the offshore sector is the price of oil. I sent the Official Report of that debate around the industry, with which her comments went down like a lead balloon. She does not know what she is talking about.

Will the member take an intervention?

The Executive must start taking an interest in the offshore sector and do something for it, because it involves 130,000 jobs.

Will the member take an intervention?

I ask Wendy Alexander to sit down, please.

The Executive must do that to boost the Scottish economy.

A debate on the Scottish economy is welcome and worth while. Sadly, however, the debate has so far resulted in the Opposition parties getting into their entrenched positions and not taking the opportunity to talk about the strengths of the Scottish economy and the ways in which we can help to improve the economy further.

Bill Butler rightly pointed out that Murdo Fraser had some brass neck to criticise the current economic record of Scotland, given the Conservatives' record of failing Scotland over 18 years. Back in the 1980s, when the Conservatives were in power, unemployment in my constituency hit 20 per cent. It is currently below 3 per cent because of the successful economic management of Labour in Government.

Will the member give way?

I have only four minutes. I will, perhaps, give way later.

In revisiting the constitutional settlement, Jim Mather stuck to his usual position that the answer for Scotland is to cut the levels of taxation, especially business taxation. However, I challenge him and his colleagues on that point. We cannot have Scandinavian levels of public expenditure based on Irish levels of taxation.

When will Scottish growth match that of the UK under the current policy agenda? If the member cannot tell us that, can he tell me how long he is going to tolerate the continuing and widening gap between growth here and growth in the rest of the UK?

The signs of growth in the Scottish economy, based on recent figures, are encouraging. Bill Butler pointed out something that is often ignored by members. Although Scottish economic growth has been poor in recent years, overall Scottish GDP is still ahead of the GDP in most of England and in Northern Ireland and Wales. That fact is often ignored by members of the Opposition parties.

Even within Scotland, there are distribution issues around economic success, as Edinburgh and the Lothians are achieving a far higher degree of success than other areas. That is one of the issues that I wanted to raise with Murdo Fraser. If the way to population growth and economic success is lower levels of taxation, why are Edinburgh and the Lothians such a success at the moment? Edinburgh has economic growth and population growth although it is under the same taxation regime as the rest of Scotland.

The Tory motion is based on the false premise that, overall, Scottish businesses are taxed at a higher level than businesses in many of our competitor countries.

In England.

Well, that is false as well. That may be the case for non-domestic rates, but if all business taxation is taken into account—including taxation on transport—the taxation level in Scotland is exactly the same as it is in England and is still well below the taxation level in countries such as Belgium, Finland, France and Sweden.

The taxation rates in England are equivalent; however, if we add up the costs that are involved and the fuel that we use because of the miles that we have to travel in Scotland, our costs are astronomical compared to those in the south.

The overall taxation rate for all businesses in Scotland as a proportion of GDP is exactly the same as it is in England and, as I said a moment ago, it is well below the taxation levels in France and in Belgium, Finland, and Sweden—some of the small, independent countries that SNP members often cite. It is, therefore, a false premise to say that businesses in Scotland are taxed at a significantly higher level than businesses in England or in our major competitor countries.

The approach that the Executive is following, in continuing to invest in transport, skills and the strategy of "A Smart, Successful Scotland", is the correct policy for economic growth in Scotland. I encourage the Executive to continue with that strategy. It will be successful and will result in economic growth in Scotland, as exists across the rest of the UK. The policies of the SNP and the Conservatives are a distraction from the debate. If they want to have a serious discussion in future, they should take a more informed and constructive approach to the issue. I support the amendment in the name of the minister.

I am disappointed that we have lapsed back into the same old routine of having to hold such debates in Opposition time, given Mr Wallace's so-called Mansion House speech in September, in which it was stated that the economy would be a priority. It is all just words. I admire the Deputy Minister for Enterprise and Lifelong Learning, who is a true expert in filling a set amount of time with words; however, that is all that they are.

In previous debates, many issues have been talked about with the prospect of some immediate action, but nothing has happened. What better example of that can be cited than the improvements that Waverley station requires? That work is widely recognised as the single most important thing that could be done to the Scottish rail network to increase capacity, yet nothing is happening. When Sarah Boyack and I questioned the First Minister on that matter, he gave no hope of that project actually getting under way. That is the reality of Executive policies.

Perhaps Mr Mundell can tell us about the reality of Tory policy on the railways. How long would it have taken for the work on Waverley station to have been completed under the Tories, under whom investment in renewals and track fell to 1 per cent a year? Under the Tories, it would have taken 100 years to replace the track in the UK.

If Mr Muldoon looks back at the Tory Government's record on transport, he will see that when we said that we would do something, we did it. When the Executive says that it will do something, it just keeps on re-announcing it and coming out with study after survey after study. We did it; the Executive does not: that is the difference.

The difference in relation to the economy is the reality that people face in communities such as Sanquhar in Dumfriesshire, where, this week, 76 jobs have been lost at the Hydro Aluminium Extrusion plant. What better example can there be of the issue that Murdo Fraser raised in his opening speech of communities being affected by poor transport links? In an area such as Dumfries and Galloway, where the difference between business rates in England and Scotland really counts, that 9 per cent differential is the reality for people.

I am sure that David Mundell, as a member for the South of Scotland and as a Westminster aspirant, is well aware of the need for investment in infrastructure. If the Tories intend to cut business and water rates, are they advocating an increase in income tax to pay for that investment?

No. As I have made clear, I am happy for Scottish Enterprise Dumfries and Galloway's budget to be spent on the vital infrastructure that we need in Dumfries and Galloway, such as the A75 and the A76. I am happy to tell the electorate that, unlike some constituency members who go around defending Scottish Enterprise's unwillingness to fund the Clip ICT centre in Annan, which is vital to the community and provides the lifelong learning that we talk about so often in the chamber. The reality is that the budget of Scottish Enterprise would be far better spent on transport infrastructure and focused on developing the skills that we need. If we listened less to the likes of Alf Young and more to Murdo Fraser, the economy of this country would be in much better shape.

I am grateful for the opportunity to speak in the debate on a morning when every news report on the radio and television has talked of an upturn in the economy being reflected in the fact that the interest rate will have to be increased by 0.5 per cent to cool down that growth in the economy. That is a good background against which to have this discussion.

The USA and Japan have been recovering during 2003, and growth in our biggest trading area—the euro zone—is expected to be just 0.5 per cent, with growth rates of 0.4 per cent in Italy, 0.2 per cent in France and zero in Germany. In the context of the UK economy, Scotland benefits from the fact that it is not just about setting business rates, but about creating the whole economic background and taking a holistic approach. The Chancellor of the Exchequer has ensured that the British inflation rate has been at its lowest for 30 years and that interest rates have been at their lowest since 1955.

Right now, more people in Britain are working than at any other time in our history and economic growth is strengthening. While America, Japan and half the countries in the euro area have suffered recessions, the British economy has uniquely grown uninterrupted, free of recession, every quarter and every year since 1997.

Scotland benefits from the fact that, in Britain, growth this year is expected to be 2.1 per cent. Since 2000, Britain's cumulative economic growth has been stronger than that of Japan, the euro area and the USA. Scotland has now enjoyed the longest period of peace-time growth since the records began in 1870, more than 130 years ago. Looking forward, we expect Scotland's economic growth to increase by between 2 per cent and 3.5 per cent next year and to increase again by 3 per cent to 3.5 per cent in 2005.

During a world downturn, Scotland and Britain have achieved growth, with low inflation and high employment. Since 1997, inflation has averaged 2.3 per cent and the number of jobs that have been created now exceeds 1.7 million. In America, the unemployment rate is 6 per cent. In Germany, Italy and the euro area, the rate is 9 per cent, although in France, it is 10 per cent. In Britain, the unemployment rate is 5 per cent: for the first time in 50 years, unemployment in Britain is lower than it is in the euro area, Japan and America, which are our major competitors.

We have clear evidence of growth. The unemployment gap between the UK and Scotland is narrowing and is currently at its lowest since the mid-1990s. The survey that the influential Fraser of Allander Institute carried out on behalf of the Scottish Chambers of Commerce showed that, in the last quarter of 2003, Scottish manufacturers reported their biggest increase in orders and sales since 2000. Almost half of those who were surveyed were confident that that encouraging trend would continue through 2004, with exporters expected to make the biggest gains.

More evidence of economic growth is provided in the briefing that MSPs received from the Scottish Retail Consortium. According to the briefing, retail is hugely important to Scotland's economy and is one of Scotland's most successful sectors. The sector employs one in 10 of the work force, with 230,800 people working in 28,700 outlets across Scotland. Of particular note is the fact that Scotland's retail sector has shown consistent real growth, year on year. In 2003, retail sales in Scotland grew faster than those in the rest of the United Kingdom for the first time. That culminated in December, when total retail sales grew by 5.6 per cent in Scotland while they declined by 2.3 per cent in the UK as a whole.

Sustained growth in Scottish retail sales through the summer months and into September supports other evidence of growth in the Scottish economy. Scottish house prices, buoyed by favourable interest rates, continue to grow. In 2003, Scotland's house prices grew faster than those in the UK for the first time since 1995. Scottish house prices rose by an average of 17 per cent, compared with an average rise of 15.3 per cent in the UK.

I support the amendment in the name of Lewis Macdonald.

It is notable that the Executive has once again declined the opportunity to set a target for economic growth in Scotland, despite the fact that growth is its number 1 priority. I do not doubt that the Executive has growth as a priority, but I have doubts about its capacity to deliver on that. Perhaps the minister will tell us what the growth target is.

Actually, I am curious to know what growth target the SNP would set if it were in a position to do so.

Our growth target, which has been published on many occasions, is to be in that group of small independent nations within the European Union that, over the past quarter of a century, have successfully outperformed the UK and have significantly outperformed Scotland.

If we are to have a successful economy, we need to address a number of areas.

Will the member take an intervention?

No, thank you.

It is fair to say that the Executive has addressed some of those areas, but by no manner of means has it addressed them all. We need to tackle infrastructure problems. The Executive has done that to some extent, but it has not done so as well as it might. For example, transport is key to the area that I represent, but the arrangements that were recently announced by the Strategic Rail Authority involve a reduction in the maintenance of and future development plans for the lines north of Aberdeen. That will be a significant disincentive for people to move from using roads to using public transport.

I hope that, when the Parliament's overall powers and fiscal powers are reviewed, the Scottish ministers will try to retrieve the Parliament's transport powers. One of our previous First Ministers, Mr McLeish, told the Westminster Parliament that the Scottish Parliament would have control over railways, but that disappeared at the last minute when the Parliament was set up. Perhaps the minister will address that point.

I am concerned that we have significant deficiencies in training and skills. The Executive has tried to tackle the issue by providing targets for new apprenticeships and by encouraging enterprise and innovation education in partnership with Tom Hunter. However, there are two areas in which we have significant weaknesses. First, 30 per cent of our young people leave school with virtually no qualifications. Many of those young people live in areas of poor economic activity, the problems of which the Executive has tried to tackle by providing deprivation funding. However, there appears to be no mechanism for measuring the effectiveness or otherwise of that funding.

Secondly, at the other end of the scale are our entrepreneurial skills. Those might be best measured by the activity of our business schools, but our business schools have a very poor performance. The tables that were recently published in the Financial Times show that, of the world's top 100 business schools, Scotland has only one, which came 93rd—a position that had dropped over the past three years.

I ask the Executive to consider those issues. We need seriously to address the shortfall in skills, especially in some of our more deprived communities, where many people receive no training and are unable to take advantage of any opportunities that might come along. Why are we not encouraging more entrepreneurial development?

Finally, I want to mention the population situation. I know that the First Minister has approached the Home Secretary to seek a relaxation of the requirements for foreign students who come to Scotland, so that such students can stay here. Will the minister provide us with an update on where we are with that? In particular, I am concerned that, even if we had such a scheme, those students would just follow our other young people by, as Richard Lochhead mentioned, going south as soon as they have the opportunity to do so.

I welcome the opportunity to speak on the Scottish economy. Greens are sometimes portrayed as luddites who are anti-growth and anti-economy. Once again, let me put the record straight. Such a claim is absolute nonsense. Those who argue that case simply refuse to take the greening of the economy seriously. Economic growth can be a good thing, but not at any cost and not in any direction. Greens have always argued that there need be no contradiction between a healthy economy and a sustainable future. Indeed, it can be shown that economic policies that do not take account of sustainability are bad for business in the long term.

Growth in GDP is often used as an indicator of quality of life, but that assumes that all economic activity is good for us. The reality that must be acknowledged is that our economy is responsible for many of the environmental problems that affect us all. The biggest of those is our dependence on fossil fuels, which is driving climate change. Greens want to see economic progress that benefits all and safeguards the environment. That is a very different view of the economy from one that wants economic growth at any cost.

Will the member take an intervention?

I will not take any interventions. I feel that it is time for other folks to listen to what we have to say. We have a positive contribution to make on how we should grow the economy.

This is supposed to be a debate.

I realise that, but we need to get our point over.

Surely there must be more imaginative and effective ways for us to measure the quality of life in modern 21st century Scotland. An improved quality of life is the measure that will help to reverse the population figures.

There are many reasons to be optimistic. The remediation of the very problems that I mentioned provides real opportunities for Scottish businesses and industries. The recent WWF report showed that areas such as waste reduction, renewable energy, public transport and energy efficiency could create 50,000 jobs in Scotland over the next 10 years. That is the economic growth that Scotland needs. A recent members' business debate in the chamber heard how jobs in heavy engineering are being created by the offshore renewable energy industry. The potential for Scotland is enormous and is being noticed in the oil industry in Aberdeen. I am very encouraged by that.

A zero waste policy in Scotland could create 10 times more employment than the current landfill and incineration-based waste policy. Zero waste is being embraced as an opportunity by some of the most successful, innovative businesses around the world. What do they know that we do not know?

Scottish Enterprise is Scotland's economic development agency, tasked with developing a modern economy that is competitive at a regional and an international level. Unfortunately, its remit and performance indicators pay scant regard to environmental factors that we cannot ignore. It is time that Scottish Enterprise joined the 21st century and recognised both the threats and, importantly, the opportunities to be faced in developing an environmentally sustainable economy. The Scottish Executive must provide strong leadership on this matter.

The motion that we are debating condemns regulation as a millstone around the neck of business. That is true luddism. As long as businesses prioritise the interests of shareholders above all else, they will need effective, responsible regulation to ensure legal, social and environmental accountability. We need look no further than the examples of Enron and WorldCom to see the disastrous consequences of ineffective, weak business regulation.

I welcome Murdo Fraser's motion, especially the departure that it marks from what Brian Monteith said this time last year. One assumes that Michael Howard has cracked the whip as far as fiscal freedom is concerned and recognises that that way lies an economic abyss. We can now welcome the Conservatives back to real-world economics.

The only way the SNP can bring together the opposing strands of its economic strategy is by looking through the wrong end of a telescope. It prefers to talk about small independent countries and different parts of the world, rather than pick up on the issues that Bristow Muldoon very properly raised. There are different countries, with different kinds of policies that have different sorts of outcomes, but the SNP groups all those countries together and says that they are all doing better than we are, although when one examines what the SNP says, it can be seen that that is not true.

However, the SNP does not want to talk about Scotland in reality. It wants to talk about its vision of Scotland, but it does not want to talk about what we do now in the real-world Scotland and about what the real economic strategies are. That indicates a genuine lack of self-awareness, which was displayed very well by Fergus Ewing in his answer to Carolyn Leckie's question. How does Jim Mather intend to deliver the existing level of public services if, by separating Scotland from the rest of the UK, he will be starting with minus £2 billion?

We would do that by creating the virtuous circle of having a bigger tax take, paying less in benefits and being able to fund public services so that we invest in development, rather than simply handle failure. Given Des McNulty's touching faith in the status quo as a formula for economic governance, can he say which countries are queuing up to emulate Scotland?

Wales. [Laughter.]

Scotland does pretty well—Wales is a very good example of a country that is seeking to emulate it. Regions of England are examining the arrangements that we have in Scotland and the ways in which devolution might deliver greater economic scope for them. I return to the Tories, whose motion I am addressing. I do not want to deal with froth, which we get from the SNP week after week. We get the same stuff.

It is possible to argue that reducing business rates is the key to economic growth. Unfortunately, there is not much evidence to support that proposition: Murdo Fraser attended Paul Krugman's lecture a few weeks ago and Paul Krugman made that point very clearly.

When representatives of the Confederation of British Industry Scotland appeared before the Finance Committee in the previous session and were asked what their priorities were, they said that they were better transport, enhancing skills and there being no significant variation between the financial and economic arrangements of Scotland and those of the rest of the UK. The CBI Scotland wants the most level possible playing field. We can talk about how best to achieve that and there is a real debate to be had between Labour and Liberal Democrat members and the Conservatives. I welcome Brian Monteith back to that debate—I am delighted that he is here.

The member says that there is little evidence to suggest that cutting business rates will improve economic growth. Does he agree that there is a significant body of evidence to show that increasing business rates damages economic growth, which is what the Government has done?

Brian Adam will confirm that our economic experts indicated that the evidence does not suggest that and that marginal tax rates were not the key issue in determining business performance. In my view, the key issues are the level of innovation, the kind of thinking, the types of skills that we have, the infrastructure that we can put in place, our confidence in ourselves and the way in which we integrate ourselves into the UK and Europe, which are the real markets in which we operate. That is the vision and the task that exists for Scotland. If we walk away from that and engage in a theoretical process, we will not deliver for the people whom we represent.

My area of Scotland needs Scotland to grow. I want us to focus on the real tasks that lie ahead, rather than engage in a silly knockabout.

One issue that I did not mention in my opening speech was the artificial depression of Scotland's gross domestic product by the billions of pounds in corporation tax that are paid to London, on the back of work that is done by workers here. For example, BP's annual profits are £6.9 billion. It pays corporation tax on that and that goes to London. The annual profits of Sainsbury's are £677 million and, again, the corporation tax on that goes to London. That creates an artificial depression that does not reflect the contribution that workers here in Scotland make to the economy—we do not see that money back in Scotland.

I have some sympathy with small businesses. Business rates are not progressive and should be based on ability to pay. I would like bigger businesses to pay more as a proportion of their profits. Smaller businesses, such as hairdressers and chip shops, pay far more than big businesses as a proportion of their profits.

Will the member give way?

No. I do not have enough time.

It is a bit of cheek for the Tories to talk about progressive forms of taxation when they gave us the poll tax and the Tory council tax and it is a cheek for them not even to acknowledge that. It is also a cheek for the Executive not to have any proposals to abolish the Tory council tax. The Executive defends the council tax—in fact, Andy Kerr even defends the poll tax.

Our proposals would boost the economy. Under a Scottish service tax, 77 per cent of Scottish people would be better off, 7 per cent would pay the same and 16 per cent would pay more. There is no problem with that, because the 16 per cent of people who would pay more can afford to do so. The introduction of a Scottish service tax would free up money to invest in the Scottish economy and it would be spent, rather than hoarded by a tiny clique that has far too much already.

The minister referred to the fact that the transport budget is £1 billion. What a laugh—he proposes to spend £0.5 billion of that money on 5 miles of road. For whose benefit will that be spent? It will not benefit the vast majority of Scotland's population.

The low pay that is endemic in this country is an absolute scandal. Ninety per cent of the jobs that are advertised in job centres are advertised at £5.55 an hour or less. In 1994, 33 per cent of the poor were in work. Now, 41 per cent of the poor are in work, which is an absolute shame. An increased minimum wage, set at two thirds of male median earnings—the low pay threshold—would save money on council tax rebates, which would not be necessary if we abolished the tax. That would also save money on housing benefit and Department for Work and Pensions payments and lead to lower health expenditure by seriously reducing poverty, rather than just playing at doing so.

Parliament has fewer powers than even the Isle of Man. Let us wrest power from the Bank of England and from Westminster, so that we can seriously redistribute wealth, boost our economy and means test big business in order to put more money into the pockets of the majority of people, who will spend it, rather than into the pockets of a tiny clique, who will hoard it.

The debate has been good and constructive.

I will deal with a couple of points in my wind-up speech. The Tories' motion calls for cuts in business rates and water rates. That is a perfectly credible position to take and this morning the Tories have argued vehemently that that is the right way to go. It is surprising, however, that in their 2003 manifesto the Tories did not even mention water rates, never mind refer to cutting them, and that they proposed only a small reduction in business rates in order to restore the UBR. Murdo Fraser went much further in today's debate.

Does Mr Lyon appreciate that at the time of the elections in 2003 the vast increases in water charges that have taken place since then were not the political issue that they are now? What does he propose to do to reduce the burden of water charges on small business? The Executive's proposal is described by Bill Anderson as

"the sort of thing that gives politicians a bad name".

I am sorry, but if Murdo Fraser did not understand that there was an issue in the business community about water rates at the time of the election he must have been asleep.

As my colleague Jeremy Purvis said last week during the budget debate, if Scotland's business community are to take the Tories seriously they must produce an alternative budget that details where and by how much they would cut from our schools, hospitals, police forces and roads to fund their proposals. It is clear that if they are not honest enough to show us how they would fund their spending plans, the business community will conclude that the Conservatives are indulging in gesture politics.

The member is right to suggest that we should publish such details; they were published during the Scottish Parliament elections of 2003. Funding for cutting business rates and for investment in roads was readily explained but, of course, the cuts in education and health spending were not explained because none was proposed.

The Tories' position then and their position as outlined today are fundamentally different. In the middle of a budget debate, it would do the Tories good to explain where they would make cuts in order to give back the savings to industry. That would give them a much more credible position.

Murdo Fraser perhaps gave the game away on "Newsnight Scotland" on Monday night, because he promised that the Tories would turn Scottish Enterprise into a training agency. Even more bizarrely, he claimed that the private sector would set up and pay for its own enterprise agency to replace it. Is that really credible? Are a number of Scots companies really willing to put their own hard cash into helping to set up new companies and start-up operations, to invest in bringing broadband to all Scotland—when the private sector cannot currently deliver that—and to fund ITIs to improve our woeful research and development record? I do not think that such companies are out there. Perhaps Murdo Fraser, Brian Monteith or whoever winds up for the Tories will name them. Under the Tories' plans, it is clear that in Scotland we can forget about broadband being rolled out throughout the country, we can forget about improving our R and D record, we can forget about there being any help for our business start-ups and we can forget about lifting Scotland's economic performance.

Let us remember that Scottish Enterprise was born under the Tories. It was their baby, but they appear to have turned against their adolescent offspring. Scottish Enterprise has undergone substantial change in the past four years: it has refocused its role to try to face up to the challenge of a knowledge-driven global economy. It has slimmed down, squeezed out costs, introduced performance audit where previously there was none and pulled together the autonomous local enterprise companies to ensure that they are all rowing in the same direction. That has all happened in the space of four years. I would have thought that the Tories would have lauded that type of action in a public sector body. I hope that colleagues in Parliament from all parties agree that now that a new chief executive and chairman are in place at Scottish Enterprise it is time to step back and let them get on with the job. I support the amendment in the minister's name.

I start on a consensual note by saying that it is a pleasure to see Bill Aitken back in harness.

It is perhaps unfortunate for Bill Aitken's party that he did not contribute to the debate, and that we had the ambitious proposition put forward in the motion by the Conservatives that high rates are disastrous. I say "ambitious" because although the Tories are now in a state of permanent opposition—assisted by the proportional representation system that they oppose—they behaved slightly differently when they had the opportunity in power. For 16 out of the 18 years in which the Conservatives were in power, business rates in Scotland were higher than those in England. Not only that, but Craig Campbell computed over-taxation in the period 1990-95 as being £1.2 billion. That money came out of the Scottish economy from Scotland's businesses. The Conservatives are attacking that which they applied in Government—they say one thing in opposition and they do the opposite when they are in power.

Does Fergus Ewing appreciate that throughout the 1990s we steadily reduced the business rate year on year until we achieved a level playing field with England? Will he give credit where it is due?

No I will not, because it is a matter of fact that, for 16 out of 18 years, business rates in Scotland were higher than they were in England. I am glad that Murdo Fraser asked the question—I had thought that he would, so I have an answer ready.

In 1995, when Ian Lang was setting the rate for that year and for the first time bringing Scotland's rates down to the English levels, he said that he could have set the rate lower than that in England. Do members know why he did not do so? He said that if his Government did so, another Government in 2000 might come along and continue decoupling business rates. Of course, that is exactly what Jack McConnell did with Jack's tax, by giving Scotland's businesses more. What Ian Lang predicted came true, but instead of getting the lower business rates that we should have had in 1995, we achieved balance and equivalence in the level of business rates only in year 17 of 18 years of the Conservatives being in power. The little word that

"starts with ‘h' and finishes with ‘y'", —[Official Report, 15 Feb 2001; Vol 10, c 1300.]

and is not Henry is one that the Conservatives should take care about.

We are concerned about the burden of regulation. I am glad to see that Mr Wallace is back, so I will highlight an issue about regulation that was raised by the Sunday Herald and, in particular, I will mention the comments of Peter Hughes, the chief executive of Scottish Engineering. He spoke about the Scottish Environment Protection Agency, which in Scotland charges £7,500 for a licence under the control of pollution regulations, as compared with a charge of £2,000 for such a licence in England. The article states that Mr Hughes compared SEPA to

"a mosquito sucking the life blood out of the Scottish economy and picking over its bones."

That may be going over the top—I am never one for hyperbole myself. However, it seems to me to be an illustration of a very serious problem in Scotland.

Will the member take an intervention?

No.

That quotation illustrates that the quangos are out of control.

I will close by asking whether, in replying to the debate, the Deputy Minister for Enterprise and Lifelong Learning can explain the point of the enterprise team's existence when it cannot remove such an obvious unfairness as businesses in Scotland paying a levy that is about 400 per cent higher than the same levy in England.

If he cannot deal with the unfairness that Mr Hughes has identified and that the Sunday Herald rightly publicised for two weeks running, what is the point of the so-called minister for enterprise in Scotland? More and more businesses want to see all parties standing up for enterprise—that is not happening under the Executive.

Growing the economy is not just about statistical indicators going in the right direction. It is about real people, real jobs and real businesses.

We recognise that the best way out of poverty is work and that the best way to tackle disadvantage is to create jobs and give people the opportunity to take up those jobs.

The idea that Government can support business growth and improve skills and enterprise while cutting our enterprise budget simply does not add up. Of course, Government can reduce the burdens on business and it can support the small firms for which business rates and water charges are proportionately more significant: that is what we have done.

However, to take millions of pounds away from public support for business for a bit of short-term popularity is no answer at all. Our focus must be on the long term.

Will the minister take an intervention?

No.

The usual red herrings about red tape have been trotted out—if that is the appropriate phrase—in the debate. Nobody would argue with the proposition, for example, that regulations should exist only if they serve a purpose. However, no responsible business seriously wants health and safety, consumer protection and employment rights to be thrown away in pursuit of an easy life with fewer forms to fill in. Responsible businesses want less duplication and they want processes to be speeded up. That is what local economic forums have told us since their recent establishment and that is what we are enacting through the single business gateway and the single entry point for businesses in the Highlands and Islands.

Businesses want the planning system to be brought up to date and we intend to do that in order to reduce the burden of bureaucracy in the planning process, while maintaining a balance that protects the interests of the environment and of communities. It is interesting that Murdo Fraser says that he wants fewer burdens on business, given that not very long ago he argued in the chamber that the hurdles in the planning system should be made higher and harder for Scottish companies that are developing wind energy projects. The Tories offer less red tape in theory, but more red tape in practice.

Does the minister think that a third-party right of appeal would make the planning system more or less business friendly?

We are listening carefully to business on all the issues that relate to the modernisation of planning and we will consult on all those issues. We will seek to strike precisely the right balance between the interests of business and development and those of the environment and communities. We do not intend to follow the suggestion that Murdo Fraser made to create additional hurdles in the planning system.

The Tories argue that we are wrong to pick winners in the Scottish economy. That fits with their philosophy and their track record: keep out of the way, let the market pick the winners and there will be no skin off the Tory nose if the result is that local economies collapse and millions become unemployed. That simply will no longer do.

The enterprise networks have put in place ITIs in energy, life sciences and information technology. We are backing those with £450 million of public money over the next 10 years. We are picking winners: we are supporting industries in which Scotland is already strong, and we can achieve a world market advantage if we back Scottish companies that are commercialising Scottish science and research. The energy industry is one such example—I remind members that we have debated in Parliament an Executive motion on oil and gas, which recognised that the last thing that the oil industry wants or needs is one fiscal regime in Scotland and another in England. The economic and political stability of the United Kingdom is the North sea's greatest strength in attracting mobile corporate oil industry investment.

We pick winners through the small firms merit awards for research and technology—the SMART awards—which I announced earlier this week, through the pipeline of support for innovative Scottish companies and through the £43 million of public money that is rolling out enterprise education in our schools, levering in private funding, giving young people the opportunity for hands-on skills and supporting a culture of problem solving, enterprise and initiative.

We have the highest-ever level of investment in our transport infrastructure and we are rolling out broadband connections. We have a target of 30,000 modern apprentices in training, but the Tories left apprenticeships pared to the bone. Do not tell the Tories, but ours is the kind of investment that Scottish businesses want.

We are funding the trade union learning fund. In recent months, I have spoken at two training days in my constituency, which were organised by Amicus and the Graphical, Paper and Media Union. Those training days were not just about trade unionists who wanted to improve their skills and learning; they were about employers, who were there to work alongside their employees and to share our agenda of training in partnership as the best way to grow their companies, their industries and the economy as a whole.

No doubt that is a bit too much modernising for the Tories. They would rather stay behind the old ramparts and argue that business and the public sector should not get involved with each other. They argue that everything will be fine if we just cut the tax bill a bit. Maybe in the concluding speech we will hear what investment they would abandon to pay for their tax cuts—but maybe not. Either way, they are the same old Tories making the same old mistakes and the Scottish people will not be fooled.

I think that the debate has been very useful. It makes a change to have a debate on the economy and I am sure that we will have many more such debates—we certainly will if the Conservatives have anything to do with it.

The debate has been particularly useful because it has flushed out the Scottish Government's real views on economic policy. The minister talks about growing the economy, as if it were something in a flower pot that just needs us to add some Baby Bio for it to grow a little more. Of course, things are not quite that simple. The Government's amendment betrays its conceit that politicians can, with the munificence of Government, direct, plan, manage and indeed grow the economy. The amendment takes no account of international experience or of Scotland's relative uncompetitiveness, and it relies on world economic growth to bring about Scottish economic growth. Thereby lies the folly of the failure to understand what Scottish business needs: Scottish business needs to prosper in every market, irrespective of the economic conditions.

Will the member take an intervention?

I must make progress. I might come back to Mr Stone later.

Of course, one of the central debates today has been about business rates. Murdo Fraser was correct to point out that one in four businesses in Scotland pays corporation tax, but that practically all businesses pay business rates. Business rates are important because they hit the bottom line. They are a fixed cost that the many businesses that have to make investment decisions—and are cash strapped, under pressure or in a difficult economic position—cannot do much to change. Businesses can, however, change their investment decisions and they can change the number of their employees. The reduction of the business rate is one important change that Government can make to help business.

On the record, on "Newsnight Scotland", Murdo Fraser said:

"Businesses can pay for an enterprise agency."

That would be an additional tax and an additional fixed cost. Does the member dissociate himself from that remark?

No, I believe wholly in partnership between business and Government and I have every reason to believe that businesses would look after their interests far better than the current Scottish Executive does.

One aspect of the debate has been the mention of a variety of gurus. Alf Young, that well-known physics graduate and Labour researcher, was trotted out in defence of the Executive. Robert Crawford, a former Scottish National Party researcher and a business consultant whose record of hiring other consultants is unequalled, was also mentioned. We believe that Professor Sir Donald MacKay is a far more esteemed economist and knows far better what he is talking about when he says that cutting business rates—or indeed abolishing them, as he argues—would do far more to revitalise our economy than what is being done. Why rates? Rates are important because they are one of the few levers—

Will the member take an intervention?

Just wait until you hear this.

Rates represent one of the few levers that the Scottish Executive has readily available at its disposal and they have the most direct impact on business.

Did Professor Sir Donald MacKay once, during his many years as chairman of Scottish Enterprise, suggest that business rates should be abolished, which is the policy that he now advocates? He was, of course, a Tory appointee throughout that period.

It is notable that he was sacked by Labour. I recall that Sir Donald MacKay—an economics professor—often talked in his lectures at Heriot Watt University about cutting rates and business taxes and about the ineffectiveness of Government in helping business.

During today's debate we have heard a lot of economic statistics about how good growth is and how well the UK is doing and we have sometimes even heard about how well Scotland is doing. All those statistics missed the point, which is about Scotland's performance relative to the UK.

There is no key policy. We do not say that cutting business rates is the only policy; of course there are others. However, I noticed that the SNP offered nothing on economic policy in today's debate, but talked only about how it would divorce Scotland from its most important market. There is no willingness on the part of the SNP to explain what it would cut and by how much. Bristow Muldoon was right—although it is about the only point on which he was right—to say that we cannot have an economic policy that proposes the taxation levels of Ireland and the spending levels of Sweden.

It is quite clear that there is a real choice between the Government of Labour and the Liberal Democrats and the Opposition of the Conservatives. It has been recognised today that we offer a genuine alternative; I look forward to putting that alternative to the people in the future.