Scottish Economy
Good morning. Both of this morning's debates are heavily oversubscribed, so I am going to make a quick start and appeal to the opening speakers to take less than their allotted time. There is no chance that everybody who has asked to speak in either debate will be able to speak.
The first debate is on motion S1M-3376, in the name of Andrew Wilson, on the performance of the Scottish economy, and two amendments to that motion.
Today's debate, as with all Scottish National Party debates on our economy, is about bridging the gap between Scotland's mediocre economic performance and our enormous economic potential. It is a debate that will resonate beyond today, throughout the Scottish general election campaign and on into Scotland's future, as it must if we are to transform our country's long-term underperformance and acceptance of underachievement.
Inevitably, the debate rests upon the key question of whether we have faith in ourselves to show responsibility and self-reliance and to seize the initiative on our standard of living and national success. I know that many in the chamber do not have that faith. They are the doubters and cynics that have dogged Scotland's story for so long. I hope that the Parliament can break through the national self-confidence ceiling, the glass barriers that are breaking us and preventing us from achieving all that we can. Scotland should have confidence because it has all the attributes for success, bar one.
We have an international brand—we are one of barely a dozen countries in the world that means something to almost everyone on earth. We have the reputation for integrity that is so important in the modern, globalised knowledge economy. We have always had great people, but too few of them are getting the opportunities at home that they deserve.
We have a good location, but are inhibited by poor transport links. We have a superb environment and enormous natural resource strength, but so many countries are more successful than Scotland without having the blessings that we enjoy. We have many great industries that are doing well, despite the odds. Our economy is not overheated and it has the potential for rapid growth on the back of the reservoir of emigrants who could be tempted to come back to Scotland.
We have abundant potential, but we lack the leadership and government to secure the means to achieve that potential. Our established political culture remains wedded to addressing the symptoms of our relative decline, rather than to tackling its root causes head on. Palliatives are provided, rather than solutions to the problem.
The national problem is there for all to see. We will hear many economic facts and figures in today's debate, but our core problem and the core measure of our problem is found in the declining and aging population. The average Scot is expected to die two years earlier than his neighbour in England. In independent Norway, people live an extra three years. In Glasgow, a person can expect to die 10 years earlier than if he or she had, by accident, been born in Dorset. It is those health, wealth and life gaps that we need to transform. The giggling of the Liberal Democrat members shows that they do not know what matters in life.
Will the member take an intervention?
I am not interested.
The SNP has been working hard on its initiative to place the Scottish economy at centre stage, as have a host of others throughout the Scottish community. The issue is not about business versus the public services; the truth is that we need a vibrant economy if we are to secure sustainable investment in public services and to reduce dependence—which too many people have—on services.
Despite a few chinks of light from the recent U-turns—I hope that there will be more U-turns to come from the Government today—complacency is rife throughout the Labour establishment and its all too pervasive network of influence. According to The Herald of 6 May, the former—and much-missed—Minister for Enterprise, Transport and Lifelong Learning said:
"I can't get the growth issue on the agenda."
She went on to add that
"The First Minister does not consider economic growth to be one of his top priorities".
What are we to make of her successor? On the Sunday on which he was appointed, he declared it was "steady as she goes" for the Scottish economy, just as it was heading steadily from flatlining mediocrity into actual recession. He then reacted to that recession by saying that we were still well placed.
Jack McConnell himself said that the economy was getting better, just as the statistics that were being crunched showed that the economy was plunging into the red. In his statement to the Parliament in Aberdeen, the First Minister said that
"the strong and stable economy that our partnership in the United Kingdom brings"—[Official Report, 30 May 2002; c 12389.]
would see us through. Stability and strength? The reality is mediocrity and growth that is well behind that of our competitors over a protracted period, which is giving us continuous relative decline and unacceptable widening of the wealth gap, the jobs gap and the life-expectancy gap.
Only a few weeks after Jack McConnell made that speech, we were to learn that the country had entered recession for the first time in two decades: back to the bad old days of the Conservatives. What does recession mean? It means a fall in output in two consecutive quarters. That is a technical point, but if one examines the longer term it means an annualised growth gap between us and the rest of the United Kingdom, an 80 per cent fall in inward investment, and research and development rates that are well behind those in the rest of the UK and Europe.
The manufacturing fallout is felt in chemicals, metallics, engineering and textiles, which are all in recession. The fallout has spread to tourism, agriculture, construction, mining, consumer goods and investment goods, which are all in recession. Business start-ups are down and liquidations are up. New-firm growth has slumped by 80 per cent, according to Business a.m. The response of the First Minister and the Minister for Enterprise, Transport and Lifelong Learning to all that was to reconvene a sub-committee.
Will the member give way?
No.
In the job market we are feeling the longer-term pinch from mediocrity. In the past four months, unemployment has risen to third highest in the 12 UK regions and countries. Our rate is much higher than the UK average. If we bridged the gap, there would be 32,000 fewer Scots on the dole than there are at present. For every 175 net new jobs created in the UK since 1995, Scotland has created only one—that is our employment gap. If we had the same employment rate as the rest of the UK, there would be 42,000 more Scots in employment. Self-employment has fallen by 21,000 in the past four years. In the past three months alone it fell by 6,000, which points to the fact that the problem is long term, deep seated, structural and will not go away.
Behind the headlines—and arguably more important—is the long-term picture. Output in the latest quarter was down, having barely got back to where it was 25 months ago, which represents, in effect, a standstill in the Scottish economy over two years. In the even longer term, our appalling trend rate of growth of barely 2.1 per cent, or 1.9 per cent if one looks further out, is at risk of falling further. That is the real picture, and we must acknowledge it if we are to do anything about it.
How do we transform the picture and deliver consensus for growth? Scotland can do better, but we need our political leaders to build consensus of ambition for Scotland that will promote self-responsibility and self-reliance and end our dependency culture. We must win people over to the argument that building for growth and success is not a zero-sum game. We must take decisions now that will reap rewards in the future, and in the short-term future at that, because the prize that is before us is enormous.
Over the past 10 years, if we had kept pace with growth in Ireland there would be £42 billion more in the Scottish economy. The tax revenues that that would release—with no change in current tax rates—would nearly double the Parliament's budget. If we had kept pace with even the relatively slow growth of the UK over that period, we would have £3 billion more in our economy and more than £1 billion more for public service investment. If we had managed to reach our goal of doubling our trend rate of growth even over the past 10 years to a level akin to that of Australia—a country that is populated by immigrant Scots—there would be £16 billion more in our economy, which would yield more than £6.5 billion of new money per year for investment. That more than swamps the alleged and nonsensical deficit that Labour politicians parrot—a deficit that itself is evidence of their failure to get the economy moving.
Of course, no Government can deliver economic success, but it can play a huge part in creating the conditions for success or failure. Our plea to everyone here today is to keep an open mind on the issue, in relation both to the limiting of powers that would enable the Parliament to turn the situation round and, more important, to the potential that we could release were all the tools that we need at our disposal.
In the words of the well-respected journalist Alf Young, who is not known for his SNP credentials:
"Under the terms of the Scotland Act the Executive's economic powers are modestly micro".
With the best will in the world, the best ministers in the world, the best development agencies and the best chief economists in the world, this Parliament and this Executive cannot deliver, because the truth is that, as things stand, the status quo is unsustainable. It guarantees continued relative decline and it guarantees to box in our potential. This Parliament has fewer economic and financial powers than any other parliament on earth. The UK system of government is out of date, centralised and bureaucratic. Although we have devolved political policy, we have not devolved finances. We need to complete the picture.
All the economic growth in Britain is concentrated in the wealthy epicentre of London and the south-east—it has been like that for decades. In a uniform financial system, the metropolitan centre has an immense advantage. It is the centre of political and business power, finance, the media and transport, and it has the greater volume of wealthy consumers. However, it has broadly the same tax position as Dundee or Glasgow, if we ignore the fact that in Scotland Labour-imposed council taxes are twice as high and business rates are nearly 10 per cent higher. That produces a gravitational pull out of Scotland through which we lose talent, headquarters, skills, business and investment. The quid pro quo has been an alleged fiscal transfer. Even if that were true, it has evidently not worked. We need the power to place ourselves at a competitive advantage; we do not need public subsidies to keep us comfortable in our underperformance and relative decline.
I welcome and embrace many of the initiatives that the Government has promoted on the supply side; many are initiatives for which we have called for many years. Scottish Development International is an excellent idea and we hope that it does well. Technology institutes are an excellent idea and are well worth the risk. Regional selective assistance reform is good and overdue, but utterly marginal. Putting skills and science at the heart of our agenda is correct and we support that.
We all acknowledge that we must compete internationally on the basis of knowledge and skills. A consensus about that has existed at the core for some time. However, we must open our eyes to the fact that all such measures will operate at the margins until we have the financial powers to compete that will underpin those measures. Until then, we run the risk of being the victims of our own success through training people to have transportable skills and losing those people to the brain drain; through starting new ventures only to see them taken over and migrated south and through having the commercial benefits of innovations externalised. That has been Scotland's story for decades and, within the current constraints, nothing will turn that around.
Surely we all now acknowledge the problem of underperformance. Our positive plea to everyone is that they recognise the causes of that problem. We all have a responsibility to play our part in transforming the political culture and in delivering ambitious and imaginative leadership. Now that all of us appear to have opened our eyes to the existence of a problem, we must open our minds to the limits of the existing powers and to the potential to achieve much more with the full powers—the complete toolbox, we might say—of independence.
We should place the imperative for economic transformation at the top of our agenda. We should set ourselves an ambitious target for growth and build consensus throughout the nation to achieve it. After that, we can have a focused, mature and open-minded debate about the policies that we need to get the economy growing.
Our position is clear. On the supply side and the limited powers that are at the disposal of the Minister for Enterprise, Transport and Lifelong Learning and the Executive, we stand four-square behind the guts of the strategy for a smart and successful Scotland. We will have constructive suggestions to make, but the strategy has the shape of what we and others have wanted for many years. However, for that strategy to chime and deliver, we must equip ourselves with the power to place Scotland at competitive advantage financially and economically. We need to cut the taxes on growth that hamper our ability to close the wealth, health, jobs and employment gaps that exist between us and the rest of the UK and Europe. We need to set our business rates below UK rates, rather than merely announce a headline that we will stop hitting business, as was promised in February. We need to put our taxes on profit on a trajectory that will allow us to compete with the best, so that we can plug the hole in our economic bucket, provide an environment for growth and for new companies to come to Scotland, and so that we can keep and win the headquarters that we need to bring better jobs, research and development and investment back to this country.
More than anything, we need an open-minded debate that suggests new ways in which to use the powers of full financial independence in order to help to build a bridge between Scotland's performance and Scotland's potential. The opportunities exist—it is up to the Parliament to take a lead.
I move,
That the Parliament notes with great concern the latest government figures on economic growth showing Scotland has entered official recession for the first time in twenty years; recognises that this recession is the latest symptom of economic under-performance in Scotland over a protracted period and that Scotland has the potential to perform much better than it has; resolves that the performance of the Scottish economy should be of prime importance to the agenda of the Executive, the Parliament and all concerned with the well-being of the people of Scotland and the sustainable financing of public service investments, and therefore calls upon the Scottish Executive to set an ambitious target for improving Scotland's trend rate of growth and contribute to a mature, serious and open-minded debate about the best policy measures to achieve that target, keeping an open mind about both the limits of existing powers and the potential competitive benefits of properly focussed policies with the full powers of independence.
I thank the member for keeping his speech under the time limit and I remind members who wish to speak to press their request-to-speak buttons.
The SNP's motion seeks to give the impression that the economy and growth are not a priority for the Executive, but nothing could be further from the truth. Not only do the economy and jobs form one of the Executive's key priorities—along with health, education, crime and transport—but earlier this week, the First Minister could not have made it clearer that a prosperous growing economy is crucial to the delivery of the first-class public services and socially just Scotland that we want. That is a given.
It is also a given that growth is our problem; no one argues about that. The latest gross domestic product figures for Scotland were unwelcome, to say the least. However, in many ways they were not a surprise, given what has happened in the global economy and given the fact that, since 1973, the average growth rate of Scotland's economy, at 1.6 per cent, has lagged behind the 2.1 per cent rate for the UK in the same period. That is a given. Lower growth is not a recent feature of our economy, although it is true that our growth tends to be less volatile than that of the United Kingdom as a whole.
It is not all bad news, however. For example, the financial services sector has grown substantially in recent years and makes a vital contribution to enhancing the performance of the Scottish economy. Growth in that sector in the first quarter of 2002 was 1.8 per cent compared to a fall of 0.9 per cent in the UK as a whole. Therefore, although the service sector continued to grow in Scotland faster than in the UK as a whole in the first quarter of 2002, we know that the fall in manufacturing output—significant causes of which were the global slow-down and the re-structuring of key sectors such as electronics—meant that overall output fell. It is wrong to say that this is a return to the days of the Tories because, despite such difficulties, the labour market in Scotland remains relatively strong. That is important. Employment is high compared to all European countries and unemployment is low in historical terms.
Will the minister concede that that would have been difficult to achieve without the inheritance of what happened before 1997?
The inheritance was that when the economy faced such difficulties in the years to which Miss Annabel Goldie referred, two or three million people were out of work. Today we have historically high levels of employment in Scotland. They are among the highest of any European Union country. Indeed, only yesterday we saw labour market statistics that show that that position is being maintained and slightly improved.
We are not alone in suffering growth problems. For example, data from the Organisation for Economic Co-operation and Development shows that GDP in the year to the first quarter of 2002 showed a fall of 0.7 per cent in Finland and a rise of just 0.2 per cent in Germany and 0.3 per cent in the United States. That compares to a rise of 0.7 per cent for Scotland over the same period. We are not alone in suffering a slow-down in economic activity. However, no one is arguing that such a low figure for growth is acceptable. It does not meet our aspiration for an enterprising and prosperous Scotland in which our people can fulfil their potential. I think that we can agree on that.
Does the minister accept that the poor growth performance has resulted in part over the past three years from the fact that the higher business rates that are paid as a result of Jack McConnell's departure from the uniform business rate have amounted to £450 million more tax being paid by businesses here than they would have paid under the regime that is used south of the border?
No, I simply do not accept that. If Mr Ewing is willing to wait, I will come to that issue when I refer to the Tory amendment later in my speech.
The challenge will not be met through short-term tactics but through determined implementation of a medium-term strategy. We have three key economic development objectives. First, we must accelerate our rate of economic growth. We also need to close the gap to help areas of lower economic activity in finding new opportunities. There are not only differences between Scotland's economy and that of the rest of the UK; there are significant differences within Scotland, which we must address.
Secondly, we want to provide opportunities for all those who wish to work. That is not just about providing jobs for all, but about closing the gap between those who enjoy high-quality jobs with high incomes and those who seek work or work only in poor quality and poorly remunerated employment. That is part of the productivity increase and the shift towards higher added value in our economy that we need.
Thirdly, our economic development must be sustainable, not just by improving the environment and by better recycling and waste management—important as those are—but by making productive use of our human resources. We must also avoid, as far as possible, those valuable human resources being out of work and requiring further resources to support them. The requirement for a sharp improvement in our productivity is central to that.
Will the minister give way?
I need to make some progress, given the time.
The data and methodology vary, but productivity in Scotland is around, or slightly below, the UK average. However, the UK figure is about 35 to 40 per cent lower than that of the United States and about 20 per cent lower than that of France. We must therefore devote our energies and resources towards the critical determinants of our productivity. That is the heart of our economic strategy and in that—now more than ever—we need to hold our nerve. We have the right strategy and the right policies. We must not be diverted from our path by short-term issues, by debates about powers we do not have rather than about those we do, or by arguments over which arbitrary target to set or pursue.
We should pursue three priorities, the first of which is growing businesses. We must encourage entrepreneurship, support new companies and innovation and translate science directly into commercial activity, while creating a climate of innovation that allows new products and processes to be introduced, not only in high-technology industries, but in the manufacturing and financial services sectors, where the companies that are succeeding are fuelling their growth by developing innovative products.
The second priority is to ensure that our companies are connected to global markets and that they can communicate with them either electronically or physically by train and plane.
The third priority is to improve our skills base in relation to the young, those in employment and those out of work, whom we need to reskill.
I stand firmly by "A Smart Successful Scotland: Ambitions for the Enterprise Networks" and I am glad to hear Andrew Wilson support it this morning. I also stand firmly by Scottish Enterprise and Highlands and Islands Enterprise because they are important to our future.
We take it as read that those organisations are terrific and that they have been terrific for some time, but they have yet to deliver. However, when will the minister realise that the wealth gap between Scotland and the rest of the UK and Europe will not be closed until we equip ourselves with the full powers that we need to compete with Ireland, Austria and everywhere else?
I said that I stand firmly by those organisations because they operate on the structural failures in the markets. Such work does not deal with the symptoms but with the fundamental problems.
We have world-class research in our universities, and there are global markets that want it; however, too often that research does not get out there. We have new businesses looking to expand and capital looking for investment, but too often they cannot seem to get together. Above all, we have skills shortages from construction to financial services and we have people who have the potential to do anything if they are given the chance. We need quickly to match the people with the skills shortages. Accelerating that process has to be our key task and, in recent months, we have worked towards that. We have invested £10 million in further education capital for kit to maximise the relevance of skills training, £10 million on infrastructure improvements and £7.5 million on higher education research. We have also set in motion the Scottish co-investment fund to plug the equity gap growth barrier and we have matched that with a £15 million expansion of the business growth scheme. That represents a real investment in growth from within our own strengths and it will bring benefits.
The past few months have also seen the launch of a comprehensive campaign to build a culture of enterprise and entrepreneurism in our future generations. The primary schools enterprise education programme is already under way and will be mainstreamed into secondary schools next. That is investment in the long term and it holds out the prospect of a cultural shift to the kind of modern aspirational country on which future economic success can be based. There has to be a structural shift to address growth.
I acknowledge that Scotland's population is, at best, stagnant and at worst decreasing. Not only must we ensure that our people aim high and act with enterprise and confidence, but that they stay in Scotland to do so. We can have an open debate in relation to that because more has to be done in that regard.
I confess that I had thought that the Scottish National Party would have something new to offer today. Mr Wilson has tried to have Parliament recalled and, on the first day after recess, he made a point of order demanding this debate. Now he has it, however, we hear nothing new. We have read in the press that the SNP has said that full fiscal freedom is now going to be economic independence. However, that is not news because we always knew that full fiscal freedom was about only two things: the SNP's love of alliteration—
Will the member give way?
I think that I must wind up.
Yes, you are over time.
And, indeed, the SNP's love of alliteration—[Laughter.] Well, I am speaking to two people at once while I try to make a speech.
The call for full fiscal freedom was always about independence because it is a political rather than an economic strategy. Mr Wilson says that he wants to talk Scotland up, but his speech was, in the main, a catalogue of despair.
I will close by addressing the Tories. It is true that investment in infrastructure is important and, who knows, perhaps we will hear more of that later today. However, is that to be accomplished by Murdo Fraser's suggestion that we pay for it by the abolition of all business support and work-based training, or by Brian Monteith's fiscal-autonomy magic fix? Do they not acknowledge that business rate comparisons depend on rateable value as well as rate poundage, and that the United Kingdom has one of the lowest rates of business taxation in Europe? Whatever the answer, David McLetchie said clearly on television a couple of weeks ago that the Tories do not have an economic policy. He was right—the amendment does not add up to an economic policy.
Meanwhile, the Executive will continue to focus on what it can do, is doing and—above all—must do, because we are determined to create a growing, aspirational, highly skilled and prosperous Scotland.
I move amendment S1M-3376.2, to leave out from "notes" to end and insert:
"endorses the Scottish Executive's aim to increase the sustainable growth of the Scottish economy over the long term, using the powers available to the Parliament, thus providing resources for first-class public services and a more socially just and sustainable Scotland; supports the work undertaken to improve the long-term performance of the Scottish economy as set out in the Framework for Economic Development and Smart, Successful Scotland, and notes the progress in implementing measures to help businesses grow, build Scotland's global connections and improve Scotland's skills base."
We are in a challenging time for the Scottish economy. Recession has hit us for the first time in 20 years. That the SNP should choose to debate the economy at this time is a welcome initiative. It is welcome because—I cannot help but notice—the debate is only the second on the economy that the SNP has called since 1999.
That is not true.
If Mr Wilson wants some rather depressing statistics, I will read them out to him, although I would rather not waste the time. The depressing statistics are that the SNP initiated a debate on tourism and the economy, which was led by Mr MacAskill, on 28 March 2001 and it has initiated today's debate.
Perhaps it is surprising that a motion that is so lengthy says so little. Indeed, it reads more like a university debating society motion than a serious attempt to present constructive proposals to address problems in the economy that confront business. I listened to what Mr Wilson said about growth and, of course, growth is important, but business is pleading to be relieved of some of the obvious burdens that repress growth.
Mr Wilson referred to Ireland. I do not know to whom he speaks in Ireland, but I spoke within the last fortnight to two people there. One, who is in the banking sector, said that there are very serious concerns in Ireland about growing inflation, lack of skills and the non-recurrence of substantial European funding. There are real fears that the Irish economy is heading for crisis.
Will Annabel Goldie give way?
I am sorry. I want to make progress.
To suggest that we should at this time emulate Ireland is somewhat disingenuous.
The explanation for the motion is that the SNP is on the horns of a dilemma. On the one hand, it is under a political imperative to argue a convincing economic case to support independence. Indeed, the motion is taken pretty much word for word from a paper entitled "Economic Policy and Positioning" that Mr Wilson prepared for discussion at his party's national assembly. On the other hand, it is clear that popular support for an independent Scotland is limited and that business community interest in an independent Scotland is minimal. That is part of the dilemma. Perhaps that explains why the SNP's motion has nothing constructive or specific to say about the economy in the devolution settlement. That is a pity, because it is not for want of the business community asking. Mr Wilson's party colleague, Mr Jim Mather, recently confirmed in an article in Business a.m. that when he goes round businesses, he is asked repeatedly not to talk about independence but to restrict his comments to the devolved settlement. That presents the SNP with a political paradox and a pressing problem.
Whatever Mr Wilson's views, his colleagues' views clearly centre on a left-wing political agenda that is more interested in spending money than in allowing the economy to generate revenue. Mr Wilson paints an intriguing vision of a tartan Valhalla—a land flowing with Celtic milk and honey—but is completely oblivious to the various proposals, commitments and suggestions that his colleagues have made during the life of the Parliament, all of which involve the expenditure of significant sums of public money.
The reality is that the SNP has no natural interest in, or distinctive understanding of, Scottish business. The SNP has, as is evidenced by its attitude to the private finance initiative and public-private partnerships, a profound suspicion and distrust of the private sector.
I will bring Miss Goldie back to reality. Will she reflect on the fact that, despite her statements on growth and business rates, during 16 of the 18 long, painful years of Conservative rule, Scotland had higher business rates than England? Will she also reflect on the fact that, under the Conservatives, the growth gap between Scotland and the rest of the UK was even wider and grew faster than under the current lot?
I concede that, as everyone knows, under the previous Conservative Government the economy of the United Kingdom—not just of Scotland—experienced a watershed. No responsible politician would deny that. The Conservative Government was realistic enough to address the problem that existed and to turn around the Scottish economy, so that it became a modern economy with all the benefits to which Mr Gray was happy to refer. Without the inheritance of 1997, it would not have been possible for him to do that.
Mr Wilson raised the issue of business rates. I was in business when the uniform business rate was imposed and as one of many hard-pressed business people in Scotland, I regarded it as an answer to a prayer. It is ridiculous to suggest that the absence of the uniform business rate is in any way beneficial to Scottish business.
Before I took Mr Wilson's intervention, I referred to the Scottish National Party's profound suspicion and distrust of the private sector. Despite everything that Mr Wilson said, one would have thought that the SNP motion might pay lip service to some of the concerns that the business community has expressed recently. Mr Wilson says that we should get back to reality. What planet does he dwell on? The business community to which he refers is not the community with which I engage and that I meet. The chairman of the Confederation of British Industry Scotland, Mr Jack Perry, said at the recent CBI dinner:
"We need—
he is talking about now—
"increased investment in transport—both public transport and the long long overdue completion of our motorway network. Business rates is a classic example of public policy conflicting with a shared business and political agenda of supporting enterprise and growth."
If the business community is looking to the Scottish National Party for succour or support, the SNP motion is about as comforting as the throwing of a lifebelt made of cement would be to a drowning man. The amendment that I have lodged is intended to address the void in the motion. Since the Parliament was established, the Conservatives have been the only party to champion the uniform business rate and improved investment in transport infrastructure. Those two issues can be addressed now.
If the Scottish National Party has nothing to say, the Scottish Executive has no cause for complacency. New Labour at Westminster and at Edinburgh has presided—with its Liberal Democrat colleagues—over recession, poor GDP growth, poor business profitability and higher unemployment in Scotland relative to the rest of the UK. Most recently, it has imposed a tax on jobs, through the national insurance contribution hike. It is very troubling that since 1997 Scottish business has paid an additional £3.3 billion in tax, which amounts to a staggering £11,225 for each enterprise in Scotland. There has also been a steady decline in business start-ups since 1997. If we add to that the abolition of the uniform business rate by Mr McConnell, the neglect of our transport infrastructure and the imposition by the coalition Executive of almost 500 new regulations that affect business, we will have no difficulty in identifying Labour and the Liberal Democrats in Edinburgh as a nightmare proposition for business.
The Scottish National Party has nothing to say that would help. The coalition Executive says repeatedly that it will help, but it does nothing. I have a challenge for the minister. He should not pretend—as has been trailed in today's headlines—that not increasing business rates is a tremendous triumph for the Executive. By the same logic, the Executive would argue that its promise not to use the Parliament's tax-raising powers is a great prize for business. I challenge the Executive to do something meaningful and to announce today in the comprehensive spending review that the uniform business rate will be restored, which would mean a cut in business rates for many businesses. The Executive should also announce that it intends to embark on extensive road and motorway improvements.
Sir David, I move amendment S1M-3376.1, to leave out from "this recession" to end and insert:
"economic growth is the key to raising personal living standards, providing opportunity and security for all and the means by which we improve our public services and quality of life; further recognises that this prosperity can only be created on a sound entrepreneurial base, and therefore calls on the Scottish Executive to increase investment in our transport infrastructure and to return Scotland to a uniform business rate poundage throughout the United Kingdom, these being two essential factors in providing the right framework for the creation of wealth and jobs."
Sir David is very grateful, and so am I.
I welcome this debate on the economy and on growth. Andrew Wilson deserves credit for emphasising the need to focus on the Scottish economy. We cannot ignore that, and this morning's debate gives the Parliament an opportunity to address it.
Mr Wilson referred to the residual strength of the Scottish economy, and his motion concentrates on that to some extent. However, it is bizarre to criticise the limitations on the Parliament's powers and in the same breath to criticise ministers for exercising the powers that they have. That is not a consistent position. It will not help us to achieve Mr Wilson's objective: a long-term analysis of the Scottish economy.
Miss Goldie did not explain in her eight-minute speech what the Conservatives would do on any subject relating to the Scottish economy. We had 18 years of cuts in taxes and no investment in our public services or skills. That policy approach was rejected by the people of this country and I am sure that it will be rejected again in future elections here and in the UK.
What is desperately needed is not a fixation on statistics that relate to two quarters of one year, but an analysis of what needs to change in the long term. We need an analysis of the changes in patterns and trends that affect Scotland, and of the difference that Government can make through strategic investment and that Parliament can make in scrutinising the role of Government.
Tavish Scott talked about the powers of the Scottish Parliament. Does he agree that we desperately need power over taxation on oil and gas? Does he agree that the recent decision that the Westminster Government took to increase petroleum tax by 10 per cent was disastrous?
We made clear our position on that decision in London, where we can do something about it, rather than here, where we can do nothing about it.
In establishing areas in which the Liberal Democrats contend that improvement needs to be made, we do not need the sterile argument that Fergus Ewing has just made about the powers that the Scottish Parliament does not have. If MSPs want to debate macroeconomic policies, they can be elected to the palace of varieties on the Thames.
By holding the Executive to account, the Parliament has an important function in considering growth and productivity issues in Scotland.
Will the member give way?
I would like to make progress first, but then I will be happy to give way.
First we need to understand what is happening in the wider world, as Iain Gray rightly pointed out, but I noted that Andrew Wilson and Annabel Goldie did not relate their arguments to globalisation and the natural circumstances of the international situation that affects Scotland and the whole global economy. It is impossible to insulate or separate ourselves from the international context, which, dare I say it, includes England as much as it does the United States of America.
A lack of foresight is apparent in that the UK trails the US economic cycle by six to 12 months and Europe follows six to 12 months later. It is therefore imperative to keep an observing eye on what is happening in the USA. The USA has recently revised its GDP numbers to illustrate that it was in recession in the first nine months of 2001. The Federal Reserve has cut interest rates time and time again. No country has more fiscal freedom than the USA, yet it has an impending double-dip recession. There is no global recovery. Jeremy Peat of the Royal Bank of Scotland stated recently in a report that
"serious growth would have to wait for global recovery."
The world economy is not in the best of shape, but Tavish Scott should acknowledge reality. America's latest figures show that it has moved out of recession and the forecast for world growth this year is 3 per cent. There is a slow-down and there are problems, but why does Scotland always feel the brunt of those situations? Why cannot we take control and get ourselves out of our position?
Andrew Wilson made a number of points there, but I am not wholly convinced by his arguments about the economy of the United States. There is more difficulty to be faced and we should be aware of that, rather than insulating ourselves. Jeremy Peat's recent analysis illustrates the worrying figures that there are on output and jobs. He commented eloquently on the problems of too much dependence on the service sector. Much good can be done in our domestic performance in the service sector and tourism.
A downward trend in trading in the technology and telecommunications sectors has had a severe impact. Previous generations of Scottish politicians begged companies in those sectors to come to Scotland as part of an inward investment strategy. That short-term fix, which was the Tory approach throughout the 1980s, was based on the decline of the manufacturing industry. It was not about building our indigenous economic performance from within. Screwdriver plants offering low-skill jobs were never the success story that they were cited to be at the time.
It is vital that our approach is based on improving our entrepreneurial activity and encouraging the growth of businesses. The enterprise networks have an important role to play in that. The enterprise network must also recognise the views of Scottish Engineering, which represents 400 companies. Just the other week, Scottish Engineering said that this is the worst year on record for the electronics sector since records began. We must take a co-ordinated approach to those issues in both the long and medium term.
Through the capital and investment priorities that may be announced later today, the Scottish Executive could consider making changes to infrastructure in the areas of transport, training, skills, the environment and energy. I hope that, in the spending announcement to be made later today, the Minister for Finance and Public Services will concentrate as much on the medium and long-term investment that the Scottish economy needs as he does on the short-term issues that face Government when it makes policy.
There is a deep reservoir of talent in the commercialisation of research, on which the Scottish economy needs to build. We must take and tap into the best of Scotland's intellectual capital, in relation to which I believe two areas are particularly important. The first is the life sciences industry. I had the opportunity to visit Dundee recently, where I talked to a number of companies that are engaged in that area. High-risk and long-term investments, involving a significant amount of money, are being made at an early stage in order to drive forward exciting new advances in life sciences. That hugely important area for the enterprise network does not produce short-term outcomes and, to that extent, it does not attract the attention that it needs. We should support that industry because it involves not only Scottish brawn, but Scottish brain.
The second area is the renewables sector. Scotland lost the opportunity to lead on wind power—Denmark captured the lead in that sector. However, we could take the lead on wave and other renewable energies. Those are important opportunities for Scotland, and the proposed energy institute could be part of that work. I am frustrated by the lack of drive on renewables, but it is important that the sector is constantly pushed forward, as it is an area of Scottish success.
I conclude with the observation that the strategy, "A Smart, Successful Scotland", is about medium and long-term investment in the future of the Scottish economy, and the same applies to work that is being done on enterprise and education within the education sphere. Those medium and long-term steps are appropriate and strategic—they are not part of an utterly pointless rush at the issues. Mr Gray's amendment also deals with the medium and long term and, on that basis, I commend it to the Parliament.
I cannot possibly call all the members who have requested to speak, but I will get through as many as I can. I ask members to limit their speeches to four minutes.
It is absolutely essential for the future of the Scottish economy that we give our businesses a competitive advantage, rather than giving that advantage to our competitors.
The Parliament has limited powers in relation to the economy. It has no power over the taxes on fuel, the oil and gas industry or the whisky industry. Those taxes apply in the UK, and we should ask ourselves whether it is an accident that they are either the highest or among the highest such taxes in Europe. For decades, the Scotch whisky industry has tried to dismantle tax barriers in other countries, such as Japan and India, only to be told by those countries, "You should start by practising what you preach at home by reducing the level of taxation on whisky." No Scottish Government would tax our national drink to such an extent—to do so is a disgrace and an indictment of successive Westminster Governments over the decades.
I will concentrate on what was indubitably, in my opinion, the Executive's worst decision—amidst stiff competition. When the First Minister was merely the Minister for Finance, he decided to scrap the uniform business rate, which was introduced in 1995 by the Conservative Government and which ended the discrimination that Scottish businesses faced of having to pay higher business rates. Annabel Goldie was sparing in her praise for the efforts of the Scottish National Party during the campaign to end that discrimination. However, I think that she would agree that many of us—including Gil Paterson and me—were very active during the 80s and 90s in that campaign.
What Annabel Goldie was slightly coy about in saying that in 1995 the uniform business rate was an answer to her prayers, was that from 1979 until 1995—a period of 16 years, as Andrew Wilson has pointed out—there was no response to the prayer. One can only assume that the Tory deity was somewhat hard of hearing over that period. The calculation carried out by Craig Campbell of the Scottish Council for Development and Industry was that the amount of extra tax paid by Scottish businesses from 1990, when rateable values were harmonised, to 1995 was £1,200 million. That is Tory over-taxation—an average of 20 per cent higher business tax a year under the Tories. We take no lessons from the Conservatives on the need to provide Scottish businesses with a fair deal.
Let us go back to Mr McConnell, who introduced the policy that has resulted in Scottish businesses over the past three years paying business rates 10 per cent higher than in England. The Labour ministers seem to be in a state of denial about that. They try to say that there is no discrimination because, following the revaluation in 2000, rateable values in England rose by 25 per cent and in Scotland they rose by 15 per cent. Somehow that is presented as an answer. However, that is not an answer because rateable values were harmonised in 1990. The departed Henry McLeish and other former Scottish Office ministers have admitted that.
Unless we scrap Jack's tax—named after the First Minister—which imposes a burden of 10 per cent extra a year, the Labour party will reap a sour reward in next year's elections.
In view of the self-imposed time constraint, I will pass up the opportunity to reflect on some of the depressing untruth and rhetorical flights of fantasy that we have heard this morning. It was suggested that the deficit is—to quote Andrew Wilson—"nonsensical" and that the Parliament guarantees "decline". Every federal nation in the world was dismissed as economically unsuccessful and it was said that "nothing will turn us around." That is a point to which I will return.
Let us take the SNP at its word and assume that it is genuinely interested in improving the Scottish economy. Most of the people watching the debate in Scotland want to see our growth performance improve. What is the answer? We got to the answer in the seventh minute of Andrew Wilson's speech: taxes on profits to compete with the best. We heard that that is the key to success. Let us lay aside the fact that we are already in the lowest quartile in Europe, because taxes on profits is the key to success. Therefore, the only question for people of good will in Scotland is whether that is the right prescription for growth.
In this month's edition of "Scottish Business Insider", I note that the answer to the question of what is keeping us back is: number 1, skills availability; number 2, regulatory requirements; number 3, cost of materials; number 4, sterling exchange rates; and number 5, technological capability.
All those issues are addressed through "A Smart, Successful Scotland". There is no mention of the conclusion that the SNP has reached.
Will the member give way?
No. Let me come to the most important point, which was touched on by Annabel Goldie. The SNP may have called only two debates on the economy, but every Opposition debate is about the same thing: "It's no our fault, we cannae do anything about it, because the power resides elsewhere". It is always somebody else's fault. The SNP's sine qua non is that we cannot stay in the United Kingdom and succeed and that the only way to take responsibility and end the dependency culture is to leave the UK. I want to get rid of the dependency culture and I want our country to grow, but I do not insist that that requires us to walk out of the United Kingdom. The SNP can never concede that it is possible for Scotland to succeed under the current constitutional arrangements. The key to the SNP's economic policy is not what Scottish business says, but to find the silver bullet—not the right silver bullet; that the SNP currently does not have—and to label that the problem. The SNP says, "England took our ball away—that is the problem."
Let me answer the central point, Andrew. I want to get to it, as it is absolutely critical to the debate that will take place in the next six months. You said, Andrew, that the answer to economic success is for us to have the complete toolbox. I have to say that that would be news to every single member nation of the European Union. Not just to the nations that signed up for the European single market, but to all the countries that signed up to the single currency. In those circumstances people say, "I don't want do everything myself because, economically, sometimes having the full toolkit is not the right thing to do." The logic of the argument in favour of having the full toolkit is that full fiscal freedom is right for Fair Isle.
The real question for us and for people who want to see how we get Scotland to grow again is, "What is the key to getting Scotland growing again?" Let us look at the small nations that the SNP talks about. In Ireland, population growth was important, as was the role of the EU and getting the fiscal incentives right for the 1980s and early 1990s, before the accession countries arrived. A different set of considerations applied in Norway and in Catalonia. In Finland, the main consideration was technology. If we are serious about growth, we should not be debating how to find a silver bullet, when we are already in the bottom quartile. The SNP has chosen that bullet because it is the only thing that it can find that it thinks that we do not control. The real debate is—
Please close, Ms Alexander.
The real debate concerns the advantage that this part of Europe has over other parts of Europe. My view of the long-term success of Scotland, as set out in "A Smart, Successful Scotland", is that the Scots have been innovators, teachers and healers to the world for more than 300 years. We have done that successfully from within the position of the union and we can succeed on that basis again. That is where growth and success will come from.
I thank the Deputy Presiding Officer for bringing that rant to an end.
I will begin by explaining to the minister some of the events that took place at the London Stock Exchange at the beginning of this year, when a number of flotations took place. Owing to global economic conditions, out of the handful of flotations that were successful, two involved Scottish companies: the Wood Group and Venture. The companies had those successes in common and also the fact that they are successful oil and gas businesses, started by Scots in the north-east of Scotland and with company bases in the north-east of Scotland.
Instead of rewarding that success story, a decision was taken elsewhere—outwith Scotland, which is the home of the oil and gas industry—in London. The decision that was taken undermined the success of that industry. Scotland does not have that many successful economic stories at the current time, but the oil and gas industry is one.
Does Mr Lochhead recall that, when he and I were in Norway some days ago, one of the stories that we heard loud and clear was that the taxation regime on the oil and gas sector is far worse than that of the United Kingdom? Mr Lochhead and his party go on about how wonderful Norway is, but perhaps they should think twice about that.
I was going to mention that all of the Scottish companies that I spoke to at the various stands at the exhibitions we attended complained about the 10 per cent oil and gas tax that was introduced by the Westminster Government and the impact that that tax is having.
One of the companies that I spoke to was quoted in an article yesterday. The chairman of Paladin Resources, one of the independents, which is managed by Scots, said that the 10 per cent tax is
"‘ill-conceived' as it led to fiscal uncertainty, which would erode stability vital for the industry and investors in a mature hydrocarbon province".
He went on to say that the tax would
"make it more difficult for new entrants to secure finance and would also accelerate the demise of the North Sea."
Will the member give way?
No. The debate is about trying to persuade ministers that they need the powers to help Scottish industries to develop and take Scotland forward. To do so would allow us to create the wealth to invest in Scotland's social services. That is what is important and that is what we are trying to get across to ministers today.
The 10 per cent tax is extremely important. It was not a decision that was taken by the Scottish Parliament, despite the fact that the Deputy Minister for Enterprise, Transport and Lifelong Learning is supposed to be responsible for promoting enterprise in Scotland.
He should be banging on doors in London and trying to persuade UK ministers, who are taking such anti-Scottish decisions, to help him to promote enterprise in Scotland. The 10 per cent tax is already having a devastating impact. It has not even been introduced yet and has already dented confidence in the North sea. Heaven knows what will happen when it is actually introduced.
In his opening remarks, the minister said that he wanted to promote Scottish manufacturing and engineering. In the quarter before the oil and gas tax was announced, orders in the oil and gas sectors were up by 38 in Scotland. However, since the tax came on to the agenda, they have fallen by 23 in the last quarter. That is a direct impact of the tax.
Will the member give way?
The member is in his final minute.
We are seeing a resource flight from the North sea. Because it is more profitable to work in other parts of the world, people and equipment are leaving Scotland and going elsewhere. The minister said that we must create a skills base in Scotland. However, I should inform him that, because the tax is slowing down exploration in the North sea, people, particularly those on the rigs, are going to work in countries such as Mexico and India. We need those skills to boost the Scottish economy, but the young people who are going into the industry are finding it more attractive to work elsewhere.
This issue is a perfect example of why the Parliament needs more powers. We need to help the Scottish economy and secure our future. Although the oil and gas industry is essentially Scottish, decisions are being taken in London. That is where civil service jobs and the headquarters of some oil companies are based and where taxation decisions are being made. Although the minister must secure more powers to help the Parliament to deliver for Scotland, in the meantime he should use what influence he has to fight the Scottish case. Indeed, he should go down to London and try to help the Scottish economy by getting the oil and gas tax removed.
When debating SNP motions, I often find that I can agree with approximately two thirds of it. Their preambles are usually quite acceptable, sometimes reasonable and occasionally sensible. However, their conclusions are only occasionally acceptable, and are rarely reasonable or sensible. This motion proves no exception to that rule.
As soon as the motion begins to talk about "targets" and
"mature, serious and open-minded debate",
it begins to lose touch with economic reality. After all, targets and debates are only words. Because actions speak so much louder than words, the debate needs largely to focus on the actions of the Scottish Executive.
We have all seen the figures and the headlines. Indeed, one of the starkest headlines appeared in last Monday's Business a.m. It read:
"Growth in Scottish company start-ups down by 80%".
The article explained that, with start-up growth down from 10.2 per cent to 1.7 per cent, we could face a fall in the number of companies created in Scotland next year. Although that is a terrifying prospect, it is also a stark and probably accurate pointer to an economy in decline. Nowhere is that situation shown more clearly than in rural Scotland, and particularly in the South of Scotland region that I represent. Incidentally, that area is now suffering depopulation as a direct result of Scottish Executive policies.
According to the Executive's amendment, the answers to those very real problems lie in
"providing resources for first-class public services and a more socially just and sustainable Scotland",
supporting
"the work undertaken to improve"
our "long-term performance" and noting
"the progress in implementing measures to help businesses grow".
However, the answers do not lie there. Quite simply, in rural Scotland at least, they lie with the need to make meaningful and rapid improvements to two aspects of infrastructure and, as Annabel Goldie so ably argued, with a return to a level playing field on business rates.
During its recent round of evidence-gathering meetings throughout Scotland, the Rural Development Committee found that, alongside planning restrictions, one of the most strongly perceived barriers to rural development was the roads infrastructure. Nothing would do more for business development and new start-ups than for the Executive to recognise that fact and to take some practical action to do something about it. I suspect that, instead, we will be fed the usual mealy-mouthed soft soap about the Executive's investment in a properly integrated sustainable rural public transport system. Although I concede that that investment has done something for rural employment by creating the need for more bus drivers, it has done nothing to get more passengers on to those buses. Although I hope that the announcement that will be made later today will prove me wrong, I am not optimistic.
I have said many times before that we simply cannot replace the car in rural Scotland. It is time that the Executive realised that and implemented a comprehensive road improvement programme not only to allow people to access the workplace more easily but, more important, to help rural businesses to get their primary or processed products to the marketplace.
Will the member give way?
I am sorry—I am in my last minute.
The information technology infrastructure is in much need of attention and access to it is paramount in diversifying rural Scotland's industrial base. Last year, when I mentioned the lack of access to IT in rural Scotland, Jim Wallace suggested that I must be living on a different planet if I could not recognise the significant benefits of the pathfinder project in the south of Scotland. If he were here, I would say to him that I do not because there are none. Successful small and medium enterprises are having to move from rural Scotland to more urban areas in order to access better IT facilities.
I contend that the Executive's policies are failing because they are the wrong policies. They will continue to fail until ministers realise that they must differentiate between rural and urban policies. Despite the failure of those policies, however, I can think of no policy that would cause business confidence and start-ups to collapse more quickly than that called for in the SNP motion this morning. The thought of an SNP-led Executive four years ago caused several companies to move their headquarters south of the border in total panic. Independence—the SNP's answer to everything—is the answer to nothing. I am sure that on 2 May next year, we will discover that the vast majority of people in Scotland will decisively reject it once again.
If the Parliament is serious about taking proactive measures to improve Scotland's economy, it will follow my example and support Annabel Goldie's amendment.
Our Executive is committed to the creation of a strong, diverse and thriving economy. We have enjoyed the benefits of working in partnership with Westminster, which has achieved economic growth and, important for May, a reduction in unemployment, coupled with a strong labour market.
As usual, the SNP is selective in its choice of statistics to score political points at the expense of business and investor confidence. That is an important point. The SNP has picked on negative statistics over a short period. Nobody says that we have not faced problems, but we have managed to maintain our share of total UK inward investment. Scotland's performance in the period in question reflects well in the post-11 September era, when foreign investment saw a dramatic fall worldwide, allied to the severe contraction of the electronics sector and output throughout the world.
Earlier this week, Jack McConnell spoke to the Institute of Directors. He made clear the Executive's commitment to a strong economy that creates jobs and prosperity. In his speech, he outlined our key economic objectives. The minister has repeated them this morning. Acceleration of our rate of economic growth is a key task, as is improving opportunities for all who wish to work. I hold that very dear. Improving the skills of our work force is a top priority of the Executive—and, indeed, for the Parliament and the Enterprise and Lifelong Learning Committee.
An important point about which we have not heard much from the SNP is that our economic development must be sustainable. Closing the gap—not only within Scotland but within regions such as my own—is very important. I believe that we can all sign up to the objectives. In "A Smart, Successful Scotland", we have the correct strategy to accelerate our economy and create opportunities for all. However, we must ensure a correct balance between central strategy and local flexibility and innovation.
In my constituency, we recently experienced the withdrawal of a large multinational company—Alcan. However, I am encouraged by the Executive's commitment to the development of indigenous business and I congratulate the work force, the trade unions, Fife Council, Scottish Enterprise Fife and the minister and his team for their support in seeking a local solution.
Business creation is vital. We have seen 12,100 new companies in the past year—a new high. A total of £40 million has been invested in supporting small businesses throughout Scotland, through the co-investment scheme that seeks to utilise the expertise of private sector fund managers in the venture capital process, and through the extended business growth fund and additional grant support within the investor readiness programme. A total of £11 million has been awarded to Scotland's most innovative firms through the SMART: Scotland award—the small firms merit award for research and technology—and £33 million has gone to the proof of concept fund, which aims to turn innovation into new businesses and to give a competitive edge to existing firms. All those ideas have been successful.
The industrial development renewal report for the year ended 31 March showed that projects in Scotland benefited to the tune of more than £100 million, thanks to grants administered by the Executive. Labour is clear in its belief that a strong, vibrant business economy can generate growth and promote social well-being. Unlike Conservative members, I think that that is important.
I hope that, later today, we will hear about innovative projects to help training infrastructure. I agree with Tavish Scott that it is not just a question of short-term fixes; we must consider a medium and long-term strategy. We must remain firmly focused on building for long-term economic strength. I believe that the Executive's policies to increase competitiveness and boost productivity are the way forward. We want an economy that achieves the correct balance, supporting business and enterprise while promoting social and regional development.
The first thing to understand is that the Lib-Lab Executive is neither smart nor successful. For 39 years since the rate of growth was first recorded in 1963, the Scottish economy has grown at a rate consistently below that of the UK economy. There is consistently a 28 per cent gap between performance in Scotland and performance in the rest of the UK. If we compare the performance of the Scottish economy with that of the south-east of England, we see that the gap is not 28 per cent but nearer to 75 per cent. If we had had anything like the growth level of the south-east of England, Scotland would indeed—
Will Alex Neil accept an intervention?
Unfortunately, I do not have time, because of the stupid four-minute rule.
Iain Gray's amendment mentions the long term, but we have been through the long term for the past 40 years. The same speeches were made in Westminster over those 40 years, during which we have had 16 years of Labour Government and 24 years of Tory Government. It did not matter which party was in power; the result was the same. The Scottish economy has been in continual relative decline.
Come the day of a Liberal Government.
The Liberals will never get another shot. They have had 80 years to rest.
The potential wealth of Scotland in natural resources probably makes us the richest country per head in the whole of Europe. As Jim Sillars used to say, Scotland is the only country to get poorer and poorer as the oil flowed faster and faster.
The coalition parties try to ridicule the case for independence, but they should consider what a London-based accountancy company said only two weeks ago. It said that we in Scotland should at present have interest rates of 2 per cent less than that set by the Bank of England, because of the state of our economy. Wendy Alexander should note that that London-based accountancy group admits that we have a set of economic circumstances in Scotland that are different from those in the south-east of England. In my view, the Bank of England should be renamed the Bank for England, because it has done nothing for Scotland.
The member cannot take interventions; he is in the final minute of his speech.
I did not mean to tempt everybody up at the same time.
Of course, we are all united on the need for a science and skills strategy. The SNP manifesto in 1999 envisaged VisitScotland and Scottish Development International. We envisaged making Scotland the science capital of Europe. I know those manifesto commitments word for word because it was I who wrote them into the manifesto. We stand four-square behind that strategy, but as long as interest rates and fiscal policy are controlled in London we can have as many strategies as we like up here and it will not matter a toss. I said toss, not tosh, Presiding Officer.
I still know what it means, though.
A 1 per cent difference in interest rates would wipe out Scottish Enterprise's budget at a stroke. That budget is worth about 0.5 per cent of gross domestic product in Scotland. A 1 per cent increase in interest rates would more than make up for Scottish Enterprise's budget. That is the scale. That is the difference. That is the vision. That is why we need control of our own economy in an independent Scotland.
It is great when we hear the i-word—independence—spoken here, because that shovels thousands of votes in any direction other than the SNP. I felt sorry for Bruce Crawford and my SNP opponent, Rob Gibson, when they were trailing around Dounreay and Thurso the other day, trying to drum up votes. All that Alex Neil says plays into our court. If they chapped at people's doors and asked, "Do you want independence? Do you want to say cheerio to England? Do you want to say goodbye to the Queen, the Black Watch, the Royal Navy and the United Kingdom Atomic Energy Authority?" the answer would be, "No, thanks." That is why Caithness will never vote SNP. I dare say that Inverness will also vote out Fergus Ewing, who will be no more the Perry Mason of the Parliament. The more the nats talk about independence, the better it is for the rest of us, because it does not work.
What would happen to the local economy of Caithness if we went independent and the UKAEA was not there to pump millions of pounds into it? Instead of the likes of Bruce Crawford selling the whole thing short by saying, "The AEA is secretive and won't tell us what it is doing"—which is the gist of the press release that he unwisely issued before he visited Dounreay—we should be standing squarely with the authority. It is at the cutting edge of decommissioning and is the state of the art of taking apart nuclear facilities. Instead of being miserable about it, we should view it as a chance of being the best not only in Britain, but in the world, and of getting back in industry. If the nats wonder why the votes are not there when the fat lady sings and the black boxes are opened, perhaps they should know that.
We should be playing to our strengths and looking to the future, building on what we have got, not whingeing about London or the UK and blaming somebody else. We should be developing and maximising our environment, the country's tourism potential and our skills. In her good speech, Wendy Alexander was right to make that point. We should get in there and back our industries.
I shall conclude my remarks there. It was perhaps a bit naughty of me to have a go at the nats, but it is fun.
Having heard that today's debate was going to be about the Scottish economy and knowing the number of times that Andrew Wilson appeared in the media over the summer talking about recalling Parliament to debate the economy, I hoped that we might have a bit of fresh thinking from SNP members. However, what we got was their usual ploy of talking Scotland down and—surprise, surprise—the revelation that the SNP believes that independence is the answer to all our problems. That is probably one of the biggest revelations that we could have expected in the debate.
We have also heard from SNP members that the SNP wants to cut business rates, reduce taxation on profits, reduce duty on whisky and reduce tax on the oil industry. However, in other debates on the health service, education and transport, they ask us to increase the level of expenditure to levels comparable to those in Scandinavia. Where does the balance lie? What level of personal taxation do they propose?
Will the member give way?
I will decline. In the course of his 12-minute diatribe, Andrew Wilson refused to give way to any other member. If he wants to engage in a proper debate, he should give way when he is speaking.
Who asked me to give way?
Three members asked him, including my colleague Rhona Brankin and one of the Liberal Democrat members.
The obvious conclusion to be reached from Mr Neil's speech is that the SNP is against joining the single European currency. If the SNP does not want Scotland to remain part of a single currency in which interest rates are decided at a UK level, how could it want us to be part of a single currency in which interest rates are decided at a European level? The SNP leadership may disagree with that idea, and it is clear that the party is split on the matter.
Does Bristow Muldoon agree that West Lothian, which he represents, could be a cockpit for development, but that our problem lies in the need for infrastructure? Does he agree that transport, infrastructure and skills are crucial if we are to grow the economy not just in West Lothian but elsewhere? Will he get to the point and argue the case for his constituents instead of knocking people in the Parliament?
I was going to turn to West Lothian later in my speech, but I will do so now. The Scottish economy—specifically electronics—has recently experienced problems as a result of both local and global factors, and one of the worst-hit areas has undoubtedly been West Lothian, with the closures of the Motorola and NEC Semiconductors plants. The story of West Lothian also gives us a degree of encouragement about the future of the Scottish economy. In spite of those major closures and of the fact that thousands of people in West Lothian have been through the trauma of redundancy in recent years, unemployment in Livingston stands at only 4 per cent.
The SNP wants to create the picture of a Scottish economy in the same state as in the early 1980s. As Ms Hyslop probably knows, unemployment in West Lothian was in excess of 20 per cent then. Ms Hyslop might also wish to know that, in the most recent report of the Committee of Scottish Clearing Bankers, Livingston had the fourth-highest rate of business start-ups in Scotland. There is an underlying strength to the economy both in West Lothian and in Scotland as a whole. That strength has been delivered by the actions of the UK Government and the Chancellor of the Exchequer, Gordon Brown, which have given Scotland the lowest level of unemployment for three decades, the lowest interest rates for decades and the lowest inflation rates for decades. We should welcome those statistics. That underlying stability was never seen in the 18 years of Tory misrule in the UK.
What are we doing to improve the economy in Scotland? We are investing in the transport infrastructure, as evidenced in the transport delivery report, which was launched by my colleague Wendy Alexander. I expect that we will hear more later today when Andy Kerr makes his spending announcements, which will be translated by Iain Gray into further investment in the transport infrastructure.
We are investing in the skills of the people of Scotland through the success of the modern apprenticeships programme and the record number of people in further and higher education. The only alternative that SNP members have to that platform of policies is independence. They have the simplistic innocence of children who still believe in Santa Claus delivering Christmas presents. Independence is their only answer. We are living in uncertain times in a global context, but the stable economic circumstances that we have put in place at UK and Scottish levels will deliver an improved growth rate in the Scottish economy in years to come.
Like my colleague Tavish Scott and others, I welcome the chance to debate this serious issue. All parties in the Parliament share concern about the fact that Scotland's economy has officially dipped into recession for the first time in 20 years. But let us face it: given the economic background of collapsing output around the world, a nine-month recession in the American economy—and no guarantee that the United States, the main engine of growth in the world economy over the past 10 years, is coming out of recession—and months of falling output in the euro zone and the G7 countries, it is hardly surprising that Scotland has not escaped the fallout from world events.
Given Scotland's narrow economic base and an industrial policy over the past 20 to 30 years that has been based on using huge financial inducements to lure big, multinational companies to set up screwdriver operations, some might argue that we have got away lightly with only two quarters of negative growth.
I suggest to SNP members, especially Andrew Wilson, who called for this serious debate, that no degree of fiscal autonomy could have prevented the current situation. To suggest otherwise detracts from the real debate around how we tackle Scotland's record of relatively poor economic performance. The issue should indeed be top of the political agenda, and I agree with Andrew Wilson that all parties must engage in a mature, serious and open-minded debate on how we tackle it. However, Andrew Wilson and his colleagues did not contribute in any serious way to a mature debate on how we should deal with the issue. There are no quick fixes and the suggestion that constitutional change is the answer to all our problems is irrelevant.
Will the member take an intervention?
Presiding Officer, could you add the time on?
George Lyon will appreciate that agriculture plays a crucial role in the Scottish economy. He recently complained that Margaret Beckett makes anti-Scottish decisions when she is in Europe. Does that not show the case for a change in constitutional arrangements so that we can take good economic decisions for Scotland in Europe and elsewhere?
Thankfully, Scotland has a very good Minister for Environment and Rural Development who champions our cause in Europe. Indeed, nine months ago the Scottish fishermen said as much during the debate on the common fisheries policy. I remember Richard Lochhead praising Mr Finnie for his good work.
There are no quick fixes and anyone who suggests that there are is misleading the Scottish public. The first key issue that must be tackled is the widening of our economic base. Our reliance on the electronics industry as one of our main employers has been shown to leave us in a very weak position as soon as there is a downturn in that sector.
The need to improve and develop our skills base has been mentioned by many speakers in the debate. Growing indigenous businesses seems to be crucial for the future. It is no surprise that two or three years ago, Ireland realigned its economic development agencies to go down the same road. Ireland knew when its days of relying on inducing big screwdriver operations into the country were coming to an end. It is also crucial that we commercialise knowledge that is produced in our universities. We have an excellent research base and we must learn how to use it to grow jobs and companies.
Above all, if we are going to enjoy economic success, it is a fundamental requirement that we value enterprise and the people who take risks to create jobs and wealth. The Parliament has to take a strong lead in championing enterprise risk and success in the private sector. Too often, the message coming out of the Parliament—especially from the SNP—denigrates private enterprise and the profit motive. That does not help to encourage those in private enterprise who want to create wealth and jobs. The Parliament should be a business-friendly Parliament. We must work harder to ensure that that happens.
Addressing Scotland's fundamental problems will take time, but through the strategy of "A Smart, Successful Scotland", the Executive has started down the right road. However, I re-emphasise that there are no quick fixes.
Despite calling for a mature debate on the economy, the SNP offered nothing but platitudes, soundbites and the usual argument that constitutional change is the answer to every ill that confronts Scotland. Andrew Wilson even went so far as to link the longevity of the Norwegian people to their country's independence. That is not a solution; it is an irrelevance, and I will support the amendment in the name of Iain Gray.
As I wind up this morning's debate for the Conservatives, there is a strong sense of déjà vu. On the two previous occasions in the past year when the Conservatives instigated a debate on the economy, the Executive said how important the issue was—but of course parliamentary time is far too valuable for the Executive to bring forward a debate on the economy.
The difference today is that last week Mr McConnell announced that the economy was his top, top priority ahead of all of his other top priorities. Of course, that was because the sustained criticism of the Scottish Executive's handling of the economy and Scotland's economic performance had moved from the business pages to the front pages of the newspapers. The immediate knee-jerk media defence response had to be adopted. Mr McConnell was deployed to talk to business and, in the Sunday press, officials trailed a pro-business outcome to the spending review. Business will be the top priority until next week, when the next top priority will hit the front pages of the papers and the full weight of the Scottish Executive counter-spin machine can be deployed on that subject.
Scotland's economy is a long-term issue for the future and it requires sustained and focused attention. However, undermining Scotland's economy is relatively straightforward. It is not done, as the Executive often suggests, by debating the issue or by highlighting Executive inadequacies and the failings of agencies such as Scottish Enterprise; it is done by the stroke of Mr McConnell's pen. As Minister for Finance, he effectively scrapped the uniform business rate that the Conservative Government introduced. Now, rather than put up his hands and admit the mistake and the damage, we get the usual weasel words on business rates. No one knows what they mean, but it looks as though the best that we will get is an assurance that business rates will not rise. In the hour or so that Mr Kerr has before making his statement, and if it is not already the rabbit in his hat, I ask him to adopt the one policy that business says time and again would make the most difference—the reintroduction of a uniform business rate in Scotland.
The member's ambitions are limited. Does he acknowledge the fact that, during the Conservative era, growth in the UK was a third faster than it was in Scotland? How does he explain that?
I recognise the importance of growth and I welcome the fact that we are debating it. I will return to that issue, but at this point I wish to examine transport.
We are told in the media that there is a spending bonanza round the corner for transport. All I can say is that it is about time. In the five and a half years that Labour has been in power in Scotland, it has systematically cut transport budgets. It has needlessly delayed key projects that are vital to Scotland's economy, from the M77 extension—for which not a sod has been cut—to the M74 extension to the equally vital M74 south between Gretna and Carlisle. Those projects have been delayed by the UK Government for no good reason.
How can it have taken as long as this to realise the damage that the Executive has done with its anti-car dogma, which has been so detrimental to our economy? It is not as if the money that has supposedly gone into public transport is producing improved services—just ask rail commuters from Fife or even Glasgow—nor is it as if all rural transport issues have been resolved, as the much-lamented Miss Alexander once claimed. On the subject of Miss Alexander, it was good to hear some Latin in the chamber for once. The reality is that, over the past five and a half years, our transport infrastructure has declined and public transport has got worse, yet today we are all supposed to be grateful for Mr Kerr's largesse in finally beginning to produce the investment in Scotland's infrastructure that is so badly needed. However, if that investment is to be effective, it must be sustained and focused.
The SNP instigated this debate and, as I indicated, I am grateful for that, but however well intentioned Andrew Wilson is—I note his contribution to the Scottish economy; he is keeping Business a.m. going by filling half its pages—he continues to fail to deliver what Mr Swinney said, when he unveiled his talking independence campaign, would be
"the most sophisticated economic presentation on independence ever devised."
We are still waiting.
Scotland's economy is in trouble. The statistics are legion, but independence is not the answer. The Scottish Executive can, within the devolved powers, do a great deal and it should begin that process today by announcing the reintroduction of uniform business rates. I support Miss Goldie's amendment.
As Iain Gray said, we welcome the opportunity to demonstrate that economic growth and jobs remain two of our top priorities, along with transport, health and education. Economic growth is at the heart of our economic and social strategy. Fundamental to our prosperity is a buoyant and dynamic economy. I welcome the SNP's ringing endorsement of our economic framework strategy and "A Smart, Successful Scotland: Ambitions for the Enterprise Networks", which aim to achieve our objectives.
Andrew Wilson spoke of other areas of consensus on economic policy. There is a clear understanding and wide agreement that our future economic success and prosperity depend on raising our game. For too long, our growth rate has failed to match the UK average. That is true and, as has been said, it has been true for almost 30 years, but it is not the whole story. Take this week's report on business start-ups, which was quoted during the debate. Yes, the percentage increase in the business birth rate was lower than in the previous year, as the report states, but the total number of start-ups was the largest ever recorded in Scotland, at 12,100 in 2001-02.
We have heard much about business rates and the perception that an unfair additional burden is placed on Scottish business. To talk about poundage without dealing with rateable values is to miss half the picture. The rise in rateable values at the most recent revaluation was 15 per cent, compared with 25 per cent south of the border. That is what determines the rates that businesses pay.
What would the minister say to Neil Menzies of the Chemical Industries Association, who revealed that two pipelines that cross the border have the same rateable value but attract 10 per cent more in rates on the Scottish side?
Of course business has concerns about such issues and of course we listen to those concerns. It is inevitable that the impact on some industries, including the chemical industry, is different. We are listening to those concerns and we will reflect on them and propose policies in response to them.
We have set out clearly our expectations and aspirations for the Scottish economy and the big picture from which all our detailed economic policies follow, whether pan-Scotland or more locally. Those policies are being implemented.
The vision that was set out in "The Way Forward: Framework for Economic Development in Scotland" when it was published two years ago was to raise Scottish people's quality of life through increasing economic opportunities for all on a socially and environmentally sustainable basis. That vision still holds.
Stimulating actions to secure economic growth and sustainable development is central to our economic vision. To put it another way, we want to restore and accelerate economic growth, but we are also fundamentally concerned about the quality of economic growth. Growth must be socially just and sustainable by embracing all the people of Scotland. That is why it is important that such solid progress has been made on employment and unemployment in recent years. The labour market remains relatively strong, with a high level of employment and a low level of unemployment historically and in a European context. As Iain Gray said, yesterday's figures confirmed that the employment rate in Scotland continues to grow.
I am delighted that the minister accepts that a growth, employment, wealth and life expectancy gap exists. Which of his measures—if any—will close that gap, and by when?
Our challenge is to take every opportunity to boost our sustainable growth rate and to close the gap in economic growth. That is why we have set out a strategy. Some of the strategy for addressing economic growth lies with the UK Government at a macroeconomic level. It must be noted that the UK Government's prudent handling of the macroeconomy in the past five years has provided the stable economic environment in which we can make progress. Andrew Wilson seems surprised that our economic position is stable, but he need cast his mind back only five or six years to appreciate what the Scottish economy's position would be without that stable environment.
We must build on the platform of a stable UK economy and we must do that principally and centrally by enhancing productivity. That is the most critical element in stimulating economic growth and in closing the gap. Improved productivity is the key source of international competitiveness. By raising productivity and improving our competitiveness, we can raise the level of employment and raise living standards.
The minister refers to productivity. Does he agree with the oil and gas industry's view that the new tax will reduce productivity in the North sea? If so, what will he do about that?
I enjoyed Richard Lochhead's speech, in which he said that Scotland should have control of oil taxation in order to invest more in our social services, but in the same breath demanded that oil taxes be cut. That did not show much coherent vision. The Executive has a coherent vision. To overcome the growth deficit, we need policies that will stimulate increased productivity. That is why the strategy in "A Smart, Successful Scotland" is important and why it is important that the SNP warmly endorses and supports that strategy.
Clearly, the priorities of growing businesses, improving learning and skills and growing global connections are the way for us to move forward. We must embrace learning at all levels and promote a culture of enterprise and a can-do approach that will support those important structural changes. However, we do not underestimate the size of that task. We recognise that it cannot be achieved overnight. To pretend that the performance of our economy can be transformed overnight or by constitutional change is simply disingenuous. As Wendy Alexander described so eloquently, the SNP's prescription for full fiscal freedom is based entirely on its political rejection of the United Kingdom.
We do not pretend that we can determine the strength of the Scottish economy on our own. We will seek to generate the conditions to encourage growth and enterprise. We will do that in partnership with the UK Government and all the other actors in the economy who see the need for a productivity-based growth strategy for the years ahead.
Later this morning, the chamber and the press gallery will be full for a ministerial announcement on how an extra £100 million that we are to receive from the UK Treasury will be spent. Does anyone really believe that a few extra million pounds spent here or there will make any significant difference in solving our deep-seated social and economic problems? I suggest that the priorities of our devolved system of government are seriously askew when it takes the main Opposition party to stimulate a debate on Scotland's economy when that economy has moved into recession for the first time in 20 years. The problem lies, of course, with the nature of the financial arrangements whereby the Scottish Parliament has little or no power to raise the money that it spends.
There is no link to the real economy, apart perhaps from business rates. Even in that case, a peculiar perversity is built into the system. Economic logic dictates that rate cuts should be the order of the day to boost business growth. However, that will be countered by the Executive's reluctance to forgo revenue that it cannot make up by raising taxes elsewhere. Those arrangements are plainly unsustainable in the long run and the question of powers will have to be addressed whether the Executive parties like it or not.
I welcome a certain note of realism in the debate on business rates, because the cost of the measure that the Tory amendment calls for would be somewhere between £150 million and £200 million, which would mean less resources for spending. Mr Ingram implies that the SNP solution to that would be to raise other taxation. I am interested to know which other taxes would be raised to reduce the business rate or which public services would be cut to pay for that change.
It is the same old story. The whole point about stimulating an economy is that that increases economic activity and the tax base. Taxes can be lowered and there can be a bigger tax-revenue take for the Exchequer.
In the past, Labour was not so shy about talking about extra powers for the Scottish Parliament. Do members remember Scottish Labour Action, which included Jack McConnell and Wendy Alexander? That group wanted the Scottish Parliament to have the power to collect all Scottish taxes and, indeed, it wanted 20 per cent of oil revenues to be distributed by the Parliament. We do not even have that power.
Perhaps the perversity of the system that we have explains why the ruling coalition has until now turned a blind eye to our underperforming economy. It seems to have tumbled somewhat belatedly to the fact that "It's the economy, stupid." All our aspirations for a prosperous, socially just Scotland are predicated on our sustaining economic growth. Any Scottish Government worth its salt needs to create conditions in which our best and brightest—those with get-up-and-go—do not have to leave Scotland to pursue careers and lifestyles that they want for themselves and their families.
Will the member give way?
No, sorry.
Perhaps the Executive has finally also woken up to the reality of the Barnett squeeze. The Treasury handouts, also known as funding consequentials, are beginning to look meagre compared with public spending increases in the rest of the UK. Depopulation is beginning to bite. I also believe that, as David Mundell suggested, the Executive has been forced to change tack by political pressure, not least from Andrew Wilson and Jim Mather, who is in the public gallery today. They have been ramming home the truth about Scotland's economic decline and the need for the Parliament to assume fully independent financial powers to fulfil its fabulous economic potential.
The Scottish public seem to be convinced by our arguments, with the opinion polls showing 70 per cent support for financial independence. They do not seem to share the unionists' disdain for constitutional change. As Andrew Wilson outlined, Scotland has all the attributes for economic success: an international brand recognised the world over; a priceless reputation for integrity and reliability; top-quality people; a superb environment; and abundant natural resources. However, we have lacked the policies that would bring those attributes into play. Unfortunately, what we have heard today and what the First Minister said in his speech to the Institute of Directors on Tuesday show that the Executive is as stubborn and misguided as ever in the development of its policy.
Bill Jamieson, the director of an Edinburgh-based independent think-tank, said:
"In so far as there is any coherent economic policy in Scotland, it is one of piecemeal and reactive submersion in micro-policy activity, with problem avoidance and denial at the macro level."
The First Minister and his colleagues will have to change their tune on the so-called benefits of the macroeconomic policy that is pursued by the Chancellor of the Exchequer in London.
Will the member give way?
No.
As we have heard again today, the Executive stresses the importance of stability without twigging to the fact that it is possible to have a stable economy that is dead in the water. Interest rates might be low, but they are not low enough to prevent the Scottish economy from going into recession. Low inflation in the south-east of England can turn into stagnation or deflation in Scotland. The chancellor's policies are designed to manage the main economic engine of the UK, which is the south-east of England and London in particular. More of the same policies, uniformly applied across the UK, will simply maintain the Scottish economy's competitive disadvantage and do nothing to stop the wealth gap between Scotland and England continuing to grow.
It is about time that the penny dropped that maintaining a level playing field across the UK or competing internationally requires greater incentives in Scotland for businesses to start up and expand, a different tax regime that will promote research and development and different patterns of public expenditure. More needs to be spent on transport and communications infrastructure and on the promotion of Scotland abroad.
Our aspirations must be for a high-productivity, high-wage economy that can compete internationally and that will stop our brain drain. It is desperate that, on graduation, 37 per cent of all graduates from Scottish universities leave Scotland.
Our core problem is that Scotland lacks the political and financial powers to turn around our poor economic performance. That is the fundamental structural weakness of the Scottish economy. Our message to the Executive is that it must face the facts and respond positively to that analysis or face the consequences. Our arguments will only grow in strength as the Executive fails to take them on board.