Meeting of the Parliament

Meeting date: Wednesday, April 19, 2023

Official Report 1049KB pdf

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Scotland’s Finances and Wellbeing Economy

The next item of business is a debate on motion S6M-08604, in the name of Neil Gray, on managing Scotland’s finances and working with business to drive the wellbeing economy. I invite members who wish to speak in the debate to press their request-to-speak buttons.

15:25  

It is a privilege to open my first debate in my new role as the Cabinet Secretary for Wellbeing Economy, Fair Work and Energy. Before I start in earnest, I pay tribute to my predecessors who held responsibility for elements of the portfolio that I am now in charge of. John Swinney, Michael Matheson, Ivan McKee and Kate Forbes have contributed and will continue to contribute a huge amount.

It is particularly pleasing to have seen Kate Forbes back in her place this week after her period of maternity leave. I know what a wrench it is to return to work after such periods—in my case, paternity leave on three occasions. I wish Kate and her family, Ali and Naomi, well for adjusting to the new normal that we all have to adjust to after that process.

A growing, thriving economy is about more than just numbers. Economic success means making the most of the incredibly rich resources that Scotland has. It means high living standards, people being able to fulfil and exceed their potential and a dynamic and strengthening business base that, in turn, feeds into strong and sustainable finances that support public services and communities.

I take this opportunity to underline my commitment to working closely with our business community to maximise Scotland’s sustainable economic growth potential. Yesterday, the First Minister set out plans to agree a new deal for business and the introduction of a new group co-chaired by me that will explore, among other things, how Government can better support our businesses and communities using the policy levers that it has.

Our message to Scotland’s businesses is clear. We hear your concerns about high United Kingdom inflation, supply chain issues, labour shortages and the impact of regulation, and we will continue to work with you to mitigate the potential impact of those issues. In return, we will work in partnership with you to support fair work and support businesses to develop and internationalise, which will drive prosperity.

Will the cabinet secretary take an intervention?

Do I have time to do so, Deputy Presiding Officer?

Yes.

I welcome the cabinet secretary to his new role. I look forward to working with him. The First Minister said in the chamber on 30 March that, throughout the period of office of the former First Minister, Scottish gross domestic product growth had outstripped that of the UK as a whole. That statement is not true—he misled the chamber. Will the cabinet secretary apologise for the First Minister making that false statement?

The First Minister was referencing the most recent GDP figures, which show that Scotland’s GDP growth is outstripping the UK’s. It may be sad for the Conservatives to admit that it appears that the Scottish economy is doing well, but we will continue to work well to ensure that our economy continues to thrive. This week, we have incredible labour market statistics that show that unemployment in Scotland is at a record low. Surely that is something that we all welcome and seek to build on in partnership. I look forward to working with Murdo Fraser constructively, as I will with all colleagues across the chamber.

The past few years have seen the cost crisis, the pandemic, the impact of the UK’s disastrous Brexit and the fiscal instability brought on by the decisions in the UK Government mini-budget. Those things have brought untold damage to the wellbeing of people and businesses in Scotland and they have laid immense pressures on our precious public services and community and voluntary sectors.

Output in the global economy is forecast to slow in 2023, and Russia’s illegal invasion of Ukraine continues to present a risk to global trade and activity. However, the International Monetary Fund forecast says that the UK economy has the weakest growth outlook in the G20 for 2023. As a devolved Government, we do not have all the levers that other countries have to bring forward economic interventions to support their economies, businesses and people, or the levers to mitigate UK decision making.

I agree with the cabinet secretary about his assessment of the UK economy, but can he explain why the Scottish economy is going to perform even more poorly than the UK economy? According to the Fraser of Allander Institute, its decline will be greater than the decline of the UK’s economy. Can he explain why that is going to happen?

We obviously want to reverse that. We are putting in place measures through the prospectus that we put forward yesterday, and we are coming forward with a wellbeing economy to ensure that we can take advantage of the massive resource potential that we have in Scotland. Of course, we are constrained in that not all the economic levers that a normal, independent country would have at its disposal to generate economic growth are within our gift and, as Willie Rennie accepted, we are reliant on a failing UK economy and economic approach. He has to recognise that we are doing what we are doing with one arm tied behind our back. It is perhaps time that we had full control of all the fiscal and economic levers, to ensure that we can take advantage of the economic opportunities that we have.

Will the cabinet secretary take an intervention?

Do I have time, Deputy Presiding Officer?

There is a bit of time in hand if you wish to take the intervention.

I will take a last intervention from Liz Smith.

I am very grateful. I, too, welcome Neil Gray to his position. As I understand it, some of his colleagues are currently looking at ways to use the powers of this place better. Does he agree with that assessment when it comes to improving the economy, and does he accept that it is well worth looking at that?

We will always look at ideas that can ensure that we maximise the opportunities that we have. That is not only about policy levers, because we also have to recognise the limited resources that we have in this Parliament. As I said in response to Willie Rennie, we have to recognise that we do what we do to try to generate economic growth with limited powers and resources compared with those that a normal, independent country would have. I am happy to work with Liz Smith if she has ideas on some of the areas that we have within our gift that would allow us to generate further growth, and I look forward to that. I am looking to engage with the Opposition spokespeople in the coming weeks.

The UK Government needs consistently higher levels of public investment. Our foreign direct investment competitors are committing greater budgets to incentivise investment. The UK needs to invest using the levers that it has—which we would like to enjoy—on a scale that matches our ambitions. As was shown in a recent publication by the Resolution Foundation, Britain is a “low investment” state, which has ultimately left us poorer.

In the United States, the Biden Administration is stimulating massive investment in renewables and green technologies through the Inflation Reduction Act, and the European Union is following suit with its new Net Zero Industry Act and its Critical Raw Materials Act. Other Governments are leading the way and bringing markets and investment with them, but the UK is left on the sidelines, with the risk that investment will flow to the EU and the US rather than to Scotland.

The UK’s lack of action means that we are at a competitive disadvantage. There is a narrow window of opportunity to reap the rewards of our renewables revolution, so now is the time for the UK Government to prioritise meeting net zero targets and other vital infrastructure priorities and to invest in the economy rather than squandering Scotland’s energy assets once again.

That is why this debate is so important. In the face of financial and economic pressures, as well as the threats of climate change and child poverty and the need to enhance public services, it is essential that we come together to drive our transition to a wellbeing economy. That was the focus of the discussion that I had with the organisations that represent businesses across Scotland only hours after my appointment.

A wellbeing economy is a strong, growing economy that is environmentally sustainable and resilient and that serves the collective wellbeing of people first and foremost. It empowers communities to take a greater stake in the economy, with more wealth being generated, circulated and retained in local communities. It protects and invests in the natural environment, provides opportunities for everyone to access meaningful and fair work, and values and supports responsible, purposeful businesses to thrive and innovate.

That is why our national strategy for economic transformation emphasises wellbeing, building on and broadening the sustainable inclusive growth approach that was taken previously, and it is why one of the three missions that the First Minister announced yesterday is to increase opportunities in our country with an economy that is “fair, green and growing”.

In order to make the shift towards a wellbeing economy, we need metrics to track its progress, and we developed our wellbeing economy monitor specifically to look beyond just GDP and measure how Scotland’s economy contributes to improving things such as health, equality, fair work and environmental sustainability. In committing to a transition to a wellbeing economy, we can build on our considerable strengths and maximise our potential with the powers that we currently have. With independence, we could do so much more.

Scotland has a rich, diverse economy with many areas of strength, but there are underlying structural issues. We have an ageing population and our working-age population is falling. That is why we have made a commitment to address Scotland’s labour market inactivity challenges and remove barriers that keep people from contributing economically.

Investing in skills across people’s lifetimes is critical to future productivity and success as the economy and labour markets continue to evolve. Apprenticeships provide people of all ages with great opportunities to upskill and reskill. They help people to progress on their chosen career paths and thereby provide the skills that the economy needs both now and in the future.

Certain industries still face recruitment challenges—I hear about that when I meet employers in my constituency—so we continue to call on UK ministers to establish a joint task force on labour market shortages. An urgent rethink of UK Government immigration policy is also needed in order to increase access to the international labour that our economy needs. To that end, the Scottish Government has developed a rural visa pilot proposal that represents a practical and deliverable migration solution. The Migration Advisory Committee stated in its 2022 annual report that the proposal is “sensible and clear” in both scale and deliverability. We will continue to push the UK Government to engage with us on that.

We need to do all that we can to help people to get into good jobs and stay in them, by providing the right support—such as employability services, health services and childcare—at the right time, especially for those who are furthest from the labour market. The national strategy for economic transformation emphasises the need for high-quality childcare to enable parents and carers to work, increase their working hours or enter training and education.

Our recent early learning and childcare parent survey demonstrated clear positive benefits from the increase in the funded ELC entitlement, with almost three quarters of parents acknowledging that it supported them to work or to look for work. Our ELC provision, which is the most generous in the UK, also helps to tackle inequalities such as the gender pay gap. However, we have ambitious plans to go even further. In the current parliamentary session, we will build a system of school-age childcare and design a new offer for one and two-year-olds, starting with those who stand to benefit the most. Our commitment is set out in the policy prospectus that the First Minister published yesterday. I hope to meet the childcare sector soon—including the private, voluntary and independent sectors—to understand where we can support its crucial role in childcare delivery.

Our focus on people’s wellbeing, which prevents harm, is good for Scotland’s economy. In the face of acute labour shortages, it will help many sectors and businesses to access the workers that they need in order to be successful and drive our journey to a stronger, fairer, green economy. That will benefit Scotland’s tax base and public finances while also having positive impacts on our children and future generations.

Through our holistic approach to supporting the wellbeing of our children and young people, we can help to improve outcomes in education, employment, health and justice by ensuring that our children and young people are supported, encouraged and empowered to contribute to and benefit from the development of a wider wellbeing economy. By taking a preventative approach now, we can reduce issues in the future—

Cabinet secretary, I have given you some latitude because you took a number of interventions, but I ask you to bring your remarks to a close now.

Of course, Presiding Officer.

The development of offshore wind can help to achieve a just transition to net zero, decarbonise our energy system and create good-quality jobs. It is also one of the lowest-cost forms of electricity generation at scale. We have huge opportunities in relation to our ScotWind offshore project, looking at hydrogen and the tidal and marine sector—

Cabinet secretary, I really do have to ask you to conclude.

In conclusion, it is clear that we have the plan, the opportunities and the ambition that are needed to deliver a wellbeing economy. However, to succeed, we need everyone to be round the table. The prize when we succeed will be a prosperous, dynamic, thriving Scottish economy where everyone shares in and benefits from our success. The Government’s motion indicates the steps that we need to take to ensure that we get there and reap the opportunities that are there for us all.

I move,

That the Parliament recognises the need to create a wellbeing economy that is democratic, works for people and planet, and supports communities to fulfil their potential; believes that such an economy must be equitable, sustainable and dynamic in order to address the climate crises, the current financial and economic challenges, and to deliver a just transition to net zero, reduce child poverty and enhance public services; notes that plans to expand childcare support and implement the National Strategy for Economic Transformation and the Just Transition Plans will deliver new opportunities for communities, businesses and individuals across Scotland; considers that the development of community wealth building legislation will be a key component of the approach to local and regional economic development and empowerment, will promote and sustain fair work, create and retain more wealth within communities, build Scotland’s tax base, strengthen its economic resilience, increase wellbeing for current and future generations and support the delivery of high-quality public services, and recognises that independence would allow Scotland to make greater progress, but, until then, calls for the devolution of additional powers, in relation to energy, the economy and employment law, to the Scottish Parliament to support Scotland’s transition to a wellbeing economy.

Thank you, cabinet secretary. I call Liz Smith to speak to and move amendment S6M-08604.1.

15:38  

As well as welcoming Neil Gray to his position, I welcome Michael Marra to his. I look forward to working with them both.

The minister was quite right when he said that there are issues with the UK economy, but issues with other European economies have been flagged up by the International Monetary Fund and by various economists.

However, I want to concentrate on the Scottish Fiscal Commission’s sustainability programme, which was missing from the First Minister’s comments yesterday. I was a bit surprised about that because—Willie Rennie was quite right in what he said—the situation for Scotland when it comes to fiscal issues is considerably worse than the situation for the rest of the UK. That is partly to do with our ageing population demographic, but it is also to do with the fact that the tax base in Scotland is not nearly as broad as it should be. That also has an effect on productivity.

There are some serious concerns about what the Scottish Fiscal Commission has said—not least about the fact that social security spend alone is predicted to increase from £4.2 billion in the past financial year to £7.3 billion in financial year 2027-28.

Will the member take an intervention?

I will, in a minute.

That is a very substantial increase and it takes into account only one area of considerable spending.

Liz Smith concentrates quite a lot on the idea that we do not have enough people to work and that, therefore, more people are not working. Will she accept that a relaxed immigration system of some kind is absolutely necessary?

I accept that. However, I also think that the issue is not just about immigration; it is about ensuring that coming back into the working population are people who have not, perhaps because of Covid or other challenges, been participating in the workforce.

The issue is also about more than that: it is about the tax take that Scotland desperately needs from people in the working population, in order to ensure that we are addressing the problem. The Scottish Fiscal Commission’s most important conclusion is that the current tax and spend model in Scotland simply will not cut it. I think that that is the most serious issue that is confronting the Government. Kate Forbes—I am pleased to see some of her colleagues who have similar ideas on the back benches—quite rightly focused on exactly that issue, and she is right to see that as the main problem that Scotland needs to get over if we are going to succeed.

The Scottish Parliament’s Finance and Public Administration Committee was very clear in paragraph 63 of its recent “Budget Scrutiny 2023-24” report that the efficacy of the tax system in Scotland has to be questioned. It needs a complete overhaul, because many tax elasticities and behavioural changes are simply not being properly accounted for.

However, what are the actual tax rates? There is a debate about the structure of tax as well as one about tax rates. The Cabinet Secretary for Finance and the First Minister have been telling us that they want a much more progressive tax system. In theory, and in terms of social justice, that is absolutely fine, but in practice it cannot work, because we do not have the wide tax base that we need. Simply hiking up tax rates for middle and higher earners and, as a result, increasing the tax differentials between Scotland and the rest of the UK is a serious issue, and it will not bring in the money that we require in order to ensure that the economy is on the right footing.

Will the member take an intervention?

I will, in a minute.

That is the point that Willie Rennie raised in a debate just before the Easter recess. In continuing to increase the tax rate, there comes a point at which that will have diminishing returns.

Will the member take an intervention?

I will in a minute, Mr McKee.

Way back in 2016, my colleague Murdo Fraser quite rightly questioned the previous—infamous—cabinet secretary, Derek Mackay, about the Laffer effect. In continuing to squeeze middle and higher earners, there comes a point at which not only does the amount of revenue reduce but there is a detrimental effect on economic activity.

I will not entertain the chamber by going through the differential calculus that lies behind the Laffer curve, but Liz Smith should have a look at it, because it does not say what she says. This is really about understanding exactly where we are on the curve, because that will give a different perspective.

I am trying to understand the point that Liz Smith made about the Scottish Fiscal Commission. She is on the Finance and Public Administration Committee, so she should know that the Scottish Fiscal Commission does a behavioural analysis and factors that in to the tax-take numbers in advance of any tax changes being made. By the time the numbers are presented for the budget discussion in the chamber, the behavioural impact has already been factored in. I do not know about Liz Smith, but I trust the SFC to make sure that it checks its work and that it understands that the behavioural factor ratios are correctly implemented.

I absolutely trust the Scottish Fiscal Commission, and Ivan McKee is quite right to say that a lot of its analysis is first class. Indeed, the analysis that it has just issued in its “Fiscal Sustainability Report” is groundbreaking and has never been done before. However, the key point is that the overall conclusions of the SFC are damning, because they suggest that there will be a 10 per cent deficit for who knows how long—perhaps 50 years. That is serious.

I will help the SNP out a little bit with regard to what we need to do. We, on the Conservative side of the chamber, are unashamedly the party of economic growth. That means having a competitive tax and investment structure, and putting emphasis on creating a modern infrastructure for housing, transport, net zero and the rural fabric of our nation. We are also unashamedly on the side of business and of breaking down the tax barriers and red tape that stifle enterprise and innovation. That requires that all levels of government—local government, the Scottish Government and the UK Government—work together to support business and our local communities, including through placing emphasis on levelling up.

Will the member take an intervention?

I am in my last minute.

We are unashamedly on the side of promoting jobs, transferable skills and incentives to keep people in the workforce. There has been lots of chat from the SNP about that, but we need a lot more detail on exactly what policies are to be put in place.

Finally, I ask the minister, please, to ditch the Greens when it comes to this matter, because they do not have the first idea about or understanding of what it means to have economic growth underpinning the new Scottish Government.

I move amendment S6M-08604.1, to leave out from the first “recognises” to end and insert:

“is grateful to the Scottish Fiscal Commission (SFC) for its ground-breaking work contained within the recent Fiscal Sustainability Report, which forecasts Scottish economic trends for the next 50 years; notes the concerns cited by the SFC that current tax and spend structures and current models for public services will not deliver the necessary revenue that Scotland requires to address the substantial fiscal deficits, which are forecast to be around 10% each year, and calls on the new Scottish Government to be fully focussed on improving productivity, on widening the tax base and delivering the economic growth that Scotland so desperately needs.”

15:46  

I welcome Neil Gray to his place and his promotion to cabinet secretary. I know that it has been a bumpy old start for the Administration, but I wish him well.

However, the motion that Parliament is considering today is little more than a collection of platitudes, and is little different to the motion that we debated just a few weeks ago, which was the former Deputy First Minister’s swansong. I am afraid that the tune is none the sweeter for having a new singer, so far.

Will the member take an intervention?

No, thank you. No singing, please, Mr Gray.

The SNP is a political movement and a Government that exists to deny difficult numbers, and we have heard a little bit of that already. When the numbers showed that we were falling down international education league tables, this Government withdrew Scotland from those tables. It was a self-serving mistake that amounted to self-harm on this country. Yesterday, finally, after 13 years, that mistake was reversed. I imagine that whatever benefit the First Minister believes will now be accrued has been lost over all those long years without those measures.

Further, when the Government’s official kite-marked figures, which were produced by the Office for National Statistics, showed that we benefit to the tune of an average of £10 billion a year from fiscal transfer within the UK, the SNP decided that those figures had to be trashed. That approach started in the dark corners of the internet with sad little men in their bedrooms, but it has eventually become a rite of passage for SNP leadership contenders to do exactly that by savaging “Government Expenditure and Revenue Scotland” figures in meetings of party members across the country—GERS deniers, each and every one of them.

Now, of course, we have seen the video of the former First Minister—in relation to whom Humza Yousaf is proud to call himself the continuity candidate—saying, when the numbers showed that the SNP was running out of money, “Don’t ask questions. Wheesht for indy.”

As a wise man once said:

“Quis custodiet ipsos custodes?”

That wise man whom I am quoting is, of course, Colin Beattie MSP, who was speaking at the Public Audit Committee in January 2022. For those of us who are less familiar than Mr Beattie is with the works of the Roman poet Juvenal, the translation is “Who watches the watchmen?” Well, Colin Beattie and the SNP know now: it is Police Scotland.

Will the member take an intervention?

No, thank you.

It really is astonishing for the SNP to slink out from the blue crime-scene tent to come here today and preach probity in public finance, and it is equally astonishing that, in its forensic search for relaunch policy ideas, the Scottish Government has stumbled on the concept of economic growth. That is an idea that was wilfully expunged from this Government’s policy agenda in its partnership with the Greens. So, I say to the cabinet secretary today that if the Government wishes to trade in economic concepts such as a wellbeing economy, as laid out in the works of Trebeck, Williams, Jackson and Raworth, it must be able to explain where the ecological and social limits of growth are. That is what a wellbeing economy is.

There is, to be frank, no evidence in any of the muddled thinking that has been presented so far today, in the motion, in the cabinet secretary’s speech or in the First Minister’s intervention yesterday, that the Government is engaging in anything more than wilful abuse of that concept as a branding exercise.

Rather than just serving up soundbites in his speech, I implore Michael Marra to look at the prospectus paper that was published yesterday, to see the outline of the work that the Government is looking to embark on in order not only to achieve the wellbeing economy but to look at the wellbeing economy metric—it is available and publishable and can be seen—that will track the progress that we hope to make in order to ensure that we achieve the wellbeing economy. If he could engage on those facts, which I hope he does as we engage across the chamber, we will be closer to, rather than further away from, what he has outlined.

I am certainly happy to engage with the cabinet secretary on any of the metrics in a discussion of what any of it means. As I outlined in my most recent speech in the chamber on the economy, after years of listening to economic policies from this Government that have, frankly, jumped from one idea to the next over 16 years, I struggle to believe that the latest bandwagon that is being jumped on will be any more coherent or delivered than any of this Government’s previous attempts.

We are being invited to celebrate other broad concepts. The high bar of this Government is to not do ridiculous things, to decide not to continue to do ridiculous things or to decide to pause doing ridiculous things for a short while before starting them again. What do the deposit return scheme, the National Care Service (Scotland) Bill and the ban on alcohol advertising all have in common? The answer is the ineptitude of a Government that can turn any crumb of a decent idea into a toxic morass almost as quickly as it tries to blame Westminster. Of the mess that the Government has made of the deposit return scheme, the Association for the Protection of Rural Scotland said:

“This is a bitter betrayal of Scotland’s natural environment.”

While Michael Marra talks about the “morass” of the economy, could he confirm that the last words of the most recent Labour UK Government were that there was “no money” left?

If Mr Brown wants to invest himself in the idea that the most recent Labour UK Government was responsible for the global financial crisis that resulted in the banks crashing, he might recall that the First Minister under whom he served, Alex Salmond—[Interruption.]

Could we have less sedentary chitchat, please?

Alex Salmond called the regulation of the banks in this country “gold-plated”. We know that we have a very difficult economic situation in this country as a result of the Tory Government and Liz Truss’s ineptitude, but this Government has to rise to making sure that there is economic growth in this part of the country.

The manner in which the deposit return scheme was devised would have been ruinous for businesses, and Scottish firms deciding to sell only outwith Scotland is a perverse situation. It is right that the scheme is put back on the blocks for the moment, which is entirely due to the Government’s incompetence. Yesterday, Ross Greer said that it is a Westminster delay. I assure him that the businesses that I speak to are not asking for a derogation from the single market regulations: that is not their reason for feeling that the scheme has been a complete disaster. They want a scheme that is appropriate for consumers and businesses and can increase recycling without costing jobs. The first thing that they want is a scheme that is led by a Government minister who can answer the most basic of questions about it.

The test of economic competence for this Government will be whether it can reverse the situation that Universities Scotland described last week as the “managed decline” of its sector. That situation is entirely unacceptable, and it is crucial that it be reversed if we are to ensure that our economy can thrive again. The questions will be whether we can meet the skills demands to make a jobs-first transition and whether the Government has a real plan to deliver growth. Our financial prosperity counts on those questions being addressed.

On the question of financial probity, I am afraid that the Government has already failed.

I move amendment S6M-08604.2, to leave out from “notes” to end and insert:

“recognises the tremendous potential that Scotland has to be a world leader in developing an economy that works for everyone; believes that the Scottish Government should be doing more by using the extensive powers available in Scotland to create jobs, deliver environmental sustainability, tackle the cost of living, upskill workers, grow Scottish businesses and channel more investment into high-growth, innovative firms of the future, so that everyone benefits from Scotland’s prosperity; understands that sustainable economic growth will be required to successfully deliver a jobs-first transition to net zero and an economy that works for all; believes that it is vitally important that the Scottish Government enables businesses and households to have confidence in Scotland’s economic prospects, and calls on the Scottish Government to prioritise openness, transparency and competence in the management of Scotland’s finances.”

15:54  

I welcome the cabinet secretary to his post. I think that the first step that he took—to indicate that we are going to reset the relationship with business—was a wise step. There is little doubt that that relationship had really been tested, certainly over recent years and certainly with the arrival of Nicola Sturgeon as First Minister. That relationship was much more strained, so he made the right decision to reset it. However, the real test will be delivery on the key economic indicators over time.

I embrace the wellbeing economy approach. It is fundamental that we have good public services and a good local environment for people to enjoy, in which they can work and live good and healthy lives. The difficulty sometimes with this Government—there was an indication of this in the minister’s speech—is a tendency to focus more on the wellbeing aspects than on the economic aspects. That tends to be the attraction on such occasions, so I hope that there is a different approach—a more balanced approach—as we go forward. We need a strong economic approach, as well as good public services and a good environment, and we need them to work in tandem to boost the economic prospects of the country.

I like the wellbeing economy monitor; however, I have to say that it is rather subjective. Quite a lot of the indicators are of the view that the Government is making progress. For instance, the poverty-related attainment gap is down as making progress, but if I look at secondary 3, the gap is as wide as it has ever been and there is no indication that it is narrowing. Therefore, I think that it is subjective.

Certainly, we are not making progress on GDP either, because it has fallen since 2017. We need an independent assessment of the monitor to make sure that it has as much validity as the GDP and productivity figures that we rely on. The Carnegie Trust has done some really good work on that, and I hope that we will see a reform of the monitor to reflect the more accurate indicators on wellbeing.

The fundamentals on the economy are not good. Liz Smith rightly pointed out the Scottish Fiscal Commission’s work and the report for the longer term. The productivity index provided by the Confederation of British Industry, which shows Scotland lagging behind the rest of the UK on 11 out of the 13 indicators, is not good either. There is some short-term improvement, but the longer-term outlook is very weak. If we look at labour productivity, in 2020-21 it went up by 1.2 per cent for the UK; however, in Scotland it flatlined. We are going to have to see significant progress on productivity if we are to get some improvement.

Likewise on GDP—the UK economy is a basket case as a result of Liz Truss’s budget decisions, but Scotland is lagging even further behind. We should be better than the UK performance.

I want to see improvements on this—

Will the member take an intervention?

I am really limited on time today, I am afraid.

I want to see a real focus on universities and the potential that they provide. Scottish research performance has slipped in the recent Research Excellence Framework, going from 15 per cent of UK research council funding to 12.5 per cent. That is a major generator for economic potential, but we are slipping further behind.

On the skills agenda, we still do not have alignment and colleges still do not have certainty about the future. We also need to have a better relationship with the UK Government, rather than having constant friction.

As Liz Smith highlighted, we need to have a more balanced approach to income tax. I am in favour of progressive taxation—I argued for an increase of a penny—but we cannot keep on arguing. We need greater progress and we need progressive taxation, because there is a tipping point. We need to base it on evidence—I want to see the Government looking at evidence rather than living by a slogan and the rhetoric. We need to have an appropriate approach to that.

This debate is far too short, I am afraid. We need to have a much longer debate on the economy, because there is so much more to cover.

Thank you, Mr Rennie. I ask members who wish to speak in the debate to please press their request-to-speak buttons. I know that some members have not yet done so.

We now move to the open debate—[Interruption.] Excuse me, I ask members on the front bench not to talk when I am speaking. Thank you very much indeed. I call Christine Grahame.

15:59  

Wellbeing starts—

I beg your pardon, Presiding Officer—I seem to have done something funny to my screen. Sorry about this, but can someone remove something from my screen, please? [Interruption.]

Can someone assist, Ms Grahame? Thank you.

I have got a lot of funny stuff down the side of the screen.

Are we all good to go, now, Ms Grahame?

I am technologically intact.

Excellent—please continue.

We know that wealth protects and that poverty brings with it physical and mental ill health, which blights the prospects of some children even before birth, because the damage of poverty and inequality begins in the womb. It can also corral whole communities, as a postcode can determine people’s prospects in health, wealth and happiness.

Sustainable economic growth focusing on indigenous businesses, fair taxation and fair pay, together with a just benefits system, provides a foundation. However, it is simply that: a foundation. Therefore, it is what we build on that foundation that matters. Of course, we do not have power over the macroeconomy, over most areas of taxation or over some substantial benefits. Devolution dilutes not only radical progress in redistribution but the growth of a nation’s wealth.

Despite that, housing, education and health care are just some examples of where Scottish Government policies have and will improve the quality of life of those who currently cannot see the way forward for themselves and their children.

We need to accelerate the building of public sector homes. Currently, many of my constituency emails deal with housing issues: overcrowding; damp; people languishing on council lists for years; and people paying high rents in the private sector or stretching their income to breaking point with a mortgage. Yes, there is a place for home ownership, but that should be a choice, not driven by necessity.

That said, wellbeing starts with a decent roof over everyone’s head. In my book, if we want to increase the happiness, health and ambition of people, we should start with social housing. I welcome the measures that have been announced to bring empty homes back into use.

Then there is education, which is the key to having the opportunity to realise our potential. That happened for me. I was brought up in a council house, educated in state schools and had my university fees paid twice, through two degrees. Indeed, at one point, because of the family income, I had a full grant for living costs. I say to the Opposition that Brexit has impacted our university research and development.

I welcome the support for families. The uptake of the baby box is well over 90 per cent, and we have 1,140 hours of free nursery care for three and four-year-olds, with the prospect of that being extended to one and two-year-olds. In addition, there are no tuition fees. We also have free school meals for primary 1 to 5, which will be extended to P6 and P7 for those in receipt of the Scottish child payment.

I turn to health and social care. We do not pay for prescriptions. In England, the cost is well over £9 an item. Here, no one is worrying over the cost, or rationing which medication they can afford, if they can afford any.

For context—we must put some blame at the foot of the UK economy—the UK economy is at the bottom of the G7 countries in its recovery from Covid. It is doing even worse than Russia, which is waging an immoral and costly war. General inflation is above 10 per cent, and food inflation is about 18 per cent. This Parliament can do nothing about that.

It is a bit hypocritical for any Conservatives to argue that poverty in Scotland has nothing to do with Tory policies that we did not vote for. Part of the issue is being dragged out of Europe. No matter what spin Jeremy Hunt puts on it, the UK economy is, at best, stagnant, and teetering on the edge of recession.

Undertaking a house-building programme for social rented housing, as we did many decades ago, would benefit the economy, from the planners, architects, trades and suppliers to the shops that sell the takeaway bacon rolls. If I was to rank the three areas of housing, education and health, I would start with decent housing for anyone in Scotland who needs it.

16:03  

I will be focusing on a number of issues today, which I will do through the use of old-fashioned technology, such as paper, rather than mucking around with new stuff like Christine Grahame and other young bucks do.

I, too, welcome the cabinet secretary to his new role. As an Orcadian like me, he comes from an island that is rich in entrepreneurial skills, drive and determination. I hope that he can bring that to his new position, because that has been sadly lacking over the past few years.

This is an important debate, and more so given the Scottish Fiscal Commission’s clear warning, which Liz Smith mentioned, about the significant challenges that the Scottish Government will face in providing devolved public services in Scotland.

As Liz Smith highlighted, the report shows that Scotland’s fiscal gap will be around 10 per cent per year and, in only four years’ time, spending on welfare will be £1.4 billion higher than the Scottish Government receives from the UK Government. In the longer term, over the next 50 years, health spending will increase so that it consumes half of devolved spending. Further pressure will be added to that by a drop in the population of Scotland over the next 50 years, in contrast to the UK as a whole. Scotland’s financial trajectory is unsustainable.

These are not challenges that just Scotland, or the United Kingdom, faces. Countries across the world are grappling with them. As in those countries, in Scotland the financial and economic model will need to change. It is worrying that, instead of recognising that, the new First Minister seems determined to push on with the failed fiscal policies of the past. Indeed, he seems determined to accelerate a high-tax, high-spend culture that Scotland simply cannot afford, and to make no effort to grow the pie instead of taking larger slices of it from a dwindling number of people.

The Government will do that while claiming, like rabid Corbynistas, to be taxing the rich. However, the rich that they talk about are teachers, doctors and other ordinary people doing vital jobs in Scotland, who no one in their right mind would claim to be rich. They will have more money taken out of their pockets by the SNP-Green Government.

That approach has taken root in the SNP in the past few years, but it has been accelerated by the malign influence of the anti-business and anti-growth Scottish Greens. That party has signally failed to understand that, to spread wealth, you have to create it in the first place. It is a party whose leader Lorna Slater once said that economic growth is bad because it leads to people buying

“crap you don’t need to impress people you don’t like”.

There will be no fear of that in Scotland if it has to suffer more years of the Scottish Greens in Government, as those people who have not already been driven out of Scotland by high taxes will not have any money left in their pockets, anyway. It is no wonder that there is, at long last, a growing backlash from at least some on the SNP back benches who do not want to see Scotland held to ransom by six anti-growth Green zealots.

It was welcome to see some recognition of that yesterday from Humza Yousaf, who conducted so many U-turns in his statement that I doubt even he knows which way he is facing. His approach resembled tat of a man who is left endlessly driving around a roundabout until he works out which exit he wants to take.

I support the need for good jobs and believe that employment should be secure and rewarding. However, those things require strong businesses operating in a strong economic environment. The SNP-Green approach of the past few years—of more tax, more regulation and more uncertainty—is the not the way to achieve that.

In January, the Fraser of Allander Institute reported that business confidence was low in Scotland, with only 5 per cent of Scottish firms feeling more confident about the outlook for their businesses after the Scottish Government’s budget. It found that business activity had significantly declined, with the value of new activity down by nearly 5 per cent and new capital investment down by nearly 15 per cent.

Businesses need to have confidence that the Government is there to support them and will give them the tools to do the job. That means delivering the infrastructure that businesses need, for fast broadband and reliable and fast road, rail and—dare I say it—ferry links. That needs Government support, through enterprise agencies, Business Gateway and other bodies such as the Scottish National Investment Bank, to be focused on and ready to meet the needs of businesses in the way that businesses want those needs to be met. It needs Scotland’s governments—UK, Scottish and local—to work together, as they did with the city and regional deals on the green freeports.

Talk of a wellbeing economy is all very well, but business needs less rhetoric from Government and fewer regulations. I had hoped that a new First Minister would herald a new approach. Unfortunately, the evidence so far suggests that Scotland is in for more of the same from this Government—a continuity First Minister whose Government will continue to make many of the same economic and fiscal mistakes of the past.

16:08  

I start by welcoming the cabinet secretary to his new role. I wish him all the best and thank him for his comments in opening the debate this afternoon. I hope that he takes my contribution in the constructive manner in which it is intended.

I welcome the widespread recognition by the Government and others of the strong links between a wealthy economy and a fairer and greener economy, which are clearly articulated in the paper that we published with Common Weal yesterday. International evidence shows that the fairest countries, including our Scandinavian neighbours, are also the wealthiest and most productive. However, building that economy requires hard work from Government and others, and it is a path littered with potential wrong turns.

Will the member give way?

I do not have time—sorry. I have four and a half minutes, or whatever it is.

It is four.

There are clear messages that Government needs to internalise and deliver on. First, I will give the good news. The Scottish economy benefits from lower unemployment, lower labour market inactivity and higher average wages than the rest of the UK, and the percentage of workers earning less than the real living wage, which is a key lever in tackling poverty, has fallen by half over the past few years.

Scotland’s goods exports, excluding oil and gas, are growing at twice the rate of those from the rest of the UK, despite Brexit. Inward investment performance continues to outstrip that of the rest of the UK outside London and is well positioned for future successes, with some tasty opportunities coming down the track. Scotland’s world-leading position on renewable energy, life science, fintech, digital, premium food and drink and, of course, the space sector is well recognised, not just at home but globally, which is important. I look forward to minister Richard Lochhead’s space debate next week.

Of course, none of that takes away from the fact that much more needs to be done. The considerable day-to-day challenges that businesses face on labour and skill shortages, energy and input cost inflation and access to markets need to be addressed in the immediate term. However, sometimes, the best thing that Government can do is just not make things worse, and it was welcome to see some recognition of that in the First Minister’s statement yesterday, but there remains uncertainty around the direction of travel on key policies.

Although Government may find comfort and space to manoeuvre, that is not the case for business. Therefore, lesson 1 for the Government is: be clear and consistent, and resist the temptation to chop and change to grab soundbites. Business does not appreciate politics as show business.

The second advantage that the Government has is that it is in the fortunate position of knowing what it needs to do. The blueprints for success are in place. It was great to hear the cabinet secretary reference the national strategy for economic transformation, which lays out the actions that are required to deliver a strong wellbeing economy that is fairer, greener and wealthier. The supporting action plans on exports, inward investment, innovation and skills, regional development and other issues are robust, but Government has to focus on delivery. Do not be diverted into more discussions and reviews, just because it is easy for officials. Relentless and tireless focus on doing the right things, day in, day out, is what gets results. Spin over substance does not cut it.

To make this happen, Government needs to work with partners, not just through superficial engagement but through deep strategic partnerships. The mechanisms to deliver that are in place. Industry leadership groups, with their capacity to mobilise sectors to deliver agreed strategies, are key. Government needs to avoid convincing itself that it knows best. As I learned, ministers are far from the most important people in the room when dealing with business.

Partnerships go much wider than just business. The role of trade unions is critical to delivering on this agenda, and they need to be at the centre of ILGs and other partnerships. The same goes for the mechanisms that are now in place through regional economic partnerships to align and mobilise efforts right across the country.

Support for business is complicated and cluttered, with 130 different funds at the last count. That is expensive to administer and difficult to understand and has limited impact. Therefore, the next lesson is: do less, but do it better. More random unco-ordinated and non-strategic initiatives thrown out in an attempt to grab headlines are the last thing that the economy needs. Stay focused on where a real impact can be made. For example, the industry group on rest of UK talent attraction has the potential to add up to £1 billion to tax revenues over the next five years if its actions, which have been agreed with industry, are followed through. The ILG chairs group is a powerful forum for cross-sectoral co-operation and innovation and has a deep reach across Scotland’s diverse economy.

In conclusion—

You do need to conclude, Mr McKee.

—the other good news is that the Government will have help. The cabinet secretary and the First Minister have welcomed constructive input to taking forward this agenda, and my colleagues and I are only too happy to take up that offer.

You need to conclude, Mr McKee.

The cabinet secretary will be delighted to hear that we will continue to engage extensively across the economy and with partners, polishing our thoughts on what needs to be done to deliver the strong wellbeing and net zero economy—

Thank you, Mr McKee.

—that is definitely within Scotland’s reach.

I apologise, but we have no time in hand and therefore members will need to stick to their speaking time allocation.

16:14  

It is hardly three weeks since I spoke in a debate in the chamber on the wellbeing economy. That was often more a valedictory debate for John Swinney, as he stepped down from his role. Although I do not grudge him the tributes that were paid that afternoon, I raised a number of matters of substance, to which I intend to return this afternoon.

It is just over a year since the Scottish Government produced Scotland’s national strategy for economic transformation. At the time, some disappointment was expressed over the lack of a gendered understanding of the economy and the lack of an acknowledgement of the extent and nature of economic inequality.

Although the commitment to develop a wellbeing economy monitor was welcomed, if the Government is serious about the matter, it needs to demonstrate that economic policy is shifting from one that is driven solely by GDP growth to one that takes a transformative approach to address poverty and inequality.

The wellbeing economy monitor update in December 2022 showed that wealth inequality is worsening. In March, the United Nations special rapporteur on extreme poverty and human rights, Olivier De Schutter, set out why growth is not the “magic wand” to address poverty. Wealth and income inequalities largely cancel out any of the positive impacts on wellbeing that are expected to come from increased GDP.

During the pandemic, aspirations were expressed about building back better, doing business differently, investing in our communities and valuing workers, particularly those who were shown to be undervalued but vital to the operation of society. As we face a cost of living crisis, those ambitions appear to have been lost, but surely recognising models that put people first is more relevant than ever and offers solutions to some of the challenges that we face. We can create a more resilient and robust economy that is better placed to withstand external pressures and unpredicted events.

There are calls for the national performance framework to be transformed into a wellbeing framework, for a review of the national outcomes to ensure that wellbeing goals are a key part of policy and spending decisions, and for a discussion to be opened up on taxation and how we redistribute wealth fairly. The forthcoming wellbeing and sustainable development bill, which is overdue, provides another opportunity to be bold and to take decisions to accelerate the transition.

Although we can talk of Scotland’s membership of the wellbeing economy Governments partnership, it is clear that current actions are not sufficient to achieve the substantial redesign that our economy needs to achieve that vision. We need bolder action, and we can learn from partners. As I highlighted last month, New Zealand has started to build its budget around wellbeing priorities and, since 2019, has been consistent in those goals. The Future Generations Commissioner for Wales provides additional scrutiny of the wellbeing economy agenda. Here in Scotland, we could learn from local initiatives, including innovative community wealth building approaches in North Ayrshire and community ownership and engagement models in Dumfries, which are empowering communities.

Tied to the economic model that is based solely on GDP is the idea that business success can be demonstrated only by growth, but we know that many businesses do not fit that model. Businesses in the creative economy, for example, do not fit that measure of success and are therefore not valued and supported by Government agencies. The report from the business purpose commission for Scotland showed that almost half of people think that the role of businesses in society is to maximise returns. However, when the Fraser of Allander Institute asked what role businesses should have, almost two thirds of people thought that they should have a role in finding profitable solutions to the problems of people and the planet.

We need to do more to promote and grow social enterprises and co-operatives. They are often more resilient than other businesses, which is an important consideration as we recover from the pandemic. There is a real opportunity to grow the number of social enterprises and co-operative businesses in Scotland. The amount of money that supports the co-operative and social enterprise fund is small, and it is disappointing that such models continue to have a very low profile in the Scottish Government’s economic strategy. We need a greater focus on co-operative models if the target of having 500 employee-owned businesses by 2030 is to be achieved.

16:18  

The motion asks us not just to examine budget spreadsheets and haggle over spending but to think about service delivery in the long term and reconsider how we measure economic progress and face up to challenges, including the need to eradicate child poverty and minimise climate change.

The notion of a wellbeing economy is becoming increasingly well understood. For too long, countries have focused primarily on growth, often with low productivity, wage stagnation and environmental degradation. China’s economy appears—at least on paper—to be a model of success, with booming exports, high investment and rapid growth. Nevertheless, few of us would want to live in that economy. China’s growth exceeds the pace of institutional development, and there is an unstable business environment in which the rule of law is often an afterthought, working conditions are often poor and unsafe, regulation is weak and little consideration is given to the planet. China’s example might be extreme, but it illustrates a point: growth tells only part of the story and neglects the quality of life, the distribution and allocation of wealth, the calibre of jobs created and the fairness of conditions.

In 1968, US senator Bobby Kennedy said that GDP

“measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion … it measures everything in short, except that which makes life worthwhile.”

Although the relative simplicity of gross domestic product means that it remains an indicator, measuring wellbeing is increasingly important, and Scotland is at the forefront on that. As a founding member of the wellbeing economy Governments group, in which member countries work together to develop priorities for a wellbeing economy, Scotland’s contribution to mainstreaming the concept is highly valued, and our national performance framework has wellbeing as a core part of the Scottish Government’s purpose.

I am grateful to the Carnegie UK Trust for sharing its work in this area, in particular its paper on “Gross Domestic Wellbeing”. That is mapped against GDP, focusing on 10 domains, and it is linked to Office for National Statistics data. It helps to enliven the concept and offers thematic reviews of 800 recommendations from nearly 50 commissions and inquiries since 2010. The thoughtful paper that my colleagues Kate Forbes, Ivan McKee and Michelle Thomson have produced is also a useful addition to the debate.

Although I am supportive of such efforts and am keen to see wellbeing progressed, it is clear that development, fairness, equity and the alleviation of poverty will not be achieved without economic growth. While some economists would happily ignore wellbeing, others would abandon growth and its measurement altogether.

We are also focusing today on the management of Scotland’s finances, and it would be irresponsible of us to ignore the worrying analysis of Scottish Government budgets in the recent fiscal sustainability report from the Scottish Fiscal Commission, which projects spending and funding over the next 50 years. Between 2027 and 2073, on current demographic trends, health spending will grow from £19 billion in today’s prices to £60 billion—a 218 per cent increase that is associated with new treatments and the greater prevalence of chronic health conditions. Total spending will rise by 123 per cent to £120 billion, while Scotland’s economy will grow by only 72 per cent.

Simultaneously, Scotland’s population will fall by 400,000, with those aged 65 and over increasing from 22 per cent to almost a third of the population. Driven by historically low birth rates, that demographic shift and fall in the number of economically active citizens creates a huge challenge for our public finances and for the re-imagining and delivery of services.

Chamber time must be set aside to enable us to debate the commission’s report fully and hear from all parties about their proposals for addressing challenges such as taxation, immigration, the retirement age and access to benefits and services. We cannot bury our heads in the sand and shirk our responsibilities.

rose—

Many countries seek to raise low birth rates. We can do so by delivering more high-quality, affordable childcare; having more flexible, paid parental leave; pursuing policies that support both partners’ involvement in child rearing; improving work flexibility and job protection; and ensuring that the disposable income of middle earners is not impacted by crippling tax burdens. Fundamentally, we need to address the high cost of housing, with supply being the key issue.

Through developing a wellbeing economy that marries productivity and growth to environmental sustainability, we can improve our work-life balance, increase the quality of employment and make an overall commitment to a better, fairer society, and we can address long-term challenges that GDP growth alone cannot solve.

I apologise for not taking interventions—time was against me.

16:22  

I welcome Neil Gray to his new role.

The motion before us describes a wellbeing economy that recognises our dependence on the natural environment in order to thrive. Such an economy is purposeful; it relies on and enhances democracy to enable communities to fulfil their potential. To address the climate and nature crises and the cost crisis; to deliver a just transition to net zero; and to reduce child poverty and enhance public services, radical change is needed. Those interrelated challenges and crises are not freak accidents resulting from bad luck in a game of chance; they are systemic outcomes of the limitless growth model that has been adopted to date by London’s Tory Government.

We welcome the renewed focus that the new First Minister has brought to the chamber. The focus on tackling child poverty is essential—the wellbeing of our youngest generations is imperative for the future prosperity of Scotland, yet that investment is not normally accounted for when we ask ourselves how well we are doing. Embracing the wellbeing economy will increase, rather than decrease, the opportunities that are available to individuals, communities and businesses.

Our economic strategy must go hand in hand with the just transition plan. The on-going cost crisis highlights the blatant injustice of people worrying about how to afford to pay their next energy bill while oil and gas companies laugh all the way to the bank. In addition, those whose livelihoods have depended on the fossil fuel industry’s success in Scotland are increasingly concerned about their job security.

New legislation on the horizon could genuinely transform the way in which wealth is created, retained and distributed for the benefit of Scottish communities. We must take advantage of community wealth building to ensure that the influx of public and private investment in the renewable energy sector flows into, and stays in, our towns and cities.

It is worth remembering that, just a few months ago, more than 100 charities, academics and others—from the Scottish Trades Union Congress to the Scottish Men’s Sheds Association and Scottish Women’s Aid—wrote to the former First Minister calling for an urgent transition to a wellbeing economy that

“delivers good lives for all people and protects the health of our planet”.

That is what we need to do, and as fast as possible. The public is telling us that we are not yet moving in the right direction quickly enough to achieve the outcomes that the people of Scotland deserve.

Of course, changing course is no easy task when, in large part, the ship is being steered by a Tory Government with virtually no understanding of the systemic shortcomings that we are facing. However, it is in our power to do more and, in particular, to stop doing things that take us backwards.

Communities and the third sector are key to helping us to identify the things that we need to stop doing and the things that we need to do more of or do better. Local and regional economic empowerment and development doubles the need for a new deal for local government. We have the crucial role of standardising the key ingredients of a wellbeing economy: fair work; public procurement that takes the impact of public spending into account; support for community buyouts; workers having the right to buy their businesses; democratic reform that puts citizens at the heart of the decisions that affect them; participatory budgeting; and an end to the hegemony of advice from the big consulting firms and vested interests. Let us stop relying on the people who are most responsible for getting us into this mess.

Although much valuable work is being done by the Scottish Government, the third sector and local government, more is clearly necessary, especially because of the headwinds that we face with a Tory-led UK Government that fails to grasp the nettle. Business as usual—a fixation on GDP and economic growth—has got us into the climate crisis, the nature emergency, increasing inequalities, soaring inflation, obscene profits for energy companies while people freeze and so many other injustices that should shame us all.

The economy must work for the wellbeing of everyone and our life support systems—not just for the billionaires.

16:26  

I welcome Neil Gray to his new role. It was a pleasure to hear from my colleague Ivan McKee, who delivered thought leadership at the rate of a Gatling gun. His presence here is the back benches’ gain.

In our document written for Common Weal, we comment on the complexity of a wellbeing economic system and how multiple areas interrelate, not just in policy but through multiple lenses.

We know that Scotland is a member of the wellbeing economy Governments group. The group states that a wellbeing economic system should have a fundamentally gendered lens from the outset rather than treating intersectionality as an add-on.

Although I accept that the Scottish Government’s NSET contains a commitment to develop a wellbeing economy monitor, which in its latest iteration includes measures on the gender pay gap, that does not yet begin to meet the test of a fundamentally gendered lens. At the moment, we can have only a piecemeal sense of that. Our reporting does not routinely disaggregate by sex, or indeed a variety of other diversity measures. On multiple occasions, I have asked ministers to what extent and how the Government—and all public sector agencies to which it provides funding—ensures that disaggregated data is gathered. Too often, it is a well-meaning rather than a wellbeing approach that is taken.

In our report, we credit Highlands and Islands Enterprise for applying conditionality to its business grant support in terms of the real living wage and our fair work agenda. However, the Government conditionality does not go far enough in and of itself.

On a gendered lens, I would look for gender equitability in all public sector funding—in business start-up grants, procurement and so on. I would also look for early confirmation of the delivery of recommendations from the Ana Stewart review of female entrepreneurship.

We cannot and must not underestimate the loss of women’s contribution. New analysis by the Centre for Local Economic Strategies and the Women’s Budget Group found that the barriers to paid work encountered by women mean that £88.7 billion of gross value added is lost to the economy in England, Scotland and Wales annually. That is equivalent to the contribution of the entire financial services sector in the UK.

Sara Reis, acting director of the Women’s Budget Group, said:

“These findings further underline the hugely significant economic cost of systemic barriers to paid work for women—including caring responsibilities, the cost of childcare and wages undermined by the gender pay gap. What’s more, they don’t capture the social cost—the loss of connection, sense of accomplishment and?mental challenge?for women excluded from paid work is immensely damaging for both their individual health and the wellbeing of our communities.”

It is therefore not only in barriers to employment and the continuing injustice of the gender pay gap, but in the very approach to the design of public services, town planning, transport, access to education, women’s healthcare and so on that this becomes important. Even in access to our political institutions, we see that the prevailing attitudes still keep women from achieving true equality, which in turn causes further harm.

I close with a question to the cabinet secretary: do you agree with the challenge set down by WEGo and will you set out some of your thinking on it in your response?

16:30  

The dog may have a new head, but it is the same tail wagging it. Economic growth in Scotland is hindered by this coalition of chaos, with many of those on the front bench who had business experience having been sacked and the Greens continuing to hold sway over policy and pull the strings.

What is most concerning is that it is Scottish business and the Scottish public who will suffer the most. Our economy is lagging significantly behind the UK economy. Despite the nonsense that the First Minister said last week, Scotland’s GDP grew at a lower rate than that of the rest of the UK during Nicola Sturgeon’s reign. That is an absolute disgrace and highlights the severe mismanagement of the Scottish economy by this devolved Government.

According to the Scottish Fiscal Commission, Scotland’s finances are unsustainable. It stated:

“the Scottish Government will face significant challenges in funding the future provision of devolved public services in Scotland.”

The Scottish Fiscal Commission continued its gloomy outlook by stating that

“our economic projections show Scottish GDP growing by an average of 1.2% each year for the next 50 years,”

which is lower than similar projections for the UK.

Social security spend is increasing massively. Health spending is going from 35 per cent of devolved spending to 50 per cent. Policies such as universal basic income are simply fiscally unsustainable, and the Fraser of Allander Institute found that business confidence in Scotland was low.

All of those points demonstrate the SNP’s profound financial mismanagement of Scotland’s finances and economic growth. That is hardly surprising when we consider that the SNP cannot even manage its own party finances.

Taxing the middle-income earners of this country—our teachers, nurses and public sector workers—will not have the effect that the Government believes that it will have. It will drive middle income earners away from Scotland. The Scottish Fiscal Commission expects the Scottish population to fall by 8 per cent, while the UK population will increase by 5 per cent.

The SNP needs to work out why that is. Is it because it has cultured a deeply divided country, or is it because Scotland pays more tax than the rest of the UK? This devolved Government is driving earners away, and that needs to be reversed.

The Scottish Conservatives absolutely support the drive towards a wellbeing economy, but that starts by building up business, increasing wages and reducing household costs. The SNP Government has lost the confidence of businesses, is taking more from people’s pay packets, and seems hellbent on shutting off our energy supplies in the North Sea.

We want to see this devolved Government work with the UK Government to establish projects that will grow our economy for the benefit of us all, whether that is investment into freeports, levelling up or investment zones. We want to see this devolved Government take responsibility for the years of failure and work towards a Scotland that works for everyone instead of conjuring up grievance and blaming Westminster at every opportunity.

Will the member take an intervention on that point?

I have no time. Sorry.

Scotland deserves a Government that is able to deliver economic growth, financial stability and hope for the future. Instead, we have a Green-SNP coalition that stifles growth and has lost the confidence of business and the population of Scotland. Its record on economic management of this country is woeful, and it is time for it to listen to the business community, the middle-income taxpayers, the experts in this area and even Kenny Gibson, who are asking it to stop increasing taxes, widen the tax base and truly create a wellbeing economy for everyone.

I call John Mason, who will be the final speaker in the open debate, after which we will move to closing speeches. Everybody who has participated in the debate will need to be here for the closing speeches.

16:35  

We previously had a debate on the wellbeing economy on 22 March, so there has been a fair bit of duplication today. I may well make some of the same points.

Key issues for me continue to be that we need to have measures such as gross domestic product, gross national income and similar. However, as has been said, GDP is a poor metric of human wellbeing. Scotland’s national performance framework has a big part to play in that space, along with the new wellbeing economy monitor. We owe John Swinney a debt for driving forward the NPF. I continue to think that we, as a Parliament—including, I accept, myself—have not used the NPF as much as we could or should have. My feeling is that, when we consider the wellbeing economy, we can build on what the NPF is already doing, embedding it more and making it more effective.

There is currently a review of the national outcomes until June. We could add care as an outcome. I personally am open to that. However, we do not want to lose focus by having too many outcomes all at the one time. The Finance and Public Administration Committee published its report on the national performance framework last October, and we discussed the Government’s response at yesterday’s meeting. I think that both the committee and the Government agree that a number of areas need to be considered further, including integrating the NPF more into the systems and processes of Government. For example, one recommendation was that all levels of Government should more explicitly set out how their actions will deliver on specific NPF outcomes. That may well be implicit at the moment, but the committee would be keen to see that being more clearly spelled out.

When I spoke in the debate last month, I focused on two of the national outcomes: the economy and poverty. I continue to believe that those two are hugely important. There is too much divergence in income and wealth in Scotland, and we need to distribute both better among our population. Today, I will mention another national outcome: health.

That is not least because the briefing for today’s debate from the Non-Communicable Disease Alliance makes some important points and is very helpful. In particular, it emphasises the clear link between health-harming products and the negative impact on people’s health and also on our economy. It reckons that the impact of alcohol, tobacco, overweight and obesity costs our economy between £8.1 billion and £12.4 billion each year. It refers to National Records of Scotland figures for 2021 and to more than 12,000 deaths being considered preventable. Of those, more than 7,000 were deaths from non-communicable diseases such as cancer, heart disease, stroke and lung disease. The briefing says:

“We must prioritise supporting the people of Scotland to live long, healthy lives that also allow them to contribute to the economy.”

That combines wellbeing and the economy.

Finally, I will make a few comments on the amendments. It is very difficult to see what Labour is actually saying or asking for in its amendment. I love the phrase

“The Scottish Government should be doing more”.

What does that mean? Not very much. The amendment also says that we should

“tackle the cost of living”

but gives no suggestions as to how, or how that should be paid for. [Interruption.]

Excuse me, Mr Mason. Could the front benches, who will have the opportunity to close very shortly, please do Mr Mason the courtesy of listening to what he is saying?

I am glad that I have woken them up with that little phrase. Now I will go for the Conservatives. In their amendment, they refer to the Scottish Fiscal Commission’s recent “Fiscal Sustainability Report” but miss out one of the key themes, which is Scotland’s ageing and reducing population, although I accept that Liz Smith took that point on board. They could have called for a more relaxed immigration system for Scotland so that we could get more people of working age here, but they did not. Even without independence, the UK could be issuing visas allowing, and requiring, new arrivals to work in Scotland.

All in all, I welcome this further debate on the wellbeing economy and urge members to support the motion.

I note that a number of members who participated in the debate are not in the chamber for closing speeches. I will expect an explanation and/or an apology.

16:39  

They do not know what they are about to miss out on.

I, too, welcome Neil Gray to his position.

“It’s the economy, stupid.” That is not an insult but a statement of the criticality of the economy brief to all the work that we do in the Parliament. Quite simply, without a thriving economy, nothing else is possible. However, I note that the debate has some similarities with the debate that we had before the recess. I know that we are sometimes asked by the official report to give our notes in advance, but I was tempted to provide them with a hyperlink to the Official Report of 22 March.

There are some differences in today’s Government motion, though. It talks about sound financial management—not that the Government spoke much about that in the debate. I guess that it thinks that questions about sound financial management are best put by the police rather than by Parliament.

I will start with what Liz Smith and Kenny Gibson highlighted, because the fundamental baseline for this conversation ought to be the Scottish Fiscal Commission’s report. As much as we may support or disagree with the policies that the Scottish Government is pursuing today, we all need to address ourselves to the long-term outlook in relation to the fiscal gap of the £1.5 billion of commitments over and above projected revenues. Underlying points such as the increase in health expenditure and slower productivity growth at a UK level should be addressed, but the fact that Scottish productivity growth is even lower than that also needs to be addressed. Fundamentally, that is all driven by demographics, as Kenny Gibson highlighted.

One point of warning that I make to all members is that, although migration is undermined by Brexit, ultimately, in the longer term, the world’s population will start to decline by the 2080s. In the short and medium terms, we need to consider solutions that look at migration, but, in the longer term, every country in the world will have to deal with a shrinking population. That is the seriousness of intent that we need: we must treat demographics as seriously as we treat net zero. Frankly, I do not think that the debate has the status that it needs or requires right now.

One other key difference between today’s debate and the debate on 22 March is that we have seen a return of the acceptability of the word “growth” from the Government. In those narrow terms, I would accept it. However, much as Michael Marra pointed out in his contribution, what was wrong with it in the first place? I agree that, ultimately, we cannot have simply a crude measure of GDP growth—that is too narrow and crude, and it measures the wrong things. If we are serious about tackling poverty, delivering net zero and tackling those demographic changes, we need growth, because tackling those things in a stagnant or declining economy is 10 times harder. We need a dynamic economy if we are going to tackle the structural barriers that impact on those things. We need a dynamic economy in order to deal with those challenges. That is precisely what people such as Torsten Bell and the Resolution Foundation say.

That is why growth is so important, and it is why it was so unfortunate that we ended up with a delay to the national strategy for economic transformation—by as much as six months, if rumours are to be believed—because there was so much negotiation between partners and the Government. Maybe we will get some clarity.

Neil Gray appealed to us all to follow his plan, which was published yesterday.

If the member is emphasising demographics as being one of the most important challenges that Scotland faces, is that not a case for the Labour Party changing its position on Brexit?

We absolutely need a more holistic and realistic view on migration, which is exactly what people would get from a Labour Government.

I come back to the Scottish Government’s so-called plan, which Neil Gray appealed to us to follow. There are 11 bullet points in there, including such things as increasing the number of businesses, increasing wages and increasing the amount of investment. There is nothing wrong with those things, but they are, at best, broad outcomes. They are not even detailed or precise in their focus, and there is certainly nothing in the plan about what specific measures he intends to follow them.

We put forward in the motion specific measures that the Labour amendment seeks to take out—expanding childcare, implementing the national strategy for economic transformation and the just transition plan, community wealth building, promoting fair work and delivering high-quality public services. Those things would all be removed by the Labour amendment—why is that?

In the words of Ivan McKee, we need specific and clear targets. Those are just words from Mr Gray. They are broad headings. If the Government is to be serious about any one of those things, it needs to produce clear action points that will deliver those things, not just name check them. Frankly, that is all that that intervention amounted to.

Will the member give way?

Very briefly.

Ivan McKee, briefly.

If Daniel Johnson wants to see the specifics on that, he should go to the NSET report, because it is all laid out there, over 100 pages.

We are being asked to believe that this is fresh thinking and new leadership, but it is either fresh leadership or it is continuity. Maybe Mr McKee is correct, but the Government cannot ask us to believe that this is fresh thinking and then say that all of the fresh thinking was the stuff that the previous Government did—it just does not wash.

If we are going to have a genuine reset, we need a genuine focus on the structural problems that the Scottish economy has. For far too many people, there are major structural barriers to their seizing opportunity. We have the absolute absurdity of the tightest labour market since records began while people are stuck on low wages. We need to identify the barriers that prevent people from taking up work. Some of those are simple things such as a lack of public transport or of useful childcare. However, all that we have from the Government is the promise to come up with a plan on childcare for one and two-year-olds. We do not even have a date for when that plan will be implemented.

If we are serious about this, we need to embrace the concept of wage maximisation that people such as those in the Wise Group want. We need plans that actually support people into training, and not plans that only ask them why they are not doing it. We need to deal with the structural issues. Only in that way will we deliver a well-rounded wellbeing economy. The Government uses those words, but it does not have any numbers or targets for the delivery of the plans. Frankly, those were absent from the Government’s speeches and motion today and from the plan that it published yesterday.

16:46  

Earlier, I welcomed Neil Gray to his role on the front bench. I also welcome Shona Robison, who we might hear from shortly, to her role as Deputy First Minister and Cabinet Secretary for Finance. I look forward to working with both of them.

Today’s debate has been helpful, but we have only skimmed the surface of a vital subject. It is a pity that the debate was truncated. We lost 30 minutes, which meant that speeches from those on the back benches were cut to four minutes. Like Willie Rennie—who I am pleased to see is now back in his seat in the chamber, albeit rather late—

Mr Fraser, for the avoidance of doubt, Mr Rennie was in the chamber; he just was not in the seat that he is in now.

Ah, well, I apologise to Mr Rennie; I did not realise that he had joined us on the Conservative benches. I agree with him that this is a vital subject. I hope that we will return at the earliest opportunity for a debate on the economy, because I genuinely think that some of the ideas that were put forward by Mr Gray are of interest and that they deserve greater scrutiny and discussion.

During the Easter recess I spent some time in the north-west Highlands; coincidentally, I was in the constituency of Kate Forbes. The weather was glorious—which explains the unseasonal tan—and the signs of spring were all around: there were trees and bushes bursting into bud, young lambs in the fields and queues of campervans on single-track roads—well, with one notable exception.

However, despite the great weather and the warm welcome, all is not well in the rural economy. Those I spoke to in the hospitality sector were not optimistic. They face a range of serious challenges. They know that businesses south of the border have been given a 75 per cent rates reduction for the current year to assist with post-Covid recovery. Despite having the Barnett consequentials to do the same in Scotland, that has not been passed on by the SNP Government. There are real concerns about the proposed restrictions on alcohol promotions and very serious concerns about the proposed deposit return scheme which, despite being a good idea in principle, has been implemented in a most calamitous fashion.

On top of that, those in the Highlands and Islands are suffering from the on-going delay to deliver the promise to upgrade the A9 to a dual carriageway and the on-going debacle with the ferries hitting island communities, and now they face the threat of highly protected marine areas devastating the fishing sector.

Every one of those issues comes under the control of the devolved Administration, and it could choose to put every one right. I therefore welcome the U-turns that were announced by the First Minister yesterday on the alcohol promotion ban and on delaying the deposit return scheme. It seems that the continuity candidate in the recent leadership contest is already ditching the legacy of his predecessor as fast as he can; he is in full retreat.

Those U-turns are welcome, but much more needs to be done to address the issues in the Scottish economy. Despite what we have heard from members on the SNP benches this afternoon, the UK economy is doing better than many predicted. We recorded the fastest growth in the G7 in 2022, at 4 per cent, and despite what we hear about IMF predictions, I gently remind members that the IMF’s track record in predicting UK economic growth is not a good one. I think that members will remember Christine Lagarde apologising to George Osborne for getting it all wrong a number of years ago.

At the same time—this is the crucial point—Scotland’s GDP has grown at only around half the rate of the UK average in the period since 2014. Despite the First Minister claiming the contrary, Scotland’s GDP grew between 2014 and 2021 by 12.72 per cent and, over the same period, the UK’s GDP grew by 21.87 per cent.

We went over this earlier, when Murdo Fraser made an intervention during my speech. Does he accept that the trend in the most recent figures shows that Scotland’s GDP growth outperforms that of the UK’s GDP growth?

I have just demonstrated that the trend since 2014, over a seven-year period, is that we are growing at half the rate of the UK average. If the new cabinet secretary is going to tell me that the trend will miraculously turn around under his tenure, we look forward to seeing that; the proof of the pudding will be in the eating.

Of course, the member also has to accept that, if we had the full economic levers that would allow us to continue to generate the economic growth that other, independent nations enjoy, we would be able to do just that.

Mr Gray might want to listen to some of his colleagues on the SNP back benches, who now seem to have found some interesting new solutions as to how he might use the powers that he currently has to help grow the economy. Maybe he should start listening to them.

All those figures matter, because a growing economy delivers not just more and better-paid jobs but more tax revenues to spend on the public services that we all want to see. It is no wonder, as Liz Smith and other colleagues referred to earlier, that the Scottish Fiscal Commission warns in its fiscal sustainability report that, down the road, the Scottish Government faces significant challenges. I agree with Kenneth Gibson, who said that this is such a serious issue, it deserves a full debate by itself.

The response from the new First Minister seems to be that we should be increasing taxes still further. That shows that he has learned nothing from the experience of the SNP Government in widening the tax differential between Scotland and the rest of the UK. Again according to the Scottish Fiscal Commission, Scottish taxpayers are paying around £1 billion more per year, but this is translating to a net increase in tax revenues of only £325 million—barely a third—because we have slower earnings and employment growth in Scotland compared to the rest of the UK. As Jamie Halcro Johnston reminded us, under the SNP, we are all paying more in tax but we are seeing very little benefit for it.

Rather than learn the lesson from that, the new First Minister wants to go further and increase taxes even more. All that that will do is lower the tax take, shrink the economy and starve public services of even more resources. I hear from the new First Minister that he is considering a wealth tax. Ivan McKee referenced Scandinavia earlier. Look at Norway, where a wealth tax has been introduced—it has been increased in the past year. What has that done? It has fuelled capital flight. In the past year alone, 30 billionaires relocated from Norway to Switzerland, with a massive loss in tax revenues to Norway. I am not sure that there are people on the SNP front benches who understand that; I hope that there are. However, I am sure that there are some in the Forbes faction on the back benches—or perhaps we should call it the Government in exile on the back benches—who understand that and I hope that those on the front benches might start listening to them.

We need to see the Government taking a different approach. In the recent SNP leadership contest, we saw Kate Forbes at least talking about growing the economy and creating wealth. We know that the Greens are instinctively hostile to that; we know that they do not believe in growth, as Douglas Lumsden reminded us. However, I hope that there might be some in this new ministerial team who understand the basic point that, without a growing economy, we cannot afford a health service, an education system or the transport network that we desperately need.

I was pleased to hear yesterday from the First Minister that he intends to reset the relationship between the Government and business. That message was repeated by Mr Gray today. That would be a welcome move and a contrast to what we have seen in recent years. It really is time that the Government started listening to the voices of business. The sector’s asks are simple and modest: competitive taxation, quality infrastructure, no additional bureaucracy or regulatory burdens and a Government that gets out of the way, rather than trying to hold it back at every turn. If that is what the new team is prepared to deliver, we will be pleased to support it.

16:55  

First, I thank everyone for their—in the main—constructive contributions to the debate. Many have been helpful and informative. I will make an offer: let us create the space for further discussion about the range of matters that have been raised in the debate, whether that is through working on a cross-party basis where we agree, or, where appropriate, through bringing matters back to the chamber. We will not agree on everything, but there are areas on which we can make progress. In working with Neil Gray, we are certainly keen to do that where we can.

I will pick up on a couple of the issues that Liz Smith and others raised about the SFC’s report. We recognise the need for sustainable public finances—everyone in the chamber has to recognise that.

Issues including demographics have been touched on. Kenny Gibson made a fair point: we have within our control some powers with which we can make progress, whether they relate to childcare, parental employability or getting people who have been economically inactive back into the workplace through the work of the child poverty delivery plan.

All of that is good, and we need to do it. However, we also need to recognise—and honest recognition from members in other parts of the chamber is needed—that we are hampered by our lack of control over immigration policy. The rural visa pilot programme that has been proposed is a constructive and pragmatic suggestion. We need such levers.

Will the member take an intervention?

I will let Liz Smith know in a second.

We also need an urgent review of the fiscal framework, because the current one does not work for Scotland’s public finances on a number of levels. We have agreements about that review, and we need to take it forward so that we can fully benefit from growing and broadening the tax base.

I thank the cabinet secretary for allowing me to contribute again.

First, on the fiscal framework, that work is already under way. Secondly, if we look at the most recent research on immigration we see that net immigration is improving. In Scotland, we have to ask why we are not benefiting more from that in comparison with what is happening in the rest of the UK.

We need to make sure that we support communities that require labour and people to move into them in order that we address their needs and fill the skills gaps in industries in their areas. We need people to come here, and we have a role to play with policies such as the key worker housing initiative that was announced yesterday. We will work with rural communities and businesses to support them to deliver key worker housing for people who want to move there. More generally on rural Scotland, in my area of responsibility as Deputy First Minister there is a commitment across Government to pull together a rural delivery plan in order to address some of the issues, whether they relate to the rural economy or key worker housing. We recognise that some communities struggle to sustain businesses and the local economies of their areas. If we can agree on some things, we want to make progress on them.

We also need to talk up Scotland. I will highlight three areas where broadening the tax base and growing the economy are under way and initiatives are doing well. In debates such as this, there can be a tendency to talk Scotland down, which we cannot have. I do not think that that is in anyone or any party’s interests.

First, let us take photonics. The Scottish sector is a £1.2 billion industry that supports 6,500 highly skilled jobs and has added value per employee that is three times the national average.

Secondly, the initial awards in the offshore leasing round for ScotWind have delivered more than £750 million in revenues for the public purse, which will bring billions of pounds of investment into the Scottish supply chain. Thirdly, the hydrogen action plan will make Scotland a competitive producer in low-cost renewable hydrogen.

There are many areas in which we can broaden the tax base and grow the economy. Those are but three examples of where that is already happening. We should get behind those industries and sectors to make that happen.

On taxation, I absolutely accept that there needs to be balance. We need to get that right, of course. However, the Scottish Fiscal Commission, which has been well quoted throughout the debate, has estimated that the decisions that we have made in Scotland since income tax powers were devolved might raise up to £1 billion more in this financial year than would have been raised if we had followed the UK Government’s tax policy. Some members across the chamber might think that that is the wrong decision, but lower taxes mean lower spending, and members who ask for lower taxes cannot then come to the chamber to ask for higher spending. That is not economically literate, so they must therefore set out where the spending reductions would take place. However, of course I accept the need to broaden the tax base and grow the economy.

The cabinet secretary was in Parliament when Alex Salmond was First Minister, so she probably remembers, as I do, Alex Salmond arguing for a 3 per cent cut in corporation tax in Scotland, based on the view that that would increase tax revenues because it would grow the economy. Does she now disagree with that analysis?

I have never agreed with the concept of trickle-down economics. To be honest, I note that we need a balance between taxation and business regulation. Murdo Fraser seems to be indicating that he does not want business regulation, but the business community, in a meeting with Neil Gray and I, expressed support for appropriate business regulation. Businesses absolutely acknowledge the importance of regulation, where it is important to have it. Of course, if we did not have any regulation, we would not have health and safety at work or all the other improvements that have been made. Regulation is important.

I also want to touch on a couple of areas that have been raised by members. Willie Rennie talked about his keenness for an independent assessment on the wellbeing economy metric and about the work of the Carnegie Trust. We should look at that, so I am happy to take forward work on how we can make that happen.

Michelle Thomson mentioned the importance of a gendered analysis and Claire Baker referred to it, too. Of course, the National Advisory Council on Women and Girls and the work that is being taken forward by the women’s budget group is important in this domain, but I am happy to have further discussions on the issue. Just yesterday, I met the NACWG and invited it to engage with us on the budget process earlier, and it is happy and keen to do that.

I have tried to respond to as many points as I can, and I apologise for missing any. I want to end where I began, with an offer. I think that, on many issues, all of us in the chamber can try to make more progress in respect of what we agree on. That will not be easy, but we have an opportunity to do so. I am keen to look at public sector reform and at the public sector landscape to ensure that every pound of public money that is invested goes on the most efficient and best outcomes for the people of Scotland.

I hope that that is an area on which we can have agreement, so I am really keen to look at ways of trying to build consensus, whether that is through regular meetings across the parties on areas on which we agree, or through bringing ideas to this chamber for debate. Members have my assurance that that is how I intend to do business on behalf of the Government.

That concludes the debate on managing Scotland’s finances and working with business to drive the wellbeing economy.