Protecting Public Services
Good morning. The first item of business is a debate on motion S3M-7735, in the name of Patrick Harvie, on protecting public services.
09:15
As the smallest party in the Parliament, the Greens quite rarely have the opportunity to bring motions to the Parliament for debate, so what topic to choose for our limited time is always a difficult decision.
This time, however, the topic was an obvious choice. Is there any other subject that we could bring to the Parliament for debate in the current context that would not be completely overshadowed by the public spending cuts? The cuts that the United Kingdom Government is imposing, to which the Scottish Government and the Scottish Parliament must respond, would dominate a debate on higher education, on housing, on poverty and inequality, on health services, and on jobs and the economy. Is there a subject that is not affected, indeed overshadowed, by that context? Every subject that we could debate is profoundly affected.
That context is the first great test of devolution. It is the first great test of whether the hopes and aspirations of the many thousands of people who campaigned long and hard for a Scottish Parliament are to be realised or ignored. People did not put in those years and decades of work to campaign for a Scottish Parliament to give members jobs. They did not campaign long and hard so that there would be a weekly First Minister’s question time on television and they would be able to get angry and rant at the telly. They did not even campaign long and hard for a Scottish Parliament simply out of a sense of national identity.
The profound reason why this Parliament exists and why we debate issues in this chamber week in and week out is a desire on the part of the Scottish people, after the scandal of the poll tax and the years of Tory cuts and privatisation, for a Parliament that would be able to defend Scotland against that right-wing agenda, should it ever come to power again.
Well, that is no longer a theory; it is a reality. The UK now has a Government that is imposing a radical right-wing agenda of cuts, for which it has no mandate and which was never in the manifestos of the Tories or the Liberals—the Government certainly has no mandate for its agenda in Scotland. The agenda is ideologically driven by many people on the right of the Tory party, who have for years been gagging for an opportunity such as they now have. It is clear that it will impact on the poorest in society. We are not “all in this together”; the Osbornes and the Cleggs will be well protected from the effects of the cuts that they are imposing on the rest of us.
Even if we set aside the Green interpretation of economics, with which most members who are present disagree, and consider the issue in conventional economic terms, it is clear that the slashing of hundreds of thousands—perhaps even a million—jobs, which will be destroyed because of the cuts in spending in the public sector and the knock-on effects in the private sector, is wildly economically risky.
The Scottish Parliament needs to oppose that agenda. If we are to do so we need not only the power but the political will to do so. The Scottish National Party often makes the case that we need more powers and more economic levers at our fingertips if we are to pursue a political agenda in the face of opposition from the UK. The Labour case currently seems to be that more powers are on their way, through the recommendations of the Calman commission on Scottish devolution and the Scotland Bill, which has Labour support at UK level. As for the Liberal Democrats and the Conservatives, they will not oppose the coalition’s agenda, because it is their agenda.
We have no idea whether the Calman powers would help. In any case it is likely to be years before we can use them. As for the SNP’s call for more powers, the Green response is that we have never successfully and creatively used the powers that we have. One such power—the first that is mentioned in the motion—is the Scottish variable rate of income tax, which was democratically endorsed by the public in a referendum, but which successive Governments have failed to maintain. I know that it would not be popular to use the SVR, but if we cannot use it now, when public services and the very principles that underlie the welfare state are under attack as they never have been, when can we use it? In November the Parliament agreed to a Labour amendment that said that the Parliament
“considers it an abuse of power for the Scottish Government to abandon the Scottish variable rate of tax ... considers it unacceptable for ministers to mislead the Parliament ... and calls on the Scottish Government to admit responsibility for the lapse of the tax varying powers”.
However, the amendment said nothing about what should be done to fix the situation. My motion therefore calls on the Scottish Government to open negotiations with the UK Government to restore the functionality of the power.
Use of the power might not be necessary. Greens have suggested other options. In the short term, raising revenue on empty properties could bring in something in the region of £75 million and removing council tax discounts for empty and second homes could add a little more to that total. Scotland is the only part of the UK that is still giving a tax break for urban blight; using that power differently would not only bring in revenue to protect services but reduce rental costs for viable businesses, which could take up those premises. In the longer term, our land value tax proposals could bring in £1.5 billion more than the council tax and business rates that they would replace, which could be used in the first instance to protect services. We would eventually have the freedom to reduce either LVT or income tax through the Scottish variable rate.
The underlying theme must be the empowerment of local councils to make their own decisions. John Swinney and his colleagues continually call for financial powers and I often sympathise with their call, but we can create these powers for ourselves if we empower local authorities. Beyond that, we could explore local authorities’ ability to borrow, which is an ability that the Scottish Government does not currently have.
During the debate many members will focus on household budgets and the cost of housing, energy, transport, food and so on. Green policies, and many policies that have taken hold across the political spectrum, would help to reduce all those costs, but that cannot happen without investment and commitment from Government. We need to have the political will to raise revenue to defend Scotland against the UK Government’s agenda. It is not just about the powers that are available; it is about having the political will to use them.
I move,
That the Parliament calls on ministers to open discussions in good faith with their UK counterparts regarding the prompt re-establishment of the democratically endorsed Scottish variable rate of income tax; believes that the UK Government's cuts agenda is ideologically driven, economically illiterate and will have a disproportionate impact on poorer people both in Scotland and in the rest of the UK; rejects the Scottish Government's decision simply to hand on these cuts to Scottish public services, with housing, energy efficiency and public transport particularly at threat; believes that the terms of the proposed council tax freeze reduce local authorities' ability to make their own democratic decisions and look at alternatives to cutting vital local services, and urges the Scottish Government to revise the draft budget to reduce these cuts by incorporating progressive ways to raise revenue at a local level within the existing powers of the Scottish Parliament to ensure that wealthier people pay more and poorer people pay less, including options such as land value tax, a hotel bed tax and reducing exemptions to the uniform business rate.
09:23
Some elements of Mr Harvie’s speech struck a chord with me. I have much sympathy with his critique of the reductions in public expenditure. I have said in the Parliament on countless occasions—it is no secret—that the Scottish Government takes the view that the UK Government’s approach to significant reduction in public spending is being taken too far and too fast.
The issue that the Parliament must confront is that we must operate within the financial arrangements that we have at our disposal. That is a particularly acute responsibility for a finance secretary in a Government that does not command an automatic majority, because I must present to the Parliament a balanced budget and I must work with colleagues in other political parties to find a basis on which we can agree the terms and composition of the budget.
That process is under way. I presented the draft budget to the Parliament in November and the committees of the Parliament have been scrutinising it. This morning, the Finance Committee published its report on Scotland’s spending plans and draft budget 2011-12, to which the Government will respond during next Wednesday’s debate, which will mark stage 1 of the Budget (Scotland) (No 5) Bill and include debate on the committee’s consideration of the budget proposals. I look forward to setting out the Government’s thinking on another comprehensive and thoughtful report from the committee.
At the heart of what lies ahead for the Parliament in the next couple of weeks is the necessity to find common ground on which we can agree the composition of the budget and how we can deliver that budget for the benefit of the people of Scotland.
At the heart of our budget is the determination to preserve public services and deliver economic growth. As part of the proposals that we have advanced in the draft budget, we honour our commitment to pass on to the health service the consequences of the United Kingdom Government’s decisions on health expenditure. Therefore, there is a real-terms increase in health expenditure in the budget.
We have also taken decisions to protect families through the continuation of the council tax freeze and the phasing out of prescription charges. We have sustained our commitment to maintain police numbers, which has resulted in a 32-year low in crime. We also continue to invest in Scotland’s potential through investment in skills and training and the continuation of the education maintenance allowance.
All those commitments are in the budget and I use them as illustrations of the focus of the Government’s thinking. Although I sympathise with Mr Harvie’s point about the scale of reductions in public expenditure, I accept a point that Jeremy Purvis and Derek Brownlee have previously advanced that, despite the reductions in public spending, there still remains a substantial amount of public expenditure in Scotland and we have to design the most effective ways to spend it.
In the context that we face, any budget must include a balance between reductions in public expenditure and the raising of revenue. I have been clear with the Parliament about the steps that I have taken on the raising of revenue and the reductions in public spending.
I do not agree with Mr Harvie that it would be appropriate to increase the basic rate of income tax through the Scottish variable rate. The points that he made about the discussions that we had in the Parliament last November on the use of that power and the arrangements to implement it are not particularly relevant in this debate. I will appear at the Finance Committee on Tuesday to discuss those points and will be delighted to do so.
The point about the use of the Scottish variable rate is whether placing an additional tax burden on hard-working families in Scotland is the right thing to do when people already face rising VAT, very substantial increases in fuel costs and other pressures on household incomes.
The point in my motion is not that the SVR ought to be used—we have not yet proposed that and have said that it may not be necessary—but that it ought to be restored so that it is available for use. Is it not for the public to decide in the election in May whether they want to vote for candidates who say that they would use it or those who say that they would not?
It is not a question of the power being restored. The power exists in law; that is crystal clear. The issue is whether the information technology systems can enable the collection of the tax. My point, which I will reiterate to the Finance Committee on Tuesday, is that I did not inherit a system that was fit to do that.
I have considered increases in revenue and have put before the Parliament proposals for an increase in business rates on the largest retail properties as a means of raising additional revenue. As the First Minister has said to the Parliament, those who have the broadest shoulders should bear some of the burden, and I invite the Parliament to support the measures that I have set out in that respect.
This is a timely debate. It gives us the opportunity to reflect on some of the difficult choices with which I have had to wrestle as Cabinet Secretary for Finance and Sustainable Growth and which underpin the Parliament’s consideration of the budget over the next fortnight. I look forward to those discussions and I give the Parliament the assurance that is in my amendment: that we will
“work together to deliver a balanced budget that will safeguard services and strengthen economic growth for Scotland”.
I move amendment S3M-7735.2, to leave out from “ministers” to end and insert:
“all parties in the Parliament to work together to deliver a balanced budget that will safeguard services and strengthen economic growth for Scotland.”
09:29
Whatever differences I might have with Scottish Green Party policies, I have always recognised that their motivation is essentially optimism. Too often, I find the Greens overly idealistic and even utopian but, although I am regularly unable to agree with them, I would never criticise them for believing in a programme that is genuinely aimed at protecting what we have and bettering the lives of everyone who shares our planet. This morning, however, I fear that their idealism may have gone too far.
We have spent the past four years watching the Government pick fights at every opportunity with Westminster, being aware of documents that reveal that the Scottish Government instructed the civil service to seek divisions with Whitehall at every opportunity and looking on as day in, day out the Scottish ministers play the blame game with successive UK Governments. So it is surely the ultimate triumph of hope over experience to begin any motion in the Parliament by asking the SNP Administration to
“open discussions in good faith with their UK counterparts”.
It must surely also be the most futile request ever put to the Administration, that it disavow the reckless underfunding of council services that it implemented in pursuit of a headline-grabbing policy instead of delivering what is necessary to protect local communities and local services. It has chosen to move away from the use of council tax towards huge increases in rents and charges for services and has reduced the availability of those services as a result. The Greens are right to point that out in their motion.
Freezing the council tax is not a bad policy in itself, but coercing local authorities into agreeing to an underfunded freeze—which all the evidence clearly shows has led to reductions in services, increased charges and job losses—is horrendously bad government.
I agree with the member that the freeze in council tax has been popular. Many people like it but, if we acknowledge together that it cannot last for ever—council tax cannot dwindle to nothing year after year—the only exit strategy from the freeze is for the Parliament to give councils more power and flexibility to raise taxes in the way and at the level that they see fit.
I will move away from the sterile debate about whether we should try to impose restrictions on local government. The Government’s aim of ensuring that the council tax does not overburden council tax payers is not, in itself, a bad thing, but we must be much more imaginative about how we enable our local authorities to deliver public services.
Through the policies that it has pursued, the Scottish Government has centralised power and taken hold of the balance in local government finances, which is now somewhere in the region of 85 per cent central funding to 15 per cent local funding. It has completely undermined the democratic policies under which local authorities should be allowed to operate, although to ask local authorities to be careful about how they use the revenue-raising mechanisms that are available to them is not in itself a bad thing.
The way in which the Scottish Government has operated in relation to local government displays the same ruinous attitude that leads to it doctoring Government reports to justify the arguments against the findings of the Calman commission. [Interruption.] The minister can harrumph all he wants from his sedentary position, but we know that he dressed up a report to make it look as though academics supported him when that was not necessarily the case. Rather than seek to work constructively with the UK Government to improve devolution through the Scotland Bill, the SNP Administration reverts to type and carps, criticises and condemns.
The main reason that I cannot accept the Green motion is that it ignores the fact that implementing the measures to increase revenue in the ways that are suggested would lead to ordinary people, who are already being hammered by the disastrous Con-Dem policies, being further adversely affected, regardless of how progressive Mr Harvie’s suggestions are.
The Greens are right to suggest that alternatives to the blunt instrument of the underfunded council tax freeze should be considered, especially to lift the heavy hand of coercion that Mr Swinney imposed on councils, but they are being impractical and imprudent and not offering a considered way out of the mistakes that are being wrought against Scotland by its Government and the UK Government, so Labour cannot, ultimately, agree with them.
I move amendment S3M-7735.4, to leave out from first “; believes” to end and insert:
“in order to ensure that the appropriate mechanism is in place for the introduction of tax-raising powers recommended by the Calman Commission on Scottish Devolution and contained in the Scotland Bill currently before the UK Parliament and believes that the Scottish Government’s continued underfunding of the council tax freeze has directly led to cuts in vital local services”.
09:34
Some years back, Patrick Harvie referred to me as being a progressive, although he subsequently decided to spare my blushes by not referring to me by name when he followed up that comment in a newspaper article. It is in the progressive spirit that I will be happy to move my amendment.
The ideas of protecting public services and creating jobs, to which my amendment refers, are shared across the political spectrum. We might have rather different ideas about how those are achieved, but the underlying objective is surely the same. I take issue with Patrick Harvie, however, when he refers to the “right-wing” Government because, as everyone is well aware, we have a progressive Liberal-Conservative Government, which is very different. The Government is repaying the debt that the Labour Party ran up, lifting the lower paid out of income tax and reforming the welfare state to make work pay. Those are all sensible and progressive objectives and I would have thought that most members would support them.
Patrick Harvie also referred to the prospect of millions of jobs being lost, which I must say was rather scaremongering. If we go back to the experience that this country had in the 1990s, when there was a retrenchment in public spending, although jobs were lost in the public sector, many more were created in the private sector, so overall employment levels rose. That of course had a beneficial impact in rebalancing the economy and providing a sustainable basis for providing the income tax revenues that are necessary to sustain our public services.
My fear is that we go back to the 1980s. The UK unemployment figures that were released yesterday show youth unemployment approaching 1 million, and that is my fear about Con-Dem policies.
To be fair to the member, in the 1980s, we had a difficult inheritance from the previous Labour Government, so I can see why he might wish to draw parallels with the situation in which the current UK Government finds itself. I assume that the flexibility that we have developed in the labour market will lead to less of an increase in unemployment than the member fears. Certainly, the work programme that the coalition is launching hopes to ensure extra opportunities for those who might lose their jobs.
We heard in the speech from the Labour Party the oft-repeated phrase that the council tax freeze is underfunded. That was proven to be incorrect when the council tax freeze was first mooted. If I recall the figures correctly, there is £70 million of subsidy to councils compared to about £55 million that is actually necessary to fund the council tax freeze. So £70 million has been supplied every year, which means that in fact councils have had a windfall benefit through the funding of the council tax freeze. It is simply not correct to say that the freeze has been underfunded. Those who oppose the council tax freeze simply need to tell us how much more council tax people should pay, or what spending should be cut elsewhere to give more money to local authorities.
Patrick Harvie said that existing powers should be used “creatively”. I wondered what he meant by that, but he soon explained and said that he meant that taxes should increase. If I have the figures correct, he proposed £1.5 billion of extra tax for Scotland, which is about an additional £3,000 per person and which does not seem to me to be particularly progressive.
There is a simple option for Patrick Harvie and the Greens and the usual collection of self-proclaimed socialists who lecture us daily about the need to tax and spend more. They could follow the example of Hazel Blears by writing a cheque for whatever amount of tax they feel that they should pay and sending it off to HM Revenue and Customs. That cheque will be cashed, their guilt will be assuaged and another part of Labour’s debt will be repaid. There is nothing to prevent any socialist in this country from putting their money where their mouth is. The new progressive coalition Government would be happy to take money that is given voluntarily and we would not wish in any way to have any socialist in this country prevented from putting their principles, which are deeply held, into practice.
I move amendment S3M-7735.3, to leave out from “calls” to end and insert:
“believes that ensuring a strong economy is the best way to protect public services and create jobs and rejects calls to increase devolved taxes, for example by ending the council tax freeze or introducing a new non-domestic rate supplement for retailers.”
09:38
There is no question but that Scotland still has huge difficulties in addressing the colossal deficit that the previous UK administration left. The figure amounts to about £2,500 per person in Scotland and the interest payment alone on the structural deficit, per day, is about the same as the cost of building a primary school in Scotland. That is the context. The Green Party is freer than most in casting aspersions on other parties’ philosophies and discussing whether they have been betrayed, so we need to consider its position a little closer to home.
We cannot forget that we face significant difficulties. We must face up to them and address them properly. Many SNP members use a different tone from the language that the cabinet secretary uses. He simply says that the reductions are “too far and too fast”, but at no stage has he told the UK Government what would not be too far or too fast. However, the SNP back benchers always give the impression that there should be no reductions at all. Neither of those positions is credible, given the difficulties that we face.
Last autumn, the Liberal Democrats published proposals for £4 billion-worth of savings in the next four years by reforming or reducing the number of quangos, bringing down top pay, setting bonuses at zero, gaining efficiencies at 2.75 per cent per annum over that period and looking at some other areas. That is about working to protect front-line public services by securing better value from the public purse over the next four years, which is the approach that all parties should take.
Patrick Harvie stated that the position that the Liberal Democrats have taken as part of the UK Government is ideologically driven. He referred to a coalition Government that is doing damage and imposing difficulties on the people of Scotland. We do not have to go as far as London to find another coalition or to see what a Green minister would do, because Dublin is closer to Edinburgh than London is—it is about as far as Nottingham. So let us have a look at what John Gormley, the leader of the Irish Green Party, which is the sister party of the Green Party in Scotland—the two work closely on many issues—said on 10 December in the Dáil. He said:
“We must take swift harsh measures”,
and that local government
“must play its part by curtailing expenditure to the absolute neediest priorities”.
He said that local government would have enough resources only for “essential services”. Is that ideologically driven from that coalition?
Will the member take an intervention?
I am afraid that I do not have time, as I am in my final minute.
The member asked me a question.
No. Let us look at what that Green minister defended. It was cutting average welfare payments by 4 per cent, which means that families in receipt of welfare payments will suffer a 7 per cent loss of income. That is far beyond anything in the worst of what Patrick Harvie can dream up about the UK coalition. In Ireland, the health budget has been slashed by €700 million. Public sector pensions have been cut by €12,000 and public sector staff have had a 10 per cent wage cut, whereas public sector workers in the United Kingdom who earn under £21,000 can have a pay increase, and I am glad that the Scottish Government has followed that. The minimum wage in Ireland is being cut by a euro, and those on the new wage will be brought into the tax net.
Finally—I hope that this allows Mr Harvie to take a slight pause in the sanctimony that we have heard from him—it is estimated that more than 130,000 low-paid people in Ireland will be brought into the tax net, when 90,000 of the lowest-paid workers in Scotland will be lifted out of income tax in April this year, because the income tax threshold in Scotland is going up, but in Ireland it is going down.
Mr Harvie’s colleague in the Irish Green Party was proud of one success, which was that corporation tax in Ireland, which is the lowest in Europe, will remain unchanged. So all the corporate evil that Mr Harvie lectures others about in the Parliament will receive the lowest tax, and his sister party in Ireland is proud of that. Let us have a look at that other coalition and see whether he wishes to use that as an example.
I move amendment S3M-7735.1, to leave out from “calls” to end and insert:
“notes that, as a result of Labour’s financial mismanagement, the UK Government inherited the largest structural deficit in Europe, which has left it paying debt interest equivalent to the cost of building one primary school a day in Scotland; recognises that there are no easy choices in the current economic climate but that the UK Government is lifting 90,000 people in Scotland on low incomes out of paying income tax altogether and has restored the pensions link with earnings to the benefit of one million Scottish pensioners; further recognises that spending on frontline public services in Scotland will be reduced by less than in England, Wales or Northern Ireland; regrets that the Scottish Government has still not published detailed spending plans beyond 2011-12 and believes that, by introducing a surprise new tax on business and failing to tackle high pay in the public sector, the Scottish Government is not making the right choices to boost Scotland’s economic recovery and support frontline public services, but welcomes the fact that the Scottish Government has abandoned its ambitions to emulate the Republic of Ireland, where the Green Party has recently voted in support of the harshest austerity budget on record.”
I call Linda Fabiani.
09:43
You caught me unawares, Presiding Officer, I am terribly sorry.
I am pleased to speak in the debate. I have a lot of sympathy with bits of the Green party motion. For example, land value taxation is worth exploring and I agree that the wealthier should pay more, which is why I am surprised that Opposition members do not agree with the supermarket levy. Considering that Sainsbury’s makes £2.5 million per hour in the UK, I do not understand why that levy is such an issue for it. I also agree that the cuts that the UK Government has imposed have a disproportionate impact on poorer people.
I am afraid, however, that there we start to differ. For example, ending the council tax freeze now, which has been funded in each of the past three years, would cost Scotland’s hard-pressed local taxpayers an extra £70 million in 2011-12 for a 3 per cent increase. I believe absolutely that the council tax freeze is good for Scotland.
Talking about taxation, I also have issues with what the Green party’s motion says on the Scottish variable rate, because if it were used, the power to vary the rate of income tax would create a regressive tax that would hit lower-paid workers the hardest. The tax bill of someone on the minimum wage, for example, would increase by 15 per cent. That is why I am surprised, as I have said previously, to see the Green party calling for that tax to be imposed. It is all very well for Patrick Harvie to say that the Greens just want the power to be there—the power is there in legislation—but they have proposed using it, despite the fact that Patrick Harvie said only in September of last year that
“a form of tax-varying power was designed that makes it very difficult, although perhaps not impossible, to justify using it.”—[Official Report, 9 September 2010; c 28401.]
In the context of taxation, the Labour amendment asks for
“the introduction of tax-raising powers recommended by the Calman Commission and contained in the Scotland Bill currently before the UK Parliament”.
I was under the impression that the purpose of the Scotland Bill Committee was to consider how the best benefit for Scotland could be achieved. It seems to me that Labour members are predetermining the outcome of that process.
We face issues. It cannot be denied that times are hard, and I believe that it is incumbent on all of us in the Parliament and in the public services to think innovatively about how the best services can be delivered and who is best placed to meet the needs of their constituencies, whether geographic or thematic. We should strive to break down the institutional barriers that stymie progress on joint working, and we should consider disposal of community assets to viable community groups that are best placed to tap their potential. I cite the campaign in East Kilbride to save the Hunter House Museum and the sterling local work of the voluntary East Kilbride Development Trust.
Across Scotland, people are working together for local benefit. I believe that every member of the Scottish Parliament should be working for national benefit in the difficult times that we are going through. I would like to see recognition across the chamber that there are some big issues that are sacrosanct and precious, and on which we should all be working together. Good work has been done in the Parliament through its committees and on its behalf by Scotland’s Futures Forum. That is the kind of work that we should be looking at and pledging that we want to achieve. That is why, for me, John Swinney’s amendment is the only one that we should be considering and working towards. It says that
“all parties in the Parliament should work to deliver a balanced budget that will safeguard services and strengthen economic growth for Scotland.”
I call Mary Mulligan, if she is ready to be called.
09:48
I am always ready, Presiding Officer.
I commend the Green party for its choices for debate this morning. I would have been just as content to take part in the debate on opportunities for young people, but better people than I will lead in that debate.
Members: No!
Let me keep my comments to the debate in hand—protecting public services in Scotland.
I agree with Patrick Harvie’s motion that
“the UK Government’s cuts agenda is ideologically driven”.
For the UK Government, the worldwide financial recession was not a disaster, but an opportunity. It is hiding behind the argument that we must balance the books to do what it wants instinctively to do, which is to reduce public services to the bare minimum. The Conservatives believe that the private sector can provide all the services that people need and that demand will set the price. They have not been in power for 12 months and already we have seen mass demonstrations on our streets because of their unfair and uncaring policies. Just this week, we have had to listen to David Cameron saying that he wants to reform the national health service when what he really wants to do is to reduce it to being the provider of last resort.
As Mr Swinney said, the UK Government’s cuts in public services are too hard, too deep and too fast to be purely a response to the financial situation. It knows that it might get only this one chance to implement them, and it is determined to do its best.
The member questioned the coalition Government’s commitment to the NHS in England, where it has protected NHS spending. The Opposition did not make such a pledge. Is it not the case that it is the Labour Party’s policy that it would prefer to cut the NHS rather than the deficit?
That is absolute rubbish and Mr Brownlee knows it. Everyone knows that we must tackle the deficit, but Labour does not agree with how the UK Government is doing that.
My colleague Michael McMahon has clearly outlined Labour’s amendment, and I add my support for the call that the motion and our amendment make for discussions to ensure that this Parliament has the ability to vary the rate of income tax, although I agree with Mr McMahon that that might be easier said than done. I do not want to repeat the arguments on the issue, other than to say that apart from it being right for the Parliament to have such powers, we owe it, as Patrick Harvie said, to the people who voted for those powers in the referendum in 1997 to ensure that we are in a position to use them.
I also agree, of course, with Michael McMahon’s comments on Calman, but in my final few minutes I want to focus on public services in Scotland, for which this Parliament has responsibility. Having criticised the Conservatives for their ideology, I want to put responsibility for the cuts across Scotland where it truly belongs—at the door of the SNP Government. No one should be in any doubt that the council tax freeze has contributed to councils cutting services, reducing their scope or increasing charges for them.
Will the member give way?
I am sorry, but there is not a lot of time in this morning’s debates.
I am highly aware that Mr Swinney will claim that the Scottish Government has fully funded the council tax freeze. If that is the case, why, despite the increasing allocations over the past three years, have we seen councils continually cutting services further? Was Unison not correct when it told the Local Government and Communities Committee that the council tax freeze is depriving local authorities of much-needed revenue and should be abandoned?
It is not just service users who lose out. Those who provide services will suffer, too. The Fraser of Allander institute predicted that a reduction in the Scottish budget of 14 per cent by 2014-15 would lead to up to 126,000 job losses not just in the public sector, but in the private sector that provides services alongside it. Perhaps the Conservatives still think that unemployment is a price worth paying, but I am surprised that the SNP appears to agree.
Next week, we will have the opportunity to debate the SNP Government’s budget. I know that Labour’s proposals will be based on a firm commitment to protect and, indeed, promote public services.
09:52
Michael McMahon rehearsed a very old calumny about the SNP’s inability to work with Westminster. I put on record my gratitude for the letters from a UK Government minister and from three members of the Labour Party at Westminster that I received on my recent departure from office. That shows that I, for one, was able to work with Westminster, but I know that there is nothing unique about my experience. Early in my ministerial career, I met a UK Labour minister who said that after a considerable number of years in office, I was the first Scottish minister they had met. Co-operation is the name of the game, and the SNP knows how to play it.
I want to cover just two issues in my short contribution. The Green motion contains the phrase
“rejects the Scottish Government’s decision simply to hand on these cuts to Scottish public services”
and goes on, essentially, to demand tax rises. A more “economically illiterate”—to use another phrase from the Green motion—approach would be hard to find.
Let us remind ourselves what tax powers we have, because the Calman powers, if they come at all, certainly will not be with us for years, nor would a land value tax, were we to conclude that we wanted such a thing. We can raise or lower the basic rate of income tax by 3p and we can tune the council tax, but raising taxes would not make the cuts go away. It would move them to cuts in personal incomes across Scotland, and it would not even do so in a progressive way. The council tax, in particular, hits the elderly hard. That is why we sought to build a coalition of interests in this place to replace it with a new, fair, income-determined tax.
Will the member give way?
I will give way to the member if he takes 10 seconds.
We have some flexibility on time, Mr Stevenson.
I understand the overall question of cuts versus taxes but I believe that it is possible to take a progressive approach that means that the poor pay less and the rich pay more, and that untaxed business assets pay their share, too. If the member does not accept that, surely he must accept that if we are not willing to raise revenue, we are handing on the cuts. The numbers do not add up any other way.
It is a question of who pays for the cuts. The cuts are the reality that the cabinet secretary and all members of this Parliament have to engage with. If we take an approach that takes money out of individuals’ pockets, we affect the whole economy, diminish the prospect of economic recovery and prolong any difficulties that arise from the cuts. I will talk about business in a moment.
We know that the Green party is essentially an anti-growth party and taking money out of ordinary peoples’ pockets would support that objective. I am not sure that it is a sure-fire election winner and, as Patrick Harvie said in his opening remarks, using the SVR is unlikely to be popular. It would certainly create difficulties.
My second point is about business rates. Again, screwing down on business would support the anti-growth agenda. If we were to tinker with business in the wrong way and unravel the huge amount of support that we have given to small business—a vigorous small business sector is the very heartbeat of our economy—we would find ourselves in difficulties.
In recent weeks, the Green party has been rehearsing the idea of introducing a tax on empty properties. Let us look at the effect that that tax has had south of the border. Properties are being demolished and roofs are being taken down, because the burden on a shrinking business with a fixed cost associated with its property leads to such behaviour. It is hardly green to destroy property that could be brought back into use at a later date. That will not improve the economy and it is not the kind of response that will help us to grow our way out of the difficulties that we are in.
This debate has been timely because we are in the run-up to next week’s stage 1 debate on the budget, but I fear that the Greens’ proposals to increase taxes are simply a road that would make things more difficult, not less.
09:56
Patrick Harvie is right to be concerned about how we protect public services. However, as I have said in all the debates about the economy in which I have taken part during the past few months, I continue to be concerned about the premise of the base from which we seem to start such discussions. There seems to be a wish for us not to talk about the economic fundamentals of why we are here and what we are trying to address. Unless I have misunderstood, when the world’s economy crashed, we had reached the same point that we had reached in every single economic crash: the point at which values were unsustainable. This particular crash had a lot to do with property values fuelling economic and banking activity to unprecedented levels, sustained by properties that did not back the transaction.
When that happens, it is more honest for politicians to acknowledge that the totality of the economy has to readjust to match the changing circumstances. That means that the private sector will have to contract and readjust and, as a concomitant, we must accept that the public sector has to do likewise. We cannot just get out a bicycle pump and try to reinflate the economy to its previous level because, by the simple laws of supply and demand, that previous level has been shown to be unsustainable.
I find very difficult, and have found difficult, those speeches in the debate this morning and previously that assume that we can protect everything that we have because nothing has changed. That is not reality, and that is the situation that the Westminster Government is trying to address. It is certainly not sustainable for us to be spending taxpayers’ money at the rate of a primary school a day, as Jeremy Purvis pointed out, on interest payments. That is not in the best interests of sustaining and protecting public services. It cannot be described fairly as “economically illiterate” to address a structural deficit and recognise its consequences for the public purse and, more important, for the value and quality of services that are available to the public.
With all due respect to Patrick Harvie, if any speech or proposition that was made this morning was thirled to an ideology, his speech was thirled to the ideology that we can replace missing revenue by increasing taxation. I do not think that that matches the economic circumstances that we face. There is a legitimate argument about how, in changed economic circumstances, we can protect public services, but the Liberal Democrats must disagree with the proposition that we can fill the gap in its entirety by adjusting and raising all forms of taxation. That does not meet our requirements.
We face structural deficits and we need to make structural changes if we are to make a difference that will be sustainable in the longer run. That is at the heart of protecting public services. Unless we can put our finances on a course that can endure year on year, we cannot properly develop and grow public services. If we aspire to the previous illusory levels of finance, the bubble will burst yet again. I think that we are all committed to seeing that that does not happen. We do not wish to go through the pain again.
People keep telling me how disappointed they are that house prices are not rising fast enough. Why? Surely that is what took us into this trouble. Do we not understand that difficulty? It is painful for those who are in those circumstances, but we cannot go on using glib political phrases as if we can simply return to where we were three years ago and all will be well. All was not well, which is in why we are in our current predicament.
My colleague Jeremy Purvis clearly outlined alternatives that could allow us to reduce the total quantum of the public purse without directly impacting on vital front-line public services. That balance is difficult to achieve and no party will find it easy. We might agree or disagree about the elements of the situation, but our nation faces difficult financial times and we all have the same problem. Different fiscal powers and monitoring will not remove the problem. We would have had it, we have got it and we have to address it. We should not delude the public by telling them otherwise.
10:04
The Green party motion before us today is somewhat unbalanced. It is a motion that stores up great anger for the United Kingdom Government and what the Greens describe as the “cuts agenda”, with no recognition of the size of the national debt or the deficit that the UK Government has been faced with. It is a structural deficit, which means that even in the good times we spent more money than we brought in in taxation, and a deficit in the current year that means that we will have to borrow more than £140 billion more than we collect in revenue.
For those who say that the process is too fast, too quick and too deep—such as the Labour Party and Scottish National Party—the question remains: what would not be too fast or too deep? At least the Green party has answered that fundamental question by saying that it would plug the gap with an increase in taxation. The other main parties continually refuse to say how they would do that. Mary Mulligan even said that everything has been done in the name of balancing the books, as if balancing the books was somehow a bad thing. I suggest that balancing the books is a pretty critical thing for the Government to do.
We are faced with a choice: either the UK Government reduces the deficit on the UK’s terms or ultimately we have the terms imposed on us by outside forces and the markets. We are spending ridiculous amounts of money on interest payments—Jeremy Purvis coined the phrase “a primary school a day” to describe the situation. If we do not reduce the deficit, it will be far more than a primary school a day. The interest payments would spike, and we would be spending even more money on interest than on public services.
What is Gavin Brown’s view of the amount that we now have to pay in unemployment benefit because of the job losses that are a result of his Government’s policies?
Mary Mulligan seems to have wiped the slate clean in May 2010 by suggesting that unemployment did not exist for the last year and a half of the Government that she supported. The rate is actually lower today than it was for a large portion of the end part of the Labour Government’s time in office. We will take no lessons from the Labour Party on that.
Let me turn to the other part of the Green motion—the idea that by simply thrusting taxes on the people of Scotland we will improve the economy and make the country better. Leaving aside the part of the motion that suggests that all the changes should be made to the “draft budget”—I do not know whether Patrick Harvie wants that to happen by stage 1 or whether he is giving the cabinet secretary the flexibility of waiting until stage 2 or stage 3 to introduce the taxes—I question seriously whether any economic analysis has been done on the proposed hotel bed tax that Patrick Harvie wants to introduce. Has he spoken to the country’s tourism businesses?
We want to encourage people to come to Scotland to improve our tourism industry. Would imposing a hotel bed tax at the drop of a hat encourage tourists to come here? When the issue was considered by the Economy, Energy and Tourism Committee two years ago, every party on the committee voted against the concept of a bed tax. I am pleased to say that that vote was endorsed by Mr Mather at the time, and the Scottish Government reaffirmed only two weeks ago that it is a poor idea for our tourism industry and our economy as a whole.
What analysis has the Green party done on the land value tax? Does it seriously propose that the tax ought to be imposed this year, as it suggests in the motion? What effect would that have on stability and the confidence of the people of Scotland? If it is to raise an extra £1.5 billion, as the Greens suggest, it would put a heavy taxation burden on the people of Scotland.
At least the Greens have suggested how they would attempt to plug the deficit. They ought to be credited for that; other parties have completely ignored the question. However, I fear that the Greens’ suggestions—particularly the proposals to impose a land value tax and throw in a hotel bed tax, too—would damage our economy and be bad in the longer term.
10:09
When closing speeches are made at the end of our debates, the term “interesting” is often used euphemistically to describe the course that the debate has followed. As we move closer to the election, I am sure that a more accurate description of how debates pan out will be “predictable”. We may be just far enough away from the election for this debate to have been more interesting than predictable, but there was an awful lot of the expected in what we heard rather than anything very enlightening.
I note, however, how brave and commendable it is of the Liberal Democrats to put forward an amendment and argument that remind people that they are currently in bed with the Tories and playing their part in destroying jobs and services across Scotland. What we got from the Conservatives was possibly more predictable, and it just confirmed to us all why they remain such an anathema to the Scottish electorate.
Let me turn to the comments of Gavin Brown and come to the defence of my colleague Mary Mulligan. When she used the phrase “balancing the books”, she did not say that that was a bad thing. She said that it is not enough to hide behind such a phrase to follow ideological preferences. That is an important point.
As I heard Mr Brown and Mr Brownlee speak, I was reminded of an anecdote that my son gave me a few weeks ago. In his place of work, a few people were sitting around, having their lunch and ruminating on the current difficulties in the economy, when one of the younger members of staff piped up, “Can you tell me who this Mary Thatcher was?” I am pretty sure that Mr Brownlee and Mr Brown were not quite the children of Thatcher, but it is clear from the way that they have expressed themselves today that they are definitely the grandchildren of Thatcher. They know exactly who she was and what her ideology was, and they are clearly attuned to it.
Even having followed the Conservatives’ ideological arguments, I was amused to hear Mr Brownlee’s defence of the council tax freeze. To claim that £70 million was in fact too much to pay for the freeze was laughable—in fact, Mr Swinney found himself in difficulty in trying not to laugh as he tried to explain that away. The reality is that there are enough reports that show the opposite. Mary Mulligan referred to the report from Unison, but there are others, including from the independent budget review group, which said that the council tax freeze is unsustainable.
The independent budget review did not say that the council tax freeze was underfunded. If the Labour Party is saying that the council tax freeze is a bad thing, perhaps it could tell us by how much it would like council tax to increase.
The member was clearly not listening to my opening comments, when I said that the policy of freezing the council tax was not, of itself, a bad thing. However, it was underfunded and it led to cuts.
That brings me to Stewart Stevenson’s points. He asked who is paying for the cuts. I can tell him who is paying for the cuts: the elderly people who are charged more for the services that they require at a local government level, the children who are losing their breakfast clubs and youth facilities, and the disabled. A whole host of people are losing services and paying for the cuts, which can be followed back to the council tax freeze and the underfunding of it.
Some old axioms are worth repeating in debates, and Patrick Harvie’s motion does that by rightly pointing out that the Scottish variable rate was democratically endorsed by the Scottish people. However, he could have gone further and recognised that devolution is also the path chosen for Scotland by its people. This Administration has wasted four years campaigning for something that this country does not want, rather than governing on behalf of Scotland to deliver what it actually wants.
Mr Harvie is right to point out that the SNP, by simply passing on the Tory-led Government’s cuts, is undermining housing, public transport and energy efficiency. However, all those were under threat before the recession because the Scottish Government has always had the wrong priorities. All talk and no action; overpromising and underdelivering—that has been the hallmark of the Scottish Government. It has been too busy being populist, putting its party interest before the public good, and generally exhibiting such incompetence that I am left to wonder why the Greens have any confidence whatsoever in the Scottish Government’s ability to act in good faith or do the right thing on any issue, let alone work with Westminster.
As others have said, there is much that can be agreed with in Patrick Harvie’s motion but, while I confirm my admiration for the Green party’s optimism, ultimately I cannot support it.
10:14
Mr McMahon was generous to the Green party in complimenting its optimism. Being optimistic is not a charge that we could level at Mr McMahon about many things, particularly after that speech.
Mr McMahon accused me of laughing when Mr Brownlee suggested not only that the council tax freeze has been properly and fully funded but that, at stages, it has provided a windfall for local authorities. Mr McMahon must have confused for laughter the generally cheery disposition that I bring to the Parliament, which my colleagues know well. Mr Brownlee is arithmetically correct. The council tax freeze fund was set at £70 million, which represents a 3.2 per cent increase in the council tax. At different stages over the course of the past three years of the council tax freeze, inflation has not been 3.2 per cent, so Mr Brownlee’s point is absolutely correct. I wanted to put that on the record, along with a reference to my generally cheery disposition.
Will the cabinet secretary take an intervention?
On the subject of cheery dispositions, who better to give way to than Mr Purvis?
I will ask my question with a smile on my face.
I believe that the Government has committed to a council tax freeze for the coming two years. Given where inflation stands at the moment, will £70 million be enough for that?
As Mr Purvis knows, we have set a budget for one year. That budget is being considered by the Parliament, and those are the numbers that are before it. If Mr Purvis looks at the position over the period of the spending review, he will see that Mr Brownlee’s point is valid, and the council tax freeze remains properly funded.
I do not want to give Mr McMahon a sense that I will talk only about his speech—I will move on to others in a moment—but he accused the Government of not governing in the interests of the people. I have to assure him that I spend all my time considering how best we can take decisions to meet the aspirations and needs of the people of Scotland.
Mary Mulligan’s speech disappointed me because, in commenting on unemployment and castigating the United Kingdom Government for its economic performance, at no stage did she record the fact that unemployment is actually falling in Scotland. Yesterday, we saw that employment is at a higher level than in the rest of the UK, that economic inactivity is at a lower rate than the rest of the UK, and that unemployment in Scotland is falling, whereas it is rising in the rest of the UK. We also saw that there is economic growth in the Scottish economy. Those are positive indicators of a direction of travel that is correct and appropriate for the people of Scotland.
Will the cabinet secretary take an intervention?
I give way to Mr McMahon.
I thank the cabinet secretary for giving me an opportunity to remind him of the comments made by the director of the Confederation of British Industry Scotland this morning, who said that the Government really should not be congratulating itself given the state of the economy and the direction in which it is travelling.
To be honest, the comments of the director of CBI Scotland sound more appropriate as the pejorative remarks of a political opponent rather than the dispassionate comments of a business and industry leader. On the question of unemployment, there is a need for people to talk constructively about the fact that we are moving in the right direction on the economic indicators. That will be beneficial to the Scottish economy.
At the heart of the budget proposals that the Scottish Government has set out and what we have said we want to do is the protection of front-line services and the promotion of economic recovery. We recognise that those two objectives are the objectives of the people of Scotland and they want them to be undertaken for the benefit of their communities. The decisions have flown through into the budget, whether through the protection of health expenditure in our localities, which is an economic multiplier and has an economic impact in every single community in Scotland, or due to the fact that the reductions in local authority budgets have been lower than the average reductions in the public sector in Scotland, thereby protecting to an extent the resources that are available to local authorities. Those are the practical manifestations of the decisions that the Scottish Government has taken to ensure that front-line services are protected.
We have to strike a balance in our proposals between balancing the budget through spending reductions and increasing the revenue that is available to the Scottish Government. That is why I have taken the difficult decision to recommend to the Parliament the increase in business rates for the large retail sector. However, that sector can afford to contribute to the business rates pot. The increase will help us to deliver £200 million-worth of reductions through the business rate poundage, which will help us to deliver the small business bonus that is so vital to our town centres. To those who criticise the supermarket levy but also demand that we do things to support the small business community in Scotland, I simply say this: if they want us to ensure effective support for the small business community in Scotland, I encourage them to support the Government’s supermarket levy, which will deliver increased revenue and benefits to the public purse in Scotland.
10:20
John Swinney began by expressing sympathy for my core argument that the UK cuts are on the wrong scale and at the wrong time, and that they are socially damaging. He described them as going too far and too fast in reducing the public debt. I argue that the UK Government is focusing too much on cuts and not enough on raising tax progressively and fairly, including from the private sector.
For decades, we have had the lie in UK politics that we can have European standards of public services and pay American levels of tax. That lie cannot last any longer. It is clear that the UK coalition wants American levels of both. I think that Scotland would rather go a different way. If we do not do that, it will raise the question, what is the Parliament here for if we are only willing to pass on the cuts? If John Swinney intends to play the role of the pre-devolution Scottish secretary, acting as the UK’s man in Edinburgh, he will be making a great mistake. He will greatly regret coming to be seen as George Osborne’s man in Edinburgh.
Michael McMahon and Stewart Stevenson both expressed understandable concern that any tax increases would hit hardest the pockets of ordinary people. That is a concern and we should take it seriously, but such tax rises are not the only choice for raising revenue. The Scotland Act 1998 gives us the power to raise revenue to fund local services. It does not say that that has to be done through the council tax or that it has to hit ordinary households the hardest. The two examples that I mentioned, which cover untaxed business assets, should be part of the mix. Even changing the council tax to add upper bands would affect only the wealthiest. We should be exploring all those options.
Derek Brownlee reminded me of one of my most serious slips of the tongue. I am not sure, but I might have been tired and emotional on the day when I described him as progressive. He reminded me of that, then he suggested that I should follow Hazel Blears’s example. Perhaps he is working to a different definition of progressive from the one that I use. He also expressed concern about the impact of tax rises, but he seems oblivious to the impact that the cuts to services will have on the poorest and most vulnerable people in society.
Jeremy Purvis talked about the scale of the deficit. I can only assume that he fully endorses the UK Government’s policy to shift the burden to individuals, for example by writing off corporate tax bills and refusing to restore progressive income tax. He was particularly keen not to have his rant about Comhaontas Glas, the Green Party in Ireland, interrupted, despite the questions that he directed at me. It is strange that he lodged an amendment that welcomes the fact that the Government is talking less about Ireland these days but then used most of his speech to talk about Ireland.
I can only assume that, in holding me to account for the actions of Comhaontas Glas, despite my having no formal links with it, he is keen to be held fully to account for all the actions of the UK coalition, or indeed for those of any political party anywhere in the world with the word “liberal” in its name. Perhaps he would like me to hold him responsible for the actions of the German Free Democratic Party, which is also in coalition with the right wing and whose popularity is in free fall. It is trying to force through tax cuts and ban the burqa—an illiberal position that it shares with the Dutch liberals the VVD, or the People’s Party for Freedom and Democracy, which is sharing Government with the racist party of Geert Wilders. Perhaps he would not like to be held to account for those actions, though.
Ross Finnie said that my speech suggested that I was thirled to an ideology. I do not think that ideology is a dirty word in politics. It has been missing from our managerial politics for far too long. The question, though, is what ideology? Is it the free-market fixation that has failed us so badly or something different, which, I think, is what Scots wanted when they set up this place? I agree entirely with Mr Finnie’s comments on the folly of chasing rising property prices, but they suggest that he should be supporting our land value tax proposals.
I remind the chamber that the cause of the deficit and the recession was market failure of historic proportions, yet the victims of the cuts will be ordinary citizens and communities. Mary Mulligan said that the right took the financial crisis as an opportunity; in fact, the left, too, should have taken it as an opportunity to challenge and overturn the failed socially and environmentally destructive and brutally unfair deregulated free market ideology that has been dominant in this country for far too long now. That opportunity could still be taken; after all, Labour and the SNP both compete for a centre-left profile. This Parliament should be capable of ensuring that Scotland’s politics forge a successful and strong left response to the current situation. Of course, parties have to compete, but they should do so by setting out progressive and constructive ideas instead of simply blaming one another for the cuts while doing nothing about them.
In my opening speech, I listed the other topics that we could have brought for debate—education, health, jobs, housing, poverty and inequality—and said that each would have been overshadowed by the cuts. However, I go further and say that each cut will restore the giant evils that Sir William Beveridge identified: want, squalor, disease, ignorance and idleness. Even if today’s language has changed, the fact is that the cuts will revive those giant evils and, indeed, will make them worse. A generation that had to cope with massive deficit and debt built up the welfare state and we should not permit the Cameron generation to use this opportunity to tear it down. If we do, we again beg the question of what we are actually here for.