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Chamber and committees

Meeting of the Parliament

Meeting date: Thursday, March 21, 2013


Contents


Scotland’s Financial Strength

The next item of business is a debate on motion S4M-06016, in the name of John Swinney, on Scotland’s financial strength.

I remind members to speak through the chair and use the full names of other members.

14:45

The Cabinet Secretary for Finance, Employment and Sustainable Growth (John Swinney)



“By international standards Scotland is a wealthy and productive country. There is no doubt that Scotland has the potential to be a successful independent nation.”

Those are not my words, but those of the fiscal commission, which is a dispassionate and impartial group of experts that has conducted one of the most thorough analyses of Scotland’s economy.

As we take a further step towards securing a yes vote in the referendum in September 2014, I intend to demonstrate the strength of Scotland’s finances and the positive difference that independence will bring. We have strong foundations—perhaps some of the strongest on which any country has sought its independence—but we will only achieve our full potential and deliver a successful society in which all our people can reach their full economic potential through a yes vote in the referendum.

John Swinney refers to his fiscal commission and applauds the remarks that it has made. Why does he not follow its cautious advice on oil prices?

John Swinney

I will have some things to say about oil during the course of my speech, but I simply say to Willie Rennie that the Government has followed entirely the advice of the fiscal commission by taking a considered and cautious view of the expectations on price, given the range of price projections that are available between the Office for Budget Responsibility, which projects $93 a barrel, and the Organisation for Economic Co-operation and Development, whose expectations are in excess of $150 a barrel. The Scottish Government has assumed $113 a barrel.

I attach significance to the submissions of Oil & Gas UK, which predicts that production levels in 2016-17 will be around a third higher than the figure predicted by the Office for Budget Responsibility.

In the fiscal commission’s view, the evidence that the Scottish Government has taken to formulate its views on oil revenue expectations in the years to come is soundly grounded.

Willie Rennie

John Swinney did not mention Norway in any of his remarks. It, too, takes a cautious approach. It estimates oil at between $80 and $100 a barrel, which is roughly the same as the United Kingdom Government. Why has he ignored Norway on this occasion when he cites it so often?

John Swinney

Willie Rennie talks about the UK Government. The Department of Energy and Climate Change’s forecast for oil prices is $132 a barrel. I have not taken that projection; mine is $113 a barrel.

If we are going to talk about Norway, let us talk about the fact that Norway has a £400 billion oil fund that is being used to safeguard and anchor the Norwegian economy. Where is the oil fund for Scotland after 40 years of fiscal mismanagement by the United Kingdom?

The debate is timely not only because of the announcement a few moments ago of the referendum date, but because yesterday’s UK budget confirmed the choice between two futures that the people of Scotland will face. Scotland’s public finances and economy will be central to the independence debate. The choice is between a UK system that, in the budget, short-changed Scotland with a last minute cut to the finances that this Parliament has already allocated and locked in a no-growth austerity agenda, or the prospect of taking the vital decisions that we should take to stimulate our own economy.

I will set out the facts about Scotland’s financial and economic strength. The simple fact is that Scotland more than pays her way. That is confirmed by the “Government Expenditure & Revenue Scotland 2011-2012” report, which demonstrates that, once again, Scotland is in a stronger fiscal position than the UK as a whole.

The latest GERS report shows that in 2011-12 Scotland contributed proportionally more to UK tax receipts than we received in public spending. In Scotland, 9.9 per cent of UK tax revenue was raised, while just 9.3 per cent of UK public spending occurred in this country. That includes £4 billion in spending to pay the interest on the debts incurred by successive United Kingdom Governments.

The cabinet secretary mentioned GERS 2011-12. What is the projected reduction in oil revenues for 2012-13?

John Swinney

Mr Brown will be able to look at the OBR forecasts that I have just discussed with Mr Rennie, but I say to him that with regard to future years—even the future years about which there was much speculation in relation to the paper that I presented to the Cabinet about 12 months ago—it has been demonstrated that between 2010-11 and 2016-17 Scotland will in terms of net surplus be in a relatively stronger position compared with the rest of the UK, to the tune of £17 billion. Mr Brown should take that into account in assessing his numbers.

Jamie Hepburn (Cumbernauld and Kilsyth) (SNP)

Does the cabinet secretary agree that, for all the unionist hot air about oil prices, the UK Government is quite happy to accumulate the revenue that oil brings in, no matter what the price is and that, therefore, the argument that Scotland should not accumulate that revenue seems somewhat hollow?

John Swinney

Mr Hepburn makes a very fair point about the longevity of the oil and gas reserves that have flowed into the UK Government and the fact that no UK Government has complained about them over the past number of years. They have happily squandered those reserves in propping up the UK economy, but we in Scotland have not had the ability to utilise those revenues in the way that our Norwegian friends have used theirs to strengthen their economic future.

The cabinet secretary has been talking about how he would build an oil fund in an independent Scotland. Would the money for the fund be over and above normal taxation or would it come from top-slicing the taxation from oil revenues?

John Swinney

If Rhoda Grant gives me a moment to cover some other details, I will come on to make a point related to her question.

According to GERS, the finances of both the UK and Scotland were, like the finances of most OECD members, in deficit last year. However, Scotland continued to be in a relatively stronger fiscal position than the UK as a whole; in 2011-12, our deficit was 5 per cent of gross domestic product compared with a UK deficit of 7.9 per cent of GDP. To put that difference into context, it means that Scotland was in a relatively stronger position than the UK to the tune of £4.4 billion, which is equivalent to £824 for every person in Scotland.

At present, Scotland’s relatively stronger fiscal position helps to reduce UK public sector borrowing. Independence would allow us to use that stronger fiscal position to support the economic recovery, create jobs in Scotland, and protect the vulnerable. As an illustration—and addressing Rhoda Grant’s question—I note that if Scotland had been independent last year, we could have spent an additional £1.4 billion on targeted support for the Scottish economy. For example, a £1.4 billion boost to capital investment could have supported around 20,000 jobs in Scotland. From that relative surplus, we could have invested £1.4 billion in an oil stabilisation fund, as recommended by the fiscal commission, to smooth any changes in tax revenues in future years and we would still have been able to borrow £1.4 billion less than the UK in relative terms, thereby reducing our future debt interest payments. Even that cautious approach would still have left around £200 million for other priorities, such as reversing the bedroom tax that is penalising some of the most vulnerable households in Scotland.

Scotland’s relatively stronger fiscal position last year was not a one-off event. Over the past five years, Scotland has been in a relatively stronger fiscal position than the UK as a whole, to the tune of £12.6 billion. Indeed, looking back even further, we see that in every single year since 1980 tax receipts per person in Scotland have been higher than in the UK as a whole.

Those facts about Scotland’s financial strength illustrate the contrast between what would have been possible under the scenario that I just outlined for 2011-12 and our prospects under the UK’s economic stewardship.

It is clear after the Westminster budget yesterday that the real risk to Scotland comes from remaining as part of the United Kingdom. By any measure, the chancellor’s plan is not working. He will now have to borrow £244 billion more between 2011-12 and 2015-16 than he planned when he set out his austerity programme in June 2010.

Sustainable finances require a growing economy. That is not on offer from the United Kingdom. Yesterday’s budget statement coincided with a growth forecast of only 0.6 per cent for this year. Back in June 2010, the chancellor forecast growth of 2.9 per cent—nearly five times higher than what is now forecast. That is a damning judgment on the UK Government’s record on the economy.

Iain Gray (East Lothian) (Lab)

Mr Swinney is talking about the prospects for economic growth. A few minutes ago, the First Minister reiterated his belief that economic growth could be driven by a cut in corporation tax. Perhaps Mr Swinney could answer the question that Mr Salmond refused to answer: where would he like corporation tax to be set?

I did not quite catch the last part of what Iain Gray said, so I ask him to repeat it.

The question was straightforward: in the prospects that Mr Swinney describes, at what level does he see corporation tax being set?

John Swinney

I answered a question earlier today about income tax rates. Those issues will be determined by the Government of an independent Scotland. It is nice that everybody is now assuming that that will be the case. It advances the debate significantly.

The Government has always believed that we must create a competitive regime for the encouragement and development of economic growth in our society, whether that is about corporation tax or how we use research and development tax credits, which we have long campaigned to secure for a number of key industries. The difference with independence is that we would be able to take the decisions that would boost economic activity in our country and be held to account by this Parliament for taking those decisions.

Will the cabinet secretary give way?

John Swinney

I had better cover some more ground before I draw my remarks to a close.

The figures that I have presented in my speech demonstrate that Scotland’s financial position is stronger than that of the United Kingdom but, more important, they show that Scotland has strong economic foundations that would allow us to take a different approach to the recession that could ensure that public finances are placed on a sustainable footing while ensuring that households are still given access to the services and support that they require.

However, we must not lose sight of the fact that Scotland’s strength goes beyond her public finances. Scotland’s oil and gas sector is going from strength to strength with record levels of investment in the North Sea. By wholesale value, more than half of the oil and gas reserves in the UK continental shelf could still be extracted. That represents a huge resource that, if harnessed correctly, will make an important contribution to the Scottish economy for decades to come.

Will the cabinet secretary give way?

The cabinet secretary is concluding.

John Swinney

Even setting aside oil and gas, Scotland has a strong economy and asset base. As oil and gas mature, so the new technologies of renewable energy and carbon capture will reach their peak. We have 10 per cent of Europe’s wave energy, 25 per cent of its tidal energy, and 25 per cent of its offshore wind resources. Significant efforts are being made to capitalise on the supply-side benefits of those assets.

We also have a strong intellectual base. Many of our universities regularly appear in assessments of the top 100 global places of learning.

Beyond any one sector or industry, we have the strength of the people of Scotland and of our nation itself. Last year, a record 87 per cent of school leavers sustained their place in education, employment or training.

Today, as we look forward to the referendum on 18 September 2014, there is no doubt that Scotland can afford to be independent, but it is becoming ever more clear that Scotland cannot afford not to be independent.

We have indisputably strong foundations on which to build independence. With a yes vote, we will have the full tools at our disposal to use that independence to bring together our natural assets with the abilities of our people to make a stronger, fairer and more prosperous Scotland.

I move,

That the Parliament notes the publication of the latest Government Expenditure and Revenue Scotland (GERS) report; welcomes its finding that Scotland was in a relatively stronger budget position than the UK as a whole, to the value of £824 per person or £4.4 billion as a nation last year; notes that, in 2011-12, Scotland generated 9.9% of UK revenues with 8.4% of the population while receiving only 9.3% of UK public spending; further welcomes Oil & Gas UK’s Activity Survey 2013, which shows that North Sea investment is at a 30-year high; believes that, with the enormous potential of offshore wind, wave and tidal power, an independent Scotland would have the potential to secure its future as Europe’s energy capital, and agrees with the conclusion of the Fiscal Commission Working Group that there is no doubt that Scotland has the potential to be a successful independent nation.

There is no spare time in the debate. You have a very tight nine minutes, Mr Macintosh.

14:59

Ken Macintosh (Eastwood) (Lab)

Political consensus has been missing from the chamber over the past few days. I am not sure for how long it will last this afternoon, but I thought that I would begin, at least, by highlighting some of the areas on which we can reach agreement.

Scotland is a strong and prosperous country. John Swinney ended his speech by listing a number of Scotland’s virtues. I point out that every area of strength that he listed for an independent Scotland is an area of strength for Scotland as part of the United Kingdom; it holds true that those are strengths for Scotland within the UK. We pull our weight within the UK and I believe that, with the right policies in place, we can look forward to the future with optimism and hope. This is a strong country, financially and otherwise, but it is clear that we can do more so that all in Scotland can share in that prosperity. We can tackle the inequality of wealth, health and happiness that in the past has been one of our greatest weaknesses.

Where I begin to disagree with the Government motion—I have reached my third paragraph and I am already beginning to disagree—is that I believe that we will be even stronger if we work together within the UK and that we would be weaker apart from our neighbours and partners. I have always viewed our relationship with the rest of Britain as one of shared prosperity and shared risk; I do not take the rather odd view of it as being one of colonial dependency or look at it through the prism of subjugation, as some in the Scottish National Party do.

Is the member aware that, since the second world war, the UK Government has legislated on 23 occasions to create new independent countries? I am unaware of a campaign in any of those countries to rejoin the UK. Is he?

Ken Macintosh

Stewart Stevenson has virtually proven the point that I am making, which is that the SNP views Scotland as some sort of colonial dependency. We are no such thing. We formed a union with the UK. We are part of a union and not a former colony. We are not subjugated by the UK; we are an equal partner in the UK. Stewart Stevenson approaches our membership of Britain in an absolutely bizarre way.

The cabinet secretary quoted the recent GERS figures approvingly, but I would argue—as, I believe, would all the Opposition parties in the Parliament—that they entirely support my view that Scotland’s strength lies in our being part of the UK. If we look at the various tables that describe the Scottish economy, they often show that our figures are very much in the median in the UK as far as employment or economic growth is concerned. We are neither the richest nor the poorest part of the UK.

I may occasionally talk the SNP down, but I have no interest in talking Scotland down. What I object to is the rather distorted interpretation of the GERS figures that they somehow show that we are staggeringly wealthy compared with the rest of the UK or that we are particularly hard done by. In fact, the way in which the SNP presents the GERS figures borders on the financially illiterate. Yet again, in the motion before us, the finance secretary takes the percentage of UK revenues that we generate, compares that with the percentage of UK expenditure in Scotland that we receive and somehow concludes not only that Scotland is better off than the rest of the UK but, bizarrely, that we should therefore be independent.

However, Mr Swinney is not, of course, comparing like with like. By comparing percentages rather than the figures themselves, he conveniently ignores the fact that far more is spent in Scotland than we pay in revenue. At best, the SNP’s claim should be something like, “Our overdraft is not quite as bad as your overdraft,” but that is hardly the picture of financial strength that the SNP would like to portray. The sad fact is that Scotland has run a financial deficit for the past 25 years, and that is not something to be proud of.

Earlier today, the First Minister said that Scotland would be better off by

“£800 for every man, woman and child.”

Then he said that we did not have the ability to invest or save that money. That is because it is a deficit. It is not surplus; it is a deficit. The SNP portrays it in entirely the wrong way.

John Swinney

I am grateful to Mr Macintosh for giving way. I clearly set out that Scotland and the UK were in deficit in 2011-12 but that, relatively, we were in a stronger financial position, which gave us choices about how we could use that £4.4 billion. We could invest some of it to create an oil fund, use some of it to pay down borrowings more quickly or invest some of it in capital infrastructure. The crucial point is that we have those choices only if we are an independent country.

Ken Macintosh

I still entirely fail to see how we can save money that is a deficit; that would be an interesting choice.

It borders on the misleading for the finance secretary not to reveal his projection that, within three years, we will—to borrow his language—be worse off than the rest of the UK. Paragraph 14 of the leaked document—the cabinet secretary’s paper to his Cabinet—says:

“Including a geographical share of North Sea revenues, both Scotland and the UK are expected to run a net fiscal deficit in each of the years to 2016-17. Before 2016-17, Scotland is projected to have a smaller deficit”—

having a “smaller deficit” means that we will be better off—

“as a share of GDP, than the UK. However, in 2016-17, OBR forecasts suggest that Scotland would have a marginally larger net fiscal deficit than the UK.”

In other words, in less than three years’ time, we will be worse off—not better off—than the UK. That is the time when we will supposedly be going independent. At that point, we will not have the “surplus”; we will be worse off.

John Swinney

If Mr Macintosh wants to complete his analysis, I make the point—I made it earlier—that, in the years up to 2016-17, Scotland would have had a cumulative relative surplus of £16.8 billion. We can access that only if we are an independent country.

Ken Macintosh

Yet again, the cabinet secretary calls the figure a surplus. We are talking about a deficit, not a surplus. He looks backwards rather than forwards. The motion says that we will be better off and that we should base our future on that projection. If we are talking about Scotland’s future, his projections—which have been kept secret and shared with his Cabinet colleagues but not with the rest of Scotland or with the Parliament—are that we will be worse off than the UK in a matter of years.

The notion that independence will make us somehow a more prosperous country is an assertion, and it is debatable. I know that it is debatable because John Swinney recognised that in his Cabinet paper. He clearly recognises the uncertainty, the risk and the volatility and unpredictability of oil prices that accompany independence, yet he chooses to airbrush that entirely out of the rose-tinted vision of independence that he portrays to the Scottish public.

As a country, our largest trading partner is the rest of the UK. Scotland’s financial sector—our banks, investment companies and insurance companies—is a vital part of our financial strength. Those companies are united in recognising that we are better together. That fact was demonstrated in spades when some of those banks were threatened with collapse. It was the strength of the UK economy and the UK tax base that allowed us to work together to ensure that they survived.

Last minute, Mr Macintosh.

Ken Macintosh

We need only look at Cyprus today to remind ourselves what happens if confidence in banks disappears.

I do not want to hear about the never-never land policies that will never be implemented in Scotland or to hear assertions about how everything would be wonderful if we controlled the levers of power. I want to know what would be done with that power. The Government has power over colleges now and it abuses that power.

The country’s real strength is our people—their ingenuity, inventiveness and entrepreneurial spirit—but what happens? The Scottish Government sends the message to those people that it will not invest in their education unless they are going to university—into higher education. [Interruption] The cabinet secretary pretends that he does not know what happens because of his decisions.

Mr Macintosh, you need to conclude.

The cabinet secretary has cut college budgets. As a result, there are 120,000 fewer Scots in college now than there were when the SNP came to power five years ago.

Mr Macintosh, you must finish.

Ken Macintosh

The SNP is telling Scots to go to university and not to go to college, because it is not worth investing in narrowing the academic and vocational divide.

I want to know what the Scottish Government will do now, with the powers that it has, to improve and invest in our economy and to invest in small businesses and our people. It should not talk about some future that is based on the distorted figures that the cabinet secretary presents.

I move amendment S4M-06016.2, to leave out from “(GERS) report” to end, and insert:

“which, it believes, provides further evidence that Scotland is better off as part of the UK; recognises that the UK is Scotland’s main trading partner, and that, according to the latest Global Connections Survey, total sales from Scotland to the rest of the United Kingdom were worth £45 billion in 2011 alone; further notes John Swinney’s admission in a recently published Cabinet paper that, ‘in 2016/17, OBR forecasts suggest that Scotland would have a marginally larger net fiscal deficit than the UK’, and that in an independent Scotland there ‘would be more volatility in public spending than at present’; is concerned that, according to the Scottish Government’s Draft Budget 2013/14, projected investment in infrastructure projects through the Non Profit Distributing model has been reduced by £333 million in 2012/13, and will be reduced by a further £348 million in 2013/14; believes that the Scottish Government could strengthen Scotland’s economy by supporting colleges rather than cutting their budgets, investing in Scotland’s housing supply, making full use of their own NPD capital investment programme, and ensuring a level playing field for Scottish businesses bidding for public sector contracts.”

15:09

Gavin Brown (Lothian) (Con)

Many of us had high hopes of the cabinet secretary today. After the outburst yesterday, and after having seen the First Minister and the Deputy First Minister leaving the chamber, we might have expected to hear what he really thinks about the shape of Scotland’s finances. We might have also expected that he would share with us what he has clearly shared with the Cabinet on more than one occasion in private, as opposed to simply repeating what he has said many times in public while refusing to answer even the simplest questions about the direction of travel for Scottish fiscal policy were we to separate.

Between them, the cabinet secretary and the First Minister have been asked at least half a dozen times today what their policy would be on corporation tax. The answer has been either that they do not know or that they know but refuse to tell us. We have been told that it would be up to a future Scottish Government to decide what corporation tax would be, but the cabinet secretary and the First Minister do not appear to have an opinion on what it ought to be or the direction in which they would like to take it.

Will the member take an intervention?

Perhaps Mr Mason will save the Scottish Government by telling us what the SNP’s policy is.

John Mason

In the interests of clarity, given that the member is demanding to know what somebody else would have as the corporation tax rate in an independent Scotland, what would the Conservative policy be for corporation tax in an independent Scotland?

Gavin Brown

First, we do not want an independent or separate Scotland: we cannot be clearer than that.

Secondly, if Mr Mason had listened to the chancellor’s budget yesterday, he would have heard that Conservative policy is a corporation tax rate of 20 per cent. There will be corporation tax cuts next month and in a year’s time and yet another corporation tax cut a year after that to take us to 20 per cent, which will be the joint-lowest corporation tax in the G8.

I have repeatedly asked the cabinet secretary about the matter because the SNP’s big plan for corporation tax used to be that it would take it down to 20 per cent to make us more competitive. Does that remain the big plan, or does the SNP have something else? At this stage, we simply do not know.

There are big dangers in relying on a single year’s GERS figures as the basis for the entire case for separation, particularly when we are looking backwards to 2011-12. Despite the percentages that Mr Swinney likes to float about, even in a year in which we had close to record oil revenues, we had a current budget deficit of £3.5 billion and a net fiscal deficit of £7.5 billion. Mr Swinney talks about how we would be £4 billion better off because of the 2011-12 figures, but he seemed unable to answer the basic question about the 2012-13 projections for oil revenues.

Will the member take an intervention?

Gavin Brown

In a moment.

Very helpfully for me, Mr Swinney pointed us in his motion to the Oil & Gas UK “Activity Survey 2013”. It says very clearly on page 33 of that document that Oil & Gas UK predicts that the revenues for 2012-13 will be £7.3 billion, which is a £4 billion lower revenue collection than that for 2011-12. That rather negates the £4 billion figure that Mr Swinney seemed to rely so much on.

John Swinney rose—

I said that I would give way to Mr Mike MacKenzie. I hope that he will forgive me for taking an intervention from the cabinet secretary.

John Swinney

Has Mr Brown thought that the projected decline in oil revenues in the short term might have something to do with the tax raid that was inflicted on the oil and gas industry by the United Kingdom Government, which essentially stemmed investment in the North Sea, and that we are now seeing investment that will result in a significant increase in production by 2016-17?

Gavin Brown

Just yesterday, the Office for Budget Responsibility reproduced its latest projections, which were accurate and taken up to 7 March this year. The figures take into account changes over the past couple of years and announcements about investments. That ties in with a paper by the Institute for Fiscal Studies, which asks serious questions about the overreliance on oil by future Scottish Governments.

Will the member give way?

The member is in his final minute.

Gavin Brown

Perhaps I can give way to Mr Brown in my closing speech.

There is an overreliance on oil, which we know is volatile and ultimately diminishing. We know that, even in a year in which there are close to record oil revenues, we have a deficit in Scotland. As a separate country, we would have a substantial debt burden, and without a track record or credibility over a long period, we would have serious issues with the debt burden that we would face and the interest that we would have to pay on our borrowing.

We have more difficult issues with demographics than the rest of the UK and, as a consequence, we say that we would face tougher challenges as a separate country than we would as part of the UK.

Spending is substantially higher per head in Scotland. Oil may plug some of the gaps in the short term, but due to volatility and the fact that reserves are diminishing, we face serious challenges in the medium to long term. With separation, the cost of borrowing would be higher and the demographic pressures would be greater, which makes it a very big risk in the medium to long term.

I move amendment S4M-06016.3, to leave out from “welcomes” to end and insert:

“believes that analysing Scotland’s financial capability has to be conducted with a longer-term focus than a single year of GERS figures; notes that the £10.573 billion from North Sea revenue in 2011-12 was one of the highest figures on record and is higher than most predictions for future years, including the projections published by the Office for Budget Responsibility in March 2013; notes that oil revenues are historically volatile; believes there is a strong likelihood that financial markets could assess risk less favourably in a separate Scotland and raise the cost of borrowing; notes that public spending per head is higher in Scotland than the United Kingdom average and believes the demographic issues faced by Scotland are more challenging than the United Kingdom as a whole.”

15:15

Willie Rennie (Mid Scotland and Fife) (LD)

John Swinney’s leaked Cabinet paper was a good mixture of optimism and caution, but what followed just four days later was pure, unbridled make-believe. It was remarkable that the SNP moved from “considerable uncertainty”, which is a quote from his private paper, to “little doubt” in public just a few days later. We all know that oil prices are volatile, falling and unpredictable, yet the SNP now says that prices will always be high and that oil revenues will always grow and will be predictable. That is make-believe and, privately, SNP members know that.

Budget holders are always more cautious when they come to estimate oil. The independent OBR makes cautious predictions because the prices are volatile and unpredictable. The Norwegians, who are often quoted by the SNP, are also cautious and pick broadly similar estimates.

Will the member give way at that point?

Certainly.

Keith Brown

On his point about the cautious nature of the OBR estimates, did the member see Robert Chote on television last night? When asked why the OBR had got every single major prediction wrong, he said that it had underestimated oil prices. Those are the words of the OBR’s chairman, Robert Chote—that it had underestimated oil prices.

Willie Rennie

That actually makes my point. The issue is that oil prices are extremely difficult to predict. That is why we have to be cautious, and it is why the Norwegians are cautious. I am surprised that the minister is not taking advice from them as he has done in the past.

The difference in recent years between oil revenues at a low point and at their highest point is £11 billion—which happens to be, roughly, the budget of the national health service in Scotland, so the significance of any mistake that we make will be great. Even with high oil prices and revenues, it is quite remarkable that the SNP still celebrates the fact that we are running a deficit. Even at the high point they are celebrating that. I have met few households—

Will the member take an intervention?

Willie Rennie

Not at the moment.

I have met few households that celebrate spending more money than they receive. That is usually time for serious remedial action in any household, but not with the SNP. SNP members celebrate running a £7.6 billion deficit simply because it is not as bad as their neighbour’s. It is just as well that it is the law in the Parliament that John Swinney has to deliver a balanced budget—God knows what would happen otherwise.

John Swinney

I ask Willie Rennie to reflect on his last remark, given that when I set out the choices that would have been available to an independent Scotland in 2011-12, not all of them were about spending money. They were partly about investing for the long term in an oil fund and partly about accelerated debt repayment. I do not think that, if we are to have an open and considered debate on these subjects, Mr Rennie’s characterisation in that last remark was particularly fair.

Willie Rennie

All I hear from the SNP’s benches, day after day after day, is a rejection of any change that the Westminster Government introduces without a single explanation as to how that will be paid for—not one single explanation. The SNP also does not spell out that the Norwegians managed to pay for their oil fund and public services by having higher taxes. We do not hear that in this Parliament, but that is the reality of what Norway does. Again, the SNP ignores the Norwegian advice.

We face considerable challenges in Scotland. There are the demographic changes, which Gavin Brown mentioned and which are happening faster than elsewhere in the UK. The demand for services is acute. There is intergenerational poverty. There are huge pockets of poverty in parts of Scotland, which we must tackle. There are the climate change objectives and targets. I am delighted that the Government delivered those targets, but they are strict targets, which require a huge amount of investment.

We do not need efforts to be founded on make-believe plans about income from oil, which is volatile, unpredictable and falling. That would let down elderly people and people in need—and the climate. The SNP faces a test in that regard. It needs to consider how it will make its plans add up.

The SNP is very good at making promises to groups, but it fails to provide a comprehensive account of how those promises will be paid for—[Interruption.] I heard an SNP member say “welfare”. Welfare reform to make work pay is difficult. The SNP opposes absolutely everything but fails to offer its own suggestions for reform. It promises every group everything, but to reverse the plans would cost £2.5 billion.

Pensions reform is necessary, as Mr Swinney said in his paper, in which he alluded to the cost of putting things right. He promises everything to public sector workers, without spelling out how he will pay for what he offers.

On defence, the SNP appeals to every community, saying, “We’re on your side”, but fails to spell out the cost. On taxes, it makes promises on air passenger duty, fuel duty, VAT and corporation tax but fails to spell out how it will pay for them.

You must conclude, please.

Willie Rennie

It is simply not credible to promise every group everything while telling us that it is for a future independent Government to work out how to pay for everything.

I move amendment S4M-06016.1, to leave out from “report” to end and insert:

“notes in particular the volatility of oil and gas revenues over the last four years, annual changes in which can exceed half the entire cost of the NHS in Scotland; welcomes the strength of the oil and gas industry, including its tens of thousands of jobs in Scotland, all within the UK framework; is disappointed that the Scottish Government continues to delay the publication of an overall assessment of the cost of its policies for an independent Scotland and is disappointed that the Fiscal Commission Working Group did not address this; notes that the Expert Working Group on Welfare and Constitutional Reform has been provided with analysis from Scottish Government officials showing that the welfare costs for Scotland will increase by £1.9bn from the current year to 2017-18; believes that it should be a priority for the Scottish Government, upon receipt of the report of the Expert Working Group on Welfare and Constitutional Reform to publish, before the summer recess, a statement showing the costs of its promises to increase spending and its commitments to reduce taxes; believes that the people of Scotland deserve straight answers to the overall, fundamental question of affordability rather than being strung along by a series of ad hoc commitments deigned to appeal to particular groups yet divorced from any analysis of overall affordability.”

We are very tight for time, so I cannot let any member go over six minutes.

15:21

Aileen McLeod (South Scotland) (SNP)

I am pleased to speak in support of the Government’s motion. I am particularly pleased that the debate will be informed—at least from the SNP benches—by hard facts. I was going to say that even the Opposition parties would have great difficulty disputing the facts, but Opposition members have been disputing the facts this afternoon.

I refer, of course, to the report, “Government Expenditure & Revenue Scotland 2011-2012”, which was published by the Office for National Statistics. The most recent GERS report records that in 2011-12 Scotland’s contribution to the UK Government’s revenues again exceeded the share of UK public spending that was attributed to Scotland by a staggering £4.4 billion, or £824 for every person in Scotland. It also demonstrates that in 2011-12 Scotland’s public finances were in much better shape than those of the UK as a whole and that, when expressed in headline budget terms, Scotland’s overall budget deficit equates to 5 per cent of GDP, compared with a UK deficit of almost 8 per cent.

It is worth stressing not only that Scotland’s relative fiscal position is better than the UK position but that in 2011 Scotland’s budget deficit was lower than the average of the 36 advanced economies that are tracked by the International Monetary Fund. The 2011-12 data are not a fluke or a one-off result, as the GERS analysis demonstrates. Between 2007-08 and 2011-12, Scotland’s average fiscal deficit was 5.9 per cent of GDP, compared with 7.6 per cent for the UK as a whole. In other words, since the SNP took office in 2007, Scotland’s fiscal position has systematically outperformed that of the UK as a whole.

That demonstrates not only the financial viability of an independent Scotland but the outstanding competence of our finance secretary, in stark contrast with the dismal performance of successive UK Labour and Tory chancellors over the same period.

Will the member give way?

Aileen McLeod

No. I am sorry, but given the lack of vision, ambition and ideas in Opposition members’ speeches this afternoon, I will not be taking any interventions. [Interruption.] Well, it is about time that we got the facts on the record, which is what I will do with the time that I have left.

It is preposterous to assert that an independent Scotland is not financially viable, as many members on the no side continue to do. As official data show, Scotland is more financially viable outside the UK than inside it. The fact is that Scotland’s population contributes much more to UK receipts than it receives back in expenditure. The GERS report shows that in 2011-12 Scotland contributed 9.9 per cent of all UK revenues but received only 9.3 per cent of total UK public expenditure—and with a population share of only 8.4 per cent. Scotland is more than paying its way.

Doubters need not take only the word of the Office for National Statistics. A few weeks ago, the fiscal commission working group produced its first report on the macroeconomic framework under independence. That group, which included two Nobel laureates in economics, not only endorsed the financial viability of an independent Scotland but set out in considerable detail the economic policy options facing an independent Scotland to grow our economy and offered invaluable advice on establishing an appropriate framework for maximising the economic gains on offer from independence. Those economic gains include higher rates of economic growth, greater equality among our citizens and a stable framework for business and investors. The fiscal commission reminded us that, by international standards, Scotland is a wealthy and productive country, but we can become wealthier and more productive after independence because only then will we have the power to use the full range of economic policy levers to meet the challenges that we face and maximise the opportunities collectively available to us as a nation.

If further proof of the merits of independence was required, surely it was provided by yesterday’s budget statement at Westminster, which laid bare the disastrous consequences of three years of botched policies—policies that continue to be supported by Tory and Liberal Democrat members of this Parliament. After an unprecedented triple-dip recession we learn that economic recovery is further postponed, that borrowing will rise even higher and that the discredited austerity drive will bite even deeper for our disadvantaged and vulnerable. Amid the economic and social wreckage, all we hear once again is the all-too-familiar Tory view that there is no alternative, although this time round the ranks of the Tory chorus line are augmented by Scotland’s Liberal Democrats.

There is an alternative for Scotland and it is independence. The Opposition parties in this Parliament would have the people of Scotland believe that Scotland is too weak to be independent and that our wealth is based on a volatile natural resource that could suffer a calamitous loss in value overnight. For 40 years the people of Scotland have been duped about the scale and value of North Sea oil reserves, and that strategy continues today. At a time when investment in the North Sea is at its highest level in 30 years and expected to rise to £13 billion in 2013, we are expected to take seriously the better together proposition that oil revenue is a curse that we would be better off without. Given that oil reserves worth an estimated £1.5 trillion are still to be exploited, that is scaremongering and I doubt that many people will fall for it on this occasion.

On Thursday 18 September 2014, the people of Scotland will face two choices: having more of the same failed policy imposed from Westminster, or putting the future of Scotland in the hands of those who live and work here and granting the Government of Scotland the powers that it needs to grow our economy and invest in our future.

Scotland is not only financially strong; we have tremendous potential and if we are to make progress our Government needs the powers over economic and social policy that only independence will deliver. The Opposition parties tell us that Scotland cannot afford to be independent, but as the finance secretary has said, the reality is that Scotland cannot afford not to be independent.

15:27

Malcolm Chisholm (Edinburgh Northern and Leith) (Lab)

I accept that everyone on the opposite benches—many of whom I like and respect—is hoping and dreaming that everything will begin to be significantly better for Scotland from 2016 onwards, but I think that it is our duty to take a hard-headed view of the economic and financial circumstances that we will face in 2016 and thereafter.

A lot of the debate today has concentrated on revenues, particularly from oil, but we really need to look at that within the wider perspective of what the economy will be like. We ought to look at issues to do with debt and monetary and fiscal policy more generally as part of the debate.

Let us start with the revenues, given that that is what is dominating the debate today. Let us strip out oil just for 30 seconds or so. The first thing that we have to acknowledge is that expenditure per head is higher in Scotland than in the rest of the UK. On the latest figures, it is slightly over £12,000 per head in Scotland and slightly less than £10,000 per head elsewhere in the UK. So, we would clearly have to have significantly more per head in revenues on an on-going basis in order even to keep things in their present state.

Secondly—again, stripping out oil—Scotland has for some years collected slightly less per head in taxation. Logically, as oil and gas eventually run out and the revenues fall, which I accept will be over a considerable period, the fiscal challenge facing Scotland will be greater than that facing the rest of the UK. SNP members will say, “That’s unrealistic. We have oil for several years.” Looking at oil historically, we accept that last year—which has been much quoted—and in several recent years, Scotland was in a stronger financial position than the rest of the UK. However, that was not the case in the 1990s when I started as a parliamentarian. In 1991-92, oil accounted for only 3 per cent of Scottish revenue. In general, throughout the 1990s, Scotland was in a weaker financial position than the rest of the UK.

The point, of course, is that it is the future that matters now. A lot of the debate therefore centres, understandably, on the price of oil in the next few years. This has been well aired in the debate already, but as the Centre for Public Policy for Regions said recently, the Scottish Government is working on the most optimistic predictions for the next few years. That is against the advice of the fiscal commission, as Willie Rennie reminded us. He also reminded us that the Norwegian central bank—and the IMF, although I cannot remember whether he mentioned the IMF—said that oil would be less than $100 a barrel. We have to be—let us just say—slightly cautious about the kind of figures that the Scottish Government is putting out for oil over the next few years.

As I said at the beginning, this should not just be a debate about revenues and oil. We have to tell people what the situation will be in 2016. The cabinet secretary started with a very stark contrast between two futures. I ought to remind him that the UK faces two futures in the 2015 election, but I will leave that aside. He suggested that if we stay with the UK we will have austerity, and if we go with Scotland we will have the end of austerity. I do not think that that serves the debate. He was being more straightforward when he presented his paper to the cabinet. I think that those on the SNP benches will still support independence, even if we have to take a gloomier economic view of it.

We have to be absolutely honest with the people of Scotland. The reality is that in 2016 the UK will face something like £120 billion of debt. Scotland will have to take at least its population share of that, and servicing that debt will loom large in the early years of an independent Scotland, if it came to pass. As Gavin Brown alludes to in his amendment, there would be a credit risk deferential for Scotland and Scotland would have to pay higher interest on its debt than the rest of the UK would. Scotland would have to run a convincingly prudent fiscal position in the early years of independence, compared with the rest of the UK. We must face that fact and not pretend that everything would suddenly be a lot simpler.

I take Malcolm Chisholm’s point that it would be a challenge if we start afresh, but does he not think that his argument is somewhat weakened by the fact that the UK has already lost its AAA rating? Losing that rating was a fear for Scotland.

Malcolm Chisholm

The UK in is a weaker position than it was, but I am arguing—as many economists have argued recently—that Scotland would be in an even weaker position as a peripheral country in a currency union, which is the next point that I am coming to, and as a new country.

That leads to the point that has been much aired on various occasions in the Parliament recently, about what our position would be in a monetary union with the rest of the UK. We must face up to the fiscal consequences of that. The SNP’s key argument for independence is that we will have more fiscal freedom. The reality is that we would not have untrammelled fiscal freedom as part of a monetary union with the rest of the UK. Indeed, Dr Andrew Goudie, who was the cabinet secretary’s chief economist until a few weeks ago, said recently in The Scotsman that there would be severe limitations on taxation policy in such a situation. We would not be free, untrammelled and without problems in the way that the SNP and even the cabinet secretary in his opening speech suggested.

I suppose that part of my argument for staying in the UK is the question of why we would want to leave a country in which we can have significant influence through our elected representatives, in order still to be controlled in economic terms, to a large extent, by a country over which we would have no influence.

15:34

Kenneth Gibson (Cunninghame North) (SNP)

Scotland’s financial strength is the key to securing a prosperous independent future—a future that unionist members do not wish us to have. In a democracy, we have choices to make and each of us respects the right of others to have a different opinion and see things from a different perspective.

I have often wondered what it must be like to be a unionist MSP, waking up each day wondering how best to make my country look poor, inept and insecure, and wondering which group of citizens to try to scare into the no camp: maybe pensioners, by telling them that there will be no state pension in an independent Scotland; the sick and the vulnerable, by saying that there will be no NHS; or those who are just trying to get by, who are told that economic oblivion will follow a yes vote. Surely—even when it is dressed up a little, as it was, at first, by Ken Macintosh—it cannot provide much job satisfaction to have to make a career out of slagging off the prospects and potential of one’s own country and seeking to undermine our national self-confidence and belittle Scotland at every turn. I hope that, sometime, the scaremongering will stop and a supposedly positive case for the union will be made. However, I have seen little of that today and I am not holding my breath.

For decades, the old myth that Scotland—the cradle of the enlightenment—is a subsidy junkie surviving on English handouts has been peddled by myriad unionist politicians in a deliberate attempt to foster an inferiority complex north of the border and keep Scotland in its place. Happily, that myth has been debunked. Time and again, report after report has shown Scotland’s financial position to be stronger than the UK’s. Indeed, the day that we hear a Tory Prime Minister accept that Scotland would “of course” be able to stand on its own two feet, we know the game is up.

Does the member accept that the most recent significant politician to question the affordability of pensions in a separate Scotland was Mr Swinney? Was he scaremongering?

Kenneth Gibson

If Mr Gray did as we did in the Finance Committee and considered the issue of pensions in the context of all western European countries, he would see that they all face challenges. The Scottish challenge is not worse than anyone else’s. What upsets me is that Labour always tries to put Scotland down, saying that we have a unique problem—pensions, the recession or whatever it happens to be—and that, somehow, our people are too inept to be able to make a better fist of it than the UK. The reality is that Labour would rather that Scotland was run by the Tories in London than was independent.

Mr Chisholm talked about oil revenues being less in the 1990s, but if we had been independent in the 1970s—which might have happened, if the Labour Government had not deliberately lied about Scotland’s oil prospects then—we might have saved ourselves 18 years of Tory Government and would have been able to re-equip our economy for the 21st century so that we could enjoy some of the standard of living that we now see in Scandinavia.

Scotland does well, and will do much better when it is an independent country, with its own resources. We more than pay our way, but we continue to tolerate the reactionary policies of successive Labour and Tory Governments, which brought us tuition fees; the highest fuel prices in Europe despite the fact that we have 64 per cent of Europe’s oil reserves; the worst state pension in the developed world, in relative terms; the private finance initiative; the poll tax; Trident; and the Iraq war.

Scotland, with its great wealth, could choose a different path, using our resources to improve society and making decisions that better reflect the aspirations of Scotland’s people. Imagine what Scotland could do if we were able to utilise our stronger position—£4.4 billion last year—which the cabinet secretary outlined in some detail?

Will the member give way?

Kenneth Gibson

I would like to take Mr McIntosh’s intervention, but time is against us, and I have taken an intervention from his colleague already.

With the squandering of that opportunity, how can unionist members assert with sincerity that we are better together, while the dead hand of Westminster jeopardises economic recovery, costs Scotland jobs and attacks some of the most vulnerable in our society?

Like any other nation, Scotland could sustain itself through general taxation, but we also have the huge advantage of North Sea oil. Despite the alleged volatility of North Sea oil prices, I see no campaign in Norway to reunite with Sweden in order to surrender control of that resource—and, of course, Norway depends to a much greater extent on oil for economic success than Scotland would.

Will the member give way?

Kenneth Gibson

I have already said that I do not have enough time, Gavin. I have taken an intervention already.

Remarkably, the bitter together Con-Lab alliance is desperate to talk down that remarkable natural resource and is quick to scaremonger, claiming that the oil is running out and is not worth all that much anyway.

As the First Minister said earlier this afternoon—he has said it twice today—only the finest minds of the Labour and Tory parties could claim that Trident nuclear weapons are an asset and North Sea oil is a liability. We are in the midst of a new oil boom, which will see revenues increase by £3 billion annually by 2017. As the cabinet secretary has already said, we are not using the most optimistic projections. The OECD uses a figure of $150 a barrel; we are using a figure of $113. We have been conservative in our estimates.

With oil and gas from known reserves expected to last at least another 40 years, using existing technology, it is imperative that future generations of Scots benefit from that huge wealth. Instead, it is being frittered away by the London Treasury. An independent Scotland would have the flexibility to make better and more progressive choices.

Norway enjoys the benefits of huge oil and gas resources. Only 15 years ago, it began investing in the oil fund that has been described this afternoon. That is far more impressive than the £1 trillion-plus debt that the UK Government has accumulated. It is time that Scotland benefited from our great resource and used it to create a more prosperous and egalitarian society.

All the evidence shows that smaller nations are more fleet-footed, able to adapt to economic change and operate more efficiently. Indeed, small nations consistently top economic league tables. An independent Scotland would be no exception. Only independence can secure Scotland’s financial future and allow Scotland to become the great success that it could, should and will be.

I remind members to use full names.

15:40

Margaret McDougall (West Scotland) (Lab)

I welcome the opportunity to speak in the debate. Instead of following the example of the Government, distorting figures to make an argument for separation, I will take the time that has been allocated to me to encourage the Government to consider the resources that we should be investing in to secure a stable future. The people of Scotland deserve to know that there can be more stability in their future—stability that cannot be guaranteed by the changeable value of our oil reserves. Our future depends on utilising our greatest resource: the people of Scotland.

If the SNP Government was not so distracted by separation, it would see the importance of investing in colleges instead of cutting their budget by £35 million and it would invest in real apprenticeship schemes instead of spinning rhetoric. If it had invested the autumn statement capital consequentials in housing at a level of £330 million over two years, it could have provided a boost to the jobs market and stimulated the economy at the same time—not to mention helping to provide homes for the 45,322 people who were registered homeless in Scotland in 2010-11.

Given the most recent employment statistics, which revealed that female unemployment has gone up by 8,000 in the last quarter, the Government should be focusing on investment and training opportunities and on reversing the cuts to colleges, which so disproportionately affect women. Although I welcome the rise in employment in general, it is not good enough to overlook the negative points in the most recent unemployment figures, especially when North Ayrshire, which I represent, has a 6.8 per cent unemployment rate, which is the highest in Scotland, whereas that of Aberdeenshire is only 1.2 per cent, which is the lowest in Scotland. That is not only bad news for my constituents; it paints a broader picture of an SNP Government that is reliant on jobs in the oil and gas industry to boost levels of employment in one part of the country while it refuses to invest in further education and skills training in other parts. That inequality must stop. How can we hope to secure our future without investing in the future working generations of the country?

But no: instead of decisively leading Scotland out of recession by training and educating the future workforce, the SNP Government is busy manipulating facts and figures to suit its arguments on separation.

Linda Fabiani (East Kilbride) (SNP)

Does the member have a memory of one Jim Murphy, who was incumbent at the Scotland Office at the time, having to retract his press release analysis of the GERS figures and admit that Scotland was in a far better position than the UK? Given that, can she tell me what the UK has done over the years about all those issues that she is concerned about?

We have heard enough figures being bandied back and forward today, and I am not going to add to that.

The SNP claims that we would be viably set up as an independent country 18 months after the referendum.

They have no figures.

Order.

Margaret McDougall

That is at the same time—2016—as when the CPPR says that our oil revenues will fall and Scotland will become the worst-off place in the UK. We heard only yesterday that the Office for Budget Responsibility has predicted Scotland’s oil and gas revenues to have fallen by 40 per cent in 2012-13 compared with the previous year. That is not to mention that, two weeks ago, in leaked Cabinet papers, the finance secretary admitted:

“We will need to be mindful that these pressures could reduce the resources available to provide additional public services”.

Why not take that private reticence on the viability of an economy built on oil reserves to the public? It is time to stop the focus on volatile and uncertain sources of revenue and instead value our workforce as a foundation for the economy that we can rely on.

Leading economist and Nobel prize winner Professor Stiglitz informed the Economy, Energy and Tourism Committee that

“if an economy is growing ... on the basis of natural resources that are being depleted, that raises a question about whether it is sustainable.”—[Official Report, Economy, Energy and Tourism Committee, 27 February 2013; c 2606.]

The only way in which to secure the sustainability of Scotland’s economy is not to base it on oil, but to invest in skills and education.

Will the member take an intervention?

The member is in her final minute.

Margaret McDougall

We need more investment in further education; a boost to capital expenditure programmes, which will create jobs; and better funding for childcare to allow greater numbers of women to get into work—that is what the Government should focus on in the here and now.

The UK Government spends more per head in Scotland than it spends anywhere else in the UK, so instead of speculating on what might be, we should make the most of that spend to build a highly skilled, highly educated and highly productive workforce. We have to step away from the spin and political manoeuvring displayed by the SNP in this debate and, instead, push for real investment in what should be a prosperous and sustainable future for Scotland.

15:46

Linda Fabiani (East Kilbride) (SNP)

As my colleague Aileen McLeod detailed earlier and as John Swinney’s motion details, the facts are there: the latest GERS report clearly shows Scotland’s financial strength and the work of the fiscal commission working group confirms that Scotland has the potential to be a successful independent nation. It is that financial strength and potential combined that makes the future so very exciting: having the ability to decide for ourselves how our nation and those who live here can turn from the mismanagement of the past and head for a successful future.

It is about having the ability to decide what kind of society we want ours to be. How can anyone not welcome that? For me, at the very least we would not tell those who live in council or housing association properties that they are not entitled to call their house their home if they hit hard times. We would not force those with disabilities to endure additional anguish and stress through cruel welfare reform or threaten to withdraw free prescriptions, free education and even concessionary travel.

I despair when I look at what is being imposed on my fellow Scots, which is particularly galling when we consider the financial strength and potential here that can surely no longer be denied by any clear-thinking person. After all, even when one discounts oil and gas output, Scotland has the third-highest GDP per head in the UK, behind that of London and the south-east.

Will the member give way?

No, thanks—away and talk to your people in Westminster and tell them to stop being so cruel to people in our nation.

Speak through the chair, please.

Linda Fabiani

Taking energy into account, Scotland is one of the richest nations in Europe, but still the nay-sayers talk us down, as evidenced by today’s amendments from Labour, the Conservatives and the Liberal Democrats. Those better together guys tell us that we need to be careful that Scotland does not take too high a risk by opting for independence. However, what risk are Scots taking if we stay in the union? It is easy to judge that, if we look back over the period of the debate about the management of our oil.

As even Jack McConnell recognised some years ago, population change is a powerful measure of economic performance. Any country that has enjoyed the bonus of 40 years of oil revenues and development should be doing well internationally, retaining its existing population and attracting more. Uniquely, that is not the case for Scotland. Westminster managed the impossible in creating a population decline in an oil-rich country. In all our near neighbours—Ireland, the rest of the UK, Denmark, Norway and Iceland—the population grew between 1970 and 2010. In Scotland, it stagnated for most of that period and people left to pursue lives elsewhere.

At the beginning of the debate over Scotland’s oil wealth, two big unionist parties dominated Scottish politics: the Tories, who have been reduced to a rump across the country; and Labour, which has retreated into an increasingly narrow heartland. That heartland has seen little benefit from 40 years of oil exploration off Scotland, unless we count—I say to Margaret McDougall—high levels of deprivation and unemployment as a benefit of the union. Looking at past performance, can anyone who represents people in Scotland really believe that Westminster will manage our future resources in the interests of members’ constituents? If the no campaign succeeds, we will see a continuation of Scotland’s resources draining south to prop up a failing UK economy. With half the value of oil still to extract, it is time to recognise the truism that those who fail to learn from history are doomed to repeat it.

It is sad that, in its desperate efforts to bolster the union, even the Labour Party has lost any sense of acting in Scotland’s interests. It was so busy telling us that oil is not Scotland’s salvation that it allowed it to be drained off to fund an unsustainable boom in London, for which we are now paying the price. Scottish people are now paying the price. For 40 years, the driving force has been the needs of the London Treasury and not the prospect of building a sustainable energy future and a sustainable social future.

Opposition parties demonstrate their lack of concern for the long term every time they welcome Westminster’s misrepresentation of the industry’s future. We hear a lot about recent OBR forecasts. They bear little relation to those of other commentators, yet members of the better together parties, whether in the UK coalition or not, simply trumpet them as proof of Scotland’s lack of potential in the industry. I heard Willie Rennie on television the other night talking about the OBR’s track record. Margaret McDougall talked about that today. The OBR was only formed in 2010. How can it have a track record? It is ridiculous.

Will the member take an intervention?

The member is in her last minute.

Linda Fabiani

According to many UK Government forecasts, the Scottish oil industry should have shut its doors long ago. Instead, the Treasury has extracted up to £12.5 billion annually to prop up its financial mismanagement.

I started my speech with straight facts and I will end with the same. Yes, the oil market is volatile, but peaks and troughs can be well managed—look at Norway. Scotland is a marvellous country. It is buffeted by wind energy, its glens flow with hydro power, much of the landmass is built on coal and it is surrounded by oil. Only Westminster could turn Scotland into a land from which people emigrate to escape poverty. Only better together could tell us with a straight face that it is a risk to leave decades of mismanagement behind us.

Will you come to a conclusion, please?

We can make Scotland better. We have a resource in our people and we have resources all round our land. That is the vision for which we should vote yes, because the alternative is, at best, more of the same.

15:52

Iain Gray (East Lothian) (Lab)

This debate is less about the strength of Scotland’s financial position and more about the weakness of the SNP’s financial arguments. Above all, Mr Swinney’s motion seeks to discredit his own analysis of Scotland’s financial prospects post-separation as outlined to his own Cabinet colleagues in his own Cabinet paper, which was leaked two weeks ago. Truly, this Government has taken us through the looking-glass, with SNP back benchers rubbishing Mr Swinney’s private analysis on Mr Swinney’s public behalf. We have just heard Linda Fabiani lambast those who base their analysis on OBR estimates, which is exactly what Mr Swinney did in the paper that he prepared for the Scottish Cabinet.

I remember the first North Sea oil boom. When I was growing up in Inverness, you could not miss it. Tens of thousands of Scots were building oil rigs at Ardersier and Nigg and the rigs were literally queued up along the Moray Firth. Every family and town had somebody working offshore with stories of unheard-of wage packets and leisure to spend them. I do not see that happening now, but what I do see is a mature, growing oil and gas industry based around Aberdeen that demonstrates daily the world’s current confidence in Scotland. There are major new headquarters for Norwegian companies such as Statoil and Aker and significant investments from Korea and Sinopec from China. Transocean is planning to base all its global training outside the US in Aberdeen. A recent Lloyd’s survey showed that four out of five companies there plan growth, but it also showed that that growth is primarily international and that, for most companies, North Sea operations constitute 20 per cent or less of their business.

Those investments are happening right now in Aberdeen. They were attracted exactly by Scotland’s openness to their business, by our position as part of the English-speaking world and by our position as part of a stable United Kingdom and part of the European Union. They do not depend on Scotland’s share of the continental shelf. We can build an oil industry that will outlast North Sea oil, and we are doing it right now as part of the United Kingdom. Those companies tell us that their problem is finding the skilled workforce that they need, so they would be better served by a Scottish Government investing more in college places and less in separatist rhetoric.

As for renewables, a former leader of the SNP published a document last week that says that the £2 billion subsidy required by our renewables industry is

“all right if paid for by England ... but it is not clear how this could be done when Scotland is independent.”

The inconvenient truth, which even lifelong nationalists cannot hide from, is that Scotland’s undoubted potential in renewable generation is strengthened by Scotland being part of a United Kingdom.

We are told today that Scotland would be better off to the tune of £824 per person. That figure is explicitly designed to sound like a separation windfall. Mr Swinney has even told us how he would spend it. Earlier today, the First Minister called it a “surplus”. Ken Mackintosh is right, though. It is not a surplus. It is £4.4 billion of deficit. Mr Swinney is saying that if he inherited a deficit smaller than the UK’s, he would immediately increase it to George Osborne levels of fiscal mismanagement, which he described today as an unsustainable level of debt.

John Swinney

Mr Gray has just departed fundamentally from the Labour Party’s economic narrative, its criticism of George Osborne and its belief that there is a legitimate argument for borrowing to invest in growth in the economy. Is that what he is saying to Parliament today?

Iain Gray

Not at all. There is nothing wrong with deficit budgeting if it is honest, transparent and invested properly. What is not acceptable is to slice and dice debt and pretend to the Scottish people that it is an asset that we can spend—not once but over and over—and to promise Scots prosperity based on sub-prime bookkeeping. The idea that we create a stabilisation fund by an unsustainable—by Mr Swinney’s own admission—level of deficit seems Orwellian.

Mr Swinney had a reputation for fiscal probity. He was the one willing to force unpalatable decisions on his colleagues, telling them that they could not afford to cancel student debt and that they had to cancel rail links to airports, cut the housing budget and slash spending on colleges. He earned his characterisation as the austere bank manager of the Government. When John Swinney told the Cabinet that, within a few years, Scotland’s deficit would be worse than that of the UK and that oil would dominate a separate Scottish economy, with price volatility and declining production threatening cuts to public services and defence, that was Mr Swinney, the trustworthy bank manager.

Now, Mr Swinney is lambasting George Osborne for offering him funny money to spend, but his motion proffers exactly the same currency to pay the price of separation. As for his wise words on oil, the Cabinet did not want to hear that, so he was sent out, like a poor man’s J R Ewing, to declare that he had seen the future and it was oilier than he had thought after all.

Keynes said:

“When the facts change, I change my mind.”

Mr Swinney is saying, “The First Minister has told me to change my mind and now I’m going to change the facts.” With that, he has sacrificed his hard-won fiscal credibility.

I am afraid that we have lost a lot of time from the debate, which will have an impact on the final speakers.

15:58

John Mason (Glasgow Shettleston) (SNP)

We have heard today that Scotland is in a much stronger position than the UK. We have heard that, for 8.4 per cent of the population, we contribute 9.9 per cent of the revenues and get 9.3 per cent of the expenditure. At the point of independence, of course Scotland starts at the same low point as the UK. However, the point is that we can climb out of the pit faster.

No one is saying that we are immediately in surplus, but we have heard figures today showing that Scotland is relatively better off than the UK by £4.4 billion. We could reduce the debt by £1.4 billion, which I think deals with what Iain Gray was saying, and we could invest in housing or whatever.

Is it really the Opposition’s contention today that it is better for Scotland to stay poorer and subsidise the UK? When we are out in the street, some people say to us, “Better the devil you know than the devil you don’t.” I therefore want to spend a little bit of time looking more closely at the UK, the devil we know.

In the past, we were told that if we voted for devolution or independence, we would lose Linwood and the steel industry. In fact, we have lost both: the UK lost us our steel industry and our car manufacturing. Similarly, we were told that an independent Scotland might lose its AAA credit rating. What has happened? We have lost the AAA credit rating. Who lost it? The UK.

Surely, it is clear that the UK is a failure. London politicians may look down on Greece and Cyprus, but the reality is that we are not far away from them. On a list of countries by gross government debt as a percentage of GDP, Japan—unsurprisingly—is first and Greece is second. However, Cyprus is only 33rd and the UK is 20th.

Debt is not wholly bad, especially if it is used for capital investment with a long-term benefit, so I would support short-term borrowing.

John Mason suggests that we are not far away from Greece and Cyprus. Do investors around the world think that?

John Mason

That is why the UK lost its AAA rating. Investors around the world are losing confidence in the UK; I lost it before them.

As I say, borrowing is not necessarily an entirely bad thing, but one of the marks of the UK’s failure is how out of control debt has become. Willie Rennie talked about debt being critical. According to yesterday’s BBC headlines following the budget, borrowing will be £114 billion this year and is set to fall to £108 billion, £97 billion and £87 billion in the following years.

Does Mr Mason understand that the £4.4 billion surplus that Mr Swinney and his colleagues have been referring to is included in that figure of borrowing that he has just criticised?

John Mason

Nobody is saying that the £4.4 billion is a surplus; it is a relative surplus. It is a smaller deficit than the UK’s. I have said that we start in the same pit as the UK and we get out of it quicker.

Some people looking at the BBC figures that I have mentioned might think that that is the total borrowing and that the figures are horrific. However, those figures are only the UK’s new borrowing. The UK is borrowing huge amounts of money every year. Borrowing as a share of GDP is due to fall from 7.4 per cent in 2013-14 to 5 per cent in 2015-16. However, those figures relate to the new borrowing. Debt as a share of GDP total debt is set to increase from 75.9 to 85.1 per cent in 2015-16. That is failure.

If we look at the total figures, it is scary. The UK’s borrowing is £1,111 billion at December 2012, which is approximately £18,000 per head of population. Over the next year, the figure will increase by £114 billion, which is about an extra £1,900 per head. Those are only the amounts that the UK Government owes. When mortgages and unsecured personal loans are included, the figure is about £40,000 per head of population. When we consider those figures, can we say that the UK has been a success story? I do not think so.

Before the euro, people used to joke about countries such as Italy and Greece and how they devalued their currencies because of the economic mess that they were in. Exchange rates slipped and slipped again. However, that is exactly where the UK is now. When the euro was introduced, it was worth about 70p. The pound fell and it became about 80p for a while. Currently, it is worth 85p.

Of course, there are good things in the UK, as there have been over the past 300 years that we have been living together. However, let us not look at the UK with rose-tinted spectacles or have our hearts rule our heads; rather, let us look at the UK realistically and deal with the facts.

The Labour amendment mentions housing and colleges, which Margaret McDougall talked about. However, her speech was an argument for independence. Let us think about why there is not enough money for housing and colleges. Of course, we could cut another area, such as health, which is what I assume she wants to do in order to put more money into colleges. However, that would merely rearrange our limited resources. The key reason why we do not have more money for colleges and housing is that the UK and its economy have failed, Scotland is suffering the consequences of that.

There are many other scare stories about Scotland not being able to afford the UK’s welfare system. However, we now have the bedroom tax and welfare cuts. The UK has failed on welfare and it is dragging us down with it. Do we want a race to the bottom on welfare for our children and our grandchildren? Last Friday, there was a guy at my surgery who was well dressed and presented and who had worked for most of his life. However, he had not eaten properly since the previous Tuesday and he was hungry. Is that a success? The UK has failed.

16:04

Mary Scanlon (Highlands and Islands) (Con)

SNP members look as if they need a bit of cheering up, so I will start by outlining some measures from yesterday’s budget that will help families and business across Scotland: the increase in the personal tax allowance to £10,000; the 10p tax rate becoming zero; the introduction of a £2,000 employment allowance; the reduction in corporation tax to 20p in the pound; the freezing of fuel duty; measures to clamp down on tax avoidance; thousands of people taken out of paying tax altogether; and the identification of Peterhead as one of the UK Government’s two preferred bidders for funding for carbon capture and storage, with the potential to create another 1,000 jobs in that area. The structural deficit is down from around £170 billion to £114 billion and it looks as if it will be eliminated by 2017, when we will be living within our means and spending only the amount that we raise in tax. As Malcolm Chisholm pointed out, public spending has historically been higher in Scotland than it has in England and is currently £1,200 more per head of population, despite the fact that household disposable income per head in Scotland is very similar to that for the UK.

The Government’s motion focuses on oil and gas revenues and, as other speakers have made clear, there can be no doubt that that commodity is finite, declining and very volatile. As figures from the Scottish Parliament information centre show, on a geographical basis, oil and gas accounted for nearly half of all revenues in the mid-1980s; more than 20 per cent of Scottish revenue in 2008-09; 15 per cent in 2010-11; 12 per cent in 2009-10; and 3 per cent in 1991-92. In fact, since the SNP came to power, the production of crude oil has fallen by one third from 76,000 tonnes in 2007 to almost 52,000 tonnes in 2011, its lowest level since 1978.

How volatile is the oil price compared with the City of London, before which successive Government have prostrated themselves?

Mary Scanlon

If I thought it was worth answering that, I would do so.

Oil & Gas UK’s recent report confirms that direct tax receipts from North Sea oil and gas production have fallen from £11.3 billion in 2011-12 to £7.3 billion in 2012-13—in other words, in one year. The certainty resulting from the UK Government’s measures on tax relief on decommissioning was highlighted at last night’s meeting of the cross-party group on oil and gas; it was said that such moves will speed up asset sales and free up capital that companies can confidently use for investment. With nearly £36 billion being spent on decommissioning, that will be important and excellent business for Scottish yards.

Investment in the North Sea is at a 30-year high as a result of UK Government tax incentives and allowances such as the new brownfield allowance which, according to Oil & Gas UK, has led to companies investing more than £2 billion. Indeed, many companies are now reassessing their brownfield options in the wake of that allowance.

Another point raised at last night’s cross-party group meeting was that operating costs per barrel of oil in the North Sea are rising and now range from £5 to more than £30. Since 2010, production has fallen by 30 per cent in just two years largely because of shutdowns, both planned and unplanned, in existing fields. Bad weather has affected production—[Interruption.] Mr Swinney might laugh, but this is all in the Oil & Gas UK report. I suggest that he takes the matter up with—

Will the member give way?

Mary Scanlon

No—my time is very short. I might come to the cabinet secretary in a second, but the points that I want to make have not yet been raised.

Bad weather has affected production and in 2012 the Elgin field had to be shut. That is a fact. Earlier this year, the shutdown of the Cormorant Alpha field curtailed production in 27 neighbouring fields that export via that asset. At lunch time, I met the convener of Shetland Islands Council, who confirmed that, as a result, the Sullom Voe oil terminal was shut down for several days on more than one occasion.

John Swinney

I simply point out to Mrs Scanlon that, on the issue of lower oil production, Oil & Gas UK’s “Activity Survey 2013” says:

“much of this fall can be attributed to the damage done to investor confidence by the numerous adverse tax changes in the mid-2000s”.

Mary Scanlon

The facts speak for themselves. Those are the facts and, if John Swinney had listened to the representatives from Oil & Gas UK speaking last week about the incentives on decommissioning and the brownfield allowance, he would know that those tax incentives are the reason why, as is mentioned in his motion, investment in the North Sea is at a 30-year high.

For all the reasons that I have outlined, it is difficult to predict revenues from a commodity such as oil.

Scotland has a £7.6 million net fiscal deficit. That is the Government’s own figure. Aileen McLeod also confirmed it. I am running out of time, but all I can say is that the United Kingdom brings strength, stability and security to Scotland’s finances and makes us better protected from shocks to our economy, such as the recent banking crisis, and fluctuations in the price of oil. We are better together.

Before I call Willie Coffey, I let the remaining three open debate speakers after him know that they will each have five minutes to speak. Mr Coffey, you have six minutes.

16:11

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

Scotland is already a strong country financially. With independence, we can grow our economy further to make even greater progress.

Scotland is the European Union’s energy capital, with more than 60 per cent of all Europe’s oil production. Our oil will be worth £48 billion over the next six years. We have a quarter of Europe’s potential offshore wind and tidal energy.

Our food and drinks exports continue to grow and are valued at more than £5 billion a year. Our universities are among the best in the world. Inward investment is strong, and the GERS figures show that we have a fiscal position that is stronger than that of the rest of the UK, whose deficit is 6 per cent of GDP, whereas Scotland’s is 2.3 per cent. We contribute 9.9 per cent of tax revenues to the UK and receive back 9.3 per cent in spending.

Having full economic powers at our disposal would not only allow us to focus on growing our economy but give us the ability to get to grips with poverty and improve the welfare of our citizens. For too long, in an oil-rich Scotland, we have endured child poverty that has blighted the hopes and dreams of thousands of our young people. In some communities in Scotland, child poverty is as high as 43 per cent. Good progress has recently been made in driving that down, but we could do more with independence.

Who among us can say with hand on heart that the UK has spent Scotland’s vast oil reserves wisely over the past 40 years? Where is the UK’s equivalent of Norway’s oil fund, which is now estimated to be worth £450 billion?

I can tell members where the UK’s money went. It was squandered by successive Labour and Tory Governments on things such as Polaris and, now, Trident—nuclear weapons of mass destruction all stationed in Scotland and safely far away from England’s population centres. Billions of pounds have been wasted.

We have seen blunder after blunder by the UK in almost every sector. For example, in NHS information technology procurement, we wasted £12.7 billion. Members may remember the fiasco of the Child Support Agency, in which £1 billion was written off. Seven billion pounds has been wasted in defence procurement mistakes and £5 billion was wasted on the abandoned identity card scheme. Let us also remember the £750 million wasted on the hapless millennium dome, which Tony Blair forced on a less-than-enthusiastic London public. Billions of pounds have been wasted.

In the present day, the much-bragged-about AAA credit rating has gone. Growth forecasts are now cut in half, and UK debt as a share of the country’s GDP is forecast to rocket to more than 85 per cent by 2016. Who pays the price for that? Scotland’s children, our poorest families and pensioners do.

George Osborne will go down in history as the man whose economic growth forecasts started at the lowest levels ever and then gradually worked their way downwards. With a record like that, is it really in Scotland’s best interests to stick with the UK?

On his list of failures—apparently, failures of the UK—will Willie Coffey include the construction of this building?

Willie Coffey

I am really sad to hear that from the Liberals. I do not know whether Mr Rennie was around at the time but, as I understand it, the UK Government procured and commissioned the Parliament building, too.

I would like to turn my attention away from the UK’s failures and to look at how many small nations in the world are meeting economic challenges much more effectively than their bigger counterparts are. Of the 34 advanced economies as defined by the International Monetary Fund, 23 have populations of less than 20 million. Eleven of those smaller countries are in the top 15 advanced economies based on per capita income and four of them are in the top five based on the World Economic Forum’s global ranking of competitiveness. Scotland GDP per head is about 118 per cent of the UK’s, and we rank about eighth out of those 34 countries. The UK languishes in around 16th place.

What is going on and why are smaller countries faring better? According to David Skilling, who is a senior adviser to the New Zealand Government, there are three main reasons why smaller countries have outperformed larger economies over the past few decades. First, they have a greater capacity to adapt to a world that, through globalisation, is rapidly changing. Secondly, they tend to have higher levels of “social capital and trust”, well-functioning political institutions and a well-developed sense of external matters. Thirdly, they also tend to have good reputations for the quality of their policies. All those contribute to their enhanced performance.

Mr Skilling concludes that, when it comes to continuing to succeed in what he describes as the current unforgiving environment, smaller countries have a distinct edge, provided that they continue to innovate and shape their policy development to the new economic environments that present themselves. To that end, smaller countries are more likely to play a leading role for many years to come and can offer unique guidance to other, larger advanced countries.

The message is clear for our small country of just over 5 million people. Next year, on 18 September, we will stand at the crossroads and decide which of two possible futures is best for us: one with a lumbering, incompetent and failing UK, whose priorities—which are not shared by the Scots—are to spend billions on weapons instead of weans and to attack the poor and reward the rich—

You must close, please.

The alternative is a future that will see Scotland emerge, at long last, to pursue a destiny that our own people share.

16:17

Margaret McCulloch (Central Scotland) (Lab)

I appreciate the opportunity to speak in the debate and to contribute to the wider discussion about Scotland’s future.

My position is now, and has been, that Scotland is best served by devolution—a Scottish Parliament within a United Kingdom—but I also count myself among the majority of people in Scotland who feel that our life and politics would be enhanced if we had a stronger Parliament within a more modern and flexible union.

We learned last week that devo max is not any more popular than independence, but in their report on attitudes to constitutional alternatives John Curtice and Rachel Ormston found that there was a clear majority in support of key financial decisions being taken in Scotland. Whatever Scotland’s constitutional destination, the economics of change and the implications for the public finances will be absolutely critical.

It is important that all of us in the Parliament take a sober, considered view of Scotland’s financial position—especially those of us who advocate significant constitutional change, who range from people who argue for independence to people like me who support the devolution of further financial powers.

It can be quite revealing to take a considered look at Scotland’s finances. The UK figure for total expenditure per capita is £10,937, whereas the Scottish figure is £12,134. As we all know, the UK faces a net fiscal deficit, but so does Scotland, even with a geographical share of oil revenues. Critically, Scotland’s geographical share of oil revenues was almost a fifth of its total revenue. I will return to that point.

Much of the debate has centred on oil wealth and tax revenues from oil and gas. Indeed, much of the constitutional debate since the 1970s has focused on those same issues. In my opinion, the very fact that oil and gas are so central to the constitutional debate and the arguments for independence that are being deployed is in itself significant. It underlines a critical point that has been made for many years: the financial case for independence, as articulated to us by the Scottish Government, hinges on a single volatile commodity.

Let us be clear: no one disputes the opportunities that oil and gas afford Scotland, especially given the sector’s importance to the north-east. Despite claims to the contrary from the First Minister and Aileen McLeod, no one in the Parliament views oil wealth as a curse. However, the centrality of the North Sea in the vision of Scotland’s future that the Scottish Government is developing points to a Scotland that is not just buoyed by but tied to oil wealth. That is at odds with my vision of a diverse and dynamic economy.

Of course we must develop key growth industries such as oil and gas, but we must also look at the resilience of the economy as a whole and at how wealth is dispersed in Scotland. A range of business sectors—including small and medium-sized enterprises, manufacturing and retail—are important to our economic potential as well as our tax base and they are being overlooked in the contest over Scotland’s future.

SMEs are contending with some of the most difficult trading conditions that they have ever seen, and yet the Government has put off its rates revaluation and has chosen to sustain rates at near boom levels.

Will the member take an intervention?

Margaret McCulloch

No—I am taking no interventions.

Manufacturers are closing down in places such as my home town—East Kilbride—and there is no Government strategy to do anything about that. Retail accounts for 9 per cent of total employment, but it is not included in the Government’s economic strategy.

The Scottish Government must address fundamental concerns that people and businesses have here and now about how Scotland’s financial position will be sustained and strengthened, whatever future the people of this country ultimately decide on. An independent Scotland might be viable, but nothing in the GERS figures or the oil figures makes the UK redundant or in any way less viable.

I totally oppose the present UK Government’s policies, but I believe that the essential case for Scotland in the union remains convincing. Together, as part of the United Kingdom, we can bear bigger deficits than smaller nations can. We can nationalise banks, which we had to do in response to the global financial crisis to save jobs, savings and mortgages. In comparison with new economies that are yet to mature, we can borrow relatively cheaply to invest.

Scotland standing on its own two feet faces opportunities and challenges like any other nation—not least the budget challenge that was identified in the leaked Cabinet memo.

You must close, please.

Equally, the prospects, security and solidarity that come to Scotland from being part of a strong and successful union should not be readily dismissed or denied, if we are to have an honest debate about Scotland’s future.

16:22

Patrick Harvie (Glasgow) (Green)

It is understandable that the debate has been framed by the constitution at least as much as by the economy. My party’s policy is in favour of independence and my personal view is strongly in favour of it, but we have members on both sides of the constitutional debate. That is because we are not defined by the issue. We are defined far more by our economic policy and the idea of the economy as a wholly owned subsidiary of the environment. It is therefore perhaps unsurprising that my take on the debate will be a wee bit different.

John Swinney told us that Scotland is a prosperous country, and I agree. The difference is that I probably mean something a wee bit different by the word “prosperity”. I want us to ask what we mean by a word such as “prosperity”. That might sound like an abstract concept, but it is one of the big ideas that Margo MacDonald urged us—rightly—to focus on earlier. It is one of the most important questions facing the world.

I think that the First Minister took Joseph Stiglitz’s name in vain earlier in relation to corporation tax, but Joseph Stiglitz is one of the leading advocates of a more holistic approach to the economy and of a recognition that wealth is not limited to financial wealth. Prosperity is not limited to the question of whether we are a little bit richer or a little bit poorer. I and my party will never reach a view on independence that is based simply on the richer-or-poorer blizzard of factoids.

How do we value and measure prosperity? Jim McColl and Brian Souter might look at their corporation tax bill and decide that they feel more prosperous if they get to keep more of their profit, but our society will not prosper from the inequality that grows as a result. It will prosper if we share our material wealth more fairly.

Where do Scots place their priorities? What makes them feel that they have what they need to live a decent life? What makes them feel that they can prosper as human beings?

The Oxfam humankind index asked people those questions. If we look at the priority that people give to the factors in their lives that give them a sense of security and a sense that they have what it takes to prosper in life, we will see that having an “Affordable, decent and safe home”, “Physical and mental health”, a clean environment, and “good relationships with family and friends” are important. We have to look halfway down the list in the index before we get to “Having enough money to pay the bills and buy what you need” and “Having a secure source of money”. That does not make those things unimportant, but it means that other factors are more important to people, and we should think about them more profoundly when we ask ourselves what prosperity means.

Oil has been talked about a great deal. There is the idea that oil is a great economic asset. It is potentially an economic asset, but it is also potentially the source of economic ruin. The oil and gas industry’s value is based on the known reserves that are available, and there is the idea that all those reserves can be turned into economic revenue, but that is not true. The world knows that we have many times more fossil fuel reserves than we can afford to burn. If we expect to continue the environmental conditions that allow us even to run an economy, we will have to leave a lot of those reserves where they are, or we will destroy the conditions that allow us to operate an economy. There is economic value in the oil and gas reserves, but it will be realised only if we restrain our use of them—otherwise they will not give us prosperity.

We talk about jobs and whether we can create new jobs from new industries, but jobs are not the same as prosperity. Many people will argue that having a job gives a person dignity and that having a source of income gives a person the things that they need for quality of life. However, low-waged jobs that are subsidised through the welfare state, jobs that are time pressured and jobs that undermine people’s health and social capital can take away people’s prosperity. Jobs that are well paid, jobs that are more equally paid between the highest and lowest in a business, and jobs that are family friendly, stimulating and rewarding generate prosperity.

I urge everybody on both sides of the independence debate and on all sides of the economic debates that we face to think more deeply about what we mean by wealth and prosperity. If we talk only about GDP and financial wealth, we miss the point.

I call Mike MacKenzie, who has up to five minutes.

16:28

Mike MacKenzie (Highlands and Islands) (SNP)

The debate is timely, as it comes shortly after the latest GERS figures have been announced. Those figures, which are up from last year’s figures, clearly show that Scotland is on a successful trajectory.

Scotland has been in a better fiscal position than the rest of the UK for five years. We are now producing 9.9 per cent of the UK’s revenue, which is up from 9.6 per cent in the previous year. That indicates significant fiscal strength, especially as we have only 8.4 per cent of the UK’s population. It is unfortunate that we receive only 9.3 per cent of the expenditure. In other words, we pay more to Westminster than we get back, and we have done so for some time. The figures also reveal that Scotland is in a better position than the UK to the tune of £4.4 billion, or £834 per person.

I am sure that the Opposition parties will be glad to hear that the good news story for Scotland does not stop there. Scotland’s oil and gas industry is entering a new phase of increased production, with investment this year expected to reach £13 billion and plans for longer-term investment exceeding £100 billion.

I think that the Opposition parties think that those oil companies and their investors are completely stupid, but it is no surprise that they expect the fields to be more, not less, productive over the coming years and that revenue is expected to be between £41 billion and £57 billion over the next six years. That will give a newly independent Scotland a great start. It is a financial springboard that will propel us on to even greater success.

That is not all the good news. As the First Minister has said, Scotland has won the energy lottery not once, but twice: it has 25 per cent of Europe’s wind and tidal resources and 10 per cent of its wave energy potential. This will play an ever more significant part in Scotland’s economy. Scotland has an oil resource that will last for another 40 or so years, with 24 billion barrels still to be extracted, which will be worth more than £1.5 trillion at today's prices. No serious commentator is suggesting that oil prices are going to fall in the long term. However, the important point is that our offshore marine energy industry will be maturing as oil begins to run out.

The Offshore Valuation Group suggested in its 2010 report that by 2050 marine energy may contribute as much as £4 billion per annum to Scottish revenue in corporation tax alone. That excludes onshore renewables, the myriad of opportunities afforded by micro energy and the onshore supply chain, and the considerable economic potential of exporting our expertise in that most valuable sector, the knowledge economy.

The unionist parties are pessimists and doubters. Anyone who doubts that Scotland will succeed in harnessing nature or that it can solve the technical problems associated with marine energy should go to the European Marine Energy Centre on Orkney. They should experience for themselves the creative energy being brought to bear all over Orkney, not just in the offices and test stations but in conversations in pubs, fish and chip shops and cafes. They should go to Orkney and experience the renaissance effect that is under way as those creative people apply their talents to solving the problems and exploiting the exciting opportunities.

That is exactly what the economist David Ricardo meant by countries exploiting their comparative advantages. It is what Joe Stiglitz means when he prescribes moving to a green economy as the medicine for ailing economies. Unlike the UK Government, which is prevaricating over energy policy, an independent Scotland will nurture this opportunity. We will continue to lead the way in the renewable energy revolution and we will reap the economic and fiscal rewards.

There is a point when the unionists, the doubters and the doomsayers turn to dishonesty in their efforts to diminish Scotland. They crossed this line before when they buried the McCrone report and for 30-odd years told us the lie that Scotland’s oil was of little value. I have heard nothing this afternoon that re-establishes their credibility or their integrity. The Scottish public may have been fooled once, but they will not be fooled twice.

I am just about to finish—

You are indeed—in fact, you are finishing now. That is enough, Mr MacKenzie. Thank you.

I call Willie Rennie, who has up to six minutes.

16:33

Willie Rennie

In a challenging world, optimism is a trait that we should all encourage. As leaders we need to believe that the seemingly impossible can be achieved: that we can turn back the tide of global warming; that everyone, no matter what their background, can have a chance to get on; and that we can deal with poverty and hunger in far-flung parts of the planet.

It is good to be optimistic—but when we are putting a budget together it is wise to be cautious. That is why Mr Swinney’s own fiscal commission recommended exactly that; and that is why the Norwegians, too, exercise caution. A sensible mix of optimism and caution is the right formula. Make-believe should never be the basis of our decision making.

I understand what Kenny Gibson means when he says that we believe that Scotland is too small and too stupid: that somehow, because we question the SNP’s policy, we no longer believe in the ability of our nation. However, it is deeply insulting to say to me as a Scotsman, and as a Fifer, that I do not believe in the ability of my country. I believe immensely in this country’s ability and that we can punch above our weight within the United Kingdom and in the world. That strength is something of which we should be proud, and I do not regard Kenny Gibson’s comments as worthy of a member of this Parliament.

The SNP’s approach is to say, “Nothing bad ever happens.” As we know, the world is a bit more unpredictable than that. Iain Gray’s comments about the contrast between the oil industry of the 1970s and the industry today were interesting.

Will the member give way?

Willie Rennie

Not just now.

Iain Gray said that where there used to be local exploitation of resources there is now an international business, not just because the industry has built on the strengths and talents of people here but because Britain is open for business. Because Britain is a good place to do business, opportunities can be exploited for Scotland.

Will the member give way?

Willie Rennie

Not just now.

What Iain Gray said about renewables is right. Renewables present us with an incredible opportunity to deal with climate change. However, the opportunity is based on the resource of energy consumers throughout the UK. The subsidy is there to generate investment in the industry. I support renewables and I recognise that the United Kingdom enables us to maximise the opportunity.

Aileen McLeod and Mike MacKenzie cited investment in the North Sea as evidence that we will increase our oil revenues, but they fail to recognise that oil is harder to get at, which means that capital expenditure and operational expenditure go up and the tax take goes down. That is the logical consequence of extra investment in harder-to-get oil. The United Kingdom can provide tax incentives—

Will the member give way?

Willie Rennie

Not just now.

The UK can do that because oil does not dominate the UK economy. Oil accounts for around 1.5 or 2 per cent of the UK’s economy, but in Scotland the proportion is getting up to 16 per cent. If we make big decisions to create tax incentives, we will take a big financial hit. In the UK, such a hit can be accommodated.

Will the member give way?

Willie Rennie

Not just now.

Malcolm Chisholm was absolutely right to say that the credit rating of an independent Scotland could be poorer. When the credit rating agencies assess a country’s credit rating, they take account of the country’s record. Scotland has no track record as an independent nation managing its budget. It is required by law to have a balanced budget, but sticking within the law hardly constitutes a track record. That is why Malcolm Chisholm was right to say that the credit rating of an independent Scotland could go down, which would cost us dear as interest rates would go up. That is the logical consequence of what the SNP proposes.

Linda Fabiani and Willie Coffey talked about Norway’s oil fund, but they did not talk about the higher taxes that are a feature of Scandinavian life.

Will the member give way on that point?

Willie Rennie

Not just now.

The Norwegians have been able to pay for their oil fund and their public services by putting up taxes. Tax rises are not part of the message that we hear from the SNP. The SNP makes all the promises in the world to everyone, but it leaves it to a future Government of an independent Scotland to decide how to pay for everything. People deserve a little more honesty.

Will the member give way?

The member is in his final minute.

Willie Rennie

John Mason was very brave to criticise the finance secretary for claiming that the GERS figures show that Scotland has a surplus. I suspect his chances of moving forward to the front benches are limited, but I praise him for making that point.

It was great to hear Margaret McCulloch advocate more powers for the Scottish Parliament. Liberal Democrats are very much in favour of that and we have home rule plans. I hope that SNP members will embrace that agenda if they lose the referendum, as I hope that they will do.

Mary Scanlon was right to praise many benefits of the budget, including the proud Liberal Democrat policy of a £10,000 tax threshold, which will take people on low and middle incomes out of tax altogether.

16:39

Gavin Brown

Two important points must be made. First, time and again during the debate we have heard from nationalist politicians that the unionist argument is that Scotland would not cope. In the time during which I have been an MSP, not a single member of any of the unionist parties in this Parliament has ever said that Scotland is too weak or too poor, or that Scotland would not cope. The SNP asserts that that is the unionist position, but I am clear that it is not the position of the Conservative Party, and I do not believe that it is the position of any unionist party in this chamber

Of course Scotland is not too weak. Of course we would cope. The question is, “Why would you want to do it and what would an independent Scotland actually look like?” It is very easy for Willie Coffey, who was very measured in most of his speech, to say nonchalantly that we would have £48 billion of oil revenues over the next few years, but that is pure assertion and pure conjecture. If that is what the SNP is going to base its budget and fiscal choices on, it is entering the realms of fantasy.

The second point that I want to make is that I believe firmly that every single member of this Parliament, regardless of party affiliation or non-affiliation, has Scotland’s best interests at heart. It serves nobody well for people on one side of a debate to say that others seek to diminish Scotland, to suggest that we do not have Scotland’s best interests at heart or—as in Mike MacKenzie’s case—to imply that we lack integrity by saying that nothing that has been said in the debate suggests that we have integrity. That does not suit the debate. I hope that politicians on all sides can rise to the challenge of an important debate that has to be treated far more seriously than that.

I think that the point about integrity was that there was deliberate hiding of the oil figures back in the 1970s. Does Gavin Brown accept that that is what happened at Westminster?

Gavin Brown

We can see what the oil figures are, year upon year upon year, in GERS. They are available for everybody to see. We can see that in some years the amount has been £12 billion and in others it has been £1 billion.

We have heard the assertion that the UK is a bit like Greece and Cyprus and that we are not far away from their situation. I do not know how anybody can take that point seriously. I ask the member who made it: why on earth do investors from around the world come to the UK, and why is the reality that the cost of borrowing for the UK has gone down in the past couple of weeks, since the AAA rating was—very regrettably—lost?

We heard from Mr Kenneth Gibson that it is not about the volatility of oil prices, but about the “alleged” volatility of oil prices. I point out gently to anyone who says that it is “alleged” volatility that the oil figure was £11.3 billion in 2011-12 and Oil & Gas UK says that it will be £7.3 billion in 2012-13. That is a pretty big jump in a year, but it is not unusual. The figure has fluctuated over a 32-year period between £12 billion at the highest and £1 billion at the lowest. That is enormous volatility and it is far more than “alleged”.

We also heard the ridiculous argument—which we have heard time and again—that Scotland’s oil revenues over the years have propped up the Treasury.

Members: They have!

Gavin Brown

SNP members say, “They have!” That was so predictable. This might be uncomfortable listening for the SNP, but I will press ahead anyway. If we look a little more closely at the figures in GERS, we see that the UK tax take last year was £570 billion. In a very strong year for oil—one of the strongest ever—oil revenue was £11 billion. It is true that £11 billion out of £570 billion is important, but to suggest that the oil revenues are propping up the UK Government is an absurd proposition.

Will Gavin Brown give way?

No. I will take interventions from members who have been part of the debate, but not from members who have just shown up at the bitter end. [Interruption.]

Order.

Gavin Brown

To suggest that oil revenues prop up the Treasury is absurd. The Scottish tax take in the same year was £57 billion. Some £11 billion out of £57 billion is crucial, which is why people have rightly said that we have to be cautious and careful about projection of oil revenues. If £11 billion drops to £7 billion when the total tax take is £570 billion, the automatic stabilisers can kick in. If oil revenue were to drop by £4 billion when the entire tax take is £57 billion, there would be a big problem—it would become necessary to push up tax, cut public spending, or borrow excessively.

As we heard earlier, the demographics are trickier in Scotland. Spending in Scotland is substantially higher already and the cost of borrowing, as we have heard time and again, is likely to be higher. For all those reasons, independence is extremely risky, which is why the better together campaign is being realistic, as opposed to pessimistic.

16:45

Rhoda Grant (Highlands and Islands) (Lab)

Gavin Brown started his winding-up speech by pointing out some of the hot air in the chamber today. I will mention some of the more thoughtful contributions, because on the whole it has been a good debate with thoughtful contributions. One of the speeches that struck me most—although it perhaps stated the very obvious—was Margaret McDougall’s speech. In it, she pointed out that our people are, indeed, our wealth and that we need to invest in them—something that this Government has maybe failed to do, with college cuts and the rest, and on which it should perhaps reflect.

Energy also formed a large part of the debate, but members including Margaret McCulloch also pointed out the contribution of other sectors of our economy, such as small and medium-sized enterprises, retail and the like, which we ignore at our peril.

Much of the debate concerned the GERS figures. The SNP was not being honest with us, because it presented a distorted version of the latest figures. We receive £1,197 more in expenditure per head than the rest of the UK and, as Malcolm Chisholm pointed out, that is rightly so. We have a demographic issue and a natural geography that mean that service provision is more expensive for us. That additional funding helps to deal with our natural disadvantage.

The SNP went on to portray a smaller deficit as being actually a surplus. Many members pointed that out, including Iain Gray. The SNP takes no account, however, of the years when we were worse off. The benefit of being part of a bigger economy is that the peaks and troughs are less pronounced, which provides us with stability for the future.

John Swinney said that we had a surplus this year; however, no part of the UK was in surplus this year. He also highlighted how we would spend the surplus, which he credited to oil, but that flies in the face of Professor Stiglitz’s advice, as Margaret McDougall pointed out. Natural resources have to be spent to build future wealth, otherwise things are unsustainable and we squander those resources. John Swinney also did not say that he was planning to borrow to build a stability fund, which is exactly what he would be doing if he were to use the deficit to create it.

We are in the very lucky position of having oil and gas wealth, but we must use it to buoy our economy and not be tied to it, as Margaret McCulloch mentioned. Many members talked about the volatility of oil prices, which is a big issue that makes it difficult for us to guess ahead what our oil revenue will be. Let us be very clear that new technology and new exploration are often in the most difficult parts, and are therefore more costly. The cost of that technology and exploration offsets what comes back as revenue, so revenue can decrease even if production increases. We have to be very careful to pin our economy to revenue rather than to production.

Mary Scanlon mentioned the problems with field closures. I was one of the people who were lucky enough to visit the Elgin-Franklin field. It was closed, which cut off much of the UK’s gas from the North Sea—something that nobody could have foreseen. We were told last night in the oil and gas cross-party group of other closures that were carried out at very short notice because of safety and maintenance. We need to have a mind to that. While celebrating and, indeed, enjoying our oil wealth, we have to be clear that we cannot pin our economy to it.

Many members spoke about renewables, but how would those work in a separate Scotland? Iain Gray pointed out that we have 30 per cent of UK renewables, but they are subsidised by all UK customers. What would happen were that subsidy to fall on a customer base of 10 per cent of that which finances it at the moment? Even nationalists are asking that question. Developers need an answer to it. If the answer is not supplied, we will end up in a place where we cannot harness that wealth, which will not augur well for our future.

Many members talked about capital spending. One of the issues that did not get as much of an airing as it should have is the delay in investment through the non-profit-distributing model, and the Scottish Government’s failure to bring that forward quickly. That would have made a huge difference to the economy of Scotland and it represents a squandered opportunity and squandered wealth. Further, the nearly £43 million that was cut from our housing budget would have created homes and wealth for the people of Scotland. [Interruption.]

I am sorry to interrupt, Ms Grant. I would like members who are coming into the chamber to keep the noise level down a wee bit.

Rhoda Grant

Thank you, Presiding Officer.

Education was not tackled sufficiently in this debate, although Margaret McDougall talked about educating our population, which is our greatest wealth.

Many other issues should have had more prominence in the debate, including our procurement policies, which could be used to keep the wealth of Government spending in our country. I sometimes feel that I have talked about that endlessly, but it needs to be taken into account.

Members talked about the limitations of having a currency union with a country over whose fiscal policy we would have no influence. Most people would regard that as madness, and it would certainly limit our taxation and borrowing powers.

The rest of the UK is our major trading partner, which is why our wealth is very much tied to it. The total value of sales from Scotland to the rest of the UK in 2011 was £45.5 billion, which is four times greater than our total trade with the rest of Europe. Even John Swinney’s leaked Cabinet papers acknowledge that an independent Scotland would have a more volatile economy.

I ask you to close, please.

Although Mr Swinney says one thing in public and another in private, he shows that we are better together.

16:52

John Swinney

I will try to address some of the issues that have been raised this afternoon.

I will start with the comments of my friend, Linda Fabiani, who set out a challenge to Parliament and everyone in the country to consider, during the course of the referendum debate, what sort of country we want to live in. That is the fundamental question that we have to resolve. My colleague, Willie Coffey, made the point effectively as he set out some of the issues and opportunities that would arise if we opted to be an independent country. That is the nature of the debate.

Some of the debate will be influenced by the points that Mr Gibson raised. He addressed some of the entirely ridiculous accusations that are made by our opponents when they scaremonger about Scotland’s future. We have all heard them and read them, and I do not think that they enhance the debate.

Margo MacDonald, in a powerful contribution at the conclusion of questions on the First Minister’s statement, encouraged Parliament to reflect on substantial questions that we need to resolve in addressing the way in which we all decide to vote in the referendum. In that spirit, I will address some of the issues that have been raised in the debate.

Gavin Brown cautioned us not to lay heavy emphasis on any one year in terms of the analysis that is undertaken in relation to GERS. If we look at the financial performance of Scotland over a number of years, we see that Scotland was in a stronger fiscal position than the rest of the UK not just in 2011-12 but in numerous years.

Anybody who tries to suggest that I was talking about Scotland having a surplus rather than a relative surplus in the course of the debate clearly was not listening to the words that I was using. We are in a comparatively better and stronger position than the rest of the United Kingdom, and the question is whether we want to take control of that relatively stronger financial position and make it work for the benefit and advantage of the people of this country.

I am puzzled by that. During his speech, Mr Swinney used the word “surplus” numerous times. Is it a surplus or is it not a surplus?

John Swinney

It is exactly what I have said: it is a relative surplus; it is a comparatively—[Interruption.] Let us just use this phrase, then: we are better off independent than we are together. Has that helped to clear it up for everybody?

A great deal has been said about the volatility of oil. Mary Scanlon made a point on that in her speech. Between 2008-09 and 2009-10, North Sea revenues fell from £12.9 billion to £6.5 billion. Despite that, Scotland continued to run a smaller fiscal deficit than the UK. Again—we would have been better independent than in the circumstances that we were in, with Scotland having a fiscal deficit of 10.7 per cent of GDP compared with 11.1 per cent in the United Kingdom. Even when there is substantial change in the position on oil and gas revenue, we are in a stronger fiscal position.

A number of points were made about the future projections on oil and the position of the OBR. Let me remind the Parliament that, despite Linda Fabiani’s comment that the OBR has not been around for very long, it has been around since 2010 to predict economic growth in this country. In 2010, it said that economic growth in the current financial year would be 2.8 per cent. In December, it said that it would be 1.2 per cent. Yesterday, that became 0.6 per cent. Forgive me for raising a doubt or two about the value of the OBR predictions.

Ken Macintosh

I am pleased to hear Mr Swinney’s comments. Has he changed his mind since writing his Cabinet paper? In that paper, he wrote:

“The OBR forecasts set out alongside the UK’s March budget have not been seriously challenged by the industry or by independent commentators”.

John Swinney

Mr Macintosh must be a psychic. I have in front of me a page from Oil & Gas UK. This is from page 4 of the “Activity Survey 2013”:

“we can predict a significant upturn over the next three to four years, gradually rising to approximately two million”

barrels of oil equivalent per day

“by 2017”.

The OBR forecast is 1.5 million barrels in 2017. There, delivered on a plate, is the industry challenge to the OBR forecast.

The issue of the sustainability of pensions has been raised. The figures show that, in 2011-12, the proportion of UK tax revenue that was allocated to social protection—pensions and welfare—was 42.3 per cent. In Scotland, it was 38.1 per cent. We are in a stronger position to sustain welfare and pension payments to members of the public than the rest of the United Kingdom.

The only point that I was making in my sensationally leaked Cabinet document was that, as an Administration preparing ourselves for all the issues that we currently do not address, we must factor in issues such as that one in the overall calculations. That is what the Parliament and the country would expect me, as a responsible finance minister, to undertake.

In the course of the debate, John Mason made a fascinating contribution in which he talked about all those great strengths that the United Kingdom would apparently always deliver for us: the car industry, the steel industry and the AAA credit rating. As he said, we were told that all those things would always be here because we were part of the United Kingdom. However, we do not have an AAA credit rating, a steel industry of the size that we had or a car industry. Therefore, we should be very sceptical of the nonsense that is peddled by the opposite side in this argument in trying to undermine Scottish self-confidence by peddling fear.

Malcolm Chisholm said in the debate that I was ignoring the fact that a choice of two futures will be available to the people of the United Kingdom in 2015. I just gently point out to him that I do not think that there is much of a difference between the direction of travel of the Labour Party and that of the Conservative and Lib Dem Government. There certainly is not if we listen to Helen Goodman, the shadow Cabinet minister who said that Labour would implement the bedroom tax.

I must ask you to wind up, cabinet secretary. [Interruption.] Order. Let the cabinet secretary have another couple of sentences.

John Swinney

Let me make a final point, Presiding Officer, which for me captures the entire essence of the debate. Again, it involves a comment from Willie Rennie, who talked about the deep problem of intergenerational poverty in our society. He marshalled that as part of an argument for maintaining the United Kingdom. Intergenerational poverty has scarred our country because of the United Kingdom, and we need to resolve it with Scottish independence.