The next item of business is a debate on motion S4M-09462, in the name of Gavin Brown, on Scotland’s finances. Members who wish to take part in the debate should press their request-to-speak buttons now. To be helpful, I will tell members at this stage that we are extremely tight for time, so we will expect you to keep to your time limits and we will not be able to compensate for interventions. I call on Gavin Brown to speak to and move the motion. Mr Brown, you have 14 minutes.
14:41
Thank you, Presiding Officer.
In recent months, we have had a number of debates on independence and I am quite sure that we will have many more in the coming months. Today, however, we want a focused debate. We want an analytical examination of what the public finances would be were Scotland to become independent. That is the thrust of this debate. We want that for two reasons: first, because we think that insufficient attention has been focused on it so far; and, secondly, because more and more analysts are challenging the assumptions made by the Scottish Government in its white paper and in a number of other papers that it has produced.
The official Scottish Government line today is that Scotland’s national accounts are healthier than the United Kingdom’s. We intend to examine the truth of that position. Rather than trying to update its papers or official projections, the Scottish Government says in its amendment that it
“welcomes the detailed proposals for Scotland’s public finances”
in the white paper. A single page in the entire white paper is described by the Government as “detailed proposals”.
We have primary concerns about several areas, the first of which is that the white paper features figures for only the single year 2016-17 and has nothing for the year after that, nothing for the year after that and nothing for any subsequent year, were we to be independent.
I wonder whether the member can give us figures for the UK for the years that he is talking about.
If the member reads the Office for Budget Responsibility’s analysis that was published last week, I think that he will find that it gives very clear projections up to the year 2019-20. I think that the member will find, if he reads last November’s paper by the Institute for Fiscal Studies, that it has 50-year projections for how an independent Scotland would function. I think that the member will find something similar if he looks at even the simplest piece of legislation in the Parliament, such as the Courts Reform (Scotland) Bill, which I was considering in committee this morning and which has 10-year figures for the legislation’s cost implications. If such projections can be done for every single piece of legislation, if the OBR can do them up to 2019-20 and if the IFS can do them for 50 years, I think that even the Scottish Government ought to be capable of producing more than figures for a single year.
That was our first concern. Our second concern is that the Scottish Government’s figures for 2016-17 are now obviously highly questionable. We challenge the Scottish Government to defend those figures in the chamber today and to make a pledge that it will update the figures to reflect the most recent analysis that was published by the UK Government, the “Government Expenditure and Revenue Scotland 2012-13” figures and, indeed, the OBR’s figures.
Our third concern is that there are no costings for many of the policy commitments in the white paper and that not a single penny is attributed to the transition costs of moving from being part of the United Kingdom to being an independent Scotland. It is inconceivable that there would be no transition costs from unpicking more than 300 years’ worth of history and becoming a separate state. Nobody in the chamber could believe that no financial costs at all would be attributed to that.
I accept that the member has every right to look into the detail and all the rest of it, but does he accept the bigger picture that a country of five million people with oil and gas is perfectly financially viable?
There is a big difference between saying that a country is financially viable and claiming that it would automatically be richer than the country of which it is already a part. That is the charge that has been put forward by the Scottish Government and, indeed, the yes campaign—that we would be richer. Every single man, woman and child in this country would be richer as a consequence of independence, according to the white paper. If the Scottish Government’s position now is not that, but simply that we would be viable, I suspect that most people would agree, but that is not what the Government is saying or how it is campaigning. It is saying categorically that we would be richer, despite evidence and suggestions to the contrary.
Will the member take an intervention?
Not just now. I ask the member to let me make some progress.
We hear that we have figures for only a single year, but it is clear that independence involves far harder choices than the Scottish Government cares to admit. There are serious long-run fiscal pressures that we would have to face. The Institute for Fiscal Studies states:
“The main conclusion of our analysis is that a significant further fiscal tightening would be required in Scotland, on top of that already announced by the UK government, in order to put Scotland’s long-term public finances onto a sustainable footing.”
That means that there would have to be
“significant tax rises and/or spending cuts”.
That is on top of the UK restrictions that have already been put forward.
Will the member give way?
The Scottish Government says that it will ignore what the UK Government wants to do because it will do things differently but, even if it followed the UK path, additional tightening would be required in Scotland, according to the Institute for Fiscal Studies. It puts the matter more specifically—
Will the member give way on that point?
I give way to Mr Stewart. He is nothing if not persistent.
I thank the member for giving way. Mr Brown has failed to talk about economic growth. We are being constrained by current UK policies and we could grow the economy much more than is being done.
I do not know where Mr Stewart was when the autumn statement came out or when the budget came out. I do not know where he has been over the past nine months, full stop. The projected growth for the United Kingdom has gone up to 2.7 per cent for this year and it will go to 2.6 per cent, 2.5 per cent and carry on a trend, according to the chancellor, with projections of that magnitude. What level of growth does Mr Stewart seriously expect Scotland to have in the years following independence, when almost all the Scottish Government’s policies, apart from its corporation tax policy, were it to implement that, would be identical from a fiscal point of view? Where on earth will he get that growth from?
Will the member take an intervention?
Perhaps the cabinet secretary has the answer to that question.
I will answer that point in my speech later on, if Mr Brown will forgive me. I ask him whether the OBR’s estimates of economic growth since 2010 have been realised by the Conservative Government.
Mr Swinney knows the answer to that question. The projections that were made in 2010 were made long before the euro crisis—a crisis that engulfed an entire continent with which we do the bulk of our trade—and we saw six quarters of uninterrupted contraction. The suggestion that, somehow, if we had been independent in 2010, we would not have suffered as a consequence of the euro crisis is utterly ridiculous. Every economy on the planet was affected by that, particularly every one in Europe.
Let us move on to the figures for 2016-17, for which the Scottish Government has actually agreed to put pen to paper. Those figures are highly questionable. The Scottish Government says that our net fiscal balance deficit for 2016-17 will be 3.2 per cent at the very worst. It says that it could be a 1.6 per cent deficit but, at the very worst, it will be a 3.2 per cent deficit. This week, the Centre for Public Policy for Regions suggested that it would be 5.5 per cent. The Institute for Fiscal Studies suggested that the deficit would be 5.2 per cent. The Treasury—admittedly, not as independent as the other two—said that it would be 5.3 per cent and Citigroup said that it would be 5.4 per cent. The estimates among analysts and the Treasury for the deficit in 2016-17 range from 5.2 per cent to 5.5 per cent, but the Scottish Government alone says that it will be 3.2 per cent at the very worst and potentially only 1.6 per cent.
Will the member take an intervention?
Not yet.
The Scottish Government is out of kilter with the analysts. The primary reason for that—it is not the only reason—is that the Scottish Government claims that offshore receipts for Scotland in 2016-17 will be £6.8 billion at the very worst and £7.9 billion at the very best. The OBR, in its updated analysis, has said that it would be £3.2 billion for the UK as a whole, most of which would be Scottish. That means that there is a £4 billion black hole between what the OBR is saying and what the Scottish Government claims is the case.
Scottish National Party back benchers have been instructed, every time someone mentions the OBR in the chamber, to chuckle, ridicule and make sneering remarks—[Interruption.]
Order.
They fell right into that one. They did not use to do that when the projections said what they wanted them to say.
Last week, the First Minister said:
“the figures that we have outlined are robust.”—[Official Report, 20 March 2014; c 29214.]
Hear, hear.
“Hear, hear” we hear. Let us check how robust the figures actually are, because for 2012-13 we have outturn figures as opposed to projected figures. The OBR said that for the UK, £6.5 billion would be collected; the actual outturn figure for the UK was £6.6 billion—fairly close.
At the same time, though, the Scottish Government said that the Scottish share of oil revenues for 2012-13 would be £6.9 billion; the actual Scottish share was £5.6 billion.
Will the member give way?
Not just now.
The Scottish Government was out by £1.3 billion, yet the First Minister says that the figures are robust. What makes that mistake even worse is that the Scottish Government made that prediction in March 2013. There was only a month to go before the year end and the oil revenues actually coming in, but the Scottish Government still managed to misjudge it by well over £1 billion.
Perhaps that was an isolated year. Let us look at 2013-14. The OBR has said that its projection for 2013-14 is £4.7 billion. The industry, Oil & Gas UK, has said that it will be around £5 billion, so there is a spread from £4.7 billion to £5 billion. The Scottish Government’s official position is still that we will collect £7.1 billion in oil revenues, if we are unlucky, but it is potentially £8.3 billion.
Will the member take an intervention?
I will give way to Mr MacKenzie.
The member is in his last minute.
I will give way to him in my closing speech if he cares to trouble me.
The Scottish Government is out by at least £2 billion for the financial year that we are about to finish. It was out by at least £1 billion last year, but it claims that the figures that it has outlined are robust. That is why we are calling on the Scottish Government to publish updated oil and gas figures.
This week, the Scottish Government told the Financial Times that it had
“never committed to regular updates of the forecasts”,
but the “Oil and Gas Analytical Bulletin” says:
“This is the first in a series of bulletins summarising recent trends in the Scottish oil and gas industry. Further updates will be published in due course.”
In the ordinary meaning of words, the Scottish Government said that it would update the forecasts. That is why we are calling on it to update us on the fiscal position for 2016-17 and to publish the figures for the years after that.
I move,
That the Parliament expresses concern regarding the lack of financial detail in the Scottish Government’s white paper on independence; notes that it has projected budget figures only for a single year, namely 2016-17; further notes that a number of independent experts predict a weaker fiscal position than the Scottish Government, including the recent report by the Centre for Public Policy for Regions; is concerned about the tighter fiscal challenges faced by an independent Scotland in the longer term, as outlined by the Institute for Fiscal Studies, and calls on the Scottish Government to publish updated oil revenue forecasts and an updated fiscal forecast for 2016-17 as well as its fiscal forecasts for the years post 2016-17.
14:55
The debate takes place against the backdrop of last week’s budget, which confirmed that our fiscal departmental expenditure limit budget will be cut by almost 11 per cent in real terms over the current spending review period. It is also clear that there are billions more in spending cuts to come. We now know that the Chancellor of the Exchequer intends to continue to cut public services until at least 2018-19. Indeed, 60 per cent of the cuts planned by the chancellor have yet to be implemented.
Despite the positive gloss that the chancellor put on matters in his budget statement, which Mr Brown reinforced, the fact remains that growth has undershot the OBR’s forecast in each of the past three years. By the end of 2015, UK economic growth will be 5 per cent lower and public sector borrowing £190 billion higher than was projected in June 2010 when the chancellor first set out his austerity plans.
I say to Mr Brown that the reason why the position of the UK is so poor in comparison with that of other countries is that, of the G7 countries, Germany, France, the United States, Canada and Japan have all recovered to their pre-recession levels of economic activity. Only the UK and Italy have failed to reach their pre-recession levels of activity. That is why it matters that the growth of the UK economy has been poor. The explanation that Mr Brown gave about the impact of the eurozone crisis is completely destroyed by an analysis of the economic recovery of the G7 countries.
Are all those countries projected to have higher growth than the UK in 2014?
My point is that, in his excuse of a response to my intervention, Mr Brown said that the poor position of the UK was to do with the eurozone crisis, but the data that I have provided destroys that analysis.
The budget contained an additional £63 million of Barnett consequentials for Scotland over the next two years. I intend to update the Parliament next Tuesday, with a statement on how we will deploy those resources. It is important that the consequentials are considered in the context of the vast cuts that have already been imposed on Scotland.
The debate also follows on from the publication of the latest GERS report, which shows that tax revenues in 2012-13 were £800 higher per head in Scotland in comparison with the UK. That means that, in every one of the past 33 years, tax receipts have been higher in Scotland than they have been in the UK. Over the past five years, Scotland’s public finances have been healthier than the UK’s by a total of £8.3 billion. That is the equivalent of nearly £1,600 per person. Our higher tax receipts mean that Scotland’s spending on social protection benefits, including pensions, is more affordable and accounts for a smaller share of tax revenues and gross domestic product than such spending accounts for in the UK.
Given that we have an accelerating economic recovery that reflects the underlying strength of the Scottish economy and a clear track record of sound financial management, it is no wonder that an independent Scotland would rank as one of the wealthiest countries in the world.
Can Mr Swinney tell us why, today, the SNP website says:
“Scotland gets 9.3% of UK spending, but generates 9.9 per cent of UK taxes”?
That is clearly incorrect.
At the point at which that statement was put on the website, it would have been based on the GERS figures that were available at the time. That is a statement of fact as regards the information that was available.
Mr Brown challenged one of my colleagues—Mr Stewart, I think—on the wealth of Scotland. If we look at the ranking of Organisation for Economic Co-operation and Development countries by GDP per capita, we see that the UK, with GDP per capita of $35,671, would be ranked at number 18, whereas Scotland, with our onshore economy and a geographical share of oil included, would have a figure of $39,642 per capita and would be ranked at number 14.
The cabinet secretary says that we would be ranked 14th, but in the white paper, he said that we would be ranked eighth. What has changed? [Interruption.]
Order.
I will tell Gavin Brown what has changed: the OECD’s methodology. In fact, Standard & Poor’s has confirmed that
“Even excluding North Sea output and calculating per capita GDP only by looking at onshore income, Scotland would qualify for our highest economic assessment.”
If Mr Brown wants to trade advisers and analysts, that is my contribution to his analysis.
Looking at the difference between tax receipts and spending on everyday services for 2012-13, GERS shows that Scotland and the UK were both in current budget deficit by almost identical amounts as a percentage of GDP. Scotland’s net fiscal deficit, which includes investment spending, was 1 per cent higher than the UK’s. Our higher investment spending reflects in part the much-needed support that the Scottish Government provided to economic recovery. We made a deliberate decision to switch spending from current to capital budgets, increase investment to boost the recovery, and offset as far as possible the full impact of the UK Government’s capital budget cuts. That investment has helped the recovery and will continue to pay off in the future.
That also reflects the decision, which I know is disputed in the chamber, to keep water services in the public sector. Is it any wonder that Sir Charles Gray, who is the architect of keeping Scotland’s water industry in public hands and the politician who took the risk to hold a referendum to stop the privatisation plans of the previous Tory Government, has come to the conclusion that a yes vote is essential in the referendum this September? Some people should perhaps reflect on the conclusions that he has arrived at.
GERS also shows that Scottish North Sea oil revenues fell between 2011-12 and 2012-13. That was largely due to one-off factors, such as the unplanned disruption to production at several large gas fields, such as from the Elgin field shutdown in March 2012. More important, it reflects record levels of investment spending in the North Sea, where capital investment reached £14.4 billion last year. That is more than double the level that was recorded in 2010. That spending is immediately deductible from companies’ corporation tax liabilities.
Will the cabinet secretary give way?
If Mr Johnstone will forgive me, I still have some ground to cover.
Although that reduces tax receipts in the short term, it increases production potential and, in turn, future tax receipts. That is, after all, why companies are investing in the North Sea oil and gas sector.
When we look at the opportunities in the North Sea sector, we need only look at the analysis that was undertaken in the Wood report, which was accepted in full by both the United Kingdom Government and the Scottish Government. The final report said:
“Production hit a low of 1.4 billion”
barrels of oil equivalent
“last year, but a number of larger new fields are due to come on stream in the next two to three years and that could gradually take production back to the level of two to three years ago where it could be sustained for the remainder of this decade.”
We have to bear those points in mind when we look at analyses and projections of oil and gas revenues. Equally, we have to bear it in mind that the CPPR analysis that Mr Brown cited is no different from the OBR analysis and the IFS analysis, as it is all the same analysis by the OBR. That analysis does not take into account the increases in production—it assumes that oil production will remain identical over the next five years—and it uses a price assumption that is $21 a barrel below the estimate of oil prices that was put forward by the United Kingdom Government.
In March last year, the Scottish Government published the first in a series of oil and gas bulletins and we said that we would update them on a regular basis. The Government intends to publish its third “Oil and Gas Analytical Bulletin” in the coming weeks. It will set out the impact of recent North Sea developments on the outlook for future production and revenues.
In November, we published “Scotland’s Future: Your Guide to an Independent Scotland”, which set out the opportunities that will be created by independence and utilised the latest available data on the opening balance sheet of an independent Scotland in 2016-17. Now that more data is available, we will extend those projections over a number of years, building on the analysis in the white paper and its central conclusion that Scotland is a wealthy country that will start life as an independent nation with great economic prospects.
In the first-year balance sheet that John Swinney has already published in the white paper, why is no account taken of his Government’s promises to increase welfare spending by £4.5 billion? He is planning to spend exactly the same as Iain Duncan Smith is.
The cabinet secretary is in his final minute.
The 2016-17 analysis sets out the opening balance sheet of an independent Scotland. Acquiring the powers of independence offers up the opportunities to strengthen and build dynamism into the Scottish economy.
We have set out in great detail in the white paper the issues to be confronted. The Government will set out further projections. I am sure that Mr Brown will be first in the queue to welcome them, given his call for projections.
There are real choices in the referendum. The country can decide whether we want to resign ourselves to an agenda of austerity delivered by the UK Government or whether we want to do what everyone else in the world does, which is to take control of our destiny to ensure that we have the opportunity to create prosperity, fairness and sustainability for our people and our country. That is what the Scottish Government will offer.
I move amendment S4M-09462.2, to leave out from “expresses concern” to end and insert
“welcomes the detailed proposals for Scotland’s public finances and the economy set out in Scotland’s Future: Your Guide to an Independent Scotland; notes that, over the last five years, Scotland has been in a relatively stronger fiscal position than the UK as a whole by £8.3 billion, equivalent to £1,600 for every person in Scotland; further notes that Scotland has generated more tax revenue per person than the UK as a whole in every year since 1980; welcomes the record levels of investment currently being undertaken in the North Sea and the increase in production and tax revenue that this will generate in the future; is concerned by the impact of the UK Budget on households, whereby Treasury analysis shows that all households have lost income as a result of UK Government cuts, with the lower income families among the hardest hit; notes that, on current UK Government spending plans, 60% of cuts to public spending are still to come, putting Scotland’s economic future at risk; raises further concerns over the financial competence of proposals for further minimal devolution of income tax, and agrees that only independence will provide the Parliament with the full range of economic levers to improve Scotland’s economic performance and tackle inequality.”
15:05
It was just this morning that the Confederation of British Industry added its voice to the concerns of the IFS—[Interruption.]
Order.
—the CPPR and countless others who have questioned the veracity of the Scottish Government’s fiscal plan for independence.
Will Jenny Marra take an intervention?
No, thank you.
In a statement from the UK’s top business representative body that could not have been clearer, John Cridland, who is director general of the CBI, said:
“The economic plan outlined in the White Paper does not add up.”
He is right. That is largely thanks to the Scottish Government’s continuing refusal to accept the word of experts and instead to believe its own hyperbole and rhetoric.
Take, for example, oil receipts—the primary driver behind the Scottish Government’s fiscal plan. The price of oil has more to do with the politics of the middle east than it has to do with Scotland’s children’s need for a decent education, with our citizens’ health or with safety on our streets. Come the referendum and every day after that, the price of oil will be set, as it always has been, far from these shores and further still from the problems in our communities.
Will Jenny Marra take an intervention?
No, thank you.
It is with frustration that I come to the debate only to hear abstract figures being traded around the chamber—figures that are based on assumptions, estimates and sheer guesswork, but which are presented as gospel to prove the case for constitutional change that will last beyond the white paper’s fiscal cliff of 2017 and for generations to come.
Suppose that we take as fact—I do not—the Scottish Government’s figures that, by 2017, as much as £11.1 billion will be raised annually in revenue and tax from oil. We still cannot escape the fundamental shift that will come with independence and from leaving an economy that is so large and varied. That economy, which pooled resources from all across the UK to support the Scottish banks, will shift to an economy that will leave our public services—to the sum of our entire national health service budget—reliant on the trading price of Brent crude.
Will Jenny Marra take an intervention?
No.
Without a formal currency union, the money that we use to pay for our schools, hospitals, teachers and police service will be left in the control of a foreign country’s bank.
That is no vision of independence. That is no footing on which to create a transformed and transformational economy, and that is no way to achieve the sustained generational campaign that is needed to unpick the social problems that we face.
Will Jenny Marra give way?
Will the member give way?
No.
As sure as poverty, inequality and poor health have been passed from generation to generation, they will surely take generations to shift.
Recent history does not favour the Scottish Government’s optimism. The OBR revision of North Sea oil revenues and taxes from £6.7 billion to £4.1 billion by 2017 is cause for alarm.
Will Jenny Marra give way?
The member has made it clear that she is not taking interventions.
I am concerned that we have a Government that is not prepared to acknowledge the dubiety of its fiscal position, which is so strikingly apparent in the £7 billion difference in projected oil revenue between the OBR’s estimates and its own estimates.
Say the Government is wrong and the OBR, the CBI, the CPPR and the IFS are all right. What then?
Say the sky falls in.
Mr Stewart! Stop it!
That will leave us in a fiscal position in which we are worse off than the rest of the UK—not better off.
With the Scottish Government’s planned cut in corporation tax, it will be the nurses, the police officers and the teachers of our children who will suffer, as John Swinney will be forced either to make public service cuts that are deeper than Osborne’s or to raise taxes on workers everywhere. I did not come into politics to make that choice—and I do not think that John Swinney did, either.
We move to the open debate.
15:10
I hope that I take all the time that I have been given for my speech—and not just four and a half minutes.
I thank the Scottish Conservative Party for this opportunity to promote the north-east of Scotland—the powerhouse of the UK that will soon become the powerhouse of an independent Scotland.
The question that most people are struggling with is this: “What would you say to living in one of the world’s wealthiest nations?” Let us take a look at how wealthy we really are. We need look only at the north-east’s contribution to Scotland’s booming food and drinks industry; Scottish beef, Scottish fish and whisky are some of our great successes.
Moreover, from Royal Deeside to Banffshire and the Buchan coast, from Angus and the Mearns to the great cities of Dundee and Aberdeen, the north-east is a huge market for wealthy tourists from wealthy countries that are like our own, including Norway and Germany. There are even a few tourists from France, now that the French media and French journalists are reporting events in Scotland as never before.
Our rural economies are generating billions of pounds a year, and our universities are world leaders, with some of the best being in the north-east.
I congratulate Christian Allard on making the case for the union.
Perhaps Neil Findlay did not hear me correctly; my accent might be causing him some problems. [Laughter.] I am, of course, talking about the north-east of Scotland.
At last the people of Scotland are being told the truth—that they are living in one of the world’s wealthiest nations. In that regard, we recently heard a change of tone from Scottish Labour and its devolution commission. That commission—another of many—stated that we are the third richest part of the UK after London and the south-east of England, and that is without the same old North Sea oil revenue that the Tories are concerned about today.
Jenny Marra mentioned the CBI report that was published this morning. Page 3 of that report, which backs the Labour commission’s statement, says:
“The Scottish economy is emerging strongly from the shadow of the global economic crisis. Its growth rate has been almost exactly the same as the equivalent figure for the UK over the past 40 years. Moreover, upon independence Scotland would be one of the wealthiest nations within the OECD, coming eighth out of all OECD nations in 2011.”
Incidentally, Gavin Brown will find exactly the same figures in the white paper. Some people will find that conclusion astonishing, and I wonder whether Gavin Brown and, indeed, Jenny Marra will trust the findings of the CBI and Scottish Labour’s commission, and whether they will choose to share Westminster's concerns about our ability to prosper with all of this wealth.
I believe that the Tories’ concerns lie in the fact that, after a yes vote, a Tory government in London would lose control of all our wealth. We have been here before; underestimating the value of North Sea oil is becoming a habit of successive Westminster Governments. In fact, the fiscal challenges that we face today are a result not of the Scottish Government’s optimistic projections, which are actually lower than the industry’s own projections, but of the negative contributions that successive Westminster Governments have made to the North Sea industry. Today we are hearing another of those contributions, as no campaigners warn us of the challenges that come with such wealth, and talk down the oil and gas industry.
What would people say to living in one of the world's wealthiest nations? I can tell Parliament that there is someone in the north-east who knows how that feels. Coming from a fishing background as he does, Sir Ian Wood sees the opportunities that North Sea oil can bring. How optimistic is Sir Ian Wood about the future? The answer is clear and can be found in the work that he has published in “UKCS Maximising Recovery Review: Final Report”. His report not only tells us about one of the greatest industrial success stories in modern times, but points out that Governments need to up their game in order to attract more investment in the oil and gas sector.
How did Westminster react to that optimism and that vision for the industry? With its latest budgets, the UK Government has caused fiscal uncertainty throughout the north-east oil and gas sector. George Osborne’s budget promise was to act on all the recommendations of the Wood review, which was published on 24 February. Instead, a month later, the Chancellor of the Exchequer’s response was to surprise the industry with another tax from out of the blue—a tax on rigs and flotels in the North Sea. With 27 billion barrels of resource yet to be recovered, North Sea industry chiefs are absolutely astonished by another example of the fiscal instability that is being delivered by the UK coalition Government.
In case Gavin Brown thinks I am exaggerating the resource that is still to be recovered, I remind him that 27 billion barrels of oil is BP’s projection. On page 57 of the Scottish Government’s white paper, the Scottish Government makes the modest projection of 24 billion barrels of remaining reserves.
The right policy mix and fiscal stability can be delivered under independence. A Scottish Government in an independent Scotland will make the most of North Sea oil and gas, which will underpin our prosperity for years to come. Now that we live in one of the world’s wealthiest nations, the only question that remains is whom we should trust with our future. Should it be successive Westminster Governments that do not understand Scotland and its wealth, or our own Scottish Government—ourselves?
15:16
The Government’s amendment, like much of the cabinet secretary’s speech, is dogmatic and partial. It ignores vast quantities of expert evidence and analysis, and it denies the intrinsic uncertainty of so much of the future that we are considering. It is partial in that it talks about revenues but does not talk about spending. It also talks about the fiscal position of the past five years but not the previous decades.
I suppose that we should be grateful for that, because it is an improvement on the Scottish Government’s website which, as Murdo Fraser pointed out, focuses on one year when Scottish revenues as a percentage of UK revenues exceeded Scottish public expenditure as a percentage of UK public expenditure. The Scottish Government accepts that criterion on its website—it focuses on one year and ignores the fact that, in 16 of the previous 18 years, Scottish public expenditure as a percentage of UK public expenditure was greater than Scottish revenues as a percentage of UK revenues.
That takes us to the heart of the problem that we are debating today. We can argue about oil prices all afternoon and all evening, but the important point—which the Institute for Fiscal Studies has emphasised—is that contrary to the Scottish Government’s certainty about increasing oil revenues, there is uncertainty and volatility.
Is Malcolm Chisholm making the argument that Scotland is too poor to be independent?
That is a ridiculous question. Mike MacKenzie is not listening to what I am saying. Of course an independent Scotland is financially viable, but we would not be better off. That is the crucial point that I and many others are making this afternoon.
The cabinet secretary said that the analysis of the Centre for Public Policy for Regions is dependent on the OBR, but it is not dependent on the OBR—it deals with a range of scenarios for oil prices in the next few years. It states:
“It would need currently unforeseen improvements in North Sea production and/or the oil price before Scotland’s fiscal balance reverted to being better than the UK’s.”
It is clear that in the much longer run oil revenues will decline—not least because of decommissioning, which will result in tax reliefs to allow oil companies to decommission. Rowena Crawford and Gemma Tetlow, in another piece of expert analysis in the National Institute Economic Review of February this year, state:
“our broad conclusion—that Scotland faces a tougher long-run fiscal challenge than the UK as a whole—is robust to a variety of alternative, sensible assumptions.”
That is the fiscal problem and challenge that Scotland faces over and above the currency problem, which we are not focusing on today, although we know that it would have profound effects on interest rates and many other matters.
Of course, many people choose to ignore the economic and financial realities and hope that they can be bypassed by aspirations for progressive social change. Well, they cannot be bypassed. Over and above that, I do not think that the Scottish Government’s white paper is exactly a model for progressive social change. A clear example of that—this is directly relevant to the fiscal subject of today’s debate—is the proposal to cut corporation tax by 3p below whatever the prevailing rate is in the rest of the UK. Joseph Stiglitz, who is a member of the Government’s fiscal commission, has said that that would have no effect on investment but would create more inequality, and Crawford Beveridge, who is also on the fiscal commission, told the Finance Committee two or three weeks ago that that kind of change would have no significant effect on investment, either.
What we would have, therefore, is a further £385 million cut to the budget in an independent Scotland, which would increase the fiscal challenges that it already faces. That, of course, ignores the fact that, under the Scottish Government’s preferred model of monetary union, it would not be allowed to cut corporation tax by 3p anyway—indeed, the full range of economic levers that it boasts about in its motion would also be completely impossible under that kind of monetary union.
Of course, in its desperation, the Scottish Government is clinging to an analysis by Professor Leslie Young—although I have to say that his analysis uses the phrase, “tight fiscal union” and also paints an alarming picture of the situation that would prevail if we had a monetary union, in which there would have to be a migration of the banks. He says that there would be a
“slow-motion bank run”
on Scottish banks as people shifted their deposits to English banks. That is from the key person that the Scottish Government is invoking in order to persuade people to vote for independence. It might be that he has some criticisms to make of the particular financial and economic analysis of the permanent secretary to the Treasury, but he also talks about the macroeconomic and financial risks of monetary union. As Peter Jones said at the end of a devastating article in The Scotsman on Tuesday, Professor Leslie Young
“demolishes the economic case for independence.”
The Scottish Government is clutching at straws. It is doing that in relation to Standard & Poor’s as well, but I do not have time to go into an analysis of that.
Indeed, you do not.
The reality is that there will be no monetary union, and that will result in higher interest rates and much else. Of course, that will be on top of the fiscal difficulties that are the subject of today’s debate.
An independent Scotland is financially viable, but we would certainly not be better off.
15:22
We have heard a lot today about projections and some perceived realities, but let us look at the realities.
The UK budget figures show that George Osborne has failed on every test that he set himself. He said that debt would begin to fall as a share of gross domestic product by 2014-15, that the current account should be in balance by 2015-16 and that public sector net borrowing would fall to £20 billion in the same year. The chancellor has, however, reported that debt will not begin to fall as a share of GDP until 2017-18, that the current account will not be in the black until 2017-18 and that public sector net borrowing will not be £20 billion in 2015-16 but a much higher £68 billion. We have the highest level of public debt in the UK’s history, at £1.5 trillion. Furthermore, as the cabinet secretary rightly pointed out, the UK has the weakest performance of any G7 country, apart from Italy.
We also know that the reality is that there are £37 billion of cuts still to come over the course of this Parliament, and the chancellor has confirmed his austerity drive until at least 2018-19. Jenny Marra talked about people. How does that affect people? For households in the bottom income quintile, the cuts are the equivalent of £814, or 3.4 per cent of income. Those are the realities that we have to bear today. Those austerity measures and the failure of the UK chancellor to boost the economy to improve the living standards of people not only in Scotland but in the rest of the UK are the realities that we have to bear. If we had the levers of power, we could do much better at boosting the economy. I will concentrate on a few areas in which that is possible.
I will touch briefly on oil and gas—I am sure that everybody expects me to speak about that to a degree. In the North Sea basin, we have—and have had for a long time—the instability of Westminster rule. There have been 16 changes to the fiscal regime and 14 different oil ministers in the past 17 years. The income that could have been taken out of the basin over that period is so much greater than what has been taken out that it is unbelievable. Members should not take my word for it; they should take the word of Sir Ian Wood, because that is what he said. Because of the 16 changes to the fiscal regime and the 14 oil ministers, in the past few years—until this year—companies have moved and invested in West African provinces and other places.
Will Kevin Stewart give way?
I will take a brief intervention from Mr Gray. After all, it is a debate—although some folk do not realise it.
I certainly accept that the oil industry likes stability, but if stability under the UK has been so bad, why do Shell and BP both think that their best chance of stability is for Scotland to remain part of the United Kingdom rather than to be independent?
We have heard from some of the elites in the UK. Iain Gray should talk to folk who are involved in production in BP, Shell and many other companies to whom I talk regularly, because they have a completely different view and believe that a Scottish Government would create the stability that is required for long-term investment.
I will move on from oil and gas. We require a can-do approach to boosting the economy. Sometimes, we are completely restricted by the fixation on the economy of London and the south-east of England. Vince Cable has called London
“a kind of giant suction machine, draining the life out of the rest of the country.”
Everything is aimed at boosting the economy in London and the south-east of England and very little is aimed at Scotland.
That said, we do well in some quarters—mainly in spite of the things that are thrown at us. We have great organisations in Scotland that boost exports. The wee county of Angus has been a prime example of that in recent years. It made early links with China and has benefited since, which has allowed the Scottish Government and others to boost our exports to China dramatically in recent years.
You must draw to a close.
I know, Presiding Officer.
The reality is that the chancellor has not delivered as he said he would, which is typical of Westminster Governments. It is time that Scotland had a can-do approach and the levers of power to drive economic growth and share the wealth that this nation obviously has.
15:28
If members were to listen to Kevin Stewart, they would think that Scotland had not benefited from 130,000 extra jobs since 2010, that growth was not up and that unemployment was not down. However, the reverse is true: the conditions have improved, despite members in other parties claiming that none of the plans would work and that they would make the situation worse. In fact, the plans have worked, we are on track and we are making progress. Scottish National Party members would get some credit if they recognised that a bit.
John Swinney is a modest man, but today is a glorious day for him. When he prepared his paper for Cabinet eyes only, he told the Cabinet that an independent Scotland would be highly dependent on volatile and uncertain oil revenues. His report was subsequently downplayed, and a spokesman for the Government said that it was out of date almost as soon as it was published.
Within days of the report’s appearance, the First Minister claimed, with his usual great bravado, that there was going to be a new “oil boom”. He said that he was making “a cautious estimate”, before making incautious predictions. A spokesman said that Mr Swinney’s report had
“been ‘overtaken by events’ with oil revenues having surged”.
We knew, however, that John Swinney was right. We stand here today—I think that I can include all my colleagues on the benches to my right—to praise John Swinney. Once disowned by his Cabinet, he has now been vindicated for what he said in his paper. I salute John Swinney as the new oil prophet. He is somebody we should perhaps listen to—if he adopts the approach that he took in his secret report for the Cabinet.
Let us recall what John Swinney said in that report. He referred to “volatility”, saying that
“North Sea tax receipts have been more volatile”.
He discussed “uncertainty” and talked about production being lower than previously envisaged, and operating and exploration costs being higher. He repeated the fact that
“This high level of volatility creates considerable uncertainty in projecting forward Scotland’s fiscal position”.
Will Mr Rennie give way?
Not just now.
On falling resources, Mr Swinney said:
“these downward revisions have resulted in a deterioration in the outlook for Scotland’s public finances.”
Let us consider what has happened to those oil revenues. In the latest GERS figures, UK oil revenues fell from £11.3 billion in 2011-12 to £6.6 billion in 2012-13. That is £4.7 billion less.
The reaction to that was interesting. Mr Salmond’s reaction was to blame the unpredicted shut-down of the Elgin-Franklin fields. He said:
“This, in part, was caused by unplanned disruption to production and above average levels of spending on development.”
Will Mr Rennie give way on that point?
Mr Salmond was damned by his own words. He confirmed that there was uncertainty in the North Sea, which was exactly the point that John Swinney was making.
Will the member give way?
Will the member give way?
Will Mr Rennie take an intervention?
I do not think that Mr Rennie is giving way.
I give way to Mr Swinney.
I ask Mr Rennie to follow the logic of his argument. If investment is made by North Sea oil and gas companies—investment that is offset against revenues—he will see that there is a gain to come in future years. That is exactly the point that I made in my speech.
I will address that point in a second. Of course there is higher operational and capital expenditure in the North Sea. However, the result is a reduction in the revenues that are forthcoming. It will be more difficult to exploit the oil, so those costs will remain high and the revenues will be lower. The return is lower—
Will Mr Rennie give way?
Mr Stewart should have got the indication by now that, no matter how loud he shouts, I am not going to let him intervene.
Mr Salmond said that the issue was to do with the Elgin-Franklin fields, but I notice that Mr Swinney did not comment on that. That shut-down was unpredicted—it was unplanned. That illustrates the uncertainty with the North Sea. Unpredictable events lead to unpredictable finances, and that has a direct impact.
Will the member give way?
No.
We were then told that we should look at a five-year period. Of course we should do that. Let us consider how the figures have bobbed around over the past few years. They went from £9.3 billion down to £8.9 billion, down to £7.4 billion, up to £12.5 billion, down to 5.9 billion, and then to £8.4 billion, £11.3 billion and £6 billion. The numbers are bobbing about all the time. The unpredictability of revenues from the North Sea is considerable.
Mr Swinney was right about the volatility, the uncertainty and the falling resource over time. I praised him for that then, and I praise him for it now; I just hope that he sticks to it.
The significance of volatility for the public finances is considerable. In the United Kingdom, oil revenues account for something like 1.5 to 2 per cent of the total Government tax take. For Scotland, it is a massive 15 per cent, or sometimes 20 per cent. With such volatility on such a narrow economic base, the impact on public services will be considerable.
We are told that the oil fund will provide cushioning, but there will be no oil fund on day 1, even if oil revenues fall below what we need for public services. The implications for public services are therefore considerable.
I am pleased that Mr Swinney has agreed to Gavin Brown’s reasonable request, and I hope that he adopts the approach that he adopted in his Cabinet paper. If that happens, we might get a little bit more transparency.
15:35
The motion before us today reminds me of Francis Bacon’s statement that
“If a man will begin with certainties, he shall end in doubts.”
Let me sow the seeds of further doubt in the minds of Opposition members. The clamour for certainty and the demand that the white paper should contain projected figures beyond 2016-17 fail to recognise that the only thing that is certain is the change in constitutional circumstances that will take place after September 2014 and the period of significant change that will occur between that point and March 2016.
It is a bit rich for Opposition members to come to the chamber today and demand projected budget figures beyond financial or investment cycles that are currently subject to United Kingdom Government intervention. I ask them to come and negotiate in the interests of both Scotland and the rest of the UK so that we can plan further ahead.
The Conservatives’ motion subtly offers a cri de coeur for our Government to prepare a longer-term budget, although they know that there will be huge changes as a consequence of independence and that any numbers will be impacted accordingly. The determinants of full taxation—not only corporation tax—that will create productivity, growth and increased revenues are not yet in this Parliament’s hands, but they soon will be. The proposed policies on childcare and immigration are just two examples of planning for that growth, which is already underpinned by confidence given the number of jobs that have been created by foreign direct investment in the past five years.
I have the numbers here. The proportion of jobs that were created by foreign direct investment in 2008 was 8 per cent; in 2010, the figure was 19 per cent; in 2011, the figure was 20 per cent; and, in 2012, the figure was 16 per cent. Our freedom to set taxation and fiscal policy will allow us to generate and stimulate small businesses and manufacturing, and our exports will have an impact on the numbers that the motion is seeking. As I said, those policies are not yet in our grasp.
The motion states that
“a number of independent experts predict a weaker fiscal position than the ... Government”,
and mentions the CPPR report. Let us look at what the report’s authors say. The report will drag us towards oil revenues later in my peroration, but it does more than that: it questions the so-called forecasting ability of the Office for Budget Responsibility, which is now on its fourth or fifth revision of the figures for North Sea revenues and production. The CPPR report states:
“OBR make no forward assumptions over what might happen to the Barnett formula or to Scottish finances so it is not possible to be certain whether the fiscal position under independence would be better or worse than that within the existing United Kingdom.”
In addition, the CPPR’s written submission to the Economy, Energy and Tourism Committee’s review of Scotland’s economic future post 2014 states:
“The scenarios show that by 2017-18 in cash terms, Scotland’s share of the revenues could be as high as £11.8 billion or as low as £4.1 billion.”
That is some fiduciary limit to play with.
Will Mr Brodie give way?
No—I will not take any interventions because we have limited time.
Table 1 in the CPPR report highlights figures in cash terms—I know that Gavin Brown loves to talk about cash terms—for GDP including oil and gas; GDP excluding oil and gas; GDP per capita; and GDP per capita excluding oil and gas. Under every item, Scotland’s growth rates are greater—in some cases, much greater—than those of the UK.
At a meeting of the committee, I asked Professor Jo Armstrong—who is one of the contributors to and signatories of the CPPR report—the following question:
“what credibility do you give to the projections from the Office for Budget Responsibility and their seemingly unending fluctuations?”
Professor Armstrong responded:
“that is a wide-ranging conversation. I cannot give you chapter and verse on the OBR’s forecasting record. You would probably want me to say something about oil price forecasts, since that is the most contentious element of the OBR’s performance.”—[Official Report, Economy, Energy and Tourism Committee, 5 March 2014; c 4072-73.]
I have two final points to make on the oil issue. BP, which provides global oil consumption data going back to 1965, has stated that the global consumption of oil stood at 89.8 million barrels of oil per day in 2012. The International Energy Agency’s “World Energy Outlook 2013” says that world oil demand will grow to 101 million barrels per day by 2035. Against that backdrop, and even against what the doomsayers say about oil running out, the forces of supply and demand suggest that, with increasing demand, there will be a very dramatic rise in oil prices.
And finally?
Finally, Presiding Officer, I quote the IFS, which has also been drawn into the motion. I questioned Paul Johnson, who heads up the IFS, and he said:
“I do not disagree with any of that. Scotland is clearly a rich economy. Within the UK, it is one of the richest regions. No doubt it will continue to be successful”.—[Official Report, Economy, Energy and Tourism Committee, 5 March 2014; c 4072.]
I cannot say more.
15:41
It is most unusual to follow two Liberal Democrats in a row. [Laughter.]
I welcome the debate. The more we scrutinise the SNP’s version of independence, the better. The white paper itself is full of holes, uncosted promises and delusional sentiments. It does, however, offer a glimpse of the type of independent Scotland that Mr Swinney has in mind for us. It is a deregulated, low-tax, red-tape-cutting economy. It is not a Scandinavian-style social democracy, but a neoliberal, trickle-down economy that serves the interests of big business and is based outside the sphere of influence of the Scottish political system. That is Mr Swinney’s vision.
Under Barnett, we have UK-wide redistribution from areas of wealth to areas of need. That is a good thing.
Will the member give way?
Will the member give way?
Not at the moment.
We hear cries of “What aboot oil?” As we have seen recently, and as members have mentioned, there is an inherent volatility in oil prices. I ask members to imagine waking up every day and looking out the window to check the oil price to see whether we can fund our schools, hospitals and public services. Even if the oil price was stable, the revenues would only plug the gap that we have already been told about by all the various commentators such as the CPPR and IFS, and in GERS and all the rest of it.
I will allow Mr Allard in at this point.
I invite the member to come to the north-east of Scotland to see what an independent Scotland will look like—it will look like a prosperous country.
I would be delighted to come to the north-east again, but I thought that the member was arguing earlier for independence for the north-east.
The white paper, or the SNP manifesto, is a remarkable document. It promotes a vision of a country in which everything that is bad disappears and everything that is good in life just gets better, and it says that all that will come with a cross on a ballot paper. That is just not credible.
I believe in good, well-funded public services. That is the civilising force in our society. However, we cannot build such services at the same time as we hand out gifts to corporations. If we were to cut corporation tax in Scotland to attract foreign companies, it is inevitable that England would follow to compete, as would Wales. We would see a spiral to the bottom on taxation, followed by a spiral to the bottom on wages and terms and conditions. Even Joseph Stiglitz, whom the First Minister quotes regularly, has said:
“It is just a gift to the corporations increasing inequality in our society.”
The head of Waterstones books said
“It’s a dash to the bottom and it is insanity because personally I think schools and hospitals are rather good things. Somebody has to pay for them.”
Those are the words of a wise man.
What about the spectacularly bad plans for the currency? It has been assumed that we will enter a currency union, even though the Government has been told repeatedly that that will not happen. That proposal also tells us what type of Scotland will emerge if the SNP has its way. It would mean handing over control and influence over interest rates, borrowing regulation and all the other areas that affect the currency to the Bank of England, which will, by then, be a foreign bank, and to the UK chancellor. There will be no politicians at Westminster to have any influence over our budget, our benefits and our tax rates. Far from bringing powers to Scotland, a sterling zone hands powers away. As the eurozone has taught us, there cannot be economic union without political union.
Will the member give way?
I give way to the Liberal Democrat.
Clearly, Mr Findlay is so clever that his brains have gone to his head. Can he tell me how much influence the MPs at Westminster had over the last budget?
We have MPs representing us at Westminster. They have influence over policy, they debate policy, they discuss policy and they vote on policy. That must have passed Mr Brodie by.
We now have a choice. We can choose the positive Labour case for enhanced devolution within the UK, whereby we keep the pound, avoid a currency union and avoid the situation in which our budget, our borrowing and our tax and benefit rates are signed off by the chancellor of another country—we can avoid what has been called the nonsense on stilts of the currency union. We can maintain the Barnett formula and its UK-wide redistribution, whereby Scotland gets a greater share of public spending, or with independence it can be scrapped. We can build a diverse economy, or we can have one that is reliant on oil. We can have progressive taxation, with the highest earners taking a greater share of the burden, or we can have John Swinney’s vision. We can have corporation taxes that are consistent across the UK, or we can have tax competition and a race to the bottom. We can extend the living wage, end the exploitation of zero-hours contracts and deal with tax avoidance through procurement, or we can have Maureen Watt, Gordon MacDonald, Jim Eadie and Adam Ingram vote those progressive moves down, as they did last week.
In the final six months of the campaign, we can now debate two visions of Scotland: an SNP vision that is based on the fantasy that a tax-cutting, deregulated, free market agenda will deliver increased and improved services, or a Labour vision that is based on the core values of solidarity, justice, fairness and equality.
15:47
I will start by looking a little bit at where we are now and where Scotland is now within the UK.
The first point is the failure of Westminster. The UK has not been a success story. We have heard that from Christian Allard with regard specifically to oil. The UK has also failed on income and wealth distribution, welfare reform and tackling poverty. Germany has done much better than the UK at maintaining a manufacturing industry, and it is Germany’s success that allowed it to bail out Greece and other countries while, by contrast, the UK could barely bail out itself. Germany has used the European Union and the euro to its advantage while, by contrast, the UK has dithered at the door of the EU and continues to do so, not knowing whether to take part fully or run off home. It is the worst of both worlds.
Looking at the future, we certainly argue that the size of the cake in an independent Scotland will be at least as big and probably considerably bigger than our share of the current UK cake. However, there are people who argue that, even if the cake was a bit smaller, that would not matter so much if it was shared out more fairly. We do not need an economy of the current size to give the people at the bottom a better life.
The SNP would like to improve things, and we have set out a plan for that—all 600 and whatever pages of it. This debate was initiated by the Conservatives, so I presume that they hope to see whether there are flaws in our plan. That is fair enough—it is their job—but what is the Conservatives’ alternative plan? It is maybe for some more powers, but we do not know much about that. We did not see much movement from the Conservatives when the Scotland Bill went through the Scotland Bill Committee, which I sat on. The Conservatives would not give us any more income tax powers, more powers over the Crown estate or powers over air passenger duty. Maybe, the Conservatives’ plan will be to cut £4 billion from Scotland’s budget. Probably, they will continue to cut the welfare budget, crushing those who are already struggling. We definitely have a budget that will cut incomes for the bottom 20 per cent by £814 per year.
Can the member provide an explanation, because the Cabinet Secretary for Finance, Employment and Sustainable Growth has not done so, as to why there is not an increase of £4.5 billion in the first year of an independent Scotland for its welfare budget? The budget seems to be the same as the one that Iain Duncan Smith is planning.
Willie Rennie makes a mistake that is at the key of my argument. Yes, by all means, let us look at one year, two years and five years, but let us also look at the bigger picture over the longer term. We are making a big decision. Three hundred years ago, we went into a union partly because we had big financial problems. Three hundred years later, we are part of a country that has a debt of £1.5 trillion. It has not been a success. We have lost a relatively large part of our population, compared with the rest of the UK: we have poured lives into wars around the world. This union has not been a success, so there are bigger decisions to make than just decisions on one year’s finances.
What is the Labour plan—what might we get? We hear a lot about what might happen if Labour wins at Westminster in 2015. Even if it did do some good things—let us give it the benefit of the doubt and say that a Labour Government in 2015 would do some good things—that would all be undone five years later by a Conservative Government. What has Labour promised us so far? Maybe some extra powers over taxation, which would take us from 22 to 26 per cent—wow, that is exciting! Look at the Labour record: it has failed to regulate the banks, virtually bankrupted the UK and failed to close the rich-poor gap.
Jenny Marra, who would not take an intervention from me, talked about social problems. Surely she would accept that this Parliament is more committed to sorting social problems than Westminster is. Neil Findlay would not take an intervention. He talked about redistribution, and listening to his speech was like listening to a fantasy speech—he used the word “fantasy” himself—about what might happen in some ideal Labour world, as compared with the reality in 2014.
This debate is not just about finance. Of course finance is important and of course we want some projections for the future, but there is a danger that we get so bogged down in minutiae that we lose the bigger picture. When I left home in my twenties, I wanted to run my own life. I did consider my limited salary at that time and my likely expenses, but they were not the only deciding factors. Income and expenditure were important factors and, as long as they appeared reasonable and as long as I accepted there was some uncertainty around them, I could go ahead and make my decision to set up my own home. Similarly, people get married or move in with a partner based not just on their financial expectations but on what they want to do with their lives. One of the mistakes that the Conservative Party has made over a number of years has been to put too much emphasis on money and profits and too little emphasis on other more important things, such as relationships, society and caring for the vulnerable.
When we look at income and expenditure past and present, we can choose one year or a set of years that suit us, but let us not lose sight of the bigger, longer-term picture. Many countries around Scotland’s size without the resources that Scotland has are doing extremely well. I recently spoke at a breakfast debate hosted by the Association of Chartered Certified Accountants and the Institute of Directors. One of the audience made the point, which I though was well put, that of course there is uncertainty about the future, but the question is who we want to manage that uncertainty. I suggest that, based on past record, this Parliament would manage the uncertainty better than Westminster would.
15:53
I am pleased to see Gavin Brown back in the chamber. For those of you who do not know, Mr Brown was absent unwell for the past two days. I do not want to go into any details, but it is fair to say that Kermit the Frog was not the only green thing around Parliament on Monday. I am delighted that Gavin Brown is back, restored to health and leading the debate so well.
The Scottish Government’s annual GERS figures are a useful mine of information for anyone who is interested in not just Government finances but our constitutional future. For the past year, we have been constantly told by people in the SNP such as Mr Swinney and his colleagues that Scotland puts more into the UK than we get out. We have been told that we contribute 9.9 per cent of tax revenue and get back only 9.3 per cent in spending. Of course, those figures never correlated, because the totals were different. That was not always disclosed, and we were left with a £7 billion annual deficit.
The latest GERS figures are less encouraging for the SNP. They show that the situation has been reversed: even on the SNP’s flawed measure we are putting in less than we are taking out and the fiscal deficit has grown from £7 billion to £12 billion. Sadly, as I pointed out to Mr Swinney earlier, even the SNP website has not caught up and is still promoting last year’s figures—perhaps the SNP webmaster could not bring himself to update them, so depressed was he at the new figures.
The SNP response to that is to shift the goalposts. Rather than talk about one year’s figures in isolation, which is of course what the SNP has been doing non-stop for the past year, the SNP now wants to talk about the past five years. But why stop there? Why take just five years? Why not take 10 years, 15 years, 30 years or even 100 years? By being so determined to promote one year’s figures for the past 12 months, the SNP has left itself with no excuse and finds itself hoist by its own petard.
Will the member accept that the GERS figures are working on a five-year cycle?
If that is the case, why did the SNP spend the past year going round the country promoting one year’s set of figures as if they were gospel? The SNP cannot have it both ways.
I agree with something that John Mason has just said. What actually matters here is not so much what has happened in the past as what is going to happen in the future, and on that we must take the messages coming from independent observers. The CPPR has stated:
“Scotland’s fiscal balance is set to worsen ... There will be a net fiscal loss under independence, looking into the future.”
The SNP’s response to that is that Scotland will do much better from oil revenues than the OBR predicts. However, the Scottish Government’s track record on estimating oil revenues is woefully poor, as Mr Brown reminded us.
Surely it does not make sense to plan our future finances as a nation on the basis of the most optimistic scenarios. For example, I might think that I can sell my car for £5,000, but when it comes to it I might not achieve that price. It would be remarkably foolish of me to go out and spend £5,000 until I at least had an independent evaluation of that figure, never mind a buyer who was prepared to pay that price or the money in my bank. However, that is what the SNP is trying to do—it is taking the most optimistic set of projections and assuming that that will be the outturn.
Will the member take an intervention on that point?
No. I need to make some progress.
In response to the budget last week, Mr Swinney bemoaned the fact that austerity would be with us for years to come. However, the reality is that austerity is with us whether or not we vote for independence and that, in fact, under independence it will get worse. The Institute for Fiscal Studies is clear, as was quoted earlier, that an
“independent Scotland would require a significant cut in spending or increase in taxes, over and above that already announced by the UK government, in order to put ... long-term public finances onto a sustainable footing. The scale of this fiscal tightening is likely to be greater than that required for the UK as a whole.”
The IFS is not alone in that view, because when we had Professor Jeremy Peat of the David Hume Institute at the Economy, Energy and Tourism Committee two weeks ago—incidentally, he is a man who agrees with the SNP’s currency position—he said that there would need to be greater fiscal tightening in an independent Scotland. That means having either higher taxes or a lower level of public services, or a combination of both.
The SNP response to that is to say that if Scotland was independent, we would use the economic levers to grow our economy faster than has been the case historically. However, we would have to go some to beat the projected levels of UK growth. As Gavin Brown said, the UK is projected to be the fastest-growing western economy in coming years. We have yet to hear precisely what measures the SNP would implement in an independent Scotland to exceed that projected dramatic growth increase for the UK. The SNP might say that improvements in childcare will help deliver economic growth. Precisely that point was put by my committee colleague Mike MacKenzie to Paul Johnson of the IFS in a meeting of the Economy, Energy and Tourism Committee three weeks ago, to which Paul Johnson said:
“The evidence on the relationship between universal childcare provision and female labour supply is nothing like as strong as you might expect it to be, so I would not expect an additional X hundred million pounds of spending on childcare to pay for itself in any sense through producing additional tax revenue.”—[Official Report, Economy, Energy and Tourism Committee, 5 March 2014; c 4091.]
Will the member take an intervention?
The member is in his last minute.
That is a clear and substantial statement that the SNP’s assumptions around additional childcare are simply wrong and that it would not be the economic game-changer that the SNP claims. Those are independent voices exposing the SNP’s approach.
We know from the projections where the UK economy is going: it is growing at a record rate. We need to know where the Scottish economy is going in the event that we vote to separate ourselves from the UK.
You must close, please.
The CPPR has called for an updated version from the Scottish Government of its oil and gas bulletin, but the Government needs to go further than that and publish its forward projections. When people in Scotland come to vote on independence, they need to know whether our public finances will be better or worse if we become independent than if we stayed in the UK. At the moment, the SNP is keeping people in the dark, and that is not good enough.
15:59
Last Friday, I took part in a referendum debate that I found quite enjoyable. The main reason for that, I believe, is that it involved an audience of young people who were clearly open minded about the choice that is before our country, rather than being particularly partisan or tribal. I record my thanks not only to those who participated but to the fixers project and the YMCA, which were the sponsors of the event.
What struck me more than anything else was that those young people wanted definitive answers. At the very least, they wanted clarity and certainty about the facts, on which they could then make up their minds. I sympathise with that view, as I am sure most voters in Scotland do, but, as well as being frustrated that there can be no certainty about the case that is being put forward for an independent Scotland, I worry that the SNP is deliberately pursuing a policy of obfuscation of facts that we should be able to agree on. The Conservative motion that we are debating highlights the issue, and I worry that the SNP is deliberately refusing to provide some of the detail that we should be able to agree on.
It strikes me that, whenever statistics, analysis or research fails to back up the SNP’s view of independence, that analysis is either rebutted or ignored. The reason why I believe that there is a deliberate policy and choice not to provide detail is that we have a paper from the Cabinet Secretary for Finance, Employment and Sustainable Growth in which he reveals a far more accurate analysis of the choices that an independent Scotland would face. I think that Willie Rennie made this point earlier. It is an analysis that could have provided a more consensual basis for the rest of us in Scotland to discuss the options that are before us. It could have been an agreed foundation on which we could then have argued the pros and cons of independence. However, the finance secretary decided that he is willing to share his real views on Scotland’s finances only with his cabinet colleagues.
If we look at some of the key observations that the cabinet secretary for finance made but wished to keep secret, we see that he knew in advance that there would be a bigger deficit in Scotland than in the UK. I quote:
“in 2016-17 OBR forecasts suggest that Scotland would have a marginally larger net fiscal deficit than the UK.”
He acknowledged that volatility exists in oil revenue. I quote again:
“there is however a high degree of uncertainty around future North Sea revenues, reflecting considerable volatility in production and oil prices.”
He predicted oil revenue falling:
“a geographic share of North Sea tax receipts is expected to fall to £4.8bn in 2016/17.”
As we now know from the GERS figures, it has fallen by 41.5 per cent in one year. He recognised the impact of such a fall on Scotland’s public finances. I quote again:
“given the relative importance of North Sea revenues to Scotland’s public finances, these downward revisions have resulted in a deterioration in the outlook for Scotland’s public finances ... The high level of volatility creates considerable uncertainty in projecting forward Scotland’s fiscal position.”
He also forecast that public sector finances would be squeezed:
“there are also inherent real terms cost pressures within public sector budgets ... We will need to be mindful that these pressures could reduce the resources available to provide additional public services.”
The point here is that Mr Swinney is not alone. The Institute for Fiscal Studies, in a typically dispassionate look at the Scottish finances, highlights almost exactly the same issues. It reminds us—this is something that the SNP rarely mentions—that public spending per head is higher in Scotland than in the rest of the UK, and the IFS goes on to state that, even based on an optimistic set of assumptions, an independent Scotland would face a more challenging fiscal outlook than the rest of the UK—a challenge that the IFS measures in billions of pounds.
The reason why that matters is that, by refusing to give that financial detail, the SNP undermines the credibility of its own case for building a progressive Scotland. As the IFS points out, an independent Scotland would require a significant cut in spending or increase in taxes to put our finances on a sustainable footing, yet the only thing that we know for sure about the SNP’s plans is that it intends to cut taxes—to cut VAT for some tourism industries, to cut air passenger duty and to cut corporation tax for large companies. The First Minister has specifically said that he would not wish Scotland to be put at a competitive tax disadvantage, implying of course, as the New Statesman put it so well, that his vision is not a
“progressive race to the top”
but a depressing
“race to the bottom.”
If independence offers us less or no control over our currency, our lender of last resort and our interest rates, and with the cabinet secretary and the IFS arguing that our fiscal position is likely to be worse, it is no wonder that the SNP is deliberately vague about our future.
There is one way of guaranteeing the Scottish economy’s stability so that we can build the progressive future that many of us want, which is by staying in the UK. Devolution guarantees a Scottish influence over interest rates and guarantees that we will not pursue a destructive race to the bottom on tax. It guarantees complete control over our health service, our education and our housing in Scotland. Devolution gives us the freedom to care for our elderly or to extend childcare; it gives us the best of both worlds.
What is required to tackle inequality is not constitutional change but political will. What is required to tackle child poverty is not independence but political leadership. I hope that the cabinet secretary will accept that it is difficult to have any confidence in the SNP’s plans for our political future if the SNP does not have the confidence to share with us its financial forecasts for that future.
16:05
The Tory motion has exposed more uncertainties about the United Kingdom’s economic, social and environmental policies than have any of its attempts to talk down Scotland’s policies.
I question why Scotland should be locked into the unstable UK economy, which is one of the most unbalanced and unequal economies in the developed world. The UK is one of the most heavily indebted nations in the world and one of the most unequal in the developed world. It has the most regionally unbalanced economy. All those issues have been recognised by the UK’s leaders, such as David Cameron, who has described the reliance on London and the south-east as “fundamentally unstable and wasteful”.
John Swinney’s amendment repeats the fact that
“Scotland has generated more tax revenue per person than the UK as a whole in every year since 1980”.
Meanwhile, the UK’s spending plans show that 60 per cent of the cuts to our public spending have still to be implemented, as has been said. There is no doubt that that could put Scotland’s economic future at further risk.
Will the member give way?
Excuse me until I make some progress; I might bring in the member later.
I turn to the sources of the Tories’ arguments, who are
“a number of independent experts”
who
“predict a weaker fiscal position than the Scottish Government”,
such as the Institute for Fiscal Studies. When the Finance Committee asked questions about the IFS report, the statements were considerably nuanced. Professor David Bell said:
“I think that the IFS report was widely misunderstood in that it was a projection—in other words, it was based on things not changing, in policy terms.”—[Official Report, Finance Committee, 4 December 2013; c 3449.]
That means that without our own policies we would stay the same but that with our own policies we could grow our economy.
The CPPR, which is hardly an independent body, claims that an independent Scottish Government will face tighter fiscal challenges, but Scotland is a wealthy country. It is 14th in the OECD figures, whereas the UK is 18th. As a leading developer and user of renewable energy and as an exporter of renewables and fossil fuels to Britain, Europe and the world, we are in a strong position.
The total lack of CPPR assessment of renewables in the Scottish economy is interesting. I have yet to find any analysis by it of Scotland’s renewables; it has always dealt with oil and nothing else—one part of the economy. Last year, 40 per cent of Scots’ electricity supply came from renewables and 100 per cent is an achievable target by 2020. It strikes me that the CPPR is a one-string banjo; it does not address the broad Scottish economy. Why not?
On what grounds does Mr Gibson suggest that the CPPR is not an independent body?
We could have a whole debate about the sources of the people who are in the CPPR and their political attitude over many years, which has been inimical to the SNP.
The Institute for Fiscal Studies is concerned about the alleged weakness of an independent Scotland’s fiscal position, but the IFS has many strings to its bow. Its director, Paul Johnson, is a member of the UK Committee on Climate Change, which published its report, “Reducing emissions in Scotland: 2014 progress report”, yesterday. It praises Scotland’s renewable energy output, which reached 1GW in 2012. If we are to meet our 2020 target, we will need to produce 1.2GW of renewable energy per annum.
We must build up our economy and build it on the energy that we can produce, other than oil. Most of our targets go further than those of the UK. Given that they will strengthen the energy security of Scotland and the UK, why are they being ignored? They will result in huge additions to Scotland’s GDP. I need only point to the decision that SSE has made in the last week to back the Beatrice offshore wind farm. That project and the Moray Offshore Renewables project in the Moray Firth are far bigger than the Forth replacement crossing.
Thankfully, despite the uncertainties of UK energy policy, SSE, which is our biggest company, is on course to develop such major projects—no thanks to the UK Government. SSE says that a single energy market in Great Britain is the most likely scenario in the event of a yes vote. That is its preferred outcome, in any case.
I return to the uncertainties that have been created by the UK on energy, along with everything else. The UK Government’s energy minister has said that there is no way that the UK would buy Scottish renewable energy but, interestingly, he has never said that the UK would not buy Scotland’s oil.
You must conclude, please.
Ed Davey has shuffled away from support for renewables to support for nuclear energy. The uncertainties that have been created by the Westminster Government are all part of the story that is not told in the motion. John Swinney’s amendment gets at the truth.
I must ask members to keep to their allotted time. If they do not, they will be taking time out of the final member’s speech.
16:12
I do not disagree with John Swinney’s view that the recovery and growth have been slow in the UK in comparison with many other European countries, but I suggest that the answer is not to ditch our comrades, friends and family in England, Wales and Northern Ireland, but to ditch the Tories in 2015 and to put in a Labour Government.
I turn to the white paper and the currency. We now know that the UK Government has made it clear that, in its view, a currency union will not happen in the event of independence. That position is taken by other political parties at UK level, where there is agreement that it would not be in the interest of the rest of the UK to accept a currency union with a new Scottish state.
I do not take too kindly to a former public schoolboy coming up to Scotland to tell us that we will not be able to use the pound, but the fact is that all the evidence suggests that it would not be in the UK’s interest to enter into a currency union with a newly independent Scotland.
More important, if we take the decision to become an independent state, I do not believe that it will be in the interest of Scotland to enter into a currency union with the remainder of the UK. I would suggest that it offers the worst of all worlds: we would keep the pound but would have no say over it or over interest rates, money supply, the banks, employment targets or crisis measures. If we want to keep the pound, we should stay in the UK. That will ensure that we have direct representation at Westminster, which makes the laws on the economy, and direct representation in a Government that supervises and sets the targets for the Bank of England.
Economic union and common trading and commercial relationships remain essential. Ironically, even those who want a separate state now favour the retention of an economic union with the UK that involves shared administration of monetary policy, interest rates, inflation targets, money supply, crisis measures and macroeconomic stability. The difference between the parties is that the SNP wants UK control without Scottish representation, whereas the Scottish Labour Party wants to ensure that, if such matters are the responsibility of the UK Administration, Scots will have a say in the decisions that are made.
I also want to focus on what I believe is the unfairness of the SNP Government’s proposals and the greater inequality that will result for Scotland if we form a separate state as proposed by the SNP. One policy is a 3p cut in corporation tax for Scotland’s wealthiest companies. That is the equivalent of £125 a household lost from the public purse and public services and handed to the most profitable companies in the corporate sector. That is just one example of SNP unfairness versus Labour’s fairness. We will not put money into the hands of big business while cutting budgets for schools and colleges and cutting support and skills to help people to get into jobs.
Will the member take an intervention?
No, thank you.
The SNP policy would take Scotland on a race to the bottom. We have to wonder what would be next.
The issue is not just the handouts to big businesses. We know that the SNP Government will not support Labour’s proposal for the transfer of £286 million to hard-pressed families through an energy price freeze. Ironically, those same energy companies will have a double boost under the SNP proposals, as they will also be the biggest beneficiaries of the corporation tax handout that is being proposed as part of the drive to create a separate Scottish state.
Our economic priorities should be to address the big challenges that our country faces. Some 21 per cent of 16 to 24-year-olds are unemployed, and college admissions have fallen by 36 per cent since 2007. It is not tax handouts to big businesses that the economy needs; it needs a national skills strategy, a national jobs strategy, and measures to stop low pay. We must have the courage to say that we will insist on a living wage for all public service contracts that are issued in Scotland and the vision to say that we will transform our education system to ensure that no child is left to fail. I do not believe and cannot accept that any child was born to fail.
In conclusion, what is glaringly obvious about the economics of the white paper is that they will promote inequality and do very little to address the big issues that Scotland and its people face as we move forward.
16:17
I thank our Tory colleagues for bringing forward for debate the subject of Scotland’s finances.
Much has been said in the debate, and it would be impossible to pick up on everything, but I thought that it was interesting to hear Malcolm Chisholm say that he feels that the white paper is not a model of progressiveness. I would have thought that any reasonable person—even Malcolm Chisholm and possibly even Neil Findlay—might feel that a document that sets out progress towards universal pre-school childcare for all children aged one to five, the abolition of the bedroom tax, decency in the state pension, bringing postal services back into public hands and the removal of Trident from the Clyde is progressive.
Will the member take an intervention?
No, I will not just now, thank you.
The question is raised: what might those people reckon to be a progressive document? Could that be the findings of Labour’s cuts commission? Its findings have been parked until after the referendum, of course. I wonder why.
I challenge the Labour Party: why does it not bring forward those findings before 18 September? We could then ask the people of Scotland what they consider to be a progressive document—the findings of Labour’s cuts commission or the Scottish Government’s white paper. I know what my money is on.
Will the member take an intervention?
No, I will not.
I was also intrigued to hear Gavin Brown ask out loud where my colleague Kevin Stewart had been recently. I thought that that question could equally be posed to Mr Brown. He has lodged a motion that mentions the IFS position on the fiscal challenges that Scotland faces. Where was Mr Brown when the Finance Committee held a meeting on 4 December? In that meeting, we heard what Professor David Bell said, and we also heard Professor Peter McGregor say:
“we might ask whether the achievement of higher economic growth by a set of policies could get us out of the bind that the IFS has identified. I think that the answer to that question is yes—it would be surprising if it were otherwise. Economic growth can help us to get out of the situation.”
That makes the point that, with the power in Scotland’s hands, we can make a positive impact.
My favourite quote from that day was from Dr Angus Armstrong, who said of the IFS report:
“It is almost inevitable that the projections will not be correct”.—[Official Report, Finance Committee, 4 December 2013; c 3460.]
I know where I was: I was at that Finance Committee meeting. I even know where Mr Brown was: he was at that meeting, too. Obviously, he was just not listening that day.
It was also very interesting to hear Jenny Marra laud the CBI. We did not hear her mention Tony Banks, chairman of Balhousie Care Group, who said that the CBI
“have never consulted me on my views on independence and I don’t know of any members they have asked.”
The CBI leadership is doing what it has always done: it is representing its own narrow interests rather than the interests of Scotland or their members’ views.
The CBI has a long-standing record in that regard. We can look back to the 1990s, when the CBI leadership opposed the creation of the Scottish Parliament in the 1997 referendum. I would hope that all Opposition members—even those who are members of the parties who opposed the Parliament at the time—recognise that they were wrong to do so and, if they do not, why are they even here in the first place? Ms Marra did not make that point, either.
I turn to the oil and gas issue.
Will the member give way?
I will not.
It is always important to bear in mind that Scotland’s productivity levels, without accounting for North Sea oil and gas, are at the same level per capita as the UK as a whole. Oil and gas are a massive bonus for Scotland; they are not the foundation of the Scottish economy.
Iain Gray talked about Shell and BP’s concerns about operating in a stable environment. I might take their proposition somewhat more seriously if those self-same companies were not operating in some of the most hostile, unstable environments across the globe. They operate in areas where they face threats of terrorism and civil war. The idea that those companies would not want to operate in an independent Scotland is an absolute nonsense, and we would do well to bear that in mind.
Let us look at the situation now in the North Sea. Oil and Gas UK estimates that capital investment in 2013 reached £14.4 billion, a figure that has more than doubled since 2010. That is important in relation to some of the figures that some members have mentioned, because that investment reduced revenue by £2 billion. Paul Johnson, the director of the Institute for Fiscal Studies, appeared at the Finance Committee earlier this month. He explained that the investment
“is one of the reasons why revenue has been lower: that investment can be offset against tax payments.”—[Official Report, Finance Committee, 5 March 2014; c 3776.]
That is more information that was lost on Gavin Brown.
Will the member give way?
Not just now.
That investment has been concentrated in the Scottish share of the North Sea. Oil & Gas UK forecasts that production would increase from 1.4 million to 1.7 million barrels a day by 2017. An independent Scotland would support such investment because we would benefit from that in the long run.
On the oil price, members are clinging to the OBR estimates, which assume an oil price of $99 a barrel, but the Department of Energy and Climate Change has put estimates at $120 a barrel. How do Tory members square that circle? How do they respond to the difference between their Government department’s estimate and that of the OBR? We should reflect on the fact that the Scottish Government has been more cautious than DECC on the oil price, so it is more cautious than the UK Government’s position.
I want to return to first principles. All of us surely accept that Scotland has what it takes to be an independent country—we heard that from Malcolm Chisholm. We have the economic base—
You must close, please.
Without independence, I fear that we will be in a downward spiral, with a UK Government that we did not elect slashing our budget and harming our families, which is what we saw with the recent budget.
I am afraid that you must close.
We have the foundations to be a successful independent country; we must embrace that opportunity.
16:23
I have heard some things today that I will not forget in a while. The first comment that I heard was before the debate started when I, along with one or two other members, was held prisoner by the BBC in the garden lobby to do a brief interview. During that interview, I heard Kenny Gibson make a wonderful claim. He said, very straightforwardly, that Scotland runs an £8.8 billion surplus. That is what he said—members can check the BBC iPlayer. Some of us knew what he meant by that figure. He meant that, if one takes the past five years’ figures and compares the expenditure in Scotland and that of the UK as a whole, one can separate out £8.8 billion-worth of savings that were made in Scotland relative to that budget. That was not a surplus, but a reduced deficit over a five-year period. If one says that very quickly, it sounds very effective.
The trouble is that Kenny Gibson and one or two others on the SNP back benches are guilty of the cardinal sin of believing their own propaganda. There is one person who I do not believe will make the same mistake: John Swinney. As I have said in many debates, he is my favourite Government minister. He is the man with the brains who knows how things work. After all, he is the man who took to Cabinet the famous secret report that contained all the predictions that we now know to have been 100 per cent accurate. I have also expressed my admiration for Mr Swinney as the man who has implemented in Scotland, in an adept and professional way, an austerity policy that we should all be proud of. The problem is that he qualifies what he has done by saying that, if this were an independent Scotland, he would spend money like it was going out of fashion and ruin all his previous good work.
In his opening speech, Mr Swinney mentioned Scotland’s fiscal position and, once again, talked about oil revenue. He said that the deficit went from a relatively healthy £7 billion a year to an unhealthy £12 billion, according to the last GERS figures, because of the amount of tax relief that was claimed against investment. It is true that there was a lot of investment and a lot of tax relief, but where Mr Swinney goes wrong—the First Minister joins him regularly in this—is in assuming that this is some one-off cost, when the truth is that we require continuous investment in the North Sea if for no other reason than to slow the industry’s decline, let alone increase production. Worse still, both men are very keen to completely forget about the importance of decommissioning to the industry’s future and the fact that those costs, too, can be set against tax. The danger is that as production continues in the North Sea and money continues to roll in, companies will have plenty of opportunity to set costs against tax and keep down total revenue.
Christian Allard spoke very strongly about the strengths of the north-east economy. It is wonderful to have an economy in which our local authorities and health service struggle to recruit in the face of a private sector that is aggressively recruiting their staff. Organisations such as the police force are struggling to maintain numbers as the private sector sucks people out of other industries. I would like the whole of Scotland to face up to the same problem; unfortunately, however, the whole of Scotland will not make the choices that have been made in the north-east. In fact, Mr Allard almost seemed to be taking an I’m-all-right-Jack attitude, but he should be careful. That sort of thing could get Aberdonians a bad reputation.
The truth is that you couldnae make it up, but what we hear from the Scottish National Party’s back benches is the simple chant, “Yes, we can”.
Will the member give way?
I have still to address what one or two other members said in the debate.
Chic Brodie gave away a secret when he attacked Neil Findlay by suggesting that his brains had somehow gone to his head. If Mr Brodie’s own brains were in his head, he might not be sitting on the SNP benches but still be sitting with the Liberal Democrats.
Will the member give way?
I must come to a close. I have only a minute left.
Indeed, Mr Johnstone. You are in your final minute.
The main issue that I want to touch on before I close is welfare. This Government and indeed many speakers in this afternoon’s debate have talked about what the Government would like to do to the welfare budget in an independent Scotland.
Will the member give way?
The member is in his last minute.
Nicola Sturgeon has historically mentioned figures without actually saying how many years they apply to, and she has asked for £1.5 billion, £2.5 billion and £4.5 billion of additional expenditure. Every week on the Welfare Reform Committee, SNP members hint that welfare would be generously provided for in an independent Scotland, and the same hint is made in debate after debate in this chamber. However, if that claim is to have any credibility, the Cabinet Secretary for Finance, Employment and Sustainable Growth must tell us how it will be funded. As of today, there has been no indication of the extra expenditure that the SNP would put into welfare and how that money would be raised.
You must close, please.
Looking at the budget that we have in front of us, I think that it is obvious that the money would come from either reduced expenditure or increased taxation. The cabinet secretary must tell us now before we vote.
I call Mike MacKenzie. I am sorry, but I can give you only five minutes.
16:29
I am disappointed at the relish that the Opposition parties take in any opportunity to talk down Scotland and our prospects. I am concerned for their wellbeing, because it must be truly depressing and debilitating to live under the cloud of doom and gloom that they constantly manufacture. To cheer them up, I draw their attention to the fact that, even without oil and gas, GDP per capita in Scotland is 99 per cent of the UK average. Even without oil and gas, we are a wealthy country. Standard & Poor’s says that, even without oil and gas, Scotland would be successful. Oil and gas are a very welcome bonus.
Will the member give way?
No, thank you. I am short of time.
The only depressing aspect of our good fortune is the fact that successive UK Governments have failed to set up an oil fund. In trying to talk down Scotland’s oil, the unionists are singing a sad old song—a lament, a dirge with a déjà vu quality about it. We have heard all that before, in the 1970s, when we were told that Scotland’s oil was the wrong type of oil, that there was not much oil and that it would run out in 30 years or less. It was only with the uncovering in 2005 of the 1974 McCrone report, which had been secretly buried under the 30-year rule, that we finally had proof of the truth that we all knew.
Will the member give way?
No, thank you. I am short of time.
Both Tory and Labour Governments knew back then, in the 1970s, the full immense value of Scotland’s oil. They knew that it had the potential to propel an independent Scotland into a period of unparalleled prosperity. They were disingenuous then and they are disingenuous now. While they told us those things, they quietly siphoned off more than £300 billion of revenue from Scotland’s oil, leaving no legacy and no lasting benefit.
It is correct to say that oil and gas revenues have declined in the past year, and it is worth examining why. First, as Christian Allard mentioned, the Elgin field was unfortunately shut down for almost a year.
Will the member take an intervention?
No, thank you.
Secondly, there have been capital allowances amounting to an estimated £2 billion in respect of record investments. Perhaps more important has been the long-term fiscal instability that is outlined in the Wood report. There have been no fewer than 16 significant fiscal changes in the past decade: what industry can prosper under such uncertainty? Sir Ian Wood says that the UK Government has failed to provide an appropriate regulatory framework, that DECC has failed to allocate sufficient resources to properly understand the sector and that DECC officials have failed to talk to their colleagues in the Treasury to ensure that the fiscal and regulatory regimes are complementary. It is little wonder that the recovery rate in the UK continental shelf fields is only 40 per cent while the rate in Norway’s fields is 48 per cent. It is worth noting, too, that it is only following George Osborne’s U-turn on his 2011 tax raid on oil and gas that we have seen investment return to the sector, with record investment of £14.4 billion in the past year.
It is truly stretching the imagination to suggest that the investors do not know what they are doing, that this highly sophisticated industry does not know what it is doing and that Oil & Gas UK’s estimate that there are 24 billion barrels of recoverable oil left is incorrect. It is simply not credible to suggest that the industry is making those investments on the back of long-term oil price forecasts that do not suggest strong and stable prices. Production is set to increase from 1.4 million barrels a day to 1.7 million barrels a day in 2017. When even DECC disagrees with the OBR forecast and assumes an oil price of $120 a barrel compared to the OBR’s assumption of $99 a barrel, it is clear that the industry is set for a more prosperous future than the OBR predicts.
With the powers to set a stable and consistent regulatory and fiscal regime, and with increasingly clever technology, production rates will rise and Scotland can be assured of the full economic benefit of our oil and gas.
16:35
It is five or six months since the Institute for Fiscal Studies demolished the economic case contained in the white paper and demonstrated that an independent Scotland would face a worse fiscal position than the UK as a whole, and would require tax rises, spending cuts or both, just to stand still. Since then, as many members have noted, oil revenues have fallen by almost 45 per cent in one year, and predictions have fallen further. Further, we have seen a series of commentators such as the Scottish Retail Consortium, the CPPR, BlackRock Investments and—today—the CBI coming to the same conclusions as the IFS did.
Since then, the OBR has revisited its predictions twice. Yet, as Gavin Brown pointed out, the Scottish Government is still working on a year-old estimate of oil revenues, which looked wildly overoptimistic at the time, and is now close to suggesting 2013-14 outturn figures that are twice the OBR’s figures.
I know that Mr Gray takes a keen interest in these matters and is an expert on oil and gas. Therefore, can he explain why the OBR has changed its methodology and has transferred some of what was taken to be offshore revenue to onshore revenue?
The way in which we estimate revenues, offshore and onshore, is reviewed all the time. However, I will say something about that, with regard to the IFS, in a moment.
There has been much criticism of the OBR, and one has to agree that the OBR does not always get its estimates right—in fact, in recent times, it has been far too optimistic, although not as optimistic as the Scottish Government. Gavin Brown is, therefore, right to demand an update.
Mr Swinney’s criticism of that commentary is that it is all the same thing, as it is all based on the OBR. However, that is not true. As he well knows, the IFS considered a number of scenarios and, in the most optimistic scenario, it used the Scottish Government’s own oil figures, the Scottish Government’s own optimistic projections for immigration, debt share and interest rates, and—I say to Mr MacKenzie—assumed that, as offshore activity reduced, it would be replaced by onshore activity instead. Even with all that, it still came to the conclusion that an independent Scotland would face tax rises, cuts or both in order simply to stand still.
The truth is that we have heard all sorts of figures being bandied about today. No doubt the less comprehensible they are, the happier that the Scottish Government will be. There have been many attempts to convince us either how wealthy we are as part of the United Kingdom—we have acknowledged that we are—or how bad the UK position is. However, all that has missed the point, because all the commentators tell us that it is our relative position that will be worse, should we choose separation. Mr Rowley hit the nail on the head when he said that the way in which we should deal with our dislike of coalition policies—a dislike that is shared by Labour and the SNP—is to get rid of the coalition Government.
Will the member give way?
I am sorry, but time does not allow.
There are two readily comprehensible illustrations of what all this means, and they have not been addressed today.
The simple fact is that, if the cabinet secretary were the chancellor of an independent Scotland, he would this year have faced a £4.5 billion shortfall in his budget, which is equivalent to the whole schools budget. He has suggested, as have many of his colleagues, that that is but a blip, caused by extra investment and problems in production in the Elgin field. However, that exactly proves the point that oil production is massively volatile, and that is something that would be a huge risk for a separate Scotland.
As for the argument that the blip has been caused by significant investment, which is set against tax, surely the core point that Ian Wood made in his report was that, in order to extract the remaining resources from the North Sea, that investment would have to continue. That means, of course, that we will continue to see a fall in the revenues and profits from North Sea oil, and therefore in the tax that flows to Government.
Secondly, this week the CPPR demonstrated that, at the point of independence, Scotland would be worse off than the UK to the tune of £1,000 for every man, woman and child. That is £1,000 more tax, less public services or higher borrowing.
Mr Rennie was right when he said that Mr Swinney once had a reputation for managing the finances and that that John Swinney told his Cabinet colleagues the unvarnished truth that an independent Scotland would be at the mercy of volatile, falling oil receipts, would be unable to guarantee pensions and would have to slash public spending. He was right. The figures and commentators say that he was right; only the Scottish Government refuses to accept the reality.
The losers in all that are the people of Scotland. It is their choice in September and they want facts on which to base their choice. Instead, they are given assertions that fly in the face of all the evidence. Mr Stewart talked about a can-do attitude, and the least that the Scottish Government can do is to start telling the public the truth about the economics of independence.
16:41
I never thought that I would come to a debate and end up feeling sorry for Neil Findlay, but it has happened to me this afternoon. His heart must have sunk when Jenny Marra opened her speech as the Labour Party’s official spokesperson in the debate and said:
“It was just this morning that the Confederation of British Industry”.
That must have been a real body blow to Mr Findlay, given the crusading speech that we heard from him about how the Labour Party is following a great socialist agenda to try to reform the country. It is nothing of the sort, from anything that I have heard of it.
I wonder whether Mr Rowley, who knows that I have enormous respect for him, is aware of who was cutting corporation tax in 1998 and in 2008, when it fell from 31 per cent to 30 per cent and from 30 per cent to 28 per cent. Those cuts were, of course, made by Labour Chancellors of the Exchequer.
Members: Oh!
I have confirmed to Parliament the revelation that the Labour Party was cutting corporation tax.
That, of course, is a point that Mr Swinney often makes. Will he acknowledge that those cuts in corporation tax took place when Gordon Brown and the Labour Government were increasing spending on health, education and welfare to a degree that had never been seen before?
If we add all that together—all the assumptions about revenue and expenditure—and then look at the fact that the country went bust, that tells us all that we need to know about Gordon Brown. [Interruption.]
Order, please.
I sat in the House of Commons and listened to Gordon Brown telling us about all the financial management he would do, about how everything would be sorted out and about how he had abolished boom and bust. Of course, we all know—as Mr Johnstone has reminded us on countless occasions—that that was complete rubbish.
Does the cabinet secretary accept that the difference is that cutting corporation tax across the UK would not end up setting region against region in competition with one another in a drive to the bottom, and that that would be the problem with cutting it in Scotland alone?
I come from the straightforward point of view that I want to do what is right to improve the performance of the Scottish economy and to strengthen the opportunities for the people who live in Scotland. [Interruption.]
Order.
A large part of the debate has hinged on the quality of estimates that can be made for the public finances. I will share with Parliament some observations about the quality of OBR analysis. In March 2013, the OBR forecast that economic growth in the United Kingdom economy in 2013 would be 0.6 per cent, but 12 months later it came back and set out its analysis that growth had been 1.8 per cent. That is three times higher than the OBR had forecast.
In March 2013, the OBR forecast that growth in the UK economy would be 1.8 per cent in 2014. As Gavin Brown fairly said, it has now set its estimate at 2.7 per cent. That is 50 per cent higher in the space of 12 months. When the chancellor went to the House of Commons last Wednesday, he trumpeted that as
“the biggest upward revision to growth between Budgets for at least 30 years.”—[Official Report, House of Commons, 19 March 2014; Vol 577, c 782.]
If anybody looks at the information that I have just put on the record and suggests that the OBR is in possession of some holy grail of forecasting, I would say that when it comes to forecasting it is more like Monty Python.
Will Mr Swinney give way?
Talking of Monty Python, of course I will give way.
On the subject of overoptimistic forecasts, I wonder whether Mr Swinney saw the paper from the Centre for Public Policy for Regions on Monday, which says that the Scottish Government’s forecasts for North Sea oil revenues were
“skewed in an optimistic manner”.
Surely Mr Swinney should listen to the CPPR—or does he share Rob Gibson’s view that it is a non-independent source of information?
We should be careful, in relation to forecasting, about analyses that are presented; that goes for some of the material we are discussing. Professor David Bell went to the Finance Committee on 4 December last year. There is a bit of a debate about whether Gavin Brown was listening that day, although he appears to have been present. Professor Bell said:
“I think that the IFS report was widely misunderstood in that it was a projection—in other words, it was based on things not changing, in policy terms.”—[Official Report, Finance Committee, 4 December 2013; c 3449.]
The IFS essentially set out the economic conditions that would prevail in Scotland if we were to remain part of the United Kingdom, on the basis that GERS does not predict the economics of an independent Scotland, but simply rolls forward the public finances as they are today.
Then there is what Professor Peter McGregor said at the same evidence session. This is the material and fundamental point about the debate; it is about whether we just resign ourselves to economic difficulties and perpetual austerity, or take the powers to do something about it. Professor McGregor said:
“we might ask whether the achievement of higher economic growth by a set of policies could get us out of the bind that the IFS has identified. I think that the answer to that question is yes—it would be surprising if it were otherwise. Economic growth can help us to get out of the situation.”—[Official Report, Finance Committee, 4 December 2013; c 3460.]
That is the absolutely core point in the debate. Are we prepared to assume the responsibilities—
Will the cabinet secretary give way?
Why not?
It is a bad day when the cabinet secretary uses Jamie Hepburn as his wingman on economic issues.
Ask a question, please.
Let me ask the cabinet secretary this. He has just said—[Interruption.]
Order.
The cabinet secretary has just said that economic growth this year will be 2.7 per cent. What level of economic growth would be needed in Scotland to avoid fiscal tightening?
You are approaching the last minute of your speech, cabinet secretary.
The point that I am making to Mr Brown and his colleagues is that we have been subjected to a prolonged and unnecessary period of economic austerity as a consequence of the mistakes that have been made by the UK Government in pursuing its economic strategy.
If we take the economic levers to ourselves, we can use the resources of Scotland and the capabilities, strengths and key industries of Scotland to generate stronger economic performance. Frankly, we could not deliver a worse performance than the performance that is being delivered by the United Kingdom, given the shocking failure to reach economic estimates that the UK Government itself made in 2010.
This debate is about whether we are going to resign ourselves to listening to a perpetual unionist “dirge”—as Mike MacKenzie rightly put it—in the years to come, or decide to take the responsibilities for ourselves, build a future for our country and ensure that the people of this country can realise the economic opportunities to which they are absolutely entitled, and which the wealth and creativity of the Scottish population give us every right to be confident of delivering.
16:49
The cabinet secretary’s blatant inability to answer that last question proves the point that our party has been trying to make. He stood up and, as the chancellor did, pointed out the record improvements in growth forecasts—as high as 2.7 per cent for this year, with better growth for next year, the year after and the year after that.
My simple question was this: given the high growth that is projected for the UK, what level of economic growth would be required to avoid any fiscal tightening whatever? That is the Scottish Government’s position—it does not want to implement fiscal tightening as the UK Government wants to, and it ignores the suggestions from independent expert commentators that Scotland would have to go further than the UK’s level of fiscal tightening in order to get the public finances to a sustainable place.
The IFS has stated that
“even under the most optimistic scenario ... in which Scotland experiences ‘high migration’”;
experiences 2.2 per cent productivity growth; has a debt share of 40 per cent of Scottish national income and pays the same interest rate on debt as the UK; and has high North Sea revenues,
“we still estimate that the ‘fiscal gap’ for Scotland would be 1.9% of national income”.
That is significantly larger than the gap of 0.8 per cent that the IFS estimates that the UK faces. The independent experts say that we would have to go further than the rest of the UK, but the Scottish Government says that it will not even take the measures from the UK Government. How on earth can it square that circle?
That reminds me of the saying, “You can’t make a crab walk straight.”
We heard from a source today about quantitative easing, and that the UK Government has been buying back its own debt and has asked the Bank of England to return the interest on bought gilts, which is a sum of approximately £4 billion. We have talked about openness today. Scotland has not had its share of that money, so will Gavin Brown support a request to the chancellor to return an amount equivalent to 0.8 per cent of our GDP?
Mr Brodie is a unique character. Through his contribution—or peroration, as he likes to call it—he has managed to unite the chamber by confusing not only me, but all the members on my party’s benches, as well as all those on his party’s benches and on the Labour benches.
What is the answer?
Mr Brodie said earlier that the Opposition has a cheek to ask for more than a single year’s figures from the Scottish Government.
What is the answer?
Mr Brodie.
Chic Brodie must have been very disappointed when John Swinney said earlier that he was going to provide several years’ figures, just as Opposition members had requested.
I will pick up on a couple of points in the debate before I address the commitment that Mr Swinney made earlier. We have heard from the Scottish Government that we were the eighth richest country in the OECD, but all of a sudden, a few months later, we are only the 14th richest country in the OECD. [Laughter.]
The SNP members laugh as if the error was made by the Conservative Party rather than by their party—
Will Gavin Brown give way?
I will give way in just a second.
We were given the excuse that our placing has dropped because of the methodology. The question is this: were we ever, as the white paper tells us, the eighth richest country, or is that yet another error in the white paper?
The assertion that Scotland is the eighth richest nation in the OECD was based on the OECD’s methodology at that time. Its methodology has changed.
The SNP members in the chamber were, in fact, all guffawing at the idea that Mr Brown bemoans the fact that Scotland is “only” the 14th richest nation in the world. Why does he always talk down Scotland in that terrible fashion?
What a woeful answer that was, Presiding Officer. The OECD’s methodology changes, and suddenly Scotland has dropped by six places. The clue, of course, was in the Scottish Government’s previous figures, as the footnote right at the bottom of the document says, “Source: Scottish Government calculations.”
I will pick up on something else that Mr Swinney said, which has been oft repeated. The Scottish Government does not like the most recent edition of GERS, so it is determined to go to the five-year GERS programme. The Government has said without a hint of embarrassment that if Scotland had been independent five years ago, we would be £1,600 better off per head—[Interruption.] That gets a big cheer from SNP members.
Let us work backwards from 2008, which is the year from which those figures came. Let us imagine that we had gone independent on 24 March 2008, just as the SNP would have wanted. The policy of the Scottish Government at that time was to join the euro, so we would have joined the euro in 2008. Five months after we would have become independent, the two largest banks in the country collapsed and needed a bail-out, and two years later, the euro went into meltdown. I do not think that anyone on the planet can believe that we would be, if we had gone independent in 2008, £1,600 per person better off.
Let us welcome the commitments that were made by John Swinney today in the latter part of his speech. He spent 90 per cent of his speech avoiding talking about Scotland’s fiscal position in 2016-17, avoiding any projections, and avoiding the fact that almost all his policy commitments are uncosted and that he has said nothing about transitional costs in the white paper. Let us put all that to one side for a moment and welcome the commitments that were made.
He said that, in the coming weeks, he will publish an oil and gas analytical bulletin. Let us welcome that. We look forward to seeing the updates in the figures. He described it as the third bulletin, which is technically correct, but I point out that the second bulletin—
It is correct.
It is correct.
I see we are having a cameo appearance from the First Minister when we are discussing Scotland’s finances if we become independent.
In the second bulletin, there was no hint, mention or clue about the oil and gas revenues that are expected during the next five or six years. So, the bulletin might well have been called the second bulletin, but it entirely avoided all figures on revenue. We hope that the third edition will have the figures that we request and not just a little survey, as was in the last bulletin.
We also welcome the fact that John Swinney says that he is going to make projections for the years post 2016-17. There was a rumour circulating that the cabinet secretary wanted to do that in the white paper but was blocked from doing so.
This is pathetic.
That has clearly touched a nerve. We are glad that the cabinet secretary has now decided to do that—[Interruption.]
Excuse me, Mr Brown, but the Government front bench is getting a bit excitable.
The front-bench members are struggling today, Presiding Officer. It is just a pity that most of them were not here when we were discussing the future of Scotland’s finances should we become independent.
When the cabinet secretary does publish the projections, will he put in the policy costings for the promises that he and his Government have made, such as the ones that are made in the pensions paper that he has produced that contains 30 policy commitments, only one of which is costed? Will he put in all the costings for that?
On the stabilisation fund, the SNP says that, immediately following independence, it will establish a stabilisation fund. Will it put the costings for setting that up into its projections, and say how much it intends to put into it in year 1, when we are projected to be running at a 5.5 per cent of GDP deficit? Will it put in the policy costings for renationalising the Royal Mail—a policy that was announced in this chamber by the First Minister, much to the surprise of the cabinet secretary, his party, and the rest of the country? Will it include policy costings for welfare? The SNP complains about the position with welfare in the UK, but it has made no commitment to reverse the measures, apart from one or two.
When the SNP publishes its projects, it is crucial that we get the actual policy costing and the transition costs. If we do not, the piece of paper will not be worth anything in terms of furthering the debate. We have asked for oil costings, for an updated fiscal position, and for papers that go beyond 2016-17. It is critical that we get those things, which is why we brought the debate to Parliament.
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