Official Report 1201KB pdf
The next item of business is a debate on motion S6M-19895, in the name of Craig Hoy, on growing Scotland’s economy. I invite those members who wish to speak in the debate to press their request-to-speak button. I call Craig Hoy to speak to and move the motion.
16:02
Today, the chickens came home to roost for the Chancellor of the Exchequer. In what has been described as “shambolic” and “a fiscal fandango”, Rachel Reeves has systematically and recklessly talked down the economy. She has flown kites and then shot them down. She has repeatedly leaked tax and spending proposals. She has performed U-turn after U-turn and then sought to blame others for the breaches that have sown much doubt and distrust. It has been a bizarre strategy: a nihilistic form of expectation mismanagement, which has taken a wrecking ball to the United Kingdom economy.
Will the member take an intervention?
I will not give way at this point in time.
Markets have heard the mood music and have responded in kind—
The pound is up, borrowing is down.
—with the savage cost of servicing our long-term debt.
Pound is up, borrowing is down.
Mr Marra, please let the member speak.
If Mr Marra were to look at what we are paying on the gilt market relative to our competitors, he would realise that the markets have no confidence in this Government.
It is cheaper than this morning.
Mr Marra says that it is cheaper than this morning—it was extremely bad this morning. I will leave Mr Marra to make his own case for this disastrous budget.
It is quite clear that we are now in a doom loop of Rachel Reeves’s own making. Confidence in the economy has slumped, business confidence is dismal—the sharpest drop since Labour was last in power 17 years ago—and confidence in this Labour Government is shot beyond repair.
However, it did not have to be like this. When the Conservative Government left office, we were leading in terms of gross domestic product growth, which was twice what it is now, inflation was falling, interest rates were on a steadily downward path and the cost of living crisis was abating. The Conservatives recognise that things were far from perfect, and we are determined to learn from the mistakes that we made. I only wish that Michael Marra would do the same.
Last June, the green shoots of recovery were visible and very real, but they are now gone. Today’s reckless tax-and-spend budget—and, I suspect, the Scottish budget—will set us back further still, because it was a missed opportunity to promote economic growth; to deliver investment into Scotland; to address the alarming increase in economic inactivity; to reduce and not further inflate the benefits bill; to recognise the importance of backing and supporting working households; to ease the cost of living pressures; and to protect Scotland’s struggling rural economy.
As the debate that preceded this one made clear, our top ask for this budget was to end the energy profits levy, but the chancellor did not scrap it—in fact, she has extended it. We in the chamber should now share a very real concern for the oil and gas industry, including the jobs, the tax revenues and the wider economic activity that it generates, which the Office for Budget Responsibility has downgraded by £2.5 billion for this year alone.
To hear from John Swinney and the Scottish National Party hollow calls for the chancellor to scrap the windfall tax on oil and gas companies is, frankly, pitiful. That has more to do with John Swinney saving his own job than preventing further job losses in this vitally important sector.
Will the member take an intervention?
If I can get the time back, Deputy Presiding Officer.
There is not a lot of time, but we will see how we go.
Could the member remind us which party introduced the EPL? That is all that I want to know. [Interruption.]
The Deputy First Minister should have been here earlier. I believe that she asked for it. Which party brought in the presumption against the issuing of further oil and gas licences in Scotland, which is doing damage to the Scottish economy?
There is a raft of other tax and spending announcements where our commonsense calls have been ignored by both Governments. Labour’s cruel family farm tax will do real damage to the farming community and the wider rural economy.
Neither the United Kingdom chancellor nor the Scottish finance secretary has grasped the fundamental rules around taxation. What Scotland needs now is the sensible application of a modern-day equivalent of Reaganomics, not the counterintuitive, tinpot fiscal policies of Rachel Reeves and Shona Robison.
Our motion sets out a position against any further tax rises. Instead, Rachel Reeves is setting out on a path towards ever higher tax—a path to nowhere that is well trodden by Shona Robison and the SNP—and an extra £26 billion in tax by 2029-30. That is the highest ever tax base in the United Kingdom. It is tax on top of tax on top of tax.
Freezing thresholds might in the short term stealthily fill the chancellor’s black hole, but that will surely and steadily damage the economy as more and more middle earners become enmeshed in ever higher taxes. As we see in Scotland, the net effect is that people work less hard, save less, retire earlier or do not take that promotion, which all compounds the depressing doom loop that undermines growth and investment.
However, it is not just income tax that is rising under Labour—there are higher taxes on savings, dividends, gambling, capital gains and the use of electric cars. There is national insurance on salary-sacrifice pensions and more tax on Irn Bru. This is not a smorgasbord of tax changes; it is a fiscal car crash that is anti-aspiration, anti-business and anti-growth.
The politics of envy are all over the budget. There is a higher tax on middle-income earners and a mansions tax, which sends out a message to the world that the rich ain’t welcome in Britain any more.
Labour is not just making the same mistakes as the SNP is on tax; it is making the same mistakes on welfare, too, with £3 billion to remove the two-child benefit cap and a failure to fundamentally reform the social security system. Labour’s approach and the SNP’s approach mean that welfare spending is now out of control in Scotland and in the rest of the UK.
I accept that today’s budget delivers extra resources of £820 million to the Scottish Government. My challenge to John Swinney and the SNP is this: why not do something that they have not done before? They should do something novel, such as cut tax. That would deliver the best solution to tackle the cost of living crisis by giving people their own money back. That would be a good budget for Scotland and a good budget for growth, but it will not happen because John Swinney is Rachel Reeves in disguise.
We need both of Scotland’s Governments to urgently prioritise economic growth and to deliver economic stability. The Scottish Conservatives are pro-growth, we are low-tax and we are on the side of workers and businesses.
I move,
That the Parliament believes that the UK Budget should be an opportunity to promote economic growth, deliver investment in Scotland and address the alarming increase in economic inactivity; recognises the importance of backing working households, easing cost pressures and protecting Scotland’s rural economy; believes that ending the Energy Profits Levy is essential to secure investment in the North Sea; emphasises that the UK Labour administration’s tax rises on family farms and small businesses are deeply damaging and should be reversed, and warns against further tax rises; calls on the Scottish Government to prioritise growth with measures to improve productivity, support small businesses, tackle soaring welfare costs and strengthen Scotland’s fiscal position, and believes that both of Scotland’s governments must urgently prioritise economic stability, investment and opportunity as the foundations of sustainable public services within the UK.
16:09
There are many reasons to be optimistic about Scotland’s economic performance and potential. We have a fundamentally strong and resilient economy. Since 2007, gross domestic product per person in Scotland has grown by more than 10 per cent, compared with less than 7 per cent across the UK as a whole. Productivity has grown at an average rate of 0.9 per cent per year, compared with the UK average of 0.3 per cent. We have a highly skilled population and world-class sectors in food and drink, financial services, gaming, digital technology and energy. We are second only to London and the south-east of England when it comes to attracting foreign direct investment.
Will the minister take an intervention?
I do not think that I have time.
There is no time in hand—it is up to the member.
Be very quick.
If what the minister says is correct, why did Professor Sir Anton Muscatelli make the point in his report that was published just two weeks ago that, had the Scottish economy grown at the same rate as the UK economy, we would have an extra £1 billion in tax revenues to spend? Was he wrong?
If we look back at the data for the most recent full year—that is, 2024—we will see that the Scottish economy grew faster than the UK economy as a whole. The latest figures show that Scotland’s unemployment is lower than that of the UK and that Scotland’s median monthly pay is higher. Just in the past year, the Scottish National Investment Bank, which was created by this SNP Government, supported more than 3,000 jobs and £168 million of supply chain spend in Scotland. The Techscaler programme that was created by this Government supported almost 1,700 individuals, representing more than 1,200 start-up and scale-up businesses. Over £500 million of investment in net zero, which was committed by this SNP Government, will unlock infrastructure and manufacturing facilities that are critical to growing the offshore wind sector.
There is much that we can be positive about. However, despite all that, there is no doubt about the challenge and difficulty that our economy has experienced over the past few years due to a combination of Brexit, Covid and the war in Ukraine, with the resultant energy crisis and inflation shocks all driving up the cost of living. Labour’s damaging tax on jobs and the increase in employers’ national insurance contributions have had a deeply damaging impact on our economic prospects.
The Scottish Government is doing all that it can to support the transition to a low-carbon economy, but the UK Government’s current approach to the energy profits levy is driving an accelerated decline that places the energy transition at risk and destabilises economic growth opportunities. Industry leaders across the oil and gas and renewables sectors have united in calling for reform of the EPL, a levy that critics say is risking the loss of 1,000 direct and indirect jobs every month.
However, the chancellor confirmed today that the levy will remain in place until 2030. We are all dearly concerned that that approach will have further consequences for business confidence, jobs and investment across Scotland’s energy sector over the coming weeks, months and years. We continue to call on the UK Government to be sensible and to bring forward a sustainable fiscal regime that supports the important just transition.
Meanwhile, businesses continue to face significant challenges. Those include high energy costs, which deter investment, drive higher production costs and weaken industry. That has an impact on the growth of industry across the wider economy.
rose—
I am afraid that I do not have any time left in the short time that is available.
It remains deeply disappointing that energy bills are £500 higher than the Labour Party promised before the UK general election. That has contributed to the cost of living crisis, which has also had an effect on our high streets and hospitality sector.
I must also mention the significant impact of Brexit, which has caused the primary and most damaging impact on the economy and public finances in the past decade. The conspiracy of silence from Labour and the Tories on the damage that Brexit has caused remains jaw dropping. The House of Commons library estimates that Brexit is costing the Treasury up to £90 billion a year in lost revenue, and that, for the average Briton, there has been a hit to GDP per head of up to £3,700. Brexit has generated significant barriers to trade and investment. The opportunities that would be presented by open access to a market of 450 million people are enormous for an outward-looking economy such as Scotland’s, which is why this Government believes that Scotland must rejoin the European Union as an independent nation.
Scotland is a country of tremendous opportunity, and this Government’s economic strategy outlines how we will utilise our strengths to do everything in our power to grasp that opportunity. We want the ability to ensure that Scotland’s renewable energy wealth delivers lower bills for households and businesses, a transformational competitive advantage for Scotland’s economy, restored membership of the EU and full self-government with independence, which will allow us to take control of our own economic affairs. That golden combination is how we will transform our economy, improve the lives of our people, protect the planet and put more money in people’s pockets.
I move amendment S6M-19895.3, to leave out from “and address” to end and insert:
“, including through delivering investment that can be utilised for public services such as Scotland’s NHS and to help Scotland’s journey to net zero; further believes that a fiscal regime for offshore industries must support a just transition for oil and gas workers, and support the development of Scotland’s key renewables sector; notes that UK Government tax changes on family farms and employer national insurance contributions have impacted Scotland’s economy, and calls on all parties to support efforts to rejoin the European Union and the European Single Market, recognising that Brexit has been the primary and most damaging impact on the economy and public finances in the last decade.”
16:14
Today’s budget from the Labour UK Government is a budget for the good of ordinary people across our country, and Labour values run right through it. It will lift 95,000 Scottish children out of poverty, provide vital help with energy bills and raise the minimum wage. There is an additional £820 million for Scotland in the budget, which was secured by Scottish Labour and Anas Sarwar. Since Labour came to power last summer, Scotland’s budget has been transformed by £10.3 billion in additional funding.
I thank the Scottish Conservatives for this early opportunity to discuss the budget as we all begin to analyse the impact that it will have on our economy, our family lives and our public services.
Will the member take an intervention?
No, thank you, sir.
My thanks end there. The Tory motion is an exercise in brass-necked gaslighting of our country. It was the Tories who crashed the economy three years ago and sent inflation, mortgages and bills soaring. It was the Tories who spent the national reserve three times in the first quarter of 2024, burning through money that the country did not have.
Not content with 14 years of growthless ideological austerity, which left the fabric of our country weakened and hobbled our economy and productivity, the Tories sought to salt the earth at the end of a session of Parliament when living standards had fallen for the first time since the Napoleonic wars.
The mammoth task that the Chancellor has faced since she entered the Treasury on 5 July last year is the result of those 14 long years of feckless, immoral incompetence from ever more rabidly right-wing Tory leaders who partied while our old folk died; who corruptly lined the pockets of their rich friends; who broke the bonds of trust between citizens and politics in this country; who committed a historic act of national economic self-harm in Brexit; and who laid our nation’s reputation low across the world. May we never see their likes again.
People continue to struggle with that legacy and the cost of living in this country. However, in the face of that horrendous legacy, the job of rebuilding has begun and real progress is being made. Since the general election, there have been five interest rate cuts, which have taken nearly £1,500 off the average annual cost of a mortgage. Inflation is coming down. The average wage has increased by £1,800, and that will grow further, given the increase in the minimum wage that is provided for in the budget today.
We have always said that there was more to do on energy bills, which is why I am so pleased to see that, in today’s budget, the Chancellor announced that this Labour Government is cutting the cost of energy bills by £150 every year. Alongside the warm homes discount, that will mean that Labour has delivered £300 off energy costs for the Scots most in need.
[Made a request to intervene.]
I am happy to give way to Mr McMillan.
The member is happy to take an intervention from someone who is not in the chamber.
I did not know that he was not here.
We do not seem to have Mr McMillan now. Please just continue, Mr Marra.
What a shame. On we go.
The Chancellor and the whole of the Labour Party have been very clear from the start that none of this is easy and that a country cannot be fixed overnight.
Will the member give way?
Certainly, Mr Hoy.
Does Mr Marra believe that Rachel Reeves will be in her job this time next year?
Absolutely. I dearly hope that she is, because today’s budget is an incredibly strong budget, and she delivered an incredibly strong budget speech. It has set a new trajectory for the country. It has made strategic interventions on poverty for people in Scotland, and it is setting the economy on the right road.
Will the member give way?
No, thank you, sir.
The member is about to conclude.
Populists of every political stripe might pretend that there are shiny, easy answers to the challenges that are facing our country, but serious, decent people know that there are not. The hard work of governing is to deal with the world as it is and to work to make it better.
I move amendment S6M-19895.4, to leave out from “UK Budget” to end and insert:
“delivery of a successful Scottish economy depends on stability in the UK public finances and a long-term plan to invest for future growth; recognises the challenging global circumstances, including the continued threat of tariffs, which create uncertainty and risk deterring investment and dampening growth; notes with concern that lower earnings and employment growth in Scotland compared to the rest of the UK are reducing the impact of tax policy in Scotland; agrees with the Auditor General for Scotland that ‘the Scottish Government has not set out clearly enough how it plans to address this economic challenge in future years, and what this would do to support fiscal sustainability’, and calls on the Scottish Government to work in proper partnership with the UK Government to deliver stability, long-term growth and prosperity across Scotland.”
16:19
Since Russell Findlay took over the leadership of the Scottish Conservatives, he has taken the party into outright rejection of science and evidence and full-on climate denial, suggesting, as the motion for debate does, that understanding the implications of climate science and the importance of meeting international legal obligations is ideological. I would have thought that would horrify traditional Conservatives, who respect experts, science and international law.
Will Lorna Slater point me to any such denial of science? I do not recall any such interjection on my part.
Russell Findlay has come to the chamber several times, including in supporting the two Conservative motions today and on at least two occasions at First Minister’s question time, to challenge the climate science around the extraction of oil and gas and the need to stop burning fossil fuels. We absolutely and urgently need to stop burning fossil fuels in order to prevent global heating beyond 1.5°C. If Russell Findlay is in full support of climate science, he will understand that the recommendations that are made by the Climate Change Committee must be taken seriously and implemented. That means no more expansion of oil and gas extraction in the North Sea.
Does Lorna Slater not see—
Will the member take an intervention?
Certainly.
Which member is Lorna Slater giving way to?
I will give way to Russell Findlay.
Does Lorna Slater not see the difference between supporting Scotland’s oil and gas industry, which we are proudly and rightly doing, and supporting the journey to net zero in a responsible and affordable fashion?
I will come on to the state of Scotland’s oil and gas industry, why it is in decline and what we must do about that in detail in my closing remarks, but first I will take the other intervention.
On the science, the UK Climate Change Committee states unequivocally that carbon capture and storage is “essential” to achieving net zero. Do the Greens support the scientists in that regard by supporting CCS?
I am aware of the Climate Change Committee’s recommendation. There are two different types of carbon capture—Fergus Ewing may or may not be aware of the technology. One type involves the theoretical idea that carbon can be stuffed into caverns in the North Sea, which is totally unproven, and we are not sure that it would work at scale.
The other kind of carbon capture is something that can be fitted on to industrial sites to temporarily decarbonise them as the energy system decarbonises. We absolutely support the second type as part of a transition to clean energy. However, until the theoretical notion of stuffing carbon back under the North Sea is proven to work at scale, I do not support that type, because it is not proven to work and it sounds like it could be highly dangerous and risky. That is my answer to that question.
Let us talk about growth. The Tories, the Lib Dems and even the Labour Party have the peculiar idea that we need to have growth before we can fix any problems, whether the problem is poverty, quality of life or climate change. The answer is always that growth will fix it, but that just is not correct. Let us compare Japan, a low-growth country, with the USA, a high-growth country, as examples. Japan—the low-growth country—has lower rates of crime, lower inequality, better public transport, much lower maternal mortality and universal healthcare. High growth has categorically not enabled the USA to tackle any of those problems. In fact, as the benefits of growth in the US have largely been felt by the richest, it has actually made the problems of inequality worse.
It simply is not true that the best way to run an economy is to try to maximise growth. The way to run an economy is to balance opportunity and obligation, so that everyone can thrive, and to invest in the commons—that is, the things that contribute to everyone’s wellbeing, such as effective public services, public infrastructure and transport.
Ms Slater, please conclude.
We are all richer when we have good universal healthcare, reliable trains, and clean air and water.
I move amendment S6M-19895.1 to leave out from first “believes” to end and insert:
“calls on the UK Government to deliver a budget that supports a fairer, greener economy for Scotland by introducing an annual wealth tax on the wealthiest 1% of households in the UK, raising between £70 billion and £130 billion a year, to invest in communities, public services and climate action across Scotland, including reducing the cost of energy and other essentials for those who are struggling with the cost of living and inflation.”
16:23
I apologise to colleagues in the chamber for dialling in remotely today due to illness.
This is a worthy topic of debate, particularly today of all days, on UK budget day. The Scottish export statistics that came out yesterday revealed that our total international exports have fallen by 4 per cent in real terms since 2018. As we know, Scotland’s food and drink exports are declining at a rate of around 5 per cent.
With that in mind, particularly on budget day, I wanted to see a cut to spirit duty in Labour’s budget in order to support our whisky industry. We should also have seen reforms to agricultural funding, to ensure that our Scottish produce thrives and is available on supermarket shelves right across the world, and support for our north-east industries. Instead, there has been a raft of announcements, including a pay-per-mile penalty on electric cars, which I have to say is bizarre given our so-called net zero ambitions as a country.
There are also hidden tax rises with the income tax threshold freeze, not forgetting the top-down tax that tells people what they can and cannot drink. The reality is that the budget has not provided an opportunity to grow Scottish industries, and I do not think that it will do anything to drive the economic growth that we need. That is not my view; it is the view from our key sectors. The comments that have been made since the budget was announced this afternoon from bodies such as the Scotch Whisky Association or Offshore Energies UK tell their own story about how industry has reacted to the budget.
Of course there is never enough money, but it is important that Scotland gets its fair share of any consequentials that arise from today’s budget. We desperately need that. I say that from my time on the Public Audit Committee in relation to our perilous college sector, the national health service and the state of our roads: we see it all around us in our public services. We do not simply tax and borrow our way out of the problem.
The reality is that we are not growing fast enough. I say politely to Lorna Slater that growth is not a bad thing if it is done fairly and with fairness at its heart. It is possible to grow the economy—it is not just possible, but necessary. Our economy grew by 1.2 per cent in 2024, and we had just 0.5 per cent growth in 2023. We can compare that with the figures from countries such as Spain, with more than 3 per cent growth—and Malta has 6 per cent growth. Other countries are keeping pace.
Will the member take an intervention?
I do not have a lot of time—I apologise.
There is a sense of urgency about the situation. Audit Scotland has told us there is a massive funding gap in the Scottish budget, which will be around £5 billion by 2029. My concern is whether we will have years of cuts to public services to fill that black hole.
I would have liked to have seen more in the UK budget today about rejuvenating and reviving our city centres, town centres and high streets, because many of them sit empty and derelict. I was pleased to see some money for Inchgreen in Greenock, but it is a drop in the ocean compared with what is actually needed to revive areas such as Inverclyde. There are 91 vacant retail units in my home area of Inverclyde—91 units sitting empty, without creating employment or raising taxes. In North Lanarkshire there were 382 vacant town-centre units. We can fill those spaces with economic activity, with a boost and a boon to small business growth. I would really like to see that.
The UK budget was a bit of a missed opportunity to galvanise the economy. We need to grow the pot of money that all Governments need to invest in public services. All eyes will now be on the Scottish Government and its budget. It will have some tough choices to make as well.
I hope that, if nothing else, we can all agree today that Scotland can and should be a powerhouse of economic growth across a wide range of key sectors. I hope that that is a shared ambition that will require a grown-up conversation about how we fund public services, how we finance capital investment and how we trigger a small business and start-up boom.
I move amendment S6M-19895.2, to leave out from first “should” to end and insert:
“must be a turning point, which delivers real economic growth, tackles the cost of living crisis and seeks a closer relationship with Europe; understands that far too many families are struggling to get by and believes that businesses have been held back by the increase to employer national insurance contributions; calls for an emergency plan to give immediate help through a 5p VAT cut for hospitality, accommodation and attractions until April 2027, alongside the removal of the main renewables obligation from people’s electricity bills, funding both through a new windfall tax on large banks and saving households £270; notes the analysis by Audit Scotland that shows that there is a projected deficit of £4.7 billion in the Scottish Budget by 2029-30, for which ministers have not provided detailed plans, and believes that Scotland deserves better than this, but that it needs to be a change with fairness at its heart.”
We move to the open debate.
16:28
Today’s UK budget appears to be another missed opportunity to tackle the biggest challenges standing in the way of the economic growth that Scotland should be capable of.
A strong workforce is vital for effective economic growth. However, as our motion highlights, there is currently an alarming decrease in economic activity across Scotland. Unemployment has increased over the past year, and a fifth of working-age Scots are economically inactive. Those are far from just statistics; that inactivity means missed opportunities, stalled ambition and lost growth.
To be clear, that is a problem created by both of Scotland’s Governments. The UK Labour Government’s jobs tax is already costing jobs and livelihoods. One in five businesses are claiming that they have already cut jobs due to the national insurance hike. A third of businesses are saying that they plan to cut jobs in the coming months. At the same time, Labour’s Employment Rights Bill will only make it more difficult to provide employment. Instead of strengthening our labour market, the bill risks making hiring more complicated and more expensive. It is little wonder that the Federation of Small Businesses, the Law Society of Scotland and the Confederation of British Industry have raised concerns about the proposals. There is little use in increasing job security if the reforms risk decreasing the number of jobs that are being created and becoming available. Any chancellor who is serious about creating growth should urgently reconsider those anti-business reforms.
Meanwhile, here in Scotland, the SNP’s high-tax agenda has meant that the Scottish tax base has not had the growth that it should have had. Despite having significant powers in relation to employability, the SNP has chosen to prioritise welfare reforms.
As our motion highlights, the welfare budget is rapidly spiralling out of control. The total budget is set to reach more than £9 billion by 2030, which is over £2 billion more than the block grant allocation for social security. The UK Government has already tried, and failed, to control welfare spending earlier this year. As it stands, the Scottish Government has no plan for how to address those spiralling costs—and does not seem to be interested in creating one.
Our motion rightly speaks about the risks in some taxes that threaten opportunities, and the importance of dealing with those risks. We should be backing working households and working people. At the same time, we need to address the spiralling welfare costs that are consuming ever-higher amounts of both the Scottish Government and UK Government’s budgets. We need to deliver reforms that mean that, where possible, people get into well-paying jobs, while ensuring that we target support for people who need it the most. That also means creating more jobs and making sure that there are no anti-growth taxes such as those brought in by the Labour Government.
If the political will existed to do that, members on the Conservative benches would stand ready to work with either Government to ensure that we improve and that those reforms take place. For now, the onus rests on both of Scotland’s Governments to do what is needed to place Scotland firmly on the path to sustainable growth. Doing anything else would be an abdication of responsibility.
16:31
I thank Craig Hoy for bringing forward this debate, which provides us with some limited time for initial reflection on the UK Government’s budget. That is welcome. I begin on an unusual note of consensus: I agree with Mr Hoy—I think that most of us would agree—that the manner in which we have reached this point has been somewhat shambolic on the part of the UK Government.
Notwithstanding that, it would be churlish not to welcome at least one announcement made by the UK Government today: the long overdue reversal of the two-child cap. The Scottish Government has long called for that—the SNP has long called for it. Tremendous efforts have been made by the Scottish Government, such as through the Scottish child payment, that are bearing fruit and having an impact on driving down child poverty. The fact that that measure has been taken should be welcomed.
However, I want to flag some areas of the UK budget where I have concerns. Jamie Greene has already mentioned the first one: the road pricing for electric vehicles seems somewhat counterintuitive when we are trying to move in the direction of tackling climate change. That needs to be explored further.
In relation to the minimum wage, or the misnamed national living wage—I commend Mr Marra for not using that misnomer; the terminology should be changed—there is a missed opportunity in that the age differential remains. It is welcome that the minimum wage level is rising and we should not pretend otherwise, but the fact that it is rising to £12.71 only for those aged 21 and over is a missed opportunity. The independently assessed real living wage—the real, real living wage, independently assessed by the Living Wage Foundation to be the minimum that is required for people to have a decent standard of living—is already £13.45. We should remember that, through the efforts of the Scottish Government and others, Scotland has the highest proportion of working-age population of any UK nation that is paid at least the real living wage.
One other area in which I will flag a note of caution is the extension to the soft drinks industry levy. I think that it is well-intentioned and I understand the rationale for it, but being, as I am, the representative of Cumbernauld and Kilsyth where that great Scottish icon, AG Barr, is located, I am concerned to understand what the implications of the measure might be for AG Barr as an employer. We will have to reflect further on those matters in due course.
The promotion of economic growth is interesting subject matter for the Tories to have chosen today. It was interesting to hear Craig Hoy suggest that there were mistakes made by the Tories in their own record. He did not spell out what any of those mistakes were; I will try to spell out what a few of them might be.
For example, the Institute for Public Policy Research reported the New Economics Foundation’s finding that, in the decade up to 2019, the austerity measures that were undertaken by the Conservative Government—which, I should say, began under the previous Labour Government, although they certainly went into overdrive under the Tory UK Government—cost the UK economy £100 billion. Austerity shrank the UK budget by £100 billion. We had the disaster zone of the Truss-Kwarteng mini-budget, for which no OBR assessment was produced, and which the Tory MSPs wanted to be replicated here. That increased inflation, pushed up mortgage rates, collapsed market confidence and reduced the value of people’s pension pots.
On top of all that, we had Brexit, which the National Bureau of Economic Research has said will, by this year, have reduced UK GDP by between 6 per cent and 8 per cent, investment by between 12 per cent and 18 per cent, and productivity—which, in Scotland, grew by twice the amount by which it grew in the UK between 2008 and 2024—by between 3 per cent and 4 per cent.
Therefore, I think that we should support the minister’s amendment, if for no other reason than that it sets out, quite reasonably, that we should reverse the damage of Brexit and rejoin the European Union.
16:35
If our business and industry leaders were participating in this debate, they would be absolutely seething about what they have heard in today’s budget, such have been the missed opportunities to improve productivity and to increase growth, which were their two big asks, and to lower the tax burden.
Business and industry leaders are really angry about the confusion that has been created over recent weeks by the extraordinary briefings, rebriefings and leaks that we have had from 11 Downing Street, many of which have created considerable uncertainty and anxiety in the financial markets. They are angry about the intention of Rachel Reeves to put billions more into the welfare budget, which is already well out of control, and which comes at the expense of ordinary taxpayers having to stump up for the black hole in the fiscal budget. They wonder why on earth it should become even more comfortable to be on benefits at a time when the promotion of jobs is becoming more expensive.
Business and industry leaders are angry with the UK Government, which imposed a £25 billion bill for employer national insurance contributions—£2 billion-plus of that in Scotland—the effect of which, in rural communities, has been compounded by the pernicious tax on family farms.
Business and industry leaders in Scotland are worried, too, because, in Scotland, there is the same policy pursuit of making welfare more generous in relation to the overall size of the budget. That has already brought very serious warnings from the Auditor General, the Scottish Fiscal Commission and the Fraser of Allander Institute, which have all been warning the Scottish Government for a long time about the folly of its ways—all, apparently, to no avail. Those expert bodies have all made the point that the increased devolved tax rates may have increased revenue in recent years, but that impact has been seriously weakened by the lower growth in earnings and employment in Scotland relative to the UK. In other words, we are paying far more tax but to no real benefit.
Those facts should underpin the approach of the Scottish Government in its own budget, when it comes on 13 January. We cannot have a repeat of what has happened in recent budgets, such as the 8.3 per cent real-terms cut in funding for the economy portfolio that formed part of the budget two years ago and the 20 per cent real-terms cut in college funding that has taken place over the past five years. Those are examples of policy decisions that undermine growth because they undermine jobs and the harnessing of new skills. In the case of colleges, they also undermine some of our local communities, which are desperately trying to address economic inactivity by getting more people back into the labour force.
Let me turn to tax. As I know that the Scottish Government has been told by many senior figures in business and industry, the growing gap between UK Government and Scottish Government tax rates is detrimental to attracting some of the new skills that we desperately need in this country, especially when it comes to new recruitment of middle and higher earners. That is on top of the fact that, as the UK Secretary of State for Business and Trade, Peter Kyle, has admitted, recent UK tax rises have led to an exodus of wealthy entrepreneurs. That is deeply damaging to investment. In Scotland, the difficulty of recruiting middle to higher earners is compounded by the higher rate of land and buildings transaction tax. The UK Conservatives say that it is time to scrap stamp duty. Will the Scottish Government do the same for LBTT?
The Scottish Government maintains that all those effects are offset by free prescriptions and free tuition, but it knows only too well that those are not free at all, as it is all taxpayers’ money that is being shelled out. The Government also knows only too well that the so-called policy of free tuition—which, incidentally, is very discriminatory because it affects only Scotland-domiciled students—is simply not working.
The artificial cap on places for domiciled Scots is a very serious issue with regard to encouraging more graduates to stay in Scotland, and the Scottish Government knows that that is having a detrimental effect on colleges. When it comes to 13 January, just for once, will the Scottish Government listen to what it is being told by the experts—the Scottish Fiscal Commission, the Fraser of Allander Institute and all the experts—because their messages are very stark?
16:40
The budget that was published today can be viewed only in the context of a mandate that was given to the UK Government to provide stable and reliable governance of public finances. As we know from a previous UK Government, a cavalier approach, especially from Liz Truss, led to a disastrous situation in which interest rates jumped and inflation went through the roof. The national reserve was spent three times over, leaving a black hole of £22 billion, which is phenomenal. At best, it could be said that that was reckless; in actual fact, it was incompetent.
However, in July 2024, Labour took the reins. Do not get me wrong; it has been extremely challenging and difficult for the Labour Government. However, since then, interest rates have been cut five times, as has been mentioned; mortgage rates have been reduced; businesses have more money to invest in new technologies; inflation has dropped from over 9 per cent to 3.5 per cent; and the minimum wage will have risen by over 11 per cent in less than two years, helping the lowest-paid earners. Abolishing the two-child cap—
Will the member take an intervention?
I do not have much time and I have quite a bit of my speech still to go.
That is what competent governance looks like. Instead, the SNP Government has proposed unfunded spending demands worth more than £90 billion since Labour won the election while rejecting every single revenue-raising measure that is put to it.
Let me tell you: money disnae grow on trees. Instead of living on fantasy island, the Scottish Government must now look forward with the same ambition and vision that the UK Labour Government has shown and use the opportunity of a new budget to invest in Scotland’s growing industries and people.
As I speak, Scotland is lagging behind England and Wales on regional growth, and median wage growth is stagnating, compared to the UK average, the north-east and north-west of England, Yorkshire and the Humber, the east midlands, the west midlands and Wales, which have captured growing technology and manufacturing sectors with a fraction of the economic levers that the Scottish Government has.
If Scotland had the same growth and investment as those regions, its economy would be larger to the tune of £8 billion, with increased tax revenues to match for further investment in health, housing and education, further enabling growth.
The Scottish Government should start by showing faith in Scottish companies by prioritising them in the way that greater Manchester and Norway have done. Manchester directly awarded contracts for buses to Alexander Dennis, and Norway has done the same with ships built in Glasgow, where the finest ships in the world are built. However, the drive, ambition and creative ideas that Scotland needs from its leaders in this challenging global context are clearly lacking and beyond this very old, tired SNP Government.
16:43
I thank the Tories for bringing forward this debate on the day of the UK Government’s budget. Thanks to the OBR, we all knew what was in the budget before it was presented—the whole process has been shambolic.
Some measures are welcome. The lifting of the two-child benefit cap is obviously welcome, but this is not a budget for growth. Growth is forecast to slow, productivity to fall and inflation to rise. The Resolution Foundation published its analysis today, forecasting that disposable income will rise by 0.5 per cent per year during this Parliament—the lowest increase since the 1950s.
Let us look at the state of the UK economy today. The UK national debt is at £2.7 trillion, which is nearly 100 per cent of GDP. We hear from Craig Hoy and his colleagues about responsible management of the economy. The national debt was £1.1 trillion in 2010 and rose to £2.15 trillion prior to Covid—that is the price of Tory mismanagement. Inflation is at the highest rate in the G7. Just today, the Scotch Whisky Association said that the budget would “needlessly cost jobs” in Scotland.
Will the member take an intervention?
I have only four minutes. I am sorry.
At the same time, the Bank of England is selling gilts that were held under the quantitative easing scheme. More overseas owners have stepped into that market, accounting for about a third of it. The OBR has warned that that could make the UK more vulnerable, and gilt prices have fluctuated today.
Against that backdrop, Britain’s annual debt interest spending has reached £100 billion. That represents £1 of every £10 that is spent by the Treasury, adding to budget pressures.
The Office for Budget Responsibility has downgraded its forecast for UK growth in each year to 2030-31, as part of a review that was undertaken before the budget.
It is clear that the lack of investment under Tory Administrations undermined the UK’s potential economic expansion. Just last month, Rachel Reeves said that the Office for Budget Responsibility would be
“pretty frank”
that Brexit had had
“a bigger impact on our economy than even was projected”.
I have not heard a word from either the Tories or Labour colleagues about that.
A new study by the US National Bureau of Economic Research has found that the economic damage since the 2016 vote resulted in a cut to the UK’s GDP of between 6 to 8 per cent. A new analysis by the House of Commons library has estimated that Brexit is costing HM Treasury up to £90 billion a year in lost tax revenue. There is still not a word from Labour or Tory colleagues about that. Brexit has hit GDP per head in Britain by between £2,700 and £3,700 per year.
The SNP is clear in our amendment. We call on
“all parties to support efforts to rejoin the European Union and the European Single Market, recognising that Brexit has been the primary and most damaging impact on the economy”.
In my constituency, the biggest drag on growth has been the UK Government’s tax changes for family farms. Douglas Alexander and I recently met NFU Scotland in East Lothian. The NFUS told him that the inheritance tax changes were preventing investment from coming into the sector. Douglas Alexander turned around and said that, at that time, he—the Secretary of State for Scotland—had no influence over the Treasury on that point. That is obvious.
The renewables sector is key in Scotland, including in East Lothian. Scottish Renewables has called on the UK Government to increase the ambition for offshore wind in allocation round 7. That is incredibly important. Claire Mack said:
“It is critical that the UK Government’s upcoming auction rounds enable Scotland’s offshore wind pipeline to move into construction so that their full value can be realised for consumers and communities.”
It is a fantastic growth opportunity.
The Scottish Government has a strong record on economic growth. Since 2007, GDP per capita in Scotland has grown by 10.3 per cent, compared with 6.1 per cent at the UK level. Scotland is the top destination in the UK for foreign direct investment outside London for the 10th year in a row and, last year, Scotland secured nearly one in six of inward investment projects in the UK.
I ask members to support the amendment in Ivan McKee’s name.
Fergus Ewing is the final speaker in the open debate.
16:47
Admittedly, it was before the Deputy First Minister was born, but when I first campaigned in a parliamentary by-election—in Dundee East, when Gordon Wilson narrowly failed to get elected in 1973—our slogan was, “It’s Scotland’s Oil”.
When I had the privilege to be the energy minister—I also had responsibility for business, tourism and enterprise—from 2011 to 2015, I was proud to be part of a team that said that the primary objective of the Government was economic success for our country. Everything else comes from that. All the revenue for public services comes from a successful economy. That is so obvious, is it not? Well, it seemed so.
When I was energy minister, I worked with leading experts such as Sir Ian Wood, and we quickly formulated maximum economic recovery as our policy—a policy so good that it was filched by the UK Government. I have no objection to that piece of political larceny—it was a good theft. I should say that the prime influencer was Sir Ian Wood, not humble me. However, it was the right policy then, and it is the right policy now.
I say to the Deputy First Minister that I genuinely fear for Scotland over the next five years, because although people believe that we must go to renewables, that will take a long time—much longer than people say—and we need oil and gas. There is a consensus among ordinary people that that is the case.
Back in 2022, I was proud to bring together a cross-party group—Alistair Carmichael, Amber Rudd, Charles Hendry and Brian Wilson—and, in Aberdeen, we made a declaration: we need both. During my remaining time, which is not long, I want to talk about the more subtle point that the group made: how is the UK going to afford the just transition?
The London School of Economics estimates that the cost will be £1 trillion, and the Climate Change Committee estimates that it will cost £50 billion a year. I have seen even higher figures quoted to upgrade the national grid. They are on a colossal scale and would have been unimaginable 20 years ago.
Will the member take an intervention?
I am sorry, but I want to develop my argument in the short time that I have.
The Government and the taxpayer have not got the money for this. We have got to be quite clear that the economic problems that we face in Britain, given the level of gross domestic product per head and the level of borrowing per head, are unprecedented. Unless we draw in our horns, spend money more effectively and avoid taxing everything in sight, we are leaving a bitter legacy for our children. Is that responsible? No, it is not.
My recommendation is very serious. We need oil and gas. As Gary Smith—a fine campaigner for the industry—says, the oil and gas industry is not the enemy. As was argued earlier by Douglas Lumsden and Liam Kerr, the industry supplies just about everything that we need, including anaesthetics, incidentally.
Only by working with the industry can we raise money from oil revenues—£40 billion from Campbell Fuel and the Rosebank oil field alone. Perhaps we can mandate oil companies to invest in carbon capture and storage. If we do that, with the expertise that will remain in Aberdeen, although not for much longer, we can develop world-leading expertise in CCS in the North Sea. As we did with subsea expertise in the North Sea, we can export that expertise all over the world and create something out of nothing. That is the only way that it can happen.
The two Governments need to start to wake up and smell the coffee. We need more exploration and a fair tax system. The EPL must go. It is as plain as a pikestaff: if that does not happen, we are in deep, deep trouble.
16:52
There have been some pretty good, but still predictable, speeches in the debate. We have heard everyone blaming everyone else for the woes of the world, as always, but when you talk to people in the real world, they only want both of Scotland’s Governments to get on with the job of making sure that our economy is surviving and thriving. Scotland has bags of opportunity up and down the country.
As I said in my opening speech, we have a strong food and drink industry, which includes everything from distilleries, fisheries, our farms and food processing. We all have those in our constituencies and regions. There are 17,000 businesses in the sector, employing 123,000 people, and there is a turnover of nearly £20 billion.
That is a powerful foundation for a small country to work from, but we have not only food and drink; we also have our fintech, renewables, pharma, TV and film, and, yes, oil and gas—and I cannot forget our world-famous tourism offering. We need to do more of what we are good at, but that should not be the height of our ambition. We have to grow our new and emerging industries—biotech, defence, data centres and those involved in the artificial intelligence revolution. Unfortunately, we heard very little discussion of that in today’s debate or during the budget at Westminster earlier. My appeal to the Scottish Government, as well as to the UK Government, is to focus on how we help Scotland and its economy do more of what it does best.
The problem is that we cannot grow any of those industries without the right talent, and I am afraid that the picture there is quite worrying. We have a massive skills shortage. The Scottish Government’s own employer skills survey showed that there are 20,000 skills shortage-related vacancies in Scotland. Clearly, businesses are struggling to fill key roles, particularly in the engineering sector, which needs about 58 per cent more engineers over the next couple of years. Much of that demand will be met by those who have done apprenticeships, and it is no surprise that we have a skills shortage when our colleges are making teachers redundant and cutting courses. Many of them have hit financial walls—a point that was raised by Liz Smith.
The CBI is calling for a Scotland-wide strategy to develop workforce skills. We can go further if people want to change careers and retrain in tech or AI, and we can reform our planning system to get infrastructure projects off the ground, because there are far too many bottlenecks in the system.
We should not forget about transport and connectivity, and I make no apologies for raising those issues. Trains and buses are one thing, but we will unlock potential by fixing our ferry network, getting those using the M8 moving, dualling the A9, getting people to work and keeping people connected.
Governments needs to be honest with people. If they are going to take money from people’s pay packets, they need to spend that money wisely. So far, people have not seen that from either of their Governments.
16:55
Fergus Ewing overlooked the dangers of runaway global heating when he talked about the costs. He is right that the costs of transitioning are expensive, and the whole of our society and economy must focus on that issue, but the costs of not transitioning far exceed the costs of a managed and just transition.
There has been talk in the chamber about plastics as by-products of oil and gas. Plastics are ubiquitous in our society and are generated as a by-product of oil and gas because they are so cheap. We pull up oil and gas literally to burn most of it, and some of it is turned into plastics as by-products, but I reassure members that plastics can be synthesized from any hydrocarbon—it does not have to be oil or gas. We use oil and gas for anaesthetics and other by-products just because so much of them goes to waste. Those chemical processes could be changed and applied to other hydrocarbons in the future, including for recycled and waste plastic. Members do not need to worry—we do not need to keep pulling up oil and gas in order to keep the plastics industry going. We can adapt.
The Conservative motion not only does not take climate risk seriously but does not deal with the reality that, however much Craig Hoy wishes it was not so, the North Sea basin is in decline.
Will the member take an intervention?
I will not take any more interventions.
Production peaked in 1999, at 4.4 million barrels a day. The figure is now down to about half a million barrels a day, so there has been an annual decline of 7 per cent, and each barrel is more expensive to extract than the last.
Will Lorna Slater take an intervention?
No. I took loads of interventions in my opening speech.
The oil and gas sector is not a growth industry in the UK, and an industry that is experiencing such a precipitous decline cannot form the basis for the growth that the Tories want. The Scottish Conservatives do workers and investors in the industry a disservice by pretending that any amount of policy change or investment can take the industry back to where it once was or put it on a growth trajectory. Until they accept that the industry is on its way out, they cannot develop transition plans for the alternative industries that will grow and provide a stable future for the economy.
We owe it to the people who work in the oil and gas industry and the communities that depend on it to be honest about the future, which is not in oil and gas. It is high time that we accepted that and came up with alternative plans, or we will have more communities being suddenly surprised, as the ones that depend on Grangemouth and Mossmorran have been. We knew for a long time that those communities needed alternative plans, and pretending that the oil and gas industry can carry on for ever does them a disservice.
The alternative involves an economic transformation towards a net zero economy. The CBI reports that the UK’s net zero economy has become a powerhouse of job creation and economic expansion, with 10.1 per cent growth in total economic value being supported by the net zero economy since 2023. There is the growth that the Conservatives have been looking for—it is in the net zero economy, not in the oil and gas industry, which is declining by 7 per cent a year.
The CBI also says that, in Scotland alone, the net zero economy contributes £9.1 billion—about 4.9 per cent of the country’s total gross value added—and supports 100,700 full-time jobs, so nearly one in five Scottish workers are employed in a role related to net zero. That is what the future looks like, and it is where investment would create the foundation for a successful long-term economy.
Flogging the dying horse of oil and gas is not only endangering our future; it is not preparing us for it, with Scotland risking being left behind as investment moves into technologies and industries that are designed for a net zero world.
16:59
The Labour Government is bringing stability to our national finances in a turbulent world, and it is right that we strike a balance between what the country can afford and when it can afford it. I am therefore delighted that, today, our Labour Government scrapped the two-child cap. As a result of the stability that is being increasingly won, that legacy of the Tories has finally gone.
Has Mr Marra had a chance to look at business reaction to the budget today and the comments from the Scottish Chambers of Commerce? The SCC’s Liz Cameron has described it as a “disappointing and damaging” budget that puts business on the brink. Where are the member’s pro-business credentials now?
As, I am sure, Mr Fraser might want to acknowledge—I said this to Mr Hoy earlier—people often tell us to look at the markets, and the pound is up and the cost of borrowing is down since the chancellor took her seat. It is absolutely clear that the budget has received a positive reception in the marketplace, and rightly so, because it brings stability to the public finances.
Scottish Labour has consistently called for the scrapping of the two-child cap, but, more importantly, it is something that we have worked to deliver. I pay tribute to Anas Sarwar and Paul O’Kane, who have worked consistently, behind the scenes and in front of cameras, to tell the story as to why that should happen.
I personally made the case to the chancellor on behalf of the more than one in four children in my home city of Dundee who are growing up in poverty. Degrading, grinding child poverty is a moral offence that limits the life chances and potential of far too many in Scotland, and the extreme cost of dealing with the consequences of child poverty has an impact on our public finances that lasts for decades. Scrapping the two-child cap alone will lift 1,000 children in Dundee, and 95,000 across Scotland, out of poverty. To be frank, that is why I am in Parliament, doing this job. That progress is won through rebuilding the foundations of our economy and the stability of our public finances. It is diligent decency, it is right and it is just.
This Labour budget redistributes wealth. In supporting working people, it gives a helping hand to those with the least and increases the minimum wage, which will benefit 200,000 of the lowest-paid Scots. Introducing a mansion tax—something that the SNP Government has, so far, refused to do—will mean that owners of properties that are valued at more than £2 million in other parts of the UK will pay their fair share. There is also the first-ever permanent real-terms increase to the universal credit standard allowance. Those are Labour choices, but they can be made only because of the tough choices that have been made since July last year.
Paul McLennan was right to highlight the size of the public debt across the UK. I recommend to him an instructive video, “Britain’s debt, explained with custard creams”, which shows how we got to that position. Some of the culprits are sitting on the opposite side of the chamber. The budget also delivers increased headroom, which—to be frank—we need in order to ensure that we can bear down on that public debt in the long run.
I agree with my colleague Davy Russell, who was right to ask whether the SNP should reflect on whether it can call itself a good-faith partner in that process. In the past year alone, the SNP has made in excess of £95 billion of spending demands of the UK Government while, at the same time, opposing every single revenue-raising measure.
Ivan McKee talked about wondering where the money comes from, and he mentioned tax rises. That is what raises the money, Mr McKee. You have to put in place the tough decisions around taxes to get the £10.3 billion—
Through the chair.
—of extra spending for the Scottish purse.
Will the member take an intervention?
No, thank you, sir.
The SNP are not serious people, and their own woeful record of financial mismanagement and incompetence proves it.
More than £6.7 billion of money has been wasted on ferries that do not sail, prisons that do not get built and ever-increasing Government largesse, not to mention the three chaotic emergency budgets. If SNP members want to talk about stability, I point out that the Scottish Government has had three emergency budgets in subsequent years. To top it all, there is a £1 billion underspend, although SNP members cry “Austerity!” at every opportunity.
Scots are sick of the tired SNP Government. In 2026, they will have the chance to vote for a Scottish Labour Government that will work in genuine good-faith partnership with the UK Government to grow our economy and deliver for the people of Scotland.
17:03
I know that members will agree that it is always nice to start an economy debate with a bit of positivity, which has been sorely lacking so far this afternoon.
Looking back at the journey that the Scottish Government has been on over the past few years, there are some very encouraging statistics that reflect the creativity, brilliance and vision of Scottish business. Back in 2020, we set out a vision to establish Scotland as one of Europe’s fastest-growing entrepreneurial economies. The latest Tech Nation report shows that Scotland is by far the fastest-growing major entrepreneurial economy in the UK, and among one of the most dynamic in Europe, growing at an annual rate of 19 per cent and outpacing the wider UK at 12.5 per cent, France at 12 per cent and even Sweden—one of the world’s most admired start-up economies—at 10 per cent. I think that that illustrates what we can do when we work closely in partnership with the drivers of economic growth, which are our businesses, our workforce, and our wonderful founders.
The debate was a characteristically Labour moment, I felt. If the Tories’ time in office was characterised by arrogance and frequent bouts of ineptitude, then Labour’s time in office has been incoherent and confused. It is worth remembering why millions of voters backed Labour last year. Many of them had high hopes that change would happen.
[Made a request to intervene.]
I have only four minutes.
Many believed that Labour’s manifesto would deliver economic growth and prosperity, and many believed and hoped that the party would be different. The only change that we have seen is that Labour has frequently changed its position, sometimes within days. I think that it would be fair to characterise its manifesto more as fiction rather than non-fiction, and there has been a constant saga of U-turns and broken promises.
Many people have commented that the budget process has been absolute chaos from start to finish. Every time the chancellor did an interview, she raised the prospect of a new tax. That is not just bad politics; it reverberates across the economy and creates huge unease and uncertainty, when we know that the economy thrives on certainty. That is part of the reason why businesses, some of which have been quoted already in the debate, have been so critical of the UK Government’s budget.
I also know that many people voted for Labour because energy prices were one of the single most challenging costs that households were grappling with. They hit people hard. I remember sitting next to a senior Labour MP who promised that Great British Energy would reduce people’s bills by £300, which perhaps tells us how much thought Labour had given to designing GB Energy prior to the election. However, UK household energy bills are now £340 a year higher than the Prime Minister promised, even after today’s announcement.
As we have heard in the debate, the UK Government is not even pretending to deliver on its promises. It is giving all sorts of reasons for that, not least the legacy that was left by the last Government. However, there is a cost to the broken promises and ideological incoherence.
One of the most obvious costs is that—despite most parties agreeing that the energy profits levy is guaranteed to cost thousands of jobs, not just in the north-east, but elsewhere—the UK Government has not offered any hope of delivering a change to the tax before redundancies take place. In other words, it is waiting for thousands of people to lose their jobs before it replaces the energy profits levy. The UK Government seems to be interested only in policies that suppress the job market, hit family firms and family farms, and cost people their jobs. The rhetoric from both parties that are sitting opposite me is undermined by the reality of what they have delivered while they have been in Government. I think that the people of Scotland can see through that.
I call Murdo Fraser to wind up the debate.
17:08
I will try to wind up the debate and respond to a few points that have been made. I have to start with the Deputy First Minister. I noticed that in her remarks she referenced Tory ineptitude. I wonder whether she has glanced at the Business Bulletin for today and tomorrow and seen that we will be spending the rest of this afternoon and tomorrow afternoon trying to fix a mess that is of the SNP’s making. Perhaps the Deputy First Minister needs to examine the beam in her eye before she extracts the mote from others.
I will use four words: Liz Truss; Kwasi Kwarteng.
Well, Presiding Officer, I will mention Derek Mackay in response to that.
We are here to debate the Labour budget. As Craig Hoy said, the handling of the budget—never mind the detail for a moment—has been absolutely disastrous. We have had briefings and counter-briefings, with the chancellor appearing on television one day saying that she was going to do one thing and then, three days later, changing her mind—income tax was going to go up, then it was not, and so on. The chaos has been deeply damaging to the economy, as my colleague Liz Smith said. Andy Haldane, the former chief economist at the Bank of England, said that the situation was a “fiasco”, that it has been “costly for the economy”, that it has
“caused paralysis among business and consumers”
and that it is
“the single biggest reason why growth has flatlined.”
That is true. The uncertainty has been deeply damaging.
Before the budget, we already had the largest tax burden increase in UK history. The country is facing a £33 billion fiscal gap, which is due to profligate spending by Labour. Despite its promises to cut spending, Labour’s welfare changes are actually increasing it. I say to Michael Marra that UK borrowing costs are surging to a 27-year high under Labour, with 30-year bond yields higher than when Liz Truss was Prime Minister.
Let us leave aside the fantasy story that we heard from Michael Marra and look at Labour’s true track record. Economic growth has stalled, with the economy barely staying out of recession. When she presented her budget last year, Rachel Reeves promised that she was going to fix the economy and sort out the public finances. However, she did the opposite. The increase in employer national insurance has been disastrous. We have seen an increase in unemployment to its highest level since Covid, and businesses complain that it is a literal tax on jobs. The Understanding Scotland economy tracker shows that 73 per cent of Scots expect the country’s financial situation to deteriorate in the next year, and 69 per cent say that it has got worse over the past year, thanks to Labour. Meanwhile, the public finances are in a dreadful state, with the Institute of Chartered Accountants in England and Wales warning that the UK is on an unsustainable path.
Labour broke its promises to business, to pensioners, to farmers, and to the WASPI women—women against state pension inequality. Now we have the budget headlines from today. Income tax and national insurance thresholds are frozen—that also means a broken promise, because taxes are going up for working people. Taxes on income from dividends, property and savings are up. There is a new pay-per-mile levy on electric cars, which Jamie Greene and Jamie Hepburn referred to. Someone who has an electric car and lives in a rural part of Scotland will be paying through the nose, thanks to the choices that have been made by Labour. There is an increase in spirits duty. The number 1 ask of the Scotch whisky industry was a freeze on alcohol duty, but what has Rachel Reeves done? She has increased it and slapped on more tax. On that point, I remind members of my entry in the register of members’ interests. According to the OBR, the tax burden is to hit 38.3 per cent of GDP by 2030-31—an all-time historic high—which could distort or constrain economic activity by more than expected. All of that is to pay for more welfare spending, which will be up £11 billion by 2029-30.
Growth is down, productivity is down, inflation is up, taxes are up, spending is up and borrowing is up. We have no new support for the oil and gas sector, no new oil and gas licences, and the EPL is being extended and will remain in place, even though the OBR says that it is unsustainable.
Let us not forget the SNP record, which I will address in the short time that I have remaining. Earlier, I reminded Ivan McKee that, over the past decade, the Scottish economy has grown at one half of the UK rate on average. According to Professor Anton Muscatelli’s recent report, that is costing the Scottish budget £1 billion a year in tax revenues.
The SNP has taxed business in Scotland more than they would be taxed elsewhere. Retail, hospitality and leisure businesses, which are already being squeezed due to a lower consumer spend in Scotland, and which have actually been given a bonus in England by Rachel Reeves today, are paying much more than their counterparts south of the border. It is little wonder that barely a week goes by without some of them closing their doors.
As Liz Smith said, the differential rate of income tax in Scotland continues to damage the economy, making it harder for businesses to attract talent. Further, despite that tax taking £1.7 billion out of the economy in Scotland, the actual benefit to our public finances is only £616 million, as Audit Scotland has made clear. As Alexander Stewart said, both Governments are letting us down.
Today, we needed a budget for growth, a budget for jobs and a budget for household incomes. That is what the Conservatives would have given us. Instead, Labour has let us down.
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