UK Government Budget
The next item of business is a debate on motion S4M-02494, in the name of John Swinney, on the United Kingdom Government budget.
15:57
The Chancellor of the Exchequer’s budget and the broadly unchanged economic forecast by the Office for Budget Responsibility confirm the fragile state of the United Kingdom economy and the extent to which the outlook has deteriorated since the chancellor set out his deficit reduction and growth plans two years ago. In June 2010, the OBR forecast that the UK economy would grow by 2.8 per cent in 2012. It now expects growth of just 0.8 per cent. At that time, the OBR believed that UK unemployment had peaked at 8.1 per cent but, two years later, the rate is still rising and is not expected to reach its peak of 8.7 per cent until the end of this year.
Against that backdrop, there was a need for the chancellor to set out a compelling vision of how the UK Government was going to kick-start the economy and support households, which have seen their incomes squeezed. That is emphasised by the news today of the downgrading of growth in gross domestic product in quarter 4 of last year, which shows that GDP growth in 2011 was only 0.7 per cent. Unfortunately, the chancellor did not grasp that opportunity, and the measures that he announced in the budget will provide little benefit to the households and businesses that are facing a financial squeeze.
Does the cabinet secretary seriously believe that the increase in the income tax threshold will not help families and households up and down the country?
If we consider that on its own, with no other factor taken into account, Mr Brown perhaps has a point but, as I will discuss later, we must also to take into account the increases in VAT, national insurance and fuel duty and the cuts to tax credits, child benefit and housing benefit. Those things will all have an effect on household incomes. It might suit Mr Brown’s agenda to look at these questions in a little bubble but, unfortunately, there are wider issues that have to be taken into account, which is what we appealed to the chancellor to do in his budget statement.
The chancellor’s determination to cut the top rate of income tax will benefit the richest 1 per cent of the country, which includes 15,000 people in Scotland, but it is being paid for by a £1 billion a year tax raid on the elderly. The withdrawal of the more generous personal allowances for the over-65s will affect 330,000 existing pensioners in Scotland. By 2016-17, the number of pensioners affected will have risen to 500,000, each paying up to £220 extra a year in income tax.
The cabinet secretary has just talked about not looking at things in isolation, so surely he should look at the triple lock on pensions that has been delivered by the Government.
I would encourage Mr Rennie to think twice about his analogies. The triple lock looks as though it is the triple lock of giving people an increase in the state pension—which seems to be the only defence that has been put forward—at a time of high and significant inflation as well as increases in other costs, such as VAT and fuel duty, that will have an effect on the household income of the elderly. When it comes to triple locks, I suspect that there is a triple lock on the financial prospects of elderly citizens in our society.
I am sure that few people in the country or the chamber—with the exception, perhaps, of Mr Rennie and Mr Brown—would consider that cutting the tax that is paid by the wealthiest in society while simultaneously increasing the tax that is paid by pensioners would be either fair or equitable. I would have thought that a cut in the top rate of income tax might be something that people would want to take a stand on and vote against in order to ensure that there was no doubt about their position on the matter. However, when given the opportunity to do so, the Labour Party did not manage to turn up for the vote.
Is Mr Swinney aware of the Labour Party’s stance on the 50p rate before the budget, during the budget and now?
I heard what the stance was before the budget and I heard about it during the debate on the budget but, when it came to the vote—the point at which they could do something about it—the Labour members were posted absent. Where were they all?
Of course, courtesy of Guido Fawkes, we get the marvellous e-mail trail that shows the level of transparency that the Labour Party presides over. We read:
“We should probably hold off releasing line in Scotland just yet, in the hope that it is ignored, but will probably have to do it later.”
That is the first time that the Labour Party has been shy about putting out its press lines to the media, but there we are. It is better than any freedom of information request that I have ever had to authorise, and it did not even cost us any money.
The Chief Secretary to the Treasury has been keen to take the credit for the increase in personal allowances for working-age adults but—this is the point that I would make to Mr Rennie and Mr Brown—he must also take responsibility for the impact of the tax rises and benefit cuts that have already been implemented by the coalition. Over the past two years, we have seen increases in VAT, national insurance and fuel duty. We have also seen cuts to tax credits, child benefit and housing benefit. The Institute for Fiscal Studies estimates that, taken as a whole, the tax and benefit reforms of the coalition will cost the average Scottish household almost £800 in 2012-13.
It is the very poorest in society who are being affected the most. The Treasury’s own analysis shows that the bottom two income deciles—that is, the poorest 20 per cent of households—will experience some of the largest reductions as a proportion of their income as a result of the coalition Government’s benefit cuts and tax increases. They will undergo a fall in net income of close to 2 per cent, compared with falls of around 1 per cent for the population as a whole.
The chancellor has repeatedly said that we are all in this together, but I am sure that few households in Scotland would see it that way.
In Scotland, we have taken a different approach. The Scottish Government has taken all the measures at its disposal to support households. By extending the council tax freeze for the lifetime of this Parliament, we have ensured that the average band D household will benefit by around £1,200 in total. It is households in the bottom half of the income distribution scale that are estimated to see the greatest benefit as a proportion of household income. By maintaining free university education in Scotland, we are saving students around £23,000, compared with the cost of studying in England. By scrapping prescription fees, freezing water charges and abolishing toll charges, we are providing support for households throughout Scotland. That support stands in stark contrast to the reforms of the UK Government.
The key priority for the budget was to get the economy moving. At a time when growth is fragile, short-term support is urgently required. However, the chancellor allocated next to no additional resources to support the economy; indeed, the OBR has stated that the measures that were announced in the budget would have only
“a limited impact on our economic forecast”.
For Scotland, the consequentials from the chancellor’s statement amount to £4 million in each of the next three years. That will do little to offset the 33 per cent real-terms cut to our capital budget during the current spending review period. Nevertheless, we are pleased that the UK Government has listened to the Scottish Government’s proposals on the economy.
First, on the oil and gas industry, which is a key component of the Scottish economy, we have argued that the correct support needs to be in place for decades to come. That is why we have repeatedly called for the UK Government to provide long-term certainty on decommissioning tax relief and to introduce more generous field allowances. The measures that were announced last week should go some way to mitigating the damage that was caused by the chancellor’s £2 billion tax raid on the industry last year.
Secondly, I welcome the fact that the UK Government has accepted our case for the provision of enhanced capital allowances in three of the Scottish enterprise areas that we created, at Irvine, Nigg and Dundee. In that regard, I am delighted that, in recent days, GlaxoSmithKline has announced the expansion of its sites in Irvine and Montrose, and that Gamesa has announced a £125 million investment in offshore wind farm manufacturing in the port of Leith, which will create 800 permanent jobs.
Thirdly, the chancellor’s decision to reverse his opposition to providing tax breaks for the computer games industry is a welcome conversion. That is a measure that we have long pressed the UK Government to adopt. The games sector is a growing and dynamic industry. Figures that were released last week show that UK sales of computer games, which were worth close to £2 billion, surpassed those of DVDs last year. The games industry in Scotland is a global success and employs 1,500 people. The budget measure should help to level the playing field and let Scotland’s computer games industry compete internationally to reach its full potential.
Two minutes ago, the cabinet secretary was saying that the budget would do nothing for the economy. He is now on to the third part of the budget that he says will make a difference to the economy of Scotland. Does that fact not rather defeat his own argument?
It just demonstrates that I am an entirely fair man, in that I tell it as it is.
The budget included three welcome measures: a measure to repair the damage that the UK Government did to the oil and gas industry last year; a measure to repair the damage that the UK Government did to the computer games industry last year; and, on enterprise areas, the UK Government’s acceptance of our proposition on enhanced capital allowances. Who can say fairer than that?
If the cabinet secretary is a fair man, why does his motion not include a single mention of the substantial increase in the tax threshold? If he is a fair man, surely his motion should have included mention of that.
I have talked at length about the increase in personal tax allowances, and I have also talked at length about the cost at which that comes and the damage that is being done to household incomes and to pensioners in our society. Mr Rennie bemoans the fact that I have not mentioned personal tax allowance changes. He should forgive me for pointing out that the chancellor did not mention that particular uprating in his budget statement to the House of Commons. It was all good news, good news, good news. To be fair—as I always am—to The Daily Telegraph, the fact that it said that that was a dodge of which Gordon Brown would have been proud summed up the extent of the budget failure. I do not think that Mr Rennie can question my credentials on fairness, but we can certainly question the credentials of the chancellor in delivering fairness in his budget.
I have two final points. We argued for a substantial increase in capital investment in the budget, to enable us to kick-start the Scottish economy. That is what is required at this stage to create employment and to deliver growth in all our communities, and we regret that the chancellor did not take that step.
Secondly, the UK Government has set up the national loan guarantee scheme, which is designed to provide lending to small and medium-sized enterprises across the UK. We are seeking assurances from the UK Government that that scheme will deliver on the ground. Too few companies in Scotland have been positively affected by project merlin. Given the data that we now have, the budget needed to stimulate the economy. It patently did not do so, and neither did it pass the test of fairness against which any budget should be judged.
The Government has set out its response in the motion, which I commend to Parliament.
I move,
That the Parliament is disappointed that the UK Budget is a missed opportunity to promote growth and deliver greater fairness; notes that the Treasury’s analysis shows that those on the lowest incomes have been hit disproportionately hard by the deficit reduction plans and that over 300,000 pensioners in Scotland will be adversely affected by the decision to abolish age-related income tax allowances in order to pay for tax breaks for the wealthy; welcomes the UK Government’s response to the Scottish Government’s calls for a package of measures to support the oil and gas sector, the provision of enhanced capital allowances for three of Scotland’s enterprise zones, funding for Edinburgh to become a super-connected city and the introduction of tax relief for the video games industry; disagrees however with the Chancellor’s decision not to provide funding for £300 million worth of shovel-ready capital projects, which could be taken forward immediately to support jobs, and notes that the Chancellor’s failure to deliver for Scotland demonstrates the importance of the Scottish Parliament having the full range of economic levers to deliver jobs, growth and fairness for the people of Scotland.
16:10
I do not normally feel sorry for the Tories, and I suspect that charity will be in short supply in today’s debate, but Conservatives must have winced with each successive headline that they read this past week. The budget was the most trailed in living memory, with leaks about a package of measures specifically for Scotland and help for the oil and gas industry—a lot of supposedly good news stories. The days of strict budget purdah seem to be far behind us.
The chancellor failed, however, to mention that his headline measure, the much-heralded tax break for top-rate taxpayers, was to be subsidised by freezing the personal allowances of pensioners. Nearly everything in the budget was well publicised, except for the granny tax.
I suspect that some members on the Tory side of the chamber think that, with a little more political savvy, a bit of better news management and a bit of political spin, the budget could have been handled better—those on our own side could perhaps learn from recent days too, but that misses the point. The granny tax sums up for most people what is wrong not only with the Tory budget, but with the Tory Government.
The budget is fundamentally unfair and is failing in its prime objective of getting the economy going. No one understands why giving more money to millionaires will improve our country’s economic prospects, whereas most understand that it is not right to punish those on fixed incomes who are entering retirement.
Just to get rid of the hyperbole, is it Ken Macintosh’s view that somebody who earns £151,000 a year is a millionaire?
No, but the point is that someone on £150,000 is in the top earning bracket, and it is not right for a Government that says that we are all in it together to give to those in the top 1 per cent handouts that are paid for by the vast majority of working people. That is fundamentally unfair.
The tax break that someone on £150,000 is getting is actually greater than the salaries—and pensions—of some of the people I am talking about.
All those stories remind us that we are talking about the same old Tories: a cabinet full of public school millionaires who introduced a budget in which those who earn more than £150,000 become £10,000 a year better off.
Just for good measure, in case people missed it, the day after the budget we discovered in the Treasury red book that the chancellor plans some extra help in retirement and on inheritance tax for non-domiciled individuals too. Who pays for all that? Families with children, pensioners and working people.
If Labour is so fond of high taxation, why did it put the highest rate of tax up to 50p only one month before it lost the 2010 election? Would Ken Macintosh agree that increasing the level of personal allowance before people pay tax is worthy? Will he, unlike the finance secretary, welcome the reduction in corporation tax from 28 per cent to 24 per cent?
That is a series of questions. We introduced the top rate of tax as a temporary measure. We are not in favour of high taxes per se but, in a recession, if one believes in progressive policies, one should expect those who earn more to pay more. That is the principle that is lacking in the Conservative budget, which does not have a progressive heart.
Will Ken Macintosh confirm that if it came to power in 2015, the Labour Party would take the tax rate back up to 50p?
The 50p tax rate was introduced to pay for public services and to get the economy going. The simple answer is that we will make that assessment on its merits in 2015. I can tell Willie Rennie that we do not support the rate coming down now, because it is the wrong measure at the wrong time.
Who is paying for it? The answer is families with children, pensioners and the working people of this country. If I may borrow a phrase, it is being paid for by the squeezed middle. They are the ones who are losing out because of increased VAT and fuel charges and they are losing child benefits and child tax credits. Perhaps those who lose out most of all are the 2.6 million unemployed people in this country. We are losing a whole new generation of youth to unemployment, because we have a Government that is obsessed—
We have heard much of what the member has to say, we have read the proposals in Labour’s amendment and we have seen what has happened since the Welfare Reform Act 2012 was passed. Does Ken Macintosh agree that it is shortsighted and will have a detrimental impact on the people of Inverclyde for the Labour-Tory Inverclyde Council to cut the number of welfare rights officers from 18 full-time officers and one part-time officer to 13 at a time when even more demand will be placed on them by those who seek their advice?
I appreciate the subject that Mr McMillan has raised, but it is outrageous for a member of the SNP to question Inverclyde Council when 89 per cent of the cuts proposed by this Government fall on local authorities. Decisions by the SNP Scottish Government are forcing cuts in local authorities, in education and in the voluntary sector. The SNP always looks to pin blame for the cuts elsewhere.
Can the member explain why it is that, under the SNP Government, the spending share that goes to local government is higher than the one we inherited from the previous Administration?
I am sorry, but talking about the spending share disguises the fact that 89 per cent of the cuts fall on local councils. I suggest that Mr Mackay should argue more strongly in the Cabinet and in his party for the local authorities that he used to represent to stop these cuts falling on the services that are provided to people in Scotland.
Will the member give way?
I had better make some progress, Presiding Officer.
You have two minutes.
My goodness.
I was going to say that there is much common ground between Labour and the SNP on the economic agenda, because we agree that the budget is both unfair and does not stimulate growth, but my difficulty with the SNP motion and the SNP submission to the budget is that there is a list of demands and cuts but no statement of how the chancellor would pay for the demands and cuts that the SNP asks for.
When he sums up, will the minister say whether he supports Labour’s measures? Does the SNP support a cut in VAT? Does it support the bankers’ bonus? In particular, does the SNP support a cut in corporation tax? The chancellor has cut corporation tax to 24 per cent, will cut it to 22 per cent and possibly aims to cut it further. My understanding of the SNP’s position is that it wants to cut corporation tax still further. What services do the SNP intend to cut to pay for that?
I do not believe that competing with the rest of the UK on corporation tax is a policy that will work for Scotland. It will clearly have a detrimental effect on services in this country. I particularly do not like the idea that we will cut corporation tax so that we can attract companies such as News International to set up their headquarters in Scotland. The leadership of that company is morally bankrupt and the only reason why it would come to Scotland is to treat us as a tax haven. In all honesty and all seriousness, is it the SNP’s policy to cut corporation tax further than the UK Government is doing? That is my understanding of its policy.
The difficulty with the Government’s motion is that it refers to giving Scotland
“the full range of economic levers”
and powers, but the Government refuses to say what it would do with those economic levers. If the Government intends to cut corporation tax, I do not believe that that will be progressive or fair.
I move amendment S4M-02494.4, to leave out from “welcomes” to end and insert:
“believes that the Chancellor should be doing more to create jobs across the UK; is disappointed that working families with children are still set to lose tax credits and child benefit as well as being hit by increases in VAT; believes that, rather than reducing taxes on those earning more than £150,000, measures such as a cut in VAT would be fairer on hard-pressed families and working people and would do more to stimulate the economy, and calls on the Scottish Government to do more using the powers and spending at its disposal to tackle unemployment, which is higher in Scotland than the rest of the UK, and to help local businesses including through the use of community benefit clauses for public sector contracts.”
16:20
What a typically ungenerous, uncharitable, ungracious set of contributions to start the debate. The contributors could not even bring themselves to welcome the increase in the threshold for income tax, merely saying, “Mr Brown may have a point.” They could not bring themselves to welcome the cut in corporation tax—the SNP claims to be in favour of it, yet when Mr Osborne doubled the cut down to 24p last week, it could not mention it or welcome it. How pathetic is that?
This is a budget that does a number of good things for Scotland. To be fair to Mr Swinney—he is fairness personified—he welcomed the moves in the oil and gas sector, the enhanced capital allowances and the tax relief for the video games industry. In his motion he welcomed Edinburgh becoming a super-connected city. Those are four big initiatives that can help the economy in different parts of Scotland, which rather undermines his argument that the budget did nothing at all for growth or the economy.
This is a budget that focuses very much on the economy. It also focuses on stability and, with the increase in the tax threshold, on trying to help low and middle-income earners in particular.
Why, therefore, has the OBR revised downwards its forecast for growth from more than 2.5 per cent to 0.8 per cent?
Just as I am attacking the SNP, Mr Macintosh steps in to their defence and tries to pull together the unholy alliance that has formed today—a very shaky alliance in many respects. He will know that since the OBR published its initial reports back in 2010, a number of things have happened in the global economy, including the euro zone crisis, the increase in the cost of fuel globally and instability in the middle east. It is not just the UK that has had downgraded forecasts; Mr Macintosh will be aware that most of the western world—worse so in the rest of Europe than here—has had downgraded forecasts.
At least the coalition Government had the courage to have an independent body overseeing the budget process and independent forecasts that were not influenced by the hand of the chancellor or any other minister. We are not afraid of bad news. We believe in the coalition Government and in putting the facts on the economy out there for all to see and challenge.
The deficit reduction plan is a central plank of the Government’s progress and it ensures that we have the best possible chance of maintaining our AAA status. This year we see in the red book that we are paying—
Will the member take an intervention?
As long as it is not about Inverclyde.
I am sorry but it is about Inverclyde.
Gavin Brown was talking about whatever it is he was talking about, because I got lost—
Cut to the chase, please.
Ken Macintosh sideswiped my question earlier. Is Gavin Brown delighted that as a result of the deficit reduction policies of his party in power in London, there will be fewer welfare rights officers in Inverclyde to deal with the effects of the deficit reduction policies?
I think that the phrase “cut to the chase” means hurry up and not go into a mini speech on a point that has already been made.
Mr McMillan said that he was not paying attention. That does not astonish me. It would not surprise me if he had not read the red book, just as it would not surprise me if he did not even listen to the budget on the day.
The deficit reduction plan will ensure that we maintain our AAA status. As it stands, we are paying £46 billion in debt interest alone. Any diminution of the AAA status could put that figure far higher. As the International Monetary Fund said recently:
“The pace of the Government’s planned fiscal consolidation is in line with international practice, given the UK’s high budget deficit.”
The increase in the income tax threshold gives a greater reward for work, especially for those on low or middle incomes. The personal allowance was £6,475 a year when the Government took office, but it will be £9,205 by April of next year, which is a staggering increase that gives a big boost to families and households across the country and puts more money in people’s pockets.
Will the member give way?
I have only 12 seconds left, so I am afraid that I cannot give way.
Over a period, we will have the biggest cut in corporation tax, which will make our tax system the most competitive of the G20 countries. The budget is good for families, good for business and good for the country.
I move amendment S4M-02494.2, to leave out from “is disappointed” to end and insert:
“welcomes the UK Budget, which includes the largest increase in the personal tax allowance in 30 years, an increase of £1,100 in April 2013, which will lift an additional 73,000 people out of income tax and benefit over two million people in Scotland; welcomes the cut in corporation tax, which will mean that by April 2014 the UK will have a 22% main corporation tax rate, the lowest in the G7 and a sign to the rest of the world that the UK is open for business; welcomes the reduction in the top rate of income tax to 45p so that the UK no longer has the highest rate of income tax in the G20; supports the UK Government’s commitment to stick to the plan to deal with the deficit and notes that in 2012-13 the UK will pay £46 billion in debt interest payments alone; welcomes the UK Government’s package of measures to support the oil and gas sector, the provision of enhanced capital allowances for three of Scotland’s enterprise zones, funding for Edinburgh to become a super-connected city and the introduction of tax relief for the video games industry; welcomes the move to allow small unincorporated businesses to calculate their tax on a cash basis, the improvements to the Enterprise Management Incentive, the Business Finance Partnership and the Enterprise Finance Guarantee scheme, which will all support growth, and notes that this budget builds on previous positive incentives announced by the UK Government, including the National Loan Guarantee Scheme and the Youth Contract.”
16:26
To rebalance the debate a little, we need to major on one of the significant developments in the budget, which is the major advance in delivering the Liberal Democrat commitment to raising the income tax threshold to £10,000. The budget will raise the personal allowance to £9,205 by next April. Across the UK, 21 million basic rate taxpayers will get an extra £221 cut in their income tax bills and a further 840,000 people will be taken out of paying income tax altogether. The budget brings the total tax cut for basic rate taxpayers to £550 and the total number of people who have been lifted out of paying tax to 2 million.
Will the member give way?
I will in a second.
As a result of our budget, people who are working full time on the minimum wage have had their income tax bill cut in half. That significant development helps to make work pay and it helps millions of people on low and middle incomes who are striving to improve their lives through work. That commitment was on the front page of our manifesto, and I am very proud that we are delivering it.
I give way to Mr Macintosh.
Mr Rennie has answered my question. I was going to ask whether, despite that list of achievements, he can genuinely say that he is proud of the budget, particularly given that Vince Cable said that we should not lower the top rate of income tax from 50p to 45p.
I am proud of the budget, because it delivers a significant cut to those who are on low and middle incomes. I thought that the Labour Party would welcome that, too, but hardly any of Mr Macintosh’s speech was devoted to that, and the same is true of Mr Swinney’s.
Will the member give way?
Go on, then.
Is Mr Rennie proud of the fact that the Institute for Fiscal Studies estimates that, in Scotland, those in the bottom 20 per cent of income distribution will lose the most as a proportion of their income on average as a result of the budget?
We have to make choices in government. The member seems to ignore the fact that people on low and middle incomes will benefit significantly from the change. The budget is progressive. It has helped to make work pay and has incentivised people to work. I would have thought that the SNP would want to encourage people into work, but that does not seem to be the case.
The budget continued down the path of fiscal responsibility that we set when we came to power in 2010. Those who argue that much more should be spent ignore the consequences of that. The challenge is to spend enough to stimulate the economy without spending too much and losing the confidence of the markets. There is a direct consequence. Despite the buffeting from the euro zone and elsewhere, we have successfully protected our credit rating, which keeps borrowing costs low. That affects not only Government borrowing, but personal borrowing and mortgages, the cost of which would shoot up if we did not keep spending under control. People who pretend that there are easy choices and that we can spend money with no consequences are living in cloud-cuckoo-land.
Until today’s debate, I thought that Labour understood the need to live within our means and to keep the finances under control. However, it appears to have adopted the same approach as the SNP, which seems to have the single transferable billion. Wherever one looks, the SNP promises a billion or two on whatever people want—it makes promises on almost anything. If people want higher welfare payments, they have got them. If they want 50p off a litre of fuel, they have got it. If they want an oil fund, they have got it. If they want extra spending on capital, they have it. If Sir Rupert Murdoch wants corporation tax halved, the SNP will see what it can do.
That billion has been spent numerous times, and people will eventually ask how hard worked it is and what the choices are. It is the hardest-working billion in Scottish politics. Despite the rhetoric on financial responsibility—there was even more today from Mr Swinney, criticising all sorts of other changes—the SNP is not fiscally responsible. In government, one has to make choices, even if that is difficult.
Will Willie Rennie give way?
No, I am coming to the end.
The budget helped not only working people but businesses. Let us go through some of the changes, because SNP and Labour members do not seem to give credit for some of them.
Corporation tax will be cut to 22 per cent from April 2014. That is a big change. It will be the lowest rate of corporation tax in the G7 and the fourth lowest in the G20.
Our measures on credit easing will also help money get into businesses, and the coalition Government is delivering 100 per cent capital allowances for plant machinery in Irvine, Nigg and Dundee. The Scottish Government has admitted that 4,000 jobs could come from that. It is a great development.
Edinburgh will receive £11 million to deliver ultra-fast broadband and high-speed wireless connectivity. There will also be £50 million for which other cities can bid. Those are major improvements.
There are also the corporation tax reliefs for the video games industry and the changes to oil industry taxation.
The moves are significant, but one would not think it to judge by the comments from SNP members. Despite the challenges, the budget has delivered tax cuts for those on low and middle incomes, continued along the path of fiscal responsibility and provided support for businesses to help the country grow.
I move amendment S4M-02494.3, to leave out from “is disappointed” to end and insert:
“welcomes the measures in the recent UK Budget that will raise the income tax threshold to £9,205, meaning that 165,000 Scots will have been taken out of income tax since 2010 and more than two million working people on low and middle incomes in Scotland will have seen their tax bill fall by £550; welcomes the measures on tax avoidance and stamp duty that mean that the tax burden on the wealthiest increases fivefold, especially the steps that discourage the use of offshore tax havens by the well-off to avoid paying their fair share of tax in this country; notes that pensioners will enjoy the biggest ever cash increase in the state pension, leaving pensioners better off this year, next year and in future years thanks to the restoration of the link to average earnings as part of the triple-lock guarantee for pensioners, and also welcomes the package of measures to support the oil and gas sector, the provision of enhanced capital allowances for three of Scotland’s enterprise zones, funding for Edinburgh to become a super-connected city, a boost for Scottish ski centres through VAT changes, the National Loan Guarantee Scheme to help smaller businesses in Scotland receive cheaper loans, the introduction of tax relief for the video games industry and the introduction of a Patent Box from April 2013, which will apply a reduced 10% rate of corporation tax for profits attributed to patents and similar types of intellectual property.”
16:32
Willie Rennie said that the SNP Government was not financially responsible, which makes me wonder why he supported our budget only a few weeks ago.
I welcome the opportunity to participate in a debate in which the dismissal of Scotland and its interests in last week’s regressive UK budget can be exposed.
The Tory budget failed to provide a fair balance of economic security to families and opportunity for growth in Scotland. The fact is that the Tories in the Parliament are themselves not very impressed by the budget, as shown by the fact that only two of them have bothered to turn up for the debate, compared with 55 SNP members.
The announcements of enhanced capital allowances for enterprise zones in Dundee, Irvine and Nigg, the tax credit for the video games industry and the new field allowance for North Sea oil extraction west of Shetland are positive achievements, although the latter simply makes up for the ham-fisted attack on the oil industry last year. I also welcome the raising of personal tax thresholds.
If Kenneth Gibson welcomes those initiatives, why did SNP MPs at Westminster vote against them?
We must look at the budget in the round. If Mr Rennie listens to the rest of my speech, he might hear that.
The chancellor’s decision to reduce the top rate of tax to 45p and his inability to recognise the growth potential and needs of Scotland mitigate against the announcements that I welcomed.
The Labour Party’s appalling and cowardly response in Monday’s vote to abolish the 50p tax rate highlights its inability to respect its promises and obligations. Despite the fact that Ed Balls enthusiastically assured us that Labour would
“vote against the higher rate tax cut”,
the party abstained simply because the vote was forced by the SNP and Plaid Cymru, which was a clear case of focusing on the singer rather than the song and destroys Labour’s credibility.
Of course, Labour’s incompetence when in power in announcing the 50p tax rate months before its implementation allowed some of those affected by the tax to arrange to dodge it, as Robert Chote—the chair of the Office for Budget Responsibility—made clear only this morning in evidence to the Finance Committee.
I point out to Mr Rennie that the tax rate drop benefits only 15,000 people in Scotland, whereas the decision to freeze and remove the age-related personal allowance on pensioner incomes will affect more than 327,000 Scottish pensioners. Mr Hepburn has already pointed out that the 20 per cent poorest people in our society will be the most adversely affected by the budget.
Will the member take an intervention? We are quite close so the member will hear me.
Can we have Gil Paterson’s mike on?
Thanks very much for that, Presiding Officer.
What impact does the member think the increase in postage will have and who will that affect?
It will affect people who depend on the post, and not only small businesses that cannot always get the best contracts, but pensioners who, for example, may not be online. The most socially excluded people in our society are the ones who will be most adversely affected by that regressive move.
The chancellor promised to deliver a just budget to benefit families, yet tax credits will no longer be available to more than 84,000 Scottish households and 119,000 children will be adversely affected. The chancellor has not considered the impact of his severe cuts on the people of Scotland. The Institute of Fiscal Studies estimated that the UK Government policy will cost households an average of £790 a year. As we have heard already, he does not seem interested in improving the UK’s sluggish growth rate by putting in place measures to stimulate it.
The chancellor failed to resource 36 shovel-ready projects in Scotland with £302 million of capital investment to begin projects, including the construction of a new centre of virology research in Glasgow, two projects at Hunterston and the A737 in my constituency. Those would have generated more than 4,200 jobs.
Will the member take an intervention?
I am really sorry, Gavin, but I have taken two interventions and I am running out of time.
Investing in our infrastructure is essential to generate jobs and boost economic growth but the chancellor deemed that unimportant through his willingness to delay the projects.
The chancellor’s lack of concern for small businesses has created many concerns and reduced business confidence in the UK Government. He has not considered the combined effect of rising fuel duty and VAT on small businesses. John Walker, the national chairman of the Federation of Small Businesses, stated that the increase in fuel duty—when VAT is added—by 3.63p in August
“will still hit businesses and households hard and so we need to see a long term solution to address high and volatile fuel prices.”
That solution was promised by the Tories and Liberals before the 2010 election, but it was not delivered. Scots will continue to pay high levels of fuel duty and that will undermine competitiveness, reduce the money in people’s pockets and cost jobs.
Worries about the high levels of VAT were emphasised by Brian Berry, chief executive of the Federation of Master Builders, who said:
“The chancellor also missed an opportunity when streamlining VAT to include a lower rate of VAT for Green Deal , which would be a useful incentive.”
The FMB estimates that 2,103 new Scottish construction jobs would have been created by such a cut in VAT.
The member must finish.
Thank you, Presiding Officer.
16:37
We learned last week that the going rate for an audience with the Prime Minister is £250,000, a sum which Boris Johnson once described as “chicken feed.” That gives a startling insight into just how out of touch the Westminster Government is, so we should not really be surprised by the contents of last week’s budget.
The budget pillaged the pockets of the elderly, the unemployed, the disabled and those on low incomes, so that Cameron, Clegg, Osborne and their chums in the banking and financial sectors could maintain their stocks of champagne and caviar, for the next episode of “Come Dine with Dave at Downing Street.”
For the 14,000 people earning £1 million or more who are getting a tax cut of more than £40,000 each, it is “Guid yin, Gideon”. Back in the real world, a family with children that earns just £20,000 is losing £253 a year from April. That is on top of the VAT rise, which is costing a family an average of £450 per year. It hardly sounds like we are all in this together.
Will the member take an intervention?
I am sorry, no.
We know what the chancellor's budget does for those in society who are more than just better off. What about those who need some extra support in these difficult times? The Institute for Fiscal Studies has shown that the Con-Dem coalition’s policies will see an increase of 100,000 a year in the number of people in poverty across the UK. Only last month, we heard about more than 200 women a day losing their job in Scotland, at a time when female unemployment is at its highest for more than 23 years in the UK.
In the past fortnight, members have had the opportunity to discuss children’s issues in the chamber, in particular childcare. The opportunity was welcomed because even before the budget was delivered, we knew what the Westminster Government was doing to the lives of thousands of children across Scotland. Attacks on working tax credits will hit hardest 4,500 children across the city of Glasgow, and pressures such as that are taking their toll on hard-working families not just in Glasgow but across the country.
Will the member give way?
I am sorry, but I have not got time.
What is more, the Tory budget failed to help out those hard-working families by not tackling the rise in the price of fuel—a move that could have helped small businesses.
I find it all the more galling that the chancellor billed his budget as one that rewards work when, as the Scottish Trades Union Congress stated in its budget submission,
“it is now indisputable that government policy is hitting wages much harder than profits”.
What are we getting in return? More people are being moved out of the tax range, but that is not a solution for people who are not in work. We need more investment in creating jobs, not tax cuts for those on the highest pay. The STUC has calculated that more than 500,000 people in Scotland are either unemployed or underemployed. For those people, tax and benefit changes do not bring new jobs.
Every budget is an opportunity and last week should have been about delivering a stimulus for economic growth and job creation. Instead, the opportunity was seized to give the rich a massive tax break. George Osborne’s budget gave the rich prosperity and the rest austerity. Scottish Labour’s amendment recognises that and recognises the priorities of job creation and economic growth. I hope that all members will share those priorities at decision time by supporting our amendment.
16:41
Gavin Brown is upset that SNP members seem reluctant to welcome any measure in the UK budget, but some of those measures have been welcomed. I will reiterate what could be described as the positive aspects of the budget. There was an acceptance of the Scottish Government’s case for enhanced capital allowances for enterprise areas in Nigg, Dundee and Irvine. The increase in the threshold for personal income tax allowance, which one might have thought went along with the UK Government’s stated objective to reward those on low and middle incomes and to reward work, could have been a positive aspect. However, it was undermined by the removal of tax credits for many of those families. That strikes me as giving with one hand and taking away with the other.
There were many negatives in the budget, and I will list a few of them. There has been no action in response to the Scottish Government’s request for help in supporting the shovel-ready projects of which it has provided a list to the UK Government. The change to the regional pay policy is squeezing the incomes of those who can least afford it and is creating a false dichotomy between the private and public sectors. There has also been a freeze in state pension age-related allowances from April 2013 and a change to the 50p tax rate, which I will come to a little later. It was a mixed budget, but it had more negatives than positives in it.
Let us look at some of the impacts of the UK Government’s budget agenda. As I said to Willie Rennie, the IFS estimates that those in the bottom 20 per cent of the income distribution in Scotland will, on average, lose the most as a proportion of their income. Willie Rennie suggested that that ignores the benefits of the change to taxation for one-income families, but I suggest that he is ignoring the evidence of the IFS to the contrary. It is also estimated that families with children will lose £530 a year, on average, as a result of the tax and benefits reforms that will be introduced in 2012-13. Those are the practical effects on people up and down Scotland in the communities that we represent, and Mr Rennie would do well to reflect on that. All of that stands in stark contrast to the Scottish Government’s agenda of doing what it can to support hard-pressed families at this time through the council tax freeze, the freeze on household water charges and its prescription charges policy.
I turn to the change in the 50p tax rate. It is interesting that the change was predicated on the basis that the tax was not bringing in as much money as had been forecast when it was still an income generator that was bringing in revenue for the public purse. On that basis, we cannot justify getting rid of the 50p rate.
Will the member give way?
I will let Mr Rennie in after I have made my point.
The 50p tax rate sent the important signal that people who can afford to pay more towards the public finances do so. It was interesting that Mr Rennie suggested that people who express concern about the budget are in cloud-cuckoo-land. Danny Alexander himself said that the idea of cutting the 50p rate was “in cloud-cuckoo-land”. We know who is living in cloud-cuckoo-land.
I do not think that the member has realised that, as a result of the budget changes, five times as much will be brought in as the 50p rate was bringing in. Surely the approach is progressive. Surely it is the right thing to do.
That remains to be seen. Mr Rennie does not recognise the impact on the poorest in society, as is forecast by the IFS.
As Ken Macintosh said, there is much common ground between the SNP and the Labour Party on the UK Government’s budget. I was disappointed that when Labour members had a chance to vote against the change to the 50p tax rate, they were posted absent, as John Swinney noted. We can ask where they were. Willie Bain MP said on Twitter:
“There is a long-standing PLP convention that we do not support SNP motions”.
That is unfortunate in two regards. First, the vote was on not an SNP motion but a procedural motion of the UK Government. Secondly, even if there had been an SNP motion, so what? Surely doing what is right for the people whom we represent is better than base partisanship. The Labour Party needs to do more to explain its position. I hope that there is no Labour convention against voting for SNP motions in the Scottish Parliament and I hope that Labour will back the Government’s motion in this debate.
I had intended to call Malcolm Chisholm next. Who to call in debates and in what order is up to the Presiding Officers. However, it has been intimated to me that Malcolm Chisholm would rather speak later in the debate, so I call Margaret McCulloch, who will be followed by John Mason.
16:47
When the chancellor set out his budget a year ago, he said that he had
“put fuel into the tank of the British economy.”—[Official Report, House of Commons, 23 Mar 2011; Vol 525, c 966.]
However, the economy has stalled since then. Unemployment has gone up month by month and the chancellor is borrowing £150 billion more than he planned to do. All the experts tell us that the increased borrowing that was announced in November is a consequence of the chancellor’s failure to create growth and secure jobs. The pressure that his fiscal policy has put on our economy and our society also puts a strain on our people.
We need a budget that stimulates demand, restores confidence and—this is crucial—creates jobs. I will focus on jobs and employment. When I made my maiden speech last year, I said that if we are to accomplish anything during this parliamentary session, we must give hope and opportunity to all people who are experiencing unemployment.
I know from my work in Central Scotland and from my previous career as a training consultant that there are initiatives out there to help people to find jobs and training. Some initiatives are successful—at least, they are as successful as they can be given their limited resources or geographical coverage—such as Routes to Work South in Lanarkshire. Others could be more successful if they were better resourced through job subsidies and employer incentives. However, since May, I have been unable to find a single Government initiative that matches the scale of the unemployment problem—not the work programme, not the community jobs Scotland programme and not even the draft youth employment strategy.
The claimant count in my region is not coming down but going up. In my area, more businesses are closing down than are opening, and levels of poverty, which were falling for much of the past decade, are increasing. When we look at those trends, we find human stories, which are often lost in the cut and thrust of the budget debate. It is frustrating to hear from organisations such as Scottish Enterprise and Jobcentre Plus that people who are doing everything that can reasonably be expected of them are not getting anywhere.
It was reported last week that in some parts of the country 31 Scots are chasing every vacancy. How can jobseekers succeed if the odds are stacked against them like that? What must those jobseekers think of a Government that puts tax cuts for the richest 1 per cent of earners in the country before the prospects of claimants who are struggling to find work and to support a household on a maximum of £67.50 a week?
I have worked with all kinds of unemployed people, from graduates to those who are furthest away from the labour market. I will always remember the case of a man in his late 50s who was on one of my training-for-work programmes. He was under immense pressure to find a job and pay the bills, with threats from the bank to foreclose on his mortgage. I was doing everything that I could to help him apply for job vacancies, including cutting out adverts from newspapers for him. However, when I asked him whether he had applied for any of the vacancies, he would say no. Eventually, I found out why: he just could not handle the constant rejection. For too many people, that is the reality of unemployment.
That is why Government at all levels must make job creation a priority with a better budget. A better budget would have cut VAT to help hard-pressed families and boost employment in key sectors; a better budget would have used Government buying power to create jobs here in Scotland; and a better budget would have brought back the future jobs fund and helped Scotland get back to work.
16:51
I want to use two concepts in John Swinney’s motion as the main part of my speech. The first one is the term “greater fairness”, which is in the third line of the motion. We have often heard it said that in difficult times everyone should take some of the pain. I think that most of us would probably agree with that concept, although there is also an argument that those who got us into this financial mess and profited from it in the past should take all of the pain and that those who were innocent in that regard should not take any.
Assuming, however, that all of us should bear some of the pain and that those who are better able to should suffer more than others, how does the UK budget fare? The answer has to be: not very well. First and most obvious, there is the question of income tax. It is perhaps seen by most people as the fairest of all the taxes, because it links tax with the ability to pay. That is why council tax should be replaced by a local income tax.
Of course we welcome the fact that allowances at the bottom of the scale have been increased to £9,205, which will take some people out of paying tax and is in itself positive. However, at the same time we see 300,000 pensioners in Scotland being hit harder, with their allowances frozen. What about those at the top? If we believed that everyone should share some of the pain, that would actually be an argument for increasing the top rate of income tax, even if only temporarily. However, what do we see from the Tories? We see the 50p rate cut to 45p and we see Labour abstaining on the vote on that very point. Did Labour again just abandon principle, which we have become used to? Did Labour fear upsetting middle England, or was it just fear of supporting anything that the SNP does, be it good or bad? Perhaps it was just incompetence. Let us remember that Labour introduced the 50p rate just before the most recent general election and has said that it will not reintroduce the rate; it also abolished the 10p rate of tax.
I do not think that anyone is saying that we should return to the 83 per cent rate of income tax, or even the 98 per cent rate, which I remember. However, surely the 50p rate is not so drastic. Jamie Hepburn and Willie Rennie in particular addressed whether the 50p rate was bringing in enough money. One reason for it not bringing in enough money is that the rules are so loose for those at the top, who do not pay under the PAYE system, that they are able to move their income around between tax years. Perhaps that is one of the things that need to be tightened up.
Will the member give way?
Will the member give way?
I will take Patrick Harvie’s intervention first.
Is it not absurd to start from the position that the rich are not paying enough tax at the 50p rate and to end up with the conclusion that we should charge them less?
Absolutely. That is the point that I was trying to make.
If 50p is not a drastic top rate of income tax, why do the majority of European countries have a top rate of income tax that is considerably lower?
We could move on to discuss a number of European countries. The Nordic countries—which many of us aspire to be like—often have higher taxation than we do. We need to have a more progressive rate all the way through. Jumping from a rate of 20p to 40p strikes me as a little odd, so the whole thing needs a good shake.
There were signs in the budget of welfare spending going up, because more people are unemployed, yet something like £16 billion has already been taken out of welfare spending. In his budget statement, George Osborne talked about taking out a further £10 billion by 2016. Who that will affect is pretty clear. If he really wanted to cut welfare spending, he could do that by creating jobs—the SNP and Labour would support that. However, taking out funding without creating jobs will hurt those who are at the poorest end of society.
The acting chief executive of Citizens Advice Scotland, Susan McPhee, said:
“There is nothing in the budget that will seriously relieve the pressure on those who are suffering the most ... Today ... the government has missed a real opportunity to support low income”
households
“and instead increased the financial support of high earners. The government need to provide more support for those who really need it.”
We all have a lot of choices to make. One choice that Labour must make is whether it prefers to continue in the UK with a Tory Government every few years or to have an independent Scotland with an SNP Government or even a Labour Government.
16:56
I am pleased to speak in the debate. It will come as no surprise that we will not support the Government’s motion. We can assume from the criticism in SNP members’ speeches that, if Scotland ever became an independent country, tax rates would rise, debts would be unpaid and borrowing would certainly increase. [Interruption.] If SNP members are not sure about that, they should listen to their own rhetoric.
If we want to attract the brightest and the best and to increase economic growth and the number of businesses that come to our country, we certainly cannot have the highest rate of personal income tax in the G20, which we have had. The coalition Government inherited the highest top tax rate in the G20 in 2010, when Labour implemented the 50p tax rate one month before leaving office.
Many people and companies are internationally mobile. The highest rate in the G20 provides no incentive to choose the UK rather than other countries as a place of work. At 40p, our rate will be in about the mid-range of G20 countries.
The effects on tax revenues of varying tax rates are well represented by the Laffer curve, which highlights that the highest tax rates never yield the highest revenue. The 50p rate that Labour introduced was expected to raise £2.5 billion in revenue, but it raised about £1 billion at most, according to HM Revenue and Customs.
The new lower rates of corporation tax will mean that 16 of the G20 countries have higher corporation tax rates than us—only the rates in Saudi Arabia, Russia and Turkey will be lower. A corporation tax rate of 28 per cent was inherited from Labour in 2010. That will be down to 24 per cent next month and 22 per cent in April 2014. Given that John Swinney ran out of time before he could welcome that reduction and the coalition Government’s ambition to reduce the tax further to 20 per cent, I am sure that he will now welcome that.
The fiscal forum, which the coalition Government established in September 2011, has improved engagement between ministers, the oil and gas industry, the Treasury and the Department of Energy and Climate Change. That closer working will produce longer-term certainty, especially for the £34 billion of work from decommissioning North Sea oil rigs. With the industry, the Government is also considering the case for introducing a new category of field that would qualify for the field allowance.
I very much welcome the work that is being done in Shetland. It is incumbent on all of us to ensure that as much as possible of the £34 billion of contracts is done in Scotland.
The raising of the personal allowance to more than £9,200, which a Tory chancellor has delivered, will take 73,000 people in Scotland out of tax, so more of their earnings will be in their pockets. I am pleased that the coalition Government has been able to deliver on its long-held promise to raise the personal allowance, and I look forward to the achievement of a £10,000 threshold. In terms of supply economics, there is no greater incentive for a person to work than to get more of their earnings in their own pocket.
The member goes on about the low level of tax. What about the proposed reduction in the 40p tax rate threshold? What implications does that have for sucking more people into paying more tax?
I explained that around five minutes ago; obviously, the member was not listening. That is well explained in the OBR’s and the Treasury’s Laffer curve. Taxes exist to bring in revenue, and the member needs to look more closely at that. It is important. The days are long gone when it could be assumed that higher taxes bring higher revenue.
The enhanced capital allowances for Irvine, Nigg and Dundee are welcome—as others have said, they will deliver more than 4,000 jobs—and the pension rise, which is worth more than £5.30 a week, is the highest in 30 years.
I am sure that we all agree that the chancellor has again shown his determination to tackle tax avoidance by introducing a new general anti-abuse rule to tackle artificial and abusive tax avoidance schemes. Tax evasion is illegal and wholly unacceptable, and I hope that all members welcome the clampdown on it and on the avoidance of stamp duty. I also welcome the £325 million for the Department for Work and Pensions to tackle fraud and error. The budget encourages honest, decent people to get out to work.
I also welcome the £26,000 welfare benefits cap.
17:01
Let us knock on the head a false dichotomy—the claim that somehow we do not support certain measures in the budget. We have recognised that there are some welcome measures contained deep within the budget that relate to, for example, the computer games industry and the offshore sector in my region. Admittedly, they reverse damage that was done before. It is a bit like a person thanking the man who has turned up at their door with a couple of buckets of water, but who had set fire to their house in the first place. Nonetheless, I am a charitable man and welcome the fact that the UK Government has seen the error of its ways in that regard.
The problem is that we cannot simply extract a couple of welcome gestures in the budget and ignore what is happening more widely. SNP members have emphasised that point throughout the debate. It would be good if, just occasionally, the Conservatives and the Liberal Democrats showed a little bit of self-awareness and humility and admitted the damage that some of the budget will do, particularly to some of the lowest-paid in society. My colleague Jamie Hepburn made that point eloquently. He pointed out—he did not use our own figures or party-political spin, but rather the Treasury’s and the IFS’s figures—that the lowest paid 20 per cent will suffer the most hardship as a result of the measures in the budget. That is equivalent to double the average impact on their personal income.
We can talk about taking people out of paying tax, but all that does is present a panacea, whereas the measure is a fig leaf behind which are hidden the pressures that will be borne by the lowest-paid in society. As a result of the hikes in VAT and fuel duty and the taking away of tax credits, money is being put in people’s pockets with one hand while the other hand is reaching round to take money out of their other pocket. That is exactly what the UK Government is doing to the lowest-paid in society; it is nothing to do with improving their lot.
We have heard about what Citizens Advice Scotland has said. The chief executive of Citizens Advice at the UK level, Gillian Guy, has said:
“Raising the personal tax allowance is an empty gesture to struggling families on low wages. Poorer working families who get housing and council tax benefits will not get all of the money in their pocket, because as their income goes up, their benefits will go down.”
People are being given with one hand, but it is being taken away with the other.
There were opportunities for growth that could have been pursued as part of the budget, but they were ignored. There is nothing in the budget about improving growth, getting the economy moving and getting people back into work. Brendan Barber, the general secretary of the Trades Union Congress, said:
“We needed a budget that looked to the future and made jobs—particularly for young people—the national priority. Instead we have got a budget for the rich by the rich.”
That is exactly what it is. Even Charles Moore, that well-known socialist, made that point, writing in The Daily Telegraph:
“I did notice an interesting reply that Mr Osborne gave when challenged on the Today programme about his own income. ‘My salary is less than the £150,000 threshold,’ he said. ‘I am not a big winner from this Budget.’”
By his own admission, those who earn more than £150,000 are the big winners from the budget. It is the rich who are the big beneficiaries as a result of the budget. Simply by employing a clever piece of accountancy trickery, the richest have been able to dictate the level of the highest rate of tax in the country. That is extremely unfortunate. Instead of kowtowing to the highest paid in the country, the Government could have done so much more to get the economy moving.
Will the member take an intervention?
I will give Mr Brown an opportunity to redeem himself.
This is tedious stuff, Presiding Officer. I do not know whether the member has taken the trouble to read the red book, but is he aware that the biggest single measure in monetary terms is the increase in the threshold for income tax? That dwarfs every other thing that happens in the budget.
Oh dear. I have made quite clear the actual equalisation impact that the UK Government has put in place. In fact, it is not just an equalisation impact. It is a regressive impact, because of all the other pressures that the UK Government is applying to people. Mr Brown can talk about raising the income tax threshold, but the fact is that the UK Government is taking money away from people at the same time as it is pretending to them that they will get more.
An example of a tax cut that would have been welcome is a cut in the VAT on small improvements to houses, which would have got the economy moving and increased jobs. Instead, we have a budget for the rich, by the rich.
The Scottish Government is doing what it can within its powers—by increasing capital spend and delivering the living wage, the council tax freeze and the abolition of prescription charges—to get the economy moving and help low-paid families. Low-paid families in Scotland will recognise which Government is working for them.
17:07
There have been many speeches by SNP and Labour members who have agreed with each other—although that is sometimes hard to tell, because more disagreement is voiced—in their fundamental criticisms of the UK Government’s budget. Let me see whether I can join in on neither of their sides.
Before, during and since the recession, there has been growing inequality in this country, which has now reached levels that have not been seen since the 1930s. We have seen the hoarding of wealth not only by the richest individuals, but by the private sector, where reserves have reached record levels during the period of recession and recovery. Now we have a budget that worsens that inequality by cutting tax for the wealthiest, and we have benefit cuts, which are also deeply socially destructive, yet those things are not even achieving the UK Government’s economic objective because public sector borrowing hit £15.2 billion in February.
I was disappointed by the rather underwhelming defence of the 50p tax rate by Ken Macintosh. He talked about the importance of having a principled progressive taxation system, but then he said, “Well, it was only temporary. We weren’t going to reintroduce it anyway.” If we talk about the principle of progressive taxation, it is essential that we say what we would do with it. Describing it as a temporary measure and then challenging the Scottish Government on the handing on of cuts will not wash. If we are not willing to hand on those cuts, we have to say where we would raise taxation, and neither Labour nor the SNP has been willing to talk about that.
We have to engage in the argument about support for progressive taxation in order to pay for public services, but there is no argument in favour of high taxes by themselves. What we need is an appropriate level of taxation to pay for the public services that we need.
I am afraid that that is a hotel-bill vision of society. There is an argument in principle for levying higher taxes on the wealthy if we want a more equal society. If that is one of our social objectives, taxation is a means to achieve it.
The Tory-Liberal Democrat defence has been predictable. Gavin Brown described some of the opening speeches as “ungenerous”. We know exactly to whom the UK Government has been generous in its budget. The Tories and the Liberal Democrats are in denial about the failure of their economic policy and the social harm that it will inflict. When the Liberal Democrats tell us about raising the tax threshold and Gavin Brown tells us that it is the largest element in the budget, we must point out that the majority of it will not go to the poorest people; the bulk of it will be spread throughout the economy. I will benefit from it and Gavin Brown will benefit from it: anybody who is working will benefit from it. People on high salaries, like us, will benefit from it. We are in the top 2 per cent of salaries, for goodness’ sake; we should have been hit hard by the budget, as should anyone who earns a high salary. The benefit will not go to the poorest people.
Mary Scanlon tells us that low taxes on the wealthy are important because we have to attract the best people; I have to say that greedy is not best. We have to protect public services because we have to look after our best people. We have to protect salaries in the public sector because we have to look after our best people. Giving a tax break to the super-rich is not protecting our best people; it is protecting our greediest people.
Is it a good idea to try to attract industry and the best people to the UK with the highest income tax and corporation tax in the G20? Is that an incentive?
I am happy to welcome any business to this country if it wishes to make its fair contribution through the taxation system. Cutting taxes for wealthy executives and the wealthiest shareholders and cutting corporation tax is not going to achieve that social objective.
There are other areas on which Labour and the SNP agree with the UK Government, such as the £3 billion tax bung to the oil and gas industry, which will make it even harder than it already is for the offshore renewables industry to attract the skills from that sector. The offshore renewables sector is where we should be deploying incentives, because we need to give it the ability to attract the people who have the necessary skills. We should be reducing incentives for additional and reckless oil drilling. There is a business-as-usual agenda in environmental and economic terms, which makes an utter joke of the UK Government’s claim to be the greenest ever.
17:12
I want to talk specifically about the way the budget will affect one part of the South Scotland region that I represent. Dumfries and Galloway has a significantly higher proportion of older people than the rest of the country: 30 per cent of its population is older people, compared to 23 per cent for Scotland, which represents 45,000 older people in the region. They are not the rich, three-holidays-a-year pensioners of modern mythology. Those who will be affected by the age-related allowance freeze have incomes ranging from £10,000 to £26,000. According to Her Majesty’s Revenue and Customs, 4.4 million such pensioners across the UK will lose an average of £83 as a result of the freeze, which might not sound like much, but to people who are living on a fixed income, it is considerable. It is also the most modest estimate of the average cost of the freeze; many people will pay a great deal more.
In my region, pensioners are likely to have to travel further than others and to pay higher fuel costs. They face much higher fuel prices than people anywhere else in the country. The average cost of unleaded petrol in the UK is £1.38 per litre, but in Kirkcudbright this month it is £1.48 a litre. The cabinet secretary talked about an absence of fairness and growth in the budget. The unfair cut to the incomes of 45,000 older people in Dumfries and Galloway will not only damage those individuals—it will also damage local economic growth.
The Institute of Fiscal Studies calculations that others have mentioned show that each pensioner will lose an average of £83 a year, which amounts to £3.7 million for those 45,000 older people in Dumfries and Galloway. This large rural region, with lower average wages and higher fuel prices than the rest of the country, cannot afford to lose £3.7 million from its economy.
Of course, we are told that there are compensations for the freeze in age-related allowances. The cut in the top rate of income tax will deliver £1 billion to the very rich across the UK, with each person who earns above £150,000 standing to gain a tax bonus of £10,000 a year. Very few such people live in Dumfries and Galloway, but it is a well-established fact that money that is given to those on lower incomes is much more likely to be spent in the local economy, which stimulates it, than is money that is given to the very wealthy, who are more likely to invest in property, for example. I suggest that the £3.7 million that has been taken from the local economy through freezing of allowances will not be compensated for by rich people splashing their extra cash in the streets of Kirkconnel or Sanquhar.
Does Joan McAlpine welcome the increase of £5.36 a week in the old-age pension, which is the highest increase in 30 years?
As I said, any increase in the pension will be wiped out by the effects of the Government’s actions on, for example, VAT. It is the Scottish Government, through its freezing of council tax, that is putting more money into the pockets of pensioners and other low-paid people.
There is one significant thing that the UK Government was asked to do in Dumfries and Galloway that could have delivered growth. In the budget, George Osborne was asked to release the funds that are needed to upgrade the Hardgrove to Kinmount section of the A75, which is the main east-west link in the region. I was pleased that the upgrade was included in the list of shovel-ready projects that the Scottish Government presented to the Prime Minister after he indicated that he would consider capital investment in Scotland that was ready to go, so it was extremely disappointing that it was not mentioned in the budget, and nor were any of the other shovel-ready projects. If those projects had gone ahead, they would have injected £300 million into the Scottish economy and created thousands of jobs. The A75 upgrade would have injected £10 million into the local economy and would have saved lives: there have been several accidents on that road, in which lives have been lost.
The fact that the Prime Minister raised expectations only to dash hopes illustrates once again why Scotland must have control of its own taxation and spending, so I look forward to the day when the budget that is presented to Parliament by Mr Swinney is the only one that we need to debate.
17:16
I support the Government motion. The cabinet secretary mentioned that the recovery is fragile; indeed it is. In its green budget news release, which was quoted in evidence at this morning’s meeting of the Finance Committee, the IFS states:
“The risks to our central forecast are very much on the downside ... The case for a significant short-term fiscal stimulus to boost the economy is stronger than it was a year ago. There seems little prospect that it would prompt an offsetting monetary tightening in the present climate”—
which is often what the Conservatives argue. Predictably, Mr Brown has risen to his feet.
Paul Wheelhouse and I were both there when the IFS gave evidence to the Finance Committee a few weeks ago. The IFS representative did not take a firm view on whether a fiscal stimulus should be provided. Does he accept that that was the IFS’s position?
I disagree fundamentally with Mr Brown. The IFS made a clear case for a short-term injection, and it cited capital investment as being one of the three key ways in which that could be done. In his oral evidence, Mr Johnson of the IFS suggested that VAT cuts, national insurance changes and, crucially, capital spending—particularly on housing and roads—would have the greatest impact. Spending on roads would not be popular with Mr Harvie, but I am sure that spending on housing is popular with all of us.
As well as failing, as my colleague Joan McAlpine said, to fund shovel-ready projects that would have boosted growth in the construction sector—which, as we all know, has a high multiplier effect and pumps money back through the economy relatively rapidly—the UK Government is to cut consumer spending through the proposed granny tax, which will affect 330,000 pensioners.
In addition, the UK Government’s proposed welfare reforms will hit the poorest people in our society and create enormous problems in all our constituencies, to the extent that Helen Forsyth, who is the chief executive of Berwickshire Housing Association, has informed me that it is planning to bring in soup kitchens to deal with the impact of the Welfare Reform Bill. The Conservatives should be ashamed of that; it is clear that that should not be regarded as a “union dividend” for Scotland.
Gavin Brown talked about the role of the OBR, and I have the greatest respect for Robert Chote, who gave evidence to the Finance Committee today. However, although, as the cabinet secretary identified, the projection is that unemployment as defined by the International Labour Organization will peak in 2012 at 8.7 per cent, Mr Chote could not enlighten the committee on what the regional differential might be in this or other years. In other words, the OBR analysis is not yet sophisticated enough for it to be used to understand the regional impacts of the UK Government’s budget. That is alarming. I am not blaming the OBR—that is not part of its remit—but it is an issue that the UK Government should address and which it has a responsibility to take into account. Indeed, we know that in previous years Eddie George of the Bank of England accepted that unemployment in the north of England and Scotland was a price worth paying to control inflation in the south-east of England.
Willie Rennie said that people who do not accept the need to reduce the deficit live in cloud-cuckoo-land. That is wrong, because it is not only the level of debt, but the ability to sustain the growth that will help to service that debt that is crucial. In its most recent pronouncements on the UK’s credit rating, Moody’s has made it clear that the weak prospects for growth and not just the level of debt are putting the UK’s rating at risk.
We have already heard about the 33 per cent cut in Scotland’s capital budget over the spending review period. Robert Chote confirmed that the projected £1.4 billion cut to the general Government investment figures, which appeared in the paper that was presented to the committee today, reflects the UK Government’s spending plans beyond 2014. The Government is already talking about potentially cutting further. The IFS indicated in evidence to the committee—as Gavin Brown will no doubt remember—that it anticipates more bad news from the UK Government in the next spending review.
On fuel duty, I identify with the comments from colleagues that a Government that pretends to care for rural economies throughout the UK should be ashamed of itself for introducing an increase at the present time.
17:21
I apologise for seeking to influence the order in which the Presiding Officer calls speakers, and I undertake never to do so again. I am sure that I will be suitably punished by giving a bad speech this afternoon.
I will start in the safe territory of the respected economist Will Hutton, who always gives a fair and balanced view of budgets. In his Sunday column in The Observer, he was moved to say at the very start that
“The budget was a disgrace. The government has washed its hands of any attempt to relieve the worst recession since the 19th century.”
I believe that millions are paying more now so that millionaires can pay less in a year’s time. For the avoidance of any doubt, and for the sake of SNP colleagues, I assure members that the Labour Opposition at Westminster will lodge amendments to the Finance Bill to ensure that the 50p tax is maintained. We probably do not want to hear any more about what happened on Monday night but—as the cabinet secretary will know as a former Westminster member of Parliament—the vote was not specifically about corporation tax, and it would not have been the normal time to register opposition to specific tax changes as distinct from the budget as whole. However, that is enough of that.
What is striking about the budget is not only what is in it, but what is not; one could make a whole speech about the missing elements. I see that Gavin Brown is unfortunately not in his place just now. One of the most significant things in the Office for Budget Responsibility report, to which he referred, is that there is no material adjustment to its economic forecast this week, as compared with two weeks or a month ago. In other words, the budget did not fundamentally change the macroeconomic outlook and was, in that regard, a missed opportunity.
The budget contained some good measures, such as the tax relief for the video games industry, which was first granted by Alistair Darling and then removed by the Conservative Government. Such specific examples can be given, but of far greater importance is the disaster that the budget brings for millions of ordinary people. As the Institute for Fiscal Studies has pointed out, and as the cabinet secretary reminded us, it will be people in the lowest two deciles who will suffer the most—especially families with children.
Will Malcolm Chisholm reflect on the implications of the budget proposals on market-facing pay for some of the people in Scotland and other parts of the United Kingdom about whom he is talking?
That is another dimension. The budget not only describes things that are going to happen in the immediate future—in this year and the following year—but points, as I was going to mention, to £10 billion of further cuts to the welfare budget, which is truly shocking and scandalous.
The budget also intimates—as the cabinet secretary highlighted—a wish to go down the path of regional pay. Public sector pay is the last prop of many local economies. It would perhaps not be described in that way in Edinburgh, for example, but the idea that people cannot get jobs in the private sector because of the level of pay that is received by nurses and teachers is absolutely absurd. There are thousands of well-qualified people who are desperate to get employment in Edinburgh and elsewhere, and we welcome the jobs that are coming, particularly from Gamesa. It is lack of demand, not the pay of public sector workers, that is causing problems in the economy.
I was saying before that intervention that the lowest deciles will suffer the most. To a significant extent, that is because of the raid on tax credits. I was very pleased that Ed Miliband announced in a speech today that Labour would seek to protect working families from the raid on tax credits and would raise the money for that by reversing the Government’s pension tax break for those who earn more than £150,000 a year. Labour budgets over the years were fair and progressive and what we are arguing for on tax credits and VAT reductions, given that VAT is a regressive tax, are in that tradition of fairness and progressiveness.
It never ceases to amaze me that lower-paid people are to be made to work harder by getting less, while the rich are to be made to work harder by getting more. According to the red book, they will gain £3 billion, which will rise to £4 billion, from the corporation tax cut.
Will the member give way?
I am in my last minute. Otherwise, I would be delighted to take an intervention. I will be guided by the Deputy Presiding Officer.
I can give you back the time for the intervention.
Would the new progressive Labour regime also reinstate child benefit to people who earn in excess of £60,000 a year?
I cannot speak for what Labour at Westminster will say on that issue. It is well known that there are problems with the proposal, in that someone who earns £50,000 could lose money whereas a couple who earn £99,000 would lose nothing. My personal priority is to reverse the raid on tax credits. I thank the Deputy Presiding Officer for giving me that extra time.
One of the few good things to come out of the budget is that the Labour lead over the Conservatives before the budget was 4 per cent, and it is now 17 per cent. I suggest to SNP colleagues—although they will not agree—that the answer to a bad UK Government is a good UK Government, and the sooner we have one, the better.
17:27
We have had commitments on reversing welfare cuts, tax credits, VAT, fuel duty, national insurance contributions, child benefit, postage stamps and shovel-ready projects. The list of commitments is huge and I am sure that I have missed out some of them.
Paul Wheelhouse said that this is not only about spending but about growth; there is an element of truth in that. It is about growth. It is about the balancing act between spending enough to stimulate the economy—which is partly what the youth contract and the extra capital that was accelerated in the autumn statement, were about—without spending too much, which would unsettle the markets. I think that he recognises that we have to consider that part of the equation. In that context, he was probably a bit embarrassed by all the commitments that his colleagues made on a range of issues.
Paul Wheelhouse rose—
Will the member take an intervention?
I will do so shortly.
I hope that Paul Wheelhouse will have a word with his colleagues afterwards, because he said a few wise words and he would probably welcome a bit more control from SNP members on their spending commitments. I will take an intervention from him first.
I support the claims that my colleagues made about postage stamps. The increase in their price takes money out of the consumer spending that ultimately feeds through into growth in spending on the high street and in revenue from taxation.
I will also take Kenneth Gibson’s intervention.
The UK Government indicated that borrowing is £11 billion less at this stage than was expected: it has dropped from £137 billion to £126 billion. Would it be so wrong to put half of that £11 billion, which was not expected, into shovel-ready projects? That £5.5 billion would create 77,000 jobs and would provide a stimulus. In contrast to what Mr Brown claimed, the IFS said that that would not harm economic prospects at this time, and would help the unemployed people who could take the jobs.
It is interesting that Paul Wheelhouse did not disagree with his colleagues on their proposed extra spending. I will return to that shortly. On Kenny Gibson’s point, it is about a balancing act; it is about ensuring that we maintain credibility. Members will not have failed to notice that some credit rating agencies have considered our outlook. We must therefore constantly keep our spending under review to ensure that we are not being reckless.
Kenny Gibson and his colleagues have fallen into that trap, which is why I disagree with them so fundamentally on all the commitments. Individually, those things are all worthy and I would love to do them, but we have to live within our means. Perhaps John Swinney and the First Minister have brought in two Nobel prize winners to try to make the sums add up. The sums do not add up just now, so perhaps they need Nobel prize winners to make their budget work for a future independent Scotland, because only Nobel prize winners could do that. That we have to live within our means is an important fact to consider.
Several members said that there are some good things in the budget. I thank them for recognising that. However, they then continued to focus on all the bad and difficult stuff, without making a more balanced contribution. They looked at things in isolation, so let us look at some of the facts. We will raise five times as much as the 50p income tax rate would have raised. We will do that from the tough measures on tax evasion, the higher rates of stamp duty for expensive properties and the tycoon tax.
Will the member take an intervention?
I will not just, now.
I would have preferred to have kept the 50p rate—I think that most Liberal Democrats would—but we have to look at the practical implications. If more can be raised elsewhere, let us do that. It is not how we do it but what we raise that counts.
Will the member give way?
Will the member give way?
As a Liberal, I believe that the most important thing to ensure is that those who have the broadest shoulders bear the greatest burden.
Will the member give way?
That is where the debate comes to pensioners. A lot of tosh has been talked about the situation of pensioners.
Will the member give way?
Order. Mr Rennie is not giving way.
Pensioners will actually be better off as a result of the measures. I know that members prefer to look at issues in isolation, but I remind them that the triple lock, which the Liberal Democrats in the coalition insisted on, will raise the state pension by average earnings, inflation or at least 2.5 per cent. I have to be a little ungenerous to the Labour Party in doing this, but I compare that with the 75p increase that Gordon Brown delivered. We have to compare that 75p increase with a £5.30 increase. I know that inflation is different now, but £5.30 is a colossal increase compared with 75p, and the budget is delivering it.
We are also moving towards the citizens pension, which combines the state pension and the second pension.
Will the member give way?
No.
At current expectations, £140 will be delivered, so pensioners will not be worse off as a result of this UK Government. We have to live within our means. Things are tough, but that is what we have to do.
Members have been very keen to criticise the budget. I hope that Mark McDonald explains to people in Aberdeen that 99,400 people in Aberdeen will be getting a tax cut. Many other members have criticised a budget that is delivering progress. I wish that they would look at things in a more balanced way.
17:33
Getting the barracking from the Government benches this afternoon reminded me of what The Economist editorial said last week in response to the budget:
“The politics of this will be rough, but it was the right thing to do.”
Oh well then.
Those were words of The Economist, not mine—and it was indeed the right thing to do. The budget puts the United Kingdom on a stable course, giving us credibility across international markets while trying to promote growth and giving a well-earned boost to low and middle-income earners up and down the country.
Let me pick up on a couple of criticisms of the budget. There was much criticism of the abolition of the 50p rate from April next year. Jamie Hepburn seemed to accept that the 50p rate did not raise a huge amount of money. We will lose about £100 million in moving down to the 45p rate. His view—a perfectly valid one to hold—is that the 50p rate should be kept anyway because it sends a signal. I agree that it sends a signal, but I take a different approach: I think that it sends out the signal that we have the highest rate of personal income tax in the G20 countries.
To clarify for Mr Brown, I do not accept that the rate raised a small amount—it raised revenue. However, I was intrigued to hear him say that the changes will cost £100 million, whereas Mr Rennie tells us that they will raise revenue. Both cannot be right, so which is it?
The member raises a fair point, so let me make the issue clear. The Government will lose £100 million of revenue from income tax by moving to the 45p rate from the 50p rate, but it will gain £490 million through the cap on unlimited tax reliefs; it will gain £65 million from stamp duty land tax in terms of the enveloping into corporations; and it will gain £225 million from the 7 per cent charge on properties that are sold for more than £2 million. Therefore, if the objective is to consider how the budget impacts on the wealthy, the point that Mr Rennie and the coalition Government make is that, although the wealthy will get £100 million back via income tax, if we add together the figures of £490 million, £225 million and £65 million, the total far outweighs the amount that the wealthy will gain. That is why it is not true or correct to say that the change in the rate is being paid for by taking money away from old-age pensioners.
Will the member give way?
Not at this time. Actually, as it is Iain Gray—go on.
I appreciate that.
Surely Mr Brown will admit that the signal that the measure sends is that if someone is rich and does not pay their tax, the Government will remove that taxation, whereas, if someone is poor and pays their tax, the Government will increase their taxation and they will pay more. Does he really believe that that is the right signal to send?
If we want to have the most competitive tax environment in the G20, we cannot have the highest top rate of tax. Maybe Mr Gray does not want us to have the most competitive tax regime in the G20—that is his prerogative—but the coalition Government has set that ambition, and rightly so, I think.
Kenneth Gibson commented sparingly on the response to the budget from John Walker of the Federation of Small Businesses. To be fair, it is true that John Walker was disappointed about the level of fuel duty and that there is no dedicated Cabinet-level minister for small businesses. However, what else did he say in response to the budget? I see that he welcomed
“proposals to cut the burden of red tape”;
he welcomed proposals
“to get young workers into employment”;
he welcomed
“measures to improve access to finance”;
and he welcomed
“moves to simplify the tax system for the country’s smallest companies.”
He also
“commended the fact that the Budget was fiscally neutral which would help reduce the budget deficit and was pleased with the OBR’s positive revision to growth forecasts this year, along with forecasts for falling inflation.”
That is straight from a House of Lords library note. It is incumbent on Mr Gibson to give a balanced view of what the Federation of Small Businesses said.
Will the member give way?
Not at this time. I have only one minute to go.
Another issue that has come out relates to capital budgets. We hear that there is no money for the 36 shovel-ready projects that the Scottish Government keeps talking about. However, it completely ignores the fact that, in the autumn statement, almost £0.5 billion of additional capital spend was given over the course of the spending review period. While we are at it, as Mr Swinney will know, the Scottish Government was given £50 million for the financial year 2011-12, but it decided to give that to Scottish Water and did not even consider any of those 36 shovel-ready projects. When Mr Swinney was quizzed at the Finance Committee on whether he had given thought to anything else, the simple answer was no.
Oh, come off it.
It is a bit rich for Mr Swinney, who is now putting on the fake and mock laughter to try to hide his embarrassment—
Will the member give way?
Presiding Officer, do I have time to take an intervention?
Yes.
I have been utterly fair in the debate this afternoon. If Mr Brown was to be fair in reflecting what I said to the Finance Committee, he would say that I made the point that the UK Government said that the money had to be spent before the end of the financial year 2011-12, which is the end of this month. If Mr Brown thinks that that degree of expenditure in shovel-ready projects could be delivered, he has not run a Government for a while.
So the shovel-ready projects are not quite as shovel ready as Mr Swinney wants to say they are and—here is the important point—he did not even consider anything else. It is no wonder that he shakes his head in embarrassment. He would have done better not to intervene on me and to quit while he and his Government were behind.
17:40
Let me be clear: the budget asks millions to pay more so that millionaires can pay less. There are 14,000 people throughout the United Kingdom who earn more than £1 million and are about to get a tax cut of £40,000—a cut that is one and a half times the average salary in Scotland. As Anne McTaggart said, we are not all in it together.
I will take a moment to focus on the 50p tax debacle and what happened late at night in Westminster on Monday. I am sure that the SNP could not resist it. It was actually quite funny when Mr Swinney mentioned it. We appreciated that—I particularly liked the bit when he said that it was the most interesting FOI request that he had ever seen. Perhaps that is because the ones that he signs off have a lot more redactions in them.
However, I find it rather sad when back bencher after back bencher mentions the 50p tax rate vote in their speech because, in choosing to waste precious debating time to gloat about a little bit of clever manoeuvering at Westminster, they lose the opportunity to share the experiences of their constituents. [Interruption.]
Will Kezia Dugdale give way?
Mark McDonald rose—
Order. We will hear the member.
I will not give way to Mr Hepburn on this occasion. Summing up is about answering points and, considering that SNP members have obsessed about the 50p tax rate, I will use my opportunity to reply.
The reality is that Labour’s record on the 50p tax rate is consistent. We introduced it and our position is clear. My colleague Malcolm Chisholm outlined how Labour will table amendments at Westminster.
Will Kezia Dugdale give way?
I ask Ms Scanlon to let me go on for a second. I will let her in if I can.
The First Minister’s position is less clear. He has made three big speeches on the economy this year alone, but made not one mention of the 50p tax rate being at the heart of progressive politics. There was no mention of the 50p tax rate in the SNP’s manifesto or its submission on the budget process.
I asked the Scottish Parliament information centre to do a LexisNexis search on the terms “SNP” and “50p tax rate”. It said that there were no relevant results. I am afraid that the SNP’s record is not consistent.
If the 50p tax rate is so wonderful, why did it take the Labour Party 12 years and 11 months of a 13-year Government to introduce it?
Our view on the 50p tax rate is clear: in difficult economic times, people who have more should be asked to pay more. That is fundamentally what our position was about.
Mary Scanlon managed to say in her speech that the 50p tax rate turned off investment in Scotland at the same time as saying that nobody paid it. It cannot be both.
Not every SNP back bencher chose to make cheap political points.
Oh, no!
I will give credit to Joan McAlpine for her speech—if members wheesht a second, they might hear me. She deserves credit because she talked about the real-life experiences of her constituents.
I was recently in Dumfries, talking to young people about life as an unemployed person in a rural community, and I appreciate that the budget does nothing for them. However, I say gently to Joan McAlpine that front-bench SNP members could do much more to help young unemployed people in rural constituencies.
Willie Rennie said that he was proud of the budget and that people on low incomes would benefit significantly.
Will Kezia Dugdale give way?
I would like to move on, if that is okay with Ms McAlpine. I think that she might like this.
Is Mr Rennie aware that the Child Poverty Action Group said this week that 100,000 low earners throughout the United Kingdom would gain not the £220 that he claimed but just £33 from the rise in the tax threshold once we take into consideration all the other changes that his Government is making? I worked out that that is less than 10p a day. Is that really something of which he is proud?
Ms Dugdale is considering things in isolation again. The change is substantial, and people on the minimum wage will benefit substantially. I would have thought that Labour would welcome that kind of progressive move.
Mr Rennie might want to meet the Child Poverty Action Group to ask it about the rigour of its figures. I did not give my position; I gave CPAG’s position—and Mr Rennie should consider it carefully.
Stuart McMillan intervened on both Ken Macintosh and Gavin Brown to talk about welfare advisers in Inverclyde. I say to Mr McMillan that Mr Macintosh was right: when local authorities face 90 per cent cuts to their budgets, they face difficult choices. Mr McMillan could consider what the Labour Government in Wales did in giving money directly to local authorities to protect the jobs of welfare advisers. If Mr McMillan is really concerned about cuts to welfare advisers in Inverclyde, he could put that argument to his finance secretary and could argue for the same cash.
Will the member take an intervention?
I am sorry, but I do not have time. We can talk about it later in the bar, if you like. How about that? It’s a date.
Mark McDonald said that it was perfectly okay for his party to like some aspects of the budget but to vote against it overall. I agree with that notion. It is exactly the approach that this party has taken to budgets for years. He might like to reflect on that.
Mr Brown and Mr Rennie are welcome to celebrate their budget, but the stark reality is that 1 million young people in the United Kingdom are unemployed, and the budget contains no national wage subsidy scheme. The economy has stalled and there is no plan for growth. The Government’s overarching purpose is to pay down the deficit, and yet it is borrowing £150 billion more in order to deliver the austerity programme that we have heard so much about today. It is hurting but it is not working.
Will the member take an intervention?
I am in my last 30 seconds.
I support the Labour amendment, but we cannot support the SNP motion, simply because we do not believe that the answer is separation.
I call Fergus Ewing to wind up the debate. Mr Ewing, you have until 5.59, so there is plenty of time for interventions.
17:47
Ha ha—thank you, Presiding Officer. It is my pleasure to respond to this debate. We have seen a lively and entertaining series of discussions, and full and frank exchanges. At times, I have felt that the temperature in the chamber was almost as high as the ambient temperature in Aboyne yesterday—a record-breaking 23°. That was great for the Scottish tourism sector—a sector that has not been mentioned so far in this debate. Before I do my best to respond to points that members have raised, as tourism minister I will say that we were disappointed that the budget did not contain measures to tackle two particular matters.
I am not someone who advocates uncosted measures, and we acknowledge the difficulties that have been pointed out by members right across the chamber—not least by the Cabinet Secretary for Finance, Employment and Sustainable Growth.
Will the minister take an intervention?
I ask Mr Rennie to let me make my point first, and then we can move on.
As I was saying, two issues arise. The first is air passenger duty, and the second is VAT. The 2012 budget documents confirm that, in addition to the increase in the air passenger duty rate that has already been announced from April, a further rise will apply from April 2013, related to the retail prices index at that time. The Treasury has estimated that the revenues will increase from £2.7 billion in 2011-12 to £3.9 billion in 2016-17. The managing directors of the airports in Aberdeen, Edinburgh and Glasgow wrote jointly to the chancellor before the budget, urging him to reverse this year’s increase. They said that APD is regularly cited as a barrier to growth.
All but two members of the European Union have reduced VAT on accommodation. France has a rate of 5.5 per cent, Germany’s is 7 per cent and Italy’s is 10 per cent. Even Ireland, with the economic difficulties that we all acknowledge that it faces, has managed to reduce its rate. The point of doing that is to attract more visitors to the country and to gain, in fairly short order, more revenue by ceasing to be at such a competitive disadvantage. I am not criticising the Government for not making a substantial reduction in this budget, because we acknowledge its difficulties. However—and this is a serious point—we need to avoid being regarded as a too-high-cost destination.
The minister made some interesting remarks about APD and VAT, which I am sure he has made to the UK Government. Does that mean that he disagrees with the SNP back benchers who spoke on the issues of welfare cuts, tax credits, VAT on repairs, fuel duty, national insurance contributions, child benefit and the price of postage stamps? I do not include the shovel-ready projects in that list, as I am sure that Mr Swinney suggested that he agrees on those. However, if he does not disagree, his claim about fiscal responsibility is slightly dubious.
I would have shortened that intervention if I were the member. I point out that the Cabinet Secretary for Finance, Employment and Sustainable Growth raised those matters in his letter to the right hon George Osborne on 9 March. Among the various topics that Willie Rennie mentioned was the price of postage stamps. Now that the first-class stamp is 60p, I doubt that the Westminster cheque will be in the Holyrood post.
I turn to matters that were raised in the debate. The issue of personal allowances was a major issue, with claims and counter-claims being made. Some members were keen to highlight the benefit of the increase in the income tax personal allowance. The SNP is in favour of progressive taxation—that has always been the case, in a moderate way—so we believe that, in principle, that is a good move. However, as some members have said, budgets must be judged in the round and on the impacts of all their measures—that is the key to understanding how to set a budget and must always be borne in mind. It is an unavoidable fact that, as a direct result of the UK Government’s policies, the average Scottish household will be almost £800 worse off next year. That point was made by Kenneth Gibson, who quoted quite a few other statistics that I will not repeat. He was correct to point out that many of his constituents will be worse off, even if they have notionally benefited from the rise in personal allowances, because of the rises in other taxation—for example, the rise in fuel duty, which the cabinet secretary mentioned. They will be worse off in the round.
That is what the people outwith the chamber whom we represent will look at. People tend not to remember specific details about budgets other than measures that are insulting, such as the 75p increase in the state pension, or measures that cause untold damage through undermining confidence in business, such as the tax raid on the oil and gas sector last year. According to people such as Sir Ian Wood, who is better placed to opine on those matters than anyone in this chamber, that undermined confidence in boardrooms throughout the world.
I turn to personal allowances for pensioners. Members have argued that the withdrawal of age-related personal allowances is a mere simplification exercise. Let us be clear: it is not, it is a tax rise. The Institute for Fiscal Studies concluded that the chancellor
“should have avoided dressing up what is clearly a tax increase merely as a simplification.”
That is a fairly damning verdict. Willie Rennie mentioned the triple lock, but the basic state pension will increase only in line with the consumer price index in April 2012 and it is expected to increase only in line with the CPI in April 2013, too.
Will the minister give way?
Hang on a second. That means that the state pension will remain unchanged in real terms—that is a fact.
Corporation tax was another of the three or four main themes in the debate. Mr Swinney made it clear that he welcomed certain measures in the budget. I thought that Mr Brown was somewhat churlish, in his opening remarks at least, although he contradicted himself three or four minutes into his speech when he acknowledged that Mr Swinney had welcomed some measures.
We want Scotland to become an ever-more competitive place for business. However, a uniform corporation tax for the whole of the UK is neither desirable nor economically efficient. Parts of London have an in-built competitive advantage, and devolving corporation tax would provide a range of options to address imbalance. Grant Baird, who I think was the First Minister’s predecessor as Royal Bank of Scotland chief economist, once said that contiguous tax regimes are good for competition.
The minister says that he wants a more competitive Scotland. Does that mean that his vision is of a low-tax, deregulated Scotland?
No. My vision is of a Scotland that is succeeding to a greater extent than it is currently doing.
I referred briefly to changes to the oil and gas fiscal regime. Last year, the increase to more than 80 per cent in the supplementary petroleum tax for pre-1993 fields caused more damage than any other budget in the UK has done for many years. The reason it caused so much damage was because it was totally unheralded. There had been no pre-legislative consultation, as happens in the Netherlands—under legislation—and the tax increase came as a total shock to companies that have to plan oil and gas projects over decades. Anyone who has to invest in a project over decades wants stability and certainty, in so far as those exist on this planet. Suddenly, the rug was pulled from under companies. In boardrooms throughout the world, confidence has been undermined.
I hope that that damage can and will be repaired as we go forward. As members know, I have a good relationship with Charles Hendry and others on such matters. I welcome the new measures on fuel allowances and decommissioning. However, they do not entirely make up for the damage that was done last year.
Is the minister on slightly shaky ground when he says that he is against unheralded tax increases, given what he and his Government did with the retail levy?
No, and I think that I have covered that point more than sufficiently in previous debates. That was a poor point.
A huge opportunity has been missed as a result of the failure to boost the economy, at a time when that was so needed, by financing the shovel-ready projects that many members mentioned, such as Dundee central waterfront, Fife energy park, Inverness campus, Forres enterprise park, Lews castle, David Marshall lodge and various road and university projects. All round the country, jobs could be created if projects that are or are nearly shovel ready were allowed to proceed.
That is also the view of Michael Levack, of the Scottish Building Federation, who said:
“The value of construction output from infrastructure projects last year was around £1.3 billion, or 12 per cent of total industry output ... our own analysis suggests that ... additional funding could potentially have boosted direct employment in the construction industry alone by up to almost 5,000 jobs.”
It is tragic that such an opportunity has been missed. That is how the budget will be remembered.