United Kingdom Budget (Implications for Scotland)
The next item of business is a debate on motion S3M-4004, in the name of John Swinney, on the UK budget's implications for Scotland.
I welcome this opportunity to present the Scottish Government's response to last week's budget. Before I do that, I want to set the response in the context of the economic conditions that we face, and to update Parliament on what the Scottish Government is doing to help Scottish households and businesses.
To increase sustainable economic growth has been the Scottish Government's overarching purpose from day 1. It assumes even greater importance in the current circumstances, when economic conditions are the most challenging in recent memory. Data that were released last week confirm that the Scottish economy is officially in recession. In the past nine months, the United Kingdom economy has shrunk by more than 4 per cent, which has wiped out more than two years of economic growth. In Scotland, unemployment might be lower than it is in other parts of the UK, but it is on the increase and there is no room for complacency.
The Government is determined to use every lever at our disposal to respond to the downturn. We responded early and decisively in October with a six-point economic recovery programme. Since then we have introduced more than 60 measures to support the economy. We are supporting communities through increased and better investment. Through our 2009-10 budget, we are accelerating £293 million of capital spending, which—on top of the £50 million that we brought forward last year—will support more than 5,000 jobs. We are spending a record £644 million this year on building affordable housing.
We are also pushing ahead with our changes to the planning system. Yesterday we launched e-planning, which is a new online system that will speed up the planning process, save local authorities an estimated £17 million and save users a further £44 million.
We are supporting businesses on the issues that matter most to them. From the beginning of April, we have expanded our small business bonus scheme, which has helped tens of thousands of small businesses to pay reduced or no business rates, and has saved the average small business around £1,400. We recently announced plans to create a Scottish investment bank, which will bring together £150 million of public sector investment funding to support Scottish businesses.
We are also helping individual Scots who face uncertainty and redundancy in these difficult times. We have provided the funding to freeze the council tax for a further year—that, at a time when bills are still rising in England and Wales. In co-operation with other parties in Parliament we are introducing an apprenticeship guarantee to help youngsters who are affected by redundancies to complete their training. We have signed our first local employment partnership with Jobcentre Plus in order to improve the training and job opportunities service for individuals. That is evidence of our determination to work in collaboration across the public sector and to marshal all our resources in support of Scottish households and businesses.
We are taking sensible, positive and significant measures, which are collectively supporting thousands of Scottish jobs. However, most of the short-term macroeconomic levers for responding to the recession rest with Westminster. The Chancellor of the Exchequer had an opportunity in his budget statement to take bold measures to address the economic crisis, but his statement fell well short of that mark.
There were announcements in last week's budget that we welcome. I am encouraged that the chancellor has listened to our calls to provide more support to savers and to improve incentives for investment in the North Sea. I also welcome the support for developing a low-carbon economy—a sector in which Scotland has a competitive advantage and real opportunities.
However, many of the measures that were announced will be deeply damaging to Scotland. The increases in alcohol and fuel duty will have a direct and adverse effect on the Scotch whisky industry and our rural communities. The chancellor has chosen to ignore our calls for reform in those areas. The cuts in public spending that the chancellor announced will have a real effect on Scotland for many years to come.
If an amendment to the Finance Bill that would end the VAT reduction is tabled in the House of Commons, how will the cabinet secretary recommend that his Westminster colleagues vote on the amendment?
I would first have that discussion with my Scottish National Party colleagues in Westminster. I would then be happy to share the outcome with Mr Purvis, if such a scenario had to be faced in the House of Commons.
It is clear that the Scottish economy will be in a fragile state next year. Her Majesty's Treasury estimates that the UK economy will grow by a modest 1.25 per cent in 2010, whereas the International Monetary Fund expects it to contract by a further 0.4 per cent and almost all forecasters expect, at best, zero growth next year. Whatever forecast is selected, it is clear that suppressing aggregate demand at this stage of the economic cycle is the wrong course of action. However, against that background, the chancellor announced real cuts in the Scottish budget.
Would the cabinet secretary care to agree with Professor Bell and his own director general for finance that the Scottish budget is increasing in real terms and not being reduced?
The director general made it clear to the Finance Committee that there will be a real-terms reduction in the budget for the Scottish Government in 2010-11 and confirmed that point again to the committee in a letter earlier today, from which I will quote. She states:
"it remains the case that there will be a real terms reduction in the budgets available to the Scottish Government between this year and the next."
That answers comprehensively the question that Mr Kerr asked.
Will the cabinet secretary admit that there would be a cut only if the money that the SNP Government, by its own decision, brought forward into this year's budget to be spent on measures that we supported, was taken out of a future budget that we are now discussing? There is a cut in that budget only because he cut it.
Mr Kerr ignores the fact that his Administration in the House of Commons is cutting £500 million out of the Scottish Government's budget. That is the cut in the budget. Mr Kerr, of course, was at the front of the queue demanding that we accelerate capital expenditure, which we have done to support jobs, although he now complains about the decisive action that this Administration has taken.
As we face £5 billion in so-called efficiency savings, we will face real cuts in public expenditure. This Government is at the forefront of work to deliver a real public sector efficiency programme. Our programme will deliver transparent, verifiable savings that stand up to scrutiny. Better procurement across the Scottish Government resulted in reported efficiency gains of more than £340 million in 2007-08. Improved national health service drug purchasing delivered efficiency savings of £33 million against a target of £20 million in 2008-09. Scottish Government officials have negotiated with the National Policing Improvement Agency savings of £2.7 million for Scottish use of the police national computer and the Airwave radio system. Only this morning, I announced a new contract to bulk buy electricity for the public sector—an initiative that the chancellor encouraged us to take, that we have delivered in a matter of days and that will save taxpayers a further £10 million a year.
I really welcome the savings that the minister has just indicated. When he was on "Good Morning Scotland", he was repeatedly asked whether he would cancel the referendum on independence, which is not wished for by the people of Scotland—certainly not by Parliament. Under intense questioning, he said that it is up to Parliament to decide whether to spend money on a referendum. Will he confirm that that is the case? When Parliament decides on that, will he accept its decision?
I would have thought that, after Lord Foulkes's lengthy experience in Parliament, he would understand that it must give authority for public expenditure to be undertaken. That is what we secure in the Budget (Scotland) Bill and the budget process. I am glad to say that he was an enthusiastic supporter of our 2009-10 budget.
The Scottish Government has to face the reality of the budget cuts that come from the United Kingdom Government. Their consequence on the Scottish budget will be a departmental expenditure limit reduction of £496 million, which will threaten 9,000 jobs in Scotland when economic recovery is at its most essential. That comes against the background of not warnings, but plans in the red book from the United Kingdom Government of long-term spending cuts, which are a result of the scandalous mismanagement of our public finances by the Labour Government over the past few years.
The Institute for Fiscal Studies estimates that, between 2011-12 and 2013-14, total UK departmental expenditure will fall by 2.3 per cent a year in real terms. If the UK Government chooses to implement across-the-board cuts in public spending, the Scottish Government budget is likely to fall by over 3 per cent in real terms every year between 2011-12 and 2013-14, with a fall of over 9 per cent a year in our capital budget. That would mean that, in 2013-14, public spending in Scotland would be between £2 billion and £3 billion lower in real terms than it is in this year, at a time when we will be wrestling with the rising cost of the private finance initiative. That expensive experiment of the previous Administration means that we must find £2.7 billion extra in cash in this parliamentary term to fund PFI repayments, compared with the 2007-08 year when we came to office.
Will Mr Swinney give way?
I am afraid that I must conclude my speech.
Of course, that all comes at a time when the UK Government could have made other choices. For example, it could have chosen not to embark on identity cards or the Trident nuclear missile system—it could have imposed the cuts elsewhere. However, the UK Government has decided to impose cuts on the core public services that will affect recovery of the Scottish economy, which is the wrong course of action to have taken. The Scottish Government will use all its energies to protect the Scottish economy in the face of the UK Government's incorrect decisions.
I move,
That the Parliament expresses its deep concern at the contents of the Chancellor of the Exchequer's Budget last week; recognises that this is a product of poor financial management of the UK economy in recent years that will leave unprecedented burdens of debt for many years to come; acknowledges the significant pressure that the reduction of planned budgets of £500 million will have on public services, and calls on the Scottish Government to bring forward budget proposals for 2010-11 that will support a sustainable economy and effective public services and include an assessment of the carbon impact of its budget.
I begin by making an announcement to members. In the teeth of the biggest recession for many years, there is a real-terms increase in our budget of some £2.2 billion over three years. It is a real-terms increase, not a cut. Of course, Mr Swinney fails to recognise that real-terms increase.
The increase was reported to the Finance Committee this week by none other than the Scottish Government's head of finance. It was said four times at the meeting that the real-terms increase was 1.7 per cent, unwelcome though it was to the ears of Mr Swinney. Even with the revised figures that we received just before the debate started, there is still a real-terms increase of 1.3 per cent, which emphasises again that the SNP is choosing to mislead the Scottish people about the budget. Professor Bell agrees with that point, as does Scottish Parliament information centre research—it is all there in the tables. Again, it is simply the case that the SNP is misleading the people of Scotland.
I therefore suggest that the motion that we have before us today is built on the politics of the Tory-SNP alliance that we see so frequently in the chamber. Of course, no one has to study politics greatly to understand that that alliance props up this Administration. In turn, we should not be surprised by that alliance, because Alex Salmond recently expressed his admiration for Thatcherite politics, but said that Scotland disliked the social consequences. Of course, it was the SNP who delivered Thatcherism to us by bringing down the Labour Government of the day. No doubt, the SNP will seek to do the same again.
On the point about fooling the people all the time, I suspect that the time is up on that particular tactic because the UK budget confirms that there will be an increase each year in cash and real terms—there will be an increase of £2.2 billion. Despite the cabinet secretary's repeated scaremongering, the Scottish Government will have more cash next year to spend. On top of that, the UK Government is spending an additional £400 million.
What therefore constitutes a cut in the twisted world of the SNP and its spin doctors? Here is what happened: the SNP decided to accelerate spending from next year to spend in this year, with which fiscal stimulus we agreed. However, the SNP is now trying to say that that very money, which it decided to bring forward, is a cut in its budget. Of course, it is ludicrous to suggest that. The SNP took the opportunity that the UK Treasury provided and brought forward that money, fully accepting that that advance would obviously count in the following budget.
When exactly in this analysis will Mr Kerr get round to the UK Government's £500 million of real cuts in the baseline budget of the Scottish Government?
First, the cuts are taking place under the SNP right now. Secondly, the Scottish Government must take its share of the responsibility to rebalance the books of this country, given the £2 billion that has been put into the pockets of Scots, the provision of £50 billion to save the Scottish banks and the underpinning of toxic debt to the tune of £580 billion. The SNP is being deliberately misleading in trying to distort the facts and figures in the budget. The cabinet secretary has yet again failed to admit that the Scottish budget is increasing in real terms and in cash terms, but that is exactly what is happening in the budget.
Mr Kerr mentioned the need to rebalance the books. How many years does he think that will take?
The Chancellor of the Exchequer laid out his view and perspective on that matter, and I agree with him on that point.
Contrary to the claims of the SNP, the chancellor's budget will not cut public expenditure in the face of a recession. The chancellor announced £5 billion-worth of fiscal stimulus for this year, with increased support through tax incentives to help businesses to ride out the recession and with help for young people under 25 to ensure that they are assisted into employment or training.
Will the member give way?
I will in a second. I want to ask the cabinet secretary, who is about to rise to his feet, whether he will guarantee today that the consequentials from the budget—additional resources from the Labour Government that will be available to him to spend—will be spent on housing, green energy, youth employment, further education colleges, capital projects and much-needed assistance for the third sector?
Of course the Government will consider those issues in an orderly fashion and report back to Parliament. I point out that the Labour Party in this Parliament has made many other spending demands.
In his economic analysis, will Mr Kerr state whether he believes that the economy will come out of recession in the fourth quarter of this year?
There are many opinions and views on that matter. I have no reason to believe that that is not possible as, indeed, other economic commentators have said.
Another big subject on which SNP ministers have continued to get it wrong—in the real world of economics instead of the fanciful world that they live in—is VAT, which other members have already asked about. We know that the SNP was split on the matter, with its MPs at Westminster taking the view that the VAT cut was a good idea and its MSPs, in the shape of Mr Salmond and his colleagues, taking a different view. Would the cabinet secretary care to comment on the recent Centre for Economics and Business Research study that showed that
"the VAT cut is working",
which echoed recent findings from the Institute for Fiscal Studies and from Goldman Sachs? In December, when the VAT cut was introduced, the SNP's MPs at Westminster supported it, but the party's ministers up here attacked the cut as "marginal". This month, the CEBR—hardly an organisation that frequently supports the Labour Government—has published a document, appropriately called "Credit where credit's due", which states:
"The figures are clear; the VAT cut is working … retail sales for the year are likely to be £8-9 billion higher than would have been the case without the VAT cut."
Moreover, the Institute for Fiscal Studies report makes it clear that, in respect of the VAT cut,
"those dismissing it as a failure"—
including many in the chamber—
"ignore the likelihood that things would be even worse without it."
Will the member give way?
I will in just a second.
Goldman Sachs—perhaps Gavin Brown will comment on this point—has stated:
"the VAT cut was instrumental in driving this strength"
in retail sales.
If the VAT cut is so good, does Mr Kerr think that it should continue after December?
I think that that is a legitimate strategy for the chancellor to discuss. I am not aware of the entirety of what is on the Government books in respect of that matter, but I think that the issue should be considered.
The Tories, the SNP and others have been proven completely wrong on the VAT cut, which has provided an average of £275 for each family in Scotland in difficult times. That has been a good thing for Scotland. Salmond, Swinney, Mather and all the rest were wrong to dismiss the cut, but let us hear what they had to say. Mr Mather said:
"There is also concern about the marginal benefits to the economy of the 13 months' cut in VAT".
Perhaps he should have listened more closely to Mr Hosie, who said:
"I support fiscal stimulus … and £12.5 billion of real money for the real economy"—[Official Report, House of Commons, 17 December 2008; Vol 485, c 1148-50.]
The Tories were not far behind that view either, but things changed on the way to Parliament. Before the pre-budget report, Ken Clarke said:
"I would look at a ... temporary reduction in VAT which is the best way of stimulating spending, consumer spending which helps businesses."
I am sure that Derek Brownlee will be happy to comment on those words of Ken Clarke.
I am sure that Andy Kerr will have read Hansard this week, in which Mr Clarke commented on Mr Clarke. He made it absolutely clear that he was saying that if there was scope for a fiscal stimulus, a VAT reduction would be the appropriate response. When the Government is borrowing an extra £180 billion every year, there is no scope for such a fiscal stimulus.
That brings us to the nub of the issue. If Labour's VAT cut and the other fiscal stimulus measures that we have sought to take had been applied in the recession of the 1980s, when the economy was in the hands of the Tories, 300,000 or 400,000 additional jobs would not have been lost and we would not have seen the extended dole queues with which the Tories are associated. Alex Salmond agreed with that strategy. We will never forget that, and we will never forgive the Tories for it. That is the effect of sitting back and doing nothing, which the Tories advocate.
Sadly—because I had much more to say on the matter—my time is running out. There are no quick fixes, as the chancellor has said, but Scotland has received more cash in real terms as a result of his budget, and it is about time the Government grew up and started to spend that money more wisely.
I move amendment S3M-4004.3, to leave out from "expresses" to end and insert:
"welcomes the real-terms increase in the Scottish Government's budget for 2010-11; also welcomes the earlier measures that the UK Government has taken to support Scotland during the global downturn, such as the £50 billion funding to Scottish banks to support bank workers, families and businesses who rely on the banks and the £2 billion that has gone into the pockets of hard working Scots and the VAT cut that has given the equivalent of £275 to every Scottish family and boosted retail sales; recognises that last week's Budget continues to provide real help now to families and businesses, such as the guarantee that anyone aged between 18 and 25 who has been unemployed for 12 months or more will be given a training place or a job and the new investment in the renewable energy industry, which will benefit Scotland, and calls on the Parliament to recognise the role the UK Government has taken in leading the international response to the global economic crisis."
I agree with Andy Kerr—time is, indeed, running out. It is certainly running out for the Labour Party at Westminster. We might be discussing the impact of the UK budget on Scotland, but in reality we are debating the consequences of Labour's financial incompetence at UK level and its impact on Scotland. That is not just a debate for today or for later this year; it is a debate that we will be able to have for decades to come.
The member is fond of mentioning Labour's financial incompetence at UK level, but unemployment in Britain is 6.7 per cent. The latest European unemployment statistics show unemployment rates of 8.1 per cent in Germany, 8.6 per cent in France, 6.9 per cent in Italy, 17.4 per cent in Spain and 11 per cent in Ireland. The rate in the USA is 8.5 per cent. The fact that the UK has a lower unemployment rate than those countries hardly suggests that Brown is in charge of the worldwide economy.
What the Labour Party will not tell us is that unemployment is projected to go higher than it ever did under the Conservatives. According to the red book, which the Treasury published last week, the current recession will be deeper than the recession of the 1980s that Mr Kerr seems to care so deeply about. The state of the public finances is such that the members of Labour's front bench who tell us that the present situation has got nothing to do with the Labour Party will have retired before we get anywhere close to seeing a return to growth in spending.
Many of the tax changes that were announced in the budget will affect Scotland, as will those that were implied, but which the UK Government did not have the courage to announce. I note in passing that the cabinet secretary mentioned the tax changes that relate to the oil and gas industry but, as commentators have pointed out, they will make no difference at all to existing fields in which investment is falling, and whose continuation is crucial to maintaining the economic life of the North Sea.
As most members will, I suspect, choose to do, I want to focus on what the budget means for the Scottish Parliament's spending. Labour famously promised to abolish boom and bust, but we are experiencing the worst recession since the second world war. We have more national debt than every Government in history. Debt interest payments amount to six times what Scotland spends on health—assuming that the present debt interest rates do not increase.
How many times since 2007 have Labour MSPs come to Parliament to denounce cuts? Every week, they demand more money on something, whether health, local government or transport. Those siren calls will have to stop. From this year onwards, the debate will not be about where we spend more but where we spend less.
There have been many arguments at First Minister's questions and elsewhere about next year's budget and the impact of the £500 million squeeze. If the projections of the Centre for Public Policy for Regions that are highlighted in my amendment are in any way correct, that issue is the least of our worries. It is interesting that the chancellor has admitted that when he stood up in the House in Commons last week, he knew that the IMF would rubbish his growth projections. If the chancellor's figures are not correct, there will be another black hole to add to the already gaping black hole in the public finances.
If the first decade of devolution was marked by spending increases, the next one and the one after that will be marked by spending restraint. The current levels of spending are simply unsustainable, given the state of the public finances. Whether we like it or not, spending cuts will have to be made. Gordon Brown may prove to be a relatively short-serving Prime Minister, but his impact will be with us for many decades to come. The debate will not be about whether to cut, but about where to cut. That is a huge shift in culture for this Government and this Parliament, but for the sake of the country it is one that we had better get to grips with, and quickly.
The responsibility for the mess may lie firmly with the Labour Government, but that does not excuse the Scottish Government from dealing with the consequences. The impact of the explosion in public debt means that the Scottish Government will have to contend not just with next year's spending squeeze but with a spending squeeze every year of the next session of Parliament, and possibly the session beyond that. That puts into context the £500 million argument.
Clearly, there is scope for Government to be more efficient, but that scope varies from department to department, and within departments. That is the flaw with a central target, whether it is 2 per cent or 3 per cent or whatever. For some areas, a 2 per cent target will be a real challenge; for others, there will be scope to go further.
At some point, however, the capacity to deliver services via efficiency savings becomes limited. At some point, people will have to stop kidding themselves that efficiency savings will be able to cope with the squeeze on the budget. At some point, Government has to make more difficult choices, for example on which programmes to scale back or stop, and whether staffing numbers need to be reduced. Those choices will have to be made, and the sooner we face up to that reality, the better able we will be to confront it. That is why our amendment calls on the Government to prepare contingency plans for dealing with the projected reduction in the DEL in the medium term.
Does Derek Brownlee support the shadow chancellor on aircraft carriers and whether those orders on the Clyde will be cancelled?
Given that the chancellor has had to rework everything he has said in six months, it is difficult to expect the incoming Conservative Government to write a budget a year in advance. We will have to consider every area of spending, as will the Scottish Government. The impact of Labour will be there for many years to come. That will be the key issue in the 2011 election and the one after that. That is all thanks to the UK Labour Government.
I move S3M-4004.1, to insert at end:
"; notes the research by the Centre for Public Policy for Regions (CPPR) that predicts that in real terms the Scottish Government Departmental Expenditure Limit (DEL) will be between £2.1 billion and £3.8 billion lower in 2013-14 than in 2009-10; further notes the comments of John McLaren of CPPR that "the prospects beyond 2013-14 are also not good and although positive real terms growth rates are likely to return, they are unlikely to be very large until UK net debt as a share of GDP falls, possibly not until the 2030s", and calls on the Scottish Government to prepare contingency plans on how such changes to the Scottish DEL will be managed."
There will never be a UK budget that the SNP will say is good for Scotland. In the years of unprecedented growth during the previous decade, every UK budget was met with condemnation by the SNP. That was when there was an average of 5 per cent growth in the Scottish budget. It will always be thus. The SNP will never argue that a UK budget is in the interests of Scotland. The SNP is a separatist party—it is as simple as that.
Equally, at local level, when any services are under threat or will be reduced, the SNP will say that that is a result of the £500 million cut. We could rightly ask constituents who are concerned about local services who they believe—the Scottish Government or the UK Government. In these unprecedented times, it would have been helpful if, first and foremost, there had been clarity in the UK budget. Of course, there was not. It was a typical Labour budget—good for the headlines on the day, but when we see the details the day after, and the week after, we have more cause for concern.
It should have been a green and a fairer budget that made the choice to support investment in sustainable technologies, infrastructure and education. Critically, the budget should have provided crucial support for low and middle-income families. Instead, we had the headline of the 50p tax rate, and then the details, which showed hardly any action being taken on the grotesque loopholes and exemptions for the richest and little being done for the poorest. We can all recall easily the 10p tax rate fiasco—unfortunately, Labour has continued that habit in this budget.
Mr Purvis makes the point, rightly, that the burden will fall on low and middle-income families. Is it not true to say that £191 million will come from fuel duty and VAT, but only £53 million from Scotland as a result of the new top rate of tax?
I will come to the choices that have been made on taxation in a moment. I do not think that Mr Adam will be pleased with my views.
Just this week, the Finance Committee received information from Professor David Bell and the Scottish Parliament information centre that the position of the Scottish Government is not entirely clear, and that there will be 0.5 per cent real-terms growth in next year's budget. That figure includes the £391 million of cuts—although we reject that figure—as a result of the £5 billion of so-called value-for-money savings. The net growth is 0.5 per cent in real terms, and, for this year's budget in 2009-10, SPICe also shows that the Scottish DEL budget grew by 3.9 per cent from last year. That information never passes the lips of SNP ministers.
Last week, the First Minister said that there had been the first real-terms cut in the Scottish budget "since the Tory years". However, he baselined the accelerated capital investment that SNP ministers had asked for. We are not talking about conditions imposed on the Scottish Government; John Swinney was keen to tell us—as we can see in the Official Report of 26 November—that he wrote three letters to the Westminster Government in three weeks, asking for capital to be accelerated. In the week before the Easter recess, my colleague Ross Finnie asked whether the Scottish Government considered that funding brought forward from 2011 would have to be paid back. John Swinney answered:
"That is the basis on which we took up the offer. It would be nice not to have to pay it back, but I believe that that would be a difficult case to argue."—[Official Report, 2 April 2009; c 16497.]
However, the First Minister and the cabinet secretary have been arguing that case today, despite the fact that, three weeks ago, John Swinney was saying that it was a difficult case to argue.
If Mr Purvis works his way through later parts of that Official Report, he will find that, in a subsequent answer to Mr Finnie, I made it very clear that it would be advantageous not to take the money out of public spending while we were trying to recover from recession.
If the information exists, I am sure that the cabinet secretary will publish it through SPICe, but the difficulty with his position is that what he is saying now was never part of the discussions with the Treasury. The director general of finance in the Scottish Government confirmed that on Tuesday.
The cabinet secretary cannot simply change the argument as he moves along. We are seeing the difficulties that arise when people spin a position that is not reality. If the reality was that the Government could baseline the figures brought forward, the Scottish Government would of course allow exactly the same thing to happen with local government, colleges, universities and all the different bodies that the Government has asked to accelerate capital in their own expenditure. Those bodies would be allowed to baseline the money now. However, that is not going to happen; the Government will not allow colleges or local authorities to say that there is a real-terms cut in their budgets from the Scottish Government next year—even though that is the rationale that the Scottish Government is using with the Treasury.
I have no truck with the Treasury's handling of the economy, nor with its budget. However, my constituents will have no truck with the Scottish Government playing politics and spinning a situation. Our key consideration should be the need for clarity for local public services. The First Minister, the cabinet secretary and the Treasury must act together to safeguard public services during this recession. They have signally failed to do so. The spin of the past week does no credit to officials in the Scottish Government, and does no credit to the cabinet secretary.
I move amendment S3M-4004.2, to insert at end:
"; agrees that the temporary cut in VAT has proved costly and ineffective, and regrets the decision of the Scottish MPs who voted to support the cut when the money could have been used to create thousands of jobs in green energy and public transport."
We move to the open debate.
I believe that it was Enoch Powell who said that power devolved was power retained. The actions of the UK Government in this year's budget demonstrate how right he was. The treatment of the devolved Administrations by the Treasury, as if they were Whitehall spending departments, shows clearly that whoever controls the purse strings dictates public policy.
This is not the first time that such a thing has happened. The Treasury has a long and dishonourable track record, which started with its refusal to give back to the previous Scottish Executive many millions of pounds in connection with the loss of the attendance allowance, when, collectively, we had agreed to provide free personal care. That happened despite the case being argued by the Parliament as a whole and by the then Labour First Minister, Henry McLeish. The Treasury, of course, said no. That cavalier approach of continuing to exercise power over Scottish expenditure, even on matters that have clearly been devolved, has also been demonstrated by the failure to release all end-year funding automatically. Instead, we have to go and request that funding, after making a case for it. However, it is our money.
The failure, in the past year, to release the £40 million for police and fire service pension payments meant that the costs had to be met by the Scottish budget although it should have been a clear Barnett consequential. There has also been a refusal to release the Barnett consequentials of the money expended on English prisons, the £120 million from the fossil fuel levy and the £476 million in council tax benefit—and the list goes on. However, that is not the end. Not only are those funds missing in action, lost in the pockets of Whitehall; Westminster intends to slash another £500 million a year over the next two years from an already agreed budget.
The big question is, where should those efficiency savings—as the chancellor likes to describe them, although in reality they are cuts—be made? What does the Labour Party suggest that the Scottish Government do to achieve those savings or cuts of £500 million a year?
I have one suggestion on which Parliament has already made its voice clear. It does not want to spend the money that the Scottish Government intends to spend on a referendum on independence. Parliament has said that to the Government, yet the Government persists in spending taxpayers' money on the issue when that money could easily be saved as a contribution to the Scottish budget.
Of course, the amount of money that will be spent on that must be considered. However, I believe that that money will be wisely spent on allowing people to exercise their choice.
Will the member take an intervention?
No, thank you. If you want us to take the pain, Mr Kerr, you should tell us where the pain should be. I will give you the opportunity to do so, but I will make some suggestions on how you might want to do that.
Through the chair, please, Mr Adam.
Indeed.
Is Labour considering scrapping the council tax freeze? We have heard Labour members say that. Is that what you suggest? Do you want to make cuts in education? Should we close hospitals? Is that what you suggest we do? Should we end the concessionary bus fare scheme?
Why does the £367 million saving that has to be made over the period require any of those cuts? The SNP Government has made more cuts than that in its lunch time.
So, we will not get any suggestions from you. I put it to you that the cost of pensioners losing their free bus services would be £180 million. The ending of the fuel poverty programme would release another £50 million. If we are to have the kind of cuts that you have been talking about in the health service—you promised them before the most recent election when you said that you would freeze the money—£70 million could be saved by getting rid of 480 consultants and £85 million could be saved by getting rid of a couple of thousand nurses. Moreover, if you wanted to save £102 million from our police forces, we could slash the spending on police officers and lose 3,300 of them from the beat. Those are the real choices. You cannot hide from them, Mr Kerr. You and your colleagues—
Mr Adam, through the chair, please.
The Labour Party owes it to the Parliament and the people to tell us where it plans to make the £500 million in cuts. I am sure that I am not the only taxpayer who is dissatisfied with London Labour's cuts.
Our national haulage industry is crying out for support. Time after time, it has pleaded with the UK Government for assistance for that essential part of our economy. It has suggested fuel duty rebates, a fuel duty escalator or simply postponing the ridiculous hikes in fuel taxes that are already a curse not just for the hauliers, but for all consumers of transported goods—that is, everybody. Despite those suggestions being made, no assistance has been offered in this month's budget or in the previous one. In fact, the situation has been made much worse by the additional increases in fuel duty.
If Mr Kerr wants to give us an explanation, I would be delighted to let him intervene.
No. I am not calling you, Mr Kerr. Mr Adam should wind up.
Even with limited powers, the actions of the Scottish Government to improve the quality of life in troubled economic times are exemplary. Scotland and the Scottish Government have what it takes to beat the recession, but only if London Labour stops taking back what it gives.
The Government motion begins with an absurd unqualified condemnation of the budget. I will return to that towards the end of my speech if I have time, but I will focus first on two distortions of reality that follow in the motion, which might be quite good politics but are appalling economics. The first is the statement that the debt situation is the
"product of poor financial management".
It is difficult to see what the SNP would have done in a similar situation, given the international economic difficulties that we face.
A key element of the budget deficit is the fiscal stimulus and the money to save the banks, but, of course, we know that the SNP Government supports that.
Another key element of the problem with debt is that the Labour Government doubled national debt before we went anywhere near a recession and before we had to rescue any bank.
I might come on to that as I analyse the budget deficit, but I should point out that the Tories did not support the fiscal stimulus. The fact of the matter is that the 4 per cent contraction of the economy this year would have been far worse without a fiscal stimulus package. One leading economist had estimated that the contraction would be as much as 8 per cent.
The second and more substantial element of the budget deficit is what are called the automatic stabilisers: public expenditure has to go up to deal with unemployment and other features of the recession. Even the Conservatives would have had to accept that—indeed, they would have had far more to pay, because there would have been much more unemployment.
The third element of the budget deficit is the lost tax revenues. There are grounds for concern there. The Institute for Fiscal Studies analysis points out that there is a structural budget deficit now because there has been what it regards as permanent damage to the economy, because of the recession, and particularly because of the effect on the financial sector. That is a deep worry for us all, but it certainly cannot be attributed to any "poor financial management" by the UK Government. If the Government had not saved the banks, the situation would have been a whole lot worse and the budget deficit would have been a great deal more.
Where exactly is the "poor financial management"? Derek Brownlee referred to earlier years, but for all the years between 1997 and 2008 the UK Government kept debt below 40 per cent of gross domestic product. During the past 10 years I certainly did not hear from the SNP or, come to think of it, from the Conservatives in this Parliament, complaints about the growth of public expenditure; in fact, many members of those parties were calling for more. I do not think that the statement in the motion blaming the Labour Government for the deficit as a result of "poor financial management" has any shred of truth in it whatever.
An element of the fiscal stimulus with which both the Scottish Government—or, at least, sections of the SNP—and the Conservatives disagree is the VAT element. I do not think that I have to repeat what Andy Kerr said about that. The Centre for Economic and Business Research, which is one of the bodies that analysed the VAT element, said in its report that turnover will be between £8 billion and £9 billion higher this year because of the VAT measure. That has clearly been of substantial benefit to the economy. The higher sales will in themselves generate higher taxes, so the overall cost at the end will probably be less than the £12.5 billion that was announced when the measure was introduced.
The second distortion that we have heard repeatedly over the past few weeks is the idea that a £500 million reduction will lead to real-terms cuts next year. First, the figure is not £500 million unless we include the health capital expenditure, which the UK Government has dealt with in end-year flexibility. Setting that aside, there will not be real-terms cuts. I do not think that I have to repeat all the arguments that have been well put by various members, but we can arrive at the idea of a real-terms cut only by taking the brought-forward capital expenditure as something that is only in this year's budget. We have to look at capital expenditure over two years. In that way, it is as planned. The best way that I can illustrate the real situation is by referring to page 241 of the Treasury's red book, which the First Minister himself used as his main ammunition last week to establish a cut.
If we take out the capital expenditure—we all know that the Scottish Government is playing funding games with that—and look at resource expenditure in everyday health and education budgets and so on, which people are mostly worried about, according to the same page as the First Minister quoted from, the Scottish Government will have a 1.3 per cent real-terms increase in resource expenditure next year.
Nobody wants reductions in public expenditure, but surely the SNP can give us a little hint of what action it would take to rein in the budget deficit. Of course, the SNP has mentioned Trident and identity cards, on which colleagues will not be surprised that I agree with John Swinney, as does my former colleague Stephen Byers. However, the fact is that cutting such spending would not solve the problem that the cabinet secretary describes. Spending on Trident does not start until 2012 and is spread over 10 years, so to pretend to the Scottish public that cutting that would deal with all the issues is dishonest.
My time is up. I had wanted to deal with the many good points of the budget that the motion ignores, but I will leave it to my colleagues to talk about them.
As I suspect most people do, I think that the size of the UK Labour Government's debt is so large that I cannot quite remember how many zeros should be added to the end of the figure. Even if I remembered, it would be likely that one more zero had been added by the time that I finished my speech.
However, I know that the Labour Government has borrowed more money than the combined borrowing of every previous UK Government ever. I also know that my four-year-old grandson will be an adult and will probably have his own children before the debt that Labour has built up is paid off.
If Scotland had been independent, had put £37 billion into the banks and had underwritten the liabilities, it would have used three times the borrowing capacity as a proportion of GDP that the British Government has used.
We would have done several things. We certainly would not have allowed the banks to get into the current state and we would have built up an oil fund from our revenues over 40-odd years—the Labour Government has squandered that money.
The Labour Government has broken the fundamental contract with the people that we pay tax for the services that we receive. The Government is forcing us to pay not for services that we will receive, but for its mismanagement of the economy. The man who preached prudence is now addicted to debt.
I was fortunate to be part of the parliamentary delegation to the USA and Canada for Scotland week. When I was in Quebec, I was struck not just by the warmth and regard for Scotland, but by the fact that all parties—regardless of whether they are sovereigntists such as the Parti Québécois or federalists such as the Liberal Government—put Quebec's interests first. All the parties supported the language and culture and—most important—were prepared to take on the federal Government if Quebec's interests were being affected by its decisions.
Judging by Labour's amendment, I think that the Labour Party in Scotland has many lessons to learn. For months, the Labour Party in Scotland has denied—in the face of all the evidence to the contrary—that the Scottish budget will be cut by £500 million. Last week, Iain Gray claimed that the chancellor's budget was good news for Scotland. Andy Kerr's amendment continues that theme. It is astonishing that Labour just does not listen or learn. Does the Labour Party in the Scottish Parliament not acknowledge, as the federalists in Quebec do, that it has a duty to the Parliament and to the people of Scotland who elected its members?
Will the member give way?
It is unfortunate that Iain Gray and Andy Kerr are Gordon Brown's men in the Scottish Parliament, parroting the spin that is prepared in Downing Street. If Andy Kerr wants to parrot more, please intervene.
I am interested in the member's international comparators. Why do we not pick Ireland, for example? Jim Mather said:
"those people, who say that Ireland cannot be copied successfully and effectively are no friends of Scotland."
Yesterday, Ireland's unemployment rate was 11.4 per cent. Its economy is contracting faster than any other in the world.
The problem for Labour is that nobody believes it, north or south of the border. The International Monetary Fund does not believe the assumptions that underpin Alistair Darling's budget and neither do the City and the country.
I will contrast the actions of the US federal Government with the actions in Scotland of the Labour Government. As part of Scotland week, Murdo Fraser and I met Dempsey Benton of the Office of Economic Recovery and Investment in North Carolina. Mr Benton, who is a personal appointment of the Governor, has a role of ensuring that the money that the federal Government allocated to North Carolina is spent appropriately to aid recovery.
North Carolina has a population of more than 8 million, which is almost comparable with Scotland, with our population of 5 million. In advance of the meeting, I confess that the fine detail of the US recovery programme had passed me by. I had assumed that the bulk of the money would be spent on infrastructure projects to kick-start the economy. In fact, President Obama's stimulus package is worth a total of $789 billion, $225 billion of which was allocated to states under a funding formula—the last phrase sounds familiar.
Will the member give way?
No. I want to finish the point.
North Carolina will receive $6.1 billion to support core projects, which is to be dispensed in accordance with federal rules. At a time when the Scottish Government is facing cuts that the UK Labour Government is imposing, the US states are receiving huge amounts of money to stimulate the economy.
The money that is being dispensed to the states is over and above their existing budgets. It is worth while for me to highlight some of the additional projects and money that are being made available to North Carolina. For example, weatherisation projects—in other words, fuel poverty measures including central heating—will receive an additional $132 million; child care, an additional $67 million; higher education, another $5 million; public housing, $83 million; school lunches, $3 million; highways and bridges, almost $1 billion; and education programmes, $750 million.
The White House estimates that the package will save 105,000 jobs in North Carolina alone. Thanks to the actions of the UK Labour Government, its cuts will result in at least 9,000 job losses in Scotland. The complicity of the Labour Party in Scotland is clear to see and yet, day after day, its members are calling for more money for housing, education and policing. Labour members should explain why they support Trident and identification cards and which services should be cut as a result of the cuts that their Government in London has brought upon Scotland. Indeed, we will demand that of them.
I welcome the opportunity to take part in this afternoon's debate on the implications of the UK budget for Scotland.
I welcome the measures that Alistair Darling announced last week. The budget comes at a time of economic crisis throughout the world. In the US, industrial production declined in 13 of the past 14 months. In Japan, car production is down 56 per cent on the previous year. Even in a growing economy such as China, growth is declining.
I welcome the measures that the UK Government has introduced. Listening to SNP members in recent times, one might wonder what the UK Government has done for Scotland. Alex Salmond was at it again at First Minister's question time today. Only six months ago, an intervention of £50 billion was made to support the banking system, of which the main beneficiaries in Scotland were the Royal Bank of Scotland and HBOS. That positive intervention by the UK Government averted a catastrophe and saved jobs in the financial sector throughout Scotland.
In November, we saw the £20 billion stimulus package, £2 billion of which will have a direct impact on the Scottish economy in these difficult times. In last week's announcement, we heard of the action that is being taken to guarantee jobs for the long-term unemployed and of investment in offshore industries—which is obviously of help to Scotland—and carbon capture and storage, including at Longannet in Fife. Those are positive measures. As other members have mentioned, the Scottish budget will increase by £2.2 billion over the next two years. That will give Scotland a budget that is twice the level that it was when Donald Dewar was appointed as First Minister back in 1999.
It is also important to explode the myth that the SNP puts about when it says that the 2010-11 budget has been cut in real terms. The figure of 1.3 per cent is given in Stella Manzie's letter and the figure of 0.5 per cent is given in the SPICe table; both documents say that the budget will grow in real terms. The budget is not being cut, so it is disingenuous of the cabinet secretary to suggest that it is.
It is particularly annoying that the reprofiling of capital has been taken out and displayed as a cut. That is a bit like a person getting their salary in advance, going to the boss on pay day and saying, "Wait a minute, boss. I've still not been paid." The SNP must spend more time promoting jobs and the Scottish economy rather than talking down Scotland and talking about cuts when the budget is growing in real terms.
I have some practical suggestions about how the SNP might get more out of the budget. The provisions relating to community payback orders in the Criminal Justice and Licensing (Scotland) Bill send a signal to Scotland that we will take a soft-touch approach towards criminals by relaxing sentences of less than six months. There will also be a £10.6 million drain on the public purse, according to the financial memorandum to the bill, which lacks detail—that is not the first time that that has happened. In my opinion, the financial memorandum underestimates the costs of the policy.
We are two years into the SNP Administration and we still do not have a business plan from the Scottish Futures Trust, which costs £22.9 million. What a shocking waste of public money.
In the ministerial reshuffle, Mike Russell was given responsibility for independence, but independence is a dead duck. The other three main parties in the Parliament do not support it, and having ministers and civil servants spend time on it when Scotland faces a difficult time with jobs is a waste of public money.
The Government should support microgeneration, for example, and introduce its energy efficiency plan instead of delaying it for a year. That would reduce carbon emissions, cut fuel bills and put money back into people's pockets. It is also important to support credit unions at this time.
These are serious times. We must consider how to move Scotland forward. Alex Salmond and John Swinney are the grumpy old men of Scottish politics. It is time for them to liven up, raise their game and start delivering for Scotland.
I wonder how many MSPs who are present for this debate have ever witnessed a minor car crash, with people standing around, blaming one another for what went wrong. The only difference between that and what has happened with our economy is that the economic car crash was not minor.
I wanted to say some nice things about nice people. The reason why we are where we are is that we have a Government that contains people who have been fundamentally nice; I am talking about the Government in London, not the Scottish Government—yet. Gordon Brown became Chancellor of the Exchequer in 1997 with a golden legacy from a fiscally responsible Conservative Government. In his interim budget in 1997, he was able to set great store by the fact that he had paid back some of the national debt. I hope that he enjoyed that experience, because that was the one and only opportunity he will have to do so.
What did Gordon Brown do then? He did what every Labour Government does, of course. He set out to improve public services to make everybody's lives a bit better. I offer him and the Labour Government my admiration for having that wonderful aspiration.
What went wrong? Every year, Gordon Brown's ambition to plough more of the nation's resource into public service always cost slightly more than his budget suggested that it would. Every year, the estimates in his budget statement about the income from a growing economy turned out to be slightly optimistic and he never quite got as much money as he expected. That meant that, year on year, he began to borrow, but just a little. With a quickly growing economy, it is easy to borrow just a little. Year on year, Gordon Brown borrowed against future growth for the benefit of us all.
In Scotland, we had no shortage of examples of more and more public money coming north, and we in the Parliament decided how best to spend that money. The problem was that, every year, the increases were based on slightly more borrowing, which was based on consistent growth. The then chancellor had the confidence to continue doing that because, deep in his heart of hearts, he thought that he had ended the cycle of boom and bust and that growth would go on for ever. He also encouraged a similar level of ambition in our banks and people. Through his confidence that boom and bust had gone for ever, he encouraged everyone to live on borrowed money. Little did we know that, in fact, we were living on borrowed time and that the biggest boom in economic history would become the biggest bust.
I recall that, in 2006, George Osborne set up the Conservative City circle, which was established purely to lift restraints on the regulation of the financial sector in the UK. Perhaps the member can assist me in understanding why that was.
George Osborne did not invite me to become a part of his circle. Did he invite Mr Purvis?
We are short of money. The fiscal car crash has happened in a big way, in this country and in countries throughout the world. I notice a pattern in James Kelly's speeches, in that he uses the arc of complicity—the United States, Japan and other countries that have got themselves into economic difficulty—in much the same way as Alex Salmond used to use the arc of prosperity. However, simply associating ourselves with those other countries does not take the blame away from the Government and from a Prime Minister who, as chancellor, was still borrowing at the very peak of the economic cycle. That is why we have a debt from which it will take us a generation or more to recover. The reason for the budget that we had last week is that there is no longer enough money to go round.
There is an artificiality in the debate. One group tries to avoid responsibility for the fiscal consequences that we face, while another group chooses simply to blame the party of Government in the south and to ignore the fact that it is the Government in Scotland and might have power to do something. That does not work—it is all our responsibility. The truth is that budgets will fall in years to come. Because of the level of debt, budgets will be artificially low year on year for a generation and perhaps longer. That means that we must all deal with the problem constructively.
The response that I seek from the Scottish Government, when the chance occurs, is to stop blaming the Labour Government and to consider what can be done to affect the balance of the economy in Scotland. Scotland is so dependent on public sector expenditure that we are in danger of rooting ourselves in a longer and deeper recession than that in the countries in the rest of the United Kingdom or our competitor economies. That is why I once again ask the Cabinet Secretary for Finance and Sustainable Growth to do all that he can to ensure that Scotland's private sector can recover and create jobs, and not to plough available resource into the public sector for no long-term return. I will hammer home that message at every opportunity.
I will concentrate on the budget implications facing the economy of the north-east of Scotland.
Immediately after the 2007 election, Alex Salmond promised us through the pages of the Aberdeen Evening Express that ahead were
"good times for the North-east."
Sadly, that promise, like so many that he made before, during and after the election, has not been fulfilled.
It is all very well for the cabinet secretary to lodge a motion blaming the Westminster Government for poor financial management. We all know that the Westminster Government is to blame, but the fact remains that the SNP Government could and should be doing more to stimulate the economy of the north-east.
Although the North Sea oil industry remains resilient in the face of the global downturn, there is a fear in the north-east that the current relatively low price of oil of around $50 a barrel is simply not high enough to convince operators to continue to invest in exploration in the North Sea. The Scottish Government cannot assume, therefore, that the north-east is or will be exempt from the difficulties that face the rest of the country, simply because of the oil industry.
The construction industry in the north-east is having a particularly torrid time. There are two very simple and straightforward ways in which the Scottish Government could provide a much-needed boost to the construction industry in the north-east. It could give the immediate go-ahead both to new schools throughout Aberdeenshire and to the Aberdeen western peripheral route.
Aberdeenshire Council has agreed to deliver 13 new primary schools over the next 10 years, at a cost of £126 million, and to provide the estimated £44 million that is needed to replace Alford academy. That is welcome. However, there is no way that the council can also come up with the further £200 million necessary to build five other academies that need to be replaced at Ellon and Inverurie, which are in the First Minister's constituency, and at Kemnay, Stonehaven and Laurencekirk, which are in my constituency.
Will the member give way?
I am just getting into my stride.
The agreements secured by the Liberal Democrats as part of the budget negotiations earlier this year committed the Scottish Government to a new funding stream for the Scottish Futures Trust this year. However, given the state of the economy, I urge the Government to ensure that that is implemented now—not by the end of the year. Such a funding stream would provide not only a much-needed short-to-medium-term boost to the construction industry but investment in our children's education—surely the best long-term investment that we can make.
Will the member tell us why, during the eight years in which his party was part of the Administration, schools in Aberdeenshire got into such a parlous state that they now require the level of investment that he is speaking about?
I remind Brian Adam that the previous Scottish Executive provided funding for new schools in my constituency. Pupils in my constituency, in Portlethen, Lairhillock and Hill of Banchory, are currently reaping the benefits of the investment that was made by the previous Scottish Executive and receiving their education in first-class schools.
Despite the SNP's promise to match the previous Executive's school building programme brick by brick, its dogmatic approach has led it to fail even to consider other funding methods for much-needed new schools. Meanwhile, a great many children face the prospect of receiving their entire secondary education in buildings that are simply not fit for purpose. The SNP has let those children down badly—that is the SNP's responsibility.
Similarly, as we heard today from the Minister for Transport, Infrastructure and Climate Change, the SNP Government has failed to say how it intends to pay for the much-needed Aberdeen western peripheral route. The AWPR would provide both a short-term boost and a long-term boost to the north-east economy. Initially, it would provide construction jobs. Once completed, it would allow businesses in and around the Aberdeen area to transport their goods much more freely.
The recent announcement by the Scottish Government that it will not even receive the recommendations from the public inquiry until this summer filled me with dread. We were told last year that the much-vaunted strategic transport projects review was to be published last summer, but we did not receive it until December. Similarly, in his last answer to a parliamentary question on the subject of the AWPR, the transport minister advised that work on the road was expected to start in 2010-11—it is the 2011 part that bothers me. The SNP cannot allow the project to be shelved in 2011 while it tries to work out how to pay for it.
The SNP has held up investment in schools for years while it wrings its hands over how it will pay for it without, in the memorable words of Christina McKelvie,
"lining privateers' pockets to the tune of £500 billion".
Her YouTube broadcast was a marvel to see—I had to watch it again today.
The cabinet secretary should stop trying to pick a fight with Westminster for party-political reasons; that is what the motion is about. Instead, he should get on with doing the many things that the Government could be doing in the north-east of Scotland in particular, and delivering the funding that we so desperately need for vital projects to safeguard and create jobs in the north-east.
This afternoon's debate is underpinned by the state of the UK economy and discussions about that. There has been what has been described as an unprecedented collapse of gross domestic product in the UK economy, with the highest ever peacetime levels of public debt. That cannot be blamed solely on the bank bail-outs, as so many are keen to do—it is about debt that was accumulated in previous Labour years to help balance the books. Just one example of the UK Government's historic financial irresponsibility is the fact that, due to the introduction of the international financial reporting standards, off-balance-sheet PFI transactions must now be accounted for correctly and, indeed, bailed out by the Treasury. Where does the risk lie now? It lies with the public purse, despite the risk premium that has been paid to developers and speculators over the years. John Swinney outlined the effect on Scottish Government expenditure that that is having.
The former and current Chancellors of the Exchequer and their colleagues are now scrabbling around to try to obfuscate reality and to obscure their inefficiencies, which are legion. When was the last time that one of Mr Darling's growth predictions turned out to be correct? I have no time to detail all the occasions that it took for him to move his estimate of public sector net borrowing from £38 billion to £180 billion.
Will the member give way?
No.
The chancellor's previous forecasts destroy any credibility in those that he makes for the future.
As we heard from Alex Johnstone, we have been left with a burden of debt. The chancellor's estimate of UK Government borrowing in 2009-10 is £175 billion. The recent economic projections of the Organisation for Economic Co-operation and Development estimate that in 2010 the UK's gross public debt, which is one of the Maastricht criteria, will be 66 per cent of GDP—double that of Finland and 20 per cent higher than that of Ireland. The OECD's projections also show nations' financial liabilities.
I will not give way to Mr Kerr. I am teaching him something—I wish that he would sit down and listen to me.
Sadly, the UK is again way out on its own, running net financial liabilities of 43 per cent of GDP in 2010. I find it interesting that small, independent Norway is offering money to the IMF while Peter Mandelson is preparing the UK to go, cap in hand, to ask for funds.
The stark figures that I have given can be illustrated for Scotland in the budget cuts that are now being imposed. In the chancellor's budget, there was confirmation that £500 million of cuts will be made to the Scottish budget next year and beyond. All serious commentators are clear—a cut in public services is being imposed by the Westminster Government.
Name one.
Rhodri Morgan, the First Minister of Wales, has said:
"The Archangel Gabriel could not find such proposed cuts … without damaging public services".
I rather like the analysis of Bob Crow, who said:
"With a combined £30bn worth of public sector cuts and privatisation, this budget represents the final political suicide note of the New Labour government."
The Deputy Prime Minister, Harriet Harman, has stated:
"You cannot cut your way out of recession—you can only grow your way out of recession."
The cuts come against a backdrop of the UK's fiscal stimulus package for 2010 being weaker than those of almost all other G20 countries.
What does the £500 million cut potentially mean for the annual Scottish budget? It means damage to education, our health services and other front-line services. Thankfully, the good husbandry of the Scottish Government has already allowed it to take action, within its limited powers, to tackle the recession.
There has been a reshaping and acceleration of capital expenditure. The Government is ensuring that its activity supports economic development: advice to businesses and individuals is being increased, and the small business bonus scheme was welcomed across the board.
The Scottish Government has shown imaginative thinking, from which Westminster could learn. Westminster could support Scotland and rethink some of its previous ridiculous refusals, some of which were outlined by Brian Adam. It could hand over Scotland's £120 million fossil fuel levy. It could hand over Scotland's accrued council tax benefit. It could agree the Barnett consequentials for the London Olympics regeneration spending, and the £1.2 billion increase in UK prison expenditure.
The most imaginative thinking of all would be to stop peddling the myths about Trident jobs and to support Scotland, and indeed the world, by hitting the Trident replacement programme on the head.
Will the member take an intervention?
I am in my last minute.
In the present financial climate, public services should not be sacrificed on the altar of weapons of mass destruction.
John Swinney is quite right in his motion: Parliament should express
"its deep concern at the contents of the Chancellor of the Exchequer's Budget last week".
We should be honest and recognise
"that this is a product of poor financial management of the UK economy in recent years",
and we should get behind a Scottish Government that wishes to make proposals
"for 2010-11 that will support a sustainable economy and effective public services".
Scotland deserves that from its representatives.
She said it once; she said it twice; she said it three times; and yes, she even said it a fourth time. I am of course referring to the Scottish Government's director general for finance and corporate services when she gave evidence at the Finance Committee on Tuesday afternoon. "What did she say?" I hear you ask, Presiding Officer. She said that there was a real-terms growth of 1.7 per cent in the baseline Scottish budget next year. That is not a cut, as her boss John Swinney would have us believe, but growth. Now, we are told, she made an error. I confess to being slightly bemused, as that error was made not once but four times. Her repetition of the 1.7 per cent growth figure, which was said with a great deal of confidence, now turns out to be wrong.
What bemuses me even more is that that error was made despite the flurry of notes that were being passed to her by the Government's deputy director of finance. Indeed, I had counted seven notes in total by that point, which the director general read from to enlighten the committee. Was the deputy director wrong too? How is it that our two most senior finance civil servants, with their impressive track record, can be wrong on such a fundamental issue? Indeed, I had the privilege to work with one of them when I was a minister, and his advice was always factually accurate. Perhaps the reason why we now have a letter of retraction is that the director general's boss, John Swinney, was embarrassed. Should I instead say "mortified"? It is a much better word.
It appears that officials are made to recant, retract and repent for the errors of their ways to spare the blushes of the Cabinet Secretary for Finance and Sustainable Growth. After all, he had been claiming—and still does today—that the budget has been cut. He can assert all he likes, but to be contradicted by his two leading senior civil servants is unfortunate to say the least.
It would appear that the budget baseline is in fact growing. I concede that it is not growing as fast as we all would have wanted, but it is growing nonetheless. It is difficult, with all the spin, claim and counter-claim, to discern the facts, but let me shed some light on my new specialist subject: baselines. I confess to developing slight anorak tendencies in this regard, which some less kind souls in the chamber might say is deeply disturbing.
Let me take members on the journey of discovery that I have travelled. First, the baseline for the Scottish budget, based on the departmental expenditure limit, is £27.5 billion for 2008-09, £28.4 billion for 2009-10 and £29.2 billion for 2010-11. Those are the figures that are published by the Treasury. Maths might not be everybody's forte but, despite the SNP's reduction in the number of maths teachers, even primary school children could tell us that the baseline is going up.
It is worth pointing out that the Scottish Government has taken decisions that are of their very nature short term, and those inflate the budget line for 2009-10. The Government made those decisions freely; they were not forced on the Government. Let me deal with some of them. The main change has been the reprofiling of capital expenditure. Members will recall that the Treasury agreed to John Swinney's request to bring forward capital spending. That was a decision for the Scottish Government. It could have chosen to leave the money where it was. I make no criticism of the Government for deciding to accelerate that spending, but it is disingenuous to claim that there is an adverse impact on the budget overall. Indeed, the Centre for Public Policy for Regions acknowledges that the overall pot for capital remains the same. We are simply bringing forward some capital to spend earlier; there is therefore no impact on the baseline. That should therefore be excluded from the budget baseline for 2009-10.
Let us consider end-year flexibility money that was agreed by John Swinney and released by the Treasury. The overall total was approximately £900 million, a proportion of which falls in 2009-10. That, too, was a decision of the Scottish Government. That, too, is short term in nature and should be excluded from the baseline calculation.
Finally, let us consider the Scottish Government's overcommitment of £100 million, which the cabinet secretary explained was to maximise spending. I do not disagree with that but, again, it is short term and a consequence of the Scottish Government's decision, and should not be included in the baseline.
I know that all that is complicated—it took me a while to get it. However, when we take out the short-term cushioning in 2009-10, which has never been built into the DEL baseline budget for future years, we see the true picture, which is growth. I acknowledge that some members think that I might be partial, but no such charge can be laid at the door of SPICe or of the Finance Committee's budget adviser, Professor David Bell. I invite members to consider table 2 in Professor Bell's paper for the Finance Committee, which is most interesting. Professor Bell has made it abundantly clear that if we exclude capital reprofiling, there is year-on-year growth in the DEL budget baseline.
There is growth, albeit small, whether we use Treasury figures; the figures for the Scottish budget excluding reprofiling; or the figures for the Scottish budget including consequentials without reprofiling. In each case the budget goes up, not down. If members are not content with Professor Bell's analysis, I invite them to consider table 3 in the paper from SPICe, which shows that, without reprofiling, there is an increase in the budget baseline. That even includes the efficiency savings. The cabinet secretary and the SNP have developed a mantra that distorts the level of efficiencies that must be found. Why let the facts stand in the way of a good story? However, it is interesting that, even with the efficiency savings that are required by the UK Government, the budget baseline grows.
The letter from the director general gives the game away. She says that the rate is not 1.7 per cent and that an error was made in the manual calculation that was done during the meeting of the Finance Committee. However, members should look closely at line 7 of paragraph 3, where she says:
"The figure is in fact 1.3%".
That is 1.3 per cent growth, and no amount of spin or assertion on the part of the cabinet secretary can cloud that fact. He has the responsibility for delivery; he should get on with it.
It has been observed that if government brings with it the burden of responsibility, a spell in opposition might offer some freedom and flexibility. What is strange in Scotland is that our political debate is currently dominated by two major political parties, each of which has one foot in government and one foot in opposition—and that is the case in difficult circumstances. We might have to muddle through without even a glimmer of consensus until at least one party shifts at least one foot.
Much has been said about the blame that should be apportioned for the current economic context—the crisis in the context of which budgets are being set at all levels of government. I have repeatedly argued that blame for the current context can be laid at the door of a flawed economic model, which has been consistently supported by the Labour, Conservative, SNP and Liberal Democrat parties during their various stints in government during the past few decades. I do not expect to win members over to my position in a few words in this debate. In any case, the context is out there, regardless of different opinions about where to lay the blame. We are in the situation that we are in; we all face the same problems.
Labour has responded to the problems with an amendment that contains a glowing endorsement of everything in the UK Government's budget. We can dismiss that position. The Liberal Democrat amendment adds that the VAT cut was probably a poor idea. That is true, so I can support the amendment—it is unhelpful, but it is true. The Government motion highlights the problem simply by restating it but leaves me none the wiser about the response. It leaves me none the wiser than I was two years ago about what it means to talk about supporting a sustainable economy. That remains as unclear as it has ever been. The Government talks about £500 million of cuts but is still unable to answer the question of where they will come from.
The Conservative amendment asks us to note, not endorse, the CPPR's views and analysis and asks for contingency plans. That seems reasonable but, to be fair, it is already happening. However, there will be a problem if those contingency plans cannot be developed alongside some degree of political consensus and, as I said, we do not have the best possible beginning for the development of such consensus.
The Green take on the context in which the UK Government has set its budget—we are now joined in this analysis by the Sustainable Development Commission, which launched its report "Prosperity without Growth? The transition to a sustainable economy" this week—is that the recession, as well as posing serious threats to our wellbeing, requires us to re-evaluate what we mean by wellbeing and prosperity. That would move us away from the gross domestic product fixation from which the Government at both levels still suffers. I am afraid to say that the Conservative amendment appears to display the same fixation.
Much has been said at all levels of government about a green stimulus, a green new deal and a low-carbon recovery. That is becoming common language, but the 7 per cent of the UK's fiscal stimulus that is being directed towards green measures is well below the European average. The UK compares even more poorly with China at 36 per cent and South Korea at more than 80 per cent. The consensus that the UK budget is a missed opportunity appears to be justified. In fact, in the words of Friends of the Earth, the Government has blown an historic opportunity to turn its words about a green recovery into reality. Perhaps the clearest symbol of that failure is the car scrappage scheme. Bus manufacturers and turbine manufacturers are going under, construction companies stand ready to implement a massive housing retrofit programme to cut energy waste and fuel bills, but Mr Mandelson and Mr Darling think that it is more important to give people a bung to get more cars on to the roads.
As well as talking about what is wrong with the UK budget, we need to discuss what is missing from it. We need to change the way in which Governments set their budgets. A carbon assessment process for budgets would be the first mechanism for placing economic decisions into the proper ecological context. Too often, people talk about balancing the environment and the economy as though they were two separate parts of an equation, but we need to understand that the economy exists within an ecological context—in fact, within ecological limits.
A carbon assessment process, alongside legally binding emission reduction targets, will be the first expression of that—not the last but the first. How much progress have we had towards that? Legislation is in hand to set such targets in place in Scotland and is already on the books for the UK. We have commitments on the carbon assessment of the budget that were gained from Scottish Government ministers during negotiations last year but not a great deal of progress to date. At UK level, there has been even less progress, although individual measures in the budget have some degree of carbon assessment. I cite the assessment of the measures to support oil extraction, which appears to say that they will have no climate change impact. However, 2 billion barrels of oil represents 800 million tonnes of carbon dioxide. Mike Rumbles talks about the low price of oil; the price may be low for a short while longer, but the cost remains damagingly high.
The Scottish Government's motion requires some clarification. It implies that the carbon assessment process will be produced alongside the draft budget proposals for 2010-11, not when we have agreed to the budget. I need an explicit commitment of that implicit statement. Will the full rigorous carbon assessment be published alongside the draft budget proposals for 2010-11? That would be real progress from the Scottish Government.
I note with interest that Italy is devolving taxation and borrowing powers to its regional Governments in a move that has been described as fiscal federalism. Italy started its devolution process after we did, with its 20 regions gaining power over health, education and welfare provision in 2001, but it is moving ahead of us in financial devolution. How embarrassing it is that we started first but have turned out to be the tortoise rather than the hare. Adding taxation powers to the already strong toolbox that the Italian regions have gives them the opportunity to become economic powerhouses, altering income and expenditure to suit local economic conditions and increasing their opportunities to exploit their resources and deliver for their peoples.
The contrast with our position could not be more stark. We have no power to borrow money and no means of altering the tax system to give our businesses an advantage or give our people a break to make their lives better. We have no way to raise additional moneys to pay for improved services and no way to lever in extra financing for better services. Worst of all, though, is that we must cope with the intolerable burden of UK incompetence, with a Labour Prime Minister who cannot even remember when he is supposed to make a statement and a chancellor who claimed recently that he could see the green shoots of recovery and then proceeded to pour economic weedkiller on those green shoots before they had a chance to break the surface.
The Darling budget is a continuation of the catalogue of failure that marks the Labour Government in London. Quite how Mr Darling thought that there would be recovery next year, when he predicts that the economy will shrink by 3.5 per cent this year, is anyone's guess. It is about as clever as Iain Gray's budget tactics have been for the past couple of years—it is almost like they work together.
Government debt will rise to four fifths of GDP by 2013. Labour's failure to manage the economy over the past 11 years and Gordon Brown's failure as chancellor means that Alistair Darling will slash the Scottish budget to pay for the economic inadequacy of yet another Labour Government. Stronger together, weaker apart, they say—aye, right. The UK damages Scotland and Labour damages Scotland, and the sooner we get shot of the pair of them, the better for all of us. The shocking failure of Gordon Brown and, now, Alistair Darling to address the economic problems facing Scotland and other parts of these islands amounts to a dereliction of duty on the part of those two Labour leaders. The harmful effects of 12 years of Labour misrule are more than evident: recession, worklessness and despair—the hallmarks of Labour government.
Labour keeps claiming that it is a global recession, but it is not. For example, Australia and Canada are showing that well-regulated and well-managed financial sectors and well-run economies can survive when poorly run countries are going to the wall. As Linda Fabiani told us, Peter Mandelson, at the behest of Labour in London, will go cap in hand to the IMF looking for a bail-out—echoes of 1976. Andy Kerr likes to remind us of 1979, but there was Labour irresponsibility in 1976 and there is irresponsible Labour government now.
We should perhaps cast a glance across the North Sea to our friends in Norway, who are paying in—yes, paying in—vast additional sums to the IMF to help out those countries that have not managed their natural resources well. How shameful is it that Scotland, a country as rich as Norway, is to be bailed out while Norway does the bailing out? Members of the Labour Government in London should be ashamed.
I will tell you what happens with Labour Governments. They start with a far-fetched raft of policies that are
"pickled into a rigid dogma, a code,"
then they
"go through the years sticking to that, out-dated, misplaced, irrelevant to the real needs"
of the country. Then it ends
"in the grotesque chaos of a Labour"
Government—a Labour Government—cutting public spending and scuttling round the country
"handing out redundancy notices"
to public sector workers.
"I'm telling you—and you'll listen—you can't play politics with people's jobs",
people's homes and
"people's services."
I think that those will all be familiar words.
We have had far too much failure from Labour, far too much incompetence and far too much pain for the many as welI as for the few. The Labour legacy will be pensioners, students, families, banks and businesses in debt—a shameful record. It is time for Labour to go and for the power to set the economic agenda to be returned to Scotland. It is time we set our own budgets and took responsibility for our own future. We have got what it takes in the SNP Government to take on that responsibility. Quite simply, it is time for independence.
We now move to the wind-up speeches.
I suppose that it was not necessary to be an Einstein to work out the relative predictability of the debate. We have had the Government making it clear that the situation is certainly not its fault, that it had no hand in all that we are dealing with and, indeed, that Scotland had no hand in it. I am not quite sure where the Royal Bank of Scotland is technically registered, but no doubt someone will remind me in the course of the debate.
For the Labour Party, Andy Kerr and Malcolm Chisholm made an admirable attempt to deflect attention away from what they said was no evidence of mismanagement. However, what they failed to explain to us is why the economic policies of the past 10 years were predicated entirely on the mistaken belief that growth would continue indefinitely. The fact that a whole range of decisions were made on that basis is one reason why, as Derek Brownlee pointed out, we are where we with debt that is high even by historical levels.
Whether people believe, as I do, that we should remain a United Kingdom or whether, like Christina McKelvie, they wish Scotland to be independent, the Royal Bank of Scotland and HBOS had to be saved and—curiously enough—the money for that did not grow on trees. Therefore, it is nonsense not to understand that the decision to save the Scottish banks, although it was right, has brought with it severe implications for how we manage things. Of course, other issues have added to those debts.
It is disappointing that people keep bandying figures about. I find that very difficult. It is not often that I have to dredge into the inner recesses of my mind to the days when I qualified as an accountant, but I recall vividly that one ought to compare like with like. The Scottish Government has made so many fascinating attempts to reprofile and readjust the figures to give the best impression that even the SPICe briefing now takes three tables and 14 columns to explain how one might get back to a position in which a like-for-like comparison can be made. The cabinet secretary rightly quoted the director general for finance's letter, which has been widely circulated, which states that there will be a reduction in the budget but—gosh—that is a difficult letter to read, as Jackie Baillie pointed out. It says first that there will be 1.7 per cent growth, then it gives a figure of 1.3 per cent—it does not say whether that is growth—and then, at the bottom, it says that there will be a reduction. Even as a chartered accountant, I find that very difficult to explain, but no doubt the cabinet secretary will do so in his winding-up speech. How the letter is phrased is very difficult.
However, let us get back to the reality. Even if we squeeze out and remove all the attempts at making some justification for what has taken place, we are faced with the proposition that repaying even those elements of debt on which we might have some agreement will require fundamental changes, given the vast sums of public money that have been required to deal with the financial crisis. Irrespective of the who or where or how, that is the reality that the Liberal Democrats are highlighting. Indeed, if anyone thinks that this has all happened very suddenly, let me recommend to them the book "The Storm" by my Westminster colleague Vince Cable, who makes it clear that, although the situation accelerated very rapidly, there were nevertheless tell-tale signs on which prudent economists should have taken a view at a much earlier stage.
As Derek Brownlee pointed out in his opening remarks—although I did not agree with everything that he said—we will face a tighter budgetary situation not just next year but, as the chancellor stated in the budget and in the red book and other documentation, for the next few years. It is clear that, no matter where people stand on our relationship with the United Kingdom, we are facing a very tight situation indeed. Therefore, it is simply not realistic to suggest that, if it were not for the London Government, we could simply continue to pour out money, the debt would all disappear and we could carry on as before. Politicians do the public no credit at all if they try to pretend that we do not face a difficult situation. Creating arguments between London and Scotland as to whether, if we did not do certain things, we could go on growing as we did in the past is, in the view of the Liberal Democrats, a fundamentally dishonest position.
We must accept where we are. We can have a legitimate argument about how we got here but, in saying to the people of Scotland today what we think we can do following the budget, we face hard choices. We must recognise that the Scottish budget should more accurately reflect the fact that, although more money is being made available, the rate of increase is bound to be constrained. Indeed, looking further into the pages of the red book makes for even more difficult reading. We cannot simply say that everything is the fault of something that never happened in Scotland.
That is the position that we are in. The amendment in the name of my colleague Jeremy Purvis sets out the approach that we should take and should be supported. We are in an extremely difficult situation. It would be a great help if, instead of trying to recast and recreate figures, we tell the people of Scotland about the situation that they are in. They welcomed the saving of our banking system, without which—by golly—unemployment would be much higher than it is.
It was quite some budget and it has been quite some debate. Andy Kerr and the Labour Party came out limping. They gave us a range of excuses and said that the current economic situation is nothing to do with the Labour Government. Malcolm Chisholm gave us the immortal line that there has been no financial mismanagement whatever because there are recessions in other countries, too. [Interruption.]
Andy Kerr shouts, "Global." Let me point out a few facts to him. The UK's budget deficit is the largest, in proportional terms, among the G20 countries; our national debt will swell from 39 per cent of GDP to 79 per cent of GDP in four years' time.
Can Gavin Brown explain why at no point until the start of the recession has the debt level under the Labour Government been as high as the 43 per cent of GDP that it inherited when it came to power? Does that not demolish everything that he and Alex Johnstone have said this afternoon?
No, it does not. During the 10 years of year-on-year growth around the world, the Labour Government failed miserably to put money aside or to bring the national debt down to sustainable levels. As well as the level of national debt and the size of the budget deficit, we must look at the state of sterling against the dollar and the euro. The world has made up its mind about which countries have performed worse than others.
I am interested in the member's GDP figures. Would he care to explain why Italy, Japan, France and the USA have higher GDP debt levels than the UK?
They do not have larger budget deficits—the UK has the largest budget deficit for this year.
Mr Kerr told us that the VAT cut was a good idea, but he did not seem terribly keen to extend it beyond December of this year, when it is projected to come to an end. The VAT cut has been universally rubbished; it has been rubbished not just by commentators in this country, but by commentators all over the world. No other country decided that it would be a good idea to introduce a VAT cut. Mr Kerr found one person who seemed to think that it was not such a bad idea, but it would probably be possible to find one person who thinks that global warming does not exist and is a myth. Indeed, someone has made their career and reputation on the back of that proposition, but I do not think that any MSP would support it.
Jackie Baillie offered the defence that the budget is to grow. She made quite a good case. If we compare next year's budget with this year's, I can probably accept the argument that there is marginal growth in cash and real terms, but if we compare the 2010-11 budget with what was projected in the spending review, we find that there has been a £500 million cut. In the spending review, the projected expenditure figure for next year was £30.47 billion. The actual figure will be £29.98 billion, so there has been a £500 million reduction in the budget. That is just the beginning of the problems. If the figures that we have seen are correct, we will have far bigger problems in 2011-12 and 2012-13.
Will the member acknowledge that the facts paint a different picture? Even if we take into account the efficiency savings for 2010-11, the SPICe paper profiles a growth figure of 0.5 per cent.
I have the SPICe paper in front of me. It says clearly that the projection from the spending review for 2010-11 was £30.473 billion. If we take the reprofiling out, what we are actually getting is £29.98 billion. Therefore, there is the best part of a £500 million cut.
We have heard lots of excuses today, but let us consider the other aspect of the Conservative amendment, which is the contingency plan. I aim my remarks at the cabinet secretary and the Scottish Government. We need to figure out how we will deal with the cuts next year, and year on year after that. What work has the Government done so far to make projections for tax take from council tax and business rates, and from asset sales by Scottish Enterprise and health boards?
At UK level, income tax is down 8 per cent, corporation tax is down 20 per cent, capital gains tax is down 72 per cent and stamp duty is down 37 per cent. Will the taxes that are collected by councils and the Scottish Government be down as against the projections from the budget? What predictions have the Scottish Government made about the impact on demand for health services, the impact on the justice department and the impact on housing as a result of the recession?
There will be difficult decisions to make. We want to minimise the squeeze on public services and protect spending that promotes economic growth.
The SNP's motion calls on the Parliament to express "deep concern" at the contents of last week's budget. If we had dropped into Scotland from another planet and listened to the SNP spokespeople commenting on the budget over the past seven days, or even if we had been listening to this debate, we would have been forgiven for thinking that Mr Swinney, the cabinet secretary for finance, had morphed into Private Frazer from "Dad's Army". "We are all doomed," he says. "We have not been given enough," he says. We have been asked to cut too much," he says. But in a letter to the chancellor in advance of the budget, Mr Swinney said:
"I appreciate that at this challenging time for the UK and Scottish economies you face a number of competing objectives."
Indeed we do, but in Mr Swinney's alternative universe it would seem to be the rest of the UK that has to face the challenge, not Scotland.
In the same letter, Mr Swinney commended the chancellor's flexibility in financial planning, which allowed the Scottish Government to bring forward more than £300 million of capital from its 2010-11 budget to this year. Mr Swinney said that that flexibility was
"a vital stimulus to the Scottish economy at this crucial time of recession, estimated to safeguard 5800 jobs."
However, with the SNP, and with Mr Swinney in particular, we know that a whinge will be coming from somewhere. Mr Swinney expresses concern about the UK Government's fiscal stimulus in comparison with action being taken elsewhere, particularly America. The state of Maryland, much quoted by SNP spokespeople, is receiving £2.6 billion from its central Government. The state has a population of 5.6 million, compared to Scotland's 5.1 million. "It's no fair," says the SNP, "we want more." Tricia Marwick was somewhere else in America in her speech.
The SNP moans on:
"Analysis by the Scottish Government shows if money used to fund the cut in VAT had been used instead for capital investment it would have supported twice as many jobs in Scotland."
James Kelly reminded us of the bank bailout and how much that cost, and of the £2 billion that was Scotland's share of the fiscal stimulus package.
Gavin Brown derided the VAT cut but, for his information, the Centre for Economics and Business Research Ltd said:
"The figures are clear; the VAT cut is working."
The Institute for Fiscal Studies said:
"This policy change is likely to be a reasonably effective economic stimulant … Those dismissing it—
as Mr Brown did—
as a failure ignore the likelihood that things would have been worse without it."
What are the facts, as opposed to the fiddled fantasy figures of Messrs Salmond and Swinney and the SNP? If Mr Swinney wants to challenge them at any time, I will let him do so.
Fact: the Scottish overall budget will increase next year and the year after. That is based not on my figures but on those of the Finance Committee's adviser, Professor David Bell; SPICe; the Parliament's policy experts; and, as Mr Kerr and Jackie Baillie highlighted, even the minister's own director of finance.
Fact: the UK Government will spend an extra £400 million in Scotland next year—a devolution dividend. [Laughter.] SNP members may laugh, but they will be very grateful for the devolution dividend at the Royal Bank of Scotland and HBOS.
Fact: there will be a Barnett consequential from the UK Government for Scotland. It will total £104 million and include £54 million for housing, £27 million for energy efficiency, £12 million for training and employment and £17 million to build FE colleges—another devolution dividend.
Fact: there will be an additional winter fuel payment worth £100 for the 160,000 Scots who are over 80, and £50 for Scots who are over 60. A total of three quarters of a million households will benefit—another devolution dividend.
And fact: 540,000 Scottish children will benefit from the £20 increase in child tax credit—another devolution dividend. To paraphrase Christina McKelvie, we are indeed stronger together, weaker apart.
I could go on, as there are plenty more facts, but I think that the chamber should by now have got the message. Far from expressing "deep concern" at the contents of the budget, the SNP, as well as the Tories and the Liberals, whose amendments support the nonsense in the motion, should be welcoming the measures that are being taken to help people who are looking for a new house, looking for a job or training, looking for some financial assistance to run a business, or looking for help to meet heating bills and the costs of raising a family in these difficult times.
Before I go on to discuss the contributions made by other members, I will hear one from Mr Adam.
I am grateful to the member. Would he care to explain why it is that only the Labour Party in Scotland thinks the budget is wonderful? Labour members' colleagues in Wales take a diametrically opposite view.
I do not think that I said it was a wonderful budget, but I did point out the benefits that Scotland is reaping from it.
Derek Brownlee made an ageist remark about the Labour front bench; he must have known that it was my birthday last week. He should remember the words of leading world economist Paul Krugman who, when asked whether things would be better if David Cameron were running the economy, said that they would not.
I agreed with one comment from Jeremy Purvis—he said that there would never be a Labour budget that the SNP would say was good for Scotland.
Brian Adam tried to outdo Mr Swinney's impersonation of Private Frazer, while Tricia Marwick and Christina McKelvie went on a "Thelma & Louise" road trip around America and Italy. Both disappeared over the same rhetorical cliff.
Jackie Baillie's excellent contribution completely destroyed any lingering SNP spin that Scotland's budget will go down next year.
We know that Mr Swinney's real "deep concern" is that he is being asked to make some efficiency savings. He thinks nothing of top-slicing the Scottish Government's funding for local government or threatening that unless local government agrees to impose zero council tax increases it will receive no share of the £70 million set aside for local government support, but when it comes to efficiencies in the Scottish Government it is a different matter.
Again reverting to his Private Frazer persona, Mr Swinney said that we are doomed to see 9,000 jobs go as wicked Westminster asks for a Scottish Government to make its contribution to an overall efficiency drive. The First Minister even made a rare appearance at Westminster to spout the nonsense that Scotland is being robbed of £500 million. It is a real pity that he is not paid in attendance allowances for his visits to the House of Commons, as that would certainly save the public purse some money.
The facts do not back the SNP's rhetoric. I have already mentioned the letter to the chancellor and Mr Swinney's gratitude for the capital advance. As Mr Kerr said, Mr Swinney and the SNP, with typical sleight of hand, want to claim that Scotland's budget is being cut. As we have heard, the truth is in the figures from SPICe: Scotland's budget will increase next year and the year after that by 3.9 per cent and 0.5 per cent.
As for efficiency savings, I am pleased to report that the Government has been doing well. In budgets between 2005 and 2008, the Government has saved around £1.7 billion. The Government's director general of finance, when asked at the Finance Committee this week whether she was confident of hitting the 2 per cent target, replied that yes, she was confident, because in previous years the Government had exceeded the target. When I asked her whether, if what she said was the case, the Government could exceed its 2 per cent target this year, she replied that that was something that ministers would have to decide.
There you have it, Presiding Officer. The Scottish Government is comfortably reaching 2 per cent efficiency savings and could obviously do more. All that Mr Swinney has to do is provide the political will. Instead of working against Westminster, he should be working with Westminster. Yesterday, and again today, we heard how all the Governments in the UK are working together to combat the effects of swine flu. We should expect the SNP to do the same to help the UK combat the effects of the global recession.
The UK Government's budget has provided help where it is needed most, to families, businesses and pensioners. The SNP's claim that Scotland's budget share is being cut has been exposed for what it is—a fiddling of the figures to forecast grievance. The SNP has failed to deliver its local income tax and its Scottish futures trust, and it has broken manifesto promise after promise. In short, it was elected on a false prospectus. That should be of deep concern to everyone in Scotland, who now see that the SNP has not got what it takes to govern.
It would not have been a David Whitton speech in Parliament without my being compared to some character from the stage or screen. Today, it was Private Frazer. Somebody—I think it was Mr Kelly—accused the First Minister and me of being the grumpy old men of Scottish politics. I suspect that the only thing Mr Kerr would disagree with about that analysis is that I should be accused of being old in the context of this parliamentary chamber.
I think of you as Brad Pitt.
The admiring endorsements of my independent colleague on the back benches are always a source of great comfort to me.
Ross Finnie made a thoughtful speech in which he set out the fact that although we can have a debate about how we got here—I will say a bit more about that—we must deal with where we are at and the challenges that we face. In that speech and in the speeches from Gavin Brown and Mr Brownlee, there was an acknowledgement that, regardless of our debate about the statistics, we face a serious position in relation to the future of public expenditure and a different picture of public expenditure in the period that lies ahead compared with that of the past 10 years. That is why the Parliament needs to take seriously some of the analysis that has been put before us. The Institute for Fiscal Studies, which David Whitton quoted, has estimated that, between 2011-12 and 2013-14, there will be a fall in departmental expenditure in the United Kingdom of 2.3 per cent a year in real terms. Applied in Scotland, that would mean public spending being £2 billion to £3 billion lower, in real terms, by 2013-14.
The crucial point that I make about the departmental expenditure limit is that that is the budget over which the Parliament has control in relation to the main aspects of the interface on public expenditure that matter to the people whom we represent, in terms of the services over which we have some control.
Malcolm Chisholm accurately made the point—which is often missed in such analysis—that although the UK projections for public expenditure for the years to come may forecast a modest real-terms increase in UK public expenditure at the global level, the components of that will change dramatically because of the increase in annually managed expenditure to deal with rising levels of unemployment and other social security costs, and if annually managed expenditure increases, the departmental expenditure limit—which is what funds our schools, hospitals, local authorities and all the aspects of public expenditure over which ministers have control—will be dramatically squeezed. That is the picture of public expenditure with which we have to deal, and Gavin Brown was absolutely right to question what the Government will do about it. As he would expect, the Government will prepare in an orderly fashion for its budget for 2010-11, which will be the subject of consultation in Parliament and subject to parliamentary scrutiny as we wrestle with the cash sums that we will have available to us in 2010-11. Mr Brown explained clearly why those sums will be £500 million less than was expected and envisaged in the comprehensive spending review.
The cabinet secretary chooses the language that he uses carefully. He talks about the budget for 2010-11 being squeezed. Does he agree with Professor Bell and SPICe, however, that, excluding capital reprofiling, there will be a real-terms increase in the budget baseline for 2010-11?
I recognise from the Treasury's red book, which said that we have £29.1 billion to spend in 2009-10 and expect to have £29.3 billion to spend in 2010-11, that that is a cut in real terms of £272 million, or around 1 per cent. Of course, I could have done another analysis that added in the use of end-year flexibility. I did not do that because I am a generous man, but if I had done so it would have shown a real-terms cut of 2 per cent.
The presentation of Government accounts and statistics should not rely on the generosity of the cabinet secretary. Will the cabinet secretary explain why in 2007 £100 million of capital in the education budget was put into the 2007-08 year, but in the Government's presentation of statistics it was spread over the following three years for illustrative purposes? Why is the Government not doing that with the accelerated capital in this financial year?
For the very good reason that it is being spent in this financial year, which is what Mr Purvis and all his colleagues were demanding.
In response to Mr Chisholm, who was arguing that we should ignore the £129 million health cut because it would be compensated for by end-year flexibility, I gently point out that that end-year flexibility is resource that this Government would plan to spend on behalf of the people on projects of our choosing, not to compensate for budget cuts from the UK Government. I also point out that it is £129 million that the Treasury has suggested we use to pay for the Forth replacement crossing. I understand that one cannot spend money twice; I hope that Mr Chisholm and the Treasury understand that, too.
Will the minister take an intervention?
I have more detail to cover before I conclude my remarks.
Patrick Harvie asked me to provide further clarification on the carbon assessment that would go into the preparation of the 2010-11 budget. It is my objective to ensure that we develop the carbon assessment work and deploy it as we prepare the budget and publish it at the time of preparation and publication of the budget. Obviously, that will be subject to parliamentary scrutiny.
I just want to be absolutely clear about that. Does that mean that the full carbon assessment publication will go alongside the draft budget and that we will not be waiting for it until after parliamentary scrutiny?
It will certainly not be after parliamentary scrutiny; it will happen when the budget is published.
A great deal of information about the condition of the United Kingdom economy has been exchanged in the chamber. It is important that we recognise that the percentage of GDP that is represented by the fiscal deficit in the United Kingdom in 2010 is forecast to be the worst of any of the G7 countries. That tells us a significant amount about the financial record of the United Kingdom. UK net borrowing is forecast to be £175 billion in this financial year and £173 billion in the next year, which represents more than 12 per cent of GDP. Most of the average borrowing levels in the euro zone will be 5 per cent in 2009-10 and 6 per cent in 2010-11. We should be pretty sceptical about some of the analysis that the Labour Party has given us today.
Mr Whitton called for me to pursue further efficiency savings. The Labour Party is first in the queue to complain about the efficiency savings that underpin the budgets that I have presented to Parliament in recent times. It has been the first to criticise and complain about the application of those efficiency savings—having demanded, in the infamous hungry caterpillar speech, that I go for a higher level of efficiency savings than I thought was appropriate.
Will the minister take an intervention?
I am just concluding my remarks.
The Labour Party has to make up its mind about where it stands on efficiency savings. It has delivered a prima facie cut to the public expenditure we expected to be able to deploy in 2010-11. The challenge of that will be significant to the Scottish Parliament and the Scottish Government, but it is a challenge that this Government will face to protect public services on behalf of the people of Scotland.