Economic Development (Cross-cutting Expenditure Review)
The next item of business is a debate on motion S2M-3031, in the name of Des McNulty, on behalf of the Finance Committee, on its second report of 2005, entitled "Cross-cutting Expenditure Review of Economic Development".
I am particularly pleased to speak after George Lyon's first speech as a minister, which was the first time no one has opposed some element of what he said. However, although I am pleased to open the debate, I must note the frequency with which Finance Committee debates take place on the last morning before a parliamentary recess, whether it be the Christmas recess or summer recess. This morning's debate also takes place in the aftermath of the Scottish Parliamentary Journalists Association dinner last night, which I presume has contributed to the sparseness of people in the press gallery and to the sparseness of members in some sections of the chamber.
Nevertheless, the "Cross-cutting Expenditure Review of Economic Development" is an important report that involved a substantial amount of work, for which I thank committee members, our adviser Peter Wood, the clerks and all those who gave evidence to our inquiry. The inquiry considered how the Scottish Executive's budgetary arrangements reflect its top priority of promoting economic growth.
In our many parliamentary debates on budgetary and finance issues, there has been cross-party consensus—with the exception of one or two parties, none of whose members are present so far—among the major parties that Scotland's top priority should be economic growth. We need to work collectively to build as much consensus as possible not just among political parties but among the major players in Scotland so that we can ensure that the Scottish budget's substantial resources are used effectively to deliver economic growth, which is the basis of prosperity and of our ability to fund the public services that the people of Scotland require.
Our committee did some simple things, such as trying to work out from the budget the extent to which resources were deployed in a way that reflected the fact that economic growth is the Executive's top priority. I must report that we found some difficulty in that process, because it was difficult to see whether spending decisions were rooted in an assessment or prioritisation process that linked them to their impact on economic development.
I do not, and would not, argue that the distribution of the Scottish Executive's whole budget should be determined on the basis of the economic development priority; other priorities need also to be taken into account. Priorities such as health and education expenditure have a dynamic of their own: they involve decisions on the help that we give to people who are ill and the resources that are required to maintain and improve our schools. Those matters would need to be addressed regardless of whether economic growth was the top priority.
However, given that the Executive has identified economic growth as its top priority, there should be some indication that spending decisions are being made with economic growth clearly in mind. We argue that that should be especially true of capital projects. We found that a number of issues that arose from our analysis of the budget suggested that, if economic growth is our top priority—I have indicated that there is broad agreement on that—we could co-ordinate our spending better and more effectively in order to deliver a greater economic impact.
In his research, Peter Wood separated expenditure that is linked to economic development into two categories: primary and support spending. He found that, since 1999, the increase in resources that are allocated to those categories has been smaller than the increase in spending in other areas, such as health and education.
We drew three possible conclusions from that finding. The first was that
"other policy objectives – e.g. improving health or social housing or raising school performance have, in fact, been higher priorities"
than economic growth. The second was that
"the Executive considers that the level of direct economic development spending which it ‘inherited' was broadly adequate and did not need to be substantially increased"
and the third, following from that last, was that
"the Executive does not consider that increased spending on economic development activities (such as those of Scottish Enterprise)"
or Highlands and Islands Enterprise
"would necessarily be effective in promoting economic development and that this objective is better pursued in other (unspecified) ways".
In its response to the report, the Executive does not embrace any of the three options. Perhaps they are uncomfortable options for the Executive, which raises a fundamental issue. If delivery of economic growth is the Executive's top priority, but it is spending a smaller proportion of the overall increase in the budget on that priority than on others, an explanation is required. That explanation should focus less on volumes of spending—ultimately, the Wood research into volumes of spending is not the key finding of the report—than on prioritisation of spending, which is key. In that context, we must determine the extent to which documents such as "The Framework for Economic Development in Scotland" and "A Smart, Successful Scotland: Ambitions for the Enterprise Networks" set out a process for clearly identifying expenditure that delivers the best possible outcomes in economic growth. Choices should be made on that basis.
As all of us in politics know, there are endless worthy things on which we would like to spend our resources. An endless number of people tell us that their interests, concerns and locality are and should be priorities. At one level, it is hard to say no to people, but the reality of politics is that we have a limited budget. Regardless of Scotland's constitutional status, there will always be limitations on our budget. If we go down the road that the SNP favours, there will be even more stringent limitations on our budget than exist at present but, given that there are such limitations, we must have a mechanism that enables us to say, "We're going to do this, rather than that, and we're going to do it for these good reasons."
The committee found that within "The Framework for Economic Development in Scotland", there are not sufficiently clearly developed criteria that are being acted on systematically to ensure that the resources that are being invested deliver the best possible benefits. I argue that that is especially true in relation to transport decisions. We found that major transport projects are not being assessed from first principles in terms of their contribution to Executive policy or in relation to one another. In Edinburgh, there are five different major transport projects, none of which seems to relate to any of the others—they are seen as independent projects. In my view, some of those projects should have higher priority than others, because they are more important for all of Scotland. That is not to say that the other projects are irrelevant or should not be considered; it is merely to say that, given the totality of available resources, it makes absolute business and Government sense for us to make decisions on the basis that resources should be invested where the best outcomes can be delivered.
I do not think that I have time for an intervention. I have two or three other points to make and the Deputy Presiding Officer will be tapping on her microphone soon.
The committee agreed that it is not enough to judge individual major projects purely using criteria that are specific to the appropriate portfolio. There must be comparative assessments of schemes' benefits, of how they link to economic development priorities and how they contribute to wider growth. That is absolutely fundamental to delivering a better return for our investment.
The committee also found that there is a serious lack of co-ordination between the different agencies—the Executive, the economic development agencies, local government and other players such as Communities Scotland. The links and mutual reinforcement that those agencies could achieve by co-ordinating their spending and by planning better for delivering spending are inadequate. In that context, I welcome yesterday's planning white paper and the idea of a national planning strategy, which the committee called for.
However, looking at the disposition of local government and enterprise organisations throughout Scotland, we need to ask questions not just about efficiency—on which the Minister for Finance and Public Service Reform is focusing—but on effectiveness. The number of those organisations and the fragmentation of their boundaries and responsibilities are getting in the way of efficient co-ordination. If the burden of partnership working and co-ordination is such that it is taking longer to make decisions and to implement them for Scotland, that is a fundamental problem that needs to be considered. That is a task for this Parliament. Let us remember that devolution was superimposed on an existing system of local government and other organisations' arrangements, which have continued. Six years on from devolution, there is a case for beginning the debate about how Scotland should be better governed to deliver what we all need, which is better economic growth and the better services that are consequent on economic growth.
There have been huge increases in the budget in Scotland since 1997, but especially since 1999. I am not convinced on the basis of the work that we have done that we have picked up the opportunities as well as we should have. It has taken us time to consider at all the matters that we have looked at and to make the decisions that needed to be made.
There will be debates about mechanisms, but if we want economic development, Scotland expects its Parliament to consider carefully and in a businesslike way how that development can best be achieved. We need to take significant steps. Simply to carry on as we have done and to get into a bidding war of promises about this project or that activity, and to spend the budget in an unco-ordinated way to deliver economic growth is not sustainable. It is time that this Parliament grew up, matured and delivered for the people of Scotland.
I move,
That the Parliament notes the recommendations contained in the Finance Committee’s 2nd Report, 2005 (Session 2):
Cross-cutting Expenditure Review of Economic Development (SP Paper 312).
I take some hope from what Mr McNulty has just said that we might have yet another conversion on our hands. There is no doubt that the current economic management of Scotland is based on a flawed and failed model. As for Des McNulty trying to pitch us into a cycle of overspend—that is simply not going to happen. Other countries manage to grow and compete; they cut their cloth to optimise outcomes for their people, and would reject unanimously the deal that we have. I do not see Ireland clamouring to come back into the union and accept a Barnett formula deal.
It is therefore no surprise that the "Cross-cutting Review of Economic Development" also proved that the current economic model is flawed and has failed absolutely. Primarily, the review exposed the disconnection between the Executive's rhetoric on economic growth and the difficulty of achieving that end with our current powers.
Ministers claim successes, but yesterday evening we had a debate on Clydesdale Bank branch closures after 24 months of growth. However, growth at any level is not success. For growth to be meaningful, it must close the gap between the current performance of Scotland and the rest of the United Kingdom, and it must close the historic gap that has built up over 30-plus years. Not only is there no evidence that that is happening, but there is plenty of evidence to suggest that the current and accumulated historical gaps are widening. That is why the Scottish Executive and Scottish Enterprise advocate long-termism in a fast-moving world. We are told, "Wait, auld horse and you'll get corn," but that simply would not be tolerated elsewhere. In what is a potentially resurgent new era in Scotland, we have had four enterprise ministers and two voluntary resignations in six years. Where else would that happen on the cusp of a new beginning?
The Executive's response to the Finance Committee's report states:
"It is overly simplistic to suggest that a given percentage increase in expenditure reflects a lack of priority. It is outcomes that matter—and it is outcomes which determine expenditure needs."
What are the outcomes? Our economy has lagged behind that of the United Kingdom for 30 years. Last year, Scotland's economy grew by 1.9 per cent, while the UK's grew by 3.1 per cent. This year, the forecast is for the gap between the two to be 0.7 per cent, which is still more than the trend gap of 0.5 per cent. That is no cause for celebration; it is certainly not okay when the gap is the direct cause of low life expectancy and demographic problems in Scotland.
The Executive's response also states:
"We aim to build up economic activity throughout Scotland by promoting skills, enterprise and innovation everywhere."
We support that, but surely we should have much better mechanisms to measure progress. We need answers to the question why the Government allows those objectives to be undermined by UK policies and UK tax harmonisation. In the European context, Mr Blair and Mr Brown have said that harmonisation would stifle growth and kill jobs; that is exactly what happens here. The pensions policy will reduce the stock of affordable housing as people put residential property on to their personal pension portfolios. We lack a national spatial strategy to target and hone relocation and to rebalance the population and opportunities throughout Scotland. I look forward to the new Deputy Minister for Finance and Public Service Reform taking that on board and making a name for himself in the process.
The committee's review exposed the fact that, although the Executive is high on programmes and analysis, there is not much to show for that in outcomes. That is exactly in line with John Bradley's analysis in his Fraser of Allander institute lecture. We are awash with programmes: we have "A Smart, Successful Scotland: Ambitions for the Enterprise Networks", the efficient government plan, the infrastructure plan, a national transport strategy, "Building a Better Scotland", "The Way Forward: Framework for Economic Development in Scotland", the national planning framework and even the partnership agreement. Is there scope for consolidation? I think so. Is there scope for clarification? I certainly hope so.
The Executive response to the committee report says that
"there is a need to develop still further joint working between different parts of the public sector".
That is clutching at straws, because such work has been happening for 30 years. If it was going to work, it would be working by now. Such measures will result only in arid meetings of 20 to 25-plus people. Tom Peters, the American business consultant's clear view is that such meetings create a tendency for more and more initiatives and are clear evidence of over-manning and lack of focus, which are what we have here.
The Executive's non-responses are coupled with some really worrying aspects. In recent months, Scottish Enterprise has suppressed two major reports because, in essence, they did not bolster the Executive's argument. "The Geography of the Scottish Knowledge Economy", a report that was produced on 17 December last year, and the "Corporate Headquarters in Scotland: Their Nature and Contribution to Scotland's Economic Development" report that was produced in April this year slipped out with no fanfare. Why have we not debated the content and implication of those reports? It is time for us to consider radical change—Mr McNulty eloquently moved towards that. We should even consider what has been done elsewhere. For example, in Kansas, the equivalent of Scottish Enterprise has been contracted out—the training and property people and consultants have been pushed out to the private sector. The organisation is now focused on managing the pot of money and on providing loans and guarantees, with the aim of making much more prolific progress.
It is time to change. The economic powers that both Liberal Democrat leadership candidates advocated are the only answer and the only means to foster growth and stop the damaging mismanagement of Scotland. The "Government Expenditure and Revenue in Scotland"—GERS—exercise now puts us down with Venezuela and Argentina in terms of national viability. We must recognise that economic growth is not possible with low productivity and a falling working-age population.
What I really want is for us to subject our economic development to scrutiny that is similar to that which is done by the Prime Minister's delivery unit. I would like ministers to step up to a wonderful little exposé by the Reverend Anthony Campolo in the States, who interviewed people aged 95 and over asked them what they would do if they had a chance to live life over again. First, they said that they would reflect more on life while they were living it. I urge the minister to consider the data and to reflect more on performance while he is living that. Secondly, they said that they would take risks and avoid letting unforeseen risks creep up on them. I urge the minister to do that—Scotland would be with him on that front. Finally, they offered Campolo the advice that they would do something that lived long after them. Only when we grasp economic powers will the minister have something that will live long after him.
I echo Des McNulty's gratitude to the clerks and to the various witnesses who gave evidence and helped us with the report, and I express my personal gratitude to Des for his wise counsel through sometimes difficult financial meetings. We have produced an interesting—and even perhaps dynamic—report.
Today, another 30 employees will join the growing Scottish public sector work force. Thirty does not sound a lot, but 30 were recruited yesterday and another 30 will be recruited tomorrow; indeed, in 2004 no fewer than 10,733 extra staff were recruited to join the 700,000 people who already work in Scotland's bloated public sector, in which salaries are rising by an overall £1 billion a year. Was it really only last September that Jack McConnell was telling us that bureaucracy north of the border was a drain on economic growth and that to make us more competitive the Executive would be making cuts that would go even further than those that were announced by Gordon Brown?
Will the member take a brief intervention?
I will make a few more points.
Just how much more competitive are we? Well, facts are chiels that winna ding. Economic growth in Scotland continues to lag far behind that of England and we are way behind in entrepreneurial activity. Scottish manufacturing has been down every year since 1998, and in the latest IMD world competitiveness league, Scotland came 35th after countries such as Thailand and Estonia. Even more embarrassingly, in a survey of 10 Organisation for Economic Co-operation and Development nations with populations of less than 9 million, Scotland's economic record was the worst. The best small country in the world? Certainly not in economic terms.
As a member of the Finance Committee, I am happy to endorse phase 2 of our report on economic development, but I am less happy about the gaping hole that it blows in the Executive's enterprise strategy. The Executive claims that growing the economy is its top priority, but the Finance Committee's conclusion is that the Executive's spending does not live up to its rhetoric.
In the light of Ted Brocklebank's comments about growth in the public sector, would he care to indicate his view on what percentage of public sector employees can be described as bureaucrats?
I will not be tempted into putting any percentage on those figures, but what I will say is that when more than a third of the people who work in Scotland are being supported by the other two thirds, something is out of kilter. Somebody has to pay the wages of the bloated public sector.
As the committee's report makes clear, the principal tool that is available to the Executive in pursuing its priority is the overall budget. Research that was undertaken by the Finance Committee concluded that just 5 per cent of the budget is spent on activities that are intended directly to promote economic development. If the top priority is worth only 5 per cent of investment, how much do lesser priorities attract?
Will the member tell us by how much the Tories would increase that spend?
The debate is on the Finance Committee's report into economic development. It is about the Executive's record, not any potential or putative record that the Tories might have.
There is also the problem of assessing whether economic development spending is making any impact. As the committee discovered, spending decisions are not systematically assessed or prioritised on the basis of their economic development impact. There was also damning criticism of "The Framework for Economic Development" and the smart, successful Scotland initiative. According to evidence that was gathered by the committee, there was little to indicate that FEDS or SSS
"were playing a major role in shaping spending".
In other words, nobody—least of all the Executive—has the faintest idea whether the money spent is doing anything for economic development.
As Des McNulty pointed out, the committee suggested three possible explanations as to why economic spending has grown more slowly than public spending as a whole. The first is that other policy objectives have been higher priorities; in other words, the Executive has misled the public. The second is that the Executive is satisfied with the spending levels that it inherited in 1999, but that hardly sits comfortably with its subsequent claim to making the economy its top priority in 2003. The third explanation is that the Executive believes that spending areas other than economic development might better achieve its aims. If that is the case, why does not the Executive come clean and tell us?
On transport—surely one of the key areas in the promotion of economic development—the report found that
"spending growth in transport has been most strongly driven by priorities other than economic development".
From the committee's point of view, what is required is detailed economic assessment of the highly expensive transport projects that are currently being pursued. For example, where does upgrading the M74 rank relative to the proposed Borders railway, and how should the various transport infrastructure proposals around Edinburgh be prioritised according to their likely economic development contribution?
The situation is the same in health. In evidence, Tom McCabe has claimed that spending on health has made a direct contribution to economic development, but the committee was not impressed. It noted that
"a high proportion of health spend is concentrated in the last three years of a person's life",
which makes it hard to argue that health spending as a whole is geared towards economic growth.
If the Executive persists in claiming that the economy is its top priority, it is vital that it provide detailed assessments and tackle barriers to growth. As a matter of urgency, the Executive should at least cut non-domestic rates to the level at which they are in England. I look forward to an early announcement from the new Minister for Enterprise and Lifelong Learning that he will be as good as his word and—as he promised in his leadership campaign—that he will slash business rates. I am sure that he will have the full support of Allan Wilson in that.
We have consistently voiced our concerns about the size of the public sector in Scotland, which now accounts for as much as 54 per cent of gross domestic product. As Professor David Bell told the committee:
"the public sector is gradually taking over a larger and larger share of economic activity in Scotland"—[Official Report, Finance Committee, 2 November 2004; c 1810.],
and private sector activity is being crowded out. The message could not be clearer. Scots are among the most ingenious and entrepreneurial people in the world—they have proved that over many years at home and abroad. However, these days, Scots are voting with their feet. The economic climate simply does not exist in Scotland to encourage our go-getting businessmen and women, so they are moving to places where their entrepreneurial skills are better appreciated and rewarded. No initiatives to attract fresh talent can succeed if the talent recognises that the playing field is uneven. What we need from the Executive is less rhetoric and political dogma and far more encouragement for those who have to pick up the wage bill for Scotland's ever-growing, yet ominously creaking, public sector.
I landed in the Finance Committee in the middle of its review, but I enjoyed the part that I played in the committee's work. Just as every business must constantly assess the efficiency of its expenditure, so must the public sector. That is certainly the case in a country in which more than half of the spending power now lies with the Government. As Des McNulty remarked, there has been a large increase in the Scottish Executive's spending, which has given an added edge to the debate.
Earlier this week, Ted Brocklebank described Scotland as a socialist country—he often chooses approximations rather than actualities in order to get a reaction. I would not demur if he called Scotland a country that still has a social conscience and is prepared to pay for it, but he might reflect on the fact that the more that he despises that position, the fewer votes the Conservative party will get. I refer Ted Brocklebank to the comments of Donald MacRae—a financial guru for Lloyds TSB Scotland—on public sector spending. Admittedly, he was speaking at quarter to 7 on Tuesday morning, but he said that the issue was not critical when Scotland was in a period of investment in infrastructure.
The whole thrust of the cross-cutting review into the economic development of Scotland has been to ensure that Government support has ended up in the sectors where the maximum benefit to the country can be achieved. There is a danger, as we have witnessed, that Opposition members will concentrate on the minutiae and fail to see the long-term picture and where the Scottish Executive aims to grow the economy efficiently.
Will the member take an intervention?
I will, provided that Stewart Stevenson does not take us down some intellectual cul-de-sac.
Cul-de-sacs are fascinating. The member talked about the long term. What does he think our long-term growth should be and what target would he set?
I do not know how many minutes or hours you are going to give me, Presiding Officer, but unless you are going to extend my time dramatically, I will not be able to expand fully on long-term objectives. Basically, our objective is to grow the Scottish economy and to improve the education, hospitals and roads infrastructure.
I did not find the arbitrary split between primary and supportive expenditure helpful to the Finance Committee in coming to our conclusions, but no one was able to put forward more effective criteria. However, I was pleased with the number of committee recommendations that have been taken up, including the one announced yesterday for a national planning framework to help to co-ordinate and prioritise project growth and programme spend. The framework will link expenditure to areas, whether geographical or social, where strategies are being implemented. That single, simple move should help to address the major area of concern that Des McNulty highlighted about breaking down the barriers between departments and public sector agencies where some goals could be achieved in common rather than through individual, stand-alone projects.
Another of the committee's concerns was that there is often a lack of an explicit rationale for projects that receive major spending. That situation was not created overnight in 1999 when the Scottish Parliament was born; it was inherited as part of the old Scottish Office management system. The situation is particularly prevalent in major transportation schemes, for which, in future, the economic case should be based on the wider ripples of benefit, rather than on an apparently straightforward solution to a transport problem.
When the Parliament was set up, there was concern that it would operate on a central-belt axis, yet the committee found that expenditure has increased in rural areas of Scotland. Having a country background, I am bound to say that that is a healthy position and that I fully support it, but, again, the committee was unable to winkle out any explanations for that expenditure.
There has been gradual enlightenment in the Finance Committee's work in this area, which has shown that the Scottish Executive is keen to ensure that public spending is effective. However, I am sure that colleagues on the committee would agree that there is more to be done if Scotland is to have a totally targeted expenditure programme.
I believe that our investigations were hampered by the fact that differing financial systems operate in the various public agencies, so that data from one body are not immediately or easily comparable with data from another body. There is still a reluctance to provide financial information that would open up the entrails of some of the public bodies. Although there might be more transparency than there used to be, there still appears to be a view that the less politicians know about budgets and forward financial plans, the better.
We are helped by our budget adviser on the Finance Committee, but his solitary resources against the might of the civil service finance divisions do not allow for the scrutiny that we should be carrying out. The biggest financial nut that we in Scotland have to crack is the one generated by traditional civil service thoughts such as, "If we have it in our budget, we must spend it," "If we do not spend it, we will lose it," and, "Whatever we do, we must make sure that any project is as risk averse as possible." Politicians have a responsibility in the last case in particular, as we actively encourage bomb-proof policies and blame our civil servants when they occasionally go wrong. The review by the Finance Committee has put Government on the right track in achieving better targeting, but there is a great deal still to do.
Today is the last day of term. Decades on, most of us remember the last day of the school term, which had about it a certain predictability: we could turn up in our own clothes; we could bring a game; if there were any speeches, they were about what we were doing during the holidays; and we got away at lunch time. As members who are concentrating will know, our strike rate is one out of four—we are allowed to turn up in our own clothes.
There was, of course, another given about the last day of term: even if one had the most Calvinisitic heidie in Scotland, one would not be expected to do any mental arithmetic. However, today's debate is really about a clever piece of mental arithmetic concerning whether we are putting our money where our mouth is.
It will relieve the front-bench team to learn that, with a mere 180 seconds left to me this morning, I will focus on just one statistic from the report. One in three Scots now lives in rural Scotland—although I suspect that, the day after tomorrow, that number will be a little higher. However, that part of Scotland benefits from two thirds of the total economic development spend.
That is an interesting statistic. I am not arguing that rural Scotland does not deserve two thirds of the spending. Indeed, the recent performance of rural Scotland, particularly the Highlands and Islands, rather makes the case for high spending and I commend that example to the Conservatives—there is little evidence that high spending has held back the Highlands, which has growing numbers of migrants, strong growth, good entrepreneurial instincts and a host of other good things.
I ask us to do two things over the holidays. We should consider how different rural Scotland is today for children leaving school from the rural Scotland that we knew. Rural unemployment has been all but eliminated. Previously exploited workers in the tourism industry now have a minimum wage and holiday rights. Ferries that were falling to bits in our day have been replaced by a smart new fleet.
Will the member give way?
No, I want to pursue this point.
Families used to be isolated and rural schools were falling to bits, but all that is changing. Furthermore, the idealistic land reform pipe dreams of the Brian Wilsons—and, indeed, the Rob Gibsons—are now a reality. That tells us that cleverly spent money matters. It can pump prime and not simply crowd out.
Of course, this would not be a proper debate if we did not pose a challenge. This summer, as we look around rural Scotland, we need to ask ourselves how we can serve tomorrow's generation. Of every 100 children who leave Scottish schools tomorrow, only two will ultimately make their living in farming the land or fishing the sea. Together, those two young Scots out of every 100 will get £400 million from the common agricultural policy and another £400 million from the Scottish Parliament. They will get more than the total budget of Highlands and Islands Enterprise, which supports all other industries, more than double the environmental protection budget for the whole of Scotland, four times what we spend on ferries and air services and 10 times what we spend on the Scottish tourism industry.
Scottish teachers made us do mental arithmetic because numbers tell a story. The story that we need to deal with next term concerns the question whether, despite the successes of recent years, we are spending too much supporting the rural Scotland that our grandfathers knew and not enough on the rural Scotland that our children who will leave school tomorrow deserve to know.
I feel that we are beginning to get into quite an interesting debate, in which we should have the liberty to put forward some new ideas rather than unduly pursuing partisan positions—so I will not, although my colleagues will.
The word "growth" has come up one or two times during the debate. According to my count—which the Official Report will confirm tomorrow—Des McNulty used it 15 times. It occurs 22 times in the report, which means that, in percentage terms, Des McNulty used it three or four times as much as the report did. The report uses other interesting words. The word "expenditure" occurs 61 times, but the word "benefit" is used only 11 times and the word "return" only twice. The phrase "rate of return on investment" does not occur at all and neither does the word "competition" or its derivatives such as "competitive". The word "asset" does not appear, but "infrastructure" occurs nine times and "comparative" or "compare" four times. "Succeed" and "fail" do not appear at all.
What does that tell us? It tells us something about the emphasis of the report and about the real difficulty that the committee had in engaging with the issue. We do not know how we are doing or what bangs we are getting for our bucks, so inevitably the committee focused on the bucks. I do not unduly criticise the committee for doing that, but that approach limits the effectiveness of the analysis in the report and tells us something about the challenges that will face the committee—and all of us, as parliamentarians—in the future.
We have already heard some spurious comparisons between the public and private sectors. I say that they are spurious because, of course, the public sector is a major contributor to economic activity and is not simply a drain on the public purse. The public sector is capable of delivering services more cost effectively than the private sector and in many instances it does so. I ask members to consider the cost of health care as a share of GDP in the United States and in this country. The cost in the US is twice the cost here. Not only that, but child mortality is higher in the US and its figures on many other health measures are also worse than those for the UK. The comparison between the public and private sectors is spurious. It is not the case that one is good and one is bad. We must look at things analytically.
The problem is largely down to us. The public sector has a major millstone around its neck. We expect the public sector to be more risk averse than the private sector. When we have a risk-averse sector trying to encourage a risk-taking sector, however, there is a mismatch in expectation. The report does not entirely develop that point. I meet small businessmen—after all, almost all our entrepreneurs are in small businesses—whose major problem in growing their businesses is access to risk capital. That is undoubtedly a subject to which we should return.
One of the difficulties with the statement that the rural third gets two thirds of the economic support is that a lot of that support is not economic support. There is a miscategorisation. In many cases, it is social support and I defend it on that basis. We must be careful—fishing and farming account for 2 per cent of economic activity, but they create the environment within which large amounts of manufacturing can take place. The interactions between different parts of our economy—public and private—are much more subtle than this debate allows us to recognise.
Perhaps we are in a cul-de-sac, but perhaps we are in a laager of our own making. We are boxing ourselves in. We must not artificially pose social responsibilities against economic ones. The reality is that we need economic development so that we can pay for our social objectives.
Following on from the bean counting of my colleague Stewart Stevenson, I want to talk—initially, anyway—about process. My colleague Susan Deacon frequently castigates us for being obsessed with process at the expense of outcome, but this debate is about the process that is used to analyse, to examine, to judge and to balance. The Finance Committee's report urges the Executive to sharpen up that process and I support the committee's position on that.
The community planning principles that were announced some years ago were embraced—certainly by me, in my previous life—with great enthusiasm. They urged public bodies locally to engage in that analysis, examination and prioritisation and then to allocate their combined budget resources effectively and in pursuit of those priorities. I note that the report commends Highlands and Islands Enterprise and the Highland region for doing that. Yesterday's announcement of the planning white paper and the national planning framework gave some support to the Executive's wish to travel in that direction. The inclusion of spatial issues first in national and then in local considerations will certainly help to improve our planning process.
We need clear Government priorities. Localities and communities need to know what the most important element is. For me, economic growth is the most important element, but it must drive towards certain ends.
The Executive has done much. Last week, I spoke about how well the infrastructure investment plan has been done and about the sharpening up of planning. The committee's report urges an even better focus, sharper analysis and real justifications for spending decisions. The committee says in paragraph 15:
"This lack of analysis by the Executive makes it extremely difficult to judge whether particular allocations at project, programme or departmental level are delivering the best return in terms of the promotion of economic growth."
If we target better, we will know better why and how to plan schools, transport and leisure facilities.
We need a sense of what we want to achieve when we embark on, for example, nursery provision or the M74, which was referred to. How many extra people will be better qualified and to what level? What will that mean for our universities? In road and rail investment, how much time will be saved and how many more goods will be taken to market more quickly, with a result for the economy? On the urban-versus-rural question, my colleague Wendy Alexander gave the best argument yet for further reform of the CAP and all European spending.
Why do we spend and what will we get out of it? The perception is that the Government's focus is not yet sharp enough in Scotland. If we have additional spending on services, we need to know to what extent economic growth will be supported.
In the chamber last week, I called for ministerial responsibility for such a focus across the whole budget. For a start, I would like to hear the Deputy Minister for Enterprise and Lifelong Learning talking about how he will sharpen the focus for the Enterprise, Transport and Lifelong Learning Department by pulling together at least twice a year all the agencies that are collectively responsible for enterprise and calling them to account for how they deliver on our key priorities. I support the motion and the report and I look forward to hearing the minister's response to my suggestions in due course.
I call Derek Brownlee.
Thank you. [Applause.] That should surely come at the end.
I recognise that time is tight but, before I address the matter in hand, I will say a few words about my predecessor, David Mundell. He was well known in the Parliament for the workload that he maintained, for his involvement in many local issues throughout his area and for working across party lines whenever possible. In my time in the Parliament, whether it be two years or—voters permitting—rather longer, I hope that I can build a similar reputation.
I thank members and parliamentary staff for the courtesy and helpfulness that have been extended to me in the past week.
The Finance Committee is well known—at least in the Parliament—for the volume of work that it covers and it is blessed with having to deal with a subject that can be rather dry. I was interested to read the committee's report. I will not pretend that I read it back in March, because the aforementioned Mr Mundell was keeping me rather busy at that time and there is a limit to the amount of excitement that an accountant can take in any given week. However, I have now had the opportunity to read the report in detail and I know that it contains much common sense.
The Executive's response to the report was interesting. In it, the former Deputy First Minister said:
"Growing the economy is our top priority. A successful economy is key to future prosperity and a pre-requisite for building first class public services and social justice."
I am sure that most, if not all, of us agree with those sentiments.
However, it gets better. The former Deputy First Minister continued:
"The Executive's role is to create the right environment for business to flourish and to facilitate economic growth."
For the first time in this chamber—and we will see whether it will be the last—I will say that the Executive is absolutely right. Whether the undoubted good intentions have been matched by good deeds is another matter—the report makes a number of valid observations in that respect.
The poorest people in society have the most to gain from economic growth and, as members are aware, many communities throughout the South of Scotland suffer from low wages, scarce employment opportunities and depopulation. We have to encourage economic growth in those communities; after all, it is all too easy for commentators and even parliamentarians to fixate on the more visible pockets of deprivation in the larger cities.
As the South of Scotland faces particular geographical issues that inhibit economic growth, investment in transport and communication networks is particularly important. The Executive no doubt believes that it is tackling such matters, but the committee's report has posed some valid questions. Is the Executive tackling those matters in the most effective manner? Is it getting value for money? Is it maximising potential for economic growth from its spend? The impression from the committee's report is that the Executive would be hard pressed to produce evidence to show that its approach is the most effective.
I know that the report focuses on the impact of the Executive's spending decisions but, if economic growth is to be the top priority, we also need a strong focus on the burden of taxation. Members might have seen a report by a former colleague of mine, Graeme Leach, on the impact of taxation on economic growth. Based on eight international studies, his report concluded that, as levels of taxation rise, economic growth slows. As Des McNulty said, it is always possible to highlight the benefits of a particular programme of public spending. However, when we assess the impact of that spending, we must not be blind to the impact of the burden of taxation that is necessary to fund it.
I know that my colleague Ted Brocklebank has touched on the issue of business rates. Perhaps it is naivety on my part, but I think that a consensus is emerging on the matter. If the Executive's priority really is economic growth, we will not have to wait long for a cut in business rates.
I congratulate Mr Brownlee on making his maiden speech. However, I will resist the impulse to make any remarks about his predecessor.
The Finance Committee's report says:
"This has been a complex review and has shown that there are no easy answers to the question of how resources can best be allocated to promote economic development."
For that reason, the inquiry was rather frustrating. Although everyone felt that economic growth was a good idea, there was no real consensus about the best way of investing money in order to promote it.
As Andrew Arbuckle has pointed out, it was difficult to identify the relative importance of what Peter Wood described as "primary spend" and "support spend" on economic development. For example, does the £418 million that Scottish Enterprise received and the £75 million that HIE received last year contribute more to the economy than the £242 million that was put into the roads budget or the £1.724 billion that was invested in higher and further education? Just because such investment is classed as primary spend, it does not mean that it is any more effective.
The Executive also argued—with some justification—that other parts of the budget contribute substantially to its top priority. Ted Brocklebank pointed out that the majority of health spend might be aimed at our retirement years. However, later today, we will discuss the prevention of smoking. Health improvement spend can contribute significantly to economic growth by prolonging people's working life and enabling them to work more productively. The committee found that there was no subsyst—syste—systematic—[Interruption.] Sorry. It is the day after the Scottish Parliamentary Journalists Association dinner.
The committee found that there was no systematic analysis of how spending is prioritised. Des McNulty made some important remarks about transport in that respect. As evidence from across the UK shows, investing in the transport infrastructure makes areas more economically successful.
In my remaining two minutes, I will comment on two rather parochial issues. We did not touch in great depth on the concept of city regions, but I know that the Executive believes that they are important drivers of economic growth. I do not doubt that that is true in much of Scotland, but it is not applicable to Dumfries and Galloway, so my plea is that we should not go too far down that route. If Dumfries and Galloway looks towards any city at all, it is Carlisle, which is not in Scotland. We need to think about town regions. Eventually, Dumfries may become a city and at that point we can have a city region; at the moment, however, that analysis is not particularly helpful for us.
My second point concerns the idea of rural and urban spend. I was rather less persuaded by some of the arguments that were presented to us than some of my colleagues were, because I felt that the information was based on a rather crude categorisation of whole local authority areas. For example, the 34,000 people who, like me, live in the town of Dumfries are all classified as rural, whereas the farmers and fishermen of North East Fife are all classified as urban. I did not find that analysis terribly helpful, although some of what Wendy Alexander said bears further examination.
I noticed that, even in some of what was identified as rural primary spend, £128 million was spent on research. Most of the Scottish agricultural and biological research institutes are based in or near towns, so the research workers live in the towns and the expenditure on their salaries benefits the local economies of those towns. Although the research may be of an agricultural nature, its consequences do not necessarily contribute solely to the rural economy. Indeed, the not insignificant expenditure on scientific equipment probably does not benefit Scotland at all, because much of it is manufactured elsewhere.
I do not think that we should overinterpret Peter Wood's finding that, for example, 47 per cent of the primary spend, excluding the CAP moneys, is being spent on 27 per cent of the Scottish population. However, there must be a much deeper analysis and a better understanding, for both urban and rural areas of Scotland, of what actually makes the difference. That applies both to the inquiry into economic development and to our next inquiry, which is on deprivation, where we may find that a similar set of equations needs to be made.
We come now to the closing speeches. I call Andrew Arbuckle to close for the Liberal Democrats.
We have had a good and worthwhile debate on how the Scottish Executive will look at its future expenditure plans. I am sorry that some Opposition members have concentrated so much on the present position and not on the Finance Committee's review, which, as I said in my earlier speech, exemplified the roads that we must follow and the measures that we must take to break down the barriers between departments and to provide a rationale for the Executive's major expenditure plans.
During the debate, the situation was excellently set out by the convener of the Finance Committee, who explained the reasons behind the review and the fact that the Executive is now spending more on the country's infrastructure than has ever been spent before. That was backed up by good contributions from Christine May and Elaine Murray. I worried a little bit about Wendy Alexander's contribution on the country-versus-urban issue.
The critical point that I made was not that we should dispute the total spend in rural Scotland, but that we should simply ask whether two out of every 100 people in rural areas of Scotland should benefit from sums that are 10 times what we spend on the tourism industry, which supports 10 or 20 times as many people in those communities. I am more than happy to have the debate, but I urge Mr Arbuckle not to characterise it as an urban-versus-rural issue. It is a rural-past-versus-rural-tomorrow issue.
I thank Wendy Alexander for that intervention. As someone who has been involved in the rural past—and hopes to be involved in the country in the future—I would be pleased to continue the debate with her. Elaine Murray said that we have to look further into the figures, because things are not always as they appear on the surface. I am happy to have further discussions on that point.
I do not have much more to say other than to welcome the Finance Committee's initiative in stimulating the debate through its review. There is a lot more to do. The committee should consider undertaking a further phase of the review as soon as possible to ensure that we know whether we are getting efficient Government expenditure and that the money is being spent where it needs to be spent in order to achieve economic development.
I congratulate my colleague Derek Brownlee on his excellent and thoughtful maiden speech. On the evidence of today's speech, I am sure that he will be a valuable addition both to the Conservative benches and to the chamber as a whole. However, I welcome him with some mixed feelings because, with his arrival, I lose my mantle of being the youngest member of the Conservative group. Derek is considerably younger than I am—in fact, he is the youngest member of the Parliament. I wish him a long career at Holyrood, if he does not emulate his illustrious predecessor and seek a transfer to another place.
The debate started off as the usual groundhog-day debate on the economy and finance, with members on the Executive benches saying that everything is wonderful, Opposition members saying that everything is terrible and Mr Mather making his usual plea for independence/fiscal autonomy, depending on which side of the bed he got out of in the morning. However, as the debate went on, it became a bit more interesting. We have heard some new ideas and thoughtful speeches from members on different sides of the chamber. I join other members in commending the Finance Committee on its report, which has highlighted some important points.
We all agree that growing the economy should be the top priority; that is the Executive's stated aim. The report makes it clear that the Executive's current budget does not support that aim:
"research undertaken for the committee concluded that just 5% of that budget is spent on activities which are intended to directly promote economic development and, moreover, that the share of this item in the Scottish budget has been falling since 1999."
Serious questions need to be put to the Executive on the issues.
As Ted Brocklebank said, there is a lack of proper assessment of some of the spending. For example, if we look at spending on transport, we begin to question the relevant importance to the Executive of projects such as the M74 and the Borders rail link, both of which the Conservatives support. Which of those projects will deliver higher economic growth? It is clear that more work needs to be done.
The really important question is the one that Des McNulty highlighted in referring to the report. The committee offered three possible explanations for why expenditure on economic development has grown more slowly than expenditure on public sector spending as a whole. The first explanation is that the Executive may be misleading us that economic development is its top priority, when other priorities are more important. The second explanation is that, because it has not increased them, the Executive is satisfied with the spending levels that it inherited in 1999. The third explanation is that the Executive believes that spending on areas other than economic development may better achieve its aims. It will be interesting to hear the minister's response. Which of those three explanations does the Executive agree with? That is the crucial question on which the committee is looking for an answer.
My colleague Ted Brocklebank livened up the debate somewhat by referring to the size of the public sector. As he said, 10,733 extra staff were recruited to the public sector in 2004. None of us would dispute the recruitment of additional doctors, nurses, teachers or policemen, but we know that many of the extra staff are not in front-line services but in backroom operations and, sadly, that they do not deliver the contribution towards economic growth that we want.
Professor David Bell said in evidence to the committee last year:
"We are moving to a situation in which the public sector is gradually taking over a larger and larger share of economic activity in Scotland."
He also said:
"If economic growth is the Scottish Executive's key objective, some attention must be paid to the possibility that private sector activity is being crowded out."—[Official Report, Finance Committee, 2 November 2004; c 1805-1810.]
My questions might be uncomfortable for some of those members on the Labour benches who have no experience of the private sector and think that it is simply a cash cow to fund the public sector. The issue is important: those of us who live in the real world know that a strong private sector is vital.
In response to Stewart Stevenson's comments about the difference between the public and private sectors, I say that the private sector creates the wealth that means that we can raise the tax revenue to fund public sector activity. That is why we need a strong, growing private sector. If it is the case that the larger the public sector, the more that private sector activity is crowded out, as Professor Bell said, we must be careful about the continuing expansion of the public sector in relation to gross domestic product and the payroll.
There are simple, but important lessons for the Executive. It must start to cut back on excessive costs and regulation. It must cut business rates and consider a new model of economic development. As Jim Mather said, we do not have to follow rigorously a model of enterprise that is not delivering the economic success that we need. The Executive must also consider examples from elsewhere in the world.
I am sorry that the new Minister for Enterprise and Lifelong Learning is not in the chamber, because I am sure that he would have learned much from the debate. I hope that he makes a new resolution to take action and make the changes that are needed if the economy is to be driven forward. If he does so, he will have our full support.
I, too, congratulate Derek Brownlee on his maiden speech. Given the quality of his speech, he, too, must be in the running to succeed as leader of the Tories in Scotland. I pay tribute to Derek Brownlee's predecessor, David Mundell, who was a member of the Enterprise and Lifelong Learning Committee during my tenure as convener. He made an exceptional contribution to the committee's work, despite his Tory philosophy, and I am sure that he will do extremely well at Westminster.
I must be honest and say that the Finance Committee asked the wrong question in its report. The percentage of total expenditure that is spent on economic development does not matter a great deal; what matters is that the right level of money is spent on economic development and that the money is spent effectively and in the right areas. The percentage of total spend is almost incidental if we are doing what is necessary.
The first thing that we must do is to decide what we are trying to achieve. The Enterprise and Culture Committee is grappling with the issue in its inquiry into business growth. Are we trying to close the gap between the Scottish and United Kingdom average growth rates? That would certainly be an achievement, as the gap has been closed in only two years during the past 30 years. Alternatively, are we looking further afield to our international competitors? The economies of countries that are at the same stage of development and are roughly the same size as Scotland are growing at a rate that is twice the long-term growth rate of the Scottish economy. That is the ambition that we should set ourselves. If we compare the UK average during the past 30 years with that of the Organisation for Economic Co-operation and Development countries, it is clear that the UK economy has not been particularly fast growing. Therefore, it would be entirely wrong to benchmark our ambitions against an economy that is not doing particularly well. We should be aiming to double the long-term growth rate of the Scottish economy.
I am a nationalist, so members will expect me to say that we cannot achieve that ambition if we manage only the microtools and do not have control over the macrotools, in particular interest rates. If members compare the real level of interest rates—
Will the member give way?
Not at the moment, but I will give way to Wendy Alexander later.
Interest rates in the UK are set by the Bank of England to meet the needs of England—indeed, the small part of England that is the City of London—and are not matched to the needs of the Scottish economy. As The Scotsman's own shadow monetary policy committee—which includes Donald MacRae—said, if we were setting interest rates on the basis of the needs of the Scottish economy, they would be about half the rate of those that are set by the Bank of England.
Will the member give way?
I know what the member is dying to ask me: am I talking about being inside or outside the euro? It does not matter. Countries that are inside the euro have had an interest rate that is half that of the Bank of England, despite their low economic growth, and those that are outside the euro have had much lower interest rates as well. When it comes to being in or out of the euro, the position is neutral; either way, our interest rates in real terms have been far too high.
Will the member give way?
I will do something that Wendy Alexander would not do and take an intervention.
Alex Neil said that it is critical to set interest rates. Do we take it that he will set the interest rates for Scotland? It is a deeply dishonest pretence to suggest that he will have the power to set interest rates if he believes either in a European Central Bank—which goes with being part of the euro—or in staying in the UK and having interest rates set independently. As a politician he may think that he can make a better choice than any independent mechanism, but I would be grateful for Scotland's sake if he were to clarify who would make what he regards as the most important decision.
I will give you one further minute, Mr Neil.
Thank you, Presiding Officer.
There is absolutely no question. If Wendy Alexander reads our party policy, she will see that we would have an independent central bank in Scotland, which would be given ground rules in the same way that the Bank of England gets its framework from Gordon Brown, a Scottish Chancellor of the Exchequer. Mr Mather or Mr Morgan, whoever gets the job—
It might be Alex Neil.
It might be me, but I do not think so.
Whoever gets the job would set the ground rules for an independent central bank in Scotland. There is nothing wrong with that, because they would take their decisions based on the needs of the Scottish economy, not on the needs of the south-east of England.
Since we are on the subject, and we are talking about money that is devoted to economic development, I remind Ms Alexander of the point that she made a year ago about the volatility of the oil price. It so happens that on Friday night I was sitting next to Lord Oxburgh, who is the chairman of Shell. I asked him, "Is Wendy right about the oil price?" He said, "No, she's completely wrong. The oil price will be $40 to $60 a barrel for 20 years." It is high time that we got our share of that money to spend on economic development and growth in Scotland.
Perhaps we should return to reality, although I was interested that Jim Mather—whose speech was slightly more on this planet than Alex Neil's—counselled us to look to Kansas, which he said was the best example of how to proceed. That was a welcome departure from the cherry picking of small European nations that usually goes on, and the cherry picking within small European nations of those parts of their fiscal, economic and monetary policies that SNP members like as opposed to those parts that they do not like.
It is welcome that the nationalist policy on growing the economy has matured from the famous sprinkling of fiscal fairy dust, which was the last solution, to following Dorothy down the yellow brick road, where presumably we will all meet up with our own wizard of Oz. I seem to recall—I could be wrong—that the moral of that story was that there was no wizard of Oz. No single supreme being existed who could wave a magic wand and make it all right. The answer actually lay within. In Scotland and the UK, dare I say it, we have to look to ourselves for the solution.
The minister is getting there.
I will add a couple of statistics, which I think suggest that we are indeed "getting there". The number of unemployed people is an important marker of the strength of the economy. I recall the days when millions were unemployed in this nation. The claimant count for unemployment in Scotland has gone down 45 per cent since May 1997, which means that 45 per cent more of our fellow citizens have not been consigned to the dole queue since Labour came into Government. That number is down 35 per cent since May 1999, when the present Scottish Executive came into power.
The number of people in employment, which is also an important indicator of economic success, is currently 2,441,000. That seasonally adjusted figure is up 8 per cent since spring 1997, when the Labour Government came to power, and it is up 7 per cent since spring 1999, when the Scottish Executive assumed responsibility for some of the supply side measures that we have been discussing.
Has the minister read the report from the University of Glasgow that points out that the real level of economic inactivity and unemployment in Glasgow is 28 per cent? After eight years of Labour Government, that figure is seven times the claimant count.
Alex Neil and I have had a number of exchanges on this subject. I have no doubt that one of the greatest tasks facing us in the delivery of the economic growth that we all seek lies in giving those people who are economically inactive the opportunity to make a contribution. Glasgow is a classic case in point. We know that at least half of those who are economically inactive would welcome the opportunity to get back into employment and to make a contribution. Were we able to achieve even a proportion of the growth that would come from getting those people back into the labour market, growth rates would undergo a very welcome increase.
Population forms part of the same equation. Indeed, Jim Mather counselled me in his speech to do something about it. Having a broader pool of labour upon which to draw is an important feature of economic growth. In the context of this debate, it is worth referring to the report from the Ernst & Young Scottish independent treasury economic model club—the Scottish ITEM club report—which came out just this week. The club's summer update predicts:
"Scottish growth will hold up better over the course of 2005 than that in the UK as a whole".
The Scottish economy is expected to close the growth gap with the UK as a whole from 1.2 per cent, as it was last year, to 0.7 per cent in 2005. The Scottish ITEM club views the news of renewed migration as evidence that Scotland's prospects are
"not as gloomy as some commentators would like to portray."
I wonder who the report's authors could have been talking about. The report says that Scotland enjoyed a net gain of
"26,000 migrants in 2004 … an unprecedented gain, with both domestic and international migration contributing to the upturn."
I hear exactly what the minister is saying, but I invite him to consider, compare and contrast the performance of Norway, where the population has grown from 2.2 million to 4.6 million over 100 years; that of Scotland, whose population has been oscillating around 5 million over the same 100 years; and that of Ireland, which is poised to double its population in 50 years. Is the Executive's performance on population growth adequate in that context?
Kansas did not last very long, it has to be said. All of a sudden, it is Ireland and Norway. To help illustrate the point, I continue to quote from Dougie Adams, the economic adviser to the Scottish ITEM club. He says:
"The idea of an irreversible decline in the Scottish population needs to be revised."
That is good counsel for the nationalists. Dougie Adams continues:
"Nearly 100,000 people arrived to stay in Scotland between the middle of 2003 and mid 2004, offset by just over 70,000 who left, 26,000 of whom went abroad. In the past, periods of gain from migration have tended to coincide with recession in the greater south, but this latest experience looks different."
Therefore, the recent population increase is not a freakish one-off but represents a success for our strategy of growing the economy and making Scotland a place to which people want to come so that they can stay and work here.
Murdo Fraser made some interesting points about current levels of public spending on economic development. There is no universally accepted definition of what constitutes expenditure on economic development, but it is arguable that all public spending has some impact on the economy. Some spending, such as our funding of Scottish Enterprise, is directed immediately at promoting entrepreneurialism, dynamism, business growth and skills development. However, although expenditure on things such as health is not directed primarily at promoting economic development, such spending has an important role to play in supporting such development because it helps to maintain a healthy and productive workforce, which is a fairly elementary prerequisite of economic activity.
The assumption that all public sector spending stifles private sector growth is simply untrue. According to the OECD, many of the fastest-growing European economies have public sectors that are of a similar size to, or larger than, that of Scotland. For example, over the past decade, levels of economic growth in Denmark and Sweden, which are the OECD countries with the largest public sectors, have exceeded both the European Union and euro-zone averages.
Who could credibly claim that increased investment in basic education and skills and more resources for research and development, innovation, investment in the electronic and physical infrastructure and for the promotion of investment opportunities in Scotland is holding back growth? It is not true. What stifles growth, in both the public and private sectors, is waste and inefficiency. For our part, we are committed to do all that we can, through the efficient government initiative, to secure better efficiency, effectiveness and productivity for every pound of public money that is spent in Scotland.
Although the minister is right to point out that there are exceptions to the general rule, in that countries such as Norway have shown high levels of economic growth, does he accept that countries that have lower levels of taxation and state intervention generally deliver higher economic growth levels?
That is why we have one of the lowest levels of business taxation of any of our comparator OECD countries.
The other myth, which Ted Brocklebank propagated and which is perpetuated even in some of our more celebrated national newspapers, is that public sector employment is necessarily a constraint on growth. I accept that that could be the case if private sector development were restricted by virtue of the fact that skills that would otherwise be available to facilitate growth were denied to the private sector because they had been sucked up by the public sector. However, an interesting statistic—on which the Presiding Officer will be pleased to learn I will conclude—is that, of the 150,000 Scots who have entered employment since the creation of the Scottish Parliament in 1999, some 110,000 are in the private sector.
Only one quarter of the recent huge expansion in employment has been in the public sector and less than 3 per cent of the increase is accounted for by central Government. The remainder represent those who now work in the national health service and in local government, including front-line personnel such as teachers, police officers, care workers and firefighters. If the Tories really believe public sector employment to be a constraint on growth, they should say how many of those front-line staff—teachers, police officers, care workers, firefighters and others—they would no longer require for delivering our public services.
On that progressive note, I conclude by commending the Finance Committee for its insightful look at the Executive's spending plans.
I am afraid that we have spent so long in Kansas that I can give Mr Morgan only six minutes.
I am glad to see that the chamber is filling up in anticipation of my speech.
In closing for the Finance Committee, I congratulate Derek Brownlee on his maiden speech. Despite suffering under the burden of the fact that his arrival doubles the number of accountants in the chamber—members might like to know that the other is Mr Mather—he made an excellent maiden speech on what he said can be a very dry subject. I am sure that he will be a worthy successor to David Mundell.
The committee's starting point was the importance of economic development. Economic development is the Executive's number 1 priority, delivers the resources that enable us to have the other services that we enjoy and is the engine for the scientific advance that betters our lives on a daily basis, so it is reasonable to ask how the Executive budget feeds into that priority.
I want to touch on two of our recommendations that have not yet been mentioned. We spoke about the efficient use of resources in relation to government structures. In paragraph 88 of the report, we say that we have concerns
"over the efficient use of resources arising from the number of local authorities and public agencies with overlapping remits and boundaries."
As someone from Dumfries and Galloway, I am conscious of how much more effective it is down there when all our agencies—the council, the enterprise agency, the NHS and the police and fire services—cover exactly the same geographical area. That helps co-operation and effectiveness, and the model has much to offer.
I will touch briefly on one or two of the other speeches that were made. As some have said, analysis of spending proved to be a controversial area. One of the most controversial elements of that was the rural-urban split. During the first session of Parliament, I was a member of the former Rural Affairs Committee, which conducted an inquiry into changing employment patterns in rural Scotland. We found it difficult even to come up with a satisfactory definition of rural Scotland—there are many such definitions. That points to some of the problems and dangers that are associated with comparing rural and urban areas.
Wendy Alexander seems to have a rose-tinted view of what is happening in much of rural Scotland. I will comment briefly on three of the points that she made. She said that unemployment has been vastly reduced. Unemployment statistics are automatically reduced if people emigrate from rural areas to get employment somewhere else. She said that schools have been refurbished. I agree that there has been refurbishment, except of those schools that are falling down or have closed. She even mentioned the minimum wage—as if that were a charge on the Executive's budget, for goodness' sake. I agree with the Executive's comment in its response to our report that the rural-urban split is "inappropriate—and potentially misleading."
Jim Mather considered the relative performance of the Scottish economy. Although I will not labour some of the points that he made, given that I am summing up on behalf of the committee, one issue that he highlighted that is worthy of consideration is the number of enterprise ministers that there have been since the Parliament was established. The same point applies to much of the ministerial team. We can all agree with it, because the Opposition parties are also guilty of shuffling around their spokespeople. If we do not get more continuity, it is at least arguable that decisions will be made not by politicians but by the civil service.
Ted Brocklebank made the valid point that, according to many witnesses, it was difficult to discern any link between the "Framework for Economic Development in Scotland", which allegedly underpins much of the Executive's policy, and actual policy implementation.
It is reasonable that the Finance Committee should seek evidence that spending is being directed towards the Executive's main priority. I do not think that we have the answers, so the committee is right to continue to probe the issue. After all, it was the Executive, not the Finance Committee, that said that economic growth was the top priority. As the custodian of getting on for £30 billion of spending, the Finance Committee has a duty to seek to ascertain——if not precisely, indubitably with greater certainty than at present—just how that money contributes to economic growth. We will have to consider the issue in the future.
The committee will find the minister's response disappointing. I know that he could not resist the attraction of attacking the SNP and Tory front-bench positions, but he spent the entire 10 minutes of his speech doing that and no time addressing any of the committee's concerns. He did so against the background of a written response to the committee's report that was also a bit disappointing. As a result, I am sure that the committee will return to the issue in detail in the future.