Rising Cost of Living
Good morning. The first item of business this morning is a Liberal Democrat debate on motion S3M-2780, in the name of Jeremy Purvis, on a helping hand with the rising cost of living.
This debate is taking place at a time when the country is in recession. The economic situation is unprecedented under devolution, and the Parliament is required to respond accordingly.
Last year, as in previous years, the Scottish Government suggested to the Finance Committee and other parliamentary committees that if budget amendments were proposed, the proponent should identify and put forward equivalent savings. That was the advice to Opposition parties and subject committees. It is seemingly also the stated position of all the other parties that are represented in the Parliament, which I am delighted are united.
Members will recall that, during last year's budget process, the rule was observed in the breach rather than in the adherence. The Conservatives argued for an accelerated tax cut and increased expenditure on police and drugs policies. They did not identify how their proposals would be funded, and—critically—the Government did not ask them to make detailed proposals on areas in which budget cuts could be made so that there could be tax cuts. What was good enough for them last year with respect to business taxation is seemingly not good enough for them this year with respect to personal taxation. [Interruption.] The minister says that the Government should identify the sources of funding for proposals. We will come to that in a moment.
This week, the Conservatives are arguing for national insurance cuts and a VAT holiday, with no costings attached. Their proposed tax cuts come with not a single penny of explanation; I suspect therefore that there must be resistance to them in Scotland.
On 17 January this year, the BBC reported that Stewart Hosie had reaffirmed his party's policy of cutting corporation tax by 10 per cent. He strongly reasserted that policy. Let us be clear: according to the Government expenditure and revenue in Scotland figures that the Scottish National Party has published, that would equate to a £756 million reduction in this year's Scottish budget; yet the SNP is attacking us for seeking broadly the same for individual households, rather than for big businesses.
No different principle is involved. Last year, an Opposition party made suggestions about the budget and did not say where the funding would come from, and the Government accepted its suggestions without asking it to identify the funding. Indeed, during First Minister's question time in September, Annabel Goldie announced the Conservative party's policy of cutting everyone's council tax bill by £150. She said:
"In these rough economic times, real help is needed as soon as possible. When will the First Minister find this money so that we can pass it on to those 2 million households?"—[Official Report, 11 September 2008; c 10739.]
What was good enough for the Conservatives last month is seemingly not good enough for them this month. The Conservatives are now arguing for a national insurance cut and a VAT holiday, with no costings attached. Just so that we are clear, that would mean a negative Barnett consequential of up to £200 million for the devolved budget this year.
Members will recall the Cabinet Secretary for Finance and Sustainable Growth saying on the BBC that the changes made to last year's budget at the behest of the Conservatives represented the equivalent of one morning of one day's spend of the Scottish budget. However, the SNP described the tax cuts that it put in place for local government as the biggest for a generation. That perhaps means that the principle involved is no different, but the scale is. The cuts were not sufficient, as the First Minister called for further tax cuts on 20 September in The Scotsman. On 10 April 2007, it was proudly stated on the Edinburgh City SNP website, under a happy photograph of Kenny MacAskill—I suspect that such photographs are rare—that the SNP would
"cut the overall burden of local taxation by £450 million—the biggest tax cut in a generation—which will benefit pensioners and middle Scotland".
There was no indication of how funding for that would be provided. I hear the Government's Bruce Crawford saying that that is local taxation, but taxation is taxation. The Conservatives said in a recent debate that it was not houses that paid tax, but people, whether people in local communities who pay council tax or people paying Scottish taxation for the Scottish Parliament.
An official SNP press release on 31 July this year in the South of Scotland called for the nationalisation of all of the United Kingdom's energy generation companies. An estimated £20 billion spending commitment was proposed. That £20 billion was rather a modest figure compared with the £100 billion that the First Minister promised that he would have pumped into the Scottish finance sector on 17 September. We are talking about a nationalisation policy that Scotland could not afford and which it does not have the power to implement and about expenditure of three times the Scottish Parliament's budget by a Scottish central bank that does not exist—indeed, it was not the SNP's policy to establish such a bank.
Our policies look rather prudent in comparison. We know that the Labour Party's main tax policy in the past year was the rabbit-out-of-a-hat, headline-grabbing policy of abolishing the 10p tax rate. The rabbit would have hit the lowest paid hardest, and Labour soon discovered that it had myxomatosis; Scottish Labour front-bench members, who were hitherto silent, therefore lined up to shoot it. However, the net result is that the lowest paid in Scotland are still worse off under Labour.
On 29 September, The Scotsman said:
"The only serious budget proposal to boost the economy is a 2p income tax cut put forward by the Lib Dems".
Our proposals are a considerable response to the unprecedented economic and inflationary pressures on families and earners throughout Scotland.
Unemployment is up by 19,000. How will a 2p income tax cut help the 19,000 people who have just lost their jobs?
The Conservatives should support a local income tax, which is a fairer tax that is based on the ability to pay. Such a tax would, of course, provide much-needed support for earners who pay income tax, those who are not earning and those who are on lower incomes, such as pensioners. I am talking about a tax package that is right for the economy, the low paid and hard-working families in Scotland. I would have thought that the Conservatives would jump at such a package.
On 14 October, Ireland put in place an austerity budget. [Interruption.]
Order.
Ireland is now, like Norway—although not Iceland, of course—the example that we must follow, and it is putting up tax at a time of recession. Ministers' salaries were also cut by 10 per cent there. SNP ministers now claim that Irish families are 40 per cent wealthier than their Scottish counterparts, but they neglect to say that SNP ministers will be 40 per cent wealthier than their Irish counterparts.
This year's budget is 0.3 per cent different from the published spending review last year. Our policies would make a 3 per cent difference to the budget. Money would be put back in people's pockets. Our proposals are a proper response. Efficiency savings in the infrastructure programme have been identified, unnecessary and too expensive quangos that have been established would be eradicated, and financial consultants, with whom the SNP seems to be obsessed, would be got rid of. We have identified savings and taken the right approach, which I hope members will unite around. It is better to put money back in people's pockets. We have proposed a proper response to the economic situation. We should help earners, the low paid and the economy.
I move,
That the Parliament notes with grave concern the rise in the cost of living and the impact of the credit crunch on families, individuals and small businesses in Scotland; believes that the Scottish Government should use the substantial levers at its disposal to give practical help; disagrees with the policy stated in the Draft Budget 2009-10 that "the Scottish Government will not use the existing tax varying powers in 2009-10", and believes that all parties should work to secure a 2p reduction in the basic rate of Scottish income tax, which would deliver more than £300 per year into the pay packet of the average Scottish earner and a significant fiscal stimulus to the economy.
I read with great interest Mr Purvis's article in The Scotsman of 29 September 2008. That article purported to give more detail about the proposal that was made by his party leader—who has now left the chamber—to reduce taxation in Scotland in the fashion that Mr Purvis has suggested. Taking the most generous approach that I could to the Liberal Democrats' analysis, I estimated that there were a couple of ideas in the article that might have paid £100 million at most. Therefore, a £700 million question remained to be answered.
Of course, it started off not as a £700 million question, but as a £400 million question. At first, the Liberal Democrats thought that a 2p cut in taxation would cost £400 million, and overnight they had to cobble together another fag packet to work out that it would cost £800 million instead. That leaves a gap of £700 million to be filled.
When I saw the debate that had been scheduled for Liberal Democrat time, I expected that we would hear from Jeremy Purvis a seven-minute explanation of where the £700 million would come from. That would have meant perhaps £100 million every minute. However, if I was calculating properly, we got about eight seconds—or perhaps, more appropriately, seven seconds—on where the money was coming from. Mr Purvis's explanation did not even get anywhere near the £100 million that I, at my most generous, could estimate in his article in The Scotsman of 29 September.
Will the member give way?
I will give way in one moment.
Opposition parties who wish to change the Government's budget proposition to that magnitude have a duty to use the proper process and to argue how they intend to raise the £800 million.
I ask the cabinet secretary to confirm two points. First, is it still SNP policy to cut corporation tax by 10p? If it is, what is his estimate of the revenue that would be required to compensate for that?
Secondly, what did he ask for from the Conservatives last year in the budget process, when they called not only for increased expenditure, but for a business tax cut? He asked for nothing—not in committee, nor in the chamber—and yet he worked with them to deliver their proposals. Why will he not do the same today?
I make two points in direct response to Jeremy Purvis's questions. First, he will be aware that this Parliament does not have the power to cut corporation tax, and therefore—much to my regret—we cannot advance that proposition in the budget. Secondly, with regard to the proposition from the Conservatives last time round, we were dealing—as I think Mr Purvis rather unkindly reminded me—with changes at the very margins of our budget.
So the issue is not the principle, but the scale.
Order. Mr Purvis, you have had your intervention.
The scale is one of swingeing cuts in public expenditure that Jeremy Purvis has spectacularly failed to explain to the Parliament in today's debate.
The right thing to do in these difficult economic circumstances is to act within the powers of the Parliament, and that is exactly what the Government is doing. We took steps—[Interruption.]
Order. I am sorry to interrupt the cabinet secretary, but we cannot have conversations taking place among front benchers at the same time as we are having a debate. I ask members to desist.
We took steps last year that were not supported by the Liberal Democrats to get on the side of people in their communities. We froze the council tax in partnership with local authorities, for which we got no support from the Liberal Democrats, and we took action to reduce business rates for 150,000 companies in Scotland—we got no support for that from the Liberal Democrats, but they were quick to circulate press releases claiming the credit for it and advancing the argument.
In light of the current economic situation, the Government has taken action to respond to the changing circumstances. We have reshaped our capital expenditure programme to advance £100 million of affordable housing investment and we have intensified activity and support for homecoming Scotland 2009. We are examining all aspects of Government activity, particularly in planning and regulation: we held a planning summit on Tuesday to encourage a process of greater alignment within the agencies to ensure swifter action on planning. We have re-examined the programmes on energy efficiency and fuel poverty, and we are putting an extra £10 million into the free central heating programme to assist its expansion.
We are increasing advice to businesses and individuals. At the procurement conference yesterday, we set out a fantastic new tool to encourage Scottish companies to access Government contracts through the new public contracts Scotland portal, which was fantastically well received. I am delighted to announce that the Scottish manufacturing advisory service is to be expanded by Scottish Enterprise to ensure that more companies are able to gain access to high-quality advice on business development in manufacturing.
Scottish Enterprise is beginning to recruit seasoned manufacturing professionals to double the size and capability of the Scottish manufacturing advisory service, to ensure that more and more companies are able to gain access to quality advice. SMAS has offered such advice to countless companies, which has already delivered more than £25 million of value-added productivity in the Scottish manufacturing sector. Through better financial advice, we will also support individuals in these difficult times.
When its budget proposals are considered in Parliament, the Scottish Government will advance a package of measures to address the real needs of families and businesses in Scotland. We need productive suggestions about how we can take that further, and the Government remains willing to listen to the suggestions of other parties about how we can make a greater impact, within the limited powers that the Scottish Parliament has. The Government will focus on that, and we will not be distracted by initiatives from the Liberal Democrats that carry no substance, and which have been brought to the chamber in a shabby fashion without any detail behind them. We will continue to deliver for the people of Scotland.
I move amendment S3M-2780.1, to leave out from first "believes" to end and insert:
"agrees that the Scottish Government should use all of the levers at its disposal to give practical help; calls on the Liberal Democrats to set out in detail the £800 million of cuts to public services that they would make to fund their proposal on income tax and believes that until these cuts are identified and are open to scrutiny the Liberal Democrats and their proposal have no credibility, and further believes that, as part of the forthcoming budget process, the Liberal Democrats should bring forward detailed proposals of where they believe cuts should be made."
As members know, we are here to debate a motion that Jeremy Purvis has lodged, on behalf of the Liberal Democrats, called "A Helping Hand with the Rising Cost of Living". That helping hand—a call for the Parliament to use its tax-varying powers—would deliver a 2p cut in income tax.
To be fair, we knew that it was coming: Tavish Scott caused consternation at his party's recent conference when he announced that master plan during his first speech as the Liberals' Scottish leader. We know that it caused consternation, because Nick Clegg, the United Kingdom Liberal leader, wanted a 4p cut—he obviously wanted a bigger helping hand. The problem is that it was unclear whether Mr Scott's 2p was included in Mr Clegg's 4p, or whether Scotland would get a massive 6p reduction. When Mr Scott was asked to clarify matters, he said that
"you could add the two together",
but they could also be taken apart.
We know, of course, that there was a caveat to Mr Clegg's proposal: it depended on the Liberals being in power at Westminster. Given that, according to the current ratings, there is not a snowball's chance in somewhere of that happening any time soon, Mr Clegg could have promised anything at all, as he knows that he will never be in a position to be asked to deliver it.
It is clear that Mr Scott is a bit more optimistic. He thinks that members in this Parliament will vote for the proposal. He may—who knows?—already have done a deal with the SNP to get it through, especially as the SNP wanted a penny for Scotland not that long ago. We on the Labour side of the chamber considered lodging an amendment, but we decided that we should simply oppose the motion, as we do not believe that it will deliver what Mr Purvis claims that it will.
According to the Liberal Democrats, their 2p cut would save the average family £300 a year, so the scale of their massive helping hand is around £6 a week per family. However, we need to ask at what cost that would come. The Liberal Democrats have not mentioned—and Mr Purvis did not mention—the estimated £30 million a year that the scheme would cost to administer. There is also the question of finding the £800 million from the money that is available to pay for services such as education, social work, health and services for the elderly. We do not know—because the Liberal Democrats have not told us—which services they would cut, as Mr Swinney has just said, to pay for their largesse of £6 a week. Apparently, they would cull a few quangos and make some efficiency savings in infrastructure projects—perhaps Mr Purvis is not so keen on the Borders rail link after all.
In truth, the motion is a political stunt, just like the next motion that we are going to debate, on HBOS. Anyone would think that there was a by-election going on.
Will the member give way?
I have only four minutes—Mr Purvis has had his say.
I understand that a certain Mr Clegg will be in Glenrothes this morning. I would not be surprised to hear that the press release has already been written and is winging its way to the Fife Free Press, the Glenrothes Gazette, the East Fife Mail and The Courier, decrying all the other parties for snubbing Mr Purvis and his master plan.
The way to help hard-pressed families and to give Scotland a helping hand has already been outlined in Labour's 15-point plan—I would be happy to give Mr Purvis a copy for his consideration. Among the plan's highlights are an immediate review of Mr Swinney's £30 billion budget to prioritise job creation; unblocking the public building pipeline by putting the Scottish Futures Trust on hold and returning to either public-private partnerships or traditional procurement practices; beginning immediately to establish Labour's proposal for a Scottish responsible credit initiative; and fast tracking upcoming public construction projects—such as the Raith interchange—which would involve building rather than blocking much-needed infrastructure, as the basis for job creation.
Scotland needs such things to give it a helping hand: practical, sensible measures, rather than a cheap stunt that deserves to be defeated when we vote later today.
There is a case for saying that, at a national level, tax cuts can be funded by borrowing or by increased revenues as a result of the Laffer curve. Mr Swinney made that case only a few months ago, during a moment when his back benchers were not listening. However, for the devolved Scottish Government, tax cuts can mean only one thing—lower spending. Those words are not often heard in this Parliament and are not frequently uttered by the Liberal Democrats. Truly, these are historic times. To be fair, Tavish Scott has been seen wielding an axe, but never in the direction of public spending.
There is a case for tax cuts—we made it last year, when the Liberal Democrats opposed them—but to assess their impact, we need to know the alternatives and the economic consequences of the alternatives. So far, all that we have heard from the Liberal Democrats is what we once heard, albeit in a rather different context, from Margaret Thatcher: "There is no alternative." We have no idea what would be cut to pay for Tavish Scott's increasingly expensive trip to the seaside last month.
Would £800 million plus the administration costs be cut from the budget for local authorities, which the Lib Dems complained was too low only a few months ago? Would it be cut from the health service or the police? What would the Lib Dems cut? Only a few months ago, the self-same Tavish Scott made a demand of the Cabinet Secretary for Finance and Sustainable Growth, asking whether he would
"state here and now that his unspecified savings … will not adversely affect the delivery of front-line services in the health and education sectors and across councils?"
Mr Scott added:
"Parliament deserves an answer".—[Official Report, 6 February 2008; c 5872.]
His question was about the Government's efficiency plans, which, to be fair to Mr Swinney, run to 222 pages—a whole 222 pages more than the plans outlined by the Liberal Democrats.
However, members can relax, because the Lib Dems have an answer. On 14 September, Mr Scott told Glenn Campbell:
"I know as a former minister that while current ministers may say there is no fat in the system at all … that is absolutely not true."
That might explain why, as a minister, he told the Finance Committee:
"I will duck … the issue of public sector efficiency."—[Official Report, Finance Committee, 15 November 2004; c 1916.]
We know how the Liberal Democrats, with their new-found love of tax cuts, voted on the budget. They voted against tax cuts for small businesses and against the council tax freeze. We did not know at the time, but we know now just how deeply it must have hurt these ardent tax cutters to vote in such a way. With tax cuts so firmly ingrained in their political psyche, it must have pained them to vote against such cuts, so much so that, when it came to the final vote, they could only bring themselves to abstain. Now, it all makes sense.
Let us not forget the other actions during the budget process by this party of prudence, which has newly taken to lecturing anyone who will listen—in addition to the press, Parliament and the public—on the need for cost savings in Government spending. What did they do when confronted with a series of amendments? They voted for all the additional spending and against all the spending reductions.
We believe that tax cuts should be funded. We do not believe that the Scottish variable rate should be changed on a whim to produce a temporary change in the tax rate. If there is scope for temporary tax cuts, council tax or business rates could be cut much more readily. The Liberal Democrats' proposal is for temporary, unfunded tax cuts. How ironic it is that, less than a week before the United States presidential election, the Scottish Liberal Democrats have decided to adopt George Bush economics. From the words of Margaret Thatcher to the policies of George Bush in less than two months—it's a rollercoaster ride with the new Lib Dem team. Who can tell what they will say next? More to the point, who cares?
Members should support the Government amendment and wait with bated breath for detailed proposals from the Liberal Democrats, which have been sadly lacking so far.
I think that the Liberal Democrats' proposal is the worst and most irresponsible proposal that we have heard in the 10 years of budget debates in the Scottish Parliament. I say that for three reasons.
First, it takes no account of the opportunity cost of imposing a 2p tax reduction. I was astonished that Jeremy Purvis spent five minutes telling us why he did not feel obliged to tell us where he would find £800 million of savings. He argued that the SNP and the Conservatives have been a little irresponsible in some of their pledges about tax cuts, but that is no excuse for being very irresponsible in bringing forward the current proposal. We read about problems with health spending in the Highlands and we are told that there is a black hole in the council finances in Edinburgh, and that is just in this morning's papers. Given that there are pressures on budgets, how on earth can the Liberal Democrats seriously propose £800 million of cuts at this time? In fact, they are not doing that. They are being dishonest, because they refuse to say where they would cut budgets to make room for the proposed tax cut.
What we need to do is to bring forward infrastructure spending, because that is the most effective way of dealing with the looming problem of unemployment and introducing compensatory spending into the economy. We need to look at the budgets again, as David Whitton suggested. In particular, we should bring forward more money for affordable housing. In doing so, we will take up a great opportunity not only to help the economy but to fulfil our historic pledge on homelessness. That is an example of the economic measures that we need at present. We should not cut budgets and make work on capital infrastructure even more difficult.
That is the main practical reason why a Parliament that does not have borrowing powers cannot afford to cut income tax by 2p. The second reason is the wider macroeconomic arguments. I refer Jeremy Purvis to an interesting paper called "If, When, How: A Primer on Fiscal Stimulus" by Douglas W Elmendorf and Jason Furman, which I found through Googling their names yesterday. It is well worth reading. One of the conclusions in that recent paper, which takes account of global economic circumstances, is that reducing tax rates is among the most ineffective or counterproductive options.
There is certainly an argument for helping the most hard pressed, and the Westminster Government has increased the winter fuel payment for all pensioners and the child element of child tax credit from April. We need targeted measures to help those who are on low pay or out of work. That is a legitimate fiscal stimulus, but cutting taxes across the board is not an effective way in which to stimulate the economy. It is economically wrong as well as practically impossible, I would say, because of the effect that it would have on the Scottish Government's budgets.
The third reason why the proposal is wrong is that it is politically inept. We all know that debates take place about expenditure in Scotland and the Barnett formula. What message would it send out if we in the Scottish Parliament said, at this of all times, that we can afford to cut income tax by 2p in the pound? We know the conclusions that people in the rest of the United Kingdom would draw about public expenditure in Scotland. However, that is not the most important reason why the proposal is wrong. The main reasons, as I said, are the effect that it would have on vital spending programmes in the Scottish budget and the fact that it is misguided because it is not the most effective way in which to counter the threat of unemployment.
Let us bring forward the spending programmes and get on with the work on infrastructure. We should not be distracted by what is in effect a political stunt.
Sometimes I ask myself, "What is the point of the Lib Dems?" Having read the motion and listened to the speeches so far, I am none the wiser.
It is obvious that people the length and breadth of Scotland are struggling to make ends meet due to the increasing cost of living, which is primarily due to the rising costs of food, energy and petrol. Only this week, a poll found that 72 per cent of families are finding it more difficult to pay bills compared with this time last year. That being the case, and given that prices have increased dramatically in the past year, it is reasonable to suggest that the Lib Dems should have backed the SNP's proposal for a fuel duty regulator during the most recent budget process at Westminster. At that time, unfortunately, they did not understand the logic of the proposal or the need to put money into people's pockets. It is good to acknowledge that even the Tories now realise that the fuel duty regulator is a worthwhile policy, despite their having voted against it at the time.
The motion proposes that all parties should work towards a 2p tax cut using the Parliament's tax-varying powers. That is a laudable aim, I suggest, but have the Lib Dems thought through the implications of their policy? The debate about whether the cut would cost £400 million or £800 million will continue long after this morning, but it is legitimate to ask how many people would be forced into the dole queues by the £800 million cut. How would it be funded? It would certainly increase unemployment, but would it also lead to cuts in the central heating scheme or prevent the Scottish Government from investing £100 million in affordable housing? Would it be funded through the demutualisation of Scottish Water, which would probably result in increased charges for customers? Would it be funded through the scrapping of drug and alcohol programmes? The potential for the Lib Dem cuts to adversely affect the Scottish population is staggering. I am sure that people will not be duped by such utter nonsense.
The UK leader of the Lib Dems also wants a 4p tax cut, so in Scotland we would have a 6p cut in income tax. Our public services would be absolutely decimated. Iain Gray is trying to take the food out of children's mouths, but the Liberal Democrats seem intent on increasing poverty and deprivation and on starving the public sector. Within the limited powers of this Parliament, the SNP Government has already put money back into people's pockets, with a council tax freeze, the phasing out of prescription charges, the scrapping of bridge tolls and the introduction of a small business bonus scheme.
Of course, further action is needed. A reduction in the cost of energy and fuel prices would certainly help. Energy prices have increased by 38 per cent in 2008 alone and the price of petrol has risen by 22 per cent over the past year, although I accept that the prices at the pump have decreased somewhat in the past couple of weeks.
If the Lib Dems want to help hard-pressed families in Scotland, they need to put pressure on the UK Government to work for lower energy prices, lower petrol prices and lower food prices and to back measures such as the fuel duty regulator. Anything less is just playing the electorate for fools.
As I said at the outset, I often ask myself, "What is the point of the Lib Dems?" Unfortunately, their irrelevance still knows no bounds.
I will change the tone slightly by congratulating the Liberal Democrats on securing the debate. I do not sign up to their proposed response to the credit crunch, but I cannot fault their determination to debate the issues of the day. That is in stark contrast with the SNP, which seems to want to avoid any parliamentary scrutiny of its economic plans. Instead of bold or brave government, there has been a series of guerrilla media announcements over recent weeks.
The Parliament returned from the summer recess in the first days of September, and the SNP did not want to discuss the darkening economic situation. The first fortnight of business passed, and there was no debate. Then, the Government had no alternative but to publish the budget. Instead of the usual statement to Parliament, however, it claimed that there was no need to make one. Another week went by and Lloyds TSB made its bid to take over HBOS. That finally prompted a solitary statement and a carefully planned subject debate, which conveniently allowed the Government to evade bringing a motion before the Parliament.
Another two weeks passed, and the spivs and speculators were overtaken by the global financial crisis, but still no debate was deemed necessary.
Three weeks ago today, on the eve of the global financial crisis, the SNP had us discussing a register of tartans. Now, three weeks later, despite the entreaties of Opposition business managers and pleas from various parts of the Parliament, there is still no Government-sponsored debate scheduled at any time on the Government's response to the credit crunch.
Business managers bring various proposals to the Parliamentary Bureau, but I do not recall at any stage requests from any business manager for a substantive debate on the economy. Ms Alexander might not have been here yesterday, but John Swinney announced that we will bring just such a proposal to the bureau next week—a proposal for a debate very soon, in our time, on the economy.
It would be helpful if, when you continue, Ms Alexander, you could address the motion more directly.
Sure. I listened very carefully to what John Swinney said yesterday, and he simply said that the Government was thinking about it. Ten weeks on, and we have still not had a Government-sponsored debate on the situation. Imagine the reaction of the Scottish Government if, over the past 10 weeks, the Prime Minister and the Chancellor of the Exchequer had given but one statement to the House of Commons and had relied on Vince Cable to prompt a debate on the issue that is on everybody's lips.
On a point of order, Presiding Officer. Is it not necessary for the member—especially three minutes into a four-minute speech—to address the motion that is before us?
That is for me to decide, Mr Brown. I have asked Ms Alexander to address the motion and, in the one minute of her speech that remains, I hope that she will do so.
I commend the Liberals for discussing the issue that is on everybody's lips; I question why we appear to be the only Parliament in the entirety of the western world that, 10 weeks on, has not got round to debating the implications of the credit crunch. No wonder that causes some discomfort to those who have promoted it. There has been an overspun and overhyped six-point plan, and I have one comment for ministers on it: if it is so robust, why are they so scared of debating it in the Parliament?
In my final moments, I will turn to the Liberals. At least they are willing to debate the subject that is on everyone else's lips. In this party, we think that there are better ways to support the poorest pensioners, the most vulnerable children, unemployed people and the people who are most likely to be victims of the credit crunch, but the Liberal Democrats deserve credit for doing something that the Government has manifestly failed to do, leaving us isolated in the western world.
I will now address the motion. One of the most memorable contributions to any debate this year was by Mike Russell on 29 May. Referring to the debate at the time, he said:
"it was one of those occasions that do the Parliament no good whatever. Let us be ruthlessly honest about it: this was political theatre for those who are paid to be here."—[Official Report, 29 May 2008; c 9221.]
When I saw today's motion from the Lib Dems, I was instantly reminded of the idea that this is political theatre for those who are paid to be here. Furthermore, it is political theatre at its most depressing level. In the 18th century, theatre was considered disreputable among the upper classes, and acting was considered to be lying—a ritualistic deception.
We might look at the motion and think that the Lib Dems need both an economics lesson and a history lesson. The crucial period in history, in this context, was not hundreds of years ago, but just a few months ago. That was when the Lib Dems joined the Labour Party's knee-jerk chorus that SNP members were villains and misers and, even worse, that the Scottish Government was supposedly perpetrating the most painful cuts since the French revolution. That was when the Lib Dems shouted for more money for universities, more money for housing, more money for class sizes and more money for hospitals—more, more, more. An observer would be forgiven for thinking of those times as the good old days.
Now, suddenly, the Lib Dems want to throw away £800 million pounds like a rattle from a pram. I said in the past that when the Lib Dems speak in the chamber they often act as if they are still in coalition with the Labour Party. Perhaps the previous speech demonstrated that. It is also demonstrated by the fact that when Lib Dems speak in the chamber they frequently look across to the Labour benches for approval. It reminds me of children showing off to their parents. Now they have perhaps started growing up, and here we are in Holyrood, caught in the midst of their adolescent rebellion. The Lib Dems say that the change is not that they have been hit by political growing pains; they say that it is the big bad wolf come a-knocking, and that the UK economy has suddenly turned out to be a house of straw.
Will the member give way?
I am sorry, but I have only four minutes for this speech.
There is a bit of time in hand should you wish to take an intervention, Mr Brown.
I am delighted to do so.
Thank you. In the spirit of consensus, I point out that our two parties agree on local income tax. The SNP will provide nearly £300 million for a national subsidy of that policy. Will Keith Brown explain, from his party's point of view, where that money is coming from?
I will come to local income tax; Jeremy Purvis can be confident that it will be totally costed in the budget. He should have no fears about that. As I was about to say, I am not here to defend any chancellor of the past 10 years, not even by the hairs on Jeremy Purvis's chinny chin chin, but his is the wrong answer to a very real menace. As Jeremy Purvis should be aware, the Scottish Government cannot just put £800 million pounds on its national credit card, like Westminster can—although we might be forgiven for thinking that that is what got us into this mess in the first place—and £800 million of cuts would have a very real effect on those people whom the Lib Dem motion professes to help.
I agree with Jeremy Purvis that local income tax would in effect be a massive tax cut, just like the freezing of council tax, the introduction of the small business bonus scheme—the Lib Dems voted against both those measures—and the Government's moves on prescription charges. I know that, the Government knows that, and I think that even the Lib Dems know that. That is why this debate is political theatre. The Lib Dems are reading lines that many of them do not believe. Theatre is about the willing suspension of disbelief.
There are plenty of people who are looking for safety right now, as they face a new age in the UK economy—a UK economy that has been completely misrun by the Labour Party. An unfunded, unrealistic 2p tax cut is designed to play to people's fears and cynically win their votes. As has been said—by Malcolm Chisholm, I think—the Lib Dems know that this is never going to happen, which is why they have put it forward. Their 2p tax cut policy has been drafted on the back of an envelope and it is intended to go no further than the front of an election leaflet. Today, the Scottish Parliament will see that childish act for what it is. I have every confidence that the Scottish people will, too. I am sure that this never occurred to the Lib Dems, but I am sure that that will also be true for the people of Glenrothes.
It is unfortunate that the format of the debate means that there has been only one speech from a Liberal Democrat. During Jeremy Purvis's opening speech, I was confused about what he was trying to convey. When I read the motion, I thought that he would explain two things. First, I thought that he would explain the Liberal Democrats' handbrake turn. A party that wanted to increase taxes in the previous two general elections now apparently wants to reduce taxes. What is the party's attitude towards public services and why has it changed in the twinkling of an eye? I thought that that would be explained, perhaps to an audience that is more sceptical than was the audience at the seaside during the Liberal Democrat conference.
Secondly, I thought that Jeremy Purvis would want to explain where the money would come from. John Swinney's amendment places Jeremy Purvis in some difficulty, because it rightly calls on the Liberal Democrats
"to set out in detail the £800 million of cuts to public services that they would make to fund their proposal on income tax".
Jeremy Purvis, like John Swinney, is a former member of the Finance Committee, so he knows the protocol of the Parliament. If a party makes a spending recommendation, it should identify the proposal's implications—that is the accepted format.
The Liberal Democrats have not explained why they have changed their basic philosophy. Nor have they offered an analysis of what their policy would mean. I regret that their approach is all too familiar in parts of Scotland. People in Aberdeen and Edinburgh, who have the misfortune to suffer a Liberal Democrat-led administration, are experiencing significant difficulties with service reductions as a result of those administrations' decisions. If the Liberal Democrats' policy were to be adopted, the misfortune would not be confined to Aberdeen and Edinburgh. What would we say to health service users in Highland, Glasgow and other parts of Scotland, who I presume would lose out on resources if less money was available to the Scottish Government?
The Liberal Democrats have given us little to go on with their proposal—other than a headline—so all that we can do is consider what the Scottish Government should do. David Whitton made important points in that regard. We need to progress capital expenditure and deal with the problems that will potentially affect the construction industry in Scotland. The Government has made much of the £100 million that it will bring forward for affordable housing. That is a valid aspiration, but we need the money to be committed in practice. I would like the Government to make progress on that.
I would also like the Government to say how it will ensure the continuity of Scottish Water's capital programme between the current quality and standards phase and the next one, so that there is not the interruption that often happens at the cusp between the end of one phase and the start of another. There are vital transport projects, such as Glasgow crossrail and fastlink in my area—I am sure that members can identify such projects in their areas. I hope that the Government will put forward not just proposals that it might have made before the credit crunch as part of its strategic transport projects review but revised proposals that take account of the urgent need to get on with projects and ensure the continuity that the construction industry desperately needs.
There are practical steps that the Government can take as an appropriate response to the credit crunch, but a 2p reduction in income tax is not one of them.
We come to closing speeches. Due to a reduction in the number of speakers in the next debate, we have a little time in hand, so I can offer closing speakers an extra minute, should they choose to take it.
It has not been a great morning for the Liberal Democrats so far. It is fair to say that they have not found universal support in the Parliament for their proposals—and I am talking about support from their own back benchers, let alone from the other parties in the Parliament.
The policy had an unhappy start. When it was announced, like a rabbit being pulled out of a hat—to use Jeremy Purvis's phrase—we were told that the policy would cost £400 million. However, 24 hours later, we were told that it would cost £800 million. The Liberal Democrats excused the mistake by saying that Tavish Scott had been standing in front of the sea in a bad light and had been short of time. There we have it. Tavish Scott got away with his mistake only because it was overshadowed a day later when Nick Clegg said that he thought that the state pension is approximately £30 per week.
The policy does not even have the support of Vince Cable, the man who most Liberal Democrat members of the Scottish Parliament wish was the leader of the Liberal Democrats. When he was asked what he thought of the policy, he said that he was not sure how it would operate, as he had been in India and had not had a chance to check the fine print. A day later, when he had had a chance to check the fine print—I presume that that did not take long—he said:
"They would only be able to cut taxes in Scotland if they found cuts in public expenditure."
That is the clear UK Liberal Democrat position and that is where the problem lies. In general, Conservatives favour tax cuts—of course we do; we always have done. We will seriously consider any fully costed proposal for a tax cut. Mr Purvis said that our council tax discount is not costed, but it has been clearly costed at £281 million and is based on efficiency savings that the Government claimed that it could find. Although he does not realise it, Mr Purvis implicitly accepts that figure because, if he does not, there is a serious gap in his local income tax plans. Our policies are costed; the Liberal Democrats' policies are not.
The Liberal Democrat proposal would lead to cuts in services, but we do not know what they would be. We have heard the proposal about the Scottish Futures Trust, which would save about £14 million. We have heard about the skills body that suddenly the Liberal Democrats do not like and think is unnecessary. The problem is that the cost of the skills body is almost identical to the cost if it were located in Scottish Enterprise. It was moved out for strategic reasons, but returning it to Scottish Enterprise, as I presume the Liberal Democrats want to do, would not save a huge amount of money. The big, rabbit-out-of-the-hat idea is that the rest of the money would be found from unexpected extra Barnett consequentials, according to a Lib Dem press release. The policy has been shown to be a sham.
Will the member give way?
I was in the final 30 seconds of my speech, but the Presiding Officer said that I could have another minute or so, so I will take an intervention from Mr Purvis.
The Government's efficiency plans for the £14 billion infrastructure programme stand at around 1 per cent over the period. What do Conservatives think that the efficiency savings should properly be? Should they match the approach to revenue spending and be nearer to 3 per cent, or should they remain at 1 per cent?
The difference between the Conservatives and the Liberal Democrats is that we will not take a stab in the dark and jump in with an answer without considering details and figures.
Will the member give way?
I see that the cabinet secretary is desperate to intervene.
I am grateful to Mr Brown.
If the Government undertook to achieve the kind of efficiency savings in its capital programme that Mr Purvis talked about and tried to use the money to fund other spending programmes, to ensure that there was revenue support for local authorities, we would be breaching Treasury rules.
I am a staunch unionist and I certainly would not want the cabinet secretary to breach Treasury rules.
The Scottish Conservatives have taken a positive stance this year and did so last year. We voted in favour of and pushed for the acceleration of the small business bonus, we pushed hard for and voted for the council tax freeze and we are pushing for a £150 council tax rebate. All three policies are underpinned by full costings. We will vote against the Liberal Democrat motion.
I call David Whitton, who has up to five minutes.
Thank you, Presiding Officer, although it really is a task to speak for five minutes on the Liberal Democrats' argument because we have not heard much of an argument to defend their motion. However, we can go back over some of the comments that have been made this morning.
I am grateful to my colleague Malcolm Chisholm, who is more learned than I am and has served in this place and another place for more years than he perhaps cares to remember. He described the motion as the worst and most irresponsible ever brought to this Parliament. Given his senior status among our ranks, I take his words as worth listening to.
The motion on Trident might have been that.
Does the member think so? That comment was from a sedentary position, but never mind.
I think that I heard Stuart McMillan make a strange observation about Iain Gray trying to take the food from starving children. I am not sure where he got the starving children from, but if he was referring to the SNP's free school meals policy, we know from yesterday that a large number of local authorities in Scotland are wondering where they will get the money from. Just like Oliver, they are holding out the bowl and asking for more. Keith Brown, also on the SNP benches, spoke about a suspension of disbelief on tax cuts of 2p, but the SNP wants the whole of Scotland to suspend disbelief that it can get through its new 3p nat tax that will somehow be the answer to Scotland's prayers.
The Liberal Democrats want a 2p cut in income tax but, as we have heard in the debate, they support the introduction of the SNP's local income tax, which at the beginning will be 3p. They seem to want to cut 2p with one hand and add 3p with the other. However, as Keith Brown mentioned, we need to suspend disbelief, as the proposals could go even further. At least the SNP is consistent: it proposes a 3p increase. The Liberal Democrats want each local authority to set its own rate, so the tax could be 3p, 5p, 10p or even more. If the actions of the Liberal councillors in my area are anything to go by, who knows?
I said earlier that we in the Labour Party had published a document called "Helping Scotland weather the international economic storm", and we heard reference to some of the practical suggestions in it. The document was sent to Mr Swinney, who I hope has had time to consider the proposals.
I spoke about prioritising job creation and reviewing Mr Swinney's budget. Labour will certainly support the Scottish Government in reviewing budget allocations that give priority to job creation, investment and skills. I also spoke about unblocking the public building pipeline by putting the Scottish Futures Trust on hold. The lack of detail and action on the Scottish Futures Trust is making our construction industry nervous. Many have said in evidence to parliamentary committees that they are facing a black hole, as the Confederation of British Industry Scotland and Scottish house builders put it.
That means that the SNP has a duty to consider the situation and make proposals on infrastructure spending. We have helpfully suggested the Raith interchange as an example. The Scottish Government allocated funding in the strategic spending review in 2007 to the Raith interchange as costing between £20 million and £100 million to be funded by a non-profit distribution model. As I understand it, the money is in the budget, but the project has stalled. I hope that Mr Swinney can give us some guidance on whether it can get moving again.
We want more spending on those of our schools that are in what is called class D condition, which includes Lasswade high school and Elgin academy. The school building programme has stalled while the country waits for details of the Scottish Futures Trust, which means that children are being educated in less than good surroundings.
Does the member accept that there was a joint announcement last week by Inverclyde Council and the Scottish Government on building four new schools?
I was not aware of that announcement, but my point is that those schools should have been started by now. If they had been, the construction industry might be receiving the boost that it deserves.
I agree with Gavin Brown that this has not been the Liberals' finest hour. We will not support their motion.
Through freezing the council tax and introducing the small business bonus scheme, the Scottish Government has already taken significant steps to make Scotland the lowest-taxed part of the UK. As John Swinney and others said, the Liberals chose not to support those measures during last year's budget process. Having refused to back the measures, how on earth can they expect to be taken seriously with the ill-thought-out nonsense that they dreamed up in a panic as their poll ratings tumbled?
As Derek Brownlee, Malcolm Chisholm and Keith Brown said, unlike reductions in income tax and other taxation at the UK level, which could be financed through borrowing or other measures, a cut in the Scottish variable rate would automatically mean a reduction in public services in Scotland. What would the real impact of the Liberals' ill-thought-out proposals be on real people and real businesses? What impact would they have in the home and on the high street?
The Liberals have made a headline-grabbing announcement, but they are not prepared to say where the cuts will fall. It took Jeremy Purvis nearly six minutes of his speech to begin to address his party's proposals. Given his obvious nervousness and discomfort about them, I genuinely feel sorry for him. He has been badly exposed by his leader.
As we all know, the Liberals' proposals would require public expenditure in Scotland to reduce by £800 million. Politics is about choices, and the Liberals have chosen to propose slashing public spending in Scotland by unprecedented levels. They have also chosen to take no responsibility for the inevitable consequences of their choices. Will they tell us where the axe would fall? Would it fall on the central heating scheme, at a cost of £46 million, or on the Borders rail link, at a cost of £115 million? Would it fall on the Inverness bypass, at a cost of £120 million, or on the accelerated affordable housing finance, at a cost of £100 million? Even if we took all those projects together, that would not secure even half of the £800 million that was needed.
Would the axe fall on the £168 million of additional funding that Jeremy Purvis claims that he wants to see allocated to Scottish universities?
May we be clear about this? Is the minister saying that he is opposed to using the Scottish variable rate to reduce taxation as a point of principle, or is it simply a process issue? If it is a process issue, I invite him to operate in the same way as the Government did with the Conservatives last year: let us have discussions about it. Is it a point of principle or process?
While the Scottish Government is reducing council tax and business rates without the Liberals' support, I do not give much credence to anything that Jeremy Purvis says. The truth is that he is not being straight with people. He knows that there would be £168 million of cuts to universities, on top of other cuts, to pay for the Liberals' tax proposals.
To see the full extent of the Liberals' breathtaking hypocrisy and the contempt with which they are treating the citizen, we need only look at their website this morning. They want
"more investment in early years education"
and, under the heading of positive policies for young people,
"new investment in clubs offering sport, leisure, music, art and environmental activities during evenings, weekends and school holidays."
Keep going, Bruce; this is good stuff.
I will keep going; do not worry.
The Liberals want investment in research to "multiply threefold". They also want
"an increase in modern apprenticeships … more investment in improving school meals … a major programme of investment in Scotland's community health facilities with 100 new and refurbished local health centres across Scotland"
and
"more investment in diagnostic equipment and staff".
If the Liberals are to be honest about their position, they must remove that stuff from their website today. They cannot possibly afford all those policies.
The front page of the website features a plea from Liam McArthur for more support for the pig industry. That is quite laudable, and we are doing what we can in that regard, but—at the very time when the Liberal Democrats are seeking to reduce public expenditure—he criticises us for not spending enough on this area. He might be talking about the pig support package, but the Liberal Democrats' proposals are more like a pig in a poke.
The Liberal Democrats have chosen their path, which leads to electoral oblivion. I wish them well in that quest; they have made a great start.
I will turn to more serious matters in the little time that I have left. No one in Scotland can have failed to notice the rapid pace of inflation, which currently sits at a 17-year high of 5 per cent—many Scots are actually finding it to be higher than that. A third of Scots households are expected to enter fuel poverty this year following dramatic rises in energy costs, and many families are facing huge rises in their grocery bills, with staples such as bread up 41 per cent this year. That is why the Scottish Government, across a range of areas, has announced package after package to help people in these difficult times. We are on the side of people in their homes and in the high street.
I thank Wendy Alexander for pointing out to the chamber that it has taken the Liberal Democrats to focus the attention of the chamber on the economy and the credit crunch and our solution to the current problems, and that, to do so, we had to use our own debating time, of which we get only four sessions a year. We should not look at other issues—even important ones, such as the British-Irish Council—when the whole country is talking about the credit crunch and families and individuals are tightening their belts. It has taken the Liberal Democrats to bring the matter to the chamber.
Jeremy Purvis opened the debate by identifying the hypocrisy of the SNP and Conservative alliance, which has, this year, called for tax cuts for businesses without identifying where the money for that would come from but opposed Liberal Democrat plans to cut personal taxation because it says that it does not know the details of the proposal. What a pathetic excuse.
John Swinney quoted from The Scotsman, and I would like to quote The Scotsman back at him. In today's edition, that well-known SNP supporter George Kerevan has a major article in which he says that the key is
"consumer spending not public spending".
He writes:
"The best way forward in current circumstances is to cut income tax … This is instant, bolsters consumer confidence and does not distort resource allocation … A tax cut is also theoretically possible in Scotland, where the Scottish Government could use its devolved powers to slash the basic rate of income tax by up to 3p in the pound. Given that the Scottish Lib Dems are already on record as supporting a 2p cut, there would be a majority in Holyrood for such a move."
Of course, that would be the case only if the Scottish Government had the political will to use our powers here in the Scottish Parliament.
Will the member give way?
I am just getting started; I will give way later on.
I think that that was a selective quote.
Order. I have previously asked front benchers not to make sedentary interventions.
I have to select quotes—I would love to quote the entire article. I recommend that Government members read the article, as it is very educational.
I remind everyone, including Bruce Crawford, that the 2p income tax cut means £800 million less spending, which is only 2.7 per cent of the £30 billion of the Scottish budget.
To be fair to David Whitton, Labour does not want to see tax cuts for everyone. His speech was, therefore, no surprise, so I do not criticise him for that.
As Mr Rumbles now has about four minutes of speaking time left, would he like to use the entire remaining time to tell us where he is going to find that £800 million?
The position that we are in is precisely the position that the cabinet secretary was in last year when he entered into negotiations with the Tories about tax cuts. The pot cannot call the kettle black.
Derek Brownlee said that tax cuts were from the George Bush stable. I will quote again from George Kerevan's article, which I also recommend that the Tories read. He writes:
"Europe is presently going nuts over an Obama presidency but Obama's main policy plank is an income tax cut. So why not here?"
The Tories are still stuck in cautious, pre-recession mode and are paying a political price in the polls for having nothing to say about cutting taxes. That should be enough time to spend on the Tories, but I will stay with them a little longer, as it is impossible for me to deviate at this point.
Gavin Brown, as ever, is completely at sea on this issue. In the Tories' debate on 2 October, he said:
"Mr Rumbles … charged round the lobby telling everyone that he would intervene during every speech by a Conservative member to ask about tax cuts—it would have been a good idea not to talk about such plans to Conservative researchers."—[Official Report, 2 October 2008; c 11407.]
I have news for Gavin Brown. It was Tory researchers who suggested that that be done because they are so embarrassed at the position of the Conservative MSPs, who should be joining the Liberal Democrats on this matter. I would welcome them joining us in advocating personal tax cuts.
Would the member take a word from a Conservative?
I think that we have heard enough from the Conservatives but, as I have time, I will give way.
Does the member accept that the only principle by which his proposal could reinflate the economy of Scotland is that of trickle-down economics, which would mean that he—as a Liberal Democrat—is fundamentally suggesting that the poor should live from the crumbs from the rich man's table?
That is an appalling thing to say. The Liberal Democrats are in favour not of trickle-down economics but of Obama economics.
I well remember that when I asked, during that debate on 2 October, whether the Conservatives were interested in tax cuts, Alex Johnstone shouted out that they were not. That resonated across the chamber.
At a time when the nation is in terrible economic circumstances and every family and individual is having to tighten their belt, it is the duty of the Scottish Government and MSPs to tighten our own belts and challenge the ever-growing budget that we spend, which is made up of taxpayers' hard-earned cash. If the SNP Government can cut taxes for businesses, which it has, it can cut taxes for low and middle-income taxpayers as well. Other Governments across the world are cutting taxes to put money back into taxpayers' pockets. Indeed, it is the first thing that Obama says that he wants to do when he becomes president. The UK Government refuses to do it, however, and now the Scottish Government refuses to do it as well.
Today, the Liberal Democrat motion gives us an opportunity to help people across the country. We should take that opportunity at decision time.