Chamber and committees

I should explain that I am having to contribute remotely today due to a family issue; otherwise, I would be in the chamber.

I welcome Ivan McKee to his new role as Cabinet Secretary for Public Service Reform. I know that he is keen to dispel the notion that he is here as an axeman to make cuts to public services—that is, to be “Ivan the Terrible”, as my colleague Meghan Gallacher suggested some weeks ago—but I think that we need some clarity from the Scottish Government about what public service reform actually means.

When, in a debate last week, I challenged the Scottish Government on how it would address the looming £5 billion black hole in public finances, the cabinet secretary’s response to me was that it would do so through public service reform. However, in other interviews, he has made it clear that public service reform is not about making cuts. However, those statements cannot both be true at the same time, which is why we need some clarity on what exactly reform is intended to deliver and how that £5 billion black hole will be filled.

We want to see that black hole in the public finances closed. It needs to close. We need to hear the meat of the Government’s argument on what public service reform means. That is the point that is made in our amendment today, and I am very pleased to move it.

I move amendment S7M-00309.5, to leave out from “welcomes” to end and insert:

“acknowledges that the Scottish National Party administration has failed to deliver on public service reform during its 19 years in power; agrees that the delivery of excellent and sustainable public services should be the goal of public service reform, rather than the preservation of existing corporate structures; notes that, while a long overdue commitment to deliver public service reform is welcome, the Scottish Government’s finances will remain unsustainable until Social Security Scotland’s ever-rising benefits bill is controlled, and calls on the Scottish Government to clearly set out how it plans to close the near £5 billion forecast black-hole in Scotland’s finances.”

15:54

Last week, when I asked in the chamber how the black hole would be filled, the Cabinet Secretary for Public Service Reform replied that it would be public service reform that would fill the gap. At the same time, he said that public service reform was not about reducing the overall spend on public services. Those two statements cannot be true at the same time. Which is it? [Interruption.]

Oh, so soon! I will, of course, give way to Mr McKee.

Maybe Mr McKee was misquoted in the interview that I saw, when he said that public service reform was not about reducing costs.

What we have to do is deliver economic growth. If we can grow and expand the tax base, we do not need to increase tax rates to get the revenues that we need. That is where the Scottish Government has been failing. The Scottish Fiscal Commission talks about the economic growth gap that my colleague Craig Hoy referred to earlier.

People talk about the private jet tax as something to celebrate. I was recently told by tourism leaders that the fastest-growing sector in Scottish tourism is what they call the high end of the tourist market. That now represents 30 per cent of total income and is expanding rapidly. That is high-net-worth individuals—wealthy people—choosing to come and visit Scotland, and what are we going to do? We are going to try to introduce a private jet tax to discourage them from coming to Scotland. That is the opposite of what we should be doing.

I can remember—as will some other members here—when Fergus Ewing was the tourism minister. Fergus Ewing argued for years that air passenger duty should be devolved so that it could be passed to this Parliament and the Scottish Government could cut it in order to encourage more people to fly here, but guess what? It has now been devolved—we now have air departure tax—but what is the Scottish Government going to do? Will it do what that wise man Fergus Ewing said and cut the tax? No—it wants to put it up. It wants to make it more difficult for people to come here. It wants to damage Scottish tourism. If only we could get Fergus Ewing back.

We know that we have a problem with the lack of venture capital in Scotland. We are very good at generating ideas. We have great spin-offs from our universities, but once they get above a certain size, they cannot get the venture capital that they need in order to grow. Therefore, many end up being sucked away to the golden triangle in the south of England or overseas to the west coast of the US.

The reason why we do not have enough venture capital in Scotland is that we do not have enough venture capitalists in Scotland, because venture capitalists want to invest in businesses close to where they live. That is why there is a virtuous circle of venture capitalists and growing dynamic tech companies in the south-east of England and we do not have the same opportunities here. If we send out messages that we want to tax the better-off people more and more, we will drive people away, drive investment away and lose jobs in those dynamic sectors of the economy.

What we should be doing with our tax powers, instead of constantly increasing the tax burden, is making Scotland competitive and attracting more wealthy people to come here. Whether they are coming on holiday, to invest, to set up businesses or to purchase property, let us encourage them. The fiscal framework that determines the overall level of the Scottish budget depends on relative income tax performance between Scotland and the rest of the UK. If we have more high-net-worth individuals in Scotland paying more tax, we will generate proportionately more money to fund our public services. That is the approach that we should take, not wealth taxes that will raise very little, cost a fortune to collect and drive away the very people, businesses and capital that Scotland needs. That is the point that we make in our amendment and I encourage members to support it.

I start by welcoming Jenny Gilruth to her new position as finance secretary and also Hannah Mary Goodlad, whom we look forward to hearing from shortly.

I also congratulate all those who made their first speeches—Kim Schmulian, Katie Hagmann, Martyn Day, Joe Fagan, Iris Duane and Andrew Baxter. I do not want to single anybody out, but I thoroughly enjoyed Andrew Baxter’s audio tour of his constituency’s highlights. I think that I have climbed most of the mountains in his constituency, and I hope to complete the rest of them this summer—weather permitting.

We are talking about wealth taxation for public services, and ensuring that we have well-funded and effective public services is a worthy ambition. However, we cannot increase taxes to a level where it becomes counterproductive. Liam Kerr made that point earlier when he quoted the economist Arthur Laffer, who made that case many decades ago with his famous curve.

I think that we will be debating those issues next week, so I am sure that we will get much more clarity from Mr McKee on what exactly is going to happen.

What has the debate been about? It has been about more wealth taxes. The motion talks about celebrating a mansion tax and a tax on private jets. That is going in entirely the wrong direction. Scotland should be encouraging wealth creators and creating a welcoming environment for those of high net worth who want to come here to live, work and invest, because that is clearly in our economic interest. Scotland has already become the highest taxed part of the United Kingdom, and we know that the population of Scotland is growing less quickly than the population of the UK as a whole. We are not attracting the people here in the numbers that we need to grow our tax base.

All the time, the business community tells us that differential taxes in Scotland are a barrier to attracting talent. We know that there are people working in the public and private sectors in Scotland who restrict their working hours because the tax burden means that it is not worth their while to work more, and now the SNP wants to make matters worse. Perhaps Keith Brown can reassure me that that is not the case.

I am enjoying Mr Rennie’s analysis of where we are. He raises the issue of the looming £5 billion black hole. The Deputy First Minister seemed to suggest that taxes were not going to rise to fill that. Mr McKee is on record as saying that public sector reform does not mean reducing overall public spending. Is Mr Rennie any clearer than I am as to how that £5 million black hole is therefore to be filled?

That is not all that Malcolm Offord does not understand, to be fair, but I agree with Mr McKee’s basic premise, and I hope that Mr Offord would, too.

The biggest growth in the Scottish budget is not spending on public services but spending on benefits. We learned this week from another place, the Mandelson files, that the Secretary of State for Work and Pensions, Pat McFadden, said:

“Every meeting I have is ‘who can we tax in order to pay benefits to others.’”

The Scottish Government sounds as though it is pretty much in the same boat, because we are facing a £5 billion black hole in the public finances by the end of this decade not because public spending on services is going up but because of the exponential rise in benefits. Throughout the debate, Willie Rennie has made a doughty attempt—as we would expect from him—to get answers about how that gap will be filled. The cabinet secretary seemed to indicate that taxes were not going to go up. I saw reported comments from Mr McKee earlier this week trying to deny the image of the mad axeman, or Ivan the Terrible, as some people are, disgracefully, trying to present him. The Government says that it would not preside over cuts, but if it will not put up taxes and there are not going to be cuts, how are we going to fill the gap? I will happily give way to anybody sitting on the SNP front bench if they can give me an answer to that question.