Meeting date: Wednesday, June 15, 2016
Meeting of the Parliament 15 June 2016
Agenda: Portfolio Question Time, Economy, Point of Order, Business Motion, Parliamentary Bureau Motion, Decision Time, Trade Union Membership
- Portfolio Question Time
- Point of Order
- Business Motion
- Parliamentary Bureau Motion
- Decision Time
- Trade Union Membership
The next item of business is a Scottish Labour Party debate on motion S5M-00448, in the name of Jackie Baillie, on the economy.14:42
I welcome every opportunity to debate the Scottish economy. To my mind, nothing is more important. A strong economy and a strong society are but different sides of the same coin—we simply cannot have one without the other. However, this is also an opportunity to reflect on where we are and what more we need to do to support business and the workforce in an ever-changing landscape. Nowhere is that more evident or challenging than in the oil and gas sector.
Let me take a step back and consider the current state of the economy. Overall, the picture is not good. I say to members on the Scottish National Party benches that of course there are things to welcome, such as the positive inward investment figures. However, we need to recognise the scale of the challenge that we face so that we can take the right action to turn things around, to support businesses, to grow employment and to increase revenue to fund our public services—aspirations that I believe we all share.
The Scottish economy is facing an uncertain future. Over the past week, several respected organisations have cast doubt on Scotland’s prospects for economic growth in the coming year. I hope that they are wrong, but hope is simply not enough; we need action, not complacency. The Ernst & Young Scottish ITEM club has downgraded its forecast for gross domestic product growth for 2016 to 1.2 per cent, and it notes the continued gap between Scottish and United Kingdom growth. It also tells us that that gap is growing, and the difference has been much larger than in previous years. That followed comments by the Scottish Government’s own chief economist highlighting that the pace of growth in Scotland last year, at 1.9 per cent, was significantly below that in 2014, when growth was at a rate of 2.7 per cent. Today, it is suggested by respected economists at the Fraser of Allander institute that we might even be on the very brink of a recession—not something that any of us wants to see.
A slowdown in growth underpins some of the recent increases in unemployment and drops in employment. Figures that were published today show that there has been a drop in employment levels in Scotland, which is the only area of the UK to register a fall. We must not allow that to develop into a trend. Meanwhile, as we would expect, the construction, manufacturing and oil and gas sectors have all reported reduced activity, and business optimism has plummeted.
In the interests of balance, which Jackie Baillie mentioned at the start of her speech, does she welcome in those figures the 11,000 people who have got jobs since the previous figures were produced?
I always welcome good news, but it troubles me that the cabinet secretary wants to talk about only the small things that are good and that he does not recognise the overall picture. Unless we recognise the overall picture, we will not intervene appropriately to prevent the economy from falling into recession. The situation is that serious.
The Bank of Scotland purchasing managers index, which was published on Monday, confirmed that the private sector in Scotland contracted in May. Although the difference from April to May may be slight, it is a worrying sign of overall contraction in the Scottish economy. Therefore, I urge the Government to bring a sharper and more urgent focus to its efforts to grow the economy if we are to avoid some of the legitimate concerns about recession and unemployment increasingly becoming a reality. If the Government does so, it will have Labour members’ full support.
Oil and gas are, of course, critical sectors in our economy. We all support the oil and gas industry, which has highly skilled workers who often work in challenging conditions. However, there is no doubt that the oil crisis has had a devastating impact.
Jackie Baillie mentioned oil and gas and Labour’s support. Will she clarify matters for Ineos, which wrote to the Labour Party yesterday to seek to draw attention to the confusion in the party? Jackie Baillie’s colleague Claudia Beamish suggests that the Labour Party is against fossil fuels, and Jackie Baillie and her other colleagues suggest that it is in favour of fossil fuels. When will Labour members make up their minds?
Murdo Fraser will find that there is no confusion on our part. I am always happy to explain to him in words of one syllable precisely what the Labour Party position is. We are in favour of a balanced energy mix and we want to move to a low-carbon economy—I hope that we all share that aspiration for the future—but we recognise that oil and gas are important to our economy. I do not think that many of us in the chamber would have imagined that the price of a barrel of oil would have fallen from $115 in 2014 to $27 in January 2016, which was the lowest level in more than a decade. There has been a welcome, albeit partial, recovery in price—it is still less than half of previous levels, and the position is expected to continue for at least five more years.
In the face of that, I welcome the improvements that the industry and the workforce together have made in increasing production and reducing operating expenditure. That drive for efficiency has reduced the unit cost of production by a staggering 28 per cent. However, Oil & Gas UK has reported that further cost-reduction measures will be necessary.
Let me sound a clear note of caution. I have been contacted by an offshore worker on the construction side who is employed by one of the main contractors in the North Sea. He described terms and conditions being eroded and workers being paid off and then brought back on zero-hours contracts—and that can happen several times in the space of a few months. He told me that a lot of his colleagues are walking away from the sector and finding alternative jobs; that the workload is increasing; that morale is at rock bottom; and that there will be a skills shortage when things pick back up, because many, having had enough, quite frankly, have already let their tickets expire. He said:
“It is a sad day when zero hours contracts seem to be gripping the industry offshore, many are concerned about health and safety and I fear this loss of experience will take many years to put right.”
He is right, of course. If workers are treated in that way, they will move on and their skills will be lost to the industry. The industry bears responsibility for that and must stop those unfair practices.
The human cost is truly troubling, and the impact on jobs is frankly breathtaking. Oil & Gas UK has reported that, by the end of this year, jobs supported by the offshore industry will have fallen by 120,000—we are talking about 120,000 individuals, and that does not take into account the wider impact on families. The loss of jobs touches every part of Scotland, but much of it is increasingly being focused on the north-east.
The people who have lost their jobs are those who are directly employed in the extraction of oil and gas, those who are in the extensive supply chain and, of course, those in the induced jobs that have been created by the sector’s spending in the wider economy. The signs in the north-east are worrying. As we would expect, unemployment has risen, property sales are down and business start-ups have fallen, even though in Scotland as a whole they are actually increasing. Moreover, hotels have seen their yield per room fall by 42 per cent due to lower occupancy rates, again at a time of increases elsewhere.
I do not decry the scale of the challenge that we face, but I ask Jackie Baillie to reflect on her use of the 120,000 figure. That is a UK-wide figure; the numbers do not affect Scotland to that extent.
We can argue about whether the figure is 10,000, 20,000 or 30,000, but the minister would do well to recognise its scale.
I acknowledge the very positive work of Aberdeen City Council and Aberdeenshire Council in their efforts to support the industry and protect jobs. I also acknowledge Sir Ian Wood’s considerable efforts, first, in identifying in the Wood review what needed to change and, secondly, in chairing what I think is called the north-east ONE group, which aims to do everything possible to minimise the effects of the oil crisis on the industry and the local economy. Likewise, I welcome the Scottish Government’s work, particularly through the energy task force under the stewardship of Scottish Enterprise’s Lena Wilson.
However, the scale of the challenge that we face means that we have a responsibility to do much more—and to do it urgently. We have set out Labour’s proposals, some if not all of which I hope will find favour with the chamber. I am sure that there will be other suggestions that will merit support.
I am also conscious that some actions involving reserved matters such as taxation must rest with the UK Government, but that is not and should never be an excuse for our doing nothing. We must use the powers that we have and strain every sinew to support the industry and protect jobs. Let us be honest: the industry equally has a responsibility to do more.
In the short term, we support trade unions’ calls for an industry summit involving operators, regulators, government at all levels and the trade unions themselves. We have made no secret that we want the Scottish Government to publish an updated oil and gas bulletin—we need to assess the impact on the Scottish economy and, importantly, to ensure that the focus is on jobs.
There should be an immediate review of the Scottish Government’s £12 million transition training fund to ensure that it is working effectively. Recent reports show that only 91 people had actually received assistance, although I see that the cabinet secretary has updated the figure to 100. My understanding is that one of the criteria is that a person needs to have secured another job first before they are eligible for the fund. If that is the case, I am not surprised that the numbers are small. Although I welcome yesterday’s announcement by John Swinney that the fund can be used to train teachers, we are still talking about 20 vacant teaching posts, which will not in and of themselves make a dent in the scale of the jobs that have been lost.
We believe that the energy task force needs a much sharper focus. The cabinet secretary’s amendment talks about the task force helping 8,800 people and 100 companies, although I note that in answer to a parliamentary question—it was answered yesterday, just one hour before his amendment was lodged—he said that 2,500 people and 100 companies had been helped. I commend that significant improvement in work rate in the space of an hour but, irrespective of which figure is right and irrespective of the numbers themselves, the point is that we should not focus simply on inputs. Instead, we need to know about outcomes. Rather than measuring the number of people who have been seen, we need to know how many jobs have actually been saved, and how many people the task force has helped to find and sustain other employment. Those are the things that we should be measuring, which is much harder to do—absolutely—but that is the challenge that we should be setting ourselves.
We are faced with a potential loss of 120,000 jobs by the end of the year, but we are not even beginning to touch 10 per cent of that, never mind help people actually get other jobs.
Will the member give way?
I have given way loads of times and I am running out of time.
I want to touch briefly on some medium-term actions that need to be taken. The SNP favours the creation of regional economic forums, and we agree—let us have one in the north-east that involves trade unions and civic society as well as public and commercial interests. We have previously called for the creation of a new public body—UK offshore investment limited, or UK OIL—to help the industry with public investment in strategic infrastructure, and I hope that the Scottish Government and other parties in the Parliament will join us in lobbying the UK Government in that regard.
We need a plan for the export market, because the skills that have been built up in the sector are indeed world class and should lend themselves to new areas of exploration. I welcome the recent Scottish Enterprise-led trip to Burma to that end.
I know that other members would urge us to make the transition to a low-carbon economy and move away from an overreliance on fossil fuels, but in the short to medium term we need to work to secure jobs in the North Sea. However, we also need a plan for transferable jobs and skills. The transfer of technology and skills into other subsea offshore technologies such as renewable energy requires planning and co-ordination, and we think that the Scottish Government should lead on that. In the medium to long term, we support investment in decommissioning. I know that the key question here is one of timing: we do not want to decommission too early, as that could be detrimental to the industry, but we should not let the opportunity pass us by.
This week, we have had a flurry of statistics and warnings from respected economists and commentators about the state of the Scottish economy. We were a hair’s breadth away from recession last year, and it might be unavoidable this year. I implore the Scottish Government not to bury its head in the sand, because everything is not okay. It is clear that we need Government intervention. The Fraser of Allander institute made it quite clear:
“It is not new strategies the Scottish economy needs but clear insights and policy action”.
I urge all parties in the Parliament to come together to take urgent action on the economy and on oil and gas.
That the Parliament notes recent publications, including the EY Scottish ITEM Club, which indicate that Scotland’s economy faces many challenges in the coming year, with GDP growth forecasts downgraded; further notes, in particular, the decline in the oil and gas industry, with reported jobs losses of more than 120,000 since 2014, as reported by Oil & Gas UK recently, alongside the Bank of Scotland oil and gas sector report that shows that a third of businesses in the oil and gas industry plan to cut jobs further during 2016, showing the scale of the challenge; welcomes the Scottish Government’s Transition Training Fund but notes that it has been reported that it has helped only 91 people, and calls on all parties in the Parliament to work together to support the oil and gas industry and its workforce and for action to be taken to support the industry over the short, medium and long term.14:57
I am grateful for the opportunity to update Parliament on the measures that this Government is taking to promote sustainable economic growth and to ensure that all communities in Scotland can benefit from the proceeds of such growth.
The Scottish economy has been resilient over the past 12 months, despite challenging conditions. Gross domestic product grew by 1.9 per cent last year, in line with our long-term average, while wages grew at their fastest rate in real terms since before the financial crisis. Today’s labour market statistics show that overall unemployment is largely unchanged; in fact, unemployment is down by 4,000 on this time last year.
Ernst & Young’s survey on foreign direct investment also indicated that 2015 was a record year for Scotland, with 119 investment projects being secured—that is more than in any other part of the UK outside London—which helped to secure more than 5,300 jobs across the country. The survey also highlighted that the Scottish economy has
“been resilient in managing to weather the oil and gas price volatility storm whilst also being able to flourish in other sectors”.
This month, both the Ernst & Young ITEM club and the Fraser of Allander institute forecast that the Scottish economy will continue growing this year and next, despite the challenging economic climate that we face.
Will the minister take an intervention?
I will bring in Mr Macdonald once I have developed my points.
However, the reports also noted that the economy faces significant external economic headwinds. In particular, falling oil prices have presented significant challenges for the oil and gas sector, and that was confirmed by the employment analysis that Oil & Gas UK published last week.
I heard at first hand about the challenges that the sector faces earlier this month, when the cabinet secretary and I met industry leaders in Aberdeen to discuss what more can be done to support the sector. The Scottish Government is working closely with the industry, the workforce, trade unions and the UK Government to secure a long-term future for the sector.
As Jackie Baillie mentioned, in February we established a £12 million transition training fund to support individuals and to help the sector to retain talent. At the same time, Scottish Enterprise allocated a further £12.5 million for oil and gas innovation and further business support. I would like to clarify something that Jackie Baillie said: the criteria have changed and there has been more flexibility on the need to find a permanent job before accessing the fund. Since my and the cabinet secretary’s visit, there has been a significant change, so the situation is dynamic; the number of applications is always growing.
The minister has mentioned a couple of times the estimates of the number of jobs that have been lost across the UK that were produced by Oil & Gas UK last week. As the minister with responsibility in this area, can he tell us what the Government’s estimate is of the number of jobs that have been lost in Scotland as a result of the oil price downturn?
I will get Mr Macdonald a more definitive figure, but I believe that in the region of 50,000 jobs have been lost in Scotland, or slightly over 50,000. That is a very significant number—I do not dismiss the scale of the challenge—but I want to bring it to Ms Baillie’s attention that 120,000 is a UK-wide figure, not a Scotland-specific figure.
The energy jobs task force continues to provide valuable support: it has engaged with approximately 8,800 individuals and more than 100 employers to better help those affected to move forward into new employment, new ventures, training or education. I acknowledge that the north-east is facing particular challenges. That is why, on top of the £125 million that we contributed to the Aberdeen city region deal, we have announced a further £254 million of support in key infrastructure to secure Aberdeen’s position as one of the world’s leading cities for business and industry. That takes the Scottish Government total to £379 million, compared with £125 million from the UK Government.
The Scottish Government has taken decisive steps to support the sector and the economy of north-east Scotland, and we are also pressing the UK Government to take further action to support the industry. It is crucial to incentivise investment and exploration to support what remains a vital and significant employer across Scotland and the UK. We will continue to engage constructively with the UK Government to take the action needed to protect jobs.
The Scottish Government continues to seek to diversify the energy sector. Earlier today, I was pleased to attend the signing of a multimillion pound contract between Global Energy Group and Siemens, which will enable Nigg Energy Park in Ross-shire to develop into a genuine multi-energy site, securing around 100 direct and indirect jobs and associated supply chain opportunities. That contract is an important milestone for the Port of Nigg, which has received more than £45 million in investment since 2011 and is now well on its way to being recognised as one of Scotland’s key energy ports.
Our labour market has continued to grow in recent years. There are now nearly 2.6 million people in employment in Scotland, which is close to a record high and an increase of over 140,000 since 2010. However, the labour market statistics released today illustrate that we cannot be complacent—I agree with Jackie Baillie on that—and that Scotland continues to face economic headwinds. That is why one of our first actions in this parliamentary session will be the publication of a new labour market strategy to ensure that everyone in Scotland has the skills and opportunities to gain well-paid and secure employment.
We delivered more than 25,000 modern apprenticeships last year and we are committed to providing 30,000 a year by 2020. That approach is helping to ensure that our young people have the skills and training they need to get into work, with 92 per cent of modern apprentices completing an apprenticeship still in work six months later.
We will work with schools to inspire more young people into science, technology, engineering and mathematics to ensure that they have the skills that are necessary to compete in the labour market.
We are ensuring that those who are made unemployed get access to training to help them back into employment. Such pre-employment skills training is essential both for those who are nearest the labour market and those who face barriers to employment. Over 50,000 training places have already been delivered through our employability fund since its launch, and a further 11,650 training places will be provided this year. Further, once we have the powers, we will introduce a jobs grant to help young people aged 16 to 24 who have been unemployed for six months or more back into work.
We are continuing to encourage fair work and progressive workplace practices through the business pledge, the promotion of the living wage and the fair work convention—measures that not only protect workers’ wellbeing but can help to improve productivity.
A strong and vibrant economy is fundamental to increasing prosperity and reducing inequality. That is why increasing the competitiveness of Scotland’s economy has been a central feature of our economic strategies since 2007. There has been real progress: since 2007, Scotland’s productivity has grown faster than that of the UK as a whole; our business base is growing, with the number of registered businesses in Scotland at an all-time high; and we are attracting a record number of foreign investment projects to Scotland.
There is much to be positive about—however, we recognise that more needs to be done. That is why we are investing in our transport infrastructure, including the Queensferry crossing, the Aberdeen western peripheral route, the A9 dualling, the M8 extension, the Borders railway—I am pleased to say—and the Glasgow to Edinburgh rail improvement programme. Crucially, we are also investing in the digital infrastructure that our economy needs to support future productivity growth.
We are supporting investment in our cities. We have committed to invest £500 million over 20 years in the Glasgow city region city deal, which local leaders believe is capable of delivering 29,000 jobs across the region and attracting more than £3.3 billion in private investment.
We are encouraging a culture of innovation in Scotland through our network of innovation centres, our proposals for an annual innovation prize, and the innovation pilots that are being taken forward by the Scotland can do innovation forum, which the Cabinet Secretary for Economy, Jobs and Fair Work and I attended last week.
We will continue to encourage Scottish firms to internationalise, building on the good work done by Scottish Development International in recent years.
Those measures will be supported by our end-to-end review of our enterprise, development and skills agencies, led by the cabinet secretary, which will ensure that they are well placed to deliver our shared ambitions on Scotland’s productivity performance. This morning, the cabinet secretary published the terms of reference for the review in response to Jackie Baillie’s parliamentary question on the remit of the review.
The review and recommendations will focus on three main aims: achieving the Scottish Government’s ambitions as set out in “Scotland’s Economic Strategy” and the national performance framework; ensuring that our economic and skills interventions are shaped by users’ needs; and ensuring that delivery continuously reflects best practice. It is, therefore, important that we enter into the review with an open mind to study the evidence and listen to users, that we focus on improved outcomes throughout and that we do not seek to pre-empt the review’s outcome in any way.
Growing our economy in a sustainable way is vital to increasing living standards, tackling inequality and providing the funding that is required to invest in world-class public services. This Government will ensure that growing the economy and promoting inclusive growth will remain central to everything that we do, so that we create a productive, competitive economy that supports sustainable, good-quality employment for those who live and work here. Through our continued focus on inclusive growth, investment, innovation and internationalisation, we will secure a strong, resilient economy for all in Scotland.
I move amendment S5M-00448.3, to leave out from “indicate” to end and insert:
“recognises that the Scottish economy, and the oil and gas sector in particular, is facing many external challenges though will continue to grow this year, despite the impact of lower oil prices on the oil and gas sector, which has revised up its growth forecast for 2017, as the negative impact of the oil price fades and the pace of expansion picks up; acknowledges the EY Attractiveness Survey, which showed that Scotland attracted more foreign direct investment projects than any part of the UK outside London last year and has “been resilient in managing to weather the oil and gas price volatility storm whilst also being able to flourish in other sectors”; recognises the measures that the Scottish Government is taking to support workers and companies affected by falling oil prices and the wider slowdown in the global economy, including the Energy Jobs Taskforce, which has supported 8,800 individuals and over 100 employers to help those affected move forward into new employment, training or education; recognises that the Bank of Scotland oil and gas sector report provides clear evidence that there are still opportunities in the North Sea, and finds that more than half of companies believe that the UK Government must bring forward further support for exploration activity.”15:05
I welcome the opportunity to debate the future of the Scottish economy. The Labour Party is right to identify some of the concerns that currently face the economy in Scotland. Only two weeks ago, in this chamber, I highlighted some of our concerns, pointing to recent data showing how certain sectors are struggling. Perhaps most concerning is the growing economic gap between our performance in Scotland and the performance in the rest of the United Kingdom.
As Jackie Baillie pointed out, today we have new economic data that show that the employment rate in Scotland is now below the UK average and a stark warning from the Fraser of Allander institute—a well-respected economic body—that Scotland’s economy is “flirting with recession”. On Monday, we heard that the new output figures for the Scottish construction industry show that, over the 12 months to March 2016, activity in the private industrial sector fell to its lowest level since 1988. In response, the Scottish Building Federation and the Scottish Property Federation highlighted the Scottish Government’s changes to empty property rates relief for industrial property as the potential cause of the slump in output. Last year, the Scottish Conservatives warned that those changes, which would bring empty industrial properties within the remit of business rates for the first time, would lead to a shrinkage in the supply of commercial and industrial premises available for let and halt the construction of speculative developments. It appears that those fears are already being realised.
All of that illustrates how the Scottish Government’s policies can have a detrimental impact on the opportunity for Scottish economic growth and Scotland’s economic performance, and it highlights once again our concern that Scotland’s performance in relation to that of the rest of the United Kingdom is going backwards rather than forwards.
Labour’s motion concentrates on the oil and gas industry, and it draws attention to the well-understood decline in production and jobs resulting from the fall in the oil price. I find little in the Labour motion with which I can disagree. However, it is fair to say that it is not all bad news within the sector—I have some sympathy with the minister’s opening remarks. Last week, the Bank of Scotland published the latest in its research series into oil and gas. Although the report concludes that the past year has been an exceptionally challenging one for the industry, there is some optimism in the longer term. Interestingly, many smaller firms have been adapting to changing economic situations better than larger firms, with a quarter of all the firms that were surveyed telling the bank that their employment numbers had grown throughout the downturn.
I will highlight just one example of that. Merlin ERD, which is based in my constituency, in Perth, is an award-winning drilling energy consultancy that has been one of the success stories in oil and gas. Only yesterday, Merlin ERD announced that it had recruited four new members of staff to its team, and it has recently appointed a recruitment manager. At a time of so many redundancies in the sector, that is certainly a vote of confidence in the future. Under the stewardship of the managing director, Ian Hutchison, Merlin has won the Queen’s award for enterprise for international trade for two years in a row. That is good news for the company, good news for Perth and the local economy and an encouragement to the oil and gas industry generally.
Our amendment highlights two areas in particular. The first relates to the changes that were announced in the 2016 budget by the UK Government for the fiscal arrangements for oil and gas. Those included the effective abolition of petroleum revenue tax; a reduction in the supplementary charge from 20 to 10 per cent; an additional £20 million of funding for a second round of seismic surveys in 2016-17; an extension to the investment and cluster area allowances; and a range of other initiatives.
Those fiscal changes have been warmly welcomed by the oil and gas industry. I can only imagine that that warmly welcomed support for the sector somehow slipped Jackie Baillie’s normally generous mind when she was drafting her motion for this afternoon’s debate, so I wanted to correct the omission by including it in our amendment.
Something that I think that Murdo Fraser omitted from his list was the commitment that was given in the budget to consider loan guarantees. In my discussions with industry players, that has been their pre-eminent ask, because it is vital that the existing infrastructure is safeguarded. Will Mr Fraser join me in my call to Greg Hands, the Chief Secretary to the Treasury, for real pace on the issue? This cannot wait two or three years; it has to happen quickly.
My colleague Alexander Burnett will say more about this when he winds up the debate for the Conservatives, but I can say to the cabinet secretary that a number of colleagues met the chancellor last week to discuss such issues. The Treasury is very much aware that progress needs to be made. To say that the Treasury has been dragging its feet on the matter, as I think that the cabinet secretary has said elsewhere, is simply not to give a true characterisation of what has been happening. I expect that there will be announcements shortly.
Yesterday, Stephen Halliday, group president at leading industry analyst Wood Mackenzie, said that the UK has one of the best and simplest tax systems for the sector in the world—I repeat, “in the world”. We should join in praising that.
The second part of our amendment relates to one of the findings in the Bank of Scotland report, to which I referred in the chamber last week. When it comes to opportunities from diversification, 52 per cent of large companies have an interest in onshore shale gas. As we have argued many times in this chamber, there is no doubt that there are substantial opportunities to utilise the skills base in the oil and gas sector to develop a new industry and create thousands of jobs in onshore oil and gas.
It is sad that, as things currently stand, those opportunities will not be found in Scotland, due to the Scottish Government’s moratorium. The Scottish Government has deliberately taken a policy position that is holding back opportunities for diversification and holding back the sector. If the Scottish Government wants to be taken seriously on its support for oil and gas, it needs to think again on the issue and it needs to listen to the science. As I pointed out in the chamber last week, the Scottish Government’s independent expert scientific panel concluded:
“The technology exists to allow the safe extraction of such reserves, subject to robust regulation being in place”.
The Scottish Government has had the panel’s report for nearly two years. It needs to start acting on it.
I have to say that Labour is no better. The Labour position on fossil fuels seems hopelessly confused, as Ineos pointed out in a letter to the party yesterday. Ineos said that the Labour stance on fracking
“implies that Scottish Labour is now against fossil fuel development in general”,
“will also oppose further North Sea developments”,
which flies in the face of everything that we heard from Jackie Baillie today. Labour members need to make up their minds whether they are in favour of fossil fuels, as Jackie Baillie seems to be, or against them, as Claudia Beamish seems to be.
Will the member give way?
The member has gone past his final minute. Please begin to wind up, Mr Fraser.
I will close, Presiding Officer.
It is not just me who thinks that the Labour Party has lost the plot. At the weekend, Gary Smith, the Scottish secretary of the GMB, said that Scottish Labour is
“a party which is arrogant, doesn’t consult with us and is completely out of touch with the concerns of many of our members.”
He went on—
I am afraid that—
Gary Smith went on to say:
“It’s a party that’s divided, it’s a party that seems intent on self-harming, it’s a party that lacks discipline and it’s a party fundamentally that doesn’t know what it stands for.”
Labour stands condemned by its own comrades—
End of quote, and end of speech, please.
I move amendment S5M-00448.1, to insert after “people”:
“; further welcomes the fiscal changes that have been made by the UK Government to support the industry; notes that the Bank of Scotland report finds that 52% of large companies in the sector have an interest in diversifying into onshore gas production, but regrets that the Scottish Government’s current moratorium prevents these opportunities being developed.”
We move to the open debate. I call Ivan McKee, to be followed by Finlay Carson, who will be making his first speech in the chamber. Mr McKee, you can have six minutes or thereabouts—and “thereabouts” means less, not more.15:13
Of course, Presiding Officer.
A key measure of the strength of a business is how it responds in times of adversity. The same is true of an economy. When global headwinds gust, the resilient get results. Government works with industry, building on the inherent strengths of a diverse economy, taking advantage of opportunities and positioning itself for the cyclical upturn.
In recent years we have seen challenging times for Scotland’s oil and gas sector, which has felt the twin impacts of a dramatic fall in the price of oil, driven by global political events that were outside the control of anyone in this chamber, and by the UK Government’s inability to understand—let alone work with—the sector to ensure that its long-term contribution to the Scottish economy is maximised.
However, there are recent hopeful signs that it is beginning to be understood even at the highest levels in Westminster. In the context of next week’s different referendum, the next ex-Prime Minister of the UK said on Sunday, when explaining why Norway is so wealthy, that Norway has as much oil as we do but only 5 million people
. I say to Mr Cameron that the Norwegians have something else, too—they have a Government that has control of the country’s natural resources and knows how best to manage them for the long-term success of the oil and gas sector and the national economy.
Scotland’s oil and gas industry is one of the many sectors that underpin the Scottish economy, but it is not our only sector by a long way, and it is not the one that I will focus on today. The Scottish Government’s record of working with and supporting the offshore sector and protecting its skills base will be more than adequately covered by my north-east colleagues Gillian Martin and Stewart Stevenson; I will talk about attractiveness and how economies attract international business in an increasingly interconnected world.
My experience over many years of making big decisions about where businesses should invest has helped me to understand attractiveness. Ernst & Young understands it, too. The EY attractiveness survey showed that Scotland attracted more foreign direct investment projects than any part of the UK outside London last year, with a 50 per cent increase on the previous year. The survey stated that Scotland
“has been resilient in managing to weather the oil and gas price volatility storm whilst also being able to flourish in other sectors.”
I will look at some of those other sectors.
The survey highlights the fact that
“Business services, software, scientific research and food sectors offer strength and diversity for Scotland.”
Our food and drink sector, which includes our whisky industry, with its heritage and global brand recognition, together with the premium-quality food brands that Scotland is recognised for, is going from strength to strength. I am familiar with the business services sector, which is exporting Scottish expertise and generating income for the Scottish economy. Scientific research is underpinned by our great university sector and research and development performance, which I shall talk more about later. The EY ITEM club update described Scottish manufacturing as being set to
“match or outperform its UK counterpart.”
As the EY survey clearly states, the truth is that Scotland’s economy has proven resilient in the face of considerable challenges. That has not happened by accident. The Scottish Government is not just talking the talk; it is most definitely walking the walk. It has a clear focus on internationalisation, with the global Scotland trade and investment strategy, a 36 per cent increase in the value of exports since 2007, a trebling of the number of export advisers and new investment hubs in London and Brussels to go with the hub in Dublin.
The SNP Government is encouraging a culture of innovation through the network of innovation centres, the innovation prize and the work of the Scotland can do innovation forum. The sectoral manufacturing action plans involve working with industry to drive continuous improvement and identify growth opportunities.
Our performance in research and development is strong. The EY survey said:
“Equally positive for Scotland’s skills base is its impressive showing in R&D projects.”
Real-terms R and D expenditure in Scotland increased by 44 per cent between 2007 and 2014, in comparison with a 10 per cent increase in the UK’s expenditure over the same period. Scotland has the highest level in the UK of higher education R and D expenditure as a percentage of GDP and the fourth-highest level in the Organisation for Economic Co-operation and Development.
This is not just about R and D. If we look at investment in infrastructure, we see £5 billion of investment in rail improvements, £3.6 billion on upgrading water and sewerage infrastructure, £1.4 billion on upgrading the road network, £3 billion to build 50,000 more affordable homes and £400 million to deliver 100 per cent superfast broadband coverage across the country.
The SNP Government is investing in businesses. It is expanding the small business bonus scheme and lifting 100,000 businesses out of rates completely. The Government is also investing in people. It increased the number of modern apprenticeships from 15,000 to 25,000 and now the number will increase to 30,000. It is introducing the jobs grant to support young people into work and is almost doubling the level of free childcare to 1,140 hours.
Above all, the SNP Government understands that, by investing in our people, we can move Scotland’s economy forward to realise more of its potential and focus on building on the resilient base of our strong and varied economic sectors to take greater advantage of future opportunities.15:19
It is an enormous privilege to be delivering my maiden speech in the chamber. As is customary on occasions such as this, I pay tribute to my predecessor, the Rt Hon Alex Fergusson, but first I am sure that all members would like to join me in congratulating him on receiving a knighthood in the Queen’s birthday honours list. [Applause.]
Alex Fergusson was first elected to the Scottish Parliament in 1999 and served with distinction for 17 years, most recently as the MSP for Galloway and West Dumfries. Four of those years were spent as the Presiding Officer of this Parliament, and Alex was immensely proud when his fellow MSPs elected him to that role. I wish Alex and Merryn a long and happy retirement.
There can be no greater honour for a Gallovidian than to be given the opportunity to represent the place that I call home and the place where I have lived and worked all my life. I thank the voters of Galloway and West Dumfries who placed their trust in me and gave me this opportunity.
As one of the last newbie MSPs—if not the last—to speak, I can have the last word and tell members that my constituency is the most beautiful of all. Galloway and the Solway coast are often referred to as the Scottish riviera and stretch from Scotland’s most southerly point at the Mull of Galloway to the winding River Nith in the east. The area is as big as it is diverse. In the heart of the constituency lies Britain’s largest forest park, which offers spectacular views and encompasses the UK’s first dark skies project, where the inky black skies allow one to explore a world far beyond our own.
The Solway coast is a designated area of outstanding natural beauty, with its rugged coastline, sandy beaches and hidden coves. If ever there was an area of Scotland crying out for national park status, this is it.
“Land o’ darkly rollin’ Dee,
Land o’ silvery windin’ Cree,
Kissed by Solway’s foamy sea,
In Bonnie Gallowa’ there is something for everyone. Whether it be on a visit to Loch Ryan, the home of the only wild native oyster beds left in the UK—I am looking forward to supporting its first oyster festival—to Laggan Outdoor, which boasts one of Europe’s longest zip wires, or to one of the many historic abbeys and castles across the region, one is sure to be in awe of the natural beauty, hidden gems and historical importance of this great but often forgotten corner of Scotland.
Apart from being home to many rural communities, such as my home village of Twynholm, my constituency can boast of being home to Scotland’s national book town, in Wigtown, and our artists’ town, in Kirkcudbright, which I hope will soon have an art gallery of national significance that will contain our Viking hoard, which is of international importance.
Our small independent retailers in Castle Douglas punch well above their weight and buck the trend when it comes to high street decline, promoting the vibrant food and drink sector that exists in Dumfries and Galloway. Castle Douglas will soon host the tour of Britain for the third time—a record surpassed only by London.
I turn to the debate in hand. As we have heard today, the Scottish economy faces a number of challenges. The backbone of our economy in Galloway is small and medium-sized businesses. Their social impact on the wellbeing of local communities must never be underplayed. Those businesses require different levels and kinds of support, not a one-size-fits-all approach. That is why the Scottish Conservatives have called for a south of Scotland enterprise company, similar in form to Highlands and Islands Enterprise, which has a social as well as an economic remit. Such an organisation would work with businesses, third-sector organisations and local communities to identify the many problems that are unique to the south of Scotland and to come up with tailored solutions to help drive the economy forward, support existing businesses, upskill our local workforce, create new jobs and improve people’s way of life. That is something that should be welcomed across the political spectrum and I encourage the Scottish Government to look at the proposal seriously.
Of all the issues raised with me, internet connectivity is currently the most pressing and important. For businesses to thrive, they need access to high-speed broadband and a reliable mobile phone network. In 2016, it is simply unacceptable that some communities in Galloway still do not have a mobile phone signal and experience limited access to low-speed broadband, never mind high speeds.
Given transport’s strategic importance, there are questions about why the A75, which is a vital Euro route that links Northern Ireland to the rest of the UK, has still not been dualled. Although some progress has been made, it is imperative that the next steps include a bypass for Springholm and Crocketford.
I turn to Stranraer where, only last week, a number of constituents were made redundant. That is maybe not significant on a national level, but it is very significant on a rural level. The transition training fund, which members have mentioned, gives employees in the oil and gas sector the opportunity to retrain as teachers with employment guarantees. I call on the Scottish Government to offer my constituents the same level of assistance through tailored targeted support. Such schemes should not be limited to one sector or region.
I call for an enterprise zone for Stranraer with preferential business rates, accelerated planning and processes to pump prime and kick start a town that has huge potential. Since the relocation of ferry services from Stranraer to Cairnryan in 2011, the town has been crying out for support from the Government and has too often been let down. During the election, the Deputy First Minister visited and pledged £6 million for the regeneration of the east pier. I trust that those are not empty words and I hope that we will see the benefit of that money in the near future.
The problems in Dumfries and Galloway are not unique but they are compounded by the realities of living and working in a rural region of Scotland. I am ambitious for the people of Galloway and West Dumfries because we Gallovidians always are, but we need the support that we deserve to turn those ambitions into reality. [Applause.]
I must reprimand you for failing to mention old Minnigaff, where I once lived with the River Cree at the bottom of my garden. I have put it on the record for you.15:26
It is no surprise that, as the member for Aberdeenshire East, I will talk about the challenges that face the economy in the north-east of Scotland.
It is often the oil and gas service industries that keenly and most immediately feel the effects of any activity in the oil and gas exploration and production sector, which we all know has recently been adversely affected by the geopolitical situation that has meant a reduction in the global oil price, although the hospitality sector is similarly affected. Therefore, I welcome the investment that the Scottish Government has put into the city region deal and the additional £254 million that is to be invested in the north-east’s infrastructure.
I also welcome the minister’s statements today and the visits that he and Keith Brown have already made to Aberdeen so soon into their tenure, which are further evidence of the Scottish Government prioritising support to my area.
Of course, the measure that would make the biggest impact on the oil and gas sector is outwith the Scottish Government’s control: adjustments to the tax system. I recognise that some improvements were made in the recent UK budget, but more needs to be done. In particular, action on removing fiscal barriers for enhanced oil recovery would greatly assist oil and gas production companies investing in the North Sea and, in particular, in the north Atlantic area west of Shetland.
In addition, there is a disparity between the tax rebate rates for onshore oil and gas recovery and the rates for offshore recovery. The difference is around 12.5 per cent. That does not make sense and should be revised immediately.
I also point to the calls by my Westminster colleague Callum McCaig for action on loan guarantees for the oil and gas sector. Such access to loans will boost innovation. Given that the oil and gas industry has historically been a huge contributor to the UK Treasury, it is right that it should get such assistance at a time of need in order to maintain it for the future. I urge Conservative members to use whatever influence they have to get their Westminster counterparts to take urgent action on that and get such guarantees in place as soon as possible.
It is clear that the north-east must diversify as we look to the future, and that is why it has been utterly disappointing that the north-east, with its focus on being a centre for innovation in renewable energy, has had the rug pulled from under it by the UK Government when it removed wind farm subsidies. That is also having an impact on the many farmers who have invested in wind turbines, some of whom are in the chamber.
The job loss figures cited in the motion are troubling. As someone who was brought up in the north-east and whose family, friends and neighbours are involved in the oil and gas industry, I know many who have been directly affected. It is a worrying time for many people who have had relative employment security for many years, but I am heartened by how many of the people I know who have lost their jobs have turned their situations around.
May figures confirm that my constituency of Aberdeenshire East still has 84.8 per cent employment, which is the third highest in Scotland, behind Shetland and Orkney. That confirms what I already know about the people in the north-east: they are adaptable and resilient. I will give some local examples from my constituency.
Neil Baillie was told by Halliburton on his 50th birthday that, after 25 years’ service, he no longer had a job. Although initially devastated, as we would expect, Neil quickly decided to turn that into an opportunity for a career change that he had always had in the back of his mind, and he is now a support worker for adults with learning disabilities at Inspire (Partnership Through Life) in Inverurie.
Drue Bremner is a consultant whose phone just stopped ringing after years of constant work offers. Drue got together with his friend Lee, who had just been made redundant from an oil and gas production company. The two of them are set to open their drone survey business this month, and the phone has already been ringing.
Traditionally, the north-east labour market has been tight. We have had—and still have—issues recruiting public sector workers as a result of the north-east having been a particularly high-wage economy for the past 40 years. I am encouraged that so many people in the oil and gas industry are recognising that they have transferable skills that will be a huge asset to our public sector. In addition, our infrastructure investment is also providing jobs. I point to the Aberdeen western peripheral route project, which is also recruiting from those affected by job losses in oil and gas.
A low oil price is not new to us. This year has been particularly difficult—make no mistake—but we have bounced back before. In the mid to late 1990s, the industry was facing a price of $14 a barrel, but the industry has good form in adapting to cope with the highs and lows. Back then, large assets were sold by the oil and gas majors to smaller companies with smaller overheads, and personnel moved, upskilled and diversified.
One thing that a lot of people do not realise is that a very large proportion of people’s livelihoods from oil and gas result from contract work. Those working in the sector are very used to coming to the end of the life of one project and moving on to another. What we must ensure is that we do not lose our skilled workforce because they move elsewhere for work. There are still huge opportunities in oil and gas, and I point to the Laggan-Tormore operation west of Shetland as an example.
We are already prioritising ensuring that the sector retains its world-class workforce, supporting high-quality training and enabling redeployment and reskilling. Also, and most crucially, we must harness those skills for other areas, which will lead to a more diverse economy in the area to take us into the future.15:31
As Jackie Baillie said in introducing the debate, the latest estimate of job losses, published last week by Oil & Gas UK, is that 120,000 jobs will be lost by the end of the year. As the minister has confirmed, over 50,000 of those lost jobs are here in Scotland. Many of them are in the north-east, as Gillian Martin and others have said, and many are people I know well.
Last month’s oil and gas survey from Aberdeen and Grampian Chamber of Commerce found that staff jobs in oil companies had fallen by 15 per cent over the previous year, and that a further 17 per cent cut is predicted for the following 12 months. Each of those percentage points represents hundreds of jobs in and around Aberdeen as well as jobs offshore and further afield.
The scale of future job losses is borne out by the Bank of Scotland research that was cited by Murdo Fraser. It reports that nearly two thirds of Scottish firms in the oil and gas sector have made workers redundant in the past year and that one third expects to make more people redundant in the next year. While it is true that some companies have done relatively well, it is important to note that, for every job created in the past year, a further six jobs were lost.
For balance, I highlight that the same report showed that 22 per cent of employers were predicting that they were going to take on employees in the present year.
That is right, and it is important to get balance. The point that I have made retrospectively from those figures—that six times as many jobs have gone as have been created—may, I fear, be reflected in what happens in the next few months.
That is not a matter over which we have no control; it is a matter in which the Government can make a difference. There is no consensus on the suggestion in the Government’s amendment that things will look up as the negative impact of the oil price fades in 2017. For example, when the Bank of Scotland asked operators and contractors when they expected the price of Brent crude to recover to $75 per barrel, a level at which they could make profit, most companies said not before 2018 and most of the large companies that operate globally said 2020 or beyond.
Lower for longer is the watchword of the oil and gas industry today. The industry is seeking to adapt to that situation and the workforce is deeply affected by it; it is critical that the Government takes it on board as well. The last thing that the north-east needs is complacency from government at any level. The first thing that we need here is for the Scottish Government to acknowledge the scale of the challenge and that responsibility for the stewardship of the Scottish economy lies here with the Scottish ministers.
I am glad that today we heard, for the first time, a minister acknowledge that tens of thousands of jobs have been lost as a consequence of the oil price downturn. I hope that that is a sign of a change of tack from the Scottish Government. If so, it is to be welcomed.
Of course, it is not only oil jobs that have been lost in the north-east or even jobs in the service industries that depend indirectly on the price of oil. Hundreds of fish processing jobs have also been lost in recent months, with a substantial downscaling of the Young’s Seafood factory in Fraserburgh. Now, nearly 100 jobs are set to go after Müller Wiseman confirmed that it will close its dairy at Tullos in Aberdeen, a decision that also has serious implications for dairy farmers in the north-east.
Both those companies will argue that they are creating other jobs elsewhere but more fish filleters in Grimsby or a dairy expanding in Bellshill will not compensate for the loss of jobs in north-east Scotland. Nor will Sainsbury’s buying salmon from Marine Harvest in Rosyth.
The challenge for north-east Scotland is the same whether we are talking about employment in the energy industries, in the food and drink sector or indeed in the public sector: it is how to secure and sustain investment, jobs and growth within the region, despite it being seen as remote from the largest markets and from the centres of political power. We need government at every level to meet that challenge by recognising just how serious it is and by making the policy decisions that will deliver public investment and attract private investment to the region.
I welcome Aberdeen City Council’s decision to call a second oil summit at the end of the month. Last year’s summit allowed progress to be made towards an Aberdeen city region deal and, modest though that deal was, it is at least an acknowledgement on the part of both the Scottish and UK Governments that investment in the infrastructure of the north-east is in the public interest and that public investment can help to secure private investment in the future.
I hope that ministers from both Governments will be in Aberdeen on 30 June to consider what more they can do to bring investment into the city and the region to secure future jobs. Holding jobs fairs for those who have been made redundant, as has happened, is important, but it is not enough on its own. We need Scottish Enterprise and Skills Development Scotland to act with the urgency and the vigour that the situation demands, and we need the Scottish Government to provide the resources that match the scale of the challenge.
A £12 million fund that is open only to workers who already have a new employer to sponsor them does not go nearly far enough, and I look forward to hearing more about the increased flexibility that the minister promised earlier. Supporting up to 20 redundant oil workers to retrain as teachers is also welcome, but it is not enough given the scale of both teacher shortages and oil and gas redundancies in the north-east.
Ultimately, we need ministers to recognise that it is their job to enable service companies in the Scottish supply chain to diversify into renewable energy, to compete for decommissioning work whenever that arises and to protect jobs, because future jobs and growth matter to all of Scotland and they are under real threat today. I hope that all parties will respond to that by getting behind the Labour motion later this afternoon.15:38
I am grateful for the opportunity to contribute to the debate. Jackie Baillie began by making some general comments about the state of the Scottish economy, and I will respond to those comments before coming on to the specific agenda facing oil and gas.
Jackie Baillie made the case that a strong economy and a strong society are two sides of the same coin—she said that we cannot have one without the other. I agree that there is a deep connection between a strong economy and a strong society, but it is a more complex one than Jackie Baillie suggests. It is entirely possible to have a strong economy without a strong society. We have been there already; we know it to be true. There have been long periods of sustained, strong economic growth that have continued to see growing social inequality.
Measuring the success—the health—of our economy in GDP terms alone makes it clear that there can be periods of sustained GDP growth and rising inequality. That has been part of the criticism made by Green economics for decades, and it is a criticism that many economists around the world take to heart. They acknowledge that GDP has been placed on an economic pedestal that it was never designed to occupy and that, whether or not we believe that GDP growth can last for ever on the planet of finite resources that we inhabit, it is clearly inadequate to the task of measuring a strong, secure, sustainable and lasting economy—one which underpins the strong society that I believe most of us want to see built.
If we want a fuller and more balanced and nuanced picture of the health of the Scottish economy, I urge the Scottish Government to continue to develop the national performance framework from its starting point into what I think it could become, which is a stronger and more diverse replacement and a broader set of economic indicators. At present, GDP is still at the pinnacle of the framework, which is a place that it does not deserve to occupy, as it is a simplistic metric that distracts us from the wider question of whether we have a healthy economy supporting a strong society.
There are reasons why the Greens will, I am afraid, be unable to support the motion or any of the amendments. We lodged our own amendment, which sadly was not selected for debate.
Murdo Fraser asked Jackie Baillie an uncharacteristically fair question about the tension that exists between the two aspects of Labour’s fossil fuel policy. Jackie Baillie said:
“we want to move to a low-carbon economy.”
However, within just a few seconds she said:
“oil and gas are important to our economy.”
Both of those statements in isolation might be true, but I hope that Jackie Baillie would agree—she might if I put it mildly—that there is a difficult tension between those two arguments and that neither the motion nor any of the amendments adequately captures that tension.
There are three aspects to the transition that is required. First, our economy is too dependent on the operation of oil and gas extraction and the jobs that depend on that activity. Secondly, we are too dependent on hydrocarbons, not just through their consumption as fossil fuels but because of our industrial reliance on them—the derivatives are in pretty much every aspect of our daily lives. Thirdly, we are too overexposed to an industry that is profoundly overvalued because it is valued as though all of its reserves will be turned into economic value. We are overexposed to that industry, which is in fact a bubble. Unless we address all three of those aspects, we will not have a transition plan worthy of the phrase.
I note the comments that the member has just made about the North Sea industry, but does he have any comments about the 50,000 people throughout Scotland, mainly in the north-east, who have lost their jobs?
Indeed, we do. I am surprised that the member does not know that the Scottish Greens have been producing work for well over a year on the specific measures that can be taken in the short term to support people who are directly affected. Jackie Baillie was right to set out the immediate impact on many of the people who are already directly affected. However, in the face of that reality, surely the least responsible course of action is to keep kidding ourselves that business as usual will just bounce back and that we can throw the industry another tax break and everything will be fine. Everything will not be fine with that agenda.
Jackie Baillie’s motion ends by calling on us all to
“support the industry over the short, medium and long term.”
The central challenge, and the tension that exists in the Labour motion but which is not acknowledged explicitly, is that of supporting the people who are directly affected by the short-term impact on the industry in the context of acknowledging that the industry is not a long-term proposition.
We must address all three of the aspects that I mentioned: our reliance on fossil fuels and on the jobs coming from extraction, and our overexposure to the carbon bubble. Paul Wheelhouse has the distinction of being the only Scottish Government minister who has acknowledged—when he was climate change minister—that the arguments on the carbon bubble are real and that the bulk of fossil fuels around the world cannot be used or burned. That was before the Paris agreement, so if he meant what he said then, he must now believe that an even smaller proportion of our fossil fuel reserves can be used.
I am making the case for economic and industrial planning. Can we really kid ourselves that the change is not upon us already? If we acknowledge that it is, can we really hope that readiness for the change will simply emerge? When we see the future coming at us, are we really satisfied with last-minute task forces and emergency measures when specific jobs are destroyed? I do not think that we should be satisfied with that. Surely we must plan for the profound changes that are coming upon us to ensure that all people have the opportunity to live in a healthy society and that we have a strong economy for the long term.15:45
As Ivan McKee adumbrated, I shall talk about the effect of the oil industry’s difficulties in the north-east.
I will respond to a couple of points before I do so. Murdo Fraser should be more cautious in praising the brevity and conciseness of the UK tax code. The UK Government itself reports that, from 759 pages in the 1965-66 tax year, the code is now 11,520 pages, and the legislation upon which it is founded constitutes 2,413 pages. That is substantially more than many other places. I recognise that Mr Fraser quoted correctly, but he needed a wider context.
On Jackie Baillie’s contribution—the member should listen up because this is unusual—I say that I found her analysis more focused and more relevant to the debate than I often do, although I am of course going to disagree with some of the conclusions that she draws. However, I encourage her to live up to the improvement in her contribution that we have heard today.
My constituency of Banffshire and Buchan Coast is home to the world’s biggest offshore oil support base at Peterhead. Many of my constituents work offshore in our own waters but they also take their expertise to many corners of the world—to South America, the Philippines and the Horn of Africa—where there is oil exploration.
Those facts go to the heart of a very important thing about the industry in the north-east and in my constituency: we have skills that have been built up over a long time that will sustain us over the long term, if we have the opportunity to use them. People have been denied the opportunity to take their skills to the new renewable energy industries that we had expected—many of which would have been offshore, where there would have been a particular relevance to the skills of the engineers and people who work offshore in the oil and gas industry. That is a particularly hurtful blow to the future economic and personal prospects of the north-east.
I disagree with Patrick: he said that this is an industry without a long-term future—
The member is asked to use the full name of other members, please, for the Official Report.
I apologise if I did not say Mr Harvie.
The industry is, in fact, a long-term proposition—not, as Mr Harvie says, a short-term proposition—but it may not be as fuel. We can solve the issue of using oil and gas as fuel; we have yet to make a big impression in the use of oil and gas as chemical feedstock, so it will remain an important part of the industrial environment, even as we move away from using oil and gas as fuel.
The member makes a serious point, which I did acknowledge has a place in the argument. However, given the impact on investment in the North Sea at the moment, if this material—hydrocarbons—was able to be used only for non-fuel chemical feedstocks and not for fuel, does Mr Stevenson really think that it would be economically viable as an investment?
Mr Harvie is clearly listening to a different speech from the one that I gave, because I did not say that. I pointed to the long-term future because Mr Harvie said that there was none. I suggest that there is a long-term future.
A third of our oil remains, and that is only of the stocks that we have found; we are still finding oil in our sector. The Norwegians are finding oil—for example, they found some in the Johan Sverdrup field relatively recently. Opportunities will continue to be there; there will be opportunities for investment. We have seen the successes of smaller companies, which various people have referred to in the debate.
I now say a word or two about fracking, which is the last part of the Conservative motion, and why it is right that we have a moratorium on the subject. I reference the United States experience, because there is quite a lot of it. The National Institute for Occupational Health and Safety in the US talks about workers being
“regularly exposed to high levels of benzene, which is a known carcinogen”.
Will the member give way?
I no longer have time; do forgive me.
The institute also talks about exposure to silicosis, which is a deadly lung disease.
The BMJ talks about
“Volatile organic compounds and diesel particulate matter”
being reported by the US Environmental Protection Agency. An academic paper that was published in New Solutions talks about health conditions that
“became worse after shale gas development started”
in their area. Participants in that survey reported worsening existing conditions and new conditions in human beings, animals and household pets.
The EPA reports that there is uncertainty about how many incidents there are but says that, in Colorado, it can be as much as 12.2 spills for every 100 wells, with all the consequences that flow from that. It says that the spills reached surface water in 9 per cent of cases and contaminated soil in 64 per cent of cases.
The EPA also says that not everything is known, and I accept that. That is why a moratorium is right and why we should look further at the research to underpin a long-term decision.
The US experience tells us that we cannot proceed with shale gas in the present circumstances, but oil and gas in the north-east certainly needs support. More important, we need renewables to become the focus, and the UK Government is letting the people in my area in the north-east of Scotland seriously down in that regard.
Members will appreciate that I am giving members who take interventions a little extra time, in order to encourage interventions. That does not necessarily mean that anyone should intervene on you, Mr Scott.15:51
You have often intervened on me, Presiding Officer.
That is another matter.
It was in another life many years ago.
I start by agreeing with Stewart Stevenson that oil and gas—in the North Sea, west of Shetland and in many other parts of the globe—is an industry not just for now but for the long term. I profoundly disagree with Patrick Harvie, not least because he used the phrase “business as usual”. The oil and gas industry is demonstrably not going through a period of business as usual. As the minister has sadly confirmed, 50,000 people have lost their jobs in Scotland alone, and 120,000 across the UK. I suspect that we do not know the true scale of what is going on in terms of the changes to employment in the industry.
The industry is a long-term industry. It will be a very different industry in 10, 20 or 40 years’ time, but I do not doubt for a minute that it will still exist, for this reason if for no other: when the chairman and chief executive of the Total company was in Shetland back in the early part of May, opening the Laggan-Tormore field, he talked to an audience of oil people and the national and local press about the long-term interests of his company. What he described was not just about oil and gas, although Total is a large, worldwide player in oil and gas in many different theatres of operation. He talked about Total becoming an energy company that would invest heavily in renewables and different forms of energy over a long period of time. He is an oil executive to his fingertips—the definition of an oilman—but he saw the way that the industry is changing and I suspect that he will be at the forefront of the way in which the industry will change. Calling it business as usual is a simplistic way of putting it. The industry is different now from what it was even two years ago.
On a day like today, we should also reflect on the fact that, just the week before we all faced the electorate, people lost their lives on a Super Puma helicopter that crashed just off the coast of Norway, near Bergen, on 29 April. As recently as 2013, four people lost their lives when a Super Puma crashed off Sumburgh in my constituency. The industry pays a heck of a heavy price—sometimes the ultimate price—to bring home a resource on which most of us depend in everyday life.
Some big changes are happening. The front benches of all parties mentioned the change in oil prices. It has shifted from $110 to as low as $29 a barrel to $48 a barrel today. The costs of the industry have been cut by 20 per cent in the North Sea, with many industry analysts saying that unless costs fall by 40 per cent, the North Sea will not be internationally competitive, which can mean only one thing for the people who work in it across Scotland. There are 800 supplier businesses in the UK that work on oil and gas contracts, but 600 of them are in Scotland and the great majority are in the north-east of Scotland. The north-east is the oil and gas industry. I sometimes think that the rest of Scotland is somewhat isolated from that.
Jackie Baillie made a series of important points about the wider economy. I agree with much of what she said but, although some of the investment in construction has, rightly, been on the part of the Scottish Government, a lot of what has been happening in the economy has been masked by private sector investment in construction. If we were dependent only on the oil and gas sector, I suspect that what has been going on in the north-east would be even more stark in the wider figures for the country’s economy as a whole.
There are two important points in terms of future opportunities. One of those, which was mentioned by other members, is the west of Shetland developments. Laggan-Tormore is the biggest civil engineering contract in the UK since the Olympics. The Clair ridge developments that BP is investing in—literally at this moment, because some of the infrastructure is being put offshore this month—is vital for the future.
Will the member take an intervention?
Just a minute.
The west of Shetland developments will go on. Although, at $50 a barrel, it still looks remarkably difficult, as oil prices rise—we do not know when, but they will—some of those developments will look more attractive for the future.
I suppose that I should give way to Patrick Harvie.
I am somewhat bewildered that I am standing here about to ask the same question that Murdo Fraser asked Jackie Baillie. I have heard Willie Rennie, for example, on many occasions, say that the reason why the Liberal Democrats do not support fracking is that they do not want to open up a new front on fossil fuels. Why are they applying that policy only onshore and not offshore?
I am going to talk about the oil and gas industry. It seems to me that Mr Fraser and others have had a very lively, endless—if I may say so—debate about fracking. Patrick Harvie did not mention fracking in his speech and chooses to mention it later in the debate. That is a matter totally for him—much of it is lost on me.
My final points are on the Sullom Voe oil terminal and Lerwick. Lerwick is a port that will be part of the decommissioning future. That is a £40 billion to £60 billion industry over the next 40 years. That, Patrick Harvie, is not business as usual—it is the changing nature of the industry.
The important point that I want to make to the Government front bench here and to my friends in the Conservative Party is that we should ensure that when we, the taxpayer in this country, provide tax relief for that decommissioning, those jobs remain here in Scotland or across the UK. The three huge jackets that are being decommissioned from the Brent field will go to Teeside. I want to see some of that work in Shetland, and indeed in other parts of Scotland, in future. It is vital that ports such as Lerwick are centres of decommissioning in future.
Jackie Baillie and others mentioned the skills agenda. We should ensure that that applies not just to jobs in the north-east or other parts of Scotland; it should also relate to facilities such as the diving school in Loch Linnhe, which trains divers and has done for many years. It is an essential part of the skills infrastructure that we need in Scotland and long may that be the case.15:58
It is clear that the economy is a very wide topic and I look forward to being the deputy convener on the Economy, Jobs and Fair Work Committee and looking in more depth at different sectors in the coming session.
The Labour motion mentions two particular reports, namely by the Bank of Scotland and Ernst & Young. I will focus most of my remarks on those reports. First, I thank the Bank of Scotland for its report on oil and gas and the presentation in the Parliament last week, which I think was hosted by Murdo Fraser, although he was speaking in a debate at the same time.
As I understand it, the survey covered 141 oil and gas companies. Stuart White spoke to the report and, in his foreword, he talks about the “difficult decisions” still to be made on savings, jobs and investment. However, he said that
“cautious optimism for the future ... appears to be slowly returning.”
Positives included the fact that a quarter of firms surveyed had grown through the downturn and that there had been an opportunity to diversify, collaborate, invest and innovate. Mr White went on to say:
“We don’t want to downplay the impact of depressed oil prices”
“the oil and gas sector is proving”
to be very
“entrepreneurial, innovative and resilient”.
It is clear that the job losses have been severe, and I hope that we are all concerned for those who have lost employment, but the report also speaks about how the industry has become leaner and more agile and efficient in order to survive, and it is set to be more competitive and sustainable for the future. In fact, there was a feeling at the briefing that we would not want the oil price to rise too suddenly in case the efficiency gains were lost and inefficiency was again rewarded.
I found the contrast between larger and smaller companies to be particularly interesting. Some 41 per cent of all companies said that they had been affected severely or quite badly by the price fall, but 67 per cent of large companies—that is, quite a lot more—said the same. So it seems that smaller companies have done better than bigger ones.
On jobs, the report in question says that losses have run into five figures and that 51 per cent of companies had cut jobs. The better news, which has been mentioned already, I think, is that 29 per cent managed to keep the workforce stable and 20 per cent managed to increase staff numbers.
There is clearly a contrast in the costs of companies’ production. One very large company was said to have 2,500 staff for 100,000 barrels per day of production whereas a smaller company has just 50 staff for 30,000 barrels per day. That shows that the costs of production can vary dramatically from company to company and from field to field. In consequence, there is no one oil price that is agreed to be desirable for all producers. In fact, some businesses can operate successfully and profitably with a relatively lower oil price.
It was also interesting to hear that exploration continues in Saudi Arabia. This is seen as a good time because costs are lower. It also seems that there can still be new finds around Scottish coasts. Perhaps the UK Government should be doing more to encourage such exploration.
Labour’s motion also mentions the Ernst & Young Scottish ITEM club. We have the Ernst & Young Scottish ITEM club forecasts. It concerns me a bit that that report is a little too focused on comparisons with the UK, as perhaps we in the Parliament sometimes are. It is surely not healthy for any household or country to be fixated on its neighbours, and fanatically trying to keep up with the Joneses is not good. Of course comparisons are useful and important, but let us keep them in perspective and watch what is going on in the rest of the world, too. For example, if I read the report correctly, US GDP growth is around 2.3 to 2.8 per cent, eurozone growth is 1.6 to 1.9 per cent, and UK growth is 2.4 per cent. The figure of 1.9 per cent for Scotland is perhaps a bit on the low side, but it is not that far out of line with those of other European countries. On that point, there is validity in Patrick Harvie’s and the Greens’ arguments that GDP is too narrow an indicator anyway.
I was interested to see that the savings ratio in Scotland is over 6 per cent compared with the UK’s 4 per cent. Is that a good or a bad thing for the economy? Some would say that it is bad, as it restricts spending, which might be boosted in the short term. However, if one of the UK’s big problems is deficit and debt, perhaps more saving is a good thing in the long run.
The ITEM club report tends to question the growth in construction as disproportionately high for a relatively small sector of the economy, and it wonders what will happen when the Forth crossing, the Edinburgh to Glasgow rail improvement programme, and the M8, M73 and M74 are all completed. However, that makes me wonder where we would be if those projects had not happened. I presume that we would be worse off. Public sector capital investment has given a much-needed boost to the economy at a very difficult time.
The emphasis on construction is likely to benefit men more than women, so perhaps it is not surprising that the number of women in jobs fell a bit, according to the report. However, we note that the number of women in employment is still 4 per cent above the pre-crisis peak. That is a reminder to look at the longer-term picture and not just focus on each quarter on its own. The female employment rate is 71.1 per cent in Scotland compared with 69 per cent in the UK.
The report also states that total manufacturing exports are 5 per cent higher than in 2013, led by transport equipment at 33 per cent, metals at 21 per cent and food at 19 per cent above 2013 levels. By anyone’s standards, those are healthy figures.
Would you begin to close?
In conclusion, I would not want to finish speaking in a debate on the economy without saying that it is not just about growing the economy. Major challenges apart from growth remain, including considering who owns and controls the engines of the economy and who benefits from the economy doing well. It is disappointing to see that the Ernst & Young report criticises the national living wage. If that puts more money in people’s pockets, surely that can also boost business.
I call Jamie Greene, to be followed by Jenny Marra. Up to six minutes, please, Mr Greene.16:04
Thank you, Presiding Officer.
“Economically, we are absolutely on a knife edge with regard to the potential of Scotland re-entering a potential recession.”
Those are not my words—they are the words of Liz Cameron OBE, chief executive of the Scottish Chambers of Commerce. Much of the focus in today’s debate has, rightly, been on the north-east and the oil and gas sector, and I believe that many colleagues will speak about that. However, I want to focus on some other geographic and market sectors and bring my own thoughts to the debate.
I represent the West Scotland region, which has seen much change in its core raison d’être over the decades. It is home to Faslane, a nuclear power station and an ocean terminal; it has two international airports on its doorstep and road and rail connections to the rest of the UK and beyond. Greenock imports cruise liner tourists and Arran exports whisky. Paisley bids to be city of culture and its nearest airport now connects to New York, Toronto and Dubai.
The very face of my region’s history is defined by the mining towns of Ayrshire, near where I live, the shipbuilders on the Clyde and the cotton mills south of Glasgow. It has gone from being a region that basked in the glory of building great vessels to being the semiconductor capital and then the call centre capital of the UK, and it is now increasingly becoming home to big retail parks and the shoppers they attract.
My first job was at IBM in Greenock, just as it reached its pinnacle in laptop manufacturing. Now the place lies barren; as with many big factories, the company has moved on and moved out. That fear is still there: Texas Instruments is looking at its future and Polaroid in West Dunbartonshire is doing the same. Further down the A78, Hunterston nuclear power station will start to be wound down and decommissioned with huge losses in highly skilled jobs that will affect the families involved, and much uncertainty about where those skills will end up.
Although I enjoy meeting businesses in my region such as Arran Aromatics on the isle of Arran—a proper success story in North Ayrshire that supplies at retail and wholesale levels—I have also heard the concerns of people who are worried that they have not seen much big business investment in our region in recent years. Of course, I welcome those that have made progress and have ambitious plans. A prime example is Ferguson Marine in Port Glasgow and I will, of course, work with colleagues across the chamber to support and nurture those businesses.
In other words, although there is much to celebrate, there is much to be worried about. With regard to employment rates in Scotland, Cunninghame North and Cunninghame South are ranked 66th and 68th respectively on a scale of 73. Greenock is ranked 63rd, and Clydebank 51st. There is so much more that we can do.
Going back to my opening remark about potential recession in Scotland, I note that Jackie Baillie and Murdo Fraser have already mentioned the Fraser of Allander institute’s downgrading of its growth forecasts. I want to elaborate on those comments by pointing out that Professor Brian Ashcroft of that institute has said:
“The Scottish economy came within a hair’s breadth of recession last year and with little improvement recently may fail to avoid a recession in the coming months.”
The institute pointed out that even though the service sector registered growth of 0.3 per cent in the final quarter of last year, UK services grew three times faster. It said that financial services were “especially weak” and that
“manufacturing growth can only be described as weak”.
It is not just the oil and gas sector that is facing a rocky road; many sectors are teetering on the brink.
I absolutely accept and appreciate that the state of our economy is often influenced by international, external and uncontrollable factors, but I also believe that the Scottish Government can do some immediate and practical things to help business across all sectors in Scotland. First, on non-domestic rates, I welcome the continued commitment to help small businesses with rate relief; after all, the high street is struggling and we collectively must do all that we can to help it. However, many medium and large-sized businesses are deeply concerned about the hike in the large business supplement from 1.3p to 2.6p, as the doubling of that rate will put a burden of £60 million on Scottish business.
In modernising the structure of business rates, we should take into account the views of all stakeholders, such as the Federation of Small Businesses and the Scottish Retail Consortium. We should not see big business as a business rates cash cow. A fine balance must be struck between the need for revenue and the needs of businesses to grow and invest.
The second area in which the Scottish Government can help business is on income tax. The issue is really simple for the Scottish Conservatives: for Scotland to remain competitive, we should pay no more income tax than the rest of the UK does.
Will the member take an intervention?
I am sorry, but I am in my final 30 seconds.
In summary, we will support moves to attract investment and encourage growth in our country, but we should not demonise big business in the process. A broad mix of small, medium and large businesses is essential, and we as a Parliament must keep our eye on the ball if we are to avoid recession. Just as we must focus—as we are doing today—on the action that it is necessary for us to take on the oil and gas sector, we must come up with practical, bold and immediate measures to encourage growth across all sectors. When we go back to our various constituencies, we should not be complacent when we see the relics of industry on our doorstep; we should come back here with ideas.16:11
Presiding Officer, this my first speech in the new session of Parliament, so I would like to take the opportunity to welcome you to your position and to welcome to the chamber all the newly elected members. I hope that they enjoy and feel as deeply as I do the privilege of representing their constituents. I also congratulate Finlay Carson on his maiden speech.
I want to use my speaking time to talk about the oil and gas decommissioning industry, which is of particular interest and relevance to my home city of Dundee. Just three months ago, the Douglas-Westwood industry report told us that it is expected that nearly 150 oil platforms will be scrapped over the next 10 years. Of specific interest to me—it should also be of critical interest to the Parliament and the Government—is the analysis that
“Of all the decommissioning over the next 25 years, more than half is likely to take place between 2019 and 2026.”
As my colleague Jackie Baillie said, the last thing that we want to do is decommission too early, but we do not want to miss the opportunities that decommissioning presents for Scottish jobs and Scottish workers. If we are not ready for the opportunities of decommissioning, it is clear that they will sail past us, as many are doing at the moment.
Let us be realistic. The industry experts tell us that the bulk of decommissioning work will really take off in 2019, which is less than three years from now. Given the lead-in times that companies need in order to be able to select the correct decommissioning programmes and facilities, are we anywhere near ready to seize those opportunities for Scottish workers? Perhaps we are ready to do so further north, as Tavish Scott said, but we are not in my home city of Dundee.
As my colleagues from the previous session will know, I have for a few years been making the case on the opportunities that exist for decommissioning in Dundee, and have argued that the Scottish Government should be assisting the city to become a hub for decommissioning work. We have a deepwater port, a spacious quayside for deconstruction and free industrial land for all the spin-off capacity. We have a research base for decommissioning in our universities and a very good college to provide training programmes for young workers. We have a strong engineering base, and we still have a proud thirst for industrial jobs. We have a chronic shortage of work—we have one of the highest unemployment rates in the country and eye-watering youth unemployment.
We have all those things, but what we do not have is any assistance from the Scottish Government to bring decommissioning jobs to Dundee. Other parties, including the Government’s party, started to agree with my campaign for decommissioning jobs in Dundee during the recent election campaign, but we have still to see any action being taken or any money being spent. I welcome the money that has been spent in Aberdeen and Lerwick, but not one penny of Scottish Government money for industrial development is coming to our city to support the potential for the decommissioning industry. Given the dates that have been proffered in the Douglas-Westwood report, I want the cabinet secretary to say in his closing remarks today whether the Scottish Government is committed to assisting Dundee to become a decommissioning hub. The Government simply cannot wait any longer.
Forth Ports, which owns the port of Dundee, made a £10 million investment in our port earlier this year. Although that was very welcome, anyone looking at the industry will know that that amount of money does not go nearly far enough in preparing a port for such large-scale industry; indeed, I understand that that sum is being used to repair an existing quayside. The key thing is that when Forth Ports’ chief executive Charles Hammond announced the £10 million investment, he explicitly called on the Scottish Government to invest public money in our port.
Oil platforms are sailing all the way past unemployed workers in Dundee to Hartlepool, where local development agencies had the foresight to secure jobs for Hartlepool workers. Where is the Scottish Government’s industrial investment in Dundee? Dundee City Council has still not put together its application for a city deal. I understand that ideas were being kicked around at a recent stakeholders meeting, but with no focus on or mention of decommissioning.
The people of Dundee need the cabinet secretary to commit today to instructing Scottish Enterprise and industry experts to prepare and publish an emergency scoping report on what is possible in respect of decommissioning for Dundee. It is a simple task that should have been done a long time ago. Given the timescales for the opportunities and the dire need for jobs in my city, the cabinet secretary has a moral and political obligation to the people whom I represent to make that commitment this afternoon.16:17
Scotland’s economy does, indeed, face challenges, not least because Scotland sits within the wider context of on-going UK austerity. The notion that cutting spending is necessary to boost growth—or expansionary fiscal contraction—still has authority in the UK, which means that most Britons do not realise the extent to which we have diverged from the rest of the western world’s thinking on that issue.
Paul Krugman, who is a Nobel prize winner in economics, noted:
“Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity.”
He went on to state:
“The austerian ideology that dominated elite discourse five years ago has collapsed, to the point where hardly anyone still believes it. Hardly anyone, that is, except the coalition that still rules Britain—and most of the British media.”
Will the member take an intervention on that point?
I apologise—I have to make progress.
Austerity does not work if one wants to grow the economy, so why are we still suffering it? After the crash in 2008, it became obvious that monetary policy was not going to be enough to fight the downturn. In such conditions, the correct response is fiscal expansion—Government spending to create jobs and put money into consumers’ pockets. As Keynes wrote in 1937,
“The boom, not the slump, is the right time for austerity at the Treasury.”
What actually happened was a focus on slashing deficits—mainly with spending cuts. Even though history and practice suggested that cutting spending in a depressed economy without the ability to offset that by reducing interest rates would hasten decline, the “austerian ideology”—championed by people such as Alberto Alesina from Harvard University—was embraced by the European Commission, the European Central Bank and the UK Government. Alesina’s research was later found to be flawed, and the economic research that allegedly supported the austerity push has now been mainly discredited.
That has led the International Monetary Fund—an architect and site manager of neoliberalism—to publish an article this week in its in-house magazine, which states that neoliberalism has been oversold and that austerity should be ended. The article notes that the
“short-run costs of lower output and welfare and higher unemployment have been underplayed, and the desirability ... of simply living with high debt and allowing debt ratios to decline organically through growth is underappreciated”.
Austerity is self-defeating and debt limits by themselves are meaningless. The UK Government’s own targets require further cuts. On top of the £12 billion cut that was announced in the 2015 spending review, George Osborne has announced a further, as yet unallocated, £3.5 billion cut to departmental spending, and in Scotland our discretionary budget will be £3.3 billion lower in real terms than it was in 2011.
It should also be noted that, at Westminster, Labour acquiesced on the austerity narrative and voted with the Tories in 2015.
Perhaps the member has made enough progress to take an intervention now.
I will give way.
Ash Denham was not in the Parliament at the time, but does she recall that, just before the election, the SNP Government had an opportunity to end austerity through the budget? Can she explain why it chose not to do so?
In talking about the wider context, we need to talk about what Westminster is doing, as it clearly has more levers than the Scottish Government.
The Labour Party will recall that it accepted the £30 billion of cuts that the Tories proposed. George Osborne said that those cuts will
“make Britain fit for the future”.
The question is, fit for whom? It will almost certainly not be fit for Scotland. Why? Because the UK Government attempted to cut £7 billion from the Scottish budget just this year.
In my view, austerity has been embraced so profoundly because its primary purpose is to provide the necessary cover to massively shrink Government spending. As David Cameron said in 2013, the aim is to make the state
“leaner ... not just now, but permanently”.
The overriding goal is a permanent and irreversible reduction in our public goods, public services and social security.
If the Conservatives in this chamber want to do something useful for the Scottish economy, they should urge their colleagues in London to ditch the damaging austerity mantra in favour of investment in research and development, innovation and education. The UK Government controls the key taxation levers that affect the oil and gas sector, so it must take the action that is needed to protect businesses and jobs. In Scotland, with the powers that we have, we plan to take a different approach. Our economic strategy will be to maximise our investment in infrastructure and skills, to drive innovation, to boost exports and to promote more inclusive growth wherever we can. We plan a “can do” innovation forum to develop a range of actions as part of a sustained national programme to boost productivity through innovation.
Will the member take an intervention?
I am sorry, but I am in my last half minute.
We will prioritise infrastructure investments—over the next session of Parliament, £20 billion will be invested in a major infrastructure program that is designed to help to build Scotland’s future. Our infrastructure plans will support around 30,000 full-time equivalent jobs in the wider economy, with projects the length and breadth of the country, including road, rail and ferries, early-years childcare, schools and heath facilities. In my constituency, investment is under way at the Royal infirmary of Edinburgh site, with £230 million going to the new Royal hospital for sick children and the department of clinical neurosciences.
The intellectual case for austerity is bankrupt. It is time for the UK Government to catch up with the thinking on this matter in the rest of Europe.16:23
There are many new faces and new voices in Parliament, and we have heard another of them today. Finlay Carson’s first speech in the Parliament was excellent. Surely, we are getting to the end of the list. We will see.
Those of us who are familiar with the Parliament will be well aware of a habit that John Swinney had when he was the economy minister in the previous session. As we all know, over the years since the recession of 2008, Scotland has done rather well and the economic figures have been very encouraging. In some months, Scotland would do better than the rest of the UK; however, in other months, the rest of the UK would do better than Scotland. For the months when Scotland had done better than the rest of the UK, John Swinney would stand up and take credit for that advancement. Meanwhile, the following month, when the figures were the other way round, he would blame the UK Government or George Osborne for all the problems that Scotland faced.
The truth was that Scotland and the rest of the UK were—if perhaps slightly out of kilter—achieving the same things year on year. The problem that we face now is that we are no longer aligned. Scotland and the rest of the UK have begun to diverge; the figures demonstrate that each month as they are published. I suggest that one reason for that is that the Scottish Government has more power to encourage different approaches in the Scottish economy but is enforcing the wrong policies. It is beginning to reap the dividend of that failure.
Does Alex Johnstone accept that there are areas of policy on which we could say that the UK Government is taking the wrong decisions, such as throwing £35 billion at the nuclear power industry and not backing Scotland’s renewables industry?
It would perhaps have been beneficial to the Scottish economy if we had been building a nuclear power station here, too. That decision should have been taken some time ago.
Let me address the Government amendment. On a day when the Labour Party has brought a well-reasoned motion to the Parliament, which the Conservatives will support, the Scottish Government made the mistake of lodging an amendment that is overoptimistic. In a week in which the oil price has fallen by 6 per cent—I checked the figures before I stood up to speak—it is irresponsible of the Government to take such an approach. We should be working hard to ensure that we do not repeat the mistakes of the past.
That is why there are a number of things that we must deal with in relation to the oil industry. The UK Government has taken the action on taxation that it promised to take, but the Scottish Government has not taken the opportunity that it could have taken to ensure that the economy in the north-east, in particular, is resilient enough to stand situations such as we are in now.
Scottish Government decisions on taxation have resulted in further pressure on the north-east housing market. Members who saw the unemployment figures that were made available in the past few days might have been surprised to discover that Aberdeen constituencies still have the lowest unemployment rates anywhere in Scotland, but they must also remember that many people who lose their jobs cannot afford to stay in the north-east once the job has gone, so they leave. We have serious problems with housing, not least because the Scottish Government’s land and buildings transaction tax has put enormous pressure on more expensive homes. Members should remember that the existence of more expensive homes in the north-east is a symptom of housing shortage, not a symptom of wealth that the Government thinks that it should tax.
At the same time, failures in provision in the north-east have left our schools with unfilled teaching posts. Many healthcare facilities have unfilled posts, too. The services that are being provided are simply not adequate for the population that we have.
When the Aberdeen city region deal was announced and the shared funding arrangements were published, the Scottish Government scrambled around to find other previously announced projects whose value it could include in the figures so that it could claim that it was putting more money into the north-east than the UK Government is putting. That is why we got commitments on the east coast main line at Montrose and on the grade-separated junction at Laurencekirk, as well as other promises.
However, in the past week, the Scottish Government has told us that those spending commitments will be fulfilled only as part of a 10-year programme.
Will the member give way?
The member must begin to close, please.
The Government’s promises are not being kept. I want the minister to bring forward the Government’s spending commitments on a timescale that aligns with the expectations of the people to whom he made those promises only a few short months ago.
We move to the last speech of the open debate. I would appreciate brevity, please, Mr MacDonald—you have up to six minutes.16:29
The phrase “Cities standing strong” is one of the opening comments in Ernst & Young’s Scottish ITEM club report. It says:
“Scotland’s three largest cities—Glasgow, Edinburgh and Aberdeen—are crucial to the overall health of the economy ... Accounting for over 35% of total employment and 40% of business services employment”.
I will focus on Edinburgh. The strength of Edinburgh’s economy lies in its well-educated population—more than 42 per cent of working-age residents are educated to degree level or above, which is higher than the figure in any other UK city, outside London. That highly skilled workforce helped Edinburgh to attract 33 major foreign direct investment projects, which ensured that Scotland attracted more such projects than any other part of the UK outside London.
Edinburgh’s strengths lie in its financial services, life sciences, technology and tourism. In its city focus on Edinburgh, the Ernst & Young report highlights the fact that Edinburgh’s financial services remain critical and that growth in employment in Edinburgh is outpacing growth in Scotland and the UK.
The City of Edinburgh Council’s capital facts report highlights the fact that Edinburgh is the UK’s second-largest financial centre and is a major European centre for asset management and asset servicing. More than 90 per cent of all Scottish fund managers are based in the Lothian area.
Edinburgh’s life science research is among the best in the world. World-leading academic researchers combine with cutting-edge companies and science parks that encourage close collaboration. I recently attended an awards ceremony at which Alba Bioscience—a local company that has the good sense to employ my youngest son—was awarded the Queen’s award for enterprise for outstanding achievement in the international trade category.
In the technology and software sector, Edinburgh is home to some of Europe’s leading tech companies, including Skyscanner, Amazon, Microsoft and Rockstar North. That sector’s value has grown by 58 per cent since 2010.
Tourism is also key to Edinburgh’s economic success. Last year, Edinburgh airport had its busiest-ever year, with 11 million passengers. Four million tourists visited the city and injected £1.2 billion into the local economy. Hotel occupancy levels are at nearly 82 per cent, hitting 92 per cent during the festival, and occupancy levels are increasing year on year despite new hotels opening. Revenue per room is also increasing.
The improving employment situation in Edinburgh is resulting in a reduction in people claiming benefits and in an increase in the population of about 100 people per week as people are attracted to the area to gain employment. New businesses are taking advantage of this buoyant part of the economy. More than 1,900 new businesses were recorded over the three months to April 2016, which is a 16 per cent increase on the number of new businesses that started in the same period last year.
The National House Building Council has highlighted the 52 per cent increase in new-build starts for residential dwellings between 2014 and 2015 to house the new workers who are being attracted to Edinburgh. During the construction phases, many jobs and apprenticeships in the traditional trades have been supported.
Last week, I visited the traditional building skills and materials event that was held in St Andrew Square, where apprentices who are based at Edinburgh College demonstrated a range of trades. Of the buildings in our cities, 19 per cent were built more than 100 years ago, and many need repair or renovation. Stonemasons and plasterers are needed, and we must encourage small businesses that work in that sector to take on apprentices if we want to preserve those buildings for future generations.
There is no doubt that the downturn in oil and gas has had an impact on Scotland’s economy. However, as I have highlighted, much of our economy is doing well. That is despite Scotland getting little benefit from the £330 billion that has been paid to the UK Exchequer from oil and gas since 1975. It is maybe about time that we got some of that money back to invest in our country’s future, while we need to support jobs until the oil and gas industry gets back on its feet.
We move to the closing speeches.16:34
I would like to declare a registrable interest: I own and manage property, including commercial lettings.
As MSP for Aberdeenshire West, I am well aware of the many challenges that we have heard about today that Scotland’s oil and gas sector has faced in recent months and the impact that they are having on local and national economies. Price volatility changed the landscape of the sector, as prices fell by 70 per cent and hit a low of $27. Inevitably, that has led to job losses and decreased investment, particularly in the north-east. On the international level, many oil analysts foresee no significant upswing in crude oil prices without the intervention of the Organization of the Petroleum Exporting Countries, which is an unlikely outcome at this stage.
However, the outlook is not unrelentingly bleak. Britain’s oil and gas industry’s annual activity survey recently showed output up by nearly 10 per cent, the best exploration hit rate for 10 years and a significant fall in extraction costs. It is a challenge for both the Scottish and UK Governments to ensure that the industry is nurtured through these hard times.
Within the past week, reports by the Bank of Scotland and PricewaterhouseCoopers have shown that significant job losses are still to be expected and that there is a two-year window for action. More positively, the reports found that firms are forming new partnerships, seeking new international opportunities and diversifying into new markets. Both reports show that sustainable growth is on the horizon, and it is encouraging to see the sector progressing.
At Oil & Gas UK’s conference yesterday, I met a range of stakeholders. It was clear that the UK Government has made the UK continental shelf the most fiscally competitive region in the world, and I heard from Stephen Halliday, group president at Wood Mackenzie, that the UK now has one of “the best and simplest” tax systems—that was in the speech after the cabinet secretary’s, so I am not sure how the cabinet secretary missed it. We have seen great progress in cost reduction, but we still need greater collaboration. I believe that Andy Samuel, the chief executive of the Oil and Gas Authority, is best placed to bring company leaders together.
The industry may acknowledge the fiscal regime as working and the OGA’s regulatory regime may be making progress, but there is still a third branch that needs action. With the right support, small and medium-sized enterprises in the supply chain can grow from the 2.5 per cent of global share that they currently enjoy to a more than 10 per cent share of a global market that is worth £100 billion. The sector is more than twice the size of the aerospace industry and would continue beyond the lifecycle of the North Sea. After my maiden speech, Stewart Stevenson said that we would have little overlap, so I am pleased, in only my second contribution, to have found a common cause.
We have already seen an unprecedented level of support for the industry from the Conservative UK Government over its past two budgets. Last week, I met the chancellor and we discussed Treasury-backed loans. I am pleased to say that he was receptive to calls to expand the UK loan guarantees scheme, which would help secure new investment in oil and gas infrastructure. That, I hope, will satisfy Gillian Martin’s calls for conversations with Westminster.
The UK Government has shown its support, but local companies are facing a different challenge. Scotland should not be the highest-taxed part of the UK, and we welcome the Scottish Government’s decision to review business rates.
I have heard a number of comments from the Conservatives about cutting taxes. Why are they opposed to cuts in the highest air passenger duty in the world? Would such cuts not benefit the economy, including that in the north-east?
I also raised APD with the chancellor, who pointed out that a cut in APD would be insignificant in relation to the overall cost of a flight and is not seen as particularly effective.
Business rates affect businesses all over Scotland, as my colleague Jamie Greene pointed out. He quoted from the Fraser of Allander report, which says that Scotland is “flirting with recession”. Regardless of the outcome of the review, we urge the Government to freeze business rates until the recommendations are implemented. Additionally, we remain committed to doubling the business rates incentivisation scheme, so that local authorities are allowed to keep all the additional revenue raised by the tax. As we heard from Finlay Carson in his excellent maiden speech, fine constituencies such as Galloway and West Dumfries have much to gain from the scheme—although I would give a note of caution regarding any zip-wire photo opportunities.
Business rates have been this Scottish Government’s cash cow. I have heard of people considering pulling down buildings to avoid business rates that are too punitive. That would mean a return to the days of window and roof taxes, when people destroyed capital assets because they were unable to pay poorly thought-out taxes. Scotland’s balance sheet can ill afford that.
With a moratorium preventing onshore gas production, companies cannot invest in the industry’s long-term future. Scotland is missing out on a jobs boom and the opportunity to get energy bills down.
We heard from Ivan McKee on the importance of training and from the extremely knowledgeable Lewis Macdonald on the importance of investment in north-east infrastructure. Patrick Harvie was, as always, ideologically honest but somewhat separated from the reality that faces the sector in the north-east. We also heard from Tavish Scott on the dangers of the industry and the ultimate price that is sometimes tragically paid. John Mason spoke about the sensible recognition of cost reductions. Jenny Marra made an excellent maiden speech that highlighted the importance of decommissioning. [Interruption.] My apologies.
We also heard from Ash Denham, Alex Johnstone—
Will you come to a close, please, Mr Burnett, before you say anything else wrong? I am saving you from yourself.
Whatever our views, Scotland’s economy and the oil and gas sector in particular face challenges, whether that is attracting investment, maintaining staff numbers or adapting to a slump in prices. I urge the Scottish Government to do all that it can to support and sustain that important sector, and I support the amendment in Murdo Fraser’s name.16:34
There has been a lot more consensus in the debate than we might have expected. Of course, there were points of disagreement, but it has generally been consensual and constructive.
I highlight Finlay Carson’s inaugural speech. I do not know whether he plagiarised various tourist brochures—I am sure that he did not—but the tourism organisations in his constituency will be keen on the first part of his speech because of the glowing terms in which he described it.
The points that other Conservatives—Murdo Fraser and Alexander Burnett—made should be responded to.
First, we have been calling for loan guarantees for some time. It is good to see the Conservatives catching up at last with how important loan guarantees might be to the oil and gas industry. If they had talked to the industry previously, they would have understood their importance to maintaining and improving the infrastructure and vitality of some of the smaller and medium-sized players. It is not enough to mention the measure in a budget and then forget it for months; there has to be pace behind it. The industry will tell that to the Conservatives if they speak to it, so let us stop talking about it and crack on and do it.
If Alexander Burnett went to Aberdeen airport and said that a cut in APD would have a negligible effect on its operations, I would be interested to see what response he would get. There is no question but that APD needs to be cut. It is now the highest tax of its type in the world. It is not an environmental tax—I think that everyone is past that pretence by now—and a cut is vital to economic recovery. It stuns me that the Conservatives do not want to support that.
If Aberdeen airport is that concerned about small changes in prices, should it consider its car parking duties?
I have had no representations from the airport on its car parking duties. I have had many representations on the beneficial effects of a cut in APD.
On Alex Johnstone’s point about the north-east, I heard from the Conservatives the claim that the £250 million that is going to the city deal is from the UK Government—in fact, I think that the member who made the claim is in the chamber. That is utterly false. It is not £250 million from the UK Government; it is £125 million from the Scottish Government and £125 million from the UK Government. We asked the UK Government to make it a bigger city deal but it refused to do that, so we announced a further £254 million of investment.
Will the cabinet secretary give way?
Let me finish the point first.
Alex Johnstone implies that that was a change to what we said. We said when we announced that investment that it would have the same lifetime as the city deal. It is a 10-year deal, but that does not necessarily mean that the investment will take 10 years. I said that it is important to recognise that the Laurencekirk overpass project may include a public inquiry and that nobody can predict how long that would take.
Is it not the case that the money is not invested until the Government has found and spent it? At the moment, we do not know when that will happen.
We have made the commitment to the Laurencekirk project and to the Montrose junction. We have to go through the statutory processes before we can build them. If I was to say that we would do it in two years, I would be accused of not allowing the public to have their full say on those developments. Of course we have to do that.
In relation to the point that Tavish Scott made, I regret that the Liberal Democrat amendment was not accepted for debate. It makes some very important points, especially about decommissioning. It makes them much more constructively than the rant that we heard from Jenny Marra about the Scottish Government. Had the amendment from the Lib Dems come forward, I would have been happy to support it.
It is very important to say that decommissioning represents a huge opportunity. Tavish Scott’s point about making sure that we maximise what we can get from decommissioning is very important. It cannot be premature. From the discussions that Paul Wheelhouse and I have had with the trade unions, I know that they are very keen on it as well. There is a huge dividend, not least because of the obligations on the original licence holders in the North Sea to pay for decommissioning. A lot of money will go into it. It will be a huge benefit, and Tavish Scott is quite right to say that we should make sure that we access it.
In relation to Jackie Baillie, it was the tortured expression on her face when I asked her to welcome the 11,000 people who had found jobs in the last month that said it all. It is important that we take a balanced approach. I have acknowledged the challenges that we have at every point—and members can ask the people in the industry I have spoken to. I accept the figures that have been mentioned in the various reports. I accept that there are challenges both in relation to the oil and gas industry and to the wider economy. However, it is also my responsibility to point out where things are going well.
It might have escaped the cabinet secretary‘s attention, but I welcomed much of the Scottish Government’s activity. We are faced with a report today that says that Scotland‘s economy is on the brink of recession. Simply listing past achievements does not do anything to resolve that problem.
I take from that intervention that Jackie Baillie is unhappy about the 11,000 people who got jobs in the course of the past month.
The tenor of Jackie Baillie’s speech was to point out everything negative that she could. We have to accept that there are challenges, but we undermine rather than enhance our economic prospects if we do not acknowledge and tackle not only the challenges but also the things that we are doing right that we want to do more of. That is self-evident.
We must not lose sight of the fact that the economy is built on strong foundations. There has been nearly 2 per cent growth in the past year. The same reports that have been mentioned predict growth for this year, next year and the year afterwards. There is no question but that we are in difficult times, but we have had a record year for inward investment—not something that Jackie Baillie felt able to welcome. The performance of inward investment was startling, not only for projects built on previous ones but also for new projects. There were 119 new projects, a record for Scotland. There were some real, genuine achievements in relation to that.
There were also a record number of registered companies in Scotland, which was a fantastic achievement. Youth unemployment, which was mentioned by a couple of members, is at over 13 per cent and there are real challenges there, but that is one of the lowest rates in the whole of Europe.
Cloudwick Technologies, a US technology company, announced last week that it was planning to establish its European headquarters in Glasgow. It plans to create 125 jobs in the city. We have heard from Paul Wheelhouse about the announcement today in Nigg Bay. We have also had the BP announcement about 500, albeit temporary, new jobs. The point was made—I think by Alexander Burnett—that productivity is at its highest for 50 years.
Jenny Marra rose—
I have given way a number of times already.
We have had that productivity bonus and the recovery in price, such as it is, from $27 to $50 a barrel. As was pointed out, I think by Gillian Martin, the price had previously gone down to $14 a barrel, so we have seen an improvement. We all know how price sensitive the industry is.
We believe that we have done a number of key things that are right. We should never say that that is all that we can do. We have to listen, and I will listen to the points that Jackie Baillie made, not in her motion but in her subsequent press release, not least in relation to the proposal for further support for infrastructure in the north-east. We have also considered that, and we are happy to work with others to make sure that the UK Government does those things as quickly as it should.
We have to build on the success and address the challenges that we have. As we raised in the previous debate, we must deliver our labour market strategy and focus on skills. The point was made by Gillian Martin that, although some of the jobs have been lost, the skills have been kept in the local economy. Some of those skills have gone elsewhere but they are still within the industry, which is very important for the upturn.
Growing our economy is obviously vital for increasing living standards and in turn—this is now very important for the Parliament—for generating tax revenues that can be reinvested in the economy, our infrastructure and our public services. Those links are more important than ever, in view of the new powers over taxation that have been devolved to the Parliament.
There are challenges, but there are also things that we are doing extremely well and we have to keep that balance. This Government will ensure that growing the economy and promoting inclusive growth remains central to all we do. I ask for support for the amendment in my name.16:50
In the front room of the National Union of Rail, Maritime and Transport Workers office in Crown Street in Aberdeen is a model, built by craftspeople—by metal workers—of the Piper Alpha platform. It serves as a reminder that, however we divide at the end of the debate, we must all unite around a singular determination that never again will such a compromise to health and safety happen, resulting in such a tragic loss of human life, which is still being felt by widows, orphans and survivors across the country. Never again.
There have been some excellent speeches and there has been a degree of consensus on a shared agenda. In particular, I pay tribute to Finlay Carson, who was making his first speech.
When we are discussing oil and gas, we are discussing a natural and a national asset: a common treasury, which incidentally should never have been left entirely in the hands of private corporations whose fiduciary duty—whose first duty—is to make profits, pure and simple.
As speech after speech has shown, the debate is not simply about the oil and gas industry; it is about the very future of the Scottish economy. That is why we lodged the motion.
If this Parliament is to speak for the people, which I believe it must, it must be a voice for the voiceless, including those oil and gas workers living in fear of the future. If this Parliament is to speak for the people on the big economic issues of the day such as rising unemployment, the political choice of austerity—to Ash Denham, I say that that is a choice that is being made here as well as in Whitehall—and inequality, including the unequal distribution of power in our economy, we need as a Parliament to listen to the oil and gas industry and to the oil and gas industry trade unions. Frankly, we do not need the air of complacency around the Government’s stance this afternoon.
We must consider the scale and speed of the job cuts in this one sector of our industrial base alone—84,000 jobs were lost in 2015 and 40,000 more are to go this year. As we have heard, 50,000 of those jobs are in Scotland and yet the Government says that we should take an interest in innovation prizes and business pledges. One of my colleagues checked into that and found that, out of more than 300,000 registered businesses in Scotland, only 272 have signed the business pledge.
Exploration is at its lowest level for 45 years, with just 13 exploration wells this year and between six and 10 being forecast for next year. We should listen to Deirdre Michie, the head of Oil & Gas UK, who warned just last week:
“We are an industry at the edge of a chasm.”
If we have a duty as a Parliament to listen to the evidence, we also have a duty placed upon us to speak up and to act. If something is not working as it should, such as the transition training fund, it is the duty of this Parliament to say so. If the energy jobs task force is not yet preventing any redundancies and is not yet creating any new jobs in transferable sectors such as offshore renewable energy or oil rig decommissioning and it does not appear to be successful in its mission
“to retain and grow the talents and skills in the industry”,
it is the duty of this Parliament to say so.
Let us compare the situation here with the Norwegian sector, which has the distinct advantage—the major advantage—of common ownership in the operation of its oil fields. If the Norwegian sector is able to deliver collaboration, a degree of co-operation and standardised technology to cut costs, why cannot we do it here?
Despite the best efforts of the energy jobs task force, offshore operators are instructing offshore contractors to slash the terms and conditions of employment by 25 per cent to cut their costs and keep their profits up. We need to say as a Parliament that enough is enough.
The ordinary men and women who are oil and gas workers—the drillers, engineering construction workers, caterers, service hands and maritime crews—are saying to us in the Parliament that they want the right to work, and they want the right to work in place of fear. That is what is important to us, and that is why we say to the cabinet secretary that we need a new approach.
When I met the oil unions in Aberdeen this week, I heard that their members are facing an added injustice. The unions said to me that many offshore oil and gas workers have not been made redundant but have been reclassified as ad hoc workers. Some of them are termed long-term ad hoc workers, which is another way of saying zero-hours contract workers. We also know that there is much bogus self-employment in the industry, onshore and offshore, so many workers who should be entitled to basic redundancy payments are not even receiving them.
I turn to decommissioning. Of course where there is genuine exhaustion, wells should be closed and rigs decommissioned. Shell is already doing that in the Alpha, Bravo and Delta fields, with OGA authorisation. The Delta field is already completely decommissioned and, as we debate the motion, workers on board Alpha and Bravo platforms are working towards their complete decommissioning. However, we want decommissioning to be carried out in a planned way in facilities that are based here and by workers who are based here and not overseas. We need to consider seriously Jenny Marra’s suggestion that that should be in Dundee.
A second point on decommissioning is that we fear that wells will be closed and assets written off prematurely because extraction is deemed to be uneconomic—in inverted commas—by the operators. There are 20 billion barrels of oil equivalent still to be recovered, and those are common assets that should not be written off.
We need a renewed determination in the Parliament to say to those working people and to the communities of the north-east of Scotland that we are on their side, that now more than ever we want to invest in their future, and that they have a future. No one claims that the Scottish Government can single-handedly save the industry, but we at least expect it to have an ambitious but credible strategy for retaining jobs and skills, a strategy for skills and technology transfer and a decommissioning strategy, in co-operation with the OGA.
I will give one example of what I mean. My understanding is that the contracts to supply jackets for SSE’s Beatrice offshore wind farm project have been placed just this week. I was delighted to learn that the contracts to construct 26 jackets have been awarded to Burntisland Fabrications in Fife, but I am outraged that twice as many as that have been placed in yards overseas. That simply is not good enough. This afternoon, we call on the Scottish Government to take up that matter urgently.
We want to anchor the oil and gas supply chain in the north-east, and we want to support diversification through proper planning and intervention by Government so that we join together an industrial strategy for decommissioning rigs and fields with new investment in subsea offshore renewable energy and so that we make full use of our existing skills, technology and engineering base.
This afternoon, let us give people hope for the future—that is what the Parliament should be about—that we will not relinquish control to market forces and that, although we are talking about a part of the economy where there are powerful global corporate forces at work, there can be powerful democratic forces at work, too. I hope that we can at least unite around that idea and act to restore the confidence of people in politics.