Meeting date: Thursday, November 22, 2018
Meeting of the Parliament 22 November 2018
Agenda: General Question Time, First Minister’s Question Time, Arthritis (Access to Work Scheme Survey), Scottish Parliamentary Corporate Body Question Time, Energy Efficient Scotland, Scotland’s Economic Future and Economic Data, Decision Time, Correction
- General Question Time
- First Minister’s Question Time
- Arthritis (Access to Work Scheme Survey)
- Scottish Parliamentary Corporate Body Question Time
- Energy Efficient Scotland
- Scotland’s Economic Future and Economic Data
- Decision Time
Scotland’s Economic Future and Economic Data
The next item of business is a debate on motion S5M-14824, in the name of Gordon Lindhurst, on Scotland’s economic future and economic data. I ask those who wish to speak in the debate to press their request-to-speak buttons.
I call Gordon Lindhurst to speak to and move the motion on behalf of the Economy, Energy and Fair Work Committee.14:48
Pardon my unparliamentary language, Deputy Presiding Officer, but I shall be talking statistics.
It was Mark Twain who coined the phrase:
“I have known many terrible things in my life, nine tenths of them never happened.”
At least, that was in the version that I once read. He is also said to have said:
“Facts are stubborn things, but statistics are pliable.”
The committee’s biggest inquiries this year looked at economic performance and data. My aim is to provide a flavour of both pieces of work, and I hope that the facts will shine through from the committee’s work. Doubtless, my colleagues will pick up on anything significant that I miss.
Professor Graeme Roy, the director of the Fraser of Allander institute, advised the committee on the data inquiry. He found the experience so fulfilling that he chose to return to the role for the economic performance inquiry. The committee benefited from his expertise, rigour and—not to be underestimated in such matters—his patience.
I will start with statistics. The president of the Royal Statistical Society, David Spiegelhalter, has spoken of the Groucho principle—Groucho is my favourite Marx. If one should encounter a newsworthy number or retweeted statistic, Mr Spiegelhalter advised—[Interruption.]
Does Mr Findlay wish to make an intervention or will he allow me to refocus the chamber’s attention?
Excuse me, can I remind you that I am still here and that you should stop having a private conversation. Are you allowing the intervention, Mr Lindhurst?
If he wishes to make one.
I know that the clerks have a big input into conveners’ speeches, but we can be guaranteed that they did not write those words.
Actually, they did. [Laughter.] That is not to take away from the impact of the lines.
I will return to what Mr Spiegelhalter said, which may also apply to Mr Findlay’s intervention. He said:
“If it’s surprising or counter-intuitive enough to have been drawn to my attention, it is probably wrong.”
As a society, the extent of our data literacy is poor. It may seem to be a niche subject but it shapes decision making in so many spheres, including public policy, corporate thinking, journalistic opinion and public perception.
The committee drew on the ethos of the Bean review as a starting point for our inquiry. Professor Sir Charles Bean of the London School of Economics led an independent review of United Kingdom economic statistics and he published his final report in 2016. He encouraged a fundamental rethink of how we collect, present and interpret data. He told us:
“The key is to define the question carefully at the beginning; we should not start with the statistic and then ask ‘Now, what questions can we throw at it?’”—[Official Report, Economy, Jobs and Fair Work Committee, 7 November 2017; c 28.]
The committee wanted to examine the accuracy, utility and comprehensibility of Scottish economic statistics. We took evidence from data producers, users, consumers and regulators. The report was detailed and, at 90 pages long, rather a doorstop.
We made 29 recommendations, most of which were directed at the Scottish Government, while others were for the Scottish Fiscal Commission, the Office for National Statistics, and Her Majesty’s Revenue and Customs. The work was well received in the statistical community and the Scottish Government accepted the main thrust of our findings, but—there is always a but—we have three matters outstanding.
I begin with the least contentious point. We sought a robust and independent analysis of Scotland’s particular data needs, with the aim of distinguishing the essential from the desirable and the useful from what we may be doing out of habit. Our recommendation was directed to the Enterprise and Skills Strategic Board. Nora Senior, the board’s chair, thought that the recommendation might be better suited to the Scottish economic statistics consultation group. That was a helpful suggestion. Can the cabinet secretary tell us whether that is doable?
The second issue, which I hope is also non-contentious, concerns the Scottish Fiscal Commission. The commission’s role in economic and fiscal forecasting is crucial and in our view its data needs ought to be prioritised for that reason. However, judging from the evidence that we heard, that is not necessarily the case. We recommended that the commission should set out its data needs annually and that the areas that it has already highlighted, including price and wages data, should be prioritised. Accordingly, the commission wrote to us in September with a first annual statement of its data needs. It highlighted which organisations it relied on for such information and where improvements might be made. I hope that the cabinet secretary will respond positively to those requirements.
The third area is contentious—at least, it has been to the Scottish Government—but it need not remain so. It concerns pre-release access, which is the practice of making statistics available to ministers and their advisers prior to publication. The Office for National Statistics ended pre-release access last July and the Bank of England followed suit. We recommended that the Scottish Government end pre-release access for economic statistics of national importance, including those for gross domestic product. That was the majority view of the committee; the minority opinion was more circumspect and called for a presumption against pre-release access.
How is the issue viewed by the statistical community? The Royal Statistical Society supports an end to pre-release access, as does the UK Statistics Authority, the Office for National Statistics, the author of the Bean review and the UK’s national statistician, John Pullinger. In a letter to the UK Statistics Authority in June 2017, he said:
“On the basis of all the information available to me, I consider that the public benefit likely to result from pre-release access ... is outweighed by the detriment to public trust”.
Ten years ago the UK Statistics Authority wrote to the Scottish Government to say:
“Enabling the administration of the day to discuss and prepare statements ... whilst not allowing the same access to Parliament or the public is not, in our view, good statistical practice.”
“We believe our view on this is shared by statistical offices and other authorities around the world.”
That was 10 years ago, and since then the direction of travel has moved away from pre-release and toward the principles of equal access and earliest possible release. However, that is 10 years of the Scottish Government facing in the opposite direction. The cabinet secretary’s early comments to the committee were highly encouraging and his tone was never less than positive, but so far there has been no delivery on pre-release access to follow UK best practice. If he does not take action on it, the committee might need to initiate a bill to deal with that long-standing issue.
I turn now to economic performance. Again, I can advise Mr Findlay that the following lines were drafted by committee clerks, but I in no way seek to distance myself from them.
Ronald Reagan once remarked:
“Economists are people who see something that works in practice and wonder if it would work in theory.”
We wanted to examine what has worked in practice since 2007, the year that the national performance framework was launched, and also look forward to assess the threats and opportunities of the coming decade, focusing on innovation, investment, internationalisation and inclusive growth, as well as broad drivers for economic growth. We consulted extensively with a wide range of businesses, experts—including economists—and households. We held eight focus groups: two each in Glasgow, Edinburgh, Aberdeen and Jedburgh. We held formal evidence sessions across 12 committee meetings and we met the Organisation for Economic Co-Operation and Development and Skyscanner, among others.
We heard incisive evidence of success where Scotland is leading in innovation and, although traditional industries had struggled, other industries have flourished. Things have been good for video games, life sciences, food and drink, and tourism, but not so good for oil and gas, or construction. We sought a consistent definition of inclusive growth and a better focus on reducing the gap between the low-performing and high-performing regions. We also wanted more done to support women in business being able to access funding and advice, and greater support with job transitions and reskilling throughout all our working lives.
It appeared that the committee’s report had an immediate political impact: a change of cabinet secretary in the very week that we published. Coincidence? Who am I to say?
I quote from the new cabinet secretary—new to the Economy, Energy and Fair Work Committee, anyway:
“This is a complex area with inter-linking themes and dependencies and I commend the Committee for the thoroughness and breadth of its enquiry.”
In that, we see again the positive tone. I want to explore the Scottish Government’s response to our findings in a number of areas: NPF, growth, economic strategy, enterprise and skills, and business-to-business learning.
We had concerns about the ability to measure policy impact under the NPF. The Scottish Government referred to our data inquiry—specifically, to the measures to judge progress toward inclusive growth, including prioritising the data needs of the Scottish Fiscal Commission and renewing the impetus in developing the means of measuring social inclusion.
We repeated a call from our gender pay gap inquiry to raise the status of the care sector in Scotland. The Scottish Government said that an analysis of the growth sectors would be overseen by the chief economic adviser and that it would include consideration of the care sector.
We pushed for future updates of the economic strategy to be strengthened, accompanied by an implementation policy and supported by an evaluation plan. The Scottish Government accepted that recommendation.
We recommended, among other things, more transparency in the performance targets set by the enterprise agencies. The Scottish Government said that the strategic board is developing a framework that will be more consistent with the national performance framework and the economic strategy.
In conclusion, we were pleased with the overall response but call for more than intentions and harmonious sentiment from the Scottish Government and look forward to progress in the areas in which it has accepted our recommendations. In the words of our ever insightful adviser, the Fraser of Allander institute’s director, Professor Roy:
“Strategies and advisory groups are no substitute for good policy based on evidence, data and impact.”
That the Parliament notes the conclusions and recommendations contained in the Economy, Energy and Fair Work Committee’s 5th Report 2018 (Session 5), Scotland’s Economic Performance (SP Paper 359), and its 3rd Report 2018 (Session 5), How To Make Data Count: Improving The Quality And Coverage Of Our Economic Statistics (SP Paper 277).15:02
In fairness to Gordon Lindhurst, that was nearly as funny as the chancellor’s jokes during the budget speech this year—and it was far better than what the civil service writes for me by way of humour.
This is a very helpful debate. It is true that there was a change of personnel at the point at which the committee’s report was published. The report was timely, because, as the cabinet secretary taking on responsibility for the economy, it helped to form my thinking as I tried to find consensus on the economy.
There was, of course, a subsequent change to personnel. Just as I was trying to reach out to the economic expert that is Jackie Baillie, she was moved out of her role as the spokesperson that I would have dealt with. I look forward to her interventions and welcome Richard Leonard to his position in relation to Scotland’s economy.
I commend the committee for the thoroughness and breadth of its report, “Scotland’s Economic Performance”. I believe that, across the chamber, we are all in agreement about Scotland’s huge economic potential. The review focused on statistics, data and performance but, looking at the report, I want to build on the recommendations, taking the consensual approach to the economy that I tried to establish over the summer. I agree with most of the committee’s findings and have given my response in writing.
I have launched an economic action plan—not a strategy, but actions to deliver on the economy. The plan sets out the range of actions that we are taking to address the challenges and recommendations that are highlighted in the committee’s report, to try to stimulate our economy even further. It builds on the existing economic strategy and focuses on increasing competitiveness and tackling inequality. Those two go hand in hand; they are not separate ambitions—they support one another and we must consider them together.
We have made significant progress over the recent period. The unemployment rate is sitting at 3.8 per cent, its joint lowest rate—
The cabinet secretary mentioned the new economic action plan. Will he explain why it does not contain any new economic targets? Is that because the Government missed all seven of its previous economic targets?
As we have previously debated, a number of those targets were affected by things such as the financial crash and the oil and gas downturn. We want to deliver those targets; I did not set new targets because we want to get on with what we have been trying to achieve. However, the plan does outline new actions that we should take to deliver on the economy. We can argue about the targets, which I want to deliver, but the action plan is about actions to deliver on those targets.
On current performance, we have near-record-low unemployment. Surely that is to be welcomed. It is lower than in the rest of the United Kingdom. On productivity, growth under devolution has been faster—
Does the cabinet secretary share my concern that the unemployment and employment figures mask huge numbers of people in precarious work and on zero-hours contracts, with no guarantee of income and all the stress that that involves? Will he look at ways of identifying the scale of that problem in any statistics that he quotes?
I share that concern. We have to look at those issues—at exploitation, underemployment, the skills gap and the whole host of issues that lie beneath the figures. Nonetheless, surely it is to be welcomed that unemployment is going down and employment is going up, notwithstanding the challenges that we face from Brexit. I agree that within the figures are issues of gender, poverty and skills, which we need to explore. However, we should reflect, at least for a moment, on the falling unemployment rate.
There has been progress on productivity and on GDP—we are outperforming the rest of the United Kingdom—but we must recognise that, among European Union nations, our GDP figure is subdued because of the position on Brexit to which the UK Government has taken us. However, despite the narrative that we have had from others, Scotland has outperformed the rest of the United Kingdom on GDP growth over the past 12 months.
To return to Johann Lamont’s point, inclusive growth is important. That is about allowing more people to contribute to and benefit from economic growth. Another factor in the statistics is that we are performing quite well on the real living wage. We want everyone to be paid at least the real living wage, but we are outperforming all other UK countries on its payment. That is progress that we must build on.
We know that we can achieve more. That is why we are investing in the national manufacturing institute for Scotland. That is one example of our investment to transform skills, productivity, innovation and commercialisation in Scotland. On-site work is now under way, a full business case has been approved and detailed design work will start this year.
With the approval of the first seven NMIS industry doctorate projects, industry is also starting to contribute to showing how the institute’s national reach and ability will help to develop the skilled workforce that will enable manufacturing companies to thrive in Scotland.
Further commitments to ensure a highly skilled and productive workforce include the establishment of a national retraining partnership with trade unions and business; expanding free childcare; the funds around attainment, to give every child an equal chance to succeed; work to provide more apprenticeship opportunities, taking them to 30,000 per year by 2020; and ensuring that higher education remains free to all students in Scotland.
Businesses are essential to delivering that inclusive workforce environment in Scotland. That is why we are doing so much on productivity, performance, innovation and exports, and on identifying our growth opportunities. Those are key pillars of our fair work action plan, ensuring that we can become a fair work nation by 2025.
We are continuing to work on the Scottish national investment bank so that it can be a cornerstone institution in Scotland’s economic landscape. That will be underpinned by the legislation that I hope to introduce to Parliament in 2019, backed up by investment of £2 billion over 10 years. From 2020, the bank will invest in businesses and communities across Scotland, prefaced by the building Scotland fund.
Our programme for government commitment to have a national infrastructure mission will mean that annual investment in our hospitals, schools, houses, transport, low-carbon technology and digital connections will be around £1.5 billion higher by 2025-26 than it was in 2019-20. A new infrastructure commission will be established to provide long-term strategic advice to the Scottish Government on national infrastructure priorities. Further details on that are to follow.
Our actions have placed us in a stronger position to face challenges. Michelin’s decision to close the Dundee plant is deeply unfortunate—all members will agree on that—but it is based on extremely challenging market conditions, and the company has agreed to consider a repurposing proposition. I have brought together an action group, led by Scottish Enterprise and Dundee City Council, to develop a proposal with the clear aim of retaining a commercial manufacturing operation. We can have plans and actions, but we must also be fleet of foot.
Brexit presents a significant challenge to our economy—we have already touched on that. That is why we need to get the least-worst outcome.
I recognise that the report is helpful—it was one of many helpful reports that came out over the summer—when it comes to calibrating our systems and supporting economic growth. As a relatively new economy cabinet secretary, I genuinely want to help find a consensus in the chamber on investing in our economy and delivering fairness. That is why I welcome the debate.15:11
I thank the committee’s clerks and advisers for their invaluable support during the inquiry.
In commenting on the committee’s report on economic data, the convener of the committee, Gordon Lindhurst, explained the committee’s concerns about the Scottish Government’s pre-release access to economic data. The committee heard evidence that pre-release access is inconsistent with international best practice, transparent government and democratic fairness. The reality is that pre-release access gives the Scottish Government 24 or 48 hours to spin a positive story around key economic figures, no matter how bad they are. That means that, as soon as the data is publicly available, the media headlines are already dominated by Scottish National Party spin. That is why the director general of the UK Statistics Authority has called for the reduction and removal of pre-release access for the Scottish Government.
Should the same rule apply to UK Government departments that Dean Lockhart has suggested should apply to Scottish Government departments?
We simply recommend that best practice be followed. The ONS and the Bank of England follow best practice in relation to sensitive economic data, and that is what the Scottish Government should do, too.
We support a change and, as Gordon Lindhurst mentioned, we will keep open the option of a committee bill to address the issue if the Scottish Government fails to adopt best practice.
I turn to the committee’s report, “Scotland’s Economic Performance”. One of its key conclusions is that
“Economic growth in Scotland for”
the past decade is below
“the performance of the UK economy”
“historical trend growth rates for Scotland”.
“Levels of GDP growth are marginal; productivity is low and wages are stagnant.”
It does not have to be that way. Scotland’s economy has strong potential. Long-term economic growth in Scotland was 2.3 per cent before the SNP came to power in 2007 but has fallen to just 0.7 per cent under the SNP. Where has it all gone wrong?
The Minister for Public Finance and Digital Economy (Kate Forbes) rose—
Perhaps the minister is going to explain where it has gone wrong.
Does Dean Lockhart think that Brexit will improve those statistics or make them worse?
That remains to be seen over the medium term and the longer term. The point is that the report looked at the past decade and Scotland’s significant underperformance compared with what happened pre the SNP and performance in the rest of the UK.
In looking at where things have gone wrong, the committee heard evidence of serial policy failures over the past decade and fundamental flaws in the SNP’s approach to the economy. The list of failures is long, so let me help the cabinet secretary by briefly summarising the issues.
The committee heard evidence that the SNP’s economic strategy—the four Is strategy—lacks focus and coherence. Nora Senior, the chair of the Strategic Board for Enterprise and Skills, told the committee that the four Is economic policy is
“not joined up across the ministerial departments, which confuses the agencies.”—[Official Report, Economy, Jobs and Fair Work Committee, 27 February 2018; c 19.]
The SNP’s strategy of inclusive growth is also causing confusion. The previous cabinet secretary, Keith Brown, told the committee that inclusive growth means different things to different people. In other words, there is no agreed definition of the SNP’s flagship policy, and no guide for the multitude of enterprise agencies that are responsible for delivering that policy.
That evidence led the committee to strongly recommend that the Scottish Government’s economic strategy be reviewed and updated as a matter of urgency. However, here we are, five months after the report was published, and, despite the new economic action plan, we are still saddled with an economic policy that is not fit for purpose.
The committee also heard evidence that there is no framework in place to measure the impact of economic policy in Scotland. We spend more than £2 billion a year in skills and enterprise, but the impact of the policy cannot be monitored because there is no framework in place. In fact, when the committee asked the previous cabinet secretary for examples of policies that may have worked or which could have been put in place differently, he was unable to answer the question. That led the committee to strongly recommend that
“a comprehensive, monitoring and evaluation framework”
be introduced to measure the impact of policy.
We understand the SNP’s reluctance to set new economic targets, given that it failed to meet any one of the previous seven targets, but the committee’s view is that specific economic targets are essential if we are to properly measure the impact of policy.
Another weakness that was identified by the committee is the inconsistent and weak implementation of economic policy. A clear example is that the enterprise agencies are allowed to set, monitor and measure their own targets without any real input from the Government.
Will the member take an intervention?
I will briefly give way.
I have a serious question. Does the member think that it would be appropriate to launch a new economic strategy with specific targets before we know what the future trading arrangements with the European Union will be, given the significant impact that those could have?
The committee looked at the impact of policy over the past decade, but the member makes a fair point. We are not calling for a new economic policy right now—we are talking about a new direction, which I will come to later.
To address the issues of implementation and policy, the committee calls for
“more transparency on the performance targets set by the enterprise agencies, how these targets are measured and whether they have been achieved.”
The confused and cluttered landscape that has been created by the SNP is a further barrier to economic growth. Instead of supporting business growth, that is acting as a barrier to business development. The Parliament, in a motion that was supported by the SNP, acknowledged concerns that a cluttered policy landscape can lead to confusion, a lack of alignment, duplication and weakened accountability. All parties agreed to that motion.
The committee report also identifies that we need to do more to support Scottish business to capitalise on the significant opportunities available in our single biggest market, through the UK industrial strategy. In recent years, the British Business Bank and Innovate UK have been involved in more than £12 billion of investment across the UK. Much more should be done to help Scottish business access those opportunities. The committee therefore recommends that more “meaningful engagement” should take place between the Scottish Government and the UK Government in relation to the UK industrial strategy.
The committee heard evidence of many more policy failures. I could list them but I will make a more general observation: every one of the policy problems and the structural issues that were identified by the committee are in the control and power of the Scottish Government. The structural problems can be addressed through the introduction of a new, coherent economic framework that capitalises on Scotland’s economic strengths and our relationship with the rest of the UK.
The upcoming budget provides Derek Mackay with a real opportunity to address the issues and set out a new direction for economic policy in Scotland. He can make a start by reversing the SNP’s policy of making Scotland the highest-taxed part of the UK for skilled workers, for businesses and for our high streets.15:18
I welcome the debate, particularly on the important report “Scotland’s Economic Performance”. I will begin by paying tribute to Jackie Baillie and Kezia Dugdale, who have done much to shape the report’s conclusions, particularly the more radical ones.
I will be clear from the outset that there is much in the committee’s report that the Scottish Labour Party welcomes. The recognition that employee and co-operative ownership has
“huge potential to improve productivity, facilitate future growth, reduce inequality and retain jobs in Scotland”
is welcome. Welcome, too, is the recognition that we need positive action to encourage female entrepreneurs, who are underrepresented not just in our corporate boardrooms but in our start-up businesses. The related long-standing challenge of scaling up businesses and the identification by the committee of the so-called missing middle in the Scottish economy, because of an investment gap, provides vital analysis. We know that, all too often, businesses in Scotland are not scaled up; they are taken over. The result is that a third of the Scottish economy is overseas owned. That is a higher level than in all other parts of the UK, including London and the south-east of England.
There is a deeper-seated problem lying at the heart of the conclusions of the report. Although we acknowledge that the problem’s roots go back some considerable time, we cannot overlook the fact that the Government has been in office for over a decade and has time and again been economically complacent and industrially inept. Ten years in, and with Brexit looming, it has failed to come up with an industrial strategy and has failed to devise an economic strategy worthy of the name. The result is that, all too often, the SNP Government is only reacting to businesses failing, rather than acting, planning and investing to ensure that businesses are successful in the first place.
I agree with Richard Leonard that both Kezia Dugdale and Jackie Baillie contributed so much to the committee’s report and in other areas. Why did they lose their jobs?
I will treat that with the contempt that it deserves.
Indeed, in the Scottish Government’s response to the committee’s report, for which I am assuming the cabinet secretary takes ownership and full responsibility, we are treated to a new phrase in the lexicon of SNP economic complacency. We are told that the takeover of Scottish companies, sometimes hostile, is not a takeover at all. It is not even an acquisition or a merger. It is “entrepreneurial recycling”. Try telling the workers up and down the country who have lost their jobs that they are not victims of a loss of local ownership and control, or of a hostile takeover, but have simply been entrepreneurially recycled.
As the committee report shows, there is no plan from the SNP for Scotland to face the future. There is no plan to not only tackle the challenges of automation but seize the opportunities of automation. The impact of the digital revolution is not confined to technology companies. It is being unfolded across all sectors, right across the economy.
That is why Labour will continue to make the case for increased investment in education and the upskilling of workers. It is also why the committee is right to call in the report for automation to be a cornerstone of the Scottish Government’s labour market strategy. We hear much about fair work, but 470,000 people across Scotland still earn less than the living wage. Let me cite one real-world example.
Will the member give way?
Let me give the example. I direct members to my entry in the register of members’ interests.
Just this week, self-employed drivers at DPD’s depot in Cambuslang, who have been getting organised with the support of their union, the GMB, have been threatened that the GMB will be sued, their shifts will be axed or worse and their livelihoods may be taken away altogether. That is intolerable. I urge the cabinet secretary to back my call for the company to meet unions such as the GMB, instead of threatening to sue them.
We need a Government that is prepared to do more than simply correct market failure. We need one that is prepared to help to shape markets, to intervene, to use public procurement, to tackle climate change, to eradicate inequality and to change the balance of power to build a different and better economic future.
On export growth, too, we know that we have a long-standing problem of having too narrow an export base. Just 70 businesses account for 50 per cent of all Scotland’s exports. The committee makes the point in the report that the problem with our exports is not our trade strategy but the level of investment going into it from the Government.
Finally, years after it was first announced, reannounced and reannounced again, it now looks like we might get a Scottish national investment bank. It might go some way to help Scottish businesses in need of investment, but the £200 million per year that the SNP is offering is a long way short of Labour’s offer of £2 billion of patient industrial investment capital per year in Scotland.
The Scottish Government says that the bank’s board will determine what investment products to offer. We do not underestimate the importance of market intelligence and expert advice, but who will be on the board making those decisions? Will it be bankers or trade unionists and industrial representatives? Will it be women as well as men? Will the cabinet secretary agree to a 50:50 gender balance on the new investment bank’s board? If we insist, as we should, on gender balance in the political realm, why should we not insist on it in the economic realm, too? On that, and on other points, it is time for action.15:25
I thank all the people who gave evidence to the two inquiries, the clerks and our special adviser, Graeme Roy. I also thank the Labour Party for its keen interest in the debate, although I see that some of its members are less interested now.
The committee’s report on the performance of the Scottish economy is not only a fair reflection of what has happened over the past decade but, in connection with the equally important data inquiry, a reminder that an assessment of economic performance is only as good as the data that underpins it, and the data that underpins it is of any utility only if it measures the right metric in the first place.
A good example of where we still have work to do in that regard was highlighted in August, when Scottish Government statisticians reported that they had adjusted the methodology for measuring activity in the construction sector. That had quite an impact. They had previously thought that, from the end of 2015 to the beginning of 2018, the size of the sector dropped by 12 per cent but, in fact, it grew by nearly 4 per cent.
Beyond the normative means of measuring the economy, members will be aware that Greens have substantial and fundamental concerns, questions and criticisms in relation to how we define economic performance. We live in a world that is heating quickly, with the trajectory and consequences laid out starkly by the Intergovernmental Panel on Climate Change a few weeks ago. We live in a world in which humans have destroyed 60 per cent of the world’s animal population since 1960. Our current economic model is destroying the very foundations on which the health of the planet and the health of humans and other organisms depend. Therefore, the metrics that we use to assess the health of our economy still focus on a measure of growth that is blind to the contradictions at its heart—there are limits posed by our environment.
The well-publicised paper on hothouse earth, “Trajectories of the Earth System in the Anthropocene”, which was published in August, observed:
“Incremental linear changes ... are not enough to stabilize the Earth System. Widespread, rapid, and fundamental transformations will likely be required to reduce the risk of crossing the threshold”.
Green economics recognise that the climate crisis is leading to growing instability, unrest and economic decline. Greens also recognise that, in order to keep within the Paris climate targets, we need to keep in the ground the majority of the hydrocarbons that other parties in the chamber often tout as being part of Scotland’s economic future. As far back as 2015, we commissioned the “Jobs in Scotland’s New Economy” report, which found that investing in the transferable skills of the offshore workers who are currently employed in the oil and gas sector could create more than 200,000 jobs in the renewables industry by 2035—against the 156,000 jobs that are currently provided by fossil-fuel extraction.
At a human level, the kind of economic performance that is discussed in the two reports ignores the very worrying trends for households. Figures for private debt show that households in the United Kingdom owe nearly £1.6 trillion, and that debt is forecast to rise to more than £2.3 trillion by 2022. Those levels of private borrowing and private debt are responsible for some of the better economic figures that are coming out of the UK, but that situation is fundamentally unsustainable. Much of what passes for prosperity in this country is actually no more than a Ponzi scheme of rising house prices and increasingly unaffordable rents that is driving growing inequality in wealth throughout the UK. I am sure that members will be aware that that inequality will have substantial political consequences, as younger generations realise that they have a vote, that there are choices to be made and that their interests are not being well served by our current economic model.
Members will have heard Greens before on this topic, but I do not apologise for restating our opposition to GDP, which is a very poor indicator of a sustainable economy that fails to distinguish between useful and damaging economic activity.
Does the Green Party accept in principle that economic growth is a good thing?
It depends on how we define economic growth. If one defines it as growth in GDP, we do not accept that it is a good thing. We accept that the fundamentals of the economy are a healthy environment and human wellbeing.
The concept of GDP was invented by a US statistician called Simon Kuznets, who was tasked by the US Congress in 1932 with estimating national income over the preceding four years. He responded by aggregating several measures of the value of goods and services. Today, that is what we call GDP. However, despite Kuznets having conceived of the idea, he was one of its fiercest critics. It does not measure goods and services that are produced in the course of daily life, such as care and education—Murdo Fraser might be interested in that; it does not measure the distribution of income or say anything about wealth; it ignores environmental services; and it says nothing about energy flows. However, GDP persists and is the central goal of Scottish economic policy.
The academic Kate Raworth, among many economists, has written substantially on this issue. Her book “Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist” highlights the growing recognition that what we measure is of little use if it does not meet the challenges that we face. She recalls classical economic arguments about land, labour and capital, which have been substantially forgotten since the late 20th century in favour of arguments about labour and capital alone. However, the natural resources of the planet—water, land, soil and atmosphere—sustain life on earth. If we are to have a serious debate on our economic future, we need to frame the debate with new economic thinking.
Our debate about these committee reports should remind us that what we measure is as important as what those measurements tell us. In 10 years’ time, we will be two years away from the deadline for taking action to contain global warming to 1.5°C. The economic consequences of not doing so are unprecedented. We have been warned.15:32
I have huge admiration for the clerks who serve our committee; they provide tremendous expertise and put a large number of hours into the production of reports. I can just imagine their joy when the committee decided to produce a report on statistics—the joy must have been flowing out of the room. I warn those in the public gallery that the chamber is not normally this exciting on a Thursday afternoon, but we ration the number of debates on statistics because Gordon Lindhurst cannot contain himself when there are more than one a year.
The performance of this Government is stark. If we take the section of the “Scotland’s Economic Performance” report that focuses on the 10 purpose targets, we see that only a small number—two out of the 10—that I can see have been passed. We have failed on GDP, on employment and on life expectancy. That is the mark of a Government that has been in power for 10 years and has not taken the economy as seriously as it should have done.
Does Willie Rennie think that the oil and gas downturn or the economic crash had any impact on any of those indicators at all?
Of course, but that indicates that we are stronger together, as part of the United Kingdom, as that provides the economic breadth and support that we need during those difficult times. We have had heading towards 10 years of uncertainty due to Brexit and the independence debate. We should not ignore the amount of investment that has been disincentivised as a result of that constitutional uncertainty or the direct impact that that has had on the economy—on the Scottish economy as much as anything.
The Government has not performed particularly well over the past 10 years. Of course there have been challenges, but they should have been foreseen by the Government, which has been dependent on a small number of industries when it should have been looking to make the economy broader and stronger.
I cannot remember the number of debates that we have had in this chamber on the inability of the Scottish Government to use the economic power of its procurement budget to drive investment to small and medium-sized enterprises, but yet again, the Government’s failure to invest in small and indigenous businesses comes up in this report. A number of experts and advisers recommended ways forward on that, but the Government was deaf to their complaints.
On the Scottish investment bank, which we have heard about, there have been numerous attempts by this Government—I do not know how many announcements there have been—to get it off the ground, but after 10 years of the Government being in power, it has still not happened.
On skills, the minister did not talk about college cuts in his introduction, but cutting 150,000 places from our colleges has had a direct impact on the skills of our workforce and that has fed right through to the performance of our economy.
The Government has been too slow and too late in so many areas, which is why the Government has failed on eight out of 10 of the purpose targets.
I was interested in the “missing middle” aspect of the report, which referred to the scaling up of Scottish businesses into larger companies that are anchored here, and the proposals on anchoring businesses here for the longer term. Dr Mawson made the particularly powerful comment that public investment through Scottish Enterprise and other agencies was, in effect, lining the pockets of multinational companies—a pretty strong comment from a committee witness. Whether that is true or not, we need to look at whether we can do more to anchor those companies here. Like Richard Leonard, I was interested in the proposals on employee ownership, which is one of the mechanisms that could be used.
Would Willie Rennie support or oppose the idea of a foreign company building trains in Fife?
Of course I would not oppose that, but we need to consider whether we get value for the money that we invest in such companies. I argue that the investments that we made into Amazon have perhaps not secured the return that we would have liked. We need to look at the type of investment that we make in such companies before we bend over backwards to give them all the investment that they want.
Employee ownership is one of the ways of securing companies here; another way is through the intellectual property that we have secured through the university sector. However, skills have an important part to play. A lot of companies come here because of the expertise of our people, so we should constantly invest in people. Another thing, which is often overlooked, is the general stability of our environment. The fact that companies can operate in a secure environment here is attractive to many companies around the world, and we should encourage that.
In my final few seconds, I want to highlight the issue of immigration, because the report talks about Brexit. One of the biggest acts of self-harm that we are about to do is in our approach to immigration. There are numerous industries in north-east Fife, from the fruit and veg sector to the processing sector, the national health service, the great universities and the tourism industry, and they are all crying out for brilliant workers; but, as a result of the Brexit vote, we are closing our doors to them. We need to change that policy if we are not to damage our economy further.15:38
I am a new member of the Economy, Energy and Fair Work Committee, which has been an interesting but somewhat unique experience for reasons that I am sure members will understand.
The committee’s report on Scotland’s economic performance is timely. We are a decade on from the financial crash that unleashed great misery and untold harm—as, invariably, it is those with the least who lose the most. The crash will have its place in history and, particularly in recent times, I have heard it said that, in times of uncertainty, we tend to look more to, and hang on more to, the past. Of course, we should always listen to the lessons of the past, and it is a shame that the west and our somewhat complacent financial establishment paid no heed to the Japanese financial crash in 1997. If they had, history could have been somewhat different.
As for our experience closer to home, history will record that the powers that be, with ideological motivations, took full advantage of the crisis to advance austerity, but I hope that, when we look back, we will also be able to trace the roots, or the re-emergence, of inclusive growth—more an economic philosophy than an ideology—to our time.
It is a powerful affirmation of hope for our future that growing our economy and tackling inequality in all its forms are not mutually exclusive but two sides of the same coin. One feeds the other: tackling poverty, poor pay and health inequalities, widening educational opportunities and addressing the underrepresentation of women and others in key areas of our economy are all good for business. Similarly, those who want social democracy need to be able to pay for it.
The committee has said, rightly, that our enterprise and skills agencies should have a common understanding of inclusive growth, but that it should certainly be part of the core service offered by every part of the public sector, too, and that we also need to build consensus across the private and third sectors. We need to create consensus around what the best dashboard of meaningful measurements is for painting a vision of what a well-rounded society and productive economy looks like, and the national performance framework is potentially important in that regard.
The committee undertook what was, in my view, a valuable inquiry on how to improve the coverage and relevance of economic data and measure the impact in a Scottish and devolved context. I note the differences of opinion on pre-release access to official statistics. I can see the argument from both sides of the fence—and, for the time being anyway, I am just going to sit on that fence.
That is because, for me, the bigger prize is a comprehensive shared assessment of the opportunities and, indeed, the challenges facing our economy. We should be able to say simply that, as a rich successful country, we are not reaching our full potential. Although our labour market remains resilient, we must always scratch beneath the headlines, because good employment figures mask insecure, low-paid work.
Moreover, we must always widen our horizons, particularly when we compare our performance with that of others. This is not just about our nearest friends and neighbours in the rest of the UK; sometimes, their performance is not good enough either, for example on productivity. Despite political differences, we need to identify common ground so that we can have the collective courage to take a long-term view and commit to the future. I think that we are beginning to see that with the longer-term investments in infrastructure, the Scottish national investment bank and, crucially, housing. We must recognise that consensus builds confidence in our economy and our economic players. Certainly with Brexit on the horizon, we need to pull together in Scotland's interest.
The committee report helpfully lists where specific economic levers rest—it is always important to understand where power lies—but we need mature discussion and reflection in relation to shared economic space and the potential impact of powers, individually and collectively, given that, as we all know, there is no one silver bullet for delivering a stronger and fairer economy.
Looking to the future, we should never take our eye off the ball when it comes to young people. Youth unemployment is much reduced from its peak in 2011, when it was knocking on 25 per cent and 113,000 young Scots were out of work. The committee rightly calls for more apprenticeship opportunities for older people, but not at the expense of our younger people. The European countries that have consistently lower youth unemployment consistently invest in high-quality vocational education opportunities for young people in good times and bad. The committee, again rightly, has called for more entrepreneurial thinking in our universities and colleges. However, such thinking should run through our education system, connecting the world of work with the world of education. I think that we are seeing some of the fruits of our labour in that respect around curriculum for excellence and, in particular, the developing young Scotland’s workforce agenda.
We need to recognise, as Chris Van der Kuyl said, that
“we have never lived in a period of such fast change as the one that we live in now and that it will never be this slow again.”—[Official Report, Economy, Jobs and Fair Work Committee, 27 March 2018; c 14.]
To have come to the other end of the financial crash only to enter Brexit is so tragic, and I fear that the judgment of history will be harsh on us, but all of us must now work harder to make that vision of inclusive growth for a stronger economy and a fairer society a reality.15:45
Given that my previous attempts at humour have seemed to clear the chamber and, almost, the gallery, members will be delighted to hear that I promise to avoid making such attempts today.
I am pleased to speak in today’s debate on our committee reports on our economic performance and on economic data. I will focus on the economic performance report.
There have been a number of positive speeches. First, I thank the committee’s convener, Gordon Lindhurst, for his excellent summary of the committee’s work and its conclusions. I join him in extending my thanks to all those who gave invaluable evidence—written and oral—to the inquiry, and to the clerking team, who helped to tie together the significant body of work that went into the report.
Given the inquiry’s subject matter, it was, by necessity, wide-ranging, so it would be difficult to address its entire scope during a debate of this type. There are, however, a number of areas that emerged from it that I will consider.
First, it is clear that Scotland’s economy is diverse. In recent years, we have seen considerable divergence in the success of different sectors of our economy. We have also noted in the report some of the regional challenges, which I will come to later.
Although Scotland’s economy has shown some health and resilience in recent years, it still suffers from a degree of fragility. Against that backdrop, it is more important than ever that we look to the future. We must ensure that our prospects for growth are sustainable, and that we do some of the heavy lifting now, in order to address the long-term economic problems that have held back our businesses and employers in the past. In that respect, there is much to be welcomed in the report. The committee looked back to consider our previous economic performance, and we also looked forward to examine some of the challenges that we must overcome and the opportunities that we should harness boldly.
An area that is of particular interest to me as a member for the Highlands and Islands is the work on regional growth. We know well that there are significant disparities between Scotland’s regions, but the disparities also highlight underlying differences in the regional economies themselves, and their often quite different priorities.
Although it is tempting to consider that the divide is between urban and rural, the economic distinctions between the rural Borders and the rural Highlands are at least as wide as the distinctions between urban Edinburgh and urban Dundee. What is stark, however, is that regional disparities can be self-sustaining. Lower growth, lower investment in skills, depopulation, lack of skilled jobs and low pay become cyclical problems—and those problems become increasingly difficult to escape from.
In the committee’s recommendations, we first outline the need to evaluate and consolidate Scottish Government policies on regional economies. Steps like that will be important if the Highlands and Islands, for example, are to reach their potential. Above all, we need focus from a Government that recognises that a Scotland exists beyond our main central-belt population centres.
In its response to the report, the Government references its work on regional partnerships and the creation of the south of Scotland enterprise agency. Although regional partnerships have the potential to push beneficial change, their success will depend on the position that they are accorded and their ability to unite other stakeholders around a common vision for our regions.
The report also recognises the key role of digital infrastructure as a driver of change in regional economies. I have spoken about that at some length, including in the chamber earlier in the week. An important point to draw out of the evidence, however, is that infrastructure must be accompanied by appropriate digital skills. Again, we saw that skills are a key component in investing in and realising human potential. As the report points out, the committee has agreed to look at that area in greater depth during a future inquiry.
Although there were limits on the scope of our inquiry’s consideration of skills, we drew useful conclusions. Work-based skills are a foundation on which economic success is built. Our recommendations cover a number of areas—in particular, in-work training, reskilling and our performance in matching skills to the needs of business and the wider economy. Those are areas in which the Scottish Government can make real and significant change.
However, in-work skills are the responsibility of employers too, and the benefits of good-quality training and development are well established. Our evidence included the need for employers to fund and support their employees’ skills properly. Our findings on apprenticeships will, in the main, be familiar to policy makers, but they certainly warrant repeating—I note the examples of countries where apprenticeships are more valued, and the feedback from young people and the areas that are neglected.
We looked at support for innovation in the economy. Scotland is doing well in academic research, but some wider research and development work lags behind international comparators. We heard that R and D spending as a share of gross domestic product in Scotland is at just over 1.5 per cent, compared with more than 1.9 per cent across the EU, and it is behind the figure of up to 4 per cent that applies in some of the fastest-growing and most innovative countries.
We noted the high productivity levels of businesses that are innovation leaders, and the challenges for small and medium-sized enterprises to innovate. I hope that, even beyond the scope of the recommendations, the Scottish Government will reflect on the evidence that the committee reported on, and consider what more can be done.
Internationalisation and the funding to meet the Scottish Government’s export targets were covered at some length. We came across a common theme that has arisen in our work on the Government’s interaction with business. It is—as my colleague Dean Lockhart said—the problem of the cluttered landscape and the need for effective signposting of available support.
I have been unable to cover even briefly a number of sections of the report. It is a serious piece of work, in which positives and negatives can be found. The committee approached the report openly and in the spirit of co-operation. We found broad agreement on many recommendations that require the Scottish Government’s attention.
I commend the report on economic performance and the report on economic data, and I hope that they will be useful in the months and years to come.15:51
I think that most members who are in the chamber have focused, or will focus, on the report on economic performance. I thank the cabinet secretary and Richard Leonard for their kind remarks. Long may that continue.
The Government will argue that everything is wonderful, and will share its set of statistics to prove its case. The Opposition parties will, rightly, say how woeful everything is, and will marshal their statistics to support their narrative.
The truth is that we could do a lot better. As we face the Brexit storm, we need our economy to be resilient and to perform well, if we are to stand any chance of mitigating the worst impacts of leaving the EU. The impact on jobs and business will be significant, but we are sleepwalking completely unprepared into the situation.
Let us look at the Scottish-European growth co-investment programme that the Scottish Government set up. It announced in the programme for government, with extraordinary fanfare, £200 million for that programme, but the funding remains largely unallocated. Only £500,000 of it has been spent this year. The upshot is that the fund is not reaching the intended recipients to help them to prepare. That is another case of SNP rhetoric not quite matching reality.
Very few members will talk today about the committee’s report on economic data—apart from the convener, who could fill an opening slot at the Stand comedy club. Many people might think that the report is dull, boring and the stuff to cure insomnia, but they would be fundamentally wrong. At the risk of members tuning out, I will focus on that report.
Collecting the right data at the right time is critical to our understanding of how policies should be developed, and to our understanding of their impact. Confidence in the data and confidence that the people who gather it are independent and impartial are equally important.
Access to data needs to be open and transparent.
Is Jackie Baillie suggesting, and does she have any evidence, that the statisticians are not independent and do not act impartially?
It is not the statisticians whom I have concerns about: the Government’s record on transparency is not good. We can look at journalists’ experience of making freedom of information requests of the Scottish Government, and at the damning report from the Scottish Information Commissioner. In it was laid bare the culture of secrecy and the lack of transparency that are at the heart of the Government, and which ministers and their special advisers sanctioned. People were hiding information, delivering what I can describe only as fact-free responses, and generally subverting the process and principle of freedom of information. That amounts to deliberate obstruction; it is fundamentally dishonest and takes spin to new heights.
Let me introduce pre-release access to statistics. As the convener explained, that is the practice of ministers getting privileged access to statistics days before the rest of us see them. The civil servants will argue that they need time to explain to ministers what the statistics mean, so that they are more likely to give measured responses and be able to explain what they mean to journalists. I do not have such a low opinion of the intelligence of ministers—not all the time. Such privileged access undermines public trust in official statistics. It creates opportunities for it to be spun or buried beneath an avalanche of other announcements.
The Economy, Jobs and Fair Work Committee recommended that pre-release access to economic statistics, including on Scottish GDP, the Scottish retail sales index, quarterly national accounts and government expenditure and revenues, should end. The Office for National Statistics has stopped the practice. The Bank of England has stopped the practice. The Scottish Government, which is so keen to crow about being a world leader in all sorts of things, is content to follow far behind best practice and is ignoring the committee’s recommendation. That is disappointing and surprising.
Derek Mackay hit the ground running as the new finance secretary. There was a flurry of activity, engagement with businesses, and the mood music changed. Here was a listening and responsive minister.
Will the member take an intervention?
No. I have taken one already.
You are very generous.
The cabinet secretary should just listen. Curiously, in respect of pre-release access to statistics, he has been the exact opposite: he has been slightly hostile and uncharacteristically deaf to reason and sense.
What is being suggested is not some radical left-wing notion, nor is it some neoliberal right-wing idea. It is not rocket science. Goodness me! The ONS does it and the Bank of England does it. The Scottish Government should do it too. The time has come to end pre-release access to statistics.
I know that the cabinet secretary might not always listen to me, but here is what other people have had to say about the matter. Sir Charles Bean, the former deputy governor for monetary policy at the Bank of England, has said that pre-release access to economic data should end. Jonathan Athow, the director general of economics and statistics at the Office for National Statistics has said that pre-release access to economic data should end. Ed Humpherson, the director general for regulation at the UK Statistics Authority has said that pre-release access to economic data should end.
Derek Mackay seems to know better. He says that he wants to work in consensus and that he wants to listen. Here is the first test of that. I urge him to listen and to act, to be open and transparent, and to end pre-release access to statistics.
That is not my decision.
Instead of shouting from a sedentary position—
Will the member take an intervention?
I cannot, because I am 10 seconds over time.
You do not even know that it is not a ministerial decision.
I suggest that the minister put as much energy into ending pre-release access to statistics as he does to shouting at me across the chamber.15:58
The health of the Scottish economy underpins the prosperity of Scotland. Since 2007, when the Scottish Government set its target to raise Scotland’s GDP growth to UK levels, Scottish output grew more slowly than the UK’s in 30 of the subsequent 41 quarters. However, during the past six months, the Scottish economy has begun to show signs of outpacing the UK’s economy across various indicators. For example, figures published recently show that Scotland’s unemployment rate is lower than the UK’s as a whole.
Contemporary analysis of Scotland’s economy makes for encouraging reading. Recent GDP figures show faster growth in Scotland in the first half of 2018. Our economy grew 0.5 per cent in the second quarter of 2018, which is faster than the UK’s rate of 0.4 per cent, while our 0.9 per cent growth in the first six months of this year exceeded the Scottish Fiscal Commission’s forecast of 0.7 per cent growth for the full year.
There is much more to Scotland’s economy than GDP and jobs. Issues such as equality, job quality and household income debt ratios come into play. We must also understand what aspects of the economy are the most important to ordinary people throughout Scotland.
Scotland’s employment rate increased from 73.8 per cent in 2014 to 75.1 per cent in May to July 2018. The unemployment rate decreased from 6.1 per cent in 2014 to 3.8 per cent in July to September 2018.
With fully devolved powers or independence, we could implement further economic policies that continue to reflect a strengthening economy. Despite the global financial uncertainties that are affecting all economies, and a decade of Westminster austerity measures that were supposed to cure the UK’s financial ills but have instead promoted poverty and hardships, the evidence clearly displays that the measures that the Scottish Government is taking to protect and promote the Scottish economy are fundamentally the right ones.
There should be no doubt that Scotland is a successful country with assets that other countries covet. We stand in the top 25 global economies on income per head and rank behind only London and the south-east of England on most long-term indicators. Our exports of goods have increased by more than 12 per cent over the past year—the largest growth of any nation in the UK.
Despite the positive background, we will face challenges in the years to come. The threat of Brexit looms large on the economic horizon. Scottish Government analysis shows that a hard Brexit could cost our economy £12.7 billion a year by 2030 compared to remaining in the EU. That figure breaks down to a staggering £2,300 per person. The Bank of England has indicated that, to date, Brexit has reduced household incomes by up to £900, and Fraser of Allander economic commentary states:
“A ‘hard Brexit’ will act as a significant drag on Scotland’s—and the UK’s—economic potential ... Sleepwalking into a ‘no -deal’ outcome cannot be viewed as an effective economic plan.”
More locally, when I spoke in the debate on bank closures in September, I highlighted the serious effect that such closures have on local communities. There has been a number of closures throughout Scotland and in my Midlothian North and Musselburgh constituency. The inconvenience to local businesses and personal customers, many of whom are vulnerable and elderly, has been considerable. Bank closures continue the pernicious hollowing out of our communities, as libraries and other local facilities that formed the heart of communities are closed or run down.
Bonnyrigg is one of the largest towns in my constituency and contains a large number of small businesses whose turnover is largely cash. The businesses need to be able to bank their takings, but without a local bank or adequate arrangements through the post office, the businessman needs to either take time out of his busy day to travel to the nearest bank branch or pay for the money to be uplifted.
With the closure of the Bonnyrigg and Penicuik branches of the Royal Bank of Scotland, Midlothian is left with only one RBS branch, in Dalkeith. Although RBS needs to maximise its profit, it should not be at the expense of local services, which support the local economy. Although RBS’s most recent round of closures has brought the issue of branch banking to the fore, the issue affects all banks, and any solution must involve all banks.
The worst impact of bank closures is felt by the most vulnerable members of our society, for many of whom going into a branch remains the only feasible way to conduct their banking. It is high time that the Tory Westminster Government stepped in to save local banking services—its inaction to date has been appalling.
As I have mentioned, one of the biggest challenges that Scotland and the UK will face over the next few years is Brexit.
On the point about banking, does the member support the efforts in the House of Commons of my Conservative colleague, Luke Graham MP, with his private members’ bill on banking issues?
Unfortunately, I have very little information on that. However, now that the member has mentioned it, I shall certainly find out more details.
The ultimate economic impact of Brexit is not yet known, but it will affect every business and family in Scotland, exacerbate labour shortages and impede economic growth. Our export success is directly threatened by the prospect of the removal of our access to the single market and customs union.
If we were an independent nation and free to take our own decisions, we would have the opportunity to focus on what truly matters to our economy and we would not have to rely on others, who do not care for a Scottish voice.
I hope that it has been made clear that Scotland is currently in safe hands. While Westminster and the Tories willingly choose to ignore investment and support for local communities, the Scottish Government is taking action to enhance and boost our economy. That action includes increasing the annual infrastructure investment year on year, so that by 2025-26 it will be £1.5 billion higher than in 2019-20 and investment will be around £7 billion higher than current spending projections; investing in our digital infrastructure by awarding £600 million of contracts to ensure superfast broadband for every business and home in Scotland; and introducing the legislation that will formally underpin our Scottish national investment bank.
Those examples have already been welcomed by businesses and industry. Those and other actions that the Scottish Government is implementing point the way to long-term economic growth and are further proof of how we are taking a wide view on how to secure the country’s future in the years and decades to come.
As a member of the Economy, Energy and Fair Work Committee, I am certain that we will continue our examination of the issues related to Scotland’s economy and the data and criteria used. I look forward to debating the topic in Parliament in the months to come.16:05
I thank the Economy, Energy and Fair Work Committee for publishing its report on Scotland’s economic performance.
As many members have said, economic growth in Scotland between 2007 and 2017 was significantly below Scottish Government targets, the performance of the UK economy as a whole, historical trend growth rates for Scotland and those of small EU countries. That is a damning indictment of the SNP Government, clearly spelled out in black and white in the committee’s report. We heard earlier from Derek Mackay about some of the reasons for that, but surely not all those targets can have been missed for those reasons. There are other policies that Derek Mackay might consider and other ways in which to boost the economy.
During the 11 years of the SNP Government, we have seen it fail repeatedly to reach its economic performance targets. To top that off, the high-tax agenda pursued by the Government continues to damage our high streets and local communities and curtails the creation of jobs. Ultimately, that impacts on tax revenue and spending on services.
I want to move on to a point that was made in evidence to the committee on the large business supplement and scaling up businesses. The name “large business supplement” is deliberately misleading and was probably dreamed up by someone in the SNP. In reality, the large business supplement is a tax on small, family-owned, local businesses—they are the ones that have to cough up the additional taxes.
Businesses in Scotland have been hit by an additional £190 million, thanks to the doubling of rates by the SNP. Across Scotland, it is estimated that the total bill for big companies will be circa £129 million for the rest of the financial year. Had the rate had been kept on par with the rest of the UK, businesses would have to pay only circa £64 million. The large business supplement is set to double in my constituency.
To add insult to injury, the Government has forced the highest business rates in Europe on to Scottish companies. Scottish businesses are currently paying business rates equivalent to 2 per cent of GDP, which is higher than business rates paid anywhere else in Europe and 0.5 per cent higher than those in the rest of the UK.
Will the member give way?
I would like to finish my point first.
The committee notes that
“the scale-up of companies has been a long-standing challenge in Scotland. There is a lack of business confidence to do so”.
It is unsurprising that the committee has reached that conclusion when Scottish businesses have been forced to withstand the policy decisions of the SNP Government.
Would the member confirm that, along with a reduction in taxes that should be paid into the public purse, there should be a reduction in expenditure and therefore that she would support a matching cut in either the health service or colleges and universities?
In the autumn budget, the chancellor promised more money—£950 million—to the Scottish Government for health spending. John Mason makes an ironic point.
The SNP tax plans hit family businesses as I have just set out. Individuals are also set to continue to pay for SNP fiscal decisions through their income tax. In the autumn budget, the chancellor brought forward a tax cut for 32 million people one year early. That will deliver for workers across the United Kingdom, including here in Scotland. We all know that he will raise the personal allowance and the higher rate threshold. He brought forward that tax cut at the same time as passing on that extra funding for Scotland, perhaps for the NHS. We hope that it will be used in a way that will benefit the people of Scotland.
The Cabinet Secretary for Finance, Economy and Fair Work must follow suit or we will see the private and public sectors struggling to compete with other nations in the United Kingdom and that tax gap will continue to grow.
Will the member take an intervention?
I am sorry, but I want to make a bit of progress, if the member does not mind.
In evidence to the committee, Willie Macleod from UKHospitality stated that different rates of income tax for Scotland and the rest of the UK were an issue for hospitality, too. He spoke to the managing director of a large Scotland-based company that operates throughout the UK and was told that it was concerned about the impact of the different rates of income tax on bringing staff from England to positions in Scotland. That company is thinking about how it can reward staff appropriately when they relocate and how it can encourage them to relocate. The issue is not just about highly paid chief executives and the like, because last year’s Scottish budget put up income tax for those earning more than £26,000.
It is clear that the recommendations in the committee report are a wake-up call for the Government to act. They are an achievable and positive set of recommendations that the Government can work towards to help improve economic growth, notwithstanding what I have just said about the issues affecting high streets, the personal allowance and the higher rate threshold differentials.
The committee was unequivocal in recommending that the economic strategy be reviewed and updated as a matter of urgency. Regarding the enterprise and skills agencies, in particular the south of Scotland enterprise agency, I agree with the committee that a clear focus on delivering the strategy is required. I am glad that the committee believes that there is an opportunity for the south of Scotland enterprise agency to build transparent measurement and evaluation into its activities from the outset. Moreover, I agree that there has to be a consistent, commonly held and settled definition of inclusive growth and that it should be reflected in the enterprise and skills agencies’ operational plans.
We know that we are stuck in a cycle of low growth, weak investment and fragile confidence that is hitting our local communities and high streets hard. I just hope that in the decisions that Derek Mackay makes, he makes a sensible one.16:11
I am grateful for the opportunity to participate in the debate. I had the great pleasure and privilege of being a member of the Economy, Energy and Fair Work Committee earlier this year, and I had the opportunity to participate in the inquiry into Scotland’s economic performance. I join former committee colleagues in paying tribute to the work of the committee clerks, and I pay tribute to my former fellow committee members for all their hard work and endeavour in producing what is quite an extensive and, by its nature, wide-ranging report. That wide-ranging nature has been reflected in much of the debate.
I will pick up first on the narrative that some Opposition members are seeking to construct of 10 or 11 years of SNP Government having failed to address matters of economic growth. I appreciate why Opposition members do that: they see it as their job, and it is the nature of the zero-sum game of political debate that parties do not want to admit that the other party has a point. However, any reasonable consideration of where Scotland was in 2007 compared to where we find ourselves as we are about to enter 2019 would find that there has been considerable change for the better. Let us take infrastructure alone: when I come from the west of Scotland to Edinburgh for my week in Parliament, I now travel on an electrified railway line.
I acknowledge that the oil industry downturn has had an impact, but does the member acknowledge, in the spirit that he was talking about, any of the points that we are making about the Scottish Government’s performance?
When the Scottish Government came to power, within 18 months it faced the greatest fiscal crisis since the Wall Street crash of 1929, and it did so in a Parliament with a limited suite of powers. In addition, I gently remind members that, for the majority of the time that the SNP Government has been in power, it has been a minority Government. There is therefore a collective responsibility in the Parliament for the decisions that have been taken.
As I said, I can now travel from Glasgow to Edinburgh on an electrified railway line and I can drive the length of the now-completed M8. The Aberdeen western peripheral route will shortly open, and the M80 has been completed, as has the M74. Those projects were first mooted as far back as the 1940s, 1950s and 1960s, but it took an SNP Government to deliver them. That is testament to the Government’s record in getting on with the job. Had there not been an SNP Government, we would still be waiting for many of those important measures to be undertaken.
Some important points about skills have been made in the debate. It may have been Jamie Halcro Johnston who spoke about the need to pair up the demands of business with the education that we deliver. I draw members’ attention—as I have previously—to the work of A C Whyte, a construction company that is based in my constituency of Renfrewshire South and in my home town of Barrhead. It has partnered with West College Scotland to deliver a one-year college training course with guaranteed employment at the end. I very much welcome the work that A C Whyte has undertaken in that partnership. That model can be expanded and developed.
Brexit has been the elephant in the room in much of the debate. Publication of the report obviously predated the withdrawal agreement and the political declaration that is only hours old. We can already deduce and understand from the UK’s proposed deal that it does not deliver on the desires of the remain voters or of the leave voters beyond ending freedom of movement.
As the committee’s report mentions, we face significant demographic pressures. Over the next 25 years, our pension-age population will increase by 25 per cent, our over-75 population will increase by 80 per cent and our working-age population will increase by only 1 per cent. As the Finance and Constitution Committee’s work on the fiscal framework demonstrates, that poses significant challenges and a significant threat to Scotland.
Ending freedom of movement would be a catastrophe, and it would be a catastrophe for Scotland. Not only would it benight us and deny us engagement in the enriching experience that freedom of movement brings; it would have a devastating impact on Scotland’s music sector—in which I take a keen interest as someone with a musical background and the convener of the cross-party group on music—as well as posing a fundamental threat to our public services such as health and social care, to many of our industries and to agriculture, as members have mentioned. It would deny us the working-age population of taxpayers that we need both to fund our public services and to work in our private sector. We know the contribution that EU nationals make. They are highly qualified, hard-working and diligent individuals who make a huge contribution. For some areas of Scotland, the end of freedom of movement is an existential threat. The minister, Kate Forbes, will be aware of that in the constituency that she represents.
It is important that we have these debates and look for ways in which we can improve. As Jackie Baillie rightly said, we can always do things better. If we did not believe that we could do things better, we would not bother running to be members of this Parliament. However, the biggest threat that we face right now is Brexit. The only response that we can make to that, short of staying within the European Union, is to continue our membership of the single market and customs union and, within that, to continue freedom of movement.16:18
Members will be glad to know that I am not going to tell any jokes. I could not compete with Mr Lindhurst.
The debate has raised some interesting issues. There has been a lot of coverage of statistics and data, which has been part of the committee’s inquiries. We can all agree on the importance of good-quality and consistent data to inform policy choices, even if we disagree on those policy choices. It is important that the data is accurate.
Moving on from statistics, Derek Mackay spoke up for the Government’s record on delivering the real living wage. However, we heard from Richard Leonard that 470,000 people in Scotland are not being paid the real living wage. It is important to drill beneath the statistic to see what that means. I was recently talking to some young people in my local area who are not being paid a proper wage, which means that some of them have three jobs in order to make ends meet, to pay their bills and to stay in a house that is wind and water tight. That is the reality that far too many people—particularly young people—face.
Does the member agree that we should end the national minimum wage, have a national living wage for all workers and end the iniquitous pay discrimination against 16, 17, 18, 19, 20, 21, 22, 23 and 24-year-olds?
In order to answer that, I will jump ahead to another bit of my speech, on the importance of procurement in being able to mandate the real living wage. It is all very well to have guidance and good practice in public procurement projects, as we currently do; however, when the issue was brought to the Parliament in 2014, the SNP on five occasions voted against mandating the living wage in public sector projects. The reason given for that was that it would be against EU law. Although we all regret the onset of Brexit, perhaps one aspect of it that will come to pass will be that we are not subject to that EU law. I look forward to the SNP then making the appropriate changes to procurement legislation to mandate the payment of the living wage in all public sector projects. That would go a long way to addressing the concerns of the young people that I talked to in my local area, who, as I said, are having to do three different jobs.
Willie Rennie made a good point about grant assistance. At First Minister’s question time today, I made a case in relation to the 2 Sisters plant at Cambuslang. It was revealed earlier this week, via a freedom of information request, that Scottish Enterprise paid the 2 Sisters Group £500,000 in 2013 on the basis that the company would keep the plant open until 2020. Sadly, the plant closed earlier this year with the loss of 450 jobs, which has had a devastating impact on Cambuslang. It is an absolute scandal that the 2 Sisters Group has retained that £500,000 within the company. At First Minister’s question time, Nicola Sturgeon said that Scottish Enterprise was undertaking to recover the money, but we have to wonder why, months after the plant closed, the company still has the money, given that the legal agreement was supposedly tied up properly. I repeat my call that, when that £500,000 comes back, it should be reinvested in Cambuslang in order to alleviate the economic vandalism that the 2 Sisters Group has wreaked on the community.
Another area that we could look at in improving the economy is the use of the co-operative model, which the Government has not done enough to promote. The cross-party group on co-operatives is currently holding an inquiry into the use of that model in relation to housing. A recent presentation from a student co-op demonstrated how it was able to deliver rents of about £350—less than half the rent level for the rest of the city of Edinburgh. That can provide a real benefit not only to the students themselves but to the economy if they are able to save money on their rents. The Government should look at that.
The Government should also look at technology and, in particular, at increasing the number of women in the technology sector, which currently runs at less than 20 per cent. There are interesting areas that we need to pick up on if we are to move Scotland forward to being a driving force in the economy in the 21st century.16:24
The committee’s report entitled “Scotland’s Economic Performance” opens with the words:
“It has now been a decade since the beginning of the financial crash and the subsequent ‘Great Recession’ ... this ten year milestone marked a timely opportunity to look at the performance of the economy”.
How is Scotland’s economy performing? A number of witnesses, for example Professor John McLaren, Graeme Jones and Professor Sara Carter, highlighted the impact of the financial and oil price crises on two of our most productive sectors and therefore the economy as a whole. Despite that, the committee heard that compared to other countries and regions of the UK, Scotland is performing well. Even without North Sea oil and gas extraction, Scotland is still the third most productive of the 12 regions of the UK, with productivity sitting just below the UK average. Indeed, only London and the South East of England are more productive than Scotland. Furthermore, Scotland’s productivity grew by 7.8 per cent between 2007 and 2016 in real terms, a growth rate higher than that seen in any other country or region of the UK.
Research that was conducted by the Scottish Parliament information centre highlighted that three of Scotland’s four NUTS 2—nomenclature of territorial units for statistics 2—regions displayed above-average EU productivity levels, with the Aberdeen and Aberdeenshire area ranked 19th of all the 266 EU regions in 2015. Comparing the percentage change in productivity over the period 2007 to 2016 shows that of the 23 Scottish NUTS 3 areas, 19 grew faster than the UK average growth rate. That improved productivity is important if we want to trade with countries across the world.
As a result, between 2010 and 2016 the value of Scotland’s international exports grew by 24 per cent. In 2016, exports to EU destinations totalled £12.7 billion, which was an increase of 19 per cent, and exports to non-EU destinations were £17.1 billion, which was up 28 per cent. Our increased sales to the world have helped to support the growth in new businesses in Scotland, which has increased dramatically post-devolution. There are 100,000 more businesses now than there were in 2000, and there is the highest number of private sector businesses since records began. Those businesses get better support than they would elsewhere in the UK, which is one of the reasons why the Scottish five-year survival rate is higher than the UK average.
Better employment prospects over the 11 years are reflected in the latest labour market update, which highlights that Scotland, with an unemployment rate of 3.8 per cent, has the lowest unemployment rate in the UK and that we met our target to reduce youth unemployment by 40 per cent, four years early.
On the living wage, Scotland remains the best-performing of all four UK countries, with the highest proportion of employees—81.6 per cent—being paid the living wage or more, and Scotland has the highest pay anywhere in the UK outside London and the south-east. ONS figures show that median full-time gross annual pay has grown by 21 per cent in the past 10 years.
With a highly skilled workforce, we continue to be the top destination for foreign direct investment outside London. Business research and development spend in Scotland grew by over £1 billion for the first time in 2016. That represents a 69 per cent real-terms increase since 2007, compared with a 22 per cent increase in UK spend over the same period.
Scotland has changed for the better over the past 11 years under the Government, but there is more that can be done.
We require better statistics on the Scottish economy. Our conclusions in our inquiry into how to make data count highlighted a number of points that need to be addressed. Although Scotland is now much better served in respect of data than Wales, Northern Ireland and the English regions are, we still lack many of the statistical measures that are produced routinely at the UK level and in other countries. The Government needs to discuss with the ONS, HMRC and others how those gaps can be filled. It also has to introduce more data sharing agreements to improve the coverage and quality of data. We also need to address—this is important—the matter of UK-wide companies not having to report specifically on their activities in Scotland.
In “Scotland’s Economic Performance”, the committee welcomed
“the Strategic Board’s focus on de-cluttering and streamlining of the enterprise and skills support landscape.”
However, one area that needs to be examined is how businesses are supported from start-up to high growth. Witnesses highlighted that, despite the Scottish Government spending £2 billion a year on economic development,
“there is a divide, when businesses separate from business gateway and look to move to Scottish Enterprise”.
There is not a smooth transition from one agency to the other.
On apprenticeships, I welcome the Scottish Government’s target to create 30,000 modern apprenticeships by 2020. However, we have to ensure that we support the learning and upskilling of all our people, including citizens who are disabled, care leavers and those from black and ethnic minority communities.
Scotland has changed for the better over the last 11 years. Yes, we can do better, but we need the tools to do so. Perhaps the parties that highlighted the deficiencies in Scotland’s economic performance should think about how they have voted over the last 11 years, when there were opportunities to devolve more powers to the Parliament.
We come to closing speeches.16:31
I thank the committee for its reports and for shining a light on why our economy has grown so slowly. There are strong, practical recommendations in the reports that should be considered by the Government.
James Kelly talked about the co-operative model that was mentioned in the report. That is close to my heart, as I am a member of the Co-operative Party. Richard Leonard talked about both employee-owned and co-operative models. They boost productivity and economic growth, which was highlighted in the report, and they provide better conditions and security for workers.
The topic of precarious work has come up in the debate—in Johann Lamont’s intervention and in James Kelly’s remarks, when he spoke in some depth about the issues that young people face, such as working three jobs to try to make a living. Some of those jobs will have zero-hours contracts and others will be precarious because young people have very few rights in the labour market, which is an issue that we must address.
We must also address how we support our indigenous businesses. I have been approached by people from local companies who have built up a trade and wish to retire and are looking for models to make sure that the business stays in local hands and continues to contribute to the local economy. Too often those businesses are picked off and asset stripped for their contracts and the local workforce is left on its own. We need to make sure that indigenous businesses get as much support as others. A rather shocking statistic mentioned in the debate is that over a third of the Scottish economy is overseas owned. Willie Rennie pointed out that that means that many of the financial incentives that are paid out will go to those overseas companies. We should surely be looking to retain some of those incentives to support our own businesses, because it is clear that, when times get tough, if a person is rooted to where they are working, they are much more likely to stay and try to weather the storm, instead of moving away.
James Kelly highlighted, in the debate and at First Minister’s Question Time, that the 2 Sisters Group has received £500,000 of Government funding—
Will the member take an intervention?
I am mindful that, on 3 September, I sent a 32-page response to the committee’s report. Notwithstanding Rhoda Grant’s comments, could she confirm which of the recommendations in the report, which I have responded to, she thinks that I have failed to deliver on?
There are many and I hope to touch on them as I continue my remarks, as they were raised in the debate.
I will finish my point about James Kelly’s comments regarding the 2 Sisters Group. The Government has given it £500,000. Could that money not have been given to the workforce to try to save the business or to grow another business in its place? Would the money not have been better spent that way, which would have enabled the employees to remain in their own communities?
James Kelly also spoke about procurement. We need to use that to support local companies and to promote a real living wage. One of the other shocking statistics that came out in the debate was that 470,000 people are receiving less than the living wage. The living wage is what it has been proven that people need to live to a reasonable standard. Those people are living below a standard that we would deem to be acceptable. That is not right in a modern Scotland.
Angela Constance talked about inclusive growth. It is important that we look at how women are treated in the workforce. The value given to female entrepreneurs was talked about in the report. I was at a Commonwealth Parliamentary Association women’s conference, and women entrepreneurs were making presentations to the group. What was stark about what they were saying was that most of them could not find work that would fit with their caring responsibilities, so they set up their own companies so that they could make a living. In turn, they employed other women and made sure that their conditions were flexible. There is a lot to be done, and setting up a business should not be seen as a last resort but as something that we encourage people to do, as it creates wealth in our communities.
Another issue touched on in the report and in the debate was automation, and the challenges and opportunities that automation can bring to build a high-wage and high-skilled economy. It can boost productivity as well, and the report says that skills are crucial for the capitalisation of those developments. Yet we see that companies do not have digital and automation skills. We need to reskill our whole workforce.
When I met the Scottish Retail Consortium this morning and talked about apprenticeships and the apprenticeship levy, I was concerned that the consortium was clear that apprenticeships were not working properly, certainly in the retail sector. The average age for a start in that sector was 27 years of age, usually because the sector’s hours were more family friendly. Those people could not access apprenticeships because of their age. That is not right—we need to look at reskilling and making sure that our workforce is ready for the future.
The Presiding Officer is looking at me as if I should be winding up. I must emphasise that the economy is hugely important, because, without a vibrant economy, we cannot do the things that we want to do, such as tackling poverty and health inequality and creating a country that we can all be proud of.16:37
The debate started with the committee’s convener, Gordon Lindhurst, delivering the committee’s views with his trademark swashbuckling style. We were then tantalised by Angela Constance telling us that it was a unique experience being on the committee, without elaborating on what way it was unique—I do not know whether it was having to listen to the convener’s jokes. Perhaps she will tell us later and privately what was so unique about it.
I want to pick up issues that came up in the debate and say something about aspects of the report that I think are important. A number of members—the convener, Dean Lockhart and Jackie Baillie—talked about the issue of the pre-release of data. It is clear that statistical bodies all support an end to the pre-release of data and say that it is not good practice. The only people who take a contrary view are the Scottish Government. I ask the Government to reflect on that issue and consider whether it is time to change practice.
Is Murdo Fraser aware that that is primarily a decision for the chief statistician, who makes his own judgment on it, rather than ministers? It would be for the chief statistician to decide whether to propose a change; it is not a ministerial decision.
I am sure that, such is the weight and influence of the economy and finance secretary, if he were to have a gentle word in the ear of the chief statistician, that might have some bearing on his decision making.
Will the member give way?
This is getting interesting.
Would some not argue that that would constitute interference, which is the accusation that the Opposition is suggesting we should want to avoid?
Perhaps the answer is for Parliament to express a view on the matter, so that there is no question of undue influence.
Will the member take an intervention?
I would love to—
I will give you time, if you want to take Mr Lindhurst’s intervention.
If I have time, I will give way. Come on, convener.
To correct the cabinet secretary, the point is that that is the position under the current legislation but it is the way in which the current legislation and regulations have been set up that is the problem.
I thank the convener for clarifying that, but perhaps I will move on quickly to other matters.
A number of members talked about Scotland’s economic performance more generally. There was an exchange between Willie Rennie and Tom Arthur on that issue. I understand the point that Tom Arthur was making on headwinds—he talked about the financial crash and Brexit, which, of course, has not happened yet. However, surely the issue is the relative performance of the Scottish economy compared with the performance of the UK economy as a whole. The Fraser of Allander institute—the closest that we have to gospel on these issues—has pronounced that it believes that there has been a decade of underperformance relative to the UK economy and that, during that period, the Scottish economy has grown at a third of the UK rate. We should reflect on that.
We now have a clear choice on Brexit: the Prime Minister’s deal or no deal. I would encourage members and, indeed, the Scottish Government—
Will the member take an intervention?
I have taken three interventions already. I will have no time to make all the very important points that I want to make if I take another. I am sorry about that.
Members should listen to what industry bodies such as the Confederation of British Industry and NFU Scotland are saying and sign up to the Prime Minister’s deal.
In relation to other points in the report, one of the things that somewhat depressed me about the debate is that it could have taken place at any time over the past decade. I served on the Economy, Energy and Fair Work Committee’s equivalent in two previous sessions of Parliament, and the work that the committee has done in this session has some depressingly familiar themes. How we improve productivity, enhance exports and commercialise the research from our universities are all issues that we have been talking about for the past 10 or 15 years. That is not to say that the report does not make some valuable points; some of the conclusions need highlighting.
I have lost count of the number of new economic strategies that we have had over the past two decades. We have had individual strategies across a range of sectors. As the Fraser of Allander institute pointed out in a recent report, there is a very cluttered landscape when it comes to what such strategies are intended to deliver. Dean Lockhart made that point in his speech. The committee recommended that the Scottish Government
“produces an action and implementation plan ... backed up with a monitoring and evaluation plan.”
I appreciate that that is two more plans, but it seems to me that getting things done is more important than producing yet more strategies. [Interruption.] I am delighted that the cabinet secretary agrees with that.
The economy exists only because we have businesses, and we know from recent figures that there has been a fall in the number of enterprises in Scotland. Historically, we have had lower levels of entrepreneurship in Scotland than there have been in the UK as a whole. The committee noted the evidence on the need to ensure that Scotland is a good place to do business. Rachael Hamilton touched on that point in her speech. We hear again and again from organisations that represent business that we must keep Scotland competitive on tax with the rest of the United Kingdom. I hope that the cabinet secretary will address that issue in his budget next month.
I was pleased that the committee addressed the “missing middle businesses”. Willie Rennie touched on that issue, which has long been identified, in his speech. We have a good number of large secure businesses and a wide range of SMEs, but substantial middle-range businesses have always been missing in the Scottish economy, compared with other economies, particularly Germany’s. The committee heard that it is those “missing middle businesses” that struggle to access the support that they need to grow. They fall between two schools: they are too large for start-up support but too small to benefit from Scottish Enterprise account management. There needs to be greater focus on that area.
In closing, I want to make some comments on the Scottish national investment bank, because it is important. The initiative is welcome and fulfils an unmet need, but it will not achieve much, as the committee has said, if it not sufficiently focused.
There is concern when we hear calls—we heard them from Mr Leonard earlier in the debate—for too much direction to be given to the investment bank and for political interference over how it might lend money. My concern is that every time we get a business failure—whether it is Michelin, which we are hearing about in Dundee at the moment, or whatever else—there will be calls for the SNIB to use its resources to invest. Whatever the general merits of those calls, that is not what a Scottish national investment bank should be about. If it is going to be successful, ministers will need to appoint good people to run it and then get out of the way and let them take decisions for themselves.
In closing, Presiding Officer—
No, you must conclude.
—I say that it is a very worthwhile report and I commend it to the chamber.16:45
Surprisingly, I agree with much of the report, and I said so in my 32-page response to the committee; I said that there is a lot of consensus in the report and I welcomed much of it. That is why I asked what members feel was missing from the recommendations, notwithstanding the genuine difference of opinion on pre-release access to data, to which I will return.
One of the recommendations is that we should establish an economic consensus in Scotland. I genuinely think that this debate has been an argument in which some of us some of the time, arguably including me, rely on the lines that we believe in, but we need to work a wee bit harder to find the economic consensus. It is the only way by which we will make progress and deliver the actions on which we appear to agree. Gordon Lindhurst was certainly a champion of the committee report, but I hope that he will equally reflect on what I felt was a very constructive response to the committee’s recommendations. In that sense, I agree with Murdo Fraser—it is not often that I say that—on the actions that are required.
I thought that Jamie Halcro Johnston gave a very fair and considered speech—that is his career knackered—and Angela Constance gave a powerful and articulate speech about how growing the economy and tackling inequality go hand in hand. I believe in economic growth because, through growth, we can tackle inequality in our society, and that is what drives me.
It is true that our economic indicators are strengthening: our GDP growth has been outperforming that of the rest of the United Kingdom over the past 12 months; unemployment is at a near record low at 3.8 per cent; foreign direct investment in Scotland is in a stronger position, second only to London and the south-east of England; and our exports are growing.
I have spent the past few months listening to businesses, and I have to say that pre-release access to data has not been the number 1 issue that they have raised with me among the things that we need to do to grow our economy. It is not a ministerial decision; I say to the Tories in particular—and to those who used to be in power—that it is more a question of, “Do as we say, not as we do.” In Whitehall, pre-release access still exists.
I am convinced that, no matter how much time some members of the Opposition—just some of them—are given to look at the evidence, they still will not look at the facts to come to the right decision. A case in point has to be Brexit. I will not take any lectures from the Tory party on economic planning when we look at the madness that is Brexit right now—it has been totally mismanaged by the Tory party. Dean Lockhart says, “Let us see how it pans out”—how reckless can you be with people’s jobs and lives?
We already know that the Tories have adopted austerity as an ideology. That in itself has harmed our economy; rather than supporting our economy, it has harmed our business growth and our economy.
Will the cabinet secretary give way?
Will the cabinet secretary give way?
I have a choice! Who should I take? Dean Lockhart is still standing—I should have taken Murdo Fraser.
The policies of the UK Government apply across the UK, so why is it that the economy of the rest of the UK has grown by 1.2 per cent since the financial crisis but growth under the SNP Government has been only 0.7 per cent? There is only one explanation—it is the input and policies of the SNP Government.
Scotland is more dependent on the oil and gas supply chain than the UK as a whole is—that is the explanation of why we have been more impacted by the downturn.
The Tories said that our strategy was not good enough and that we had too many strategies. Have members heard what the new idea was in the new Scottish Tory economic strategy, apart from cutting taxes for the rich in our society? The big new idea from Dean Lockhart was a new framework. We are getting on with the actions to grow our economy, and that is why the GDP growth rate in Scotland over the past 12 months has been outperforming the rate in the rest of the UK.
To be fair to Willie Rennie, I thought that his speech was quite considered, if not the best-informed speech that he has ever made in the chamber—but I would say that. He made the case that, although the Scottish economy is underperforming as part of the union, we are still better together, only to go on and say that immigration policies will adversely impact Scotland’s economy—they will impact the UK’s economy, too, but they will impact the Scottish economy disproportionately. He is 100 per cent right. We should have powers over immigration so that we can make the right choices to support our society and economy, as well as doing the right thing.
We then turned to another friend of better together: the Labour Party, which wants us to take more action on the living wage and employability but does not want to give us the power to do that. It would rather have that power in the hands of the Conservatives, too.
We heard about Labour’s industrial strategy. However, not only does the SNP have policies to support industry, including emerging industries, in Scotland, we have intervened to save jobs and, unapologetically, we will continue to intervene to protect industrial jobs in Scotland. If members want to see what interventions look like under the SNP, they should note that Liberty Steel is making steel again, we are building ships and we intervened over Burntisland Fabrications. We will take the right actions to support our economy—
Will the cabinet secretary give way?
Maybe the member should hold off on that particular intervention.
Please sit down, Mr Leonard.
I have only about a minute left.
Our economic interventions are right. They are about investing more in our infrastructure, in inclusive growth and in innovation, so that we are the creators of our economic success and not just the consumers. Our interventions include internationalisation and our export strategy, and the national manufacturing institute for Scotland to support future industrial growth opportunities from advanced technology.
The national investment bank will be transformational, the enterprise agencies support start-ups and scale-ups and the south of Scotland enterprise agency will support that part of the country. We have city deals to stimulate our regional economies, innovation centres to work with the public and private sectors, and rates reform to ensure that we have the best package of rates anywhere in the UK. We work with the UK Government on the industrial strategy to make sure that we maximise the funds from that channel.
We are stimulating our economy and providing stability and stimulus. It is so important to support entrepreneurship at this time, as well as to have a focus on digital, women, enterprise and fairness as part of our economic strategy.
I have set out some of the actions that we will take to stimulate our economy, while the Tories try to wreck the economy with their ideological approach to Brexit, which has put us in such a precarious position.16:52
I start by commending the convener for the collegiate approach that we take on the committee. There was a lot of agreement on the committee when it came to identifying issues, many of which have come up in the debate. However, the reality is that none of us has a magic wand or can always clearly see how to solve some of the challenges that we have faced and are facing.
I will reiterate a couple of the points that the convener made at the start of the debate. I thank Graeme Roy for his input to both reports, each of which runs to around 100 pages and contains a lot of material. He was extremely helpful to the committee.
The other point that the convener made that is worth reiterating is that data and statistics are there to serve the users, not vice versa. There is room for movement from where we have been in that regard.
I will start, as other members have done, with data. There was a lot in the data report other than pre-release access, which I will come to. There were some positive points. The fact that the ONS said that it was extremely willing and wanted to engage more with the Scottish Parliament was positive and the committee will be keen to develop that. The committee agreed that we need to prioritise getting data on earnings, trade, Scottish prices and regional figures. There was a positive reaction to the Digital Economy Act 2017, to the fact that we should now have more access to HMRC data and to the question of how the gaps can be filled, which Gordon MacDonald mentioned.
The barriers that we still face include the cost of getting data, the lack of power that we have in certain sectors and the fact that there is no disaggregation in relation to many companies and other organisations.
Gordon Lindhurst also touched on the requirements of the Scottish Fiscal Commission. As a member of the Finance Committee when the commission was set up, I think that that issue should be a priority for us all.
One thing that has not been mentioned is the link that we make in the report to the gender pay gap—an issue that we had previously studied—and the need for gender-disaggregated data, which is something that, by and large, we do not have. I think that Kezia Dugdale and Gillian Martin were members of the committee when we put the report together, although they are no longer on the committee.
With regard to data, although most of our discussions were collegiate, we divided on the question of pre-release access. Before the debate, there were three positions on the matter, although I think that Angela Constance has added a fourth—that of sitting on the fence. However, I maintain that the minority view on the committee is still the best. The committee went strongly for the option of pre-releasing everything, and the Government has stood by its position of not changing anything, but the minority view on the committee was that there should be a presumption against pre-release access and that the Government should be invited to make arguments on a case-by-case basis. I still think that that is a good way forward.
I want to touch on one or two issues that have hardly been mentioned or which have not been mentioned at all in the debate. We spent quite a lot of time discussing productivity, which came up with a lot of witnesses. There is an assumption that increasing productivity is automatically a good thing, but it was pointed out that, in some sectors—say, in restaurants—what was needed was more staff, and more productivity was not necessarily a great thing.
There has not been much mention of technology and automation, although I know that Rhoda Grant highlighted the issue in her closing speech. We felt that the enterprise and skills agencies needed to really focus on that.
The care sector has hardly been mentioned, but it is clearly a huge part of the Scottish economy nowadays. Although it does not export anything or attract tourists, it is nevertheless a growing sector that we need to take seriously but in which the pay is very poor.
On entrepreneurial thinking, we focused on colleges and universities, where much of that kind of thinking takes place. There is now more emphasis on the issue in schools, which is a good thing. Indeed, we saw that at the recent business in the Parliament event, of which the committee was a sponsor.
Procurement, too, has not been mentioned, and we felt that many SMEs are still not achieving the share of public expenditure that they could be achieving here and which is perhaps being achieved in other countries.
Growth sectors have not been mentioned to any great extent, although Willie Rennie talked about the need to broaden the economy. We wondered whether the system has been too rigid, particularly with regard to what Scottish Enterprise has focused its help on, and whether improving low-productivity sectors might make an impact on the economy.
The Scottish national investment bank has been highlighted as a positive step forward, and I think that we agreed that all investment decisions should have equality impact assessments. At the same time, I agree with Murdo Fraser that the bank should not be there to bail out struggling companies. That is not its main aim. As for decluttering, which was mentioned a few times, we saw the Enterprise and Skills Strategic Board as a positive way forward in decluttering some areas.
I will move on to a number of areas that have been mentioned a fair bit in the debate. First, we looked at what is called “the fear of heights” or of scaling up—or, indeed, the missing middle sector—which is certainly an issue that concerns me a lot. We seem to be good at starting companies and growing relatively small ones, but there is a question whether some of those companies are sold too soon. We had a very useful meeting with Skyscanner, which might have sold at the right time; time will tell, of course, but at least it waited a lot longer than a lot of other companies to sell itself off. Nevertheless, it is still the case that there is often rejoicing on the financial pages when a small company gets sold for a sizeable sum, even if it might have grown.
Points have been made about ownership. We have not spent very much time considering social enterprises as an option. I think that we felt that Scottish Enterprise and Highlands and Islands Enterprise perhaps need to focus more on that sector, and that potential entrepreneurs should also think about it when they start up their companies.
Employee ownership is very important. Embedding companies in Scotland—Michelin and others have been mentioned—is important. An overseas branch may be closed more easily than one that is based here, although it is clear that Scotland-based companies have struggled as well.
A number of members mentioned inclusive growth. Although I do not have time to cover that, committee members jointly felt that that issue is really important.
I thank members for their interest in taking part in the debate. The committee will note the points that have been made and we will certainly continue to focus on the issues.