Meeting of the Parliament

Meeting date: Tuesday, November 22, 2022

Official Report 932KB pdf

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Brexit (Impact on Inflation)

The final item of business is a members’ business debate on motion S6M-05709, in the name of Christine Grahame, on Brexit’s impact on inflation. The debate will be concluded without any question being put.

Motion debated,

That the Parliament notes with concern the reported impact of Brexit on inflation and the cost of living across Midlothian South, Tweeddale and Lauderdale and elsewhere in Scotland; further notes that research by the UK in a Changing Europe think tank reportedly revealed that Brexit has increased food prices by 6%; notes reports that sterling has lost 10% of its value, leaving households poor by increasing import costs and inflation while lowering wage growth; is aware of research published by the London School of Economics and Resolution Foundation stating that Brexit has reduced how open and competitive Britain is, leading to, it believes, reduced productivity and wages over the next decade; recognises that the Office for Budget Responsibility reportedly says that Brexit will have the long-term effect of cutting UK GDP by 4%; understands that the Financial Times agreed that such a decline will mean £100 billion of lost output and £40 billion less revenue for the Treasury each year; is concerned by reports that the UK has now fallen behind all other G7 countries in the pace of its recovery from the COVID-19 pandemic, with, it understands, exports down significantly, and notes the view that Scotland will prosper more by regaining its independence and re-joining the EU than by remaining in the UK.

17:14  

Let us start at the very beginning: the European Union referendum vote in 2016. The vote across the United Kingdom was close, rounded up to 52 per cent voting leave to 48 per cent voting remain. In Scotland, the figures were 62 per cent voting remain and 38 per cent voting leave. Interestingly, by way of an aside, Northern Ireland voted 56 per cent remain.

In Scotland, every constituency voted remain, including in the Scottish Borders and Midlothian. That was in the face of an aggressive and ill-informed campaign blaming the EU for all ills and promising not just the infamous side-of-a-bus £350 million a week for the national health service, but more. We were promised that being tariff free would mean that bureaucracy would be cut, but was it? There is increased paperwork—for example, truckers need import and export declarations, security declarations and other paperwork for their shipments. New infrastructure is needed at ports to deal with queues and to check loads, and there are vast lorry parks.

The trading world was to be our oyster, despite the fact that even Barack Obama said that the UK would be at the “back of the queue”, which is where it is, and where it has stayed. There were no favours waiting for the UK. The one new deal, with Australia, has infuriated farmers and was even criticised by George Eustice, who was then the Secretary of State for Environment, Food and Rural Affairs. The reality is that most British trade is with Europe, and Brexit has crippled it.

We were promised that migration would be under control, as the UK “took back control”—more of that later, as it impacts on our economy. The UK then cut itself off from its biggest trading partner, the EU, where 40 per cent of its exports went, and for what?

The answer is: for the highest inflation among the G7 countries, which is currently running at 11 per cent, with food inflation at nearly 17 per cent. With regard to how UK inflation compares with inflation in other nations, recent analysis from the Financial Times shows that the rate of consumer price inflation is higher in the UK than it is in other devolved economies. It rose to 11.1 per cent in October 2022 in the UK, in comparison with 10.4 per cent in Germany, 7.7 per cent in the USA, 6.2 per cent in France and 3 per cent in Japan. A member of the Bank of England’s monetary policy committee noted, in a recent appearance before the Treasury Select Committee, that Brexit has added 6 per cent to UK food prices.

Yes, Covid had a price tag, and the war in Ukraine is having an impact on the UK economy, but Brexit is why it is doing so badly. Even before Brexit, the economy was weak, after nearly a decade of Tory government. If we add in Covid, Ukraine and Trussonomics, that is a heady mix for failure. That is bad enough, but when we add in the basic ingredient, the Boris Brexit, that explains much more.

Members should not take my word for it that Brexit has had a devastating impact on the UK economy. The Office for Budget Responsibility predicts that the UK will suffer the sharpest decline of any European nation, with a drop in growth of 1.4 per cent in 2023. That can be compared with small independent countries that are similar to Scotland, such as Ireland, which will see their economies grow by around 3 per cent next year.

Does the member agree with the OBR that Brexit will actually cost the United Kingdom £80 billion this year in lost trade? In 2016, Rishi Sunak said that we would be £20 billion a year better off. Does that not call into question the Prime Minister’s economic judgement?

I do indeed accept that. The OBR has also said that Brexit’s impact on the economy is now “adverse” over the medium term, to the tune of 4 per cent of gross domestic product. This is massive self-harm. Not a week passes without cries of protest from traders, truckers, farmers, hoteliers, care homes, scientists and even performing artists. Trade bureaucracy has soared. Every exported cow needs a veterinary certificate and unskilled labour has dried up, and all of that is impacting on the UK economy.

Public opinion has now swung dramatically against Brexit, with just 32 per cent still in favour and 56 per cent regretting leaving. When there are rumblings in the Tory ranks about Swiss-style deals and mutterings from the Confederation of British Industry about the need for changes to rules for migrants to enable them to work here, we know that even the Tories who are wedded to the ideology of Brexit—Rishi Sunak is right up there—can no longer delude us that Brexit is just the ticket. However, Rishi Sunak has to keep his party together, foremost especially the uber-Brexiteers, who include himself—and to pot with the rest of us.

Although the Bank of England, in its November monetary policy report, says that the major contributor to current levels of inflation is the global increase in gas, and therefore energy prices, it also highlights the impact of

“Non-energy tradable goods prices”.

Those are driven partly by global factors, such as the bottlenecks in international supply chains since the pandemic and disruption that is linked to the Russian invasion of Ukraine, but also by costs associated with Brexit.

To quote from The Guardian,

“To state the obvious, the war in Ukraine and pandemic-related supply issues are sending prices soaring across the world, but what gives Britain a particularly pronounced problem—which forecasters say will endure into the immediate future, while inflation in the eurozone starts to fall—is Brexit. Our departure from the EU has weakened the pound, which increases the prices of imports, and adds to companies’ costs. Post-Brexit limitations on foreign workers are also hitting firms’ bottom lines, as are problems with the UK’s European supply chains ... Adam Posen, an American economist and a former member of the Bank of England’s monetary policy committee, said that 80% of the explanation for Britain’s higher inflation was bound up with Brexit and its endless complexity. It amounted, he said, to ‘a trade war the UK declared on itself’.”

While living standards are under immense pressure around the globe this year as a result of record inflation, in particular in food and energy prices, officials said that Britain would suffer more as a direct result of leaving the EU.

There is more bad news. Even before the economic disaster that was Truss, it is estimated that, between 2016 and 2021, Brexit cost the UK £31 billion. The equivalent for Scotland is £2.5 billion. For Scottish Borders Council, that is £53 million, and for Midlothian Council it is £43 million.

Keir Starmer is no help, battered by his past flip-flops on the subject, and rejecting any easing for a single market, in which he is not in line with public opinion. Neither are the Liberal Democrats. For them all, Brexit is done and dusted and we must make what we can of it.

In 2014, we were told that a yes vote for independence would see us thrown out of the EU. It is ironic, is it not, that we were dragged out, despite 62 per cent voting remain, and by a party that currently holds only six Scottish seats. That lie will not fly again. Already, support for independence is on the rise as the Scottish people see the inadequacies of UK economic policies. Tomorrow, we will learn of the UK Supreme Court judgment. However that goes, I know that, sooner rather than later, Scotland will regain its independence. Brexit was the final straw.

17:23  

Presiding Officer, I may have to leave just prior to 6 pm, as I am chairing a cross-party group later.

I congratulate Christine Grahame on securing this important debate, highlighting the catastrophe that Brexit has brought to her Midlothian South, Tweeddale and Lauderdale constituency. As her motion indicates, the Brexit shambles has also affected “elsewhere in Scotland”, and that is where I will focus my comments.

Nobody with any credibility can state that Brexit has been positive. So-called Brexit opportunities have withered on the vine. From the false dawn of a trade deal with the US, which was much heralded by the former former Prime Minister, Boris Johnson, to the admission by the former Prime Minister, Liz Truss, that a deal will be years away as negotiations are not even taking place, that proves that the Tories’ Brexit crusade has left people in Ms Grahame’s constituency, and in my constituency of Greenock and Inverclyde, worse off.

I voted remain and I would do so again tomorrow. I look forward to the day that we in Scotland can rejoin the EU as an equal partner when we secure our independence from Westminster. The economic climate that Scotland currently faces is driven by a variety of factors; that is undeniable. Once again, however, no one with any credibility can deny that Brexit has been a major contributing factor to rising costs, rising inflation and a reduction in opportunity.

The shambolic Truss-Kwarteng budget has also been a huge factor in the current economic crisis, leading to the extension of the cuts agenda that we saw last week from the current Chancellor of the Exchequer. The filling of the budget black hole will lead to more austerity, with families struggling, kids going hungry and food banks facing unprecedented demand.

However, some in the chamber will argue that inflation is high elsewhere and therefore the cost of living crisis is not solely down to the Tories and the UK Government. The Financial Times reported that the consumer prices index inflation rate is higher in the UK than in any other developed country. The UK rate is 11.1 per cent, while the rates in Germany, the US and France are 10.4 per cent, 7.7 per cent and 6.2 per cent. Those are just a few examples.

The fact that a member of the Bank of England monetary policy committee has stated on the record to the select Treasury Committee at Westminster that Brexit has added a whopping 6 per cent to the cost of food in the UK tells a story.

Even worse, earlier this year, Adam Posen, a former member of the Bank of England monetary policy committee, suggested that Brexit was responsible for up to 80 per cent of the increase to prices in the UK.

Will the member give way?

Sorry.

That truly remarkable statement once again highlights the folly of a Brexit that Scotland did not vote for and how the right-wingers of the Tory Party have led the country to a level of poverty that many of my constituents, and no doubt many constituents of members from all parties, have not suffered from before.

Decisions by politicians matter. Policy decisions and legislation that politicians and Governments progress have a real-life effect on our constituents.

Will the member take an intervention?

I do not have much time—I am sorry. That is why the UK Government’s complete disregard when pursuing Brexit legislation through the Westminster Parliament, which ignored the legitimate concerns not only from many across the political spectrum but from those with no political allegiance, has led to the situation that we face.

No matter how many cost of living surgeries I do in my Greenock and Inverclyde constituency, I know that I will just be scratching the surface of the support that my community needs and deserves.

The Tory obsession with Brexit is increasing poverty. The fact that Labour and the Lib Dems—there is only one Labour member in the chamber and there are no Lib Dems—would not reverse Brexit speaks volumes about them and how thirled they are to be part of a Westminster system that helps the richest and punishes the poorest.

17:27  

During this session of Parliament, Christine Grahame has used members’ business debates to highlight non-overtly political issues, such as the men’s shed movement and the mineworkers pension scheme. We have seen other MSPs follow the same convention, with debates on issues such as gas safety week and the cancer card. Sadly, this motion does not follow that recipe. It is overtly political and I believe that it goes against the unwritten conventions of the Parliament. That disappoints me, Presiding Officer. I believe it to be unworthy of Ms Grahame.

Mr Mountain, please resume your seat for a wee second, if you do not mind.

I point out that the procedure for the selection of members’ business is well known to members. The decision was taken to hold this debate. I do not know whether the member is calling the decisions of others into question—I hope not. The business motion was selected according to due process. I point that out to the member to reflect on.

Please resume, Mr Mountain.

Thank you, Presiding Officer. I have never been one to stray away from the subject of debate, so I will address some of the issues that Christine Grahame has raised. If there are members who want to intervene, I will be very happy to let them in, providing that you are able to give me back the time, Presiding Officer.

Christine Grahame makes much of this Parliament respecting democracy. I agree with her, and I will always defend democracy. However, that cannot be on the basis of agreement when it suits her views only. In her motion, she states that the solution to the issues that she highlights is twofold: becoming independent and joining the EU.

The voice of democracy spoke in 2014 and again in 2016. The answers were clear: no to independence and yes to Brexit. As a democrat, I respect both those results, and I believe that every parliamentarian should do so, too. Sadly, however, it appears that, because Ms Grahame did not get the answers that she wants, she wants to rerun the debate and the vote.

Let us be clear that, ever since the votes and the decisions of the majority have been made—[Interruption.] Sorry, was there an attempt to intervene? Have I got time to take it, Presiding Officer? Will I get my time back?

Yes, absolutely.

I apologise for not taking an intervention from Edward Mountain in my speech, which I had to cut considerably.

I respect what Edward Mountain says. Will he address the issue, which is whether Brexit has contributed to high inflation across the UK?

Indeed I will and I will keep my speech short and to the point.

I think that most people would accept that forging a new relationship with the EU and other countries would, after 47 years of membership, be challenging. It has been. However, the suggestion that separating from a 300-year-old union would be easier is pure hot air. Flimsy pamphlets have been produced to support that argument but they have not dealt effectively with the issues, specifically fiscal issues, such as currency, pensions and national debt, to mention but a few. You cannot gloss over those issues or play fast and loose with the answers in the hope that no one notices. People will see through you and they have seen through you—your fantasy economics will not pay the mortgage.

What about the border that you would create with our biggest trading partner if you were, God forbid, to get independence and join the EU? The First Minister has said that that would lead to border crossing points, which no business would welcome. I am sad that the member I am about to mention has already left the chamber, but the only person who seems to welcome border controls is Emma Harper. Goodness knows why—perhaps she wants to establish a bureau de change.

We are better together. Take the pandemic for example. The figures speak for themselves: Scotland received £14.4 billion in Barnett consequentials from the UK Treasury. On top of that, hundreds of thousands of Scottish jobs were saved through the furlough scheme. In Christine Grahame’s constituency alone—a constituency that reaches into the Midlothian Council and Scottish Borders Council areas—nearly 34,000 jobs were saved.

Will Edward Mountain give way?

I will just finish this point and, then, if I get the time back from the Presiding Officer, I will be happy to give way.

Even now, during the energy and inflation crisis brought about by Putin’s illegal war in Ukraine, the UK continues to step up and provide support to Scotland with the energy price guarantee and an extra £1.5 billion in funding announced in last week’s autumn statement.

I can give you up to six minutes’ speaking time to reflect the interventions, Mr Mountain.

Does Mr Mountain recognise that, last week, the Paris stock exchange overtook the London stock exchange in financial trading in the European Union, that Brexit has been an utter disaster financially and that people cannot pay their mortgages right now?

I would answer that question if I had more time but I do not, so I will continue. It is not in the motion, as Clare Adamson well knows.

Christine Grahame suggested that the cost of food is due to Brexit. As a food producer—I refer members to my entry in the register of members’ interests—I can tell members the following: fertiliser has gone up 450 per cent in price and sprays by about 30 per cent; tractor fuel has doubled in price and electricity has almost doubled. The result is that wheat, for example—a basic staple for human food and animal feed—has gone from £200 per tonne to £290 per tonne and, after Christmas, might well trade at £320 per tonne. None of that is due to Brexit. All those increases are down to Putin’s illegal war.

Pursuing another divisive independence referendum is not the answer to today’s problems. The impacts of war, inflation and the resultant energy crisis are not just local to Scotland or the United Kingdom. They are global challenges and are better addressed with Scotland remaining part of the strong United Kingdom.

17:33  

I thank Christine Grahame for bringing this important issue to the chamber for debate. Her motion mentions the scenic and beautiful area of Midlothian South, Tweeddale and Lauderdale but Brexit poses challenges in Midlothian North, across Lothian and across Scotland. There is much to agree with in the motion that we are discussing but it will not surprise Christine Grahame that I cannot support its conclusion.

Last week, in the debate on the Constitution, Europe, External Affairs and Culture Committee’s report, my colleague Sarah Boyack said:

“Many of us did not want to be here, ... dealing with the consequences of the UK’s departure from the EU.”—[Official Report, 17 November 2022; c 67.]

She is right: Brexit and the levels of inflation that we face today lie squarely at the door of the Tories.

The EU referendum was a political choice by David Cameron to try to unite his party. The Brexit deal was first negotiated by Theresa May and was voted against by Boris Johnson, only for him to renegotiate parts of the deal. The former Prime Minister described it as an “oven-ready” deal, only for him and his two Tory successors to seek to unilaterally change that very deal through the Northern Ireland Protocol Bill.

The Tory party is now very keen to point out that there are inflationary pressures everywhere. That is true to an extent, but the UK finds itself in a far worse position than many comparable countries because of two factors: the recent political instability and the fact that the Tory party is held hostage by an internal faction that will accept only the most extreme form of Brexit.

I think that many people across the United Kingdom are tired of government by internal Tory drama. We need a Labour Government in Westminster to provide solid leadership and move the UK forward.

I cannot accept the conclusion of the motion that independence is the answer to those problems. Mark Blyth, who is one of the economists appointed to the First Minister’s own panel of advisers—[Interruption.] I will just go ahead. As Mark Blyth has said, independence would be “Brexit times ten”.

The answer to the disruption caused by separation from our biggest trading partner is not to repeat the process. The answer is a change of direction in Westminster, with a new, constructive attitude to our friends on the continent and a commitment to revitalising our economy. That is the only way that will deliver an economy that works for everyone across the UK. That better future is possible, and I want to see it for Christine Grahame’s constituency just as much as I do for the Lothian region and the rest of Scotland.

17:37  

I thank Christine Grahame for bringing the debate to the chamber.

I recall that we debated Brexit many times in the previous session, and it strikes me that much of what we said then has come to pass. This debate reminds us of what we said then and serves the useful purpose of puncturing the conspiracy of silence that seems to have taken hold in many quarters on the material impact that Brexit is having, in concert with other factors that are impacting on our economy and, indeed, our way of life.

We warned repeatedly and emphatically that Brexit—in particular, the hard Brexit variety being imposed by Westminster—would cause huge damage to Scotland’s economy and would add to the harm that would be caused economically, socially and culturally by the loss of the horizon 2020 and Erasmus programmes and by free movement, and environmentally, with plans to remove high EU standards from our statute books.

It is not only the Scottish Government that said that then and is saying it now. Sadly, it is reaffirmed by the sorts of statistics that are in Christine Grahame’s motion and are reported almost weekly in each new economic forecast or trade statistic. The governor of the Bank of England, Andrew Bailey, recently linked the current financial predicament to Brexit, and Mark Carney, a former governor of the Bank of England, believes that Brexit acts as a brake on economic growth and increases the rate of inflation.

The UK’s rate of inflation hit a 41-year high in October, having accelerated to 11.1 per cent. The sharp rise was caused by higher gas, electricity and food prices, and annual food-price inflation rocketed to 16.5 per cent, which is the highest for 45 years. Those figures mask a bleak reality—they mean hardship for more individuals, families, businesses and communities. The people who are paying the highest price for that are the people who are on the lowest incomes, and the people who are paying the highest price for Brexit are those who are on the lowest incomes, despite Scotland’s having voted to remain.

I recognise that there are other factors, but Brexit is a significant contributory factor. Of all the factors that we face just now, Brexit was the result of a clear political choice by a Government in these islands. The Office for Budget Responsibility has forecast that UK gross domestic product will be cut by 4 per cent as a result of Brexit, and the Financial Times reported £100 billion of lost output and £40 billion less revenue for the Treasury each year.

Brexit is fuelling inflation and is making Scotland and the rest of the UK poorer. As a consequence of Brexit, the UK is facing a worse cost of living crisis than it would otherwise be facing, which is partly due to the loss of free trade. Analysis in April by researchers at the London School of Economics and Political Science showed that post-Brexit trade barriers resulted in a 6 per cent increase in food prices in the UK.

As a food producer, I know that the majority of costs are actually down to the cost of fuel, which underpins all costs of production. They are not down to Brexit. Will the minister accept that fuel prices drive food prices? If that is the case, everyone will be affected, and I suspect that others across Europe will be catching up shortly.

I have not said in my remarks that Brexit is the sole cause of the situation that we face. I acknowledge that it is not, and I recognise that inflation across the economy will ultimately be a reflection of energy-price inflation—that is just a reality and an economic fact that we can all accept. However, my point—which is based on independent statistics—is that Brexit has been a contributory factor.

A report by the Resolution Foundation in June found that even before the UK left the EU, currency depreciation that was linked to Brexit increased the cost of living in the UK by £870 per year for the average household.

The trade barriers that we now have are causing real harm. The OBR now expects trade volumes to decline over the medium term, with them falling to 8.3 per cent below current levels in the final quarter of next year. The food and drink sector in Scotland has borne the brunt of the hard Brexit that has been imposed by Westminster on Scotland. Compared with the same period in 2019, in the first half of 2022, exports of key food products to the EU have fallen—by 52 per cent for fruit and vegetables, and by 25 per cent for dairy and eggs. Scottish businesses have seen record increases in input prices in 2022, and they cite Brexit as a factor, according to statistics from S&P Global. That has, as of July, fed through to the 21st monthly rise in the prices that are charged by businesses.

Brexit has ended free trade and free movement, which is hurting key Scottish industries and contributing to and creating labour shortages. It is expensive and time consuming for employers to recruit from overseas and for people who want to come to Scotland to live and work.

Food processing and manufacturing, hospitality and agriculture are especially affected, which harms rural Scotland in particular. As at July 2022, a range of key economic sectors in Scotland were experiencing worker shortages, including shortages of 43.4 per cent in construction and 43.8 per cent in accommodation and food.

However, that economic harm is also a social harm. We are poorer as a result of Brexit and we risk missing out on the cultural benefits of having more people of working age from a range of backgrounds contributing to our common weal.

We are doing everything that we can within our limited powers to support people and businesses. By the end of March next year, we will have invested about £3 billion in a range of measures to support households. That includes support with energy bills, childcare, health and travel, as well as social security payments that are either not available elsewhere in the UK, or are more generous than those elsewhere in the UK.

For businesses, we have an existing package of non-domestic rates relief that is worth more than £800 million, and includes the UK’s most generous small business bonus scheme. We are doing all that with one hand—although sometimes it feels like both hands—tied behind our back.

Inflation is eating away at the Scottish budget, which has already fallen by 10 per cent in real terms from last year to this. Because of the lack of additional funding in 2022-23 and the financial restrictions of devolution, we have had no choice but to make savings of more than £1 billion. The announcements in last week’s UK autumn statement do very little to address the damage that that has done to the Scottish budget.

I recognise that we face a series of global challenges, and that the situation in which we find ourselves today does not lend itself to easy solutions. However, Brexit can be cited as a contributory factor in many of the issues that we face. Ultimately, Brexit was a political choice. I dispute any argument that Brexit has democratic legitimacy in Scotland: Scotland comprehensively rejected Brexit in 2016, and in every election to this Parliament and to Westminster since then, parties that are opposed to Brexit have been overwhelmingly returned.

There could have been another reality; the hard Brexit that has been inflicted on us was not a necessity. There was a moment—in June, July and August of 2016—when the UK Government could have listened to, engaged with and heeded the warnings of this Government, this Parliament and many other stakeholders, and could have sought to pursue an arrangement with the European Union that would minimise damage. However, rather than focusing on what was best for the United Kingdom, the UK Government focused on what it thought was best for the Conservative Party. Unfortunately, as a consequence of that, we are all paying the price today.

Thank you, minister. That concludes the debate.

Meeting closed at 17:46.