Official Report 1084KB pdf
The next item of business is a debate on motion S6M-15061, in the name of Craig Hoy, on using the upcoming Scottish budget to support economic growth. I call Craig Hoy to speak to and move the motion.
We need a microphone for Mr Hoy, please. [Interruption.] It seems that Mr Hoy’s card is not in. Could you try taking your card out and putting it back in, Mr Hoy? That is the trusted old method of solving technological problems. [Interruption.] We will provide Mr Hoy with a spare card. Apologies, Mr Hoy.
16:59
It is a case of second time lucky, Deputy Presiding Officer.
Today’s budget was the moment to discover whether leopards have the capacity to change their spots. We have known for a decade and more that the Scottish National Party is reckless on the economy—reckless on tax, reckless on spending and reckless on business, all of which adds up to being reckless on growth. Today, Scotland has discovered that Labour is just as bad, with a reckless budget of broken promises.
The budget included a massive increase in tax—the biggest ever increase in a single budget; a massive increase in borrowing; a £25 billion jobs tax on employers; a financial ram-raid on Scotland’s vital oil and gas sector; higher tax on Scotch whisky; a tax assault on farmers and their families; and a cash grab on Scotland’s pensioners, who now face the prospect of freezing this winter.
In votes in this chamber, Labour and the SNP are frequently on the same page on matters such as gender reform, hate crime legislation and rent controls, but we now find that they are on the same page in the budget playbook. However, it is the wrong page and the wrong playbook because it contains more tax and more borrowing and, at the same time, cuts to key public services. All those measures are intended to fund misplaced priorities, including above-inflation pay deals, which were demanded by their friends and donors in the trade union movement.
Today, Scotland is suffering a double whammy at the hands of a cosy left-wing consensus between Labour and the SNP and their friends in the Greens. They are socialists doing what socialists do—clobbering hard-pressed taxpayers, beleaguered businesses and vulnerable pensioners.
Our motion today makes it clear that the Scottish Government has failed to deliver sustained levels of economic growth in Scotland. If it had succeeded, the finance secretary would have had an additional £624 million to spend on public services in this year alone. The Scottish economy would have been £11 billion better off in recent times if only Scottish growth had kept pace with growth in the rest of the United Kingdom.
However, rather than boosting business, this SNP Government has repeatedly put barriers in its way. For too long, Scotland has been a high-tax, low-growth economy with public services that are simply not fit for purpose. The SNP’s misplaced priorities have led to billions in waste. Public sector pay has soared while unreformed public services have suffered. For example, the two lifeline ferries, which are costing nearly half a billion pounds, have yet to take a single passenger to our forgotten islands. Hundreds of millions of pounds are wasted on pet projects, and millions more are wasted on abandoned or ill-fated legal challenges.
Ministers insist that their approach to tax is progressive, but what on earth is progressive about slapping more tax on someone who earns £29,000 a year? That is a tax on nurses, teachers and police officers—not a tax on the rich.
The Scottish ministers have increased income tax on hard-working Scots by more than £1.4 billion since 2016, but the vast majority of that tax revenue has not been generated by their newfangled rates of tax. It has come from freezing thresholds—a sleekit fiscal sleight of hand.
That is why the Scottish Conservatives are now asking the Scottish Government to examine the benefits of lowering tax in Scotland and to explore how we can apply common sense to tax in order to generate jobs and drive economic growth.
The tax gap between Scotland and the rest of the UK has stifled growth. It has prevented us from attracting and retaining key workers, such as national health service doctors and dentists, and it is undermining the financial services sector. Scottish Financial Enterprise warns that its members are finding it more difficult to attract and retain senior workers, and recruitment firms say that candidates are now asking for a Scottish weighting on their salaries to make up for the tax difference.
Fiscal drag has pulled more and more Scots into higher tax, but it is an escalator that, under the SNP, goes only one way—always up, never down—forcing more and more Scots to pay more in tax to fuel the SNP’s insatiable appetite to spend other people’s money and, frequently, to do so unwisely.
Will the member give way?
I will not give way.
Thanks to the union dividend, this year, Scotland has £2,400 more per head to spend on public services. However, although the SNP still adopts a policy of higher tax on the majority of Scottish workers, our NHS fails to meet waiting time targets; qualified teachers cannot find permanent jobs; school standards have slumped; violent crime is rising; dangerous prisoners are being released early; Police Scotland is on the brink, with the threat of large-scale redundancies; cash-strapped councils are being forced to slash services; and our roads and infrastructure are crumbling. At the same time, the SNP is cutting investment in housing and employability, but the benefits bill is still soaring.
The SNP is not just on the wrong page—it is on a different planet. It gave free mobile phones to prisoners but slashed funding to get people back into work. It is sending millions of pounds to educate children in Africa—noble as that is—but funding for teachers in Scotland is not being delivered.
However, Labour is no better. In fact, today, we found out that it might be worse. Make no mistake whatsoever—Labour’s budget is bad for Scotland, despite the additional Barnett consequentials that will come forward. It is bad for workers, bad for growth and bad for the economy. Labour promised change, but the country did not expect that it would be change for the worse through higher borrowing, which will put mortgages at risk—
For goodness’ sake. Will Mr Hoy take an intervention?
I do not have time.
Labour claims to be investing in growth but, at the same time, it risks undermining growth through a stealth tax on jobs. The national insurance tax rate that was announced today will halt investment and stifle growth, and it could force Scottish firms to close altogether. It jeopardises pay rises in the private sector and will cost jobs.
Let us take hospitality across Scotland as an example. Many pubs are staring into the abyss. The SNP has let down the sector time and again, particularly and most recently in relation to rates relief. Wages are the sector’s biggest cost, so hitting it with a jobs tax is bad not just for the sector but for the economy and growth in Scotland.
Labour and the SNP have proved that they cannot be trusted to grow the Scottish economy. It is increasingly clear that there is only one party that businesses can trust, only one party that is standing up for pensioners, only one party that is standing up for Scottish taxpayers and workers and only one party that is standing up for growth in Scotland. That is the Scottish Conservative and Unionist Party. Between now and the next election, we will work to unite people and businesses that have been let down badly by both Governments and their lamentable budgets. That is why I encourage colleagues to support the motion in my name.
I move,
That the Parliament believes that the Scottish Government has failed to deliver sustained levels of economic growth in Scotland; notes that this failure has cost Scotland’s public services £624 million in 2022-23 alone; recognises that the Scottish Ministers have increased income tax on people in Scotland by over £1.4 billion since 2016 and have created a damaging tax differential with the rest of the UK; acknowledges that, despite increased taxes and higher spending on devolved public services, this has failed to deliver better outcomes for the taxpayers who fund these services, and calls on the Scottish Government to examine the potential positive impact on jobs and economic growth of beginning to lower tax in the upcoming Scottish Budget.
17:06
I am delighted to open for the Government on the second of our triple header of finance debates this week. I welcome the opportunity to debate the issues that the Conservative motion raises, following yesterday’s interesting debate on fiscal sustainability. As I outlined yesterday, and as I reiterate today, the Scottish Government is committed to ensuring that public finances are sustainable. Taxation and the economy are two of the three pillars that will ensure that that is delivered, alongside our approach to public spending. I will focus on those issues today.
Mr Hoy began by criticising our record on the economy. A top priority for the Government is boosting economic growth, which creates good jobs, supports investment in the green industries of the future, tackles poverty and sustains high-quality public services.
Let us look at our record. Mr Hoy and the Tories will be interested to learn that gross domestic product per capita in Scotland has grown faster than it has in the UK since 2007. It has grown by 10.7 per cent in Scotland compared with only 5.6 per cent across the UK as a whole—almost double. On top of that, over the same period, productivity has grown at an average annual rate of 1.1 per cent in Scotland compared with 0.4 per cent in the UK—more than double.
If that is all true, why do only 9 per cent of Scottish businesses have confidence in the Government’s economic policy?
I will come on to talk about businesses and tax in a minute, as well as inward investment, which is an absolute measure of the confidence that businesses have in the Scottish economy.
The number of projects in Scotland grew, yet again, by almost 13 per cent last year, which was more than double the rate of growth across the UK. Indeed, that compares with a fall across the whole of Europe.
Scotland’s position as a top-performing area of the UK outside of London in attracting international foreign direct investment has been maintained for the ninth year running. That is a real measure of the confidence of international businesses in how the Scottish economy is being run.
Since its launch, the Scottish National Investment Bank has committed almost £650 million and brought in a further £1.4 billion of third-party investment for businesses and projects across Scotland. That has enabled the building of affordable homes and has supported 1,800 jobs in investee businesses, and nearly 58,000 tonnes of carbon have been avoided as a result of the bank’s investments.
The Government has set its sights clearly on establishing Scotland as one of Europe’s leading start-up economies by fostering an environment where innovation and high-growth businesses flourish. Techscaler, the Scottish Government’s £42 million national programme for creating, developing and scaling tech start-ups through education programmes, expert mentoring and a growing network of physical hubs, has had more than 1,000 applications from more than 900 individuals and 700 businesses accepted, and 36 per cent of them have women founders. Scotland’s financial services sector, which Craig Hoy mentioned, is one of Europe’s leading hubs for fintech start-ups and creating that excellent cluster, and it is a consequence of the work and focus on the part of the Scottish Government. It is difficult to characterise those as failures.
Craig Hoy talks about public sector work. I say to Mr Hoy that we are proud of the fact that we have more front-line staff—doctors, nurses, midwives, teachers—in Scotland than the average across the rest of the UK, and we are proud that we pay them a wage that is commensurate with their contribution to the Scottish economy.
The minister is doing a good job of talking about growth opportunities for Scotland. Surely he will recognise and welcome the £125 million that was announced today for GB energy, which will be based in Aberdeen. Perhaps he could explain to us why SNP members of Parliament refused to vote for that investment last night.
The Scottish Government is looking at the budget that Labour has introduced today to see what the implications of that are. The increase in national insurance in the public sector will have a significant £100 million impact on our budget, and that needs to be factored in. We have not seen Labour taking steps to cut the two-child cap—Labour has abandoned its principles there—and the misguided winter fuel payment policy is among many other errors in the UK Labour Government’s approach in the past weeks and months.
Inward migration is another measure that shows the success of Scotland’s economy. People are moving to Scotland. More taxpayers are coming to Scotland than have left.
Will the minister take an intervention?
The minister is bringing his remarks to a close.
The numbers are increasing, and the number of those who are moving from the south to the north is higher than the number of those who are moving from Scotland to the rest of the UK, and the gap is growing, as was shown in the most recent publication of the data.
We believe that there is absolutely more work to be done to grow Scotland’s economy, to create confidence and to encourage yet more investment, but the Government’s track record over 17 years has many positives that we should be proud of. We will continue to work with businesses across Scotland to grow and strengthen Scotland’s economy.
I move amendment S6M-15061.2, to leave out from “believes” to end and insert
“condemns the impact of the former UK Conservative administration’s austerity and Brexit on the public finances and the wider economy; recognises that progressive taxation in Scotland has ensured that funding has been available to deliver actions to tackle poverty, like the Scottish Child Payment; notes that the latest available evidence shows that Scotland had positive net inward migration of taxpayers from the rest of the UK and was positive for every tax band; further notes that the process to develop the Scottish Budget for 2025-26 is underway; challenges those who would propose reducing tax rates to identify the public services that they would then cut to deliver the required balanced budget; deplores the call from the Scottish Conservative and Unionist Party to introduce an illness tax in the form of prescription charges, and believes that the Baby Box, free prescriptions, free personal care, free eye examinations and free university tuition should be protected and sustained for the future.”
17:12
For the Conservative Party in 2024 to bring to the chamber a motion to criticise financial policy is, in civil service speak, a bold move. We would almost think from Mr Hoy’s remarks that a change in leadership and in the front bench means that this is somehow year zero for the Conservative Party, as if we had not gone through the misery of the past five years of a UK Conservative Government, given what that did to people’s mortgages, the cost of living and everything else that went with it. Almost two centuries of perceived Tory fiscal competence were utterly destroyed when, in less than an hour, Kwasi Kwarteng and Liz Truss wiped £30 billion from the UK economy. I would have thought that the Tories would have preferred to avoid talking about their disastrous financial record in government, which even now has left us with a black hole of tens of billions of pounds. As I say, it is a bold move for the Tories to bring a debate on fiscal policy to the chamber.
However, let us not forget that another Government has also torpedoed any notion of financial credibility. The SNP has been in government for 17 years, but its incompetence, waste and apathy have hugely damaged Scotland’s economy. What do we have to show for that SNP economy? We have £5 billion of waste. Local authority budgets have been cut by more than £6 billion. Nurses and teachers have been taxed more than they would have been if they were doing the same job in the rest of the UK, but the essential services that those taxes pay for are on their knees.
Will the member take an intervention on that point?
I would normally, but the member has to appreciate that this is a very short debate.
If the SNP had managed to keep Scotland’s economy in line with the economies of other parts of the UK, it would now be £8.5 billion larger.
I find it fascinating, however, that we now have a failed Tory Party calling out a failing SNP Government on finances, and that the Tories have not learned about the impact of prioritising unfunded tax cuts over efficiency and fairness in fiscal policy. We in the Labour Party will be getting on with fixing the horrendous mess that has been left behind.
Today, the Office for Budget Responsibility set out in fine detail the financial hole that the Tories drove us into with their incompetence and the mess that the UK Labour Government has inherited—a mess that has made some difficult choices necessary.
As the Prime Minister made clear on Monday, every single choice has been made to fix the foundations of our economy with working people in mind—people in Scotland and the rest of the UK, who have been working harder and harder but are still just standing still. Some of the choices are hard, but they will mean an employment bill that will finally make work pay, contribute to growth and raise living standards for working people. It will mean a direct response to the cost of living crisis that we were elected to tackle.
The budget will stabilise, invest in and grow the UK economy, with £63 billion-worth of investment secured from business two weeks ago creating tens of thousands of good-quality jobs in every corner of our country. It will also deliver the largest budget settlement for Scotland in the history of devolution with an extra £3.4 billion of funding. Labour is clearly delivering for Scotland.
Today’s historic budget has shown that only Labour can get on with getting our economy back on track, boosting economic growth, ending austerity and making work pay.
I move amendment S6M-15061.1, to leave out from “the Scottish Ministers” to end and insert:
“while taxpayers in Scotland are paying more than their counterparts in the rest of the UK, almost one in six people in Scotland are on NHS waiting lists, the latest PISA statistics show that Scotland’s education system is falling further behind other countries, and local government services are under severe financial pressure; believes that people are not seeing the necessary improvements to their public services; regrets that the incompetence of the Scottish National Party administration has led to chaos in the public finances, with emergency in-year budgets for three consecutive years, and calls on the Scottish Government to end 17 years of waste and incompetence in the management of Scotland’s finances.”
17:16
I note Mr Hoy’s relentless focus on economic growth in his motion for debate today. Growth by itself is not inherently good, and cuts are not a means to growth in any case—Liz Truss demonstrated that very capably, I thought. Maximising growth for the sake of having a bigger gross domestic product to bang on the table than the country next door does not actually do anything at all to improve people’s lives and can increase damage to the environment and greenhouse gas emissions, while making inequality worse—[Interruption.]
Please resume your seat, Ms Slater. We will hear the member who has the floor, which is Ms Slater, and none of the people who are making comments from a sedentary position. Please resume, Ms Slater.
Thank you, Presiding Officer.
It is making inequality worse by letting the rich get ever richer while most people get worse and worse off. Economic success needs to respect planetary boundaries and benefit the many, not just the few. No one needs a private jet or a yacht, but every child needs a warm home, a good school, access to good medical care and nutritious food.
I go back to the point about growth. Is the member therefore advocating that recession is good for the economy and good for the people of this country?
It is clear that Mr Hoy has not been listening to me. Growth for the sake of growth alone, just to get that bigger GDP number, will not solve any of those problems. We still need to redistribute wealth and invest in public services, and we can do that with the wealth that is already in the system. We cannot wait for some future date when we magically have a GDP number that will make the Conservative Party say, “Oh, today is the day we can finally invest in hospitals.” We will never reach that number, Mr Hoy—we need to start today.
I note Mr Hoy’s unevidenced assertion that the tax differential between England and Scotland is damaging. It is a pity that the Torygraph—I am sorry, I mean The Telegraph—did not get the memo and this weekend ran an article entitled “Why thousands are fleeing to Scotland—and why you should too”, which points out that net migration to Scotland from the rest of the UK hit 13,900 in the year to June 2023, which is the highest level recorded in 21 years.
Will the member take an intervention?
No, I need to make progress.
Free university tuition, free prescriptions, free eye tests, free period products and free bus travel for young people are a bargain for the £111 in additional tax per year that someone on a £40,000 salary pays in Scotland. That article does not even mention the Scottish child payment, social care support, free school meals or higher pay for nurses.
The challenges of the past 14 years, with a Conservative Government in Westminster that has cut investment to the bone and run public services into the ground, highlight how unsatisfactory Scotland’s fiscal framework is. As a devolved nation, we have only limited tax and borrowing powers and end up having to use them to try to mitigate the worst of the vicious cuts and hardships that are being imposed from London.
The Scottish Fiscal Commission, among others, advocates for fiscal reconfiguration to avoid perpetually missing our climate and nature restoration goals; and what about eliminating child poverty for good? We need more investment and money for those things, not less. Lowering taxes while continuing to subsidise polluting industries and large landowners will not achieve the outcomes that we desperately need.
The Scottish Greens want more public investment in Scotland, and we will be honest about where the money for it can come from and how it can be raised. In the Scottish budget, we would take funding from the road building and motorway expansion budgets and put it into housing and climate action. We would raise more from those who can afford it, such as those who travel by private jet.
I suggest to the Parliament that the focus should be on economic development, sustainability and prosperity for all.
Ms Slater, you need to bring your remarks to a close, please.
We have a national dashboard of wellbeing indicators. Let us put in place economic policy to improve those indicators and stop imagining that a twitch of our GDP number will make all our problems go away.
17:21
This is all great fun and there is a degree of political knockabout in it, but I am not sure that the debate is telling us a great deal that we do not already know. The reality is that growth in Scotland has been stymied by the decisions of both of Scotland’s Governments: the SNP’s failure to articulate a long-term vision has meant botched interventions and an erratic approach to tax and spend, and the Conservatives’ appalling legacy—Brexit and the Liz Truss mini-budget—are being felt by the whole country. People need hope and a fair deal.
We are all digesting today’s news from the Chancellor of the Exchequer. I join others in recognising the history of this moment, that of the first budget delivered by a female chancellor in more than 800 years of that post.
We are glad that Rachel Reeves has listened to the Liberal Democrats’ calls for more investment in the NHS, because we cannot fix the economy unless we fix the health service and the care crisis around it. I am concerned that any additional spending that results from today’s UK budget will not make the impact that we need it to make here if the plan that underpins it—Scotland’s NHS recovery plan—is wholly flawed. We have record delayed discharge, people waiting years for mental health treatment, and dental deserts, with whole council areas where new patients are unable to register with an NHS dentist. That is all interrupting the flow through our NHS, making waits longer and preventing people from getting back to work and getting on in life. Let us look at long Covid: one study in April indicated that its economic impact to Scotland could amount to £120 million every year and 11,000 jobs.
The Scottish Government is running out of friends when it comes to the national care service, too. Front-line workers, unions and the Convention of Scottish Local Authorities and now every Opposition party stand opposed to it. We absolutely need to fix the care crisis in our country, but that cannot happen while the Scottish Government remains wedded to that doomed act of centralisation, which would represent a gargantuan budget line.
There were big and difficult decisions for the new chancellor to make, but we fear that she has got too many of those decisions wrong. Workers, entrepreneurs and businesses up and down the country will be poring over the budget, too, right now. Raising employers’ national insurance is a tax on recruitment and high streets and will make the health and care crisis potentially worse by hitting small care providers, who have been hit by the pandemic, the spike in prices and input costs, and are now hit by today’s news.
To create a strong and growing economy, we need to back small business, fix the healthcare crisis and invest in the green jobs of the future, as well as fix our broken relationship with Europe. By ruling out a youth mobility scheme or long-term goals, such as rejoining the single market, the UK Government is trying to fix the economy with one hand tied behind its back.
Instead of raising the money that we need by reversing Conservative tax cuts for the big banks or asking social media and tech giants to pay more to clean up their mess with regard to the wreckage of our young people’s mental health, the chancellor has chosen unfair tax hikes that will hurt the hard-working families, small businesses and family farms that are the engine rooms of our economy.
The Scottish Government now has choices to make as it looks ahead to its budget in December. In the past, it has chosen poorly, as embodied by the ferries scandal—hundreds of millions of pounds over budget and still not serving the islanders who have been so badly let down. After years of distraction and waste, it is time to focus on what really matters: putting communities first; fixing the NHS with fast access to treatment, general practitioners, dentists, and world-class mental health services; lifting up Scottish education; delivering a fair deal for Scotland’s carers; and fixing our crumbling infrastructure while growing Scotland’s economy.
These are important days. The lines and the detail contained in Rachel Reeves’s budget, which are now being pored over, will set the weather for the remainder of this session of Parliament and the early days of the next. It is important that this Government makes the right choices with the money that is coming.
Thank you, Mr Cole-Hamilton. We move to the open debate. There is no time in hand. I ask for back-bench speeches of up to four minutes, please, and any interventions must be absorbed within the allocated speaking time.
17:25
Ministers are always pleased if opposition parties put on the table what we would do differently. I say to the minister that that is exactly why we choose to have this kind of debate in Conservative time. We are doing it because it is so important. That is the reason.
To put the debate in context, we should look at what has been said to the Scottish Government by independent analysts throughout the course of this year. They have been debating extensively the predicament that the Scottish Government finds itself in not only because of the big black hole in the public finances but because of the difficulties that the Scottish Government has imposed on itself. They flagged up, first, the failure to deliver sustained economic growth; secondly, issues with delivery of better public services; and, thirdly, concerns over tax structures—especially the differentials. That has all been flagged up to the Scottish Government and that is the context in which we should be discussing these economic changes.
The bottom line is that Scotland is nowhere near producing the necessary growth levels—I completely refute what Lorna Slater said about that. I do not disagree about having a wider definition, but the fundamental point about economic growth is that we desperately need it to provide jobs, better incomes and all the things that people want.
If we listen to senior figures in business, which we do regularly, they all tell us that Scotland is not making best use of the resources that it has—especially our most talented people. They worry, too, about Scotland’s increasing tax burden and the effect that that is having on middle to high earners—the people whom we desperately need to attract into the more important Scottish markets such as financial services, energy and technology, and food and drink.
Can the member explain why it is that year upon year, we see more and more net migration of people moving to Scotland from the rest of the UK across all tax bands, rather than travelling in the other direction?
As my colleagues spelled out in yesterday’s debate, the level of migration is not nearly what it has been in the rest of the UK. As my colleague Murdo Fraser was asking yesterday, why is it that, when the UK rates are more important than the Scottish ones, we are not getting the benefit from that? That is the question that we have to be asking ourselves.
What needs to happen? First, the budget choices that are made in Scotland must absolutely reflect the priority of economic growth. That did not happen last February—as I think the minister might be prepared to acknowledge—when, for some inexplicable reason, the SNP Government decided to make an 8.3 per cent cut to the economy budget, which had a huge impact on employability schemes. That is the very important area that we have to be concentrating on—not only now, but in the future—because the employability schemes matter in terms of boosting our growth.
Secondly, I do not know how often the Finance and Public Administration Committee, in committee meetings and in the chamber, has highlighted the need for meaningful public sector reform. I have heard the minister say that we are making progress on that. I would like to see the data. Where is the evidence that we are making progress on that? I do not think that the public sees that progress. They do not see better public services—in fact, some would argue that they are worse. Where is the data that says that we are making meaningful public sector reform?
I will finish on this point. The choices that we make must be seen in the context of what the Scottish Fiscal Commission is independently telling us about the prospective spending that there will have to be on social care, the health service and social security, because if we do not address that problem, we will not be able to put Scotland back on the right footing so that we can make economic progress.
17:30
Mr Griffin stated that it was a bold move for the Conservatives to lodge the motion for debate in the chamber, and I agree with him in many respects. I have heard many of the same old tropes from members on the benches opposite. The ferries were brought up, but those members are completely ignoring high speed 2, which has tripled in cost to £106 billion, and the £3.7 billion that has been spent on aircraft carriers that are still not in operation. Members can point out the failures in Scotland, but they should have the decency to acknowledge what is happening elsewhere.
Will the member take an intervention?
I am sorry—I do not have time.
Mr Cole-Hamilton raised the elephant in the room—the detrimental impact of Brexit, which Scotland did not want and did not vote for. The Constitution, Europe, External Affairs and Culture Committee has prepared a number of reports on that, and Mr Kerr is about to join us on that committee. He will hear from the Scottish businesses that told us about the damage that the UK-EU trade and co-operation agreement has done to their ability to export.
Another thing that has been mentioned, and rightly so, is the success of foreign direct investment, which has largely been driven by the work of the international offices. Rather than supporting those efforts to be even more successful, the Conservatives decry the offices as “pretend embassies”. The British Council has said in its deliberations with the committee that Mr Kerr is about to join that it would welcome more offices being opened across the world because of their success in attracting foreign direct investment. Rather than joining the British Council in that, the Conservatives have said that the funding for overseas offices should be cut and that they are an unnecessary aspect of the Government’s work abroad.
It is a tough time at the moment, but since 2007 GDP has grown in Scotland and has outpaced the rest of the UK. Record foreign direct investment projects were secured in Scotland in 2023. Scotland is the only part of the UK to have recorded growth for five consecutive years, and has done so to the highest level in a decade. According to Ernst & Young, Scotland is the top destination in the UK for FDI.
Our inability to secure workers because of Brexit is hampering our ability to fulfil that potential. [Interruption.] We do not have free movement of people. We cannot have what we had when we were part of the European Union, and it is beyond time that we were—[Interruption.]
Please resume your seat for a second, Ms Adamson. I have already said to members that we need to hear only from the person who has the floor. That happens to be Ms Adamson.
They do not like what I am saying, Presiding Officer, and they do not want it to be heard by the people of Scotland.
We are doing the best that we can do in that context.
The best way out of the predicament is not more austerity—it is not the austerity that we have had, and it is not the austerity that we are going to have following the budget announcement by the UK Government. We need to invest in infrastructure projects so that we can build the economy. [Interruption.] We have to invest our way out of this, because austerity completely failed, as has been shown by the performance of the Conservative Government and Liz Truss. We do not need red austerity and we do not need blue austerity: we need the ability for Scotland to make its own decisions so that we can get ourselves out of the economic crisis that is in Westminster’s hands.
17:34
It is rather ironic that we are here today to debate the Tories’ suggestions for how we can improve our economy and our nation’s economic future, given their catastrophic mishandling of the UK’s finances during the miserable 14 years for which they were in power. Indeed, the idea that the Tories are in any position to provide insight into fiscal competence is simply laughable. The damage that they have inflicted on the country’s economy through promises not being funded or being underfunded, and through decisions being taken without care and without thought will unfortunately be felt for a long time to come, as the new UK Labour Government attempts to rebuild from the economic disaster that has been left to us by the Tories.
However, I believe that, when history is written, the past decade will be the story of two incompetent Governments. It is clear to me—I believe that it is becoming ever clearer to the people of Scotland—that, despite the fact that people in Scotland pay higher taxes than those in the rest of the UK, Scotland’s public services are crumbling. Constituents are terrified as they sit on waiting lists in our NHS, not getting the treatment that they need or being unable to access crucial general practitioner services. Parents are worried about the quality of education that their children are receiving because teachers are undervalued and overstretched, and people are in desperate need of care packages that never seem to be available. However, despite all that, people across Scotland are asked to pay more and more for less and less, all while they watch the SNP Government pour money down the drain with nothing to show for it.
Take social care. Promise after promise has been made by the Scottish Government that its National Care Service (Scotland) Bill will deliver the most significant reform to public services since the creation of the NHS. However, we are left with a proposal for a centralised procurement service that bakes privatisation into care delivery in Scotland—a proposal that has been abandoned by every key stakeholder, the trade unions, COSLA and even the Government’s allies in this Parliament. Some £28 million has been spent and we are no further forward and no closer to delivering the social care provision that the country so desperately needs.
That is just one example. From the ferries fiasco to overreliance on agency staff in the public sector to delayed discharge in our NHS, the Scottish public have watched the SNP Government squander public finances while public services suffer.
I believe that, for the most part, people are happy to pay tax if they can see the benefit of doing so. They want their taxes to be used for better public services and to grow the economy in a way that will give people the best chances in life. Therefore, I must point to the fact that, if Scotland’s economy had kept pace with the economy in other parts of the UK, it would now be worth billions of pounds more. For me, that points to the SNP’s failure when it comes to economic policy, its failure to put in place an industrial strategy and its failure to recognise that, alongside taxation, we must have economic growth to build a successful and prosperous Scotland. That is why I will support the Labour amendment.
17:38
This debate highlights the SNP Government’s failure to prioritise economic growth over the past 17 years. The motion calls on the Scottish Government to put growth front and centre in its upcoming budget. For years, the SNP Scottish Government has paid lip service to the idea of economic growth but has acted differently when it comes to changing its policy. Last year, we saw a tax-and-axe budget for 2024-25 that increased income tax and failed to pass on rates relief to small businesses. That was after the SNP had spent two years in coalition with a party that shows complete contempt for economic growth, with an approach that would destroy jobs and investment.
We do not have to look far to see what happens when a Government decides to neglect growth. Scotland is forecast to have the fifth-lowest GDP of the regions of the United Kingdom. That dismissive attitude towards economic growth has had consequences, and it impacts on businesses across Scotland.
Today’s motion mentions £624 million in lost tax revenue for 2022-23, which the Scottish Fiscal Commission calculated. That funding could and should have been put into supporting public services, which we all depend on. Clearly, the SNP should be shifting its focus and implementing growth policies rather than attitudes. One of the biggest obstacles that we face is the SNP’s poor relationship with the Scottish business community. Despite announcing a so-called new deal for businesses last year, there have been no signs that that relationship will improve any time soon.
Members do not have to listen to me or to others on the Conservative benches. They can look at the failings or listen to the Scottish business monitor report by the Fraser of Allander Institute, which says that two thirds of Scottish businesses believe that Scotland’s Government does not understand their needs. Only 6 per cent of businesses believe that the Scottish Government
“engages effectively with the sector”.
Although confidence in the Government is very low across the board, in two key areas—finance and construction—it is exceptionally poor. On top of that, two thirds of Scottish businesses said that income tax policies are having an impact on their business.
The anti-business and anti-growth agenda ran straight through the heart of the Bute house agreement. No doubt businesses were hopeful that the end of that agreement would mean a change in the Government's attitude. So far, there has been no sign of that, and we cannot look forward to seeing anything in the future.
Regardless of the narrative, the truth appears to be that prosperity is very low in the Scottish Government’s priorities for the future. It is time for the Government to change its course, support growth and deliver the Scottish economy’s potential, which is enormous.
17:42
We have to face the fact that Brexit is what broke Britain. We had a number of years of austerity—Labour and Tory—before that, but Brexit broke Britain. As if that was not enough, Liz Truss took her turn and tanked the economy.
The motion that we are debating is hypocrisy at an unprecedented level. The Scottish Government, despite facing obstacles at every turn, has done a remarkable job of delivering economic progress and social benefits that consistently outshine those of other parts of the UK.
Of course, in Scotland, people pay the lowest tax in the UK.
What?
That seems to come as a revelation to some Conservatives—which demonstrates their ignorance. [Interruption.]
However, it is simply the case that a majority of people in Scotland pay less tax than those in the rest of the UK. Some people pay more, and those who do pay more tend to be higher earners. [Interruption.]
Mr Brown, please resume your seat for a second. Members, for the third—and, hopefully, the last—time, when a member has the floor, we listen to that member politely and otherwise seek to make an intervention.
I know that it is hard to listen to, but people in Scotland pay less tax than people in the rest of the UK. Those who pay more are the highest earners, and that is fair, because in Scotland we choose to support our communities and not bail out banks while ordinary families struggle.
The motion suggests that the Scottish Government has failed to deliver better outcomes. Let us look at some outcomes. We have scrapped tuition fees. Every day, we hear stories about people down south who are struggling with massive debts that they have no expectation of being able to pay off before they end their working lives. We have free bus travel for more than 2 million people in Scotland. We have the best-performing core accident and emergency departments in the UK and the highest number of general practitioners per capita in the UK. We have abolished rates for more than 100,000 small businesses, increased international exports by a staggering 69 per cent since 2007 and invested £11 billion in Scotland’s rail infrastructure.
When Westminster imposed cruel policies such as the bedroom tax, it was the Scottish Government that stepped up, by investing £74.8 million to protect people from its worst impacts, and it invested millions more to offset the child benefit cap. Where is Labour on those issues? It is nowhere to be seen when it matters.
Lorna Slater mentioned the article in The Daily Telegraph entitled “Why thousands are fleeing to Scotland—and why you should too”. Even The Daily Telegraph acknowledges that life in Scotland under the SNP is better than it was before and better than it is elsewhere. [Interruption.] I know that, again, that is hard for the Conservatives to accept.
We are seeing more net migration to Scotland, which obviously means that people who read that article believe that life is better in Scotland. One of those new Scots is Ellie Jones, a young woman from Cheshire who came to study at the University of Stirling in my constituency. She graduated, stayed and now works at the university. She shared her experience, saying:
“There are so many benefits that people don’t think about, like free dental care until you are 25. Free prescriptions and eye tests are also brilliant. You don’t realise it until you have them—they are such a big bonus.”
That is the reality for people living in Scotland, yet here we are being asked to trust the economic wisdom of a party whose leader—I do not think he is here now; I think that he has left the debate—once said, “In Liz we trust”. Now, he is back-pedalling, saying:
“We all get things wrong.”
Those are the legacies of Russell Findlay: “In Liz we trust” and “We all get things wrong”. Mr Findlay backed Liz Truss, betting on the one Prime Minister who managed to crash and burn faster than any Prime Minister in recent history, which showed his breathtakingly poor judgment. Now, the Tories are back, urging Scotland to adopt the same tax-cutting frenzy that Truss chased after—the very same agenda that left the UK in economic turmoil.
They really do not like hearing about Liz Truss on that side of the chamber, but we will take no lessons from the Tories. Their track record is loud and clear, as is ours, though in a very different way. The economic change that we should be considering is one that will truly empower people, boost our jobs and provide growth.
There might be a lesson for the Tory party. What it thought was a symbiotic relationship with the Labour Party in this chamber—when it was about always attacking the SNP—was a parasitic relationship. The Tory Party is having its lunch eaten by the Labour Party, which will replace it as the biggest unionist party at the next election. That is the reward that it gets for eight years of sticking with the Labour Party.
Scotland deserves better. We deserve the powers of a normal country with independence. We can unlock our future potential and truly thrive, and say goodbye to Brexit and Liz Truss.
We move to closing speeches.
17:47
During these debates, various people choose to defy expectations and others confirm them. The Conservatives have played up to their reputation as the pantomime villains of Scottish politics—[Interruption.]—and they have brought a motion to do the same. A few years ago, some of them were determined that Scotland should copy the disastrous mini-budget of Liz Truss and Kwasi Kwarteng. Today, it seems that they are equally determined to drag the behaviour in this chamber down to the level of the House of Commons. I very much hope that they fail.
From other parties, we expect a serious debate. The amendments from both the Government and the Labour Party contribute to a more serious debate. In the Government’s amendment, I do not see anything that anyone could disagree with. It recognises the harm done by austerity, which is well understood in every community across the country, and it recognises the harm done by Brexit, which is well understood in every community, particularly in every business, across the country. The amendment refers to the value of using progressive taxation—which I will come on to in a little more detail later—to pay for things such as the Scottish child payment, free prescriptions and ensuring that people can go to university without ending up tens of thousands of pounds in debt for their tuition fees alone, as happens in England.
The amendment also makes the clear point that Opposition parties that contribute to discussions about the budget have a responsibility to at least try to make the sums add up. If they want more spending, they need to recognise the necessity to raise that revenue through taxation.
As for the amendment from the Labour Party, I am sorry that it is abundantly clear that it has entirely abandoned its support for progressive taxation. When Scotland moved to a five-band income tax system, the Labour Party supported and agreed with that change. Now, it no longer supports it—the Labour Party believes that it is wrong that anyone pays more tax in Scotland.
Let us look at the operation—
Will the member give way?
With only four minutes for my speech, I am afraid that I do not have time.
Let us look at the operation of progressive tax in Scotland. Someone who is on £35,000 a year—that is not an exorbitant salary, but it is by no means a low income—pays barely more than £1 a week more in income tax. Those on significantly higher incomes, such as every member of this chamber, pay a fair bit more, and those on extremely high incomes pay their fair share, unlike anywhere else in the rest of the UK. Those on extremely high incomes pay significantly more.
In exchange for all that, we get all those policies that we have chosen to prioritise, whether that is the baby box, free prescriptions, free higher education or the knowledge that we live in a society that has the decency to provide a Scottish child payment to those in need. That is what we all receive from a country that commits to progressive taxation.
Today, we have seen a UK budget that—I will give credit where it is due—begins to change the country’s direction, and some of the ways in which it does so are welcome. I will take the time to study it. However, even the advocates of the Labour Party—their biggest fans—would not suggest that it brings the UK up to the level of investment that we see across the European Union or in the US, through the Inflation Reduction Act of 2022, or that would have existed under the Labour Party’s previous £28 billion green policy investment plan. It still leaves the Scottish Government with the responsibility to fund local services, to invest in net zero, to cut inequality and, as Parliament agreed earlier this month, to use every lever possible at our disposal to do those things, including progressive taxation and new local tax powers.
Mr Harvie, you will need to conclude.
There is an urgent need for that investment in net zero, and a need for tackling extreme wealth and tax avoidance.
Thank you, Mr Harvie.
If the UK will not do it, it should give us the power.
We have no time in hand. I call Michael Marra to close on behalf of Scottish Labour. You have up to four minutes.
17:51
I welcome Craig Hoy to his role as Conservative finance spokesperson. He seems disorientated and bleary-eyed from the parallel universe that he has arrived from, where the Conservatives have not just slumped to the worst electoral defeat since the advent of democracy, but faced an entire repudiation of their economic and social record across the whole of the UK. He might want to recognise that advocating for the policies of Liz Truss, whose name has come up repeatedly today, does not get us better mortgage rates. Liz Truss’s approach was an absolute disaster, which led to sky-high interest rates—
Will the member give way?
No, thank you, sir. I am just getting started.
Her approach led to sky-high interest rates, and people across this country are paying through the nose as a result of the Conservative Government’s approach.
There is some consensus across the chamber that the principal benefit of a growing economy and an economy that works properly is that people have money in their pockets—money that they can spend on their decisions. However, growth is also critical to generating the tax take that ensures that we can pay for our public services.
The economic decisions that we take to get that growth are vital. Since 2010, the lack of investment in the UK economy has left us in a perilous situation. Today, we turn the page on that chapter of our history. For too long, growth in this country has been choked off by a complete failure to invest in the people, the technology and the services that we require, not just in Scotland but across the UK. Of course, the SNP has failed to utilise the benefits of the Barnett formula and the additional £2,400 that we get per head of population in Scotland to protect our public services.
We know that, if Scottish growth had kept pace with the sclerotic performance of much of the UK over that period, our economy would be £8.5 billion larger. It is time to get Scotland growing again. There will be an additional £1.5 billion for the core Scottish budget this year and £3.4 billion next year—the largest-ever budget made available to any Government in Scotland.
Will the member take an intervention?
No, thank you, sir. I do not have time.
The era of Tory and SNP austerity is at an end. The question now is whether the SNP can get that money to the front-line services that so desperately need it. One in six people in Scotland is on an NHS waiting list, there has been a decline in our school performance in international league tables, and there is a chaotic and incompetent Government that, rather than setting proper balanced budgets, has, for three years in a row, ended up making emergency spending cuts in the middle of the year.
Alex Rowley set out very convincingly just how incompetent the Government’s approach has been to the key challenge of reforming our public services in the face of demographic, climate and technological change. He highlighted social care, education and transport, which are all in a complete mess in terms of this Government’s policy development.
People want to see the difference that their tax makes in their communities and their day-to-day lives. If they are paying more, they want to see the results of that, but, unfortunately, under the SNP, they pay more and get less in return. The SNP’s conduct over recent weeks around the UK budget has destroyed any last vestiges of fiscal credibility that a once-serious political operation might have claimed. It has demanded the earth and opposed every means of paying the bill to fix the disastrous mess that these people have left to us. Well today’s budget means that the time for blame and excuses—
Will the member take an intervention?
The member is about to conclude.
—is finally, finally over.
Thank you, Mr Marra. I call minister Tom Arthur to close on behalf of the Scottish Government. You have up to five minutes.
17:56
Thank you, Presiding Officer. I welcome Craig Hoy to his new role and wish him well. I look forward to our exchanges. I thank members for their contributions this afternoon.
The primary substance of the debate is the relationship between fiscal policy and economic growth, and there were some good contributions that focused on that. Other contributions have perhaps been more in the political space than the policy space. I will focus on the policy aspects.
We must be realistic about the situation that we face today. The past 14 years of UK Government have resulted in decisions that led to challenges, not only in Scotland but right across the UK, of anaemic growth and stagnant productivity. There were perhaps three central acts that contributed to that. When the UK Government came to power in 2010, it made a decision to pursue an austerity agenda. At a time when the economy, business and public services were crying out for investment and for priming the pump to stimulate demand, there was a withdrawal of funding, which undermined public services, the public realm and, crucially, economic development. We are contending with the legacy of that.
One of the consequences of austerity was that it fuelled the discontent that led to the vote in 2016 for the United Kingdom to leave the European Union. Following that vote, not only did the UK Government ignore the result in Scotland, but it took a very narrow margin in the UK vote overall as a mandate for the hardest of hard Brexits. Is it any wonder that a combination of austerity and Brexit has led to the challenges in growth and productivity that we are facing today?
The final aspect of that was the pickled dogma of Liz Truss and the grotesque chaos of the mini-budget. That is the problem: austerity, Brexit and the mini-budget are all driven by ideology and fanaticism, and certainly not by commonsense politics. We have a job of work to do.
Will the member take an intervention?
I am very sorry; I am limited for time.
I want to welcome the UK Government budget as a step in the right direction. I am not being churlish. I recognise the challenges that have to be wrestled with. If we want to fundamentally turn the dial on the past 14 years of UK Government rule, it will take sustained investment. I do not underestimate the challenges that the UK Government faces, but we will continue to work constructively with it. We will welcome when there is movement on things that we have called for, such as further capital investment. As members would expect, we will push further, as is incumbent on us as the devolved Government in Scotland. There is a way forward. The challenges that we face in Scotland are not unique—people across the UK face the same challenges.
I will touch on the contribution from Liz Smith, which, as always, was thoughtful and considered. She made a number of fair points, but it all comes back to the question of productivity and investment. I recognise that Labour wants to use the most advanced technology, and to use capital and skills. The challenges that we have had with productivity are directly linked to the austerity agenda, and I hope that we can now turn the situation around, not only in public services but in the private sector.
The Employment Rights Bill and the UK Government’s make work pay agenda give us a real opportunity to put on a statutory footing the fair work first policy on which Scotland has led. That is another area where we want to work constructively. Strong trade union rights and strong employment law can also be drivers of productivity and business growth.
There are opportunities for constructive working, but if we are going to wrestle with these wicked problems and challenges, we need to have substantive policy debate in this Parliament. Every country is wrestling with these issues. In July’s United Kingdom election result, a party was elected to government on 33 per cent of the vote. Populism is on the rise in the UK, Europe and North America. It is incumbent on us all, whether we are in government or in opposition, to work to drive up living standards and to have inclusive growth that lifts and benefits everyone. That is the surest way to a future that is not only more prosperous but democratically secure.
Minister, you need to conclude.
It is important that we have more debates like this one, but let us keep them focused on the substance and on the policy.
18:01
It is my pleasure to wind up the debate for the Scottish Conservatives. As Craig Hoy set out at the start, we cannot ignore the fact that the debate is taking place on the same day as we have had the first UK Labour budget for 14 years, which has delivered a staggering £40 billion increase in the tax burden—the highest ever. Michael Marra needs to listen to the fact that, as a consequence of that budget, the bond markets are showing that long-term borrowing costs are up, and the OBR is predicting that inflation and interest rates will go up. That is the legacy of what we are seeing from Labour today.
Will the member take an intervention?
I do not have time at the moment, but I might give way later, once I have made more points.
According to Mr Marra, there will be an additional £3.4 billion in the block grant. We will see the detail of that in due course but, if that is true, it will give the Scottish Government more wriggle room in the choices that it can make.
However, the UK budget is bad news for business, because it includes a hike in national insurance to 15 per cent and a staggering increase—to 78 per cent—in the windfall tax on oil and gas, which is doing enormous damage to the oil and gas sector and to the economy of north-east Scotland. There is also an increase in spirits duty and a hit on farmers passing on land. This afternoon, the National Farmers Union described it as a “disastrous budget” for family farmers and especially for tenant farmers.
What really galls people is the broken promises that we have had from Labour. In the run-up to the election, Keir Starmer said 50 times that Labour had no plans to increase taxes, but the truth has been revealed today.
The winter fuel allowance has been withdrawn from pensioners, and 900,000 pensioners across Scotland are impacted by that. There is no U-turn on that, and there is no sign of the £300 cut to fuel bills that was supposed to be promised.
Keir Starmer also said that he was going to back the Scotch whisky industry to the hilt. He has not done that today—he has increased the duty on whisky and taxed the industry to the hilt instead.
I agree with what Michelle Thomson, who is in the chamber this afternoon, said yesterday about the need to put economic growth first. That ambition is shared by most parties across the chamber, although perhaps not by the Greens.
As Liz Smith said, we cannot ignore the impact on growth of differential tax rates in Scotland. We hear that from the finance sector, the hospitality sector and those who are involved in manufacturing. We hear that businesses are now having to pay a Scottish supplement in additional wages because of the higher taxes. That has an impact not only on the private sector but on the public sector, as we know that high earners in the health service, for example, are deliberately choosing not to work full-time hours because of the impact of higher tax.
In a survey that was done by the Fraser of Allander Institute last month, two out of three Scottish businesses said that the tax issue was having an impact on their businesses. It was the single biggest concern for Scottish businesses, with 27 per cent of the construction businesses that responded saying that it had a lot of impact on what they were trying to do and was, of course, impacting on recruitment.
What should the Scottish Government do with its budget? It has to start to address tax rates. In a speech earlier this week, my colleague Russell Findlay said that the 21p rate was one of the rates that could be removed to set a direction of travel in trying to equalise tax rates in Scotland with those in the rest of the UK.
The Scottish Government has to do something about its reputation with business. Alexander Stewart reminded us of another survey that was done by the Fraser of Allander Institute. Just 9 per cent of Scottish firms agree that the Scottish Government understands the business environment in Scotland, whereas 64 per cent disagree. Just 6 per cent of businesses agree that the Government engages well with their sector. The figure was a dismal 8 per cent in 2023, and it is now down to 6 per cent—so much for the new deal for business.
However, there is now an opportunity, because Barnett consequentials will be coming as a result of the UK budget. For the past two years, I have been calling for the Scottish Government to pass on to businesses that are struggling with rising costs in the retail, hospitality and leisure sectors the 75 per cent rates relief that has been available south of the border last year and in the current year. Such businesses will struggle even more now because of the increases in employer national insurance.
Today, the Chancellor of the Exchequer, Rachel Reeves, announced not that she would extend the 75 per cent rates relief but that she would introduce a new 40 per cent relief for retail, hospitality and leisure businesses in England and Wales for the next financial year. I do not think that that goes far enough, but it is a welcome measure that will generate Barnett consequentials for the Scottish Government. If Scottish ministers are serious about supporting Scottish businesses, it is time for them to help our struggling hospitality businesses, and they have the choice to do so now that the funds are available to them.
I am nearly out of time. I welcome the change in the Scottish Government’s rhetoric, now that the Greens are no longer part of the Administration, with it talking again about economic growth. That is very welcome, but it is time for the Government to put its money where its mouth is. It now needs to start to address the impact of tax on the Scottish economy. That point is made in Craig Hoy’s motion, which I am delighted to support.
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