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Graeme Morrice (Livingston) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted that I have been able to secure this Westminster Hall debate on a vital issue to the future of Scotland and its people, in view of the pending referendum.
Before I move to the substantive part of my contribution, I should like to say a few words about the referendum campaign so far. I congratulate those responsible on the recent launch of the cross-party Better Together campaign, which will lead the debate on the positive economic and social case for Scotland’s remaining an integral part of the United Kingdom. In stark contrast to the vacuous and celebrity-driven launch a few weeks earlier of the campaign by those who advocate separation, the Better Together launch, ably fronted by my right hon. Friend the Member for Edinburgh South West (Mr Darling), drew on the experiences of real Scots the length and breadth of the country who spoke passionately about why they believe we are stronger within the UK. This grounded campaign is based on hard facts and figures, exploring the many positive benefits of being part of the UK and exposing the deficiencies in the separatist plan to end this highly successful political, social and economic union.
On the other side of the debate, the Scottish National party and the Trotskyist fringe parties had, somewhat predictably, fallen out among themselves even before Alan Cumming had had time to board the plane to return to his New York home. The splits quickly became even wider when the recently appointed head of the so-called yes campaign ruled out a second referendum question on devo-max, an option Alex Salmond and the SNP are desperately clinging to as they face up to the fact that they cannot win the first question. Even the well-respected senior Scottish nationalist, Margo Macdonald, called at the weekend for a single, simple question on separation and criticised the yes campaign for refusing to spell out the details of what independence would mean.
Lindsay Roy (Glenrothes) (Lab)
It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing this vital debate. Can he explain why he believes that a referendum should be based around a single question? What are the problems with multi-option referendums?
Graeme Morrice
I am grateful to my hon. Friend for his intervention. As I continue with my contribution, I will come to that point and develop an argument accordingly.
According to reports yesterday, it now looks like the Greens could soon follow Margo Macdonald’s lead, potentially leaving the SNP in the ludicrous position of being the only party supporting a multi-question referendum on the issue that it has spent its entire existence campaigning for.
Mr Mike Weir (Angus) (SNP)
The hon. Gentleman is talking nonsense. The SNP position is and always has been that it is in favour of independence. As the First Minister has made clear, if there were a demand from civic Scotland for a second question, it would be considered. To go on about this is nonsensical. Perhaps the hon. Gentleman would like to get to the meat of this debate.
Graeme Morrice
I note the hon. Gentleman’s intervention. I am surprised that, although for its entire existence the raison d’être of the Scottish National party has been independence, it wants to get sidelined on the issue of devo-max or devo-plus, without the questions being defined.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
Does the hon. Gentleman agree that, if the SNP truly wanted to get to the meat of the debate on separation, it would press ahead, agree the process—the referendum, the single question—and get on with it? Alex Salmond and the SNP are prevaricating over process.
Graeme Morrice
I could not agree more. I will certainly develop that theme as I progress in my contribution.
Sadly, the other predictable aspect of the campaign so far is the level of vitriol already displayed by the so-called cyber-nats—small-minded people who seem to glory in spewing forth hatred about their opponents on every available website and online forum. The contributions of these people, who often hide behind online anonymity, only serves to harm the debate on Scotland’s future, not to mention our nation’s reputation as a welcoming and tolerant place. Although I am willing to accept that some of these extreme nationalists have nothing officially to do with the SNP or the yes campaign, it would be refreshing if more senior SNP figures condemned and disowned their extremist bile. Any interventions?
Mr Weir
Yes, some horrible things are said on Twitter, but there are also, if people want to use such terms, cyber-Brits, who make equally vicious attacks on nationalists. It is terrible that the hon. Gentleman is being so one-sided. This is supposed to be a debate about the economic arguments, but we have heard nothing about that, which is typical of the no campaign so far.
Graeme Morrice
I am coming on to the meat of the debate. The hon. Gentleman doth protest too much.
I shall now move on to the meat of this morning’s debate—the economic consequences of Scottish separation. Some Scots regard the potential economic consequences of breaking away from the UK as neither here nor there. So important to them is the dogma of Scotland going its own way that even if every shred of available evidence demonstrated beyond any doubt whatever that Scotland would be worse off outside the UK, they would still not hesitate to break up Britain. To most Scots, that stance—call it the “Braveheart” factor, or whatever—is simply not credible. Although the debate is and should be about more than economics, there is little doubt that at its crux are the economic consequences of separation. The vast majority of our fellow citizens are interested in what will improve their lives and those of their families and the communities in which they live.
It is hard to deny that, in these turbulent economic times, the size, strength and stability of the UK economy gives Scotland’s businesses a huge advantage over their competitors on the continent and elsewhere. Scotland’s biggest market is the rest of the UK and it has undoubtedly benefited from being an integral part of the world’s oldest and most successful single market. I believe that most people in Scotland already recognise and embrace this. A survey conducted by the Scottish social attitudes survey at the end of last year showed that fewer than one in three Scots back separation, which was roughly the same figure as in 2005. Hon. Members will also have noted the results of the latest opinion poll on separation, conducted by TNS BMRB after both campaign launches, which puts those opposed to separation on 50% and those in favour on just 30%. The latter figure is the lowest received in favour of separation in five years of surveys by the Edinburgh-based pollster and means that in just six months a deficit of nine points for those backing separation has more than doubled. Judging by these figures, even the most ardent nationalist would struggle to argue that the yes campaign had got off to a good start.
Putting opinion polls aside and accepting the premise that, to coin the well-known phrase from American politics, “it’s the economy, stupid” that will determine the outcome of the referendum, let us turn to the available evidence on the key economic questions. Some of the most interesting expert contributions to the debate so far have come from Professor John Kay, a former economic adviser to Alex Salmond. Writing for The Scotsman shortly after the Scottish Parliament elections in May last year, Professor Kay said:
“Independence, if achieved, would bring complications—both political and economic. The reality is that Scotland would gain little by full independence. In the modern world, economic sovereignty for small nations is inescapably limited, and political sovereignty is largely symbolic.”
More recently, while speaking at The Scotsman’s “Economics of Independence” conference, Professor Kay spoke of his belief that Scotland faces five years of economic uncertainty if it opts to separate from the UK.
The potential economic damage ensuing from a long period of transition to a separate Scotland was highlighted at the same conference by oil expert Professor Alex Kemp of Aberdeen university. Professor Kemp said that the complex process of transferring responsibilities from UK Departments to a separatist Scottish Government would involve
“negotiations extending over a considerable time”.
Such fears about the potential impact of a vote for separation, and the instability and uncertainty inflicted on Scotland’s economy, have been voiced by many other academic and business leaders over the past few months. Even one of the SNP’s highest-profile supporters and financial backers, the highly successful businessman Sir Tom Farmer, does not support its separation plans. He stated in a recent BBC interview:
“I’ve never seen or heard anything yet that’s convinced me independence is the right way forward for Scotland. It’s not just about money, but, if it ended up that the country was going to be in dire poverty because of independence, I don’t think anybody wants that.”
For my part, I have drawn on the best available evidence for the likeliest economic impact on Scotland of separating from the UK. I want to focus on three aspects of the economic debate: oil and gas revenues; the share of the UK’s public debt that Scotland would assume if it were to separate from the UK; and a separate currency in Scotland.
Those three vital economic and financial questions were among several highlighted in the excellent Select Committee on Scottish Affairs report on “The Referendum on Separation for Scotland: Unanswered Questions”, published in February this year. I take the opportunity to pay tribute to the Committee’s excellent work. Under the skilled chairmanship of my hon. Friend the Member for Glasgow South West (Mr Davidson), it has embarked on a forensic investigation of the many unanswered questions that hang over the separation debate. My hon. Friend and his colleagues—I see one present today—deserve the thanks of all Members of this House for the detailed and meticulous way in which they are examining so many important points worthy of further detailed consideration, not least the economic matters on which I will now focus.
Lindsay Roy
Of the many unanswered questions, which one gives my hon. Friend the greatest cause for concern?
Graeme Morrice
That question begs the question: many questions give me concern—not least, defence.
I now move on to North sea oil, which has long been regarded by the supporters of separation as the jewel in the crown of a Scotland outwith the UK. The Library standard note on “Scotland’s economy: current situation and issues related to independence”, published in April this year, highlights three key issues when considering this critical question—the division of the UK continental shelf and, therefore, of the oil reserves; future production levels; and the price of oil.
The argument has always been that a separate Scotland should be due the lion’s share of the North sea’s oil, and that the tax revenue from the fields would therefore accrue to Scotland. The suggestion that a separate Scotland would be due most of the North sea’s oilfields, however, is very much open to debate, and most experts agree that nothing concrete could be concluded before the negotiations on separation. Furthermore, the boundary issue aside, the reality is that oil and gas can simply no longer be relied upon in the way that the SNP has always suggested, because of the production and price questions.
Fossil fuels are a declining resource, and the trend of reduced production is now clear. Oil and gas production is falling rapidly; in 2011 it was down by 19% on the previous year, and recent Department of Energy and Climate Change figures show that oil production fell by 13% in the first quarter of this year and gas production by 14%. Future projections suggest that many North sea fields will have ceased production by the 2020s, while the cost of extraction is increasing year on year.
Oil also has a history of price volatility. The Library note shows that it has varied in recent years from a low of nearly $9 a barrel in November 1998 to a peak of almost $150 a barrel in July 2008. The price of oil is closely linked to production, with a low oil price making it less economical to invest in hydrocarbon extraction. In terms of tax revenues from oil, the 2008 Kemp and Stephen paper referenced in the Library note stated:
“It should be stressed that the projections of tax revenues are subject to much uncertainty. Thus oil prices have been very volatile and this should remain the case over the next few years.”
Oil and gas of course remain an important part of the Scottish and UK economies, and will do so for many years, but to bet Scotland’s economic future on the sector is naive at best and foolhardy at worst. Those latest figures highlight the importance of a balanced economy that is not over-reliant on one industry. They also demonstrate one of the many benefits of Scotland being part of the UK economy: we are able to work together in partnership to share the risks and rewards involved in harnessing our energy resources.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
My hon. Friend is making an important point on energy. Does he agree that the current support regime for renewable energy is levied on consumers throughout the whole of Britain and, because Scotland is where the resource is, that support goes disproportionately to Scottish generators? Does he realise that about 10% of consumers are in Scotland, but that about 30% of the support goes to generators in Scotland? Is that not another example of us working well together and getting the most benefit from a renewables future?
Graeme Morrice
I entirely agree with what my hon. Friend says, and it is a further argument.
Mr Weir
Why is Scotland, of all countries, incapable of having a regime to support renewable energy? Countries such as Norway, Lithuania and Ireland can all do it. Also, if we are talking about the cost of energy, why does a generator in the north of Scotland have to pay £21.96 to feed into the grid, while a generator in London receives a payment of £13.35? The existing system is hardly fair.
Graeme Morrice
I certainly agree that Scotland is capable of sustaining a renewable energy industry, but we will do better together within the United Kingdom.
I now want to move on to the share of the UK public debt burden that should be assumed by a separate Scotland. That a breakaway Scotland would have to shoulder some of the UK’s public debt is beyond question. What is certainly open to debate, however, is how the debt to be assumed should be calculated and what factors would contribute to those calculations, including the share of the debt accrued through the bank bail-out. Members are aware of a number of recent studies to have explored this critical question.
February’s National Institute of Economic and Social Research report on the economy of a separate Scotland explored the difference between apportioning debt per capita or pro rata, concluding that there is only marginal difference between the two. The report stated:
“With a pro rata transfer of existing UK public debt, Scotland would enter independence heavily indebted with no insurance from fiscal risk sharing or fiscal transfer mechanism with the rest of the UK.”
The Institute of Economic Affairs report published just last month suggested that a separate Scotland could be saddled with an eye-watering £110 billion national debt. The report highlighted that, with the UK’s debt having recently topped £1 trillion and the expectation that it will rise even further by 2015, Scotland’s share could be even greater than £110 billion. The report’s author, Dr Richard Wellings, suggested that that high debt, which would be comparable to Portugal’s at present, coupled with decreasing oil revenues, as already referenced, would almost certainly require urgent cuts to public spending. Even calculating the public debt on the basis of population size, a proposal described as reasonable by a spokesperson for the First Minister, the report made Scotland’s share of the debt around £93 billion—still a significant burden for a small nation—and around three times greater that the Scottish Government’s current budget.
Mr William Bain (Glasgow North East) (Lab)
My hon. Friend is making a compelling argument for Scotland staying part of the United Kingdom. Does he think that it is unbelievable arrogance by those who want Scotland to leave the United Kingdom that they have not yet devised a debt target for a separate state? How on earth can the public be informed in a referendum if they deny people that information?
Graeme Morrice
My hon. Friend makes a valid point. The SNP’s argument seems to be predicated on contesting the robust figures provided by the experts in support of Scotland remaining part of the UK. Despite the differences in some of the figures that have been suggested, there is absolutely no doubt that, as the David Hume Institute report that was published in March indicated, the figures reached
“will be determined as much, if not more, by politics as by statistics”.
The undeniable point is that a separate Scotland would have to take on considerable and currently unknown public debt. Regardless of what the exact figure might be in the hypothetical scenario of a yes vote—clearly, we would not know that until negotiations on Scotland’s secession from the UK were complete—that debt, coupled with a relatively volatile tax revenue base, is likely to have a significant effect on future public expenditure, so why take the risk in the first place? Furthermore, a whole raft of additional costs that a separate Scotland would incur in setting up embassies, collecting taxes, creating new institutions to replace those broken up by separation and establishing a welfare system and armed forces, and so on, would add further to that uncertainly.
The currency to be adopted by a separate Scotland is arguably the question on which the SNP and those who advocate separation have undergone most contortions in recent times, and that is saying something. Until recently, most nationalists were strongly in favour of joining the euro, and lukewarm, at best, about the pound. As the influential SNP MEP Alyn Smith said at the party’s 2009 conference:
“We are a Nordic, European country, currently part of a debt-laden sub-prime toxic assent currency…we don’t want to be part of and which is not serving our interests well.”
At the same conference, the Scottish Government Finance Minister, John Swinney, declared that he was in favour of joining the euro, but that the final decision to join should be determined by a referendum. In January 2009, Alex Salmond said:
“I think there is a strong argument for the euro, and I think as sterling declines even further that argument is being made very strongly.”
Now, even they have realised that that is not such a sensible idea, and they have become converts to retaining sterling, although without bothering to have any discussion whatever with the UK Government. That is an astonishingly cavalier approach to such a vital question.
Between the SNP’s enthusiasm for the euro and its recent conversion to keeping the pound, it has debated options for introducing an entirely separate Scots currency. Veteran nationalist, Jim Sillars—a former key ally of Alex Salmond—even proposed last year that a separate Scotland should adopt a Scottish dollar, although I understand that no one from the Scottish Government has written to Barack Obama about it yet.
It is widely accepted that a separate Scottish currency would be a serious disadvantage to business. Although the commitment to a separate Scotland retaining sterling may sound more credible, as the recent article on the high price of separation in The Economist highlighted, it would be a monetary union without fiscal union, which has proved disastrous for the eurozone. It would, of course, be fraught with well documented problems, especially on fiscal responsibility and the lender of last resort, which were highlighted in the Library’s standard note on Scotland’s economy, which I referred to earlier.
Under formal monetary union with the UK, as has been widely highlighted, the Bank of England would continue to form monetary policy for both the remaining UK and the separate Scotland, so removing a key aspect of economic independence from the tools available to a Scotland operating outside the UK. Even if no formal monetary policy was agreed, the Library note states that
“in such a scenario, Scotland’s monetary policy would be determined by the Bank of England which would only be considering the interests of the rest of the UK.”
Mr Bain
My hon. Friend is being generous in giving way. Is the situation not even worse? The economic madness of separating fiscal and monetary policy would be detrimental to Scotland’s economy, and a democratic deficit would be created. As Members of Parliament, we can scrutinise what the Chancellor does on defining financial stability and regulating the banking sector. Which of Scotland’s parliamentarians would have democratic accountability in the proposals that Alex Salmond has come up with?
Graeme Morrice
None of them. That is clearly a problem, and a step backwards.
Mr Weir
My understanding is that when Gordon Brown—perhaps I should still call him the right hon. Member for Kirkcaldy and Cowdenbeath—was Chancellor, his greatest boast was that he had made the Bank of England independent. How does Scotland have any influence on it at the moment?
Graeme Morrice
In terms of setting interest rates and so on. The Chancellor still has a role in that regard —a role that a separate Scottish Government in an independent Scotland would not have. There would be no accountability, no influence and no say in that, and the UK Government have confirmed that officially.
Whichever way one looks at the matter, the SNP’s policy of retaining the pound sterling as a separate currency for Scotland is a proposal engulfed by uncertainty. At the same time, the SNP insists that a separate Scotland would be entitled to automatic membership of the European Union—a position that is in serious doubt, as highlighted by last year’s well documented Library standard note on “Scotland, independence and the EU”, which states:
“There is no precedent for a devolved part of an EU member state becoming independent and having to determine its membership of the EU as a separate entity, and the question has given rise to widely different views.”
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Even assuming good will on both sides of the argument for an independent Scotland trying to renegotiate terms with the EU—I do not believe that there is any reason to assume hostility from other EU member states—the fact is that the EU is not, to put it kindly, the swiftest-moving institution. Is it not likely that even with the best will in the world the new arrangements would take a long time—years—to finalise, yet again leading to the continued uncertainty about which we heard earlier?
Graeme Morrice
I certainly agree with that proposition. Going back to the 1992 general election campaign, I recall that the SNP talked about independence within Europe. I note that it is not banging on about that now.
For the sake of argument, let us assume, although it is unlikely, that a separate Scotland would be permitted to join the EU immediately. We know with some certainty that such a position would require Scotland to commit to joining the euro at some point in the future, taking the nationalists back to the same risky and unpopular position that they have tried desperately to abandon. Again, it seems to be beyond doubt that the unknown risks posed by breaking up Britain are significant and that the uncertainty about which currency the country would use could not possibly be good for business or families in a separate Scotland.
I have tried to focus on a few of the numerous essential economic consequences of separation. I could have looked at many others, including whether the tax base of a separate Scotland could sustain a separate Scottish economy and what personal and business taxation rates would have to be levied, whether the Scottish Government could meet existing UK Government state and public sector pensions commitments, what the impact would be of turning our biggest trading partner into our biggest competitor, what the cost would be to our economy of losing UK Government shipbuilding contracts and what a separate Scottish Government could borrow. I am sure that other Members will want to address those and other questions in the time that remains.
I would like to go back to where I started and the wider debate on this subject. It has been fascinating to watch the twists and turns of the SNP over the past few months. It has demonstrably failed to answer a series of critical questions about the consequences of its plans to separate Scotland from the UK, despite that having been its raison d’être for more than 75 years. Those in the SNP leadership must wonder where they can go next, as they face up to the prospect of support for separation flatlining, no matter how far into the future they push the referendum.
Many in nationalist circles must also be asking themselves how their leaders have managed to squander the considerable political capital that they enjoyed just over one year ago. What remains clear is that the economic dimension to the separation debate is crucial, and there is an absolute responsibility on the UK and Scottish Governments to publish the best available information and projections of the potential economic consequences of breaking up the UK, as debate on that crucial question continues and intensifies. Ultimately, as long as economic evidence continues to show that Scottish families will be better off remaining in the UK, coupled with the wider social, cultural and political strength derived from our interdependence with the rest of the UK, Scotland’s place as an essential part of a strong United Kingdom will be secure for many years to come.
Sir Roger Gale (in the Chair)
Order. I do not propose to impose a formal time limit on speeches, but I imagine that John Robertson, who will follow me in the Chair, will wish to call the Front-Bench speakers at about five past 12. Five Members have written in advance to express a desire to speak, and I shall call them in this order: Dr Whiteford, Mark Lazarowicz, Mike Weir, Anas Sarwar and Jim Shannon. Other Members may wish to intervene in the knowledge that they are unlikely to get called in the time that we have available.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I am happy to have the opportunity to speak in today’s debate, and I congratulate the hon. Member for Livingston (Graeme Morrice) on bringing such an important issue before the House of Commons.
Before we embark on what the future of Scotland might look like, it is important to reflect on the past. If we do not understand our history, including economic history, we are in danger of becoming victims of it, and there is no way round the fact that over the past 30 years, successive Westminster Governments have let the Scottish economy languish. Our economic growth has lagged well behind that of our neighbours and competitors in the UK, Europe and further afield.
In the three decades before the current financial crisis, growth in Scotland averaged only 2.1%, against 2.7% in other comparable small EU countries, and across the G7 countries. That chronic underperformance has had adverse consequences for generations of people in Scotland, and we must ask ourselves why it has happened. Unless we think that there is something inherently inferior about Scotland or Scottish people, or some inherent weakness in the Scottish economy, we must conclude that such underperformance is a direct consequence of poor political and economic policy decision making, and a systematic failure to address the weaknesses and maximise the strengths of the Scottish economy.
David Mundell
I am interested to hear what the hon. Lady has to say about policy making and political judgments. Does she still support the Scottish Government’s previous position of joining the arc of prosperity with Iceland and Ireland?
Dr Whiteford
The Minister makes an interesting point, and it is important to look at the performance of small nations in the vicinity of Scotland. My constituency in the north-east of Scotland is close to Norway, which I think has outperformed every country in Europe over the past three decades. We should also look at the impact of the recession and at how smaller countries such as Austria, Denmark and Sweden have been more resilient and managed to experience a less deep economic crisis. Even countries such as Iceland that went so far down during the economic crisis have bounced back with much greater dexterity than the UK economy—[Interruption.] The Minister is smiling, but he should be hanging his head in shame at the economic recession that this country is slowly trying to scramble out of. That is a shameful record for a country that has the potential to be prosperous.
Dr Whiteford
I will not give way to the hon. Gentleman just now, but I will later in the debate.
The other key issue connected to the economic languishing of Scotland is the inequality that we have allowed to develop, and the impact that that has had on our society. We live in a United Kingdom in which the top 10% of earners receive about 27% of the income, while the bottom 10% receive just 3%. To my mind, that is not a United Kingdom but a deeply divided kingdom that puts the UK in the top quartile of most unequal countries in the OECD. According to the Institute for Fiscal Studies, inequality has increased by around a third in Great Britain since 1979. In Scotland today, 780,000 people are living in relative poverty—15% of the population. That is way too high; it is causing real hardship and the long-term cost is immense.
Mr Bain
I agree with the hon. Lady about the scarring effect that poverty has on the people of Scotland. While on the issue of high pay, will she explain why last week in the Chamber her hon. Friend the Member for Dundee East (Stewart Hosie) was complaining about the potentially burdensome effect that proposals put forward by the Business Secretary could have on large companies in Scotland? It did not sound as if he was much of a friend to the workers.
Dr Whiteford
The Scottish Government have introduced a living wage for all public sector jobs for which they are responsible, and I welcome everybody who supports decent pay for working people. I did not hear my hon. Friend’s speech last week, so I cannot explain its context. I think, however, that we have to tackle inequality, and particularly women’s inequality in the workplace, which has been a long-standing problem in Scotland.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Will the hon. Lady give way?
Dr Whiteford
I will not give way just at the moment, although I will in a bit. The problem of inequality is particularly frustrating because, in spite of a period of unprecedented growth in the global economy, the previous UK Government missed a genuine opportunity to deliver a more prosperous and fairer society. It is hard not to reach the conclusion that those opportunities for growth were squandered by an unsustainable boom that had too few beneficiaries.
Graeme Morrice
I am listening intently to the economics of the hon. Lady’s argument. She will be aware that a lot of these things are currently within the gift of the SNP Administration of the Scottish Government. Is she also aware that before 2007, when the Labour-led Scottish Executive were in power for eight years, growth in Scotland was above the UK average? Since 2007, however, growth levels in Scotland have been below average for the UK.
Dr Whiteford
I thank the hon. Gentleman for his intervention, but I am slightly confused. My understanding is that according to almost every indicator—whether unemployment, employment or foreign direct investment—the Scottish economy is outperforming the UK economy. It would behove the hon. Gentleman well not to make too much play of the previous Administration’s record. Even in recent weeks, we have seen the debts that have been stacked up through poor private finance initiative investments. The Labour party took on the mantle of its Tory predecessors, and stacked up £31 billion in PFI debt. The chickens have fairly come home to roost in the past few weeks, and we are seeing NHS trusts starting to go bankrupt. Those choices left us sharply exposed to the worst financial crisis for a generation, and now the present Government’s austerity measures are strangling recovery and pushing more of our citizens below the breadline.
The failure of successive Westminster Governments to make economic policy decisions for Scotland that help our economy grow and resonate with the values of the people of Scotland has convinced me that we need the opportunity to bring decision-making powers home to Scotland so that we can set better priorities and maximise our economic potential.
Cathy Jamieson
I welcome the opportunity to make a brief point about the living wage. The hon. Lady has suggested bringing decision making closer to home. Will she explain why the East Ayrshire council SNP administration has yet again refused to pay the living wage to council employees?
Dr Whiteford
I am grateful to the hon. Lady for that intervention. However, across Scotland, the Scottish Government have shown their commitment to living standards through a range of measures including on pay, prescriptions and all kinds of things that Labour could have dealt with when it was in power and chose not to.
There are various myths about Scotland’s economic position, some of which we have already heard this morning. I am glad that we have not heard too much about the biggest myth of all: that Scotland cannot pay its way. That is simply because the evidence just does not stack up. The reality is that the official Government expenditure and revenue figures show that Scotland has a smaller fiscal deficit than the UK as a whole—not just this year or last year but over the past five years. Even when North sea oil revenues fell by 50% in 2009-10, Scotland’s fiscal position remained stronger than that of the UK as a whole. In the most recent figures for 2010-11, Scotland accounted for 9.3% of UK public spending but 9.6% of UK tax revenue. Our 9.6% of UK tax was generated with just 8.4% of the population, which adds up to £1,300 for every man, woman and child in Scotland.
However, despite the relative strength of the public finances, as a result of the financial crisis and the fiscal mismanagement of successive UK Governments, the UK has a legacy of debt—as, indeed, the hon. Member for Livingston pointed out. Scotland will have to deal with that debt, whether we are independent or not. I put it to the hon. Gentleman that if UK public debt was allocated on a per capita basis, for 2010-11—the last year for which figures are available—Scotland’s net debt would be 51% of GDP compared with 60% for the UK as a whole. Let us not pretend that that is good, but it is certainly not as bad as some people might think. We must consider the reality of the current situation without necessarily looking at Scotland in pure isolation.
Scotland’s fiscal position is stronger than that of the UK, and it will remain so if we remain committed to utilising Scotland’s strong economic foundations and asset base to ensure fiscal responsibility. Recent figures published by the Office for National Statistics showed that, in 2010, Scotland was the third richest part of the UK—behind London and the south-east—with a gross value added per head of 99% of the UK average. That is excluding oil and gas output. If Scotland’s geographical share of oil and gas is included—the internationally recognised way to distribute such a resource—the GVA adds up to 115% of the UK average. That makes us approximately the 6th highest in the OECD.
Dr Whiteford
I will not, thanks. I will try to make some progress.
I represent a constituency that is very much at the heart of the energy sector, so the maturation of the oil and gas fields presents economic challenges and opportunities. That is why it is so important for us to continue to invest in renewable energy, carbon capture and energy supply chains. Yet renewable energy producers in Aberdeenshire are paying £21.49 per kilowatt to connect to the grid, while London-based generators are being subsidised by £13.35 per kilowatt. That is a classic example of Westminster policy making undermining our economic potential.
Tom Greatrex
I am very grateful to the hon. Lady for giving way because I know that time is short. On that point, her party’s position is that there should be a postage stamp model in relation to transmission charging. I understand—I see her colleague the hon. Member for Angus (Mr Weir) nodding—that that is still the position. Is she aware of the cost of that to consumers? Ofgem has outlined that it will be £7 billion, which will be put on to consumers’ bills. Does she think that that is acceptable?
Dr Whiteford
The geographical reality with which we are dealing is that much of our renewable energy potential is located on and off the coast of Scotland. We have 10% of wave energy potential, 25% of tidal energy potential and 25% of offshore wind resources. That is a huge legacy across Europe, and we have to make the most of it. At a time when climate change puts pressures on all our energy supplies and when we absolutely have to reduce carbon emissions, that kind of investment has to happen. We must not discriminate against people in the more outlying parts of these islands because that is where such energy can and must be produced.
We absolutely need to capitalise on that opportunity to create jobs and build on our existing research strengths in our world-class universities, which are consistently being assessed as among the top in the world. In the area of science, engineering and technology, relative to our GDP, Scotland is currently No. 1 in the world for research. We also have a worldwide reputation for excellence in medicine and life sciences. We are doing very well at attracting multinational businesses to Scotland, as well as in relation to a growing number of indigenous companies.
Dr Whiteford
I would like to give way to the Minister, but I am not going to because I am conscious that other people want to contribute.
We also have real international competitive advantages and excellence in key sectors such as food and drink—another area that is very important to my constituency—and, despite difficult times for the banking sector, we have a strong and broadly-based financial services industry, where there has recently been some welcome diversification and investment. I see that as a solid foundation for Scotland economically and there is no reason why, with those opportunities, we cannot succeed. Scotland has the assets and the fiscal balances and, with the ability to make independent policy decisions, we would have the tools to grow our economy.
Another myth that has been touched on today is that we would want to abandon sterling. I want to make it absolutely clear that no one is proposing dispensing with sterling. Retaining the pound is in the interests of Scotland, the rest of the UK and the currency itself. A free flow of goods, services, labour and capital is in everyone’s interest, and a sterling zone will provide businesses both in Scotland and in the rest of the UK with the certainty and stability for trade, investment and growth.
There is no doubt that monetary policy underpins price and macro-economic stability, but it is a blunt tool for tackling Scotland’s other economic challenges. It will not address youth unemployment; it will not directly lead to investment in infrastructure or promote innovation; it will not boost skills, target overseas investment or promote investment in key sectors; and, to come back to the point I made at the start, it will not integrate our tax, health, education and benefit systems to maximise economic opportunity and tackle inequality. That is why I believe we need to be independent and to have real policy-making powers in Scotland.
Dr Whiteford
I will not, thank you.
Frankly, the Scottish Parliament would do a better job of welfare reform than the UK Government, who seem intent on vilifying people who do not have a lot of money. Instead, we could develop a more workable system. The Scottish Parliament is already doing a better job on health, and we are not going down the road towards privatisation. In addition, we are doing a better job on education, and we are not charging students £9,000 a year to complete their studies in higher education. The current levers open to the Scottish Parliament do not go nearly far enough to realise our economic potential.
Anas Sarwar
The hon. Lady is clearly very passionate about the case for independence. I just have a brief question. Did she make a submission to the Scottish Government’s consultation and, in her submission, did she ask for one question or for two?
Dr Whiteford
I do not want to go down the road of discussing the referendum, but I have always been very clear that I want one question on the ballot paper. I am happy to have that debate, but I am also listening. It is very sad that politicians are not listening to what people who are not involved in political parties are saying about this. Many of them are contributing and we have seen some very interesting ideas and good proposals from a diverse range of sources. It would be good if all of us listened to what people in civil society are saying to us. I am very clear about where I stand on the issue: I want Scotland to have the powers of an independent country, and I will argue vociferously for that. I do not see what is complicated.
I would like Scotland to have the power to make better tax policies. I would like us to have capital borrowing powers, so that we can make the investments in our infrastructure that we so badly need. I would like us to be able to build the houses and the roads we so badly need. I would like us to have the ability to incentivise the development of new technologies in renewable energy and the low carbon, life science, small business and tourism sectors. Those are the places where our economic growth will come from. If we were putting the investment into those sectors, it would have a huge impact on our economy.
If we had influence over the Crown Estate, which manages our seabed out to 12 miles and almost half our foreshore, we would be in a much stronger position to co-ordinate the efforts of manufacturers, the energy sector and regulation and planning to deliver the full benefits of the marine renewables energy revolution for Scotland.
Being independent would also enable us to boost our international profile. It would help us to contribute to key decision making in Europe and beyond and it would give us powers to boost our connectivity and linkages with our key trading partners. At a time when the emerging economies are growing so fast, it is crucial that we have an opportunity to connect with them directly and more effectively than we are able to do at the moment.
All these things give us a chance to tackle inequality. I just point to the apprenticeship scheme—25,000 young Scots will get an apprenticeship this year alone. By creating training opportunities, bringing people into the work force and retaining their skills, frankly, we can save the welfare state millions of pounds in unpaid benefits. If we had a joined-up system, with co-ordination between economic, education and welfare policies, those savings could be reinvested better than they are at the moment and used to boost economic activity.
I envisage Scotland thriving and prospering, but right now I am watching an austerity agenda running out of control while the UK economy stagnates. I believe that Scotland can do better and has the opportunity to do better. That is why I want the Scottish Parliament to have the levers of independent governance at its disposal. That does not mean that there will not be hard decisions to make, but it does mean taking responsibility for improving life in Scotland and building a vibrant and resilient economy that supports our people and reflects our values.
Sir Roger Gale (in the Chair)
Order. In view of the time, I am revising the schedule. I am sorry, Mr Lazarowicz, but Mr Shannon has been in the Chamber since 9.30 this morning, so I will call Mr Shannon next; you may find this strange. I will then call Mr Lazarowicz—Mr Robertson has arrived in the Chamber and will take the Chair—then Mr Sarwar and, if there is any time left, Mr Weir. I call Jim Shannon.
Jim Shannon (Strangford) (DUP)
Thank you for bringing me forward in the schedule, Sir Roger. I hope that hon. Members understand the reason for that. I appreciate it very much.
First, I congratulate the hon. Member for Livingston (Graeme Morrice) on bringing this matter to the Chamber today. It is not often that I disagree with my Scottish National party colleagues. We agree on many issues, mostly bread-and-butter issues, on which we strive together to make life for all our constituents better. However, I cannot agree with them when it comes to Scottish independence and I certainly want to place that on the record.
We all know the film “Braveheart”. It is well known to everyone. It is a wonderful film, one that I have watched on numerous occasions and, if I am spared, I will certainly watch again. The star of the show is that well-known Scotsman, Mel Gibson. In that film, the English are killing the natives, abusing the womenfolk and stealing the land—there is total destruction.
[John Robertson in the Chair]
If that were really the case, Mr Robertson, I would be the first person to jump to the aid of my Scottish National party colleagues to support them, but it is not. It is only a film; it is only make-believe. The reality is very different. Today we are strengthened by the Union. We all bring our talent, our culture and our history to the UK. Scotland, Wales and my own Northern Ireland contribute to the United Kingdom. We make it stronger by being part of it because we bring to it all the talents that we have. We have extensive relations with all regions. Personally, I am descended from the Stewarts of the lowlands of Scotland. My history is intertwined with the Scottish nation and family. That is something I am tremendously proud of and that I state regularly at the many occasions I speak at.
I believe that, economically, Scotland will be poorer after independence. It may have to increase taxes. Although the hon. Member for Banff and Buchan (Dr Whiteford) said that the decision had already been made in relation to sterling, I think that many of us feel that if it has been made, it has been made only recently. It will have to increase taxes, slash spending or increase borrowing after independence. What will happen to the Ministry of Defence bases in Scotland? Other hon. Members have mentioned that. What about nuclear power? Many decisions will have to be made.
The CBI director general stated that, post independence, Scotland would immediately have to face a large budget deficit, potentially bigger proportionally than the UK’s. The stability of Scotland’s economy is uncertain because of potential or possible independence. Banks have not universally or wholeheartedly expressed support. There is uncertainty. A question mark hangs over the issue. There are problems in the Scottish economy. Everyone in the United Kingdom has problems in relation to the economy, but Scotland has its problems. Independence will not lift it out of that; indeed, everything points to just the opposite.
The hon. Lady mentioned the territorial waters, and I would like to draw the House’s attention an issue in this regard. I represent Portavogie, where the Northern Ireland fishing fleets are very strong. They work together with the Scottish fleets and fish together. Will independence strengthen that or will there inevitably be battles over fishing rights and territorial waters? I want to see the strength within the Union continue, and equality of opportunity for Northern Ireland fishing fleets and Scottish fishing fleets, and for Welsh and English ones as well. I believe that North sea oil, while it is off the coast of Scotland, is my North sea oil in the same way as it is everyone else’s within the United Kingdom. That is the fact of the matter. Many would be of that opinion.
I do not believe that there is a clamour for independence. I make it my business to speak to every Scottish person I meet. I am a member of the Orange Institution. I make it my business to talk to the people who are in the Orange Order, and they tell me that they want to stay within the United Kingdom. Those outside the Orange Institution whom I speak to tell me that they want to stay within the United Kingdom, as well. As a Northern Ireland MP and a Democratic Unionist, I am committed to the Union for all of the UK—for Wales, for Northern Ireland, for England and for Scotland together, because together we are strong. If we divide, we are weak. I say to my Scottish National party colleagues, whom I am very fond of, that I cannot support them and will never support them when it comes to independence for Scotland.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I will keep my remarks as brief as possible, given the number of hon. Members who want to speak. The hon. Member for Banff and Buchan (Dr Whiteford) gave a comprehensive presentation of the SNP case for independence, but what struck me about it was something we increasingly see in the SNP arguments for independence: that on the one hand, independence is needed because it would make Scotland a better place; but on the other, independence would not change much, either. That is an inherent contradiction that we increasingly see in the SNP policy, precisely because there is a realisation that separation—full independence—is not attracting popular support, so the SNP and those supporting independence are trying to move back from it.
It is not just on economic issues that we have seen that. There is the famous quote, which I think is from the First Minister:
“on independence day…the Queen will be our Head of State, the pound will be our currency and you will still be watching your favourite programmes on the BBC.”
That is an example of how the argument is made that nothing much would change. Of course, on economic policy, fiscal policy and monetary policy, we see that even more.
Ann McKechin (Glasgow North) (Lab)
Does my hon. Friend agree that it is very strange that the First Minister came down to London about a month ago to address the Institute of Directors and intimated to it, but not to the Scottish Parliament, that he intended to align income tax rates, after separation, with those in the rest of the UK? We must ask—why bother?
Mark Lazarowicz
Indeed. That takes us to a point that I intended to deal with later but will deal with now. We are referring, with respect, to the arguments advanced by the hon. Member for Banff and Buchan, who is from the SNP. She seemed to be arguing at one point that Scotland would have a different approach to taxation and redistribution policy, suggesting, presumably, that it would be a higher-tax, higher-spending type of country. On the other hand, the First Minister is saying, as my hon. Friend the Member for Glasgow North (Ann McKechin) pointed out, that income tax in an independent Scotland would be the same as in the rest of the UK. Of course, for the past six years, the SNP Government could have used the existing powers, if they had wanted to, to increase tax in Scotland and increase public spending, but they have not. The SNP is apparently in favour of a lower corporation tax rate in Scotland, yet it tells us that it would maintain the free movement of labour, services and capital throughout the UK. If that is the case, it is difficult to visualise Scotland having a separate corporation tax rate.
The issue of sterling has been—
Mark Lazarowicz
With respect, I had better not, given the time.
The issue of sterling was raised. As we were reminded in an intervention, the Bank of England and monetary policy were of course made independent of politicians by the decision of a Labour Chancellor. However, the SNP Government have said that they want to see a seat for Scotland on the Monetary Policy Committee of the Bank of England. They are trying to have it every which way. There are many areas in which we see that type of contradiction. An important one is, of course, the suggestion that the Bank of England would continue to regulate the financial services industry, even in an independent Scotland. That is incredibly important. The financial services sector is important in Scotland, particularly in my constituency and the constituencies of many other hon. Members.
Decisions such as how banks can advertise financial products and the requirements to maintain stability in terms of their capital base would be regulated by an institution in another country, over which we would have no say if we were a separate, independent state. That leaves aside the question, raised by Scottish Financial Enterprise, of whether it would be legal under EU rules to leave the regulation of our financial services sector to a foreign—as it would then be—country.
We have heard those in the SNP say that they do not want regional pay rates for the civil service, but the biggest regional pay difference across the UK would be if we were a separate country and the rates were negotiated on, presumably, a Scottish basis only. We see contradictions in many areas. Because the SNP recognises that voters and the public do not want full separation, it wants what some describe as independence-lite, but I describe as separation with a major democratic deficit, as my hon. Friend the Member for Glasgow North East (Mr Bain) pointed out.
At best, the new Scottish Government could seek to negotiate with the Government of the remaining UK to have input on matters that affect Scotland’s interests, but they could not do that as a right, and would have to rely on the good will of a new UK Government. There is no reason why there would necessarily be ill will between the two successor states if Scotland separated; but obviously, a UK Government who no longer had Scotland as part of their state would have different interests and perspectives from one that still included Scotland. Scotland has MPs, Ministers and a voice in Parliament, where Ministers and the Chancellor can be held to account—for example, for actions in relation to the Bank of England. All of that will disappear after the separation of an independent Scotland.
It seems to be the worst of all possible worlds—a democratic deficit of no interest to Scotland, with no benefit to Scotland. Let us build on what we have with devolution, as expanded under the Scotland Act 2012 and current proposals, and improve it where we can. Let us get down to using the existing powers and not spend the next few years coming up with a new constitutional arrangement which, at the end of the day, will not even be independence in the full sense of the word, but, given the SNP arguments, will fall well short of it. It would be no good for Scotland or the UK.
John Robertson (in the Chair)
I intend to call the Front Benchers at six minutes past 12. I have two names here, so, gentlemen, sort it out.
Anas Sarwar (Glasgow Central) (Lab)
It is a pleasure to serve under your chairmanship, Mr Robertson. Having known you through Glasgow politics, I will be very strict with my time; I do not want to incur your wrath. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing the debate. The discussion today shows the passion and energy in the debate. I will take this opportunity to get to the facts of what Scotland would look like if it was a separate country.
I want to make a few quick points at the outset. The referendum is not about whether we think Scotland can survive; of course Scotland can survive as an independent country. It insults the intelligence of the Scottish people to suggest that it could not survive as an independent country. The choice on the ballot paper is not one of survival; it is whether we believe that Scotland is a fairer, more prosperous place as part of the UK or as a separate country. I believe the second, which is why I will make a positive case for Scotland remaining within the UK.
Scotland has played a key role in the success that is the UK. We have 300 years of shared history, security and prosperity. A Scot was the founder of the Bank of England, a Welshman created our national health service and an Englishman created our welfare state. Those are things of which we should be collectively proud, and that is why, in the run-up to the referendum, we will make the emotional, political, social and economic case for Scotland remaining part of the UK.
I want to touch on one point about the positive-negative case. It is often said that those who support the UK are negative about Scotland and those who support separation are positive about it. I argue the opposite. The people of Scotland are talented enough, creative enough, ambitious enough and innovative enough to be successful in the UK. It is for the separatists to tell us why they think that Scots are not.
We heard from the hon. Member for Banff and Buchan (Dr Whiteford), the successor to Alex Salmond, that a single-question referendum is her preference, so let us stop the games and get on with the substantive arguments. Another SNP Member is here, the hon. Member for Angus (Mr Weir), and I am willing to take an intervention if he can tell us whether, if he put in a submission to the Scottish Government’s consultation, it was for one question or two. I am happy to take an intervention if he wishes.
Anas Sarwar
There we have it: two SNP MPs saying that they have put in submissions, both saying that they would prefer one question. Perhaps they could get on the phone to their leader and pass on the message that he should stop being so feart and just get on with the referendum and let Scots make the choice.
I have one minute on the substantives of the economic debate, so I will be very quick. I genuinely believe that Scotland’s influence is greater as a permanent member of the United Nations Security Council and NATO, not for prestige, but to fight tyranny and repression around the world. We benefit from membership of the G8, where a Scottish leader, as Prime Minister of the UK, tackled the global economic crisis to stop a recession becoming a depression.
Scotland’s compassion is better demonstrated by being a partner in the Department for International Development, which is headquartered in Scotland, employing 490 people, with a budget of £7 billion. What would happen to those jobs if we were a separate country? We benefit from shared infrastructure, defence and foreign affairs, as does shipbuilding on the Clyde and jobs. We would not be in that position if we were a separate country.
We benefit from sharing the risks and rewards. We saw the collective strength of the UK in bailing out Scotland’s banks. Would that have been possible if we were a separate country? We benefit from the fact that we are a larger single market—our current biggest business partner is England. If we became a separate country, it would become our biggest competitor. We also benefit from being part of the strongest monetary union in history. Leaving would mean that we would have to have our own currency, join a weaker euro or leave a foreign country to set our interest rates and our borrowing and spending limits.
I could go on and on, but I see you, Mr Robertson, nodding at me to finish. Let us end the games about what a referendum will look like and get on with the big choice and have the debate. After the referendum, let us get on with making Scotland a fairer and more prosperous place.
Mr William Bain (Glasgow North East) (Lab)
It is a pleasure to serve under your chairmanship once again, Mr Robertson. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing this important and timely debate, coming as it does in the week when support for separating Scotland from the rest of the UK has fallen to as few as three in 10 people.
Mr Bain
I will give way to the hon. Gentleman a little later; I want to make progress first.
I commend my hon. Friend the Member for Livingston and other hon. Members who have participated this morning in helping to ensure that the discussion on Scotland’s constitutional and economic future is informative and comprehensive, as we head towards what the Scottish people want—a clear, decisive, legal, single-question referendum on whether to stay within the United Kingdom or leave for good.
There are three points that the debate this morning has crystallised in the minds of hon. Members and those we represent. At a time of economic uncertainty in the eurozone, with economic demand predicted to fall this year and 16 million people out of work, it would be an act of folly to separate fiscal, monetary and financial policy in the way that Scottish National party members have proposed. Both the eurozone and our economies are faced with a classic liquidity trap. Keynes was very clear that fiscal, monetary and financial policy must not work against one another in such circumstances. We in the Opposition have huge concerns about how the Government are avoiding any flexibility on fiscal policy to stimulate demand and kick-start growth at home. It is a failure of policy, not a failure of the state of which we are an integral part.
The overwhelming evidence from respected economic commentators, such as Martin Wolf and John Kay in evidence to the Select Committee on Scottish Affairs, is clear and unambiguous: separation would lead to higher borrowing costs for a separate Scotland. Even under the SNP’s purported split of oil and gas revenues, with 90% being apportioned to a separate Scotland—not the universally accepted position under international law—the national debt inherited by a separate Scotland would be 70% of GDP.
On a per capita split of oil and gas revenues, debt would rise to 80% of GDP by 2014. On the deficit, even using the SNP’s preferred measure, including a geographical split of oil and gas revenues, the average deficit would have been 4% over the past five years. Three leading credit agencies have indicated that Scotland would not inherit the UK’s credit rating on separation, which would increase borrowing costs.
The First Minister says that, with the oil and gas revenues, Scotland would be the sixth richest country in the world, but to achieve that the great centraliser would have to become the great nationaliser, and there is no prospect of even the present First Minister expropriating the assets of overseas oil and gas companies to which he is in such thrall.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
Is my hon. Friend aware of what was said at the meeting of the UK oil and gas industry group a few days ago—that it is likely that the gas price, because the US is about to go into surplus in gas and the price is falling, may be set in the North sea area at a much lower level than now, which would undermine the revenues coming from the North sea to any future Government of the UK or Scotland?
Mr Bain
Indeed, that is a powerful point. This year’s report by the National Institute of Economic and Social Research concluded that Scotland would be a significantly indebted nation on separation, with a substantial trade deficit, no insurance from risk sharing and no further fiscal transfers, which would leave us over-dependent on those very fluctuating oil and gas revenues. The strain would have to be put on borrowing or tax hikes to fund current spending.
As the economist, Brian Ashcroft, pointed out recently, the only tools available to a separate Scotland to manage aggregate demand would be of the limited fiscal variety remaining under the terms of a currency union treaty with the United Kingdom; so if inflation took off, there would have to be tax rises, a fall in public spending, or a combination of the two—hardly a recipe for economic stability or social fairness.
Those campaigning for separation never tell us what the size or role of the state would be in a post-separation world. They are keen to promise voters everything from higher benefits and pensions to lower taxes, but never with any viable fiscal prospectus to underpin such aspirations. Their ambition is to have Irish levels of taxation, but Scandinavian-style public services. That is a cruel deception to sell to the electorate, and that fatal flaw in the argument has contributed to the fall in support for separation in recent months.
Mr Bain
I will make this point and then give way to the hon. Gentleman.
Without a central bank to print money and control the money supply, a separate Scotland would find itself with higher long-term borrowing rates and higher interest payments on Government debt, whether with the Bank of England as lender of last resort or even with a less structured relationship with sterling. Those problems with rising costs of borrowing would manifestly worsen if oil and gas revenues continued to fluctuate as predicted. Martin Wolf wrote in the Financial Times on 19 January about the higher borrowing costs that a separate Scotland would face:
“It would need to lower its debts quite rapidly. This would require even greater austerity than in the UK as a whole. Given its close ties to the rest of the UK, Scotland could not get away with taxing corporations or skilled people more heavily than its neighbour. So the bulk of this extra austerity would surely fall on public spending.”
The First Minister came to London a few months ago and, as my hon. Friend the Member for Glasgow North (Ann McKechin) said, boasted to the Institute of Directors that he would always align income tax rates in a separate Scotland with those of the United Kingdom. He now says that his key fiscal policy would be to cut corporation tax to 20%. However, the Institute for Fiscal Studies said in its green budget report this year that increasing corporate tax competition between the nations of the UK would increase business compliance costs and lead to a race to the bottom on tax rates and revenues collected. The Scottish Government’s own figures reveal that lowering corporation tax by just 1% results in a loss of revenue for the Scottish taxpayer of between £67 million and £83 million a year. So the First Minister is prepared to throw away up to £166 million of taxpayers’ money a year on a punt that Laffer curve economics works, when the evidence from the United States is that it fails every test of economic fairness.
Whatever happened to that young radical who interrupted a Tory Budget in 1988 to protest against the reduction in the top rate of tax by Lord Lawson? Whatever happened to his dream of a land of bountiful plenty with freedom from London rule? He wants London to regulate Scotland’s banks, insurance, mortgages and pensions, and to set Scotland’s interest rates—with no reference to the needs of our economy—and income tax rates. We are told that Scotland would have equality in the world, but that is instead a manifesto for complete economic instability.
With business investment slumping, the construction sector on its knees, infrastructure crumbling and our green jobs sector without the capital that it needs, how on earth can the First Minister believe that Scotland’s future lies in lining the pockets of the banks and big business, by promoting a fiscal climate that would encourage short-term profit taking instead of long-term investment? If he cannot identify crony capitalism as being as much a part of the problem in Scotland’s economy as it has been in the rest of the UK, no wonder he can never be part of the solution.
As my hon. Friend the Member for Livingston has said, having to join the euro would also damage Scotland’s economy. The evidence from most credible experts is clear: if Scotland were to be admitted to the EU as a new state, having left the United Kingdom, it would have to make an in-principle commitment to membership of the euro. That would mean compliance with the Maastricht convergence criteria, with further spending reductions to follow. The destination would be clear, and it would be bad for job creation and growth in Scotland.
At a time of uncertain economic prospects in the UK, we need strong fiscal and monetary union to support job creation and diversification of the Scottish economy. Scotland Office figures from January 2010 show that net fiscal transfers from the UK to Scotland over the two decades to 2008 were of the order of £75.8 billion, and, even factoring in every penny from oil and gas revenues, there was a net transfer of £30 billion over the same period.
We need a central bank that can fully support the Scottish economy, without ifs or buts. The best means of securing that is by maintaining the fiscal and monetary union that has been successful within the United Kingdom for three centuries. Some nationalists claim co-ownership of the Bank of England, even in the event of separation, and the Finance Secretary laughably even claimed to have the right to appoint a member to the Monetary Policy Committee, but that is the politics of denial. In quitting the United Kingdom’s fiscal and monetary union, Scotland would also abandon the unconditional guarantees provided to it by that financial system, including the Bank of England’s role in ensuring macro-economic stability for Scotland.
Paying another state to set interest rates and prop up part of the banking system, without a collective institution that could be held democratically accountable by Scotland’s elected representatives, would be the worst of all worlds. Scotland’s parliamentarians would not be able directly to scrutinise or influence the Chancellor’s decision on the fiscal mandate or the definition of financial stability under the Financial Services Bill, which is vital in the precise remit that the Financial Conduct Authority will have in relation to our financial system. We would lose the potential to influence the Chancellor’s decisions on income tax, even though the First Minister has said that he would always follow them. There would be no influence over major macro-economic issues such as the Bank of England’s inflation target, set by the Chancellor in consultation with the Governor.
Labour Members consider it clear that Scotland benefits from fiscal, welfare, monetary and financial union with the rest of the UK. When other countries across Europe are bringing down obstacles to co-operation, it would be absurd for us to erect new barriers at home. We would survive as a separate state, but our ambitions should be higher than that for the people of Scotland. If we are to thrive and prosper, strong devolution within the United Kingdom, while meeting the current huge economic challenges together, is the best solution. I hope that the Minister will reflect the message that we have heard this morning and increasingly from the Scottish people about their future: we are far weaker as separate states, and far better together.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
As always, it is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for Livingston (Graeme Morrice) on securing this debate on the economic consequences of Scottish separation, and on his detailed and positive case for why Scotland would be better off remaining part of the United Kingdom. I also want to thank all hon. Members who took part in the debate, including the hon. Member for Strangford (Jim Shannon) who set out the positive Unionist case and talked about the support for Scotland staying within the United Kingdom that comes from other parts of the United Kingdom.
The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) identified the increasingly perplexing issue of the separatists arguing on the one hand that everything would be different in a new Scotland, and, on the other, that everything would be the same—if we are in any way worried about any particular aspect of separation.
The hon. Member for Glasgow Central (Anas Sarwar) gave his usual erudite exposition of the issues, and was commendably brief. The nub of the matter is that we must get on with the debate about whether or not Scotland should remain a part of the United Kingdom, and about what would be better for Scotland.
The hon. Member for Glasgow North East (Mr Bain) made a persuasive case for Scotland remaining part of the United Kingdom. I will not repeat his points; suffice it to say that—other than his criticism of the Government—I agreed with everything he said.
The contribution of the hon. Member for Banff and Buchan (Dr Whiteford) was brave because she mentioned independence—something that, as I understand it, is not encouraged nowadays in the Scottish National party. Then both she and the hon. Member for Angus (Mr Weir) went on to say that they supported a single-question referendum. I am glad that they said that here in this debate.
David Mundell
The hon. Gentleman must convey that message to Mr Salmond. If Mr Salmond is in agreement with members of the Scottish National party, he has the opportunity to proceed now with a single-question referendum. It is he who is prevaricating on the issue of the referendum, and not this Government, who have offered to facilitate the SNP manifesto commitment to a single-question independence referendum.
Mr Weir
The Minister is missing the point completely. The referendum is for the Scottish people. There has been a consultation, of which we are awaiting the results, as to whether or not there is demand for a second question. It is about not the First Minister driving that demand but whether there is demand from the Scottish people.
David Mundell
I tend to agree with the editorial of the Daily Record, which often, in my experience, reflects the views of the Scottish people. It has described Mr Salmond’s current tactics as a
“desperate-looking ploy that has left Salmond isolated and open to public ridicule.”
That is the case. Although separation is the Scottish Government’s policy and not ours, we have made it clear that, as a Government, we are prepared to facilitate a legal, fair and decisive referendum to settle this issue.
Michael Connarty
Is not Mr Salmond feart of having a single-question referendum?
David Mundell
I am sure that many people will make that analysis. The UK Government referendum consultation showed a strong majority in favour of a single question and robust reasons why that should be the case. Seventy-five per cent of respondents agreed with the UK Government that a single question would ensure a decisive outcome. The support for a single question is clear and growing, and today’s Scottish papers—if the SNP takes any notice of them—confirm that.
All three pro-UK parties have made it clear that they support a single-question referendum. Even the SNP officially support a single question. Both campaigns in Scotland are in favour of a single question. Margo MacDonald and the Greens have now joined the call for a single question on independence. The coalition Government are offering the Scottish Government the opportunity to deliver a legal referendum by giving them the legal power that they do not currently hold. We are offering to deliver the SNP’s manifesto commitment.
The SNP won a majority at the 2011 Scottish Parliament election on the basis of a manifesto commitment to an independence referendum, not to further devolution, and it is on that single question that it can claim to have a mandate. Independence is of course the founding principle of the SNP; this is its big chance to hold the referendum that it has pledged to hold in successive manifestos. If the SNP now does a U-turn and demands a second question on the ballot paper, it will be an up-front admission of defeat and an acknowledgement that the First Minister believes that he cannot win a single-question referendum on separation.
Tom Greatrex
The hon. Member for Angus probably let the cat out of the bag when he talked about the Scottish Government’s and SNP’s consultation. When the results of that are analysed, does the Minister think it would be interesting and useful to see how many contributions asking for a second question came after the May local government elections, and how many came from SNP councillors and SNP members on a standard format?
David Mundell
That will indeed be an interesting analysis. It is quite clear that the SNP and the First Minister are prevaricating on the question of the referendum. We have been calling for talks with the First Minister to be resumed so that Scotland’s two Governments can work together to deliver a legal, fair and decisive referendum. We need to get the referendum process agreed as soon as possible, so that we can get on to the real debate about Scotland’s future and whether Scotland should remain part of the UK.
Anas Sarwar
Did any SNP parliamentarians, or the SNP itself, put in a submission to the UK Government’s consultation, and if so, did they ask for one question or two?
David Mundell
The SNP did make a submission to the UK Government consultation and we welcomed it. As SNP members have stated, the SNP’s position is to have a single-question referendum. The Daily Record editorial today said:
“Salmond should stop playing games and start campaigning on the issues if he still believes he has a chance of realising his lifelong dream of independence. We need a proper decision as soon as possible. Then Scotland’s leaders can get back to more pressing matters”,
such as the economy, employment and education. That is the UK Government’s position.
In stark contrast with the Scottish Government, we are committed to getting the referendum process agreed and to getting on with the real debate. We have announced a programme of work that will set out in the period leading up to the referendum the benefits of remaining part of the United Kingdom. I am convinced, as are many Members here, that we will convince the people of Scotland that we are better together as part of the United Kingdom.