Scotland: Economic Recovery and Renewal

Lord Dunlop Excerpts

Thursday 9th December 2021 Lords Chamber

[Lord Dunlop (Con)]

My Lords, it is a great pleasure to follow my noble friend Lord Goodlad. I also congratulate my noble friend Lady Fraser on securing this debate and introducing it so well. May I also say how sorry I am that my noble friend Lord Offord is not able to take his place on the Front Bench today? I suppose that as we are discussing recovery and renewal, I join others in wishing him a speedy recovery and an early renewal of his bid to make his maiden speech.

The Motion refers to well-being. Our national well-being has been threatened as never before by the pandemic. Every aspect of life has been affected, not simply the direct impact of the virus but the indirect effects: the impact on mental health, the diagnostic tests postponed, the operations cancelled, the huge waiting list backlogs, creaking social care, strains placed on our public finances, and the cost to businesses whose trade has been disrupted for prolonged periods and now face further uncertainty. It is therefore hardly surprising that the experience of the last two years has caused everyone to re-evaluate priorities and to think hard about how individually and collectively we bounce back.

The pandemic has taught us two important lessons. First, it has reminded us of the value of being able to act collectively across the UK. Where would we be today without furlough and the vaccine rollout? Secondly, the delivery of public services is more effective when local know-how is properly engaged—when decisions are taken closer to the people affected by them. How much better might test and trace have been if less centralised at the outset? I suggest that these lessons now need to be applied to economic recovery and renewal and to the task of improving quality of life in Scotland and the UK as a whole.

Scotland, as the Motion makes clear, has an important economic contribution to make. Scotland is rightly famous for its whisky, shortbread and, as we have heard, gin. Food and drink are certainly jewels in Scotland’s exporting crown, yet this stereotype is long out of date. Scotland is now making a name for itself in industries of the future too. For example, it is a little-discussed fact that Glasgow manufactures more satellites than anywhere else in Europe. The engineering skills honed in the North Sea are now being applied in developing the next generation of renewable energy, which will help us tackle climate change. I might add in passing, to echo my noble friend Lord Goodlad, that one good reason to take care not to scare off investment in sustaining jobs, skills and businesses in north-east Scotland is that it would put at risk a managed and orderly transition away from fossil fuels.

Scotland has some outstanding performers, yet the substantial potential remains unfulfilled. Take exports: Scotland has around 350,000 businesses; only 11,000 of them export and, of those, just 100 account for over 60% of all Scotland’s international exports. If Scotland could increase its international export share of GDP to the same level of the UK as a whole, it would be worth £16 billion annually to the economy. That would provide a lot of financial firepower to help tackle, for example, the blight of child poverty in Scotland.

Fulfilling potential is a challenge that Scotland shares with the UK as a whole. One of the UK’s most intractable problems of the past 30 years has been regional economic inequality. Scotland and the UK have some of Europe’s most dynamic and productive cities and regions, yet the UK remains one of the most economically unbalanced countries in the industrialised world. Disposable incomes in the north-east of England, Wales and Northern Ireland are more than 40% lower than in London, and disparities between, for example, North Ayrshire and Edinburgh, are similarly large. Half the UK’s population, including those in the poorest parts of Scotland, live in regions with productivity no better than the poorer areas of the former East Germany. This has held back the UK’s economic performance and undermined the cohesion of the union.

International evidence suggests that economies grow faster and more strongly when they grow more evenly, and they do that where governance is less centralised. Why should that be? Because communities have greater control over resources, policies are better tailored to local needs, public investment is more effective, and beneficial yardstick competition develops. Why, for example, is Manchester doing better than Newcastle? What can we learn from Birmingham and Glasgow? Today, the UK remains one of the most centralised states, despite significant devolution to Scotland, Wales and Northern Ireland.

Within Scotland, devolved power is hoarded in Edinburgh, with local authorities increasingly emasculated. We cannot hope successfully to meet the challenges ahead without empowering local communities, north and south of the border, to play their part. There is mutual interest in this agenda—one that is unifying after all the division of recent years. London and the south-east are obviously the main drivers of the UK’s economic success—the places where returns from public investment are highest, thereby generating resources to fund better public services and support less prosperous areas. However, reducing reliance on London and the south-east can only be healthy for Scotland and all parts of the UK. As we have heard, nearly two-thirds of Scotland’s exports are sold in markets in the rest of the UK. Building stronger English regional economies will create greater opportunities for Scottish businesses, and vice-versa. I understand that the levelling-up White Paper has been delayed until the new year, so we must wait to see if the Government are serious about pursuing this agenda, but I have to say that the indications seem to be encouraging.

A less centralised UK will alter fundamentally the nature of government in this country. When significant powers were devolved to Scotland, the mistake was not to think harder about the continuing need for joint working where devolved and reserved powers intersect. Michael Gove, the first formally titled Minister for Intergovernmental Relations, is working hard to rectify that omission, and he needs to.

Covid has highlighted just how much the UK and devolved Governments depend on each other to be successful. Whatever the deep divisions are over our constitutional future, the vast majority of people in Scotland are united in wanting to see the UK and Scottish Governments working together on their behalf.

In conclusion, building what I have described as a union of co-operation will require a culture change from a Whitehall used to issuing directives and jealously guarding the purse strings. There needs to be a change of attitude in Edinburgh too. New partnerships will need to develop, in which the centre and more peripheral areas of the UK learn to work together in new ways. Whitehall will need to continue to improve its capability to negotiate with and mediate between the demands of different tiers of government. Other countries seem to manage this successfully, and there is no reason why we should not do so too.

My message to the Government and my noble friend on the Front Bench is this: do not give up when the Scottish Government refuse to work with you on valuable UK initiatives such as the connectivity review and free ports. Scotland’s network of city and growth deals shows that co-operation is possible. Press to deepen that co-operation in areas such as new green technology, space and export promotion, where Scotland has so much to contribute. Do so confident that this approach is in tune not only with the Scottish business community but the Scottish people as well, and so clearly in the best interests of Scotland and the UK as a whole.