Scotland: Economic Recovery and Renewal

Viscount Younger of Leckie Excerpts

Thursday 9th December 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, the origins of this debate are rather unusual. First, it was supposed to include the maiden speech of my noble friend Lord Offord, who only yesterday had to withdraw due to illness. He informed me yesterday that he was exceptionally apologetic not to be here. We all wish him a speedy recovery and much look forward to hearing him for the first time soon, in the new year, as he steps fully into his new ministerial role in the Scotland Office. If your Lordships will excuse the Scottish reeling pun, you have second fiddle today. I will attempt to cover my noble friend’s points and some of my own, and of course do my best to answer questions where I can.

The debate was initiated by my noble friend Lady Fraser, and I welcome her to the first debate she has opened. Today is also unusual in that it seems to me to have been a very long time indeed since we had a proper debate on Scotland. My thanks are certainly due to my noble friend in that respect as well.

My first observation is that this debate has demonstrated forcefully and eloquently the strength of feeling in this House for this great union of ours—of our four nations, including Scotland, being inexorably linked—which has stood the test of time. I loved the historical perspective outlined by my noble friend Lord Hannan.

On the same subject of devolution, which was raised by my noble friends Lady Fraser and Lord Dundee, let me be clear that we believe that the people of Scotland are best served, supported and protected by the UK Government and the Scottish Government working together. This was a theme from my noble friend Lady Davidson, who made some strong remarks in this respect, and from my noble friend Lord Dunlop. The UK Government and Scotland Office respect the devolution settlement and we seek at all times to work together. My noble friend Lord Dunlop’s report was an important and helpful piece of work, informing our intergovernmental review. We firmly believe that there is a shared ambition to improve intergovernmental arrangements. As the noble Lord, Lord Foulkes, said, it is so important to work hard to preserve this particular union. It was interesting to have his reflections on negotiations pre Mr Salmond.

These structures and processes are the best route for proactive, effective and formalised engagement, with accountability grounded in shared secretariat arrangements, transparency and dispute resolution arrangements. The UK Government are operating on the basis of new working arrangements with the devolved Administrations, as my noble friend Lord Dunlop outlined. The UK Government’s quarterly transparency reports show the range of ministerial and official-level meetings. I can report that there is extensive engagement between UK and devolved Ministers and officials every day, so this is very important ongoing work.

I will take a step back and reflect on Scotland’s place in the United Kingdom. Again, my noble friend Lord Hannan perhaps stole some of my lines. We Scots are well aware that we comprise only 8% of the population but 33% of the geography, and our DNA dictates that we must always contribute more than 8% and aim for 33% in every endeavour. I believe that we are happiest and most productive working together as four nations. This strength has allowed proud Scots in the past to demonstrably punch above their weight, from Alexander Bell to Alexander Fleming, the manufacture of some of the world’s greatest ships on the Clyde, and from Robert Burns to the great John Rae, a particular unsung hero of mine—an Orcadian and one of our great Scotsmen, who discovered half of northern Canada in the mid-19th century. I could go on.

I will start on a positive note by looking at the rude health of the Scottish economy. Our economy is performing well—remarkably well, given the awful impact of the Covid pandemic over the past two years, which has rightly been raised in this debate. The UK economy is the fastest-growing in the G7 this year and Scotland is playing its full part. Total exports have risen by over 4% this year, estimated at just over £87 billion.

However, it is no time for complacency and if the pandemic teaches us one thing it is the necessity for constant vigilance. My noble friend Lord Dunlop and the noble Lord, Lord McNicol, raised this important point. New variants such as omicron are a constant threat, though one we can face with more confidence than we could muster just over a year ago thanks to the wonder of science in the UK, which delivered vaccines on a timescale previously unthinkable. Now we urgently need to get booster jabs into as many people’s arms as possible. My noble friend Lady Davidson is right to praise the work, ingenuity and resourcefulness of the people of Scotland in helping their communities in this respect.

I turn now to energy, which formed part of my noble friend Lady Fraser’s remarks and those of the noble Lord, Lord McNicol. My noble friend Lady Fraser also asked a question on the link to the national grid. On the back of the high-profile COP 26, chaired by the UK in Glasgow, energy is certainly one area where Scotland can be a world leader in the transition to net zero. We have all the natural resources and existing infrastructure, plus the scientists and engineers required to build a balanced scorecard in energy. We contribute 60% of the UK’s onshore and offshore wind generation, our tidal and hydro opportunities are immense, plus we have 100,000 highly skilled jobs already working in energy with 70,000 in oil and gas.

We must remember, though, that the transition is to net zero, not to zero carbon, and with 35% of our energy needs in 2050 still coming from carbon—halved from 70% today—we would be foolish to ditch our world-class oil and gas sector in the North Sea just to import from elsewhere. This was a key point of my noble friend Lord Goodlad’s remarks and those of the noble Lord, Lord Bruce of Bennachie. A balanced approach in energy should include renewables, oil and gas, hydro and tidal, and carbon capture, as well as nuclear. Scotland is uniquely placed to lead the world in this space and, by doing so, will contribute massively to the well-being of and quality of life in the UK.

COP 26 in Glasgow brought the world to Scotland’s door. What a tremendous achievement for the two-year presidency of the UK to increase those countries committed to net zero up to those responsible for 90% of emissions. It is sometimes said that the UK has a limited role to play in climate change because it accounts for only 1% of world emissions, yet Glasgow proved that our UK leadership still counts as we demonstrate that it is possible to simultaneously grow our economy while cutting our emissions.

There is a determination to see nascent green technology make the breakthrough to deliver genuine environmental benefits and prosperity through employment. Scotland’s wind power, which was also a theme of this debate, is being resourced. To that end, the Government have announced £160 million to create floating offshore wind farms, maximising the higher wind speeds found out to sea. That follows the biggest investment yet seen in tidal power, namely £20 million per year. Scotland is also home to a £9.4 million trail-blazing hydrogen project at the UK’s largest onshore windfarm, Whitelee, on the hills south of Glasgow. Coupled with carbon capture, whereby the greenhouse gases which damage the environment so gravely can be safely stored in the very rocks from where we once drew oil and gas, Scotland’s energy transition surely can lead the way, making a huge contribution to the well-being of the people of Britain, notably in keeping the lights on.

Financial services were raised briefly by the noble Lord, Lord Bruce. This is one of the most successful sectors in Scotland, employing 150,000 highly skilled jobs and contributing £13 billion to Scotland’s economy. Our fintech cluster comprises more than 150 fintech start-ups in Edinburgh and Glasgow, which combine to be in the top three clusters in Europe, and Scotland is now responsible for 11% of the UK’s responsible investing market. Overall, we contribute 20% of UK exports in financial services, a sector where the UK is ranked second in the world after the USA.

Fisheries were raised by my noble friend Lord Goodlad. Our fisheries, food larder and drinks cabinet are world-class. Exports of salmon and whisky together account for 20% of UK exports of food and drink, and the whisky industry supports 10,000 jobs in Scotland, 7,000 in remote communities and 40,000 across the UK. This is where I have a reflection: assuming we can secure a trade deal with India, we could dramatically increase our exports of Scotch. Langoustines served in swish Parisian bistros are won from pristine Scottish waters and whisked from port to plate at speed. A £100 million UK seafood fund, allied with new opportunities afforded outwith the EU’s common fisheries policy, means that fishing is an industry charting its own course into the future.

I will say a few words about defence. It was not a particular theme in this debate, but I think it is important. BAE Systems on the Clyde and Babcock at Rosyth on the Forth are at the heart of the UK’s defence capability. I understand that the Indian navy is particularly interested in our state-of-the-art weaponry and defensive systems, where 15 world-leading UK companies have significant design and manufacturing operations in Scotland.

One great example is HMS “Queen Elizabeth”, the aircraft carrier built on the banks of the Forth at Rosyth, which has just returned to UK waters. As well as a potent symbol of defensive power, this trip delivered innovative trade possibilities. For example, in Mumbai, the ship was the backdrop to UK—including Scottish—promotion opportunities. It was not just whisky—I am sure gin was on board as well—but, for example, we showcased the Royal Edinburgh Military Tattoo.

Scotland’s vital contribution to defence is essential in today’s deeply uncertain world. Scots serve proudly in all branches of the forces, and RAF Lossiemouth and Her Majesty’s naval base at Faslane are at the cutting edge of our air and sea power. As we know, Faslane is home to the Royal Navy’s Submarine Service, including the continuous at-sea nuclear deterrent.

Shipbuilding, although reduced in scale, remains a Scottish speciality. I should point out that, over the last 15 years, she has delivered six Type 45 destroyers, two aircraft carriers, five offshore patrol vessels, and already has orders for eight Type 26 frigates. I am sure that I could go on.

On this link to trade, raised by my noble friend Lady Davidson, noble Lords will be well aware of the Government’s commitment to secure trade deals with 80% of the world’s trade within three years of leaving the EU. I am pleased to say that we have currently signed up to 64%, but there is much more work to do. We will bring extensive new trade alliances across the world, from which Scotland is well placed to benefit.

I turn to another theme that was raised by the noble Lord, Lord McNicol, and my noble friends Lady Fraser and Lord Dundee: the levelling-up agenda. Following COP 26, within the Scotland Office our attention has turned to the post-pandemic levelling-up agenda across the UK. EU structural funds are being replaced by the £2.6 billion shared prosperity fund and the £220 million community renewal fund, and it is worth noting the explicit commitment by the Chancellor at the Budget, reaffirming that total replacement funding via the UK shared prosperity fund will at a minimum match the previous size of EU structural funds in Scotland.

These are further complemented by the £4.8 billion levelling-up fund, with almost £180 million committed to local projects in Scotland, as part of the recent funding round announced at the Budget, alongside the ongoing investment of £1.5 billion in UK government funding. Of course, this supports the 12 city and growth deals across all of Scotland. Your Lordships will be pleased to know that the city and growth deal agenda is a good example of joint working between the two Governments and local areas across every part of Scotland. In this spirit of co-operation, a new heads of terms agreement for the Falkirk growth deal will be signed this month, as well as the full deal in Moray.

I hope the House will agree that Scotland is uniquely served by two Governments, and these UK government investments will augment and strengthen devolution by investing in people, projects and businesses within local communities equally across the whole of the United Kingdom. This plays quite well into the remarks from my noble friend Lord Dundee, who spoke about the importance of skills.

I turn to universities. All of this high-end design, technology and manufacturing is backed up by our world-class universities, such as the UK’s current top university and my alma mater, St Andrews, which continue to attract research funding of 13% to 15%—another exemplar of our “more than 8%” rule, which I alluded to at the beginning. On the new green economy, the first Industrial Revolution was born on the Clyde, and, last month, Glasgow showed once again that our universities and technologists are leading the charge.

Cities were raised by my noble friend Lord Dundee. I took note, with interest, of his remarks on twinning, which is often important. We should always remember Scotland’s vibrant cities: Glasgow for its culture—the Burrell Collection, for example—and its architecture by architects such as Charles Rennie Mackintosh, and Edinburgh for its great humour, not least the Edinburgh International Festival.

I will also pick up the point made by my noble friend Lady Fraser about Channel 4, which she is right to raise. As part of an internal channel restructuring process to take jobs outside London, Channel 4 created headquarters in Leeds and regional hubs in Glasgow and the other devolved nations. Scotland has begun to show its strength here and has a strong track record of staging big Hollywood film productions, such as the sequence of “Fast & Furious” films and “World War Z”, starring Brad Pitt, the storyline of which covers a threatening virus that turns humans into zombies, which is perhaps a sombre reflection for us this afternoon. Perhaps I should not go further on that. In addition, the £7 million UK global screen fund will target support across the screen sector, including film, TV, documentaries, animation and interactive narrative games content.

Health was raised by a number of noble Lords, including my noble friends Lady Fraser and Lord McColl. I note the points made about the record on health, which was also raised by the noble Lord, Lord McNicol. The UK Government recognise that it is important to support the Scottish Government, and £14.5 billion in additional funding has been given through the Barnett formula since the start of the pandemic. I hasten to add that this is on top of the block grant and in addition to extensive direct UK government support to people and businesses in Scotland.

More than 100,000 Scottish businesses have also benefited from £4 billion of UK Government loans. Vaccinations, which were alluded to, have been a great success, with almost 120 million doses administered, as of 8 December 2021. It is fair to say that Scotland has benefited from closely working with, and from the input of, the UK Government. I stress again: working together is the theme.

My noble friend Lord Dundee spoke about digital connectivity. The recent Budget confirmed a further £8 million from Project Gigabit to deliver full fibre to 3,600 premises in Scotland, including in Aberdeenshire, Angus, Highland, Moray, and Perth and Kinross. It has delivered faster speeds to 600,000 households and businesses in Scotland, replacing legacy copper wire with full fibre. This is part of the overall £5 billion Gigabit programme.

My noble friend Lady Fraser spoke, rightly, about tone, which was also picked up by my noble friend Lady Davidson and the noble Lord, Lord McNicol. As far as I am concerned, Scotland and the Scots people are a much-valued and most important part of our United Kingdom. Long may this continue. We hope that more Scots will come around to thinking the same about the UK Government and those good souls south of the border.

I finish by agreeing with my noble friend Lord McColl and the noble Lord, Lord Bruce, that we must strive for a positive future. I believe that there is one.