Achieving Economic Growth

Alison Thewliss Excerpts

Wednesday 18th May 2022 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

Today is National Numeracy Day and there will be a lot of figures flying about this afternoon. It often makes me think that it would be helpful in this place if we were allowed to do as they do in the US Senate and have great big charts we can point at to make these debates easier for people to follow. But the Bank of England’s predictions on GDP growth, thankfully for the Government, are quite easy to illustrate—they are pretty much a flat line. The cost of living crisis and Brexit continue to hold back growth, and opportunities for more sustainable, inclusive growth, conscious of our climate obligations presented at the COP26 summit in my constituency last year, are being squandered. It is not so much a Union dividend as a stagnant economy. It does not have to be this way.

We need to recognise that the endless pursuit of GDP growth at any cost destroys communities and the planet. Growth should be inclusive and should prioritise policies that tackle inequalities, contribute to net zero and provide high-quality jobs. Investing in green technologies, in insulating and retrofitting homes, and in improving public transport would all be a good start, but no Bills in the Queen’s Speech get close to that ambition. In Scotland, the SNP has put wellbeing at the heart of our economic strategy. It is through wellbeing and fair work that we can deliver higher rates of employment and wage growth, reduce poverty, and improve outcomes for disadvantaged families and communities.

I was proud to serve on the Scottish Government’s Social Justice and Fairness Commission, which, prior to the pandemic, set out some of the direction of travel. Last week, the Scottish Government announced the establishment of a new centre of expertise in equality and human rights, which will see the Scottish Government working with leading experts to address economic inequality, building on the principle that a fairer economy is a stronger economy.

Post pandemic, we are presented with a clear choice over whether to lead or to lag behind other successful and more equal economies while we recover from covid, deliver net zero, tackle structural inequalities and grow the economy. The UK Tory Government have chosen to ignore the problems and to lag. The UK economy is now forecast to be the worst-performing G7 economy next year. This week, we had more of the Chancellor’s sleight of hand on Twitter, in using a scale on a graph that makes less than 1% in GDP growth look good. It is not that good, so the Government should stop pretending that it is, and it is in no small part a consequence of their policy choices.

There has been no clear economic strategy from the UK Tory Government, yet the policy choice that looms over all things, from the Northern Ireland protocol disputes to manufacturing and labour supply, is Brexit. There is no doubt that global forces are posing huge challenges now, but these have been compounded by Brexit, the daftest of all economic policies. By December 2021, leaving the single market and customs union had reduced UK goods trade by 14.9%. Analysis by the Centre for European Reform shows that UK exports have taken a larger hit than imports. Pushing through that Brexit cliff edge in the middle of a pandemic, and masking the economic damage regardless of the economic cost, is an act of great economic self-sabotage. GDP growth in the UK is only about half the EU average since the Brexit referendum.

[Chris Grayling]

rose—

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[Alison Thewliss]

I will certainly give way to the right hon. Gentleman if he can explain why there is a benefit of Brexit when we see only economic harm.

[Chris Grayling]

I ask the hon. Lady to correct the record. If she looks at the website of the Office for National Statistics, she will see that the opposite of what she is saying is the case. In fact, UK imports from the European Union have fallen, whereas UK exports to the EU have recovered. It is not clear why that is, but that is what the ONS says and I hope she will go away, read that website and correct the record.

[Alison Thewliss]

That goes to my point that we can make all kinds of statistics show all kinds of things. But what we hear from food producers in Scotland is that it is very difficult for them to get their high-quality exports to the European markets, and that is a direct choice with Brexit. We have also seen it become easier for EU goods to get into the country and more difficult for UK goods to get out—these mad policies have caused all kinds of difficulties.

We face weak growth in 2023 in comparison with not just the G7, but most of the world, as well as higher inflation by far than anywhere in the eurozone. Figures today that put inflation at 9% are shocking, and it is only May. Some of that inflation rate has come about via the Government’s choice—and it was a choice—to increase VAT back to 20%. Given the rampant energy costs, it is certain that more price rises are yet to come.

Last week, Adam Posen, the president of the Peterson Institute for International Economics, told the Treasury Committee that in his view, a

“substantial majority of the inflation differential for the UK over the euro area is due to Brexit”.

That is a choice by this Government that is making things harder for people in these islands. It is an act of self-harm supported not only by the Tory idealogues, of course, but now by the Labour Front-Bench team, who apparently want to make Brexit work, against all good reason and good evidence, and against the 62% of people in Scotland who voted to remain in the EU. Earlier in the week, when I asked Ministers about the benefits of Brexit, they pointed out freeports in Teesside, which will not have huge benefits for my constituents, that is for certain.

[Martin Docherty-Hughes]

I do not want to labour the point, but when it comes to freedom of movement, if people want to make Brexit work, perhaps the easiest way is to make the Northern Ireland protocol cover the whole of the United Kingdom of Great Britain and Northern Ireland.

[Alison Thewliss]

My hon. Friend makes an interesting suggestion because, of course, Northern Ireland has benefited from that.

Investment in our communities has taken a direct hit from the loss of European structural funds. The UK Government’s shared prosperity fund will see Scotland allocated £32 million in 2022, £55 million in 2023 and £125 million in 2024—but even that third year of funding will deliver less than Scotland received before Brexit.

[Sir Bernard Jenkin]

rose—

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[Alison Thewliss]

If the hon. Member would like to explain to me why Scotland deserves less now than it had before Brexit, I will take his intervention.

[Sir Bernard Jenkin]

Would the hon. Lady like to explain to the House how much harder it would be for business and what it would do to living standards in Scotland if Scotland followed the SNP’s suggestion and left the United Kingdom, with a border across the middle of Great Britain?

[Alison Thewliss]

There are multiple benefits to Scotland being independent, and the greatest one would certainly be not having to live with policy choices made by this Government, for whom none of our people voted.

The Scottish Government have calculated that £162 million per year would be needed to replace the European regional development fund and European social fund, and that increases to £183 million per year when LEADER funding and the EU territorial co-operation programmes are added in. That means there is a significant shortfall for organisations and projects that are already operating with significant challenges from the pandemic and the cost of living crisis. Of course, many such organisations, which fund projects such as bridges and green infrastructure, and retrain those who have lost their job or are far from the labour market, were contributing significantly to economic growth. Without the money to replace them, the areas and people involved will struggle to make progress, just as Bloomberg suggests is already happening with the flawed Tory levelling-up fund.

Before the pandemic, investment was stagnant because of the drawn-out uncertainty of Brexit and an unnecessary commitment to leaving the customs union and the single market. The harm to the economy and to people’s pockets could have been lessened had different choices been made. There has been a lot of talk about the Northern Ireland protocol, but the reality is that Manufacturing Northern Ireland has found that the issue is largely with GB suppliers that are unwilling to send to Northern Ireland, while EU supply chains have recovered. There has been a 28% increase in sales with the EU and manufacturing jobs in Northern Ireland are now growing four times faster than the UK average.

The Bills mentioned in the Queen’s Speech do nothing to redress the damage caused by Brexit. James Withers from Scotland Food & Drink said:

“Had the war in Ukraine not happened, we were already facing energy bills rising, a world waking up from a pandemic…Brexit for sure has made nothing better, but has made a number of things a lot worse.”

Mr Withers also pointed to the labour market being in disarray. This UK Tory Government’s obsession with limiting immigration is causing untold harm to our growth prospects. Yesterday, the Office for National Statistics noted that around half a million people have left the labour market completely since start of the pandemic, and we do not know whether they will come back. Meanwhile, vacancies are running at a record high of 1.295 million. Who will fill these jobs? The Government have absolutely no answer to that. All these vacancies are already having an impact: surveys by the British Chambers of Commerce have found that companies cannot fulfil orders because of a lack of staff, as well as soaring material costs. Perpetuating the hostile environment is bad economics as well as morally dubious politics. It is not a recipe for growth: it is a recipe for self-inflicted economic catastrophe.

Precious little in the Queen’s Speech will help with the spiralling cost of living crisis and soaring energy prices. The April 2022 price cap was already 75% higher than one year ago. Miatta Fahnbulleh of the New Economics Foundation said that

“the government said its priority was…to help people with the cost of living crisis…Yet we had 38 bills that will barely have an impact on that agenda.”

Whether people are in work or out of work, the money in their pockets is being eroded every single day by inflation. The UK Tory Government could choose to put money into people’s pockets. They could introduce an emergency Budget to make sure that the least well-off—those who are really struggling, those who need support with their energy bills to get by—are supported. The SNP Government have uplifted the benefits in their control by 6%; there, again, the UK Tory Government lag behind. People are seeing the money that they receive eroded every single day.

The UK Government should be converting the £200 heat now, pay later loan into a grant. As the chief executive of ScottishPower has said, they should be increasing that grant substantially—he says to £1,000—to help people with their energy bills. Such is the magnitude of the increase in people’s costs. The UK Government should scrap the regressive national insurance tax hike, which is a tax on jobs at the worst possible time; reverse the £1,040 cut to universal credit; and support those on legacy benefits, who have seen very little from this Government. They should also introduce a real living wage—a living wage for all that people can actually live on—rather than their pretendy living wage, which is not even available to all ages, with age discrimination baked in. They should also look at removing VAT on energy bills, which is a significant cost.

The Government have been raking it in: additional money that they did not expect has come in through the taxation system, as set out in the spring statement, and that will increase every day as VAT receipts come in and inflation soars.

As a proportion of income, the rise in the cost of living for poorer families is nine times larger than it is for the richest 5%. Institute for Fiscal Studies figures suggest that although inflation today is at 9%, for the least well-off it is just shy of 11%. The impact of such inflation on people can sound a bit abstract when we talk about percentages here and there, but the Child Poverty Action Group has calculated that with inflation running at 9%, the value of someone’s universal credit falls by £790 per year. That is a lot of money to the people who receive that benefit and the Government should be doing more about it.

All the way through the supply chain—from those growing crops and those processing and transporting food, to those stacking it on the shelves, to those cooking their tea and putting it on the table—costs are increasing. Businesses are being pushed to the very limits to absorb the costs and it cannot continue for much longer.

When I watch Treasury Ministers in this place, it is hard for me to hide my frustration, because they have all the levers that my colleagues in Holyrood do not have, yet not one iota of the ambition or imagination. There is so much that they could do to invest in people and communities, to work towards the promise of COP26 and to build a fairer, more just and more equal society—to grow, but in a way that leaves no one behind. We cannot rely on the Conservatives or Labour—both are now Brexiteer parties—because Scotland wants to take its place in the world. We want to be part of something and to be connected, rather than to rely on the tiny ambitions of this Government. People in Scotland are yearning for a Government with the powers to do better by their people; I hope they will soon get the chance to vote for that in an independence referendum.

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[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

It is an honour to follow the hon. Member for Rugby (Mark Pawsey) and his broad critique of the Queen’s Speech.

Today’s inflation figures add to mounting evidence of UK stagflation. The Conservatives’ record is of 12 years of failure to create an economy that delivers wellbeing for people across the United Kingdom—let us remember that they have been responsible for the economy for 12 years. From the banking crisis to the present day, the Conservative party has sought out every opportunity to impose austerity and to bring about a hard Brexit of its own making. Those have combined to aggravate the UK’s cost of living crisis. Yes, there have been other causes, which have been beyond our control, and possibly beyond any Government’s control, but these are ideological choices that will go down in history as Tory creations. Out of ideas other than to centralise powers that they do not possess and blame what they do not know, the Conservatives sit on their hands as the economy for which they are responsible fails to work for households and businesses across the UK.

The Levelling-up and Regeneration Bill does nothing to correct past mistakes or deliver for the future. The Welsh Government have stated that this Government’s post-Brexit funding arrangement for Wales falls short by £772 million of structural funds alone for the period 2021 to 2025. That is not only

“an assault on Welsh devolution”—

not my words, but the words of Labour’s Minister for Economy—but a broken election promise. More broadly, sources including Bloomberg illustrate a failure to maintain current standards, let alone deliver any improvement, across most of the UK and especially across Wales.

That is not what was promised on page 15 of the 2019 Welsh Conservatives manifesto, which said that

“no part of the UK loses out from the withdrawal of EU funding”.

It is certainly not what was promised on page 29, which said that

“Wales will not lose any powers or funding as a result of our exit from the EU.”

Three years into this Parliament and six years on from Brexit, this Government cannot articulate or deliver any clear benefits to Wales. We need an honest funding settlement, devolved engagement and a focus on delivery rather than glossy announcements.

Other elements of the Queen’s Speech also give pause for thought. Rather than correcting Wales’s underfunding of more than £5 billion from HS2, it gives us—wait for it—Great British Railways. Rather than working with Transport for Wales, our publicly owned transport body, it seems that Westminster’s solution to historical underfunding is to override our solution while not correcting the underlying problems that need fixing. Put bluntly, this Government’s approach to a difficult problem is to stick a Union Jack on it and sing a song of praise to past glories. Nostalgia does not an economy make.

Plaid Cymru drove the creation of the Development Bank of Wales, yet its future, and how the new UK infrastructure bank will work with rather than over the devolved institutions, is unclear. We do not know how what we are operating for ourselves to improve the economy of Wales will align with what is being done in Westminster. That is not good government.

[Alison Thewliss]

The right hon. Lady makes an excellent point. The Scottish National Investment Bank is already up and running, but there is nothing from the Government on how that will interact with their plans either.

[Liz Saville Roberts]

Exactly. The lack of clarity and working together does not help anybody’s economy.

This Queen’s Speech does nothing for the basics of the Welsh economy or to address the ongoing cost of living crisis. I reiterate Plaid Cymru’s call for an emergency Budget and measures including a windfall tax, increased energy bill support and the expansion of the rural fuel duty relief scheme for Wales.

Net zero is obviously in the Queen’s Speech but, alas, missed opportunities include the devolution of the Crown Estate and the establishment of a Welsh national energy company to support local renewable generation and fix grid capacity—measures, by the way, that Plaid Cymru has agreed with Labour in Wales through our co-operation agreement. It is good to see politicians working together in the common interest of all the people in all our communities, rather than in conflict. I ask the Government to address the shortage of grid capacity somehow, because without further grid capacity in many areas of Wales we cannot grow our own renewable supplies and make the best of that opportunity.

Westminster’s refusal to countenance legitimate devolved proposals to boost our economy scorns our democratic voice. It emphasises how, until we have full powers over our future, we will always be treated as second best, simultaneously mocked for seeking handouts and told to be contented with handouts.

I hope the Chancellor will address the immediate crisis with an emergency Budget, or whatever he chooses to call it, including measures such as a reformed SME tax relief in Wales to boost productivity as a first step. I also hope the UK Government’s vaunted Great British Nuclear will work with and learn from Wales’s existing Cwmni Egino, which is already at work to develop the nuclear licensed site of Trawsfynydd.

Where there is a problem, it seems the UK Government’s answer is to cobble together a UK-branded institution to wallpaper over the self-perpetuating vortex effect of research funding, public investment and targeted tax relief that keeps the south-east of England within the pale of economic privilege and the rest of England’s regions, Northern Ireland and the nations of Scotland and Wales, as always, beyond it.