Scottish Economy

Debate between Anne Main and Ged Killen

Wednesday 27th June 2018 Westminster Hall

[Ged Killen (Rutherglen and Hamilton West) (Lab/Co-op)]

I beg to move,

That this House has considered the future of the Scottish economy.

It is an honour to serve under your chairmanship, Mrs Main, and to bring such an important and timely debate to the House. I am pleased to see so many colleagues here, although I am disappointed that the Under-Secretary of State for Wales is the only Government Minister who could join us. I know the Government take a rather apathetic view of devolution these days—[Interruption.]

[Mrs Anne Main (in the Chair)]

Order. Let the hon. Member continue.

[Ged Killen]

I must point out that this is a debate about the Scottish economy, so I am not sure whether the presence of the Minister, albeit welcome, is an indication of diary conflicts, or that we are all the same in the eyes of the UK Government. It would have been nice to see someone from the Scotland Office or perhaps a Treasury Minister here to answer the debate.

It has been 10 years since the financial crisis, and in an ideal world we would be looking back on the crisis from a renewed position of strength, with the fundamentals of our economy strong, and with optimism for the future. Sadly, that is not where we find ourselves. Following a decade of economic mismanagement of Scotland by the Scottish National party and Conservative Governments, Scotland’s economy has failed to recover to above pre-crisis levels in a number of areas. The fundamentals of the economy are structurally unsound, with built-in constraints on future growth, and we appear to be trapped between two economic futures: one a Tory hard Brexit, the other supercharged austerity under the SNP’s growth commission.

The Scottish people have lost a decade of economic growth. Under the projections of the Scottish Fiscal Commission, that lost decade threatens to turn into a generation. However, I remain optimistic, because there is a third way: a Labour vision for the economy—an economy driven by investment, not cuts, and a vision that has an optimistic outlook for the Scottish economy, rather than one of managed decline. Today, I will set out where the Scottish economy stands; the two visions before us as posed by the UK and Scottish Governments; and the third way offered by the Labour party.

Ten years on from the financial crisis, the Scottish economy is in a difficult position. Economic growth remains heavily stagnant. GDP growth in Scotland has averaged out at less than 1% per year since the financial crisis, while the rest of the UK has done only slightly better. Unfortunately, things are not expected to get much better, because the Scottish Fiscal Commission does not expect growth to rise above 1% until after at least 2023. If that is the case, Scotland’s economy will not just have been at a standstill for a decade, but will have remained in the freezer for a generation.

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[Ged Killen]

I thank the hon. Gentleman for his comments; he is obviously not paying very close attention in the Chamber. The UK Governments have very clear red lines drawn all over the place, and none of them seem to reach any kind of consensus. [Interruption.]

[Mrs Anne Main (in the Chair)]

Order. I know the hon. Gentleman’s remarks are provoking comments, but please can those comments be kept to either interventions or speeches?

[Ged Killen]

Thank you, Mrs Main. The Labour party position is quite clearly putting jobs and the economy first. If the hon. Member for Airdrie and Shotts (Neil Gray) intends to contribute to this debate, perhaps he can explain why it is very important for Scotland’s economy to remain in the European Union but his party wants to take us out of the United Kingdom. That is something I would find difficult to square.

The UK Government, the Scottish Government, the Institute for Fiscal Studies and the Fraser of Allander Institute have all warned of serious damage to Scotland’s economy as the result of a no-deal Brexit. Worryingly, recently it has seemed that some members of the Conservative party believe that that is an acceptable outcome. In no circumstances should any public representative be recommending that that risk be taken in pursuit of gains that, in my view, are vastly outweighed by the negatives.

On the other side of the equation we have the SNP Government, who have produced a growth commission to set out how they want to see Scotland’s economy grow in the future. In 2015 and 2017, the SNP stood on a manifesto that claimed that it was anti-austerity. The publication of the growth commission and the endorsement of its policies by the First Minister should represent the day when the mask slipped and the SNP was shown to be the party of austerity that we know it to be.

In the growth commission, the Scottish Government propose reducing Scotland’s budget deficit through an approach that would see spending on public services and benefits fall by about 4% of GDP over a decade. Compare that with the policies of the Conservative UK Government, as set out by the Office for Budget Responsibility. The UK Government’s projections see spending on public services and benefits over a five-year period, from 2018-19 to 2022-23, falling by 0.9% of GDP. The plans set out by the SNP in the growth commission would mean the Scottish Government cutting public expenditure on public services and benefits close to five times faster than this Conservative UK Government.

In its model for the future of an independent Scottish economy, the SNP has given up on monetary policy as a tool for stimulating the economy. By not proposing a new currency and by setting public spending and borrowing targets that even George Osborne would have considered ambitious, the SNP has baked serious public spending cuts into its preferred future economic model. Relying on fiscal policy alone to reduce Government debt and budget deficits, they will have to introduce spending cuts, raise taxes or do a combination of both. That is the dictionary definition of austerity.

Those are the most optimistic of figures. The IFS says that, with an ageing population adding to the pressures on the health, social care and state pension budgets, keeping to the growth commission’s targets would likely require cuts to many public services, with the commission not taking the time to spell out exactly where the axe would fall and who would lose out as a consequence. Furthermore, the IFS also said what all know to be true:

“It is also inconsistent to claim that these plans do not amount to austerity but the UK government’s current policy does”,

particularly while the growth commission’s plans

“imply slightly slower real growth in spending than the UK Government is currently implementing.”

I am sure that the SNP will not cease to call itself the anti-austerity party, even after the growth commission’s publication. However, the facts speak for themselves. These are empty calls and stolen clothing. The growth commission is most disappointing because of its lack of ambition. The two Governments of Scotland have produced plans for the future of the Scottish economy that leave much to be desired, and it is therefore up to the Labour party to present a true alternative.

The Scottish economy has three core structural problems: stagnant GDP growth, low productivity and demographic challenges caused by a projected significant increase in the over-65 population and a shrinking in the relative size of the economically active population. Labour has a vision to address all three problems. The problems of growth and productivity cannot be separated; they are twin problems. The Scottish labour market is strong—we have a relatively low unemployment rate by European standards, and an exceptionally low youth unemployment rate.

However, while unemployment has decreased over the years, wages have stagnated and economic output has not matched the increase in the labour force that would usually be expected. That is because, while jobs have been created, they are predominantly low-skill, low-wage jobs that have not helped to accelerate growth; nor have they been productive enough to increase wages. By introducing a minimum wage of £10 per hour, we can reverse the trend of low wages and encourage investment to improve labour productivity. If we increase the minimum wage, companies will have to invest in technology and training to improve the output of their workforce to match the demands they are under. No longer will low-wage, gig economy jobs serve to undercut the advantages of investment.

[Ged Killen]

The hon. Gentleman will of course realise that we are in the UK Parliament. Scotland has two Governments, and I am talking about Labour’s vision for both. [Interruption.]

[Mrs Anne Main (in the Chair)]

Order. Mr Gray, the hon. Member for Rutherglen and Hamilton West (Ged Killen) has taken your intervention. Please do not carry on your conversation.

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[Ged Killen]

It is nice to see that both the hon. Lady and her favourite pantomime villains have turned up to continue the set-to that we often see in the Chamber. I am here to make a speech on what I believe is right for the Scottish economy. She will clearly disagree on several areas, and she can set those out in her remarks. As always for SNP Members, independence is the answer, no matter the question. I am surprised to hear SNP Members now talk about devolution so much, given that they have always opposed it. [Interruption.]

[Mrs Anne Main (in the Chair)]

Order. This is becoming somewhat intolerable. No respect is being shown to the hon. Gentleman, who is trying to make his speech. This is not a conversation among Members; it is a debate, which will be held in the proper manner. I ask all colleagues to respect the hon. Members making speeches and to keep their remarks to themselves or to voice them in the proper manner—through interventions.

[Ged Killen]

Thank you, Mrs Main. While we invest in a productive workforce, we must also attract talent to fill those spaces. All of Scotland’s population growth from 2016 to 2041 will derive from inward migration, as deaths will outnumber births in each year. Brexit therefore presents a risk, as it could reduce inward migration from the EU. However, even without Brexit, population growth is too slow and lags behind that of other parts of the UK, both in terms of birth and death rates, and through inward migration. We can correct that by supporting a needs-based immigration system. It is simply unhelpful to focus on an abstract number, as the UK Government are doing—or are failing to do.

However, we must also build the communities that attract the best talent. That is why we have called on the Scottish and UK Governments to get on with the completion of the city deals projects. People move to cities and communities. The delivery of more than £1 billion of funding and the devolution of further powers will allow our cities and communities to make themselves attractive to international talent on their own terms, rather than having terms dictated by Holyrood or Westminster.

Overall, 83% of Scotland’s population—4.5 million people—live in areas covered by existing or planned city region deals. That is a huge amount of talent and aspiration to be unlocked, and we simply cannot wait any longer. However, those deals have been bogged down as both the Scottish and UK Governments cannot bring themselves together to settle the matter. We have seen in the wrangling over the devolution settlement that the SNP and Conservative party can lock themselves in disagreement if it is politically opportune to do so; dare I say that we have seen that today? However, the people of Scotland should not be punished because of the narrow interests of the two governing parties.

In conclusion, Scotland has lost a decade of economic progress under its two Governments. If nothing changes, this decade threatens to turn into a generation of stagnation. However, an opportunity exists to turn this around, and the pathway to growth is best fulfilled by an investment-based economic model.