Greece

George Kerevan Excerpts

Monday 6th July 2015 Commons Chamber

[Mr Osborne]

Of course, we do keep a close eye on the situation in Cyprus. A couple of years ago we provided a lot of support to British citizens or others receiving, for example, British pensions in Cyprus when its banking system collapsed.

One of the challenges with people in Greece who receive a British pension but have a Greek bank account is that if we simply stop the money going in, in order to try to protect the payment from whatever might happen, we do not know whether that might disrupt an agreement they have, for instance, with money coming out of their bank account to pay for rent, or for other things, and of course the Greek Government have not so far put restrictions on pensioners in Greece. We monitor this very carefully, and we have contacted a couple of thousand of the people affected to see if they want to switch bank account and offer them a British bank account facility if they want one. We keep this under daily review.

[George Kerevan (East Lothian) (SNP)]

In the light of both the unprecedented and potentially disastrous public attacks by Christine Lagarde against the Greek Government and the referendum result, will the right hon. Gentleman now urge the International Monetary Fund to make available to Greece the some £1.6 billion in profits the fund has made from charging the Greek Government for their emergency loans?

[Mr Osborne]

I do not accept that characterisation of the managing director; I think she has played a very important and constructive role in this crisis. The IMF exists to lend to countries that are by definition in some distress, but it, too, has rules, which have been established for many decades. One of them is that countries in arrears to the IMF cannot receive payments, and unfortunately last week Greece went into arrears.

Scotland Bill

George Kerevan Excerpts

Monday 29th June 2015 Commons Chamber

[Sir Edward Leigh]

My simple amendment would allow the Scottish Parliament to set tax thresholds, as any good Parliament should be able to do, and is a genuine attempt to elicit from a Minister the reasons why the Scottish Parliament is not currently allowed to set the personal allowance. I am a lawyer, but I do not claim to be a tax expert or an economist. [Interruption.] Well, it’s just the truth. I am not an expert tax lawyer or economist. This is a probing amendment to help us investigate a complex issue, to which we can always return on Report.

The House of Commons Library has illustrated the complexity of the issue:

“The Bill as it stands would allow the Scottish Parliament to set the bands of income at which different Scottish rates of tax would apply. Clause 12(3) states that where there is to be more than one Scottish rate, the resolution which sets these rates ‘must also set limits or make other provision to enable it to be ascertained…which rates apply in relation to a Scottish taxpayer.’”

That is not immediately terribly clear, but it continues:

“So, if the Scottish Parliament wished to, it could set a zero rate of tax over a specific band of income, in effect increasing the personal tax allowance to all Scottish taxpayers.”

Importantly, in its briefing on the Smith commission, the Institute for Fiscal Studies asked why the power to set the allowance was to be reserved. That is the question I am asking. The IFS, a reputable body, has asked it, and I am simply using the amendment to ask it again. I think most people would agree that setting tax and then spending the money raised is a prerequisite of a responsible Parliament.

It is not necessary to go over all the arguments I used on Second Reading or in Committee two weeks ago—they are on record—but suffice it to say that power breeds responsibility. The Scottish Parliament must take responsibility for its own destiny in the firm conviction that it is ready and able to do so. So why are we devolving bands and rates, but not thresholds? Is not setting the threshold at which people start to pay tax—the personal allowance—vital to the decision-making process? Setting a band or rate but not a threshold is like being willing and able to leap the bar in high jump without having any control over where the height is calculated from. It does not make any sense. What we are giving the Scottish Parliament is only half a power. Are not thresholds much the most interesting part of the equation? We spent a lot of time last Parliament debating that point in relation to the UK economy.

[George Kerevan (East Lothian) (SNP)]

Surely if the Westminster Parliament keeps the right to set the initial threshold, it can also vary it, thus taking away from the Scottish Parliament the ability to plan its entire budget, because the threshold could change overnight.

[Sir Edward Leigh]

That is a good point, and I agree entirely. It does not make sense. One Parliament might be trying to manage its own affairs by setting bands responsibly, but another Parliament could cut the ground from beneath its feet by changing the threshold. I do not know why the power has been reserved, but no doubt the Minister will tell us.

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[David Mundell]

Obviously I am familiar with Cuthbert’s views on a range of issues, and many of the points the hon. Gentleman refers to will indeed be dealt with in the fiscal framework, which is why that is important for delivering a stable settlement.

The Scotland Parliament will retain the receipts from the income tax it is responsible for. This represents a significant devolution of powers, with Scotland retaining around £11 billion of income tax receipts. That accounts for over 90% of income tax receipts collected in Scotland. This gives Scotland greater fiscal autonomy, with incentives to increase employment and increase wage growth.

I emphasise to Members that there are no restrictions on this power. If the Scottish Parliament wants an income tax system with a dozen different rate bands, these powers allow it to do that. Similarly, if it wants to set a zero rate of income tax, it can.

As I said on Second Reading, the devolution of the rates and bands of income tax means we will correct a fundamental imbalance in the devolution settlement. Since 1999, the Scottish Parliament has debated how public money should be spent but not how it should be raised. The Scotland Act 2012 started to change that, giving the Scottish Parliament more tax-raising powers. The Bill goes much further.

As things stand, the Scottish Government still receive the vast bulk of their budget in a block grant from this Parliament and choose how to distribute that budget according to their priorities. When the UK Government have taken difficult decisions to bring our public finances back into order, the Scottish Government have often condemned us for inflicting cuts. Although I believe those spending reductions were necessary to secure our economy and are far preferable to increasing taxation on working families in Scotland, it is true that the Scottish Government took a different view. These clauses will allow them to do something about it.

With control of the rates and bands of income tax in Scotland, the Scottish Parliament will raise over half the money that it spends. If the Scottish Government want more money to spend on their priorities, such as higher welfare payments, they will be able to increase taxes to raise that money. However, they will have to justify that spending to the hard-working men and women in Scotland who will be paying for it out of their wages every month.

[George Kerevan]

Following on from what the Secretary of State is saying, how could the Scottish Government ever be sure of their tax yield if another House were setting the threshold?

[David Mundell]

The Scottish Government already have to manage their finances by building in estimates of revenue. That is part of the system in which we operate and part of the decision to have a United Kingdom-wide tax. I will come on to that point in a moment.

The Deputy First Minister has confirmed that the Scottish Government are already considering using the tax powers that they will shortly receive under the Scotland Act 2012 to put up income tax. The powers contained in these clauses will increase the scope for action considerably. With the SNP in government, Scots might pay the highest income tax in the UK. Perhaps the party will dust down its old “penny for Scotland” policy, although now, with inflation, it might need a little more.

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[Ian Murray]

I am not sure I understand the intervention. We are debating a deficit in Scotland being £7.6 billion over and above any UK deficit, rising to £10 billion by 2020. If we are defending Scottish jobs and livelihoods, that seems not just economically incredible, but economic illiteracy. Hon. Members need not take my word for it. The Scottish Trades Union Congress general secretary, Grahame Smith, commented that the Scottish Government’s own accounts were

“a sobering reminder of some of the risks of full fiscal autonomy”.

That is from the trade unions in Scotland.

The Scottish Government sneaked out their own oil and gas bulletin, their first since May 2014, last week on the last day of the Scottish Parliament. It would be good to look at that alongside the independence White Paper. The bulletin was very much in accord with the Office for Budget Responsibility that was rubbished just a few days before. It showed that North sea oil revenues and projections have fallen drastically in recent times, so let us have a look at those figures. The Scottish Government’s own oil and gas bulletin of June 2015 estimated North sea tax receipts for the period 2016-20 to be £5.8 billion. The same scenario from the same bulletin 13 months earlier estimated the receipts to be well in excess of £26 billion. Even if we compare one year—say, 2016-17—revenues had fallen from a projected £6.9 billion to £1.1 billion, and the lower estimates are as low as £500 million.

These are the Scottish Government’s own figures—all in all, an 85% drop. That tells us two things. First, it blows apart the financial basis for full fiscal autonomy. Secondly, like my new clauses 1 and 21, it calls for a more robust and impartial analysis of the Scottish economy and public finances. That is why we tabled new clauses 1 and 21. New clause 21, alongside new clause 1, would provide for the creation of a Scottish office for budget responsibility to exercise independent and impartial fiscal and budget oversight over Scottish Government devolved competencies.

The Smith commission recommended that

“the Scottish Parliament should seek to expand and strengthen the independent scrutiny of Scotland’s public finances in recognition of the additional variability and uncertainty that further tax and spending devolution will introduce into the budgeting process.”

The new clauses would do just that and take away the politicisation of one of the fundamental underpinnings of the Scottish economy, the financing of Scottish public services and, crucially, though it tends to be forgotten in this debate, the livelihoods of everyone living and working in Scotland.

I would go further and ensure that the Scottish office for budget responsibility assesses and reports on individual party manifestos, so that the public can be confident that what they are being sold is both credible and desirable. This is about simple transparency and accountability. That transparency and accountability, as I have said, has not been forthcoming on the current manifesto commitment on full fiscal autonomy. If we had had a Scottish office for budget responsibility at the last election, it would have reported that FFA would be hugely disadvantageous to Scotland. It would have backed up the IFS analysis that showed that FFA did not work and that Scotland would need a real-terms growth rate of 4.5% per year at least between 2013-14 and 2019-20. The assistant general secretary of the STUC, Mr Stephen Boyd, commented exactly on this and said:

“The implication across the board is that taxes would be cut. There are a number of examples where the Scottish Government would be trading a real and immediate cut in revenue for benefits that may not be great in the long run.”

That shows that it would not be achievable in the figures from the IFS. The IFS’s conclusion is that FFA would incur deep, deep cuts in spending or huge tax rises.

It is easy to talk about figures, percentages and statistics, but this has to be about the everyday lives of ordinary, hard-working Scottish families. Inflicting a policy on Scotland that would leave a deficit larger than the entire education budget, or more than three quarters the size of the NHS budget, will not assist Scotland. We all reject the Conservative Government’s misguided austerity, which we know is ideologically driven, rather than an attempt to balance the country’s finances, but we must also reject any policy that would inflict harsher and deeper austerity in Scotland. [Interruption.] This is not, as some would claim—they are claiming it as I speak—about being anti-Scottish, anti-aspiration or anti-hope for the ingenuity, passion and entrepreneurial spirit of Scotland; it is a sobering response to a key manifesto commitment from the Scottish National party.

SNP Members dismiss the views of the IFS, the OBR and even their own GERS reports, but even Jonathan Portes, the director of the National Institute of Economic and Social Research, has said on FFA:

“If the SNP plan for full fiscal autonomy were to go ahead, then, as a number of commentators have said, that would lead to very, very severe austerity in Scotland.”

That is why Labour is against full fiscal autonomy; that is why we believe in the pooling and sharing of resources across the United Kingdom; and that is why the public voted to remain part of the United Kingdom.

[George Kerevan]

Does the hon. Gentleman not see that there is a contradiction in standing up and telling us repeatedly that full fiscal freedom would be bad for Scotland and asking for an independent budget review, which he clearly does not want to take account of? He wants an independent budget office, but he is telling us what it is going to say.

[Ian Murray]

That is a rather strange intervention. If Members read new clause 1 and new clause 21, they will see very clearly that what we are asking for is an independent commission to analyse the consequences for Scotland of full fiscal autonomy. If the SNP is so confident about its figures, it should back that proposal and then we will have the transparency, impartiality and independence of those policies. If it is so confident that it was not fiddling the figures, it should help us to set up a Scottish office for budget responsibility and let that body analyse its figures. However, it is clear once again that, when we shine the light of scrutiny on SNP policies, its Members want to talk about the process but not look at the impartial and independent evidence before us. If they are so confident, they will back new clause 1 and new clause 21 and bring much needed transparency, credibility and accountability back to the Scottish Parliament’s finances.

Greece

George Kerevan Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Osborne]

My hon. Friend raises one of the challenges we face. There are around 6,000 people in Greece who receive British pensions or British public sector pensions, and around 2,500 of them have Greek bank accounts into which the payments are made. We cannot protect people’s Greek bank accounts in such a situation—that is for the Greek authorities to do—which is why we are contacting the individuals concerned and saying that if they wish to have the payments made into British or non-Greek bank accounts, we will make that switch as soon as we can. We are ready to do that immediately.

[George Kerevan (East Lothian) (SNP)]

I put it to the Chancellor that there is another way in which the Greek crisis could impact on the UK economy: a Greek exit, or even simple market turbulence, could lead to a precipitant and lasting fall in the value of the euro, which would have an impact on British farm incomes because they are denominated in sterling. Will he speak with fellow Ministers to ensure that British farmers in that situation will be compensated?

[Mr Osborne]

It has long been the practice—it has certainly been my practice and, to be fair, also that of my immediate predecessors—not to comment on the value of the currency, and I do not intend to do so today.

Productivity

George Kerevan Excerpts

Wednesday 17th June 2015 Commons Chamber

[Greg Hands]

I shall give way shortly. I think I have awakened the hon. Gentleman’s interest with my reference to the SNP.

I thought that it would be helpful to start by setting out the productivity question in relation to the UK’s general economic competitiveness, setting the scene for the problems we face. Hon. Members will of course be aware that, thanks to our long-term economic plan, we can be proud of having the highest growth of the major advanced economies in 2014, and we are predicted to repeat that in 2015. We are highly competitive, and that is linked to productivity. We are ranked ninth of 144 countries globally for competitiveness, we enjoy the lowest corporation tax in the G7, and we are seen as being well governed, as we are in the top 20 of 102 countries on all eight factors of the World Justice Project’s Rule of Law index for 2015. London remains a world-leading international financial centre. British universities are by far the best in the world outside the US. For those who complain that we no longer make things, within two years we expect the UK to match its all-time car production record, which was set back in the 1970s. The city of Sunderland now produces more cars than the whole of Italy put together. We are extremely competitive.

[George Kerevan (East Lothian) (SNP)]

Is the Chief Secretary aware that the high productivity in British automotive products is an optical illusion because only 37% of the spend in the value chain relates to this country, whereas two thirds of it relates to the imported content of those cars, most of which comes from Europe—the Europe that you are trying to take us out of?

[Greg Hands]

It is a bit churlish to debate the precise details like that. The fact remains that car production in this country is extremely impressive. We should celebrate that throughout the UK, including in Scotland.

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[John Redwood (Wokingham) (Con)]

The productivity puzzle can be understood and resolved. It is a combination of bad news and not such bad news. There was a sharp fall in productivity at the time of the crisis, because we lost a lot of very expensive output, a lot of people lost their jobs and the net result was a big fall. Since the crisis has hit, there has been a continued loss of top-end jobs in areas such as oil, financial services and banking, which score very well in terms of the way people compile productivity figures. An industry such as oil, which produces a lot of extremely valuable output and has a limited number of very well-paid people, gives an enormous boost to productivity, as we have learned today from Norway. We have just lived through a period when, through no fault of any of the three Governments who have been presiding over it, there has been a sharp decline in the output of oil—because it is now a very mature province—and a big fall in the oil price. That recent fall is down to market circumstance and to things happening well away from this country.

There was also a big loss of top-end jobs in banking and financial services. There will be mixed views in the House of Commons on the social value of those jobs, but they scored very well in the run-up to the crash. Some of those jobs have now gone altogether and some have gone to lower tax jurisdictions elsewhere. The bad news side of it accounts for the drop in productivity during the crisis and the slow growth since the crisis.

The better reason why our productivity is below that of some of our continental comparators is that we have gone for a model—I think and hope with the agreement of all parties—of having more people in employment and of creating conditions in which this economy can produce many more lower paid jobs in the hope that that will lead on to higher paid jobs and more output and activity, which is a better model than those people being out of work.

Let us look at the way the productivity figures are calculated. If a country sacks 10% of the least productive people in the economy, which is the kind of thing that the euro was doing to some of our competitor countries in euroland, it can be flattering for its productivity figures, because the least productive jobs go, and the productivity of the total country rises, but the country is a lot worse off, because it then has 10% of its workforce out of work who would otherwise have been in less productive jobs. It is the same in a business. The easiest way for a business with below-average productivity to get to average or above-average productivity is to close its worst factory, but that is not always the answer that people in this House would like.

[George Kerevan]

The right hon. Gentleman is making the best he can of a bad job. For instance, if we look at the share of research and development in gross domestic product in the UK, we see that it was down not just over the 1990s, when we had the last Conservative Government, but for the period from 2000 to 2007. R and D is a fundamental component of productivity and it is down. He cannot gainsay that.

[John Redwood]

One has to first understand a problem before one can address the problem. I think we are all in agreement on this issue. Would we like higher productivity? Yes, we would. Would we like more better paid jobs? Yes, we would, and that goes for Conservatives as much as any other party in this House—probably more than any other party in this House. We not only will the end—more high-paid jobs—but are prepared to take some of the decisions that Opposition parties always deny or query in order to allow those better paid jobs to be created.

Let me go on from the analysis. I hope that the hon. Gentleman will reflect on what I have said and understand that I have provided a good explanation of the path that productivity has taken since 2007, which is a matter of common concern but has some understandable things that we cannot address. For example, we cannot suddenly wish a lot more oil into Scotland, and that remains a fact. We will not be able suddenly to create all those high-end banking jobs. Some Opposition parties probably would not like them anyway. We are where we are. What we can do about productivity is to work away on those parts of the economy where the performance has been most disappointing.

Royal Bank of Scotland

George Kerevan Excerpts

Thursday 11th June 2015 Commons Chamber

[Harriett Baldwin]

I welcome my hon. Friend to his place, and also welcome his wealth of experience and knowledge in this matter, which he ably demonstrates in his question. The sale will bring wider benefits to the overall economy. It will help us to continue to make progress in making the banking sector more competitive, and may result in a more competitive financial services sector and mortgage sector. That position is echoed not only in the Rothschild report, but in the Governor of the Bank of England’s letter.

[George Kerevan (East Lothian) (SNP)]

May I take the Minister back to page 11, table 2 and the footnote, because we did not get an answer when this was first asked? The table lays out not the forecast recoveries but just a statement of where we are at the moment, which could change. It does not include the cost of the funding of the interventions; in other words, the cost of the Treasury paper that was created to buy the assets in the first place and on which interest is being paid. Will the Minister please answer the question—what was the cost of funding the interventions?—so that we know the true cost, not the £14.3 billion?

[Harriett Baldwin]

The hon. Gentleman is absolutely right that the table is a snapshot of a moment in time. As time progresses, we will no doubt be able to pin down exactly the overall costs of clearing up the mess that Labour left behind.

European Union (Finance) Bill

George Kerevan Excerpts

Thursday 11th June 2015 Commons Chamber

[George Kerevan (East Lothian) (SNP)]

It might be considered a trifle unorthodox to give a maiden speech leading from the Front Bench of your party, so I trust Members will forgive me but I am in fear of the Whips.

The Scottish National party will not oppose this Bill, and I would commend it rather more than my friend the hon. Member for Worsley and Eccles South (Barbara Keeley) would. As I am sure Members appreciate, the SNP takes a broader and more positive view of being a member of the European Union and, therefore, of funding it. As far as I could tell from her contribution, Labour wants to be tough on Europe without wanting to be tough on the causes of Europe.

Congratulations are due to the Government. Interestingly, if we look at the contributions the UK has made to the EU over the past 43 years, we see that the five years in which the UK made the largest contributions were the past five years. The £42 billion to £43 billion sum that the coalition contributed net to the EU in the past five years was roughly the same as the previous Labour Government had contributed in 13 years. The coalition therefore managed to double what it gave to the EU, which slightly contradicts the official position of the Government, which is to be tough on Europe. I can feel for some Conservative Back Benchers who are more anti-Europe in thinking that the line the Government take in public is not actually what they are doing in reality on the EU.

I am somewhat in awe of being here to make my maiden speech in front of the right hon. Member for Wokingham (John Redwood), as I recall that many years ago when I was teaching I used one of his books as a textbook, so I always treat what he says with great concentration and concern, but SNP Members are positive Europeans and we therefore will the spending for the European Union. The way I look at what we are proposing today and going to vote on later is that we are willing our contribution to the European Union to tackle austerity—quite the opposite of what the Chancellor is doing.

Interestingly, too, if we read the papers that come with the Bill, we find that the OBR reckons that in the seven years of the next spending period the UK will make much the same net contribution as it did in the previous five years. Although the Prime Minister has made much of the fact that he has got the formal budget of the EU for the next period down, Britain’s contribution in cash terms will be much the same. [Interruption.] Inflation will have reduced the real value, possibly by about 7%, depending on the outrun, but there is no cash reduction. We are going to be providing much the same contribution as we did in the past five years, so what has happened to the money that has disappeared with the reduction in the overall contribution limits? The answer is: other countries, such as Denmark and Austria, have negotiated smaller net contributions, in real terms and in cash terms. I can feel for the right hon. Member for Wokingham, because his Government are hardly managing to be as tough on the EU as they are pretending to be.

As this is my maiden speech, I cannot go home without saying a few words about my constituency. Given how technical this debate is, perhaps a few words of diversion before we get back to the serious business will not go amiss.

I have reached the age that we in Scotland call the age for “getting your bus pass”. I had expected that I would be spending most of my time after the referendum writing a few more obscure books on economics and tending to my improbably ambitious vegetable garden, but suddenly the good folk of East Lothian sent me here to represent them. I could not be more pleased. My first and foremost duty—I have to put this on record—is to represent all of them whether or not they voted for me.

It is a pleasure to be in this august Chamber. Many, many years ago, as a small boy in Drumchapel, I fell in love with history. In those days, the history we studied in school was not the history from below but, by and large, the history of this Chamber. It was, as some Members may remember, the Whig interpretation of history, which was that all history was about the ever greater improvement of the British constitution—now, there are not so many Whigs left.

I appreciated those lessons, because this Chamber has always been kind to people of my persuasion—Scottish nationalists, people who want self-determination for Scotland. Though most parties here have disagreed with us, we have always had a fair hearing. Whether it was the radicals of the Highland Land League who came here in the 19th century, the Red Clydesiders of the Independent Labour party, or Members from the Scottish National party—we have always had a fair hearing. We may have taken issue with the Executive over the years, but never with this Chamber; we have always had a fair hearing. Indeed, in the past there has been conflict between the Executive and the Speaker. I am sure that if that happens in the future, the Speaker can expect our support.

Let me say a few words about East Lothian, which is the lovely, beautiful flat plain just to the left of Edinburgh. It is a county of small towns—Musselburgh, Haddington, Tranent, Dunbar, Prestonpans, North Berwick and Cockenzie—where people think hard and work hard. It is not a big metropolitan area; it is a county of radical tradition. From the eastern side of Scotland, the area has for centuries looked out to the North sea, to Europe and to the Baltic. Our outward-looking views on Europe and the rest of the world come, I think, from that geographical position. This idea of building positive links with Europe is what animates me. The trade links between East Lothian and Europe brought in new ideas. East Lothian is the county that introduced Presbyterianism to Scotland. We had the earliest mining communities, which added to our radical tradition.

We are the county that gave the world John Knox and Andrew Fletcher. Fletcher was the person who would lead the opposition to the Act of Union. In this context, I must mention the most renowned MP from East Lothian, John P. Mackintosh, who passed away in 1974. He is still remembered. He was a great constitutionalist and a professor of constitutional law.

Mackintosh sat on the Labour Benches, but I was lucky enough to have an old friend of his and his former campaign manager helping me in my campaign. I have always said that Mackintosh was a hero of mine, because of his genuine commitment to constitutional reform in the UK and to home rule for Scotland. He was very clear that home rule was something different from devolution. Piecemeal devolution—granting a concession here and a concession there, a change here and a change there—has hardly resolved the issue of the Scottish desire for self-government. The moves have been grudging. If there has been tension on both sides of the Chamber and argument, fractiousness and debate, it is because those of us on the SNP Benches feel that we are getting piecemeal concessions. The majority of people in Scotland want self-government. We voted for self-government in the referendum last year. Home rule within the Union must mean home rule. Mackintosh argued for that. Perhaps if we had had home rule in 1970s instead of the piecemeal drip that we have had ever since, we might have been able to move forward, and we would not be holding this debate.

I have heard Members vie with each other over which is the most beautiful constituency in the UK; they are all beautiful. In East Lothian, we have a saying, which has been current for several hundred years, which is that East Lothian is the garden of Scotland, and it is. In the east of the constituency, lush volcanic soil has created wonderful arable agriculture and great dairy farms. To the south are the dark Lammermuir hills, which keep the wind off and on which the sheep still graze. To the north, there is a lovely sea coast, which has an important fishing industry. We have a wonderful verdant county.

I am here representing our farmers, and let me say to the right hon. Member for Wokingham that those farmers are not fans of the referendum or of withdrawal from the EU. They are hard working, and do not depend on simple subsidy. The uncertainty that will be produced by a referendum and by the possibility of Scotland being taken out of the EU—most Scots will vote to stay in—is the primary worry of our farmers. One reason I am standing here today is to argue in favour of staying in the EU and of defending the ability of our farmers to access the European market. However, I have not been sent to this place to give a travelogue.

I was asked one question time and again on the doorsteps in East Lothian: why is it that in Scotland’s garden—the bread basket of Scotland—hundreds of children go to bed every night hungry? If there is any place in this United Kingdom where there is a gap between the failure of this Government’s austerity policy and welfare cap and the ability to create food, jobs and economic activity it is in East Lothian. We cannot be the bread basket of Scotland and have children go to bed hungry every night. That is the contradiction. The Government’s dogged policy of austerity—austerity here and an attempt at austerity in Europe—is simply leading to social divisions across the UK.

I am talking here to those the Government Benches, especially the right hon. Member for Wokingham—I am using him as a foil, because I have spent many decades reading his economics and I want to respond rationally to him. We on the SNP Benches believe that we must maintain a serious approach to the deficit—that is not in contention—but the Chancellor’s austerity policies are an ideological fixation. The Chancellor wants to run a primary budget surplus out of ideological intent. Yes, we must reduce the deficit and the budget, but we can do it in an intelligent and rational fashion that does not lead to the social crises that are emerging in places such as East Lothian.

Why we should not run a primary budget surplus at the moment is quite simply because all the UK is doing is growing roughly on trend, but whether we do that over the next period is questionable. It is foolhardy to try to run a primary budget surplus if we are only growing at trend. What we should be doing is running a more modest deficit, probably at around 2% to 2.5% of GDP, roughly on trend, and continuing that to give ourselves the resources to solve some of the structural problems in the economy such as our massive current account trade deficit and low productivity. If we do that and grow the economy in a structural sense, that will ultimately give us the resources to pay down the deficit. I would rather do it in that rational, conscious fashion than have an ideological knee-jerk reaction.

I have wandered far, Madam Deputy Speaker, and you have been very patient, so I shall draw to a close. We are in this place to have a rational dialogue, not to demand or to rampage. During my tenure, as well as representing as best I can the people of East Lothian, I want in some sense to help to heal the divisions between the four great nations of these islands. We want our self-government, and my final point to the right hon. Member for Wokingham is that I would like to see an English Parliament voting on English laws. That is what comes from Scotland’s having independence. I think that within a generation we will have four independent Parliaments in this Atlantic archipelago. We will co-operate, we will have a common market, we will discuss this and that and we will probably have a common defence policy, but we will achieve that by recognising the right of the four nations, and certainly of Scotland, to be self-governing and independent. The family of nations can then treat each other as equals.

Until we do that, we will continue to have to argue in this place for Scottish self-government and for our rights. Once we are a separate family, we will come together as four nations. What is wonderful about these islands is that we have four separate, wonderful nations, vibrant and creative. Co-operating as separate nations, we will challenge the world. Unless we do that we will continue to be caught up in the constitutional debate that has been going on for the past hundred years.

I commend the Bill, which says that Europe is a family of nations. So is the family of British nations, but for that to be a genuine family Scotland must be self-governing with its own sovereign Parliament.

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[Alison McGovern]

I thank the hon. Gentleman for that intervention and for his kind words. Given the comment I just made about when I chose to make my first speech at this place, I can assure him that I have never changed my mind about Europe. I shall say more about that.

Spending on research, innovation, infrastructure, education and training, and enterprise development is very important and can help us better to promote the European Union as a facilitator of growth within the UK. Of course we recognise that we must also finance all aspects of the EU, but I would question whether continuing to spend so much of our money on areas like the common agricultural policy demonstrates the right priorities. It accounted for 40% of EU expenditure in 2013 yet contributed just over 1% to total EU economic output.

[George Kerevan]

Labour Members have twice now criticised how much is spent on agriculture in the EU. Surely the hon. Lady is aware that over the years there has been a significant shift in and reform of what the agricultural fund is for. It is no longer primarily an agricultural subsidy for production and excess production but is focused on protecting the environment. Surely that is something that we should encourage.

[Alison McGovern]

The hon. Gentleman makes a fair point about protecting our environment, but my point is that in these times we need to ensure that each part of this spending is focused in the right place. At a time when the European Union has serious deprivation and so on within its borders, it is right to question each part of its spending.

I know that any discussion of Europe strikes fear into the heart of those on the Government Front Bench, especially because it stirs such joy on their Back Benches. The issue of Europe holds no such fear for me, however, and in the coming referendum I shall campaign to stay in the European Union, because we should not underestimate the benefits we receive from being part of it.

--- Later in debate ---

[Harriett Baldwin]

As I said, I welcome the hon. Lady’s European colleagues’ new-found enthusiasm for rigour and reform in the European Union, and I look forward to working closely with them to ensure that happens.

My hon. Friend the Member for Daventry (Chris Heaton-Harris) made an excellent speech that revealed his deep knowledge of the subject. As a former MEP who sat on the Committee that scrutinised the European budget, he has been assiduous in his scrutiny of this legislation—no doubt the Whips will have noted his enthusiasm to take part when the Bill goes to Committee. He asked a range of questions about the ESA reporting and the accuracy of the EU budget. The UK agrees that more can be done to improve compliance, including simplifying the rules that member states have to comply with to release their funds. We believe that the Prime Minister’s deal on the multi-annual financial framework shows that EU spending can be improved, but that will require a strong UK voice to be heard.

[George Kerevan]

Again, does the Minister understand that the OBR analysis shows that in 2020 the net contributions in cash terms from the UK will be similar to what they are now? When the Prime Minister negotiated a reduction in the EU budget, it was a reduction in the global budget, not in the British contribution in cash terms.

[Harriett Baldwin]

I accept that the OBR has published figures that clearly show that there is a real-terms reduction in the overall envelope for the settlement period.

My hon. Friend the Member for Daventry also asked about the additional costs compared with the existing decision and any offsetting benefits. He raised a number of technical points about the VAT-based contributions, which are calculated by applying a call rate to a hypothetical harmonised VAT base—are not we glad we have him in this House, knowing all the information and all the right questions to ask on the details of the financial settlement? He also asked about the impact of the switch from ESA 95 to ESA 2010. It was taken into account in the own resources decision, but it does affect all countries’ GNI, so the effect on the contribution depends on how all countries’ GNI is revised. For the UK the key determinant of contributions is, in fact, the VAT base, thanks to our rebate, which the Labour party did not succeed in giving away fully in the early 2000s. Changes in the UK’s GNI are corrected in the rebate calculation.

The hon. Member for Luton North (Kelvin Hopkins) mentioned a number of negotiating red lines that he has, although he is in a slightly different position. He asked what are the Prime Minister’s red lines. The Prime Minister has clearly set out areas where he wants change, including reforming welfare to reduce the incentives that have encouraged such mass migration from Europe; increasing economic competitiveness to create jobs and growth for hard-working families; and protecting Britain’s interests outside the euro. They also include halting the constant flow of powers to Brussels, including by ensuring a stronger role for national Parliaments, and dealing with the concept of ever-closer union. That may be what some others want, but it is not for us.

In 2010, this Government took the tough decisions that were needed to pull this country back from the brink. We can have a stable, prosperous society only if a Government spend their citizens’ money carefully, and it is right that we took that approach to the European level of government as well.