Scotland’s Economy

John Grady Excerpts

Tuesday 15th October 2024 Westminster Hall

[John Grady (Glasgow East) (Lab)]

I beg to move,

That this House has considered Scotland’s economy.

It is obvious that Scotland has the greatest of economic potential. It has some of the best universities in the world; a brilliant energy sector, with the skills and ingenuity to be at the forefront of the energy transition across the world; and the businesses of the future, such as the gaming industry in Dundee. People across the world love our country. Brand Scotland is a brilliant brand, and people across the world buy our products and, in the modern economy, our innovation and know-how. Most importantly, we value hard work, education and enterprise immensely, and I see that every day across my constituency of Glasgow East. In Scotland, we have always been, and will always be, aspirational. We also have the perfect raw materials for a modern economy. Despite that, Scotland’s economy has barely grown over the last 17 years and Scotland’s public finances are in a catastrophic state, with emergency in-year budget cuts imposed for the third year in a row.

Education is the foundation of a thriving economy. Scotland’s education system was the envy of the world, but that is not the case now. Our universities face significant deficits. Universities Scotland and other experts have made that clear, with real-terms resources to teach each Scottish student cut by 19%, the lowest investment in teaching across the UK and underfunding of research activity by £328 million each year.

It gets worse. The SNP Government have failed to act on the recommendations from the Withers skills review. That recommended a series of critical changes to skills training in Scotland to make our economy fit for the future and our people able to get the work of the future. When it comes to giving people the skills to get good work, delivery of real training speaks much louder than talking and endless consultation.

As for schools, the respected PISA—programme for international student assessment—reviews compare Scotland’s standards with those elsewhere in the world, and they show that Scotland’s educational attainment is falling. The SNP’s response—like a bad premier league footballer—is to blame PISA. With declining educational attainment, you might invest more in teachers—I should declare a minor interest here, because my children go to state schools in Glasgow—but that is not the case in Glasgow. The SNP council has cut 172 teaching posts from our schools this year, with the support of the Greens, due to its mismanagement of the city’s finances and the Scottish Government’s decisions to starve local authorities of much-needed resources.

That has real-world economic consequences. At least a quarter of businesses in Scotland report skills shortages and a lack of qualified candidates for roles. That means less well-paid jobs and less economic growth in Scotland, and it puts Scotland at a real disadvantage against other countries.

The last Labour Government acted on Scotland’s green energy potential. The amount of onshore wind capacity increased sevenfold, and our Government launched support for offshore wind, which was a brilliant success. I was excited to work on some of Scotland’s first offshore wind projects. Brian Wilson, the then Labour Minister and Scottish Labour MP, who put so much of this in place, left a brilliant legacy. That shows the positive power of a Labour Government and Scottish Labour MPs fighting for Scotland year in, year out and day in, day out. The last Labour Government left Scotland and Great Britain with a thriving renewable energy supply chain and industry—the ideal foundations for the road to net zero.

The Conservatives’ response, I regret to say, was stop-start support for renewables and a ban on onshore wind across England. They held one support auction that attracted no bids for offshore wind. It is negligence like that that means that people cannot afford to pay their bills, because wind and solar are now the cheapest forms of power. No one in their right mind would turn down cheap, low-cost, fixed-price energy over 15 years, but the Conservative Government seem to have done exactly that. Small wonder that our supply chain in Scotland is in turmoil.

Supply chain investors do not actually ask for much—just a fair bet, a reasonable measure of predictability, and a reasonable basis on which to conclude that there will be customers to serve over a reasonable period so that they can recoup their investment. The Conservatives failed to provide even that—the so-called party of business.

However, it is not all about the Conservatives. The Scottish planning system is slow and cumbersome. The principal legislation for large wind farms and electricity transmission projects remains sections 36 and 37 of the Electricity Act 1989. Wind farm developers have for many years complained about delays to consent for their projects. Consent for wind farms and transmission projects in Scotland is the responsibility of the Scottish Government. Delays put at risk the next wave of projects that are critical to economic growth and good jobs in Scotland and to getting energy bills down. All of this results in lost jobs and damage to supply chains. All of this means that people in Scotland are paying much more for their energy. And all of this puts Scottish business at a real disadvantage, because energy is a material part of their costs, and those costs are higher than they should be.

Turning to public finances, in September the SNP was forced to fill a £1 billion black hole in Scotland’s public finances within the year—this is not part of planned year-on-year budgeting. They did so in two ways. First, they spent much of the remaining ScotWind receipts, which are not recurring income, but one-off, windfall income that was meant to be dedicated to the energy transition, which is absolutely critical for places such as Grangemouth and Aberdeen. They also made £500 million of cuts, slashing NHS funding and raiding the transport budget, when our transport system is already incredibly unreliable. That is the result of short-term, quick-fix solutions to balance the books, with no long-term plan, no public sector pay strategy and no vision for our economy. After 17 years in power, the SNP has failed to grasp the concept of proper budgeting and long-term thinking. I would not recommend marriage with the SNP: for the honeymoon, you would be offered the Orient Express, but you would not even get the National Express—you would be hitchhiking on the M8 in the rain.

When faced with brutal budget cuts, surely the Scottish Government would make sure that they had spent the money they had, but that does not seem to be their approach. The SNP has failed to spend at least £250 million of European structural funding and may have to hand back up to £373 million of unspent funding. Let us pause for a minute. The UK was a net contributor to EU funds. This is money that Scottish businesses and workers paid into Brussels. We then got some of that back to spend in Scotland, and the SNP is sending it back again. Now, I love Europe and I am pro-European, but even I would venture to say that this is taking love for our fellow Europeans a little too far.

Since the SNP came to power in 2007, it has wasted more than £5 billion of taxpayers’ money on pet projects, failed industrial interventions, incompetence, costly agency spend in the NHS, overspend on infrastructure projects and, of course, the two famous ferries that do not sail. Scots also face much higher taxes compared with the rest of the UK. If I have understood it correctly— I must say I find it difficult to follow—the SNP’s position seems to be that the oil and gas giants who have made billions of pounds of windfall profits due to elevated oil and gas prices should pay less tax, but someone working in Midlothian on £29,000 a year should pay more tax than their counterpart in Northumberland.

The SNP seeks to blame others, including our very new Government. However, culpability for the state of the public finances sits with the SNP. Hon. Members should not take my word for it. The Scottish Government have been persistently and consistently warned that their approach to public finances is simply not sustainable. The gap in public finances has long been predicted by a wide range of organisations and fiscal experts, including the Institute for Fiscal Studies and the Scottish Fiscal Commission—an institute in Scotland similar to the Office for Budget Responsibility, although I am glad to say that Liz Truss did not get anywhere near it. The Scottish Fiscal Commission said of the Scottish budget that

“much of the pressure comes from the Scottish Government’s own decisions.”

The Auditor General has warned that the SNP’s short-term approach to budgets is not addressing unsustainable public finances in Scotland. We can have no confidence that the Scottish Government are able to address these problems. As Audit Scotland said in 2023:

“Historically there has been an implementation gap between public sector reform ambitions and the ability of the Scottish Government to deliver change”.

Translated into more normal language, that means that the Scottish Government keep saying they will do stuff, but they never get round to doing it.

The terrible state of public finances and higher income taxes in Scotland do not concern only working people: 82% of Scottish business leaders are concerned about Scotland’s tax divergence from the rest of the UK. Why? Because it makes it harder to recruit talented people to come and live in Scotland. I would venture to say that that is what we are desperate to do: have more people living, earning and contributing in Scotland.

There are wider problems.

[Stephen Gethins (Arbroath and Broughty Ferry) (SNP)]

The figures on migration show the opposite, and the hon. Member will join me in recognising that we welcome people from all over the world to come to Scotland. Will he also join me in recognising something that is a good for Scotland’s economy? Before the Brexit referendum, the Conservatives promised a Scottish visa—something that business and the higher education sector are crying out for. For the recent election, Labour figures promised a Scottish visa. I know that the hon. Member is not in the Government, but is that something he agrees with, along with his Scottish Labour colleagues?

[John Grady]

Scottish Labour and the Labour party are in favour of bringing talented people into Scotland, and the Scottish Government are welcome to work with us as we seek to ensure that that takes place. As I understand it, the Home Secretary is determined to ensure that it does, and I also understand that the Migration Advisory Committee is looking at the issue carefully. There is no doubt that we want to ensure that talented people can come and work in Scotland; the question is how to do it, and we are seeking to work with the Scottish Government productively on that.

One of the biggest challenges in the Scottish economy is productivity. One key way to get economic growth is to ensure that everyone can make more in the same time. The CBI-Fraser of Allander Scottish productivity index shows that Scotland is lagging behind the rest of the UK on 10 out of 13 productivity indicators, including business investment and business research and development spend. It is worth saying that business investment is simply not enough in the UK as it is, which is why our Government are so focused on increasing business investment and business research and development spend.

I regret to say that the problem comes down in significant part to the Scottish Government. In February 2024, Audit Scotland concluded:

“The Scottish Government’s 10-year economic strategy currently lacks collective political leadership and clear targets.”

That mismanagement has a terrible effect on Scotland’s public services. If Scotland’s economy had grown at the same sclerotic pace as the rest of the UK’s economy, it would be £8.5 billion larger. That would mean that there was more to invest in public services. As the Scottish Fiscal Commission’s work shows, Scotland would have £624 million more in tax revenues each year if we matched the UK’s abysmal performance under the Conservatives. Scotland desperately needs a Government who are pro-worker, pro-growth and pro-business, and that is what we will offer the Scottish people in 2026.

This crisis is due to the mess that the Tories and the SNP have made of our economy. Scotland’s independent Auditor General has warned that the SNP’s approach to public finances is unsustainable. Our public services face cuts because of the SNP’s buy now, pay later policies, and we have lost out on good industrial jobs, as they have gone overseas.

[Stephen Gethins]

Will the hon. Gentleman give way?

--- Later in debate ---

[John Grady]

I will make some progress, because I have another 26 pages to go.

The Scottish Government absolutely refuse to take responsibility for the catastrophic state of the Scottish economy and public finances. There is always some other factor, person or force majeure event to blame. I venture to say that the Scottish Government have an abundance of two things at the moment: brass necks and Teflon desks. There is no great mystery about who is responsible for the state of the Scottish economy: the SNP has been in power in Scotland for 17 years and, until July, the Conservatives had run this country for 14 years. The First Minister, the right hon. John Swinney, has been one of the central guiding minds and directing intellects behind those 17 years of incompetence; he was Finance Secretary for more than half of the SNP’s term in office and Cabinet Secretary for Education and Skills for five years.

Labour will take the steps needed to fix the Scottish economy. We are determined to bring outside investment into Scotland, which has been the focus of our international investment summit this week. We are developing a strong industrial strategy. Our new Employment Rights Bill will make work pay and protect the majority of Scotland’s business against competition from unscrupulous businesses that do not treat their employees fairly. An example of that is exploitative zero-hours contracts, which we will banish from Scotland.

GB Energy, headquartered in Aberdeen, one of Scotland’s amazing cities, will spearhead billions of pounds of investment in our energy system, including floating offshore wind, which is a brilliant opportunity for the north-east of Scotland, and hydrogen. We will work tirelessly to help our businesses export and to support our tourism sector. For the last 17 years, the Scottish Government have been selling Scotland to the Scots, but we know that Scotland is brilliant; we have to sell Scotland to the world, and that is what we will do. An early example of that is a deal with Brazil for the recognition of Scotch whisky worth up to £25 million.

I spent more than 27 years working as a lawyer with Scottish businesses before I came to this place, and I have never wavered in my belief that Scotland has the greatest economic potential. I have never wavered in my belief that Scotland’s economy can grow and deliver good jobs and the money needed to deliver the public services that Scotland deserves. That is Scottish Labour’s belief too. A growing economy gives people well-paid jobs and optimism about the future, and we are determined to deliver that. A growing economy delivers better public services, and Scotland’s public services must be improved. We are determined to rebuild our public services after years of neglect and mismanagement.

Next year is Glasgow’s 850th birthday. I am ferociously proud of Glasgow and of Scotland—including Aberdeen, where my mother came from and where I have spent so much time both on family matters and working. With investment and stable government, we can deliver the change that Scotland needs. We have got rid of one of the Governments failing Scotland; we need to get rid of the other. It is time for change in Scotland. It is time to deliver economic growth and better public services to Scotland.

[Several hon. Members rose—]

--- Later in debate ---

[John Grady]

Thank you, Mr Dowd, and I thank every Member for their wonderful contributions to the discussion. The hon. Member for Strangford (Jim Shannon) mentioned the interconnector between Scotland and Northern Ireland; I worked on the first interconnector between Scotland and Northern Ireland as a baby lawyer. It was a great passion of Mo Mowlam. The Labour party has always backed great infrastructure projects that deliver growth for all in our family of nations. The interconnector delivered a secure supply of energy to Northern Ireland and a great outlet for Northern Irish renewables. This time around, the Labour party is absolutely committed to resolving the blockers on electricity transmission development, so that we can get energy projects up and running quicker. We need clean energy supplying British people and businesses with lower-cost energy.

Inflation is the enemy of small businesses. The hon. Member for Mid Dunbartonshire (Susan Murray) was quite right to focus on small businesses, which are a real motor for growth for a modern economy. We all recall the terrible 40 or 50 days of a Liz Truss and Kwasi Kwarteng Government, which brought immense damage not just to small businesses in Scotland, but to social landlords trying to plan their investments, facing unpredictable interest rates and out-of-control inflation.

My hon. Friend the Member for East Kilbride and Strathaven (Joani Reid) focused rightly on the implications of poor economic policy and fiscal management for our wonderful towns and cities in Scotland. The mismanagement of the economy has terrible implications for people trying to educate their children and get treated, with more than 40% of certain operations—such as hip operations—in Scotland carried out privately because the NHS does not have capacity. Economic growth is critical.

My hon. Friend the Member for Livingston (Gregor Poynton) mentioned the importance of Governments working together when we face industrial challenges. I applaud the Secretary of State’s work in trying to create a productive, closer working relationship with the Scottish Government. We will always put country above party. My hon. Friend the Member for Edinburgh North and Leith (Tracy Gilbert), representing a wonderful part of the world, mentioned employment rights. We are focused on giving people a fair employment.

The hon. Member for Aberdeen North (Kirsty Blackman) mentioned how wonderful Aberdeen is. It is a wonderful city, as my mother used to tell me every day of the week. We take the energy transition very seriously, which is one of the reasons why we are so disappointed that the SNP are spending the one-off ScotWind receipt not on energy transition, but on plugging a black hole created by their economic mismanagement. I close my remarks by thanking you, Mr Dowd, for your wonderful chairing of the debate.

Question put and agreed to.

Resolved,

That this House has considered Scotland’s economy.