Devolved Administrations: Borrowing Powers

Debate between Luke Graham and Paul Sweeney

Tuesday 9th July 2019 Westminster Hall

[Luke Graham]

In short, no. We should use the borrowing powers that we already have. The SNP Administration underspent by a reported £450 million in the last year; that shows that the proper economic programme is not being put forward for Scotland. They are not delivering for us. We have the power to vary tax rates, we have additional borrowing powers, and we do not have half the risks and responsibilities that the Treasury in London has to bear, yet in each of the next four years, we are forecast to underperform, compared with the rest of the UK. Going back a year, we were the lowest performing economy in the OECD and out of the G20 advanced economies.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

The hon. Gentleman makes an important point about the capacity for surplus borrowing. The Scottish Government have used only about half of the capacity in that borrowing envelope. He will also note the huge, disproportionate cuts to local government. I understand that Government funding has been cut in Scotland by about 2.8% in the last decade, but 7.5% cuts have been imposed on local government. That has had a huge impact on the provision of municipal services. Why on earth are all the borrowing powers not being used, including issuing bonds to maximise the capital capacity of local government and to ensure we minimise the negative effects of austerity on local government?

[Luke Graham]

I thank the hon. Gentleman for his intervention. I could not agree more. What I cannot understand is the clamour and constant push for powers from the SNP, who have been saying, “We want more powers; we need them.” We have the borrowing powers. We have the tax-varying powers. We have flexibility over the business rates. We have flexibility over council tax. It is Edinburgh that decides how much our local authorities get. Just like the hon. Gentleman, I have experienced my local authority being underfunded in a way that has meant that education and general maintenance in our counties has suffered. I cannot understand it either. I wish a representative from the SNP was here to put the SNP’s case for those cuts and its economic programme. Unfortunately, the SNP is completely absent from a very important debate.

[Luke Graham]

I wish SNP Members were here to say how they would meet those responsibilities. I will not speak on behalf of the Scottish Labour party or the Scottish Liberal Democrats, but we are parties who support and respect devolution. We are the parties who are trying to make devolution work more effectively. That is why we are having these debates and changing the machinery of government to try to make it work more effectively. The SNP is the only party that does not believe in devolution. That is why it is not involved in these debates and why its members are not here today. All they care about is separation.

As the hon. Gentleman rightly points out, the SNP has not faced up to some of the responsibilities and costs of that separation. That is illustrated by the underspend. Some £100 million is somehow being rolled forward as part of setting up a new social security agency. That was agreed in 2016. We want to look at how to best serve our constituents. We do not want to be state building; we want to make sure that our constituents get the benefits that they need. Rather than spending £100 million-plus on setting up a new social security agency, which means our constituents will have to stop at three or four places to get the benefits they require, I would prefer to use that money to top up the benefits, and use current Department for Work and Pensions systems to ensure that constituents get the money they need. Our constituents would benefit, but we would not have to go through state building, and we would not have to spend money when it is not required. As I am sure the Chair appreciates, welfare is an incredibly complicated area of policy, and the systems that have supported our welfare state have been in development for over 60 years.

On the borrowing powers that we have on the resources side, there is power to borrow up to £300 million for forecast error. That is important, because as Derek Mackay, the Finance Secretary in the Scottish Government, recently outlined, their income tax forecast is down by around £1 billion. Again, this might be something that we should be debating in Westminster and Holyrood. The forecast error borrowing allowance is around £300 million, and it already looks like there will be a £1 billion gap. How will we bridge that responsibly without increasing taxes for people in Scotland, or irresponsibly having to go back to Westminster?

[Mr Sweeney]

The hon. Gentleman knows that I am certainly a staunch critic of this Government’s social security policies. However, he will be aware of the scope of powers available to the Scottish Government to deliver a system in Scotland that is qualitatively, as well as quantitatively, different. For example, ending the two-child cap in Scotland costs around £60 million, which is a fraction of the £500 million revenue underspend in Scotland, and would not even mean dipping into the available borrowing powers. What does the hon. Gentleman think are the motives behind not using those powers?

[Luke Graham]

I would not be so bold as to speak on behalf of the SNP—I do not think the party would like it. I can theorise that the SNP has not prepared for some of those powers and is not ready for them. Looking at the recent Fraser of Allander Institute report on the welfare and tax powers being given to Holyrood, we see that there are significant structural and programme changes that need to take place before those powers can be used effectively. I am sure the hon. Gentleman appreciates and welcomes some of the changes that the new Work and Pensions Secretary has made to the two-child cap policy. It is an issue that I have debated since I was elected to this place, and certainly before.

Welfare powers are available, and I am at a loss to understand why the SNP has not used them when it is so critical of a lot of my Government’s policies in this area. If the party is so critical, and the Scottish Administration have the powers, I do not understand why they have not used them in the time that they have had them. They have been supported centrally by the Department for Work and Pensions in Westminster. The SNP told us in 2014 that it would take only 18 months to establish Scotland as a completely separate state, so I do not understand why it takes seven-plus years to try to get a basic social security system for our constituents.

The other £600 million that is available for resource funding is protection for a Scotland-specific shock. Should our GDP fall to 1% below the rest of the UK, we could borrow an additional £600 million to try to prevent any additional hardship for our constituents and to support our public services in the way they need.

As I touched on earlier, it is important to note that even with all those powers and the levers at the disposal of the devolved Administration in Edinburgh, we are still looking at an economic performance over the next four years that trails behind that of the rest of the UK. After more than 12 years of an SNP Administration, we have to ask why. It is not just that they disagree with policy coming from Westminster; it is that they have powers but are not making devolution work. This is not good or bad devolution; it is dysfunctional devolution. I hope every colleague in the House will work with me and MSP colleagues to try to improve that.

We have three tiers of government in Scotland, or four if we include community councils: our local authorities, the Administration in Edinburgh, and central Government in Westminster. As an MP, I am determined to ensure that they work as effectively as possible.

[Mr Sweeney]

Further to the point on the possible motivation, does he share the view that if the Scottish Government were to deploy all those powers fully, it might in some way diminish the appetite for independence? After all, a majority of Scots agree that the United Kingdom is over-centralised, but if they were to see devolution fully deployed and fully activated, it might well address any dissatisfaction that they had with the current system.

[Luke Graham]

It feels wrong to bash the SNP when its Members are not here to respond, but this is another clear example of the SNP putting the nationalist interest above the national interest. We could be using those powers to serve our constituents today, rather than deferring their use for years and years to further grievance and stoke the flames on social media.

Why is this important? Why did I apply for this debate on borrowing? It is so important because of the underspend that, as I said, has been widely reported. It was £450 million last year. It has certainly had a real impact in my constituency, which covers two council areas: Clackmannanshire, which is the smallest county in Scotland, and part of Perth and Kinross, which is in one of the largest counties in Scotland. We have seen impacts on frontline services. In Perth and Kinross, teacher numbers have reduced. We have had to increase waste charges, and we have had a 3% increase in council tax. In Clackmannanshire, we had the threat of closure of two primary schools, which I and council colleagues were against. We had the threat of closure of the Alloa Leisure Bowl, a reduction in our secondary school supplies and a 4% increase in council tax.

Given that the SNP argues for all those powers and makes such a stand about being stronger for Scotland, it cannot make such an argument in this place and then be absolutely weaker for our local authorities and let down our public services, children and communities in such a colossal way. As I said, the underspend could well be justified. If SNP Members were here—I was hoping to have a bit of a debate with them—they could justify it by saying they were carrying some spending forward to future years, as we said about the welfare and social security agency. We might disagree with that, but at least it could be justification. As colleagues will hopefully realise, and as I have argued, given the borrowing powers that exist, the development of the Scotland reserve, and the increase in block grant coming from Westminster, there is no need for huge underspends in the Scottish budget. We simply do not need them. We can use the borrowing powers when we need to. For example, should there be a Scotland-specific shock, we could access £600 million if we needed emergency cash for our frontline services. We can actually spend the money we need now, so why cut our local authorities when it is clearly not needed?

--- Later in debate ---

[Luke Graham]

I could not agree more. The whole point of being an MP is that we put people before politics. I have certainly been critical of my Government on issues of spending—I know my hon. Friend has, too—and Members of the Opposition have certainly been critical about getting funding for Scotland, be it in block grant or city deals. We have made the arguments and posed the difficult questions time and again in this place. As I am sure my hon. Friend the Minister appreciates, we will continue to do so in a future Administration.

[Mr Sweeney]

We have had an interesting exchange of views on this matter. On the use of powers and the logical disconnect between the rhetoric in this place and how it plays out in governance in Scotland, the Daily Record has recently been reporting on the scourge of drug-related deaths in Scotland, which are at epidemic levels and are a real national emergency. How can the SNP reconcile the rhetoric about the need for the Home Office to change its views on the Misuse of Drugs Act 1971—I agree with that—with cutting addiction services in Glasgow by a quarter? How can that possibly help?

[Luke Graham]

The hon. Gentleman will have seen at first hand the impact of some of those cuts in his constituency, just as I have seen their impact on frontline services in mine. No Government are perfect and no party is perfect—I respect that—but the whole point of these debates is to discuss the issues, come forward with facts, put forward arguments, fight for our constituents and, at election time, convince them that we are the best people to represent them, and that we have the best ideas and arguments. That is why I secured this debate.

If an hon. Member or a colleague in Holyrood were Finance Secretary, rather than underspending by £450 million and putting £100 million into the social security agency, they could have invested £294 million, which is what COSLA—the Convention of Scottish Local Authorities—has requested for inflationary increases in council spending. They could have uplifted that by 10% or so to help close the funding gap in Clackmannanshire and Perth and Kinross, and they would still have had around £100 million left to put into a reserve for a rainy day, if that were genuinely their intention.

I will wrap up as I am conscious that the Minister wants to respond. I hope that he will support me and other colleagues in taking a more mature approach to funding and borrowing in our United Kingdom, to ensure that devolved parts of the United Kingdom are not separate, and to ensure that central Government engage with all levels of government, so that there is appropriate borrowing and spending, and funding goes directly to the frontline public services that need it.

As colleagues have mentioned before in such debates, balance sheets and borrowing do not sound all that exciting, but every single number on the balance sheet represents an opportunity for an education, or for investment in the NHS and social care. It is vital that we get the facts out there and have a mature and appropriate debate. I hope that my hon. Friend the Minister will support us in that.

Santander Closures and Local Communities

Debate between Luke Graham and Paul Sweeney

Thursday 14th February 2019 Westminster Hall

[Mr Sweeney]

I accept that observation. To be fair, my interaction with a physical branch is limited, because I have adopted new technology—I suppose it is because I am a millennial. I use the banking app for TSB, despite some recent difficulties with the transfer from Lloyds TSB using the banking technology. The only time I visited a branch for any substantial business was when I took out a mortgage in Dennistoun about three years ago. The hon. Gentleman makes the point that if we are going to cut the cloth, we will create almost a self-fulfilling prophecy by stripping out key banking services such as mortgage provision, which is a great problem.

[Luke Graham]

The hon. Gentleman is making a very solid point about deprivation. Some of his branches, and my branch in Alloa, are in some of the most deprived parts of our country, yet they are having services taken away. When Santander and other banks consider branch closures, they look at levels of deprivation in a constituency and they have an index. Does the hon. Gentleman agree that the index should be made public and that we should put the access to banking standards on a statutory footing, so that these closures can be subject to real consultations and be far more transparent?

[Mr Sweeney]

A rare collegial moment for the Chamber, perhaps. I agree entirely, and I was just about to come on to that issue.

When I met with Santander management last week to discuss the closure of the Springburn branch, I made the observation, “I recognise exactly why you’re doing this.” They did not deny it. I also said, “Yes, there needs to be total visibility about the economic impact and the disparity in terms of the demographics of where these bank closures are happening, because there is no visibility of that pattern.” This was recognised long ago: in the 1970s in America, there was a practice called red-lining, which involved American banks deliberately blacklisting poorer communities and withdrawing banking services.

In 1977, the Carter Administration passed the Community Reinvestment Act. As a result, commercial banks in America are obliged to redistribute their profits into sponsoring co-operative banking services and mutuals, and to promote credit unions. There is therefore a much more diverse range of banking services as a result of direct Government intervention to redistribute those services, which dates back to the 1970s. As a result of the Community Reinvestment Act, Santander will invest £11 billion in sponsoring co-operative banking, mutuals and other sustainable banking activity. That is a hefty redistribution and is in stark contrast with what happens in the United Kingdom, where there is no legislative imperative for banks to do it. We need to address that yawning chasm in legislation.

I made the point to the Santander management that the root cause of a lot of these problems is the increasing monopolisation of the banking sector in the UK. We have five major clearing banks, which hold 85% of all current accounts. By comparison, in Germany there are 400 local Sparkassen banks and over 1,000 co-operative banks. Clearly the picture there is very different, because there is legislation in place to redistribute the holding of capital in the banking system, so it is done more sustainably and is more responsive to local communities and to sectors of industry. As a result, Germany has a much healthier and more balanced economy.

I also made the point that Santander’s origins lie in the Abbey National, which was demutualised in 1989, the year I was born. We have seen a pattern of demutualisation across the banking sector, which has been negative for the UK economy. I would seek legislation to reverse the demutualisation of the British banking system.

Leaving the EU: Implications for Scotland

Debate between Luke Graham and Paul Sweeney

Tuesday 3rd July 2018 Westminster Hall

[Luke Graham]

rose—

[Mr Sweeney]

I am happy to give way on that point.

[Luke Graham]

But to which one of us?

[Mr Sweeney]

I give way to the hon. Member for Stirling (Stephen Kerr).

--- Later in debate ---

[Mr Sweeney]

On the topic of the Scottish devolution amendment—

[Luke Graham]

Will the hon. Gentleman give way?

[Mr Sweeney]

I am happy to give way.

[Luke Graham]

The hon. Gentleman is making a point about how fundamental the issue is and how important it is for the UK Parliament and for debates in this place. Does he not feel that the strength of feeling in his party is accurately represented by the number of attendees in this debate?

[Mr Sweeney]

It is a matter of logistics. My hon. Friend the Member for Midlothian (Danielle Rowley) was an observer at the Mexican elections and is still in Mexico. The shadow Secretary of State is at shadow Cabinet. Other hon. Members are at the Scottish Affairs Committee. They are all working hard in other forums for the people of Scotland, and the hon. Gentleman’s accusation is entirely unfair.

The Opposition realise that that incident of shutting down debate is not likely to be the only time that Scotland’s voice is shut out of the Brexit talks. It is definitely not the only time we will witness a fight between the UK Government and the Scottish Government. I would be surprised if we did not see the same approach taken by both Governments when it comes to the Trade Bill, the customs Bill, the agriculture Bill and the fisheries Bill. Each and every one of those pieces of legislation will have implications for people in Scotland and for our constituents, and we must not forget that. What people want is not for the Governments in different parts of the UK to be at each other’s throats, arguing about technicalities; they want the Governments to work together in a collaborative, respectful manner and to find solutions to problems. That is why we see the need for a dispute resolution mechanism to be formally agreed. I refer Members to the speech by the shadow Secretary of State for Scotland in this place on 20 June if they are struggling for ideas on what those mechanisms might be.

Constitutionally, we are in this mess because of the Tory Government. Their complete and utter lack of understanding about devolution has been quite astounding and astonishing to witness. From the original drafting of clause 11 of the European Union (Withdrawal) Bill, all the way through to the shutting down of debate, it is clear that they neither care about nor respect people in Scotland.

Moving on to the social implications, in December 2017, 150,000 European Union nationals were working in Scotland—5.7% of all people in employment in Scotland. Some 18,000 of those EU nationals work in the public sector, predominantly in our education system and our national health service, yet it took the UK Government more than a year to guarantee that they would even be allowed to remain in the UK. Even now, we know that they will have to pay £65 a head to stay in their own homes and continue to work in the vital public services upon which we all rely. It is an utter shambles. I ask the Minister a simple question: what happens to our public services if the EU nationals decide that they no longer want to be subjected to this country’s hostile environment and return to their country of origin, because without them, our national health service would crumble and our schools would grind to a halt? Have the Government made contingency plans for every eventuality?

We have not even got to the economic implications of Scotland leaving the EU. I made clear in my opening remarks that the Labour party respects the result of the referendum and accepts that we will be leaving the European Union. That does not mean that we are giving the Government a blank cheque or a free hand to negotiate any kind of deal they see fit. While we accept the result of the referendum, we must now focus on what our relationship with the European Union will look like. We have been clear throughout that the relationship must be a close and collaborative one that affords us the benefits of membership of the single market and also keeps us in a customs union.

There are many Tory Members who want to have a clean break from the European Union, but the Scottish Government’s analysis shows that Scotland could see its GDP fall by 8.5% by 2030 in a no-deal scenario. If Government Members do not like that analysis, they just need to look closer to home: the UK Government’s analysis shows that Scotland could see its GDP fall by 9% in the same timeframe if we have a no-deal scenario. I am not entirely sure what planet Members on the Government Benches live on, but that would be absolutely devastating for the Scottish economy. I cannot for the life of me see how anyone could advocate that as a policy.

I use this opportunity to issue a plea to Scottish Tory Members: it is time for them to stand up and use their leverage on the UK Government to ensure that the madness is stopped, and that we have a reasonable and logical approach to addressing the shortcomings of negotiations as they currently stand with the European Union. We have heard rhetoric about a deep and special relationship with the European Union for more than two years now, but the timeframe we have left amounts to a mere six weeks of negotiating time. I ask the Minister one question: when will we know what the UK Government’s plans are, from an economic point of view? Time is fast running out and the whole country cannot wait until after the Prime Minister’s Mad Hatter’s tea party at Chequers to get some answers.

Scottish City Deals

Debate between Luke Graham and Paul Sweeney

Tuesday 27th February 2018 Westminster Hall

[Mr Sweeney]

I do not accept that at all. The high street curve area was protected until June last year, after the change in administration. It was actually Transport Scotland—[Interruption.] No, the planning application was not before that. I am the only Member of Parliament who raised an objection to that planning application, which went to the city council only last month. Crossrail was enabled in the city region development plan, but it was removed from the latest edition of the plan in June last year at the demand of Transport Scotland. That is why a planning application went in that threatens the delivery of the Crossrail scheme, which is a vital project for Glasgow. I urge all Glasgow city region Members of Parliament to get behind it. We need to protect and safeguard the route for Crossrail. It is a critical project that should be funded by the Glasgow city region city deal, and it is another example of how dysfunctional and disjointed the whole administration of the deal has been.

At a time when public money is tight, it is unacceptable that the involvement of two Governments—in Edinburgh and London—can lead to a stalemate in the progress of the Glasgow city deal and a failure to draw up and implement a strategy for investing the allocated funds. The Tories and the SNP must get a grip if our urban areas are ever to catch up with and exceed the ambition of their English peers.

In an evaluation of their progress in 2016, the Fraser of Allander Institute commented that the three city deals that existed in Scotland at the time

“could have an important impact in increasing urban productivity, and increasing the culture of partnership and innovation in these…city regions,”

but “many more steps remain,” and that for cities in Scotland to move forward,

“they need to be empowered—with additional roles, funding and competencies, because they will need and are best-placed to identify their infrastructure investment requirements, especially in transport and housing.”

[Luke Graham (Ochil and South Perthshire) (Con)]

My constituency is not lucky enough to have a city deal yet—they are still under negotiation in Clackmannanshire and, in the form of the Tay cities deal, in Perth and Kinross. Does the hon. Gentleman agree that devolution does not mean separate? Edinburgh should pass more powers down to local authorities and work constructively with Westminster, so that we get more transparency about these deals and actually get the money to the communities where it is needed sooner rather than later.

[Mr Sweeney]

I thank the hon. Gentleman for that intervention, which was timely because I am just about to address the question of municipalism in Scotland—a great tradition that is sadly diminished.

To achieve those recommendations by the Fraser of Allander Institute, we need substantially greater powers to act at municipal level, which the Glasgow city deal shows are sorely lacking. It is fair to say that Glasgow has been progressively smothered by the process of devolution in the past 20 years. Edinburgh holds too much power. It sucks up power from other parts of the country, including Glasgow. The SNP has only exacerbated the problem by drastically cutting funding to local government at twice the rate the Scottish budget has been reduced. Rebranding the city council as a city government is just dressing mutton up as lamb, because without any substantive changes to Glasgow’s real political power it is nothing more than changing the letterhead on the city council stationery. We need to appraise honestly how devolution can better support our great cities towards more responsive, representative government, rather than increasingly concentrating power in Edinburgh.

The north of England has been invigorated by a multimillion pound investment and innovative development through its city deals. Historically Britain’s second city, Glasgow is now at risk of losing out in terms of power and investment compared with other big, regional cities in the UK. City regions such as Manchester and Liverpool have made great gains in funding, voice and influence in recent years, including through the introduction of directly elected metro mayoralties. That greater devolution of power is to be celebrated, and Glasgow, which is bigger than each of those cities in northern England, needs to learn from the recent experience of cities such as Manchester to bring more power and investment to our great city. We need to ensure that Glasgow, as one of the greatest cities in the world, and once the fourth-largest city in Europe, has a greater and distinctive voice within the UK. We should be exploring all avenues for how we increase our political clout to improve the lives of Glaswegians.

The city deal appears to be a temporary fix to underlying structural issues for funding the Glasgow city region, which over recent decades has been both ravaged by a decade of SNP cuts and undermined by the Tory break-up of what it saw as a troublesome Labour-led Strathclyde regional council in the 1990s. I hope that the debate will force the Government to provide much-needed clarity on the future progress of the longest-standing Scottish city deal, the Glasgow and Clyde Valley city region deal.

The UK Government need to be proactive in pushing for progress while putting pressure on the SNP Government in Holyrood to deliver their commitments. As has been mentioned in interventions, we need to establish unity of purpose to ensure that the right projects are prioritised so that Glasgow finally gets the vital, world-class infrastructure it needs to thrive as a global destination in the 21st century, without further delay and procrastination. The current deal clearly shows that we cannot trust the UK Government to deliver on their financial commitments, we cannot trust the Scotland Office to show leadership, and we cannot trust the Scottish Government to implement their commitments properly.