Devolved Administrations: Borrowing Powers

Paul Sweeney Excerpts

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.