Currency in Scotland after 2014

Debate between Stewart Hosie and Fiona O'Donnell

Wednesday 12th February 2014 Westminster Hall

[Stewart Hosie (Dundee East) (SNP)]

It is slightly disappointing that we cannot have a longer, more detailed debate on this issue. There is a great deal to say to answer the points that have been raised.

I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing this debate, although from what we have heard so far, it is less of a debate on currency and more of a quick canter through some of the no campaign’s scaremongering. I would like to address one or two of the points that he made. He suggested that the Scottish economy would be run on ginger bottles—that is, old lemonade bottles. What a patronising and insulting way to look at a modern, productive economy.

[Fiona O'Donnell]

Will the hon. Gentleman give way?

[Stewart Hosie]

No. I have only five minutes.

The hon. Member for Edinburgh South suggested that so much money had been put into Scottish banks. I draw his attention to chapter 1, paragraph 1 of the report by the Parliamentary Commission on Banking Standards. The cash cost at peak is reported to be £133 billion—that was £47 billion to Royal Bank of Scotland in return for 82% of the stock, around £25 million into Lloyds, and smaller amounts to the Icelandic and other financial institutions. Where taxpayers are still on the hook is the near £50 billion owed to them from Northern Rock and Bradford and Bingley, which may be many things, but they are not Scottish banks. The notion that the argument was ever about Scottish banks bad, English banks good, must be knocked on the head.

The old chestnut about Scotland in a sterling currency zone being like Greece was also raised. Greece’s problem had nothing to do with being in a currency union and everything to do with appalling productivity. As we know, Scottish productivity is nigh on identical to that of the rest of the UK. That would avoid such problems entirely.

Scotland Bill

Debate between Stewart Hosie and Fiona O'Donnell

Monday 14th March 2011 Commons Chamber

[Stewart Hosie]

I did not want to take up too much time by listing all the business people in annexe A of the Committee’s minority report, but I shall be happy to do so if the hon. Gentleman wishes.

It is not simply the business community that has backed the devolution of corporation tax. A man who is hugely respected across the political divide in Scotland is Campbell Christie, the former leader of the Scottish Trades Union Congress. He has said:

“Higher growth will create jobs and generate more tax revenues to protect frontline public services, as well as repaying the high level of debt. To achieve this, Scotland's government need greater economic powers. But the Calman legislation does not meet this need.”

[Fiona O’Donnell (East Lothian) (Lab)]

I cannot let the hon. Gentleman get away with saying that the business community in Scotland supports the devolution of corporation tax. The Scottish Parliament Bill Committee report clearly states that there was not widespread support from that community.

[Stewart Hosie]

I did say that there was significant support in the business community, and I stand by that. The one thing I will not do in the next two days is engage in the politics of the Committee report. I want to consider its recommendations, and indeed identify proposals to which there was opposition. There is certainly significant business support for the devolution of corporation tax, which will enable the right decisions to be made to engender economic growth.

--- Later in debate ---

[Fiona O'Donnell]

Will the hon. Gentleman give way?

[Stewart Hosie]

I am just about to finish.

I commend the amendment to the House.

--- Later in debate ---

[Fiona O'Donnell]

You may not have been present the last time I spoke on the Scotland Bill, Mr Walker, but it was my birthday. Every time I speak about the Scotland Bill, it feels like my birthday.

In contrast to the amendments tabled by the hon. Member for Dundee East (Stewart Hosie), the Bill offers real progress for Scotland and a recognition of all that has been achieved at Holyrood. At the same time, it offers the stability of remaining as part of the Union, which protects Scotland against some risks. The hon. Gentleman seemed to be disappointed by what he called the politics in the report of the Scottish Parliament’s Scotland Bill Committee. Perhaps, however, we should look at the history of how we have come to this point.

We had the Scottish constitutional convention and the Calman commission, both of which the hon. Gentleman’s party declined to be part of. Those things stand in sharp contrast to the SNP’s own record, because the national conversation, which my hon. Friend the Member for Glasgow North (Ann McKechin) spoke about at some length, has delivered nothing for the people of Scotland or the Scottish Parliament. That contrasts with what is on offer before the Committee today. Of course there is detail in the Bill that we need the Government to iron out, but even the Bill Committee in the Scottish Parliament—I believe it is the first time that a Committee of that type has been established, to give the Bill the scrutiny that it deserves and merits—has acknowledged that there is time to work on some of the details.

We could fair see how all puffed up with pride the hon. Gentleman was about all the amendments that he had brought before us, but I have to say that I found his arguments unconvincing. The SNP had all the time that Calman was discussing a way forward to come up with some detailed proposals, and it had some weeks of the Scotland Bill Committee’s work in Holyrood, yet what do we see? A single piece of paper containing its proposals for lasting change and progress in Scotland. I am afraid that is the sum total of its contribution.

[Stewart Hosie]

This is very confusing. I am not puffed up with pride; I am simply doing my job. We have tabled amendments on capital borrowing, revenue borrowing, corporation tax, fuel duty, air passenger duty, aggregates duty and previously on air weapons, road safety, the coastguard and other matters. I believe Labour’s substantive amendment would re-reserve some food labelling powers. That is not a hugely impressive record.

[Fiona O'Donnell]

I will withdraw my remark, then, and acknowledge the humility that we have now heard from the hon. Gentleman. Up until 20 February, however, we had seen none of the details of the SNP proposals. I have sometimes accused Conservative Members of shotgun legislation, and I have to level that accusation against him as well.

[Fiona O'Donnell]

I absolutely agree. The whole process has been about consultation, and at some point the SNP has to admit that perhaps the reason why it has been outside the process, and why it had to file a minority report, is that it is just plain wrong on this issue. I genuinely appeal to SNP Members to pause and consider whether Unionist parties would really advance legislation that would put Scotland and the Union at risk.

I am tempted to think that spring has come to the House, because what we have heard today is not the sound of chickens but the sound of constitutional cuckoos. That is what SNP Members are. They allow others to do the work and build the nest, then they come and try to throw our eggs out.

[Stewart Hosie]

We are hearing some interesting analogies. Far from throwing the eggs or the chicks out of the nest, we are bringing to the table today the aggregates levy amendment recommended by the Committee in the Scottish Parliament and by Calman. We hope to divide the Committee on it today. Will the hon. Lady join us in backing it?

[Fiona O'Donnell]

My hon. Friend the Member for Glasgow North has answered that question. If the hon. Gentleman was not listening, or if he was not able to follow it, I am afraid I cannot take responsibility for that.

I will press on and talk about the SNP’s corporation tax proposals.

--- Later in debate ---

[Stewart Hosie]

I think it was Wendy Alexander who said, “Bring it on,” but Labour then ran away. Let us deal with the provisions of the Bill, because we need to get them right. I suggest to the hon. Gentleman, whom I like and respect, that we will have plenty of time in the next 52 days leading up to the Scottish elections to have this discussion, but we should not take up the Committee’s time tonight.

The Scottish Government, and the SNP here at Westminster, do not consider an arbitrary statutory limit on borrowing set by Westminster and lacking any objective justification to be an acceptable basis for an agreement between the Governments. In particular, an arbitrary limit this low will do little to promote long-term capital investment or responsible capital budgeting. A regime along the lines of the prudential borrowing regime that applies to local authorities, in which decisions are based on affordability, would be far more appropriate. Such an approach could be operated within the guidelines suggested in our amendment. Such guidelines would be agreed between the Scottish and UK Governments, including any terms, conditions and limits set out in the code in relation to capital borrowing between the Treasury and the Scottish Government.

[Fiona O'Donnell]

I was present when Fiona Hyslop gave evidence to the Scottish Affairs Committee, and I am aware that the SNP’s position is to promote unlimited borrowing. Will the hon. Gentleman at least concede that the UK Government do have some interest in this matter, given that any amount that a future Scottish Government might choose to borrow under his proposal would have an impact on the deficit here and on the country as a whole?

[Stewart Hosie]

I recognise that, which is why the proposal is about affordability, and why the code of practice would have to be based on established principles to promote long-term sustainability. Of course, within that, there understandably has to be a recognition of the debt and the deficit position. I was critical of the rise in the deficit, and in the debt, in Budgets from 2005 onwards, before the recession and before the banking crisis, so of course sustainability and affordability have to be considered within this proposal and dealt with in some detail.

[Fiona O'Donnell]

The hon. Gentleman is really confusing me. He seems to be trying to have his Dundee cake and eat it. He said that, in times of difficulty, the last thing we should do is cut expenditure. Is he saying that it was wrong of the previous Government to spend money bailing out the banks when we faced the crisis?

[Stewart Hosie]

No, I said that I welcomed the fiscal stimulus to the economy. Many of the efforts on financial intervention were absolutely necessary, and I supported them. Of course that had to be done. My criticism was not that action was taken during difficult periods, but that we went into the recession and the downturn with half a trillion pounds of debt. I am digressing, however—

Scotland Bill

Debate between Stewart Hosie and Fiona O'Donnell

Thursday 27th January 2011 Commons Chamber

[Stewart Hosie]

That is what the Command Paper says, but because the Barnett rules have the effect of squeezing income, we will have to see precisely how the no-detriment clause works. Will it be an up-front no-detriment clause that pays against forecasts, or will it be retrospective and pay only if the estimate be lower than the forecast? None of that is at all clear yet. That is precisely the kind of issue that we want to probe with more detailed amendments in Committee.

The limited borrowing powers are slightly poorly designed and would constrain the Scottish Government, rather than assist them. Fundamentally, the borrowings can be made not against forecast reductions in revenue, but against reconciled outturn receipts 12 months after the end of the financial year. That means that revenue borrowing cannot even act as an automatic stabiliser to fill the tax gap during a downturn—something that every party accepts is necessary and supports. In short, the powers will expose the Scottish Government to the full negative impact of the economic cycle, rather than present them with the ability to mitigate those problems.

Secondly, revenue borrowing will be capped at £200 million in a single year and at £500 million in total. Therefore, even if the timing of the borrowings could have been sorted out, the limits would have been inadequate to close the revenue gaps in 2008-09 and 2009-10, when the calculated budget shortfalls were £400 million and £800 million respectively. That might be what the hon. Member for Kilmarnock and Loudoun meant when she referred to the economic parts of the Bill.

Thirdly, the repayment of borrowings within four years almost certainly means that repayments will have to be made at precisely the wrong point in the economic cycle. To make that point more solid, I should explain that the proposals would have required the revenue borrowing needed to cover the shortfalls between 2008-09 and 2009-10 to be repaid in the current comprehensive spending review period, when the Scottish block grant is already under pressure from proposed cuts of more than £3 billion. Borrowing and repayment should be possible over the entire economic cycle and should not have arbitrary timelines attached to them. Cyclical borrowing can mitigate volatility, but the proposals will generate additional volatility in future budgets.

The highly limited revenue borrowing powers that are proposed will be further constrained because the first 0.5% of any shortfall—about £127 million in 2014-15—will have to be found from cuts in the cash reserve before retrospective revenue borrowings can even be found.

The second borrowing power in the Bill is for capital expenditure. It is welcome, but could be improved. The cumulative borrowing total that is set out is £2.2 billion. That is quite low compared with recent Scottish Government investment of more than £3 billion a year. Borrowing in any year will be limited to 10% of the capital DEL—approximately £230 million by 2014-15—not the total budget. For example, a replacement Forth crossing costing between £1.7 billion and £2.2 billion would use up the entire additional capital borrowing, if we were able to secure it under the constrained limits set out by the Treasury. The only way to increase the limit to allow additional borrowing would be for the UK Parliament to agree to a legislative amendment. I am not sure that that is the best approach for securing long-term sustainable capital investment.

The borrowing powers in the Bill will limit the Scottish Government to certain types of borrowing. They will be able to use loans, rather than bonds or other instruments that would provide greater flexibility. Transport for London, which is a local authority in respect of its borrowing powers, is currently issuing commercial paper worth £7 billion for Crossrail and other projects. Birmingham city council issued paper to the tune of £250 million in 2006, and it seems passing strange that what should be seriously enhanced powers for the Scottish Parliament would not even put it on a par with TFL or Birmingham city council in its ability to raise cash through commercial paper for important national infrastructure works.

We are also concerned, like the hon. Member for Kilmarnock and Loudoun, that the Bill might not provide access to capital quickly enough to meet Scotland’s needs. The proposal is that access will commence from 2013, subject, as we heard earlier, to Treasury approval on a per-project basis. In the face of the budget cuts and the urgent need to invest in infrastructure, that is not soon enough.

The remaining tax proposals in the Bill are limited, although welcome. I have to say, however, that the Conservatives appear to have U-turned on some of the taxes that Calman said should be devolved. As I said, this is not a dry, academic exercise, and we would like stamp duty to be incremental, so that people do not pay the full whack for hitting the threshold. I am glad that responsibility for that is being devolved. It was worth £593 million in Scotland in 2008-09, but that was only 1.4% of all the non-North sea revenue raised in Scotland.

[Fiona O'Donnell]

The hon. Gentleman has been very reasonable in acknowledging the parts of the Bill of which he approves. Would his amendment not therefore have been more reasonable if it had said “on the whole” rather than “as a whole”?

[Stewart Hosie]

There are forms of words that can be accepted, tabled and selected and forms of words that cannot. I stand by the amendment, because it is important to challenge the Bill in areas in which we do not believe it comes up to scratch, and it would appear that many of our concerns are shared among the parties. To have a dry, sterile debate about the words in the amendment rather than its substantive nature does the Labour party no good. That is the only time I have been partisan in my entire speech, and I will stick to that.