Constitutional Law

Tommy Sheppard Excerpts

Tuesday 21st May 2024 Commons Chamber

[Tommy Sheppard (Edinburgh East) (SNP)]

I must start by reflecting how glad I am to see that this topic has captivated the imagination of the House with the participation here today.

Let me start by agreeing with the shadow Secretary of State on one point: if anything reflects the zombie nature of this Parliament, it is the fact that we are spending 90 minutes on the Floor of the House discussing something that usually would be decided by 12 people in the attic and, at best, go to a deferred Division.

Clearly, the Government are very thin when it comes to stuff to put before the House, but given that this measure is here, I am happy to debate it. Let me also say that there has been suggestion that there is nothing to see here—that all that is happening is a statutory instrument to give effect to an agreement that has been reached between the Scottish and UK Governments. That is not quite the case, though, is it? Of course, officials in both Governments have worked out agreements on how things should be calculated—how inflation and various other factors should be determined—and it is good to see that officials in both Governments are singing from a common hymn sheet when it gets to analysing the situation before them. But that is not to pretend that the quantum of money involved is the subject of consensus or agreement.

I would have thought that even Scottish Ministers would be a little concerned to suggest that this is an inflation-related increase in borrowing limits. The increase is 1.6% over seven years, for money that mainly goes to the construction industry where we have been looking at 40% or 50% inflation over the same period. I do not even know how they can keep a straight face in describing this as an inflation-rated increase.

The truth is that these borrowing limits are not a matter of negotiation between the Scottish and UK Governments. They are not subject to a legislative consent motion; they are something that is determined by the UK Treasury, and that is the statutory position. This UK Treasury has determined what the figures are, and, to be frank, it has the Scottish Government over a barrel because the only option is to agree to this proposed increase, or to get no increase at all. The Government have us over the same barrel, because we either agree to this 1.6% increase, or the status quo ante will prevail and there will be no increase at all.

[Angus Brendan MacNeil]

Further to the point made by the hon. Member for Glasgow North (Patrick Grady) about the shadow Health Secretary pointing out that all roads lead to Westminster, and that the spending constraints and austerity that have been chosen were foisted upon everybody, it is a ridiculous situation, surely, when Scotland’s hands are tied like no other country in Europe. Spain does not decide its priorities for health spending based on what France is spending, so why should Scotland or Wales do similarly? Why also do the Barnett consequentials stem from only one of the nations of the UK? Wales probably has the greatest health needs, but we do not see money for England as a consequence of Welsh needs or Scottish needs. Why does it all stem from the one part? That is something those of the Tory-Labour “Better Together” agenda have never addressed: the imbalance of the UK, with one partner in the lead and the rest having to follow with the choices they make for us.

[Mr Deputy Speaker (Mr Nigel Evans)]

That intervention was longer than many speeches I have given here.

[Tommy Sheppard]

I think I agree with the sentiments expressed by the hon. Gentleman. To come back to the discussion on capital borrowing requirements, the other important point that must surely be made, which reflects what he says about who is responsible, is that there is context. That context is a 16% cut—16.1%, to be exact—in the block grant available for capital funding of public services in Scotland. That is not my figure; it was provided by the House of Commons Library in an analysis done on figures provided by the Treasury. That is the real-terms cut that central Government are making, and it means that the borrowing limits available to the Scottish Government have then to be used to compensate for those cuts and to mitigate their effects.

There has been discussion about how these borrowing limits came about as a result of the Smith commission proposals, but this order is in direct contravention of the spirit of the Smith commission. The proposal from the Smith commission was not that UK capital spending that takes place in Scotland should be devolved to the Scottish Government and the Scottish Government should take control of it. That was not the proposal; I might have considered that and supported that, as somebody who supported full fiscal autonomy for the Scottish Government at the time, but that was not what we were discussing.

The proposal that came from the Smith commission was for a supplemental capacity for the Scottish Government to borrow additional moneys to fund particular projects and public services in Scotland if they had a mandate to do so. It was not meant to compensate for core capital funding. Therefore, as the Scottish Government are now being forced to do that, the cost of UK capital spending in Scotland is being incrementally transferred from the UK Exchequer to the Scottish Government. That, my friends, is a Union dividend in reverse. That is a Union penalty. That is the price we are having to pay for being part of these arrangements.

[Alison Thewliss]

My hon. Friend is making some excellent points on the impact of the budget cuts to capital funding. Does he appreciate that for constituents of ours there are direct consequences of that, combined with the inflation we have seen? The rebuilding of the quay wall at Windmillcroft Quay in my constituency is now facing real problems, because the shortfall in the project budget is in the region of £25 million as a result of the inflation in construction and other things. When the capital grant gets cut, there is no way of making that up.

[Tommy Sheppard]

I agree with that. I was just coming on to talk about the impact of these cuts and the fact that, even with increased borrowing by the Scottish Government, we are still talking in overall terms about a 9% reduction in the capital budget in Scotland. A 9% reduction means that some big projects are going to be delayed and some are going to be shelved. People who are looking for a new building or a new piece of infrastructure in their constituency should understand, when they are told delays are going to take place, that those are a consequence of what we are deciding here.

Of course, not all capital spending is to do with big, grandiose projects; a lot of capital spending is focused on improving the day-to-day operational delivery of public services, and therefore the consequences of cuts and delays will have an impact on revenue budgets as well. If we cannot improve the energy efficiency of a particular building through capital improvements, it will cost more to run that building. If we have to provide temporary facilities, that will cost more.

There is a double whammy. Not only is the capital budget having to be funded in part by a charge on the revenue budget to Scottish taxpayers, because of the borrowing the Scottish Government undertake, but the revenue consequences elsewhere in operational budgets will put them under considerable additional strain.

[Angus Brendan MacNeil]

Will the hon. Gentleman give way again?

[Tommy Sheppard]

I will not, if the hon. Gentleman does not mind, because I am just about to—

[Angus Brendan MacNeil]

I will be brief!

[Tommy Sheppard]

Really? All right.

[Angus Brendan MacNeil]

The hon. Gentleman is making a good point on capital spending. The Scottish Government and a small Scottish island cannot build a replacement hospital at the moment because of those capital constraints. Meanwhile, independent Ireland has so much money from its surplus that it is funding nurses and Erasmus students not just in its own territory, but in Northern Ireland, which is currently part of the UK.

[Tommy Sheppard]

Indeed.

This is the final point that I want to make. Let us remember that when we talk about Scottish Government borrowing—the entire thing that we are talking about here—it is borrowing with the permission of, and guaranteed by, the UK Treasury. It is not possible for the Scottish Government to do a deal with a private sector house builder and get some private finance to build more social housing as an additional project in Scotland. That is not possible unless it is agreed to by the UK Treasury and comes within these limits, so the Scottish Government, who are heralded as the most powerful devolved regional Government in the world, do not have the financial capital powers that even a medium-sized business has to manage its own affairs.

That is why, in the end, the argument should really be for a Government in Scotland who have the capacity to make decisions about capital spending and other aspects of our finances based upon the needs and requirements of the people of Scotland, rather than the needs and requirements of mandarins in the Treasury in Whitehall. That is why we should have independence for Scotland.

--- Later in debate ---

[John Lamont]

I am grateful to the hon. Member for making that point, and I will come to some of the allegations made about Scotland’s budget shortly.

The hon. Member for Glasgow South made a number—[Hon. Members: “Edinburgh South!”] My apologies. The hon. Member for Edinburgh South (Ian Murray) made a number of points about how annual limits are calculated. Annual limits are calculated in accordance with the 2023 agreement and are based on the OBR’s GDP deflator forecast at the time of the Scottish Government’s draft budget. I can confirm that the GDP deflator used to calculate the new limits for this order was 1.677%.

Let me respond to the other questions asked by the hon. Member for Edinburgh South. Some £1.76 billion of the national loans fund long-term loan remains outstanding and counts against the £3 billion statutory limit, including the £300 million borrowed in March 2024. I will write to him on his other points. He made a general point about the levels of Government debt, but we should not forget that the reason we have such significant debt is the huge interventions that the Government made to support jobs and communities during the pandemic. Had we not made those interventions to support jobs, including in the hon. Member’s constituency of Edinburgh South, many people would be out of work and many more businesses would have struggled to survive the pandemic. If he and Labour Members are now saying they were opposed to those interventions, I think our constituents would want an explanation of why they would not want a Government to make those types of interventions to help during a pandemic. From my experience of my own constituency, I know that the furlough scheme, for example, and the huge amount of additional support that went in to support businesses were very much welcomed, but Labour Members now seem to be opposed to those things.

The hon. Member for Edinburgh East (Tommy Sheppard) suggested that this agreement has in some way been imposed on the Scottish Government. That is just not the case: it is a great example of both Governments working together, both at an official level and at a ministerial level. Again, the two Governments in Scotland working collaboratively to deliver for the betterment of our country is something that all of our constituents would expect to see, and would very much welcome.

[Tommy Sheppard]

All I am trying to establish is whether the UK Government are telling us that the quantum of these borrowing limits is to be agreed between the UK Government and the Scottish Government, or whether in law, that figure is determined by the UK Treasury. Which is it?