Scottish Government Debate: Scottish Government’s Response to the Pre-Budget Report

Ms Wendy Alexander (Paisley North) (Lab): This debate is about a PBR that adds £23 million extra to and removes nothing from the Scottish Government’s budget of more than £30 billion for next year. We are having a debate on a pre-budget report that changes by less than 0.01 per cent what the Scottish National Party has known for nine months it would have to spend next year.

It is predictable that the SNP sees the PBR as a chance to have a good girn; it sees it as another chance to have a go at Westminster. It has offered little serious economic analysis. It has a main girn, which we now hear in almost every debate: it blames its own policy failures on the alleged tight-fistedness of London Labour. I simply ask the SNP whether it made any one of its manifesto promises contingent on a particular budget settlement. My recollection is that it certainly did not do so.

The truth is that the SNP did not have an inkling about how much cash would be available until the comprehensive spending review at the end of 2007. Every single one of the eye-catching promises that it is now dumping—on cancelling student debt, introducing first-time buyer grants, class sizes of 18, free school meals and maintaining the Glasgow airport rail link—was made without any idea of the resources that would be available to it. The truth is that there will be cash growth in every single year of its four-year term of office, in which it promised to deliver those things. Even in its own terms, we are talking about real-terms growth in three of the four years and the highest budget ever next year. Either the SNP had no intention of keeping its promises or it simply lacked the political will to prioritise them.

The SNP has another girn. It uses the Scottish Government’s departmental expenditure limit budget to assess whether a fiscal stimulus is under way in Scotland as a whole. We know that DEL accounts for a little over half of the total public spending that is attributable to Scotland. In response to the recession, Governments across the globe are changing the balance of spending. Here, unemployment benefit is going up, pensions will rise above inflation next year and child benefit

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is growing in real terms. That is all money that will go into the pockets of Scots. Most important, Government debt interest payments are rapidly growing to help to finance the £850 billion that the National Audit Office tells us has been offered in guarantees to support British banks. A majority of that sum is going to Scotland-based banks.

Let us think about what is the best way to support the Scottish economy through the current economic crisis. I recall that the SNP simply wanted depositor protection. It did not call for bank recapitalisation, emergency liquidity funds, the underwriting of participation in the wholesale markets, an asset protection scheme and the myriad of techniques that have contributed to that £850 billion and kept those institutions open.

In October last year, Scotland’s banks—the Royal Bank of Scotland, HBOS and Lloyds—received £37 billion of support, which is more than the Scottish Government’s entire budget, and £60 billion in emergency loans were received last winter. Last month, the UK Government promised to buy another £37 billion of RBS and Lloyds shares if required—again, that sum is larger than the Scottish Government’s entire budget—simply to ensure that those institutions could continue their operations. That is not a minor depositor protection scheme, which, of course, the Scottish Government prescribed.

I simply ask members, whatever side of the debate they stand on, why we are having a debate about £23 million extra, having never once had a debate about an £850 billion safety net. The answer, of course, is that it is about the girn potential, not about the importance or relevance of that safety net to the Scottish economy. Back in the real world, that £850 billion guarantee is the stimulus that has saved the Scottish economy from the fate of Iceland and Ireland.

Before the SNP starts bleating about Norway, as the First Minister did at question time last week, perhaps the cabinet secretary will acknowledge that in Norway, VAT is not 17.5 per cent, but 25 per cent. Food is not exempt as it is in this country: VAT is levied on it at 14 per cent. Transport is subject to VAT at 8 per cent, and basic rate income tax stands at 28 per cent. That is in a country where the value of oil tax revenues significantly exceeds what it would amount to in any potential Scottish scenario.

I suggest that we explain to the shoppers on Princes Street just now, who are trying to make ends meet and who are simply relieved that their cash machines are still operating, why we are having a debate about 0.01 per cent of the Scottish budget. The answer is that the big picture does not suit the SNP, so it simply tries to ignore it. I challenge the SNP to commission its own chief economic adviser to examine the economic impact

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of that stimulus of £850 billion of guarantees in supporting the Scottish economy in the past year. It is simply not credible of the SNP to hope that if it ignores that figure, it will go away.

To have carried out no analysis of any type whatsoever does a disservice to this Parliament. It also does the Parliament a disservice that more than two years after the SNP published its own Government economic strategy, it has not, in two years of economic crisis, had the courage to come back to the chamber and debate the strategy again. Yes, it would be embarrassing that the arc of prosperity that is eulogised therein has fallen to bits, but there is a case for dealing with the real world and bringing the strategy to the chamber to be debated some time in the new year. We look forward to that.