Stewart Hosie
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Public Finances: Scotland
Stewart Hosie Excerpts(8 years, 3 months ago)
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Stewart Hosie (Dundee East) (SNP)
I beg to move an amendment, to leave out from “accompany the Scotland Bill” to end and add:
“notes that the Smith Commission recommended that a fiscal framework be agreed between the UK and Scottish Governments on the basis that the Barnett Formula be maintained and that Scotland would be no worse or better off simply as a result of the transfer of additional powers; notes the clear statement by the Scottish Government that it will not recommend any fiscal framework to the Scottish Parliament that breaches the Smith Commission recommendations and which locks in a long-term financial disadvantage to Scotland; supports the efforts of the Scottish Government to secure a fair arrangement; and urges the UK Government to commit to the principle of no detriment so that a fair framework for the transfer of powers can be agreed and that the people of Scotland can benefit from the additional devolution of powers that they were promised by the UK Government following the referendum on Scottish independence in September 2014.”
Before I turn to the amendment and the motion, I will make a comment or two about the Scottish Secretary’s entertaining contribution. He said that his glass was half full—unlike the Benches behind him. Before he makes jibes about invisible SNP MPs, who are here in rather considerable numbers, he might like to have a glance around him.
The motion is entitled “Public finances in Scotland”, although it is not about the public finances in Scotland. At best, it can be described as being about the fiscal agreement, although in truth it is about the negotiations around the fiscal agreement. There is no reference in the motion to the continuation of the Barnett formula, which is a key point of the negotiations, although it was referenced in the speech. Neither is there any reference in the motion to “no detriment”, an important principle from Smith around which the negotiations are taking place, although it was referenced in the speech.
That does not take away from the fact that the fiscal agreement is vital. As Lord Smith said,
“it is fundamentally important to making Scotland’s new powers work…It is the final interlocking piece of the jigsaw.”
We could not agree more.
Stewart Hosie
I will give way in a moment. The shadow Secretary of State laid out the context for potential new powers, and I will do the same for the current state of play of Scotland’s public finances, and the situation in which we are negotiating the fiscal agreement. The UK Government’s cuts to Scotland’s fiscal departmental expenditure limits between the start of the last Parliament and the end of this one will be almost £4 billion, which represents a 12.5% real-terms cut. Almost half of that—£1.5 billion—will be between now and the end of the Parliament. That is, to put it another way, a 4.2% cut to Scotland’s fiscal DEL.
Even on capital, notwithstanding the Government’s assertion that it is being increased, Scotland will see a reduction of £600 million between the start of 2010 and the end of the Parliament. That is before we even get to the possibility of in-year cuts to the Scottish block grant, as we have seen in the past, having a real, immediate and direct impact on budgets that the Scottish Parliament has already set and agreed.
Stewart Hosie
I am conscious of the time, but I will take an intervention from the hon. Member for Stockton North (Alex Cunningham).
Alex Cunningham
The hon. Member for Perth and North Perthshire (Pete Wishart) said that the SNP knew what it wanted. If that is the case, will the hon. Member for Dundee East (Stewart Hosie) tell us what the SNP wants and where the Tory Government’s offer falls short?
Stewart Hosie
I will certainly speak to our amendment and comment on the motion tabled by the hon. Gentleman’s Front Benchers. I may even touch on what I think would be the best possible outcome for Scotland. I hope that will make him happy.
The cuts I have described are vital to the context in which the fiscal agreement is being negotiated. The cuts are not driven by a fiscal agreement or by the Scottish Government, but by the UK Government’s fiscal charter. The fiscal charter is a requirement to run a budget surplus of enormous proportions—a £10 billion absolute surplus and a £40 billion current account surplus by the end of this Parliament. The framework is being negotiated in the context of this Government’s cutting £40 billion a year more than is required to run a balanced current budget. That means we are negotiating on it in the context of being in the middle of a decade of UK austerity.
The alternative is clear: a modest rise in public expenditure. That would still see the deficit fall, the debt as a share of GDP fall and borrowing come down. A modest 0.5% real terms increase in expenditure would release about £150 billion for spending and investment, and make the cuts we are seeing, which are partly driving the fiscal agreement discussion, absolutely redundant.
Mr Jones
I would say this to the hon. Gentleman, whom I consider a friend. He is talking about percentage cuts to the Scottish budget, but he should look at areas, such as the north-east, that have had far bigger cuts proportionally. Unlike him, his party and his Government, people in those areas do not have the ability to raise taxes. Why have the Scottish Government not used the tax-raising powers they already have to fill some of the gap he is describing?
Stewart Hosie
That question is important, and I will come on to the use of tax-raising powers. We often hear such an argument from members of the Labour party but let us be under no illusion, because it is wrong. The Scottish Government use their tax powers daily. A council tax freeze to protect families for eight years was the use of a tax-raising power. The small business bonus to protect 100,000 businesses, which now pay no or lower business rates, was a good use of a tax-raising power. The power to mitigate the entire effect of the bedroom tax was a good use of such a power. The idea that powers are not used is simply wrong.
Stewart Hosie
For the hon. Gentleman’s benefit, I will come on to the specific issue of raising tax in a just a moment.
Before I leave the context of the UK fiscal charter, let me say that we all recall the vote on 13 January 2015 on the implied £30 billion of cuts, when we made many of the same points we are making today. The great tragedy then and now is that the Labour party supported £30 billion of extra Tory pain and austerity.
Ian Murray
Let us just dispel this constant nonsense from the Scottish National party. The hon. Gentleman’s own First Minister said, when she launched the Scottish business partnership at Tynecastle stadium in June, that the framework on which there was a vote on 13 January 2015 gave Governments enough flexibility to do as they wished. It was very similar to the fiscal framework or charter that he promoted back in November. He refuses to use such powers; he would rather demolish and demoralise Scottish public services.
Stewart Hosie
As the arguments are complicated, it is so much easier simply to quote in full from the 15 January issue of the new Labour leadership’s favourite newspaper, the Morning Star:
“Labour MP Diane Abbott accused her party’s leaders yesterday of doing working people a ‘great disservice’ by backing Tory plans for permanent austerity.”
The hon. Gentleman keeps getting it wrong.
The key thing is that Scotland’s budget has been cut and will continue to be cut by this Government, which makes the achievements of the Scottish Government all the more remarkable. That makes it all the more important not simply that we get any old fiscal agreement, but that we get it right. We must ensure that the Smith commission principle of “no detriment” is adhered to and that we do not embed unfairness in the system, so that we are not subject to possible additional cuts of about £350 million a year. We need to avoid that outcome so that we can continue to do good things and build on the progress we have seen in health spending, which is up to £12.3 billion this year and will be £13 billion next year, and in education.
The Chief Secretary to the Treasury (Greg Hands)
May I bring the hon. Gentleman back to the fiscal framework? I am interested in the amendment that he has tabled, because it seems to quote from the Smith commission—particularly paragraph 95(3) on no detriment, which states that
“the Scottish and UK Governments’ budgets should be no larger or smaller simply as a result of the initial transfer of tax and/or spending powers”.
The amendment carefully deletes some important parts of the Smith agreement. It states that
“Scotland would be no worse or better off simply as a result of the transfer of additional powers”.
Why has he deleted the word “initial”, which is very important in respect of the transfer of powers, and any reference to fairness to the UK taxpayer?
Stewart Hosie
For the sake of brevity. Let me be very clear that the negotiations that are under way are founded on a number of principles, including no detriment as a result of the devolution of further powers initially and no detriment as a result of the policy decisions of the UK Government or Scottish Government post-devolution. I would have thought that the Chief Secretary might have known that.
The whole point of getting this right is to avoid a potential cut of an additional £3.5 billion over a decade, so that the Scottish Government can continue their good work. We do not want those additional cuts to be made, because they would weaken our ability to internationalise the economy; hinder our support for businesses seeking to innovate and to do research and development; suck vital resources out of our plans to invest in education and infrastructure; and undermine all the work being done by the Scottish Government to deliver the fall in unemployment and the highest employment rates in the UK.
We understand the trajectory that Scotland’s public finances will take if the wrong block grant adjustment is chosen. As I say, it will perhaps mean the loss of £3.5 billion over a decade.
Maggie Throup (Erewash) (Con)
Given how the hon. Gentleman is speaking, it almost sounds as if the SNP MPs are having second thoughts about the new powers in the Scotland Bill. Is that because they are afraid of taking them on board?
Stewart Hosie
No. The hon. Lady is absolutely wrong; we are not having second thoughts about the powers. We want the powers—indeed, we want more powers—but the agreement that is reached must deliver a Scotland Bill in line with the Smith commission principles, in particular that of no detriment.
We want to avoid a potential additional cut of £3.5 billion over a decade.
Stewart Hosie
Not at the moment.
What is remarkable is that the motion does not talk about public finances or the impact of getting the fiscal agreement wrong. It is almost exclusively focused on the process of negotiating a formula—a formula that, of course, must deliver no detriment, which was one of the key principles identified by Lord Smith. Although fairness for Scotland is recognised in the motion, many other drivers of Scotland’s public finances are not.
Stewart Hosie
Not at the moment.
There was a cursory passing reference to Labour’s plan, which was announced yesterday, to make Scotland the highest-tax part of the UK. That has a bearing on the public finances. It is a Labour plan to add to the tax burden of half a million Scottish pensioners. It is a plan to add to the tax burden of 2.2 million taxpayers. In essence, it is a plan to change the public finances by taxing Scots more to pay for Tory cuts. That is the weakness in Labour’s plan.
Stewart Hosie
No, I am conscious of time and it would not be fair to give way.
It is absolutely right that the negotiations are done privately. Imagine if there was a running commentary and slight snippets of information, out of context, became the fodder for a new “project fear” campaign run by Labour. We do not want that. We want a Labour party that, instead of sniping from the sidelines, is determined to support fair play, and a fair settlement that delivers on the principle of “no detriment”. Instead, we have this thin motion, combined with Labour MSPs who last week backed the Tories and refused to back the per capita index deduction block grant adjustment mechanism, which would deliver the “no detriment” principles that Labour signed up to in the Smith agreement.
In my view, that is economic and political madness from Labour, but it is not a surprise. After all, in advance of the fiscal agreement, before agreement is reached on an LCM, and before powers are transferred, the Labour party has spent many times over the modest cost of a reduction in air passenger duty—a policy that will create 4,000 jobs and put £200 million of economic activity into the economy—by committing to spend £650 million of Scotland’s public finances from a pot that does not yet even exist. No wonder Labour Members are more interested in talking about process than policy.
As the First Minister has said, the Scottish Government are negotiating the fiscal agreement in good faith, but they will not sign up to a deal that systematically cuts Scotland’s budget, regardless of anything that they, or any future Scottish Government, might do. That message has been reiterated many times by the Deputy First Minister, who said a few moments ago that the reason why we do not have a fiscal agreement right now is that there is no basis to be agreed that is consistent with the Smith commission, and we will not sign up to any document that is not consistent with the Smith commission report.
Let me conclude by being even clearer on behalf of my party: we will not agree to a fiscal agreement that abandons the principle of “no detriment” and embeds unfairness into the Scotland Bill. We will not support Labour tonight. This is a silly motion about publishing minutes that does not address the core substance of the fiscal agreement. We have tabled an amendment to that motion, and I commend it to the House.
Several hon. Members rose—