The next item of business is a debate on the impact of the United Kingdom Government’s spring statement on Scotland.
16:29
Yesterday was April fools’ day, but it was no joke for ordinary hard-working Scottish families and businesses. In fact, it laid bare the impact of decisions taken by the Scottish National Party and Labour Governments—two left-wing Governments that are committed to unsustainable tax, spending and borrowing. Labour and the SNP now have serious questions to answer about their fiscal plans.
In delivering the 20-minute statement, the Cabinet Secretary for Finance and Local Government was, rightly, able to criticise the Labour Government. However, by using that mechanism, rather than by opening this debate, she has dodged such scrutiny herself. That is more evidence that the Scottish Government is unwilling to answer serious questions about the public finances on its watch and is incapable of doing so.
Will the member take an intervention?
It is a bit of a cheek to ask for an intervention 20 seconds into my speech when the cabinet secretary would not take an intervention for 20 minutes. I will take an intervention when I am further into my speech.
Before I turn to the SNP Government’s choices and the choice that it faces, I need to start with the spring statement, which was another broken promise, because it was the second major fiscal event in a matter of months. I will start with the positives, for there were some, if not many. We welcome the increase in defence spending. To those who question its necessity, I say that global security underpins economic security, as it prevents the sort of economic shocks that we saw when Russian boots landed on the soil in Ukraine, which here at home meant a £1,000 increase in energy costs for every British adult.
We also welcome and recognise the need for reform of the planning laws in England, which could drive much-needed growth, as the Office for Budget Responsibility says. However, how quickly will that happen? Will the same approach follow in Scotland, where, for example, recent data has shown that the number of new-build starts is now running at its lowest for a decade?
Does the member recognise that, over the past five years, the number of housing units being given planning permission has been 30 per cent higher than the number of housing starts? Stuff is coming through the system.
It is coming through the system very slowly, and there are supply and labour issues that the SNP has not addressed through its skills agenda to make sure that we can get houses built.
I give a cautious welcome to public sector reforms but, to deliver those reforms, UK ministers must develop a backbone in the face of their union paymasters, and SNP ministers must be bolder in their approach. I listened to the cabinet secretary say that she welcomes the cost savings that the Scottish Government is going to make. I noticed that it is a 0.2 per cent saving over this year. A fifth of 1 per cent is hardly something to boast about.
Beyond the two or three items that we can welcome, the Chancellor of the Exchequer’s emergency budget was a grim moment for the country, because it is now clear that Labour’s political choices are making Britain worse off. Projected growth for 2025 halved from 2 per cent to 1 per cent. Inflation and unemployment are both set to increase. The tax burden is set to hit a historic post-war high of 37.7 per cent of gross domestic product. Just yesterday, businesses, charities and local government bodies, including the Scottish Government, were hit by Labour’s cynical jobs tax, as well as the change in thresholds, which is impacting many small businesses.
Although Rachel Reeves will blame anyone and everyone, the fact is that that economic misery is a direct result of her political choices—her choice to roll over to the unions on public sector pay, her choice to change the rules on borrowing and her choice to undermine growth and investment by breaking Labour’s pledge not to increase national insurance. I agree with Labour that the benefits bill in the UK is too high, and that applies even more so in Scotland. Any Government that prioritises benefits over growth is living in a parallel universe if it believes that that is anything other than unsustainable.
We need to question why Labour is doing this now. The action is not being taken because the Labour Government has had some Damascene conversion to small-state conservatism. It does so out of desperation and because Rachel Reeves has run out of the fiscal headroom that she thought she had only six months ago. I warn the UK Government that the Office for Budget Responsibility still notes that the spring statement has only a 50 per cent chance of restoring that headroom, because borrowing is soaring, debt is becoming more expensive to service and the revenues and savings that Labour expects are proving stubbornly difficult to achieve.
Will the member give way on that point?
Unless I can get the time back, I do not have time. I apologise.
High tax is now the biggest concern for businesses in Scotland. Analysis of the latest business insights and conditions survey found that 18 per cent of firms identified taxation as their main concern for April, followed by concerns about falling demand. As the cabinet secretary alluded to, tariffs will no doubt be weighing heavily on people’s minds.
In discussions with the Scottish Government, we in the Scottish Conservatives advocated for lower taxes to stimulate growth. The Confederation of British Industry’s Rain Newton-Smith agrees—she has warned that uncompetitive tax policies, including Scotland’s income tax gap with the rest of the UK, are a “handbrake on growth”.
From April, anyone who earns more than £30,318 will pay more income tax in Scotland than they would in the rest of the UK, which equates to £1,527 more in tax for someone on a £50,000 salary and £3,331 more for someone on a £100,000 salary. If the UK’s financial outlook is bleak as a result of the spring statement, Scotland’s outlook under the SNP is grounds for despair.
Oh, come on.
The Deputy First Minister is shaking her head. She is, in part, an architect of the £800 million black hole in the Scottish budget, which is a result of the Scottish economy not growing in line with the UK economy.
The cabinet secretary’s statement proves that the SNP Government is simply not serious about growing the economy and is certainly not committed to cutting the soaring benefits bill. Getting people off benefits and back into work is good for growth, society, individuals and their families. Fixing Scotland’s broken benefits system is not just desirable but essential, which the Scottish Government does not seem to recognise.
Will the member give way?
I do not have time.
The Institute for Fiscal Studies has warned that the Scottish Government will find it “almost impossible” to avoid cuts to other services if it chooses not to follow UK welfare reforms. In four years’ time, the Scottish Government will be spending £2 billion more on benefits than it receives through the block grant. The choice that ministers face is crystal clear—unless they reform benefits, they will be forced to cut front-line services and increase taxes. They will not be able to do everything.
Last week, the Scottish Government, despite all its extra spending, missed its own legally binding child poverty reduction targets. Ultimately, the best solutions to eradicating child poverty and the wider problem of poverty are: getting the sick well and giving them a roof over their head; giving everyone, regardless of their background, the education and skills that they need; and generating the all-important economic growth that creates jobs and allows the Government to give a fair deal to all.
Why are you saying that when child poverty has gone down?
The cabinet secretary can chunter as much as she likes, but that is the ultimate long-term sustainable solution—the only solution—to resolving child poverty in Scotland today.
I close on a couple of very relevant issues that emerged from the spring statement. OBR data has revealed that tax receipts from North Sea oil and gas will slump from £5.4 billion to just £2.3 billion within five years. I echo the cabinet secretary’s call for progress on the Acorn project, but the sudden drop that is forecast in oil and gas receipts—do not forget that such receipts pay for public services—is a result of the political mood music that the SNP and Labour Governments have set.
I welcome the focus and commentary of the Scottish Government and the UK Government on public sector reform and efficiency, but do they really have the appetite for the dramatic and disruptive reforms that are required to drive the real savings that we need?
To close on the cost pressures that people in the real world, beyond the Holyrood bubble, are facing, the SNP Government’s chronic underfunding of local authorities means that Scots now face eye-watering, inflation-busting council tax and water bill rises. Households face an energy price cap rise, despite Labour’s promise—which has been broken—to cut fuel bills by £300.
Will the member take an intervention?
I will not, because I am almost over time.
Keir Starmer’s national insurance hike, which commenced yesterday, will mean higher prices for customers and job cuts or pay freezes for employees.
Scots are now at a breaking point. They simply cannot absorb the quadruple whammy of extra costs that were brought forward yesterday. In the 1970s, Labour squeezed the rich until the pips squeaked; 50 years on, Labour and the SNP are doing the same thing to lower and middle-income Scots.
16:39
I greatly welcome the opportunity to discuss the UK Government’s spring statement and the broad economic and political context, which is the subject of considerable public debate across the country today.
The country faces the real threat of a tariff war, the potential consequences of which can scarcely be overstated for Scotland and the rest of the UK. As the New York Times said yesterday,
“President Trump is trying to rewire the global economic order”.
[Made a request to intervene.]
No, thank you, madam. I will make some progress, because I am a matter of seconds into my speech.
No economy, regardless of its size—major, medium or small—is immune to the challenges that are presented by this convulsion. Investor confidence in the debt markets is greatly impacted by this exogenous volatility.
Almost all of us in the Parliament—with some minor exceptions—want much stronger economic growth. The SNP Government has recognised in broad terms that our ability to extract further revenue from our existing tax base is limited. The real question is: what is our strategy in Scotland to grow our median wage and our economic productivity?
Last month, the Organisation for Economic Co-operation and Development warned that tariffs will take a significant toll on the global economy, as it cut its growth forecasts for a dozen G20 countries. At the same time, the OBR has upgraded its medium-term growth forecasts for the UK, as the UK Government seeks to drive the economy and make strategic investments to modernise our infrastructure and increase productivity.
I accept and concur with the warnings about tariffs, but, given how frequently tariffs have been talked about over recent weeks, was the member as surprised as I was that there was no strategic consideration or thinking in the spring statement about their potential impact?
I fundamentally reject that conjecture that there is no strategic position. The Prime Minister is involved, day and night, in trying to deliver the best possible deal for the whole of the UK, and he is putting the interests of the country first in that regard. We must ensure that our economy can deliver the kind of public services that we need, and the UK Government is fully involved in conversations to ensure that we can get the best deal.
The Chancellor of the Exchequer’s long-term decisions have led to the UK’s growth forecasts being revised up for next year, for the year after that and for the remainder of the forecast period. The chancellor’s decision to invest for the long term is designed to secure not only our economy but our public services for the long term. To put it bluntly, she is engaged in a rescue mission for UK public services, given the inheritance that she received just nine months ago.
Will the member take an intervention on that point?
No, thank you, sir.
Rachel Reeves inherited an economy in which there had been no growth for 14 years and in which there was an in-year fiscal black hole, with the national reserve having been spent three times over in the first quarter. Public services were in a state of collapse and in need of immediate investment. That was the context in which difficult decisions were made.
We cannot return to soaring interest rates, which the Tories inflicted on us. Instead, under the Labour Government, there have been three interest rate cuts, providing vital help to people with mortgages. Any return to the chaos of vast unfunded and unfundable spending commitments—whether on services or on tax cuts; I am talking about both sides of the aisle—would lead to rapidly spiralling borrowing costs. As a highly indebted country as a result of 14 years of Tory Government, with national debt running at 100 per cent of gross domestic product, we do not have the fiscal space to contemplate that. The room for fiscal manoeuvre is extremely constrained, so the UK Government is facing up to the fiscal realities in front of it.
The cabinet secretary’s statement was replete with spending demands and rejections of revenue-raising measures. Her statement has to be considered in that context. Ever more borrowing is not available, and nor is it affordable.
In an increasingly volatile world, it is absolutely right that the chancellor has increased defence spending by £2.2 billion this year. That will result in more jobs, more investment and more security for Scotland if a genuine partnership can be built between the Scottish and UK Governments to deliver that. The SNP claims to welcome the increase in defence spending, but it cannot do so with any credibility when it has opposed every one of the chancellor’s revenue-raising measures. National security requires economic security. We cannot have one without the other. Countries that cannot afford to fight wars do not win wars, and they might struggle to avoid them. Labour will always put our national security first. Our economic security underpins our national security.
In the spring statement, there was a significant amount of focus on the changes to social security, and rightly so. The changes are significant and challenging for everyone across the country, particularly for those who rely on the support of the state. We have to be absolutely clear that a situation in which one in eight young people across the UK do not go into work or training when they leave school but, instead, rely on out-of-work benefits results in a huge loss to their personal potential, as well as a loss to our communities and our economy. The difficult fact for those of us in this Parliament is that that figure is even higher in Scotland.
The Scottish Fiscal Commission highlighted in its December 2024 forecasts the fiscal challenges and choices that are presented by Scotland’s growing social security bill. Every pound that is spent on social security over and above the block grant is a pound that is not spent on schools, hospitals and roads. Many people require vital support. We in the Labour Party are proud supporters of the Scottish child payment, which has been a great success. The state must be there for those who require it. However, we have to ensure that as few people as possible require that support, and our public services must be shaped in the direction of achieving that aim.
The UK has committed £1 billion up front to support people into work. Of course, today—this goes to the heart of the question about poverty—is day 2 of a new national living wage, which sees 200,000 Scots get a much-needed pay rise and an additional £1,400 in people’s pockets, with the lowest-paid getting an annual pay boost of up to £2,500. The UK Labour Government is also already getting on with fixing the national health service in England, and it will get more people into work via that route. It is already delivering on the promise of 2 million more appointments and is introducing structural reforms to make the system work better.
Meanwhile, in Scotland, we have a mental health crisis among young people and a child and adolescent mental health service that exists in name only. NHS Tayside reports that come directly from the management speak of waits of 13 to 14 years for young people to be seen by CAMHS. There is a direct relationship between that kind of performance on the part of our public services and the number of young people who cannot access work. They require public services that work in order to help them. The SNP might boast about meeting 18-week treatment time targets, but that is not the reality for young people in my region, with a service that is not serving them all.
I look forward to hearing the various contributions in the debate.
16:46
The world has changed. There is no question but that the re-election of wannabe dictator Donald Trump has broken the backbone of the world order that, rightly or wrongly, we have taken as read for three generations. There is no question but that Europe, and therefore the UK, faces increased risks.
Does the member think that this inflammatory language will help or hinder the UK and Scottish Governments’ attempts to reach a deal on tariffs with the United States of America?
Anyone who thinks that Donald Trump is their friend or adheres to trade deals has not been paying attention to the news. Donald Trump is bad news for Scotland and for every country he deals with.
As I was saying, there is no question but that Europe, and therefore the UK, faces increased risks now that America has reneged on its security commitments and appears to prefer to appease authoritarian Russia than defend democratic Ukraine. Unlike my colleague across the chamber, I will call an authoritarian regime an authoritarian regime, and—make no mistake—that is the direction in which Donald Trump is taking America.
There is no question but that the UK needs to re-evaluate its relationship with Europe and with America and no doubt about what commitment to the security of Europe the UK should be making. I can only hope that a security rapprochement with Europe will be the first step in the UK coming to its senses and rejoining the European Union.
Having recognised the need to adapt to this new world, the UK Labour Government has options and choices. The UK is a wealthy country. The UK spends a lot of money on defence and security, including the abomination of the so-called nuclear deterrent, which soaks up money towards a hypothetical scenario in which, somehow, we are okay with threatening civilians with extermination while depriving ourselves of funds that are needed to address urgent issues such as protection from cybercrime and real support for Ukraine.
The Labour Government could have chosen to reallocate or reprioritise defence spending. It could have chosen to stop the massive subsidies for fossil fuel companies and high-polluting industries such as aviation. It could have chosen to consider raising new revenue from the very wealthiest through land value taxes, carbon taxes, taxes on private jets and other wealth taxes. However, the Labour Government did none of those things. It was founded on the need to tackle gross inequality through the redistribution of wealth, but it has betrayed its roots and has come after the sick and the disabled.
Statutory sick pay in the UK remains among the lowest in Europe, at just £116.75 a week. That is inadequate and leads to employees being forced to choose between working while unwell or suffering financial hardship. Neither scenario supports people to get well. The Labour Government should absolutely reform support for people who are ill and disabled, but it should do so in such a way that they can get well, so that they are not forced out of work by an inflexible and punitive system in which their confidence and skills decline nor forced to continue to work without support while ill such that their condition continues to decline.
Callously cutting money for the sick and disabled without compassionate reform is horrifying. Changes to the assessment for personal independence payments mean that people will qualify for the daily living payment only if they face major barriers to performing everyday tasks, meaning that people who require assistance to wash, or supervision, or prompting to go to the toilet will no longer be eligible. The Resolution Foundation has said that the current Parliament will be among the worst on record for living standards, and all members will know from their constituents that the cost of living is at the top of their concerns. Yet, we have a Labour Government that is choosing to turn the screws on the sick and disabled instead of the super-wealthy.
When the UK decides to cut spending, Scotland’s budget gets cut. Every member of the chamber should be angry about that—not just the fact that Scotland cannot fully control its budget, but the fact that we cannot plan ahead and the fact that Scottish budgets that we vote into law can be blown away like dust in the wind by a change of UK Government policy. Day after day in the chamber we hear about the challenges of tight budgets, and the spring statement turns the screws on Scotland as well.
Will the member take an intervention?
Very briefly.
Does the member recognise that the budget for this financial year will go up as a result of the spring statement?
I would like to see the numbers on that, because we have heard of real-terms cuts from the minister today.
The UK Government has made choices. It could invest in the green economy, tax great wealth and remove subsidies for polluters. Instead of doing those things, Rachel Reeves has chosen to make life harder for those who are already struggling. Next year, Scotland’s electorate will have its chance to decide whether it approves of that choice. I hope that, someday soon, it will have its chance to decide whether it wants those decisions to be made by Westminster at all.
16:52
I echo the remarks of the Conservative members at the start of the debate. Leading with a Government statement without intervention or questions and then going straight into a debate is a very odd way of going about the business of the Parliament. I hope that ministers, as well as business managers, will reflect on that.
The spring statement was a missed opportunity to deliver the change that communities across Scotland are crying out for. At last year’s general election, the people made their wishes very clear. Their overwhelming rejection of both the Conservative Party and the Scottish National Party was a demand for something better. The chancellor claims to be focused on economic growth. In that case, she should have supported businesses by scrapping the planned hike on employer national insurance contributions, which is, in effect, a tax on jobs and employment.
Instead, the Government is inflicting yet more pain on small businesses just when they need help the most: rising costs, business closures and economic stagnation—Labour’s choices will only make things worse. That means more boarded-up shops on our high streets, fewer jobs and struggling local economies. The spring statement was also a hammer blow to our general practitioner surgeries, pharmacies and care homes, all of which will see their tax burdens rise.
Does the member recognise that the UK Labour Government put in place a series of reliefs for small businesses on high streets across the UK as a quid pro quo for the national insurance increases? It just was not replicated by the SNP Government.
I recognise that certain efforts were made to mitigate the impact, but they are not universal. There will be businesses that go to the wall and GP surgeries that have to shed staff or close their lists as a result. The Liberal Democrats have repeatedly warned of the damage that will be caused by the rise in employer national insurance contributions. We have fought to exempt health and care providers, which are exactly the kind of businesses that I am talking about, from that unfair tax, but the Labour Government is just not listening.
It did not have to be that way. The Government could have raised the money by listening to the Liberal Democrats and asking the big banks to pay their fair share, reversing the tax cuts that were handed down by the Tories, and asking social media giants to pay more. I am concerned that, in the face of the expected announcement on tariffs, we might see a decreasing amount of digital service tax being retrieved from those big social media giants. Online gambling companies should also be asked to pay their fair share.
Instead, ordinary people and small businesses are being squeezed still further. By refusing to scrap the cruel family farm tax, the Government has also made it clear that it does not understand rural communities.
I do welcome the Government’s announcement on defence spending, however. The Liberal Democrats have consistently urged the Government to commit to spending 2.5 per cent of GDP on defence, with a clear plan to reach 3 per cent as soon as possible. We are optimistic that that investment will support jobs in Scotland, and it is imperative to our national security and the security of Ukraine.
There is still much more to do to rebuild our economic and defence ties with our European allies. We need a new security alliance with Europe. That becomes even more urgent in the light of the unpredictability of the Trump Administration, which we are seeing again today, as the world awaits news of his tariffs—an event in the White House rose garden at 9 pm tonight that businesses are dreading.
A straightforward way to strengthen our economy is to repair ties with Europe through a youth mobility scheme that allows Scots to live, work and study across Europe, while welcoming young people here in return. That is a win-win, and I am frustrated that the Labour Government has so far refused to properly act on that. Strengthening our security and economic ties with Europe is more important than ever.
The SNP Government has always been very shaky about acknowledging Scotland’s important role in defence, but Liberal Democrats are clear that Scotland makes a vital contribution to the security of the UK and Europe. We should be proud of that contribution, whether it is in our dockyards or in our personnel.
The Scottish Government also has a major role to play in growing Scotland’s economy, but it is failing to grasp the opportunities that lie before us. That includes unlocking the full potential of our renewables sector and ensuring that people get the healthcare that they need to return to work. I remind members of the tens of thousands of Scots who are desperate to go back to work but cannot do so because they do not have a care pathway for the long Covid that they still endure. Right now, people are trapped on waiting lists and are unable to get on with their lives and contribute to the economy. That is why my party fought so hard to secure more funding for key skills programmes in this year’s budget.
We know that fixing the broken care system, freeing up hospital capacity and getting people seen faster are essential to Scotland’s economic recovery. That is why we have secured millions of pounds more to tackle long Covid and to get care pathways in place for the tens of thousands of Scots who are suffering from an illness that has limited their ability to work.
Liberal Democrats believe in building the foundations of an economy that can thrive for generations to come. That means supporting businesses, investing in people and ensuring that no community is left behind.
We move to the open debate.
16:57
Spring is supposed to be the time when we see the first green shoots of hope after a long winter of despair, but there were no green shoots in the UK Government’s spring statement this year. Instead, the Labour chancellor announced a new round of broken promises—austerity mark 2—and a budget that is balanced on the backs of the most vulnerable for the benefit of the richest.
We were promised change, but the only change that there has been is change for the worse. The spring statement was a reverse Robin Hood budget: taking from the poor to give to the rich. The Resolution Foundation reports that, by 2030, the poorest 10 per cent in society will be worse off under this Labour Government than they were under the Tories, while the richest 10 per cent will do even better under Labour than they ever did under the Tories. Thatcher famously said that her greatest achievement was the new Labour Party, and perhaps Liz Truss is grinning to see this Labour Government outdoing the previous Tory regime in trampling poor, ill and disabled people underfoot.
Let us face facts. The impact of Labour’s cuts will be devastating. The UK Government’s own analysis shows that 3.2 million families will be financially worse off, with an average loss of £1,720 per year. The same analysis from the Labour Government reveals that its welfare cuts will push 250,000 people, including 50,000 children, into poverty, with the poorest households £500 a year worse off.
Although the poor will be worse off due to the spring statement, it is disabled people that Labour has singled out for special punishment. With the stroke of a pen, the Labour UK Government has subjected disabled folk to the most despicable of cuts. The UK Government justifies those brutal cuts because, in its view, too many young people are faking poor mental health. That view flies in the face of independent mental health research.
This year, the UK ranks bottom in the world for mental health, below war-torn Afghanistan. Although the UK is very much the worst, it is not unique, with a decline in mental health seen in all countries. The average mental health score in English-speaking countries has declined from 90 in 2019 to only 60 today, with young people suffering most.
Globally, in 2019, 19 per cent of young people struggled with poor mental health. Today, the figure is 46 per cent, and 55 per cent in the UK. Poor mental health among our young people therefore is a problem.
Maybe benefits need to be reformed. However, rather than reforming PIP for the better, Liz Kendall chose simply to restrict PIP to people who score at least four points in a single category—a move that will consign thousands of disabled people to economic destitution.
Across the PIP scale, to get four points, someone must require physical assistance to do a task. However, needing supervision with a task gives only two points. As Lorna Slater said, it will be those who require supervision with a day-to-day task who will bear the brunt of the changes. As it stands, a disabled person who needs supervision to wash, dress, eat, toilet and understand complex decisions would be entitled to the highest level of PIP. Soon, they will receive nothing—not a single penny piece. The UK Government says that they will be fine, if they get a job—but we are yet to hear where all those jobs for people who cannot wash, dress and toilet themselves are.
The UK Government is also, of course, doing its level best to destroy the economy and ensure that there are fewer jobs by imposing a brutal national insurance jobs tax.
For those who are caught between the UK Government’s brutal cuts and economic mismanagement, we in Scotland must strive to remain a beacon of hope in the sea of British despair. However, the impact of Labour’s spring statement will also hit home in the Scottish budget, with the OBR predicting a cumulative reduction in Barnett consequentials of £1 billion over the next five years. Likewise, although a decade ago we were promised that we would be £1,400 better off together, the Joseph Rowntree Foundation concludes that the average family will be £1,400 worse off by 2030.
Although we will always strive to be that beacon of progress and hope, as the waves of despair from this Labour UK Government’s actions crash against us—
You need to conclude.
—it is more clear than ever that Scotland must unshackle herself from the UK’s sinking ship and chart her own course as an independent nation.
17:04
Last summer, many of us warned about the economic damage that would ensue if Labour was to form the next United Kingdom Government. Since Labour came into power in July, we have seen many of those fears become reality. Inflation is increasing once again, and UK growth stalled in the second part of 2024. The latest forecasts predict that, in 2025, growth will be half of what was previously predicted.
Although that is bad news for the British economy, none of it is too surprising. The UK Labour Government is a high-tax, high-regulation Government that is undermining the confidence of business across the whole of the UK, but businesses here in Scotland also have to deal with a second high-tax agenda—that of the SNP Government.
Labour’s spring statement was, in effect, an emergency budget that needed to signal a change of direction to get the economy back on track, but that did not happen. With the prospect of tariffs coming, which we have known about for some time, we would have hoped that there would have been improvements to provide certainty. Once again, however, such certainty is lacking.
In the light of the continued uncertainty in Europe, Labour’s decision to increase defence spending can be welcomed, but from the point of view of growth and long-term investment in our economy, the spring statement failed to deliver the clarity and certainty that are needed for taxpayers and businesses across Scotland.
Although the Labour Government says that growth is its number 1 priority, that was not reflected at all in the spring statement. The increase in national insurance contributions alone will have a significant impact on staffing decisions for businesses across the country. Even though that increase will not come into effect until later this week, many companies have already frozen recruitment and increased their prices, and we know that that tax increase will cost jobs and slow economic growth. The only question is by how much it will do so.
However, it is not just the jobs tax that is creating uncertainty in the labour market. The Government is also pressing ahead with its workers’ rights reforms, which are opposed by employers of every shape and size the length and breadth of the country. Not content with charging companies more for the privilege of employing people, the Labour Government also wants to tie up employers with red tape. The Federation of Small Businesses has said that the reforms are
“rushed ... clumsy, chaotic and poorly planned.”
They are not what business needs to hear from the new Government by way of support.
Is Alexander Stewart seriously suggesting that giving a pay rise to 300,000 Scots—the lowest-paid Scots—is simply a matter of red tape? Is he suggesting that giving people day 1 rights on sick pay or ensuring that they are not subject to fire and rehire or zero-hours contracts is bad?
Labour cannot achieve those things in the absence of the growth in the economy that is required to make them happen. Labour knows that, and it is not achieving it.
The FSB has also said that the Government’s proposals will
“deter small employers from taking on new staff”.
That is the case. Small businesses are being deterred from taking on staff, which is a disaster for economic growth.
The Office for Budget Responsibility has made it clear that the full impact of the reforms is hard to predict because “insufficient detail” has been provided. That means that the growth that is forecast for the coming year could be even lower than has been predicted. The OBR has also highlighted that North Sea oil and gas revenues could fall by more than half by the end of the decade, from £5.4 billion to £2.3 billion. That is partly a result of the anti-investment policies of the UK and Scottish Governments, which are slowly turning their backs on an industry that supports 100,000 jobs.
We cannot go down that road. We must not put such strain on our economy. We must ensure that everything that we do supports the environment for businesses in our community.
The SNP should not forget that its legacy on success in respect of the economy is not good, either. The actions and deeds of the SNP Government are still causing difficulties for the economy. As has been discussed, the Scottish budget is missing out on £800 million as a result of the SNP’s failure to grow the economy.
Conservative members have long called for the SNP Government to use its powers over tax and spending to cut taxes for hard-working Scots, to pass on business rates relief in full and to create a pro-business and pro-innovation environment across Scotland. That is what we want, but we are seeing the opposite. Labour policies have already damaged the UK’s economy, but because of the SNP, the damage in Scotland continues.
We will continue to champion policies to ensure that we can provide well-paid jobs and have a growing economy and effective and efficient public services. That is exactly what the Scottish public expects from both Governments. However, the spring statement is bad for the economy, bad for business and bad for consumers.
17:10
In March 2015, Rachel Reeves MP, who is now Chancellor of the Exchequer, said:
“We are not the party of people on benefits. We don’t want to be seen, and we’re not, the party to represent those who are out of work.”
She added that she had “robust” policies to ensure that spending would reduce. A decade later, she has been true to her word—not that Labour said so in last year’s election campaign.
Anas Sarwar’s once defiant, now hollow, proclamation
“Read my lips: no austerity under Labour”,
casts a long shadow over the chamber today. Last year, he vowed to stand up to Keir Starmer and to be Scotland’s voice at Westminster yet, following the UK spring statement—which was aptly dubbed “austerity 2.0” by Labour MP Zarah Sultana—with modest exceptions, the branch office here in the Scottish Parliament has been conspicuously silent. [Interruption.]
Only three of you even bothered to turn up for this debate, Mr Marra. That is how important you regard your own spring statement as being.
Please speak through the chair, Mr Gibson.
I know how much regard the member has for Paul Johnson at the Institute for Fiscal Studies. Does he agree with Paul Johnson that the spring statement does not represent austerity in any way?
No. I am sorry, but I actually agree with Labour MPs such as Debbie Abrahams, who said,
“there are alternative, more compassionate ways to balance the books rather than on the back of sick and disabled people”,
and Richard Burgon, who said:
“This Statement contains cruel attacks on disabled people. The Government is taking the easy option of cutting support for millions of vulnerable people”.
One wonders whether the latest in the succession of regressive fiscal measures that Labour in Scotland has been compelled to passively accept is beginning to take its toll. Those measures go from the removal of winter fuel payments from 85 per cent of pensioners to the dismissal of the women against state pension inequality—the WASPI women—and the backtracking on the promise to reduce household fuel bills by £300 a year.
Labour in Government has depressed business confidence and raised employer national insurance contributions, which impact three times more on lower paid workers than on the highest paid. In North Ayrshire, more than half of this year’s council tax increase is a direct result of the increase in employer national insurance contributions. Now the most vulnerable people—thousands of disabled individuals—face brutal cuts while Labour in Scotland takes the fifth.
Under Labour, individuals who are unable to wash half their body, cook a meal, use the toilet unaided or dress themselves independently will be denied PIP unless they suffer from an additional limiting condition. We are talking about 800,000 people. A further 370,000 who receive PIP will have it removed, and 3.2 million disabled people will lose an average of £1,720 a year.
The core justification for those measures lies in the claims that they will generate £8.1 billion in annual savings by 2029-30 and will incentivise workforce participation. Scotland will see year-on-year welfare cuts increase, reaching £455 million, and £430 million in resource cuts by 2029-30.
UK ministers claim that people who are affected will be supported through a £1 billion disability employment package, yet Britain’s economic watchdog will not release its employment forecasts until late October. MPs are being asked to endorse disability benefit cuts without any substantive analysis of how many of those who are affected can realistically secure employment.
The Office for Budget Responsibility was completely unsighted on those developments and it has highlighted the absence of detailed policy frameworks or impact assessments. Prior to the announcement, the Secretary of State for Work and Pensions, Liz Kendall, was apparently unaware of the impact that the spring statement would have on her department and on the millions of people who rely on it. A transition fund is to be established and consulted on, but there is no budget for it and the UK Government has no idea of the level at which it will be set. What a mess.
Further uncertainty emerged on Monday when the BBC revealed that the Department for Work and Pensions faces a shortfall of 2,100 work coaches, leaving 400,000 individuals without the employment support to which they are entitled now. How will folk whose benefits are being cut be supported into work?
The only certainty is that the cuts will drive at least 300,000 people—including 50,000 children—into poverty. The spring budget has drawn widespread condemnation from charities and organisations that champion the most disadvantaged in our society. I am well aware that Labour has body swerved those comments so far this afternoon.
The Joseph Rowntree Foundation says that 7.2 million UK households already struggle to afford basic necessities, and that figure will rise. The Resolution Foundation estimates that the UK’s poorest 10 per cent will be £500 worse off annually by the time the Labour Government’s term ends. The director of the Child Poverty Action Group, John Dickie, says:
“Stealth cuts to UK social security bring neither stability nor security to struggling families. They will push children into poverty across the UK, undermining the progress on child poverty being made in Scotland”.
That brings me to the question on everybody’s lips. Is austerity truly necessary? Other nations will grow their defence budgets without imposing callous measures on their citizens. Germany amended its constitutionally enshrined rules to increase defence spending while simultaneously establishing a €500 billion infrastructure fund and the European Union has relaxed its fiscal regulations to enable member states to strengthen defence capabilities without resorting to cuts but, no, Rachel Reeves sticks to her fiscal rules as if they are tablets of stone.
Sadly, Labour in Scotland remains subservient to Mr Starmer even as internal dissent grows. Brian Leishman, MP for Alloa and Grangemouth, denounced the UK Government’s welfare cuts as an act of inhumanity that will “impoverish” disabled people. Former Labour MSP Neil Findlay accused the Prime Minister of
“Betraying Labour’s proud history”
and laying
“waste to any claim of moral principle.”
That is, no doubt, why 19 of Labour’s group of 22 MSPs werenae here for the start of this debate.
I note that Carol Mochan is now here—she has turned up recently. She said:
“We cannot balance the books on the backs of people who require benefits just to have a passable standard of living.”
Still the condemnation goes on and, meanwhile, GDP per capita continues to fall.
Labour is undermining Scotland’s economy and public services with cuts that are aimed at impacting the most vulnerable. If—
You need to conclude.
If Labour wants to be the party of social justice rather than an instrument of calculated indifference, it must abandon its punitive cuts. It is clearer than ever that Scotland must become an independent nation or we will pay the price.
17:16
These are deeply serious global times. Already, some contributions this afternoon have acknowledged the changing nature of the western alliance and the global economic and political consensus on which so much has rested for so long. That has been fundamentally shaken. Even today, as we await the imposition of universal tariffs by the world’s largest economy on friends and foe alike, the world continues to move at pace in ways that nobody wanted to see and which often do not make rational sense.
Such factors have been referenced increasingly by parliamentarians of all parties in debates and statements over the past few weeks. That degree of seriousness, which is required in debates such as these, is welcome. I do not believe that there is anyone on the Government benches who does not recognise how much those events will impact on our national finances, regardless of whether carve-outs are secured or what the scale of the tariffs might be.
All of that is coupled with an urgent need to spend significantly more on defence in the UK and right across Europe so that we can undertake a programme of rapid rearmament. Those are decisions that have to be made and realities that we must face up to. I welcome the Prime Minister’s comments at lunchtime that the UK will take a “calm, pragmatic approach”, whereby we will engage in “constructive talks” with partners and be “prepared for all eventualities”. Therefore, it is not fair to say that no cognisance has been taken of the situation. Actually, there has been a deliberate attempt to take a very pragmatic approach.
Here in Scotland, we need to be equally calm, pragmatic and realistic about all the factors and what they will mean for our finances and to consider the impact on the wider UK finances. That is the context in which the Chancellor of the Exchequer’s spring statement took place last week, and it would serve us all well in this debate to remember that.
I am pleased that, despite those factors and the significant challenges, which are a worry to many, the chancellor has protected last autumn’s transformational budget. In the past few days, we have seen policies come into place that will make a genuine difference to the lives of many people in Scotland. The uplift in the national minimum wage yesterday—the highest uplift in the minimum wage since it was created by the last Labour Government—delivered a pay rise to 200,000 of the lowest-paid Scots. That sits alongside a generational change to the rights of workers to ensure that work is secure and that it supports people who are undertaking it; to end the use of fire and rehire practices and exploitative zero-hours contracts; and to secure rights from day 1.
I do not think that that is something to be ashamed of, as the Conservatives seem to think. The UK Government has prioritised that, because it is the right thing to do to ensure that people in work have the right support.
I do not disagree that putting money into people’s pockets is the right thing to do—I welcome that, and I am sure that many constituents in Paul O’Kane’s West Scotland region and in my constituency will welcome it, too—but does Mr O’Kane acknowledge that taking money out of the pockets of people who are disabled is not the right thing to do?
Mr McMillan makes a good point about the importance of work. I have said in the chamber a number of times that there are too many barriers to people wanting to secure work so that they can continue to progress. We must ensure that we break those barriers down; indeed, I will come on to talk about that more widely later in my speech.
That budget also confirmed no cut to the Scottish budget, and affirmed a game-changing rise of £5.2 billion to be spent here in Scotland through the largest block grant in the history of devolution. There was also a large-scale package of capital investment in infrastructure across the UK, including here in Scotland, through a renewable future as a result of mechanisms such as Great British Energy. The confirmation in last week’s spring statement that Labour will invest in the Scottish shipbuilding industry through a boost in defence spending was vital, at a time when the SNP is sending Scottish shipbuilding jobs abroad.
I note that, in the cabinet secretary’s statement, she welcomed an increase in defence spending, although, as usual, it is clear that there has been a complete rejection of all the ways to pay for that. I do not think that we have heard anything serious from members on the Government benches about how that should be paid for.
I gently suggest to the Government—[Interruption.] If it cares to listen, I gently suggest to the Government that, at such a dangerous time, a policy of unilateral nuclear disarmament is deeply unserious. It does not recognise the real challenge in Ukraine and the issues therein. That is before we mention the impact that it would have on jobs and the economy in my West Scotland region and in my colleague Jackie Baillie’s constituency.
I acknowledge that concern has been raised about some elements of the spring statement relating to social security reforms. It is important that people have the chance to engage in full with the green paper that has been published by the Secretary of State for Work and Pensions. There is a consensus on the importance of reform generally in the social security system to get more people into work. That is where proposals in the green paper that have been long called for, including £1 billion of employment support and giving people the right to attempt work without risking losing their benefits, are right. That is important, and it is also important that anyone who needs support gets it and that we ensure that we protect those people who do need support.
Will the member take an intervention?
I am about to conclude, so I will begin to draw my remarks to a close.
You will conclude, Mr O’Kane.
It is important that we base ourselves in the reality of the situation that we face. There is a grave global context to the spring statement, which we must have at the forefront of our minds if we are to have a serious and genuine debate in this place about our public finances.
17:23
As a disabled person, I find it devastating to witness the Labour Government’s recent actions, which ruthlessly and unforgivably punish disabled people and pensioners for the Government’s own failures to balance the books and deliver on its manifesto promises. Not only is that economically futile—after all, we will never get more disabled people into work by taking away the money that buys their care and their mobility aids and gets them anywhere close to being on a level footing with their able-bodied, neurotypical peers—it is brutally unethical.
During the previous Conservative Government, people using disabled spaces online discussed papers that had been made public and which considered extensive options to reduce the money being spent on benefits. Suggestions such as narrowing eligibility for PIP and discriminating against certain groups of people were highlighted as surely going too far for the Tories, including by many in the Labour Party, who frequently made comments that were extremely similar to those that I am making this afternoon.
That it is a Labour Government taking forward these reforms is devastating to everybody who voted for Labour last year, thinking that they were voting for positive change. The SNP has been working hard for years with targeted benefits and programmes to lift children out of poverty, but UK Labour is dragging them into it.
The proposal to remove incapacity benefits from anyone under 22 is not only ignorant and ageist, but cruel. It ensures that people who have their whole life ahead of them, a life that could be productive and happy if they had the right support, are instead going to live in poverty and misery, if they manage to live at all.
I again remind people that the adult disability payment, the personal independence payment and universal credit are not necessarily out-of-work benefits. Disability benefits are a recognition of the extra cost that is faced by successful claimants, who often cannot function without the things that they use the money to purchase. Universal credit is often needed by people who are not making enough money despite being in work, even if they are taking on multiple roles. Many who claim those benefits are out of work, but, knowing a lot of those people myself, I am aware that that is more a reflection of employment practices and societal norms than it is of those people and their own attitudes towards work.
Whether or not people can do full-time hours; whether they experience brain fog, chronic pain or fatigue; or whether they are unable—or struggle—to do things that others find easy, such as reading, sitting, standing, writing or speaking, they generally want to feel fulfilled in their lives. Even the most well-off pensioners I know usually volunteer or take on part-time work, and find things that they can do to be productive.
Looking at how many disabled people are unemployed and concluding that you must take away the little money that they have in order to force them into a workplace that is not set up for them, and which likely will not hire them anyway, is ridiculous, and it demonstrates either extreme ignorance or terrifying cruelty and a lack of consideration of the risk at which those lives are put.
Brutal changes to the personal independent payment are blatant attempts to remove money from people with mental health issues, whom Labour seems to think are unworthy of support, but they will also affect people who have a wide range of conditions. As Kevin Stewart and others have outlined, people who cannot dress themselves or wash without help will see their payments disappear. How will they pay somebody who will help with those intimate tasks and enable them to show up to any job? Of the 800,000 people who will, thanks to Labour’s cuts, lose out on the money that they rely on to manage their conditions, how many will be unable to keep their jobs as a result?
Labour’s broken promises are piling up at a truly remarkable speed. I can only assume that Keir Starmer and his team believe that these punitive cuts to the most vulnerable will be forgotten by the next election, but they will not. When it comes to heating payments for pensioners, WASPI women, Grangemouth workers, GB Energy and the promise of no austerity, people are going to remember the harm that is being caused now.
Instead of standing with us against the surge of the far right by protecting human rights in the face of growing risk around the world, Labour is all but handing it the next election. I said that Labour’s decisions devastate me as a disabled person, but they also dismay me as a nationalist. All of this reminds me—and I hope that this is not lost on my constituents in the Highlands and Islands—that it does not matter who is in power in Whitehall, whether it be the Tories or the so-called party of devolution. It does not matter how lacking in conscience we—by which I mean the Scottish Parliament, not just my own party—believe Westminster’s decisions to be, or how vast the gap is between the approaches up here and down there. All our spending, our plans and our powers can be badly impacted with no notice or consultation, and funding for which we had great plans can disappear at the whim of a UK minister.
We have had some incredible successes in Scotland through devolution, and I am proud of the progress that has been made in this place, but it does not work. We can do better, and we need independence.
17:28
The debate so far has shown that it is important to put the spring statement into some context, particularly with regard to the considerable challenges that the chancellor faces—those that are external rather than self-imposed. They include the considerable uncertainty in the international markets as a result of the very belligerent, protectionist policies that the cabinet secretary spoke about in her statement, which are very much across our newspapers this morning. They make for very grim reading—we should be in no doubt about that. Likewise, there is the considerable uncertainty about US defence policies, which means that we have to prioritise increases in the defence budget, and there are the further increases in world energy prices.
The chancellor is right to say that “the world has changed”, but that is only half the story. The OBR reports that the internal growth problem is one third down to structural weaknesses in the economy and two thirds down to a fall in business confidence, the problem with higher interest rates—which Craig Hoy spoke about—and the expectations factor. As we heard at yesterday’s meeting of the Finance and Public Administration Committee, the OBR has also been critical of the late delivery of some aspects of Reeves’s plans, which has made economic forecasting even more challenging. We have heard that before in another context.
As the Fraser of Allander Institute said, it really is not “credible” that the chancellor and her Treasury ministers were unaware of the OBR’s concerns about the underlying troubles in Britain’s finances. That is why it had to halve its economic growth forecast for the next year. It is also why, given the UK Government’s self-imposed fiscal rules, there is now virtually no room at all for manoeuvre should the economy be exposed to any further exogenous shocks or substantial market changes, which, as my party knows only too well, can come about if the fiscal headwinds are ignored.
There are some encouraging signs regarding new jobs in the construction and defence sectors, which I hope will also be beneficial to Scotland, and the OBR’s determination that reforms to planning legislation could add 0.4 per cent to GDP—it matters that that is the single biggest boost that it has determined for one specific policy. However, that does not detract from the serious problems in the supply side of the economy.
Will the member take an intervention?
Perhaps Mr Marra can deal with the supply side of the economy for me.
Liz Smith talks about the challenge caused by exogenous shocks to the fiscal rules. Is she suggesting that we should create more headroom in the fiscal rules? If so, how would she achieve that?
The fiscal rules are a self-imposed discipline that the chancellor set. With hindsight, when we measure the six-month period between October and now, they have proved to be extremely tight. That is a significant problem if there are exogenous shocks—which we sadly have to face up to quite regularly—because the wriggle room no longer exists. There are issues in that regard. Mr Gibson talked about some European countries where there has been a different approach to fiscal rules. There is a lot to be learned about the world economy and how the UK Government can interpret it.
On top of all of that, there is the imposition of the highest-ever tax burden, the serious issues that have resulted from Labour’s national insurance tax on jobs—that is what it is—which is having particularly detrimental effects on retail and hospitality, and the tax increases on Britain’s farmers. The Reeves economy is not in a good place, and some of that is not down to external reasons.
I do not blame the chancellor for addressing the welfare problems. She is right when she says that the size of that budget is unsustainable and that the current structure is not doing nearly enough to attract people back into the jobs market. However, she has allowed so much unhelpful speculation to take place in the past few months, which has scared many people who are genuinely on benefits—many SNP members have reflected on that point—without spelling out the available evidence of what the impacts and the side effects will be. I will come back to the issue of welfare in a minute, but, given the expectations factor, there is confusion and it is grim reading for many people who are living with genuine disability—I have great sympathy with that view.
What about the impacts of the spring statement on Scotland, aside from the relatively small Barnett consequentials of £28 million as a result of that change? There will be a £200 million cut in 2028-29 and a £435 million cut in 2029-30 plus the PIP reforms that will reduce the block grant adjustments for devolved social security. The cabinet secretary is correct in saying that the Scottish system of welfare benefits will cost more following Labour’s proposed cuts to benefits, which will mean reductions in the block grant.
However, let us be very clear that Scotland’s welfare system was costing billions of pounds long before Labour’s announcement. To take up the challenge that Paul O’Kane set us of considering the overall economy and fiscal sustainability, we need to have a serious debate in this Parliament about what we will do to reform the welfare system, to encourage more people into work and ensure that we are genuinely helping those who are most in need, not providing so much money to those who can easily get back into the workforce.
17:34
It is a pleasure, as always, to follow Liz Smith and to respond to the challenge that she has put to members today. Perhaps a debate in a more traditional format might assist us in understanding that better.
The UK chancellor is absolutely right to point to the global challenges that all the major economies are facing. The world has changed. To dismiss that is to deny the reality that we are seeing with the conflict in the middle east, the war in Ukraine, volatile energy prices and despots and dictators seeking to disrupt and divide. Just today, we see markets and economies the world over holding their breath as they wait for President Trump’s announcement at 9 o’clock—our time—this evening.
Will Mr Whitfield give way?
If Kevin Stewart does not mind, I would like to get started first.
The UK Government is working hard to secure a deal with the US, but, in the meantime, there is no doubt that the volatility in the global markets will impact our economy. The chancellor is grappling with these changed and uncertain circumstances, and, in this increasingly unstable and unpredictable world, increasing defence spending was the right choice for our national security. Anyone who argues against that fails to understand the genuine severity of the global moment.
Will the member give way?
If it is short, Mr Stewart.
I agree with Mr Whitfield. Nobody can argue that the world has not changed, but why can the Chancellor of the Exchequer not change her fiscal rules in the light of the changes that have been taking place across the globe? Why not change those rules instead of punishing disabled people?
I point to what happened less than 24 months ago, when we saw a Prime Minister suddenly decide to change their fiscal rules and throw them out of the window. We saw a sudden drop in confidence in the United Kingdom among markets around the world and investors in this country. To risk such economic instability at this time is an utterly reckless proposition.
While we are in the midst of these global challenges, the UK Government is taking long-term decisions to grow our economy. As we have heard, the OBR recognised that last week, and it is upgrading its growth forecast for next year and, indeed, for every year thereafter, with a cumulative growth forecast that is now higher than was expected at the time of the budget.
The OBR can see that the decisions that this UK Government is taking will lead to economic growth. The increase of £2.2 billion on defence spending in 2025-26 will mean more jobs and more investment right here, in Scotland. In 2023-24, the Ministry of Defence spent more than £2 billion in Scotland, supporting 25,600 jobs. Current UK defence investment represents a huge boost for Scottish shipbuilding, with the £4.2 billion contract to build five type 26 frigates on the Clyde supporting 1,700 jobs directly and 2,300 jobs in the supply chain. While the SNP sends shipbuilding jobs abroad, the UK Labour Government is investing in people and industry here, in the UK and in Scotland. That is the difference that a UK Labour Government can make for our economy and for our national security.
I want to touch on house building. The UK Labour Government is taking bold steps to grow the economy, not least by introducing the most ambitious set of planning reforms in decades to get Britain building, with a target of 1.5 million new homes in England over the next five years. What is the conclusion of the OBR? It says that there will be a real GDP increase of 0.2 per cent by 2029-2030 and 0.4 per cent within the next 10 years. That will add £15.1 billion to our economy and is the biggest positive growth impact that the OBR has ever reflected in its forecasts. That significant action by the UK Labour Government to build more homes, to tackle homelessness and to grow our economy is endorsed by the independent OBR. That is the difference that a UK Labour Government can make.
What about house building in Scotland? Completions are down 7 per cent, new starts are down 9 per cent and the approval of affordable homes is down a staggering 48 per cent from its peak in 2018. I raise that issue because, in the East Lothian constituency, which is part of the South Scotland region, 80 out of every 100,000 people are still living in temporary accommodation, while the Scottish average is 59. There is a housing emergency in Scotland, and the Scottish Government has admitted that. However, the SNP is doing nothing; in fact, last year, it cut the affordable housing budget by 22 per cent.
The “Truth About Youth” survey for 2025, which was published today, reached out to young Scottish people and asked them what their number 1 issue was. Their number 1 issue is affordable housing, with 51 per cent bothered by the issue.
Will the member give way?
I do not have time.
In the survey, 48 per cent said that affordable housing is the most important issue for their future.
To close, I will pick up one other element from the “Truth About Youth” survey. In that survey, 40 per cent of the young people who responded said that they thought that their childhood was worse than it would have been when their parents were growing up. Only 24 per cent said that they felt that it was better. That is a damning indictment of a Government that has been in power for all or most of the lives of the young people who responded. It is this Scottish Government that is responsible for that, not another Government.
Therefore, while we discuss the impact of the UK Government’s spring statement and the money and investment that it represents, the challenge for the Government here is to consider its impact and what it chooses to do with its resources.
The final speaker in the open debate will be Michelle Thomson.
17:41
I will restrict my remarks to the spring statement. It was sold as a little bit of tinkering to help people, which perhaps sounds kinder than what it really was: a full-on attack on the most vulnerable in our society—and on the most vulnerable of those, in the form of disabled people. A week before the spring statement, cuts to PIP were announced. A week later, the overall cost of PIP was further cut by the announcement of a freeze for existing recipients. That change had nothing to do with rational policy reform and certainly nothing to do with helping people into work; rather, it had everything to do with reaching the chancellor’s headroom target.
The most revealing aspect of the spring statement is that it has resulted in restoring the anticipated headroom to exactly £9.9 billion. As Paul Johnson of the IFS said,
“The Treasury has clearly worked overtime to ensure ... precisely the same fiscal headroom”.
He went on to comment that that is not a terribly sensible way of either using the IFS’s time or making policy. That understatement gently points out that it is the chancellor’s restrictive fiscal rules that are driving policy, rather than the aim of doing the right things for people and the economy.
It is increasingly likely that the headroom will vanish well before the next fiscal event and might be wiped out entirely by the coming of tariffs. On tariffs, Sir Keir Starmer claimed today:
“we have prepared for all eventualities”.
If that were so, an indication of strategy or scenario plans would have been set out in the fiscal event of last week, but there was none. The cost of borrowing has seen a rise in interest on 20-year gilts to around 5.5 per cent, and debt interest in the UK is now approaching £111 billion each year. That is not the result of emerging world uncertainty; it is a result of structural issues in the UK economy, compounded by Brexit. Those payments for debt dwarf the entire Scottish Government budget. The spring statement could ultimately lead to a further cut of around £900 million for the Scottish Government.
Will the member give way?
I will carry on, if the member does not mind.
It is claimed that cuts to overseas aid are to fund a rise in defence spending. Yet, by comparing the composition of cuts and increases, we see that overseas aid is being cut by £3.2 billion in day-to-day spending, which counts against the main fiscal rule, whereas the rise in defence spending is very different, with only £0.6 billion in day-to-day spending. The planned increase in defence spending is over 90 per cent capital, which is completely different from current patterns of defence spending, in which only 35 per cent is capital. In other words, the net effect of the changes to overseas aid and defence is to contribute £2.6 billion towards restoring the headroom target.
Even after all that effort, the OBR gave the current plans only a 54 per cent chance of achieving a budget balance by 2029-30. Even that 54 per cent is predicated on an end to fuel duty freezes, which we all know will not happen.
The spring statement also shaved more off the earlier announced plans for departmental budgets. It is assumed that the UK Government administration budget will be cut by 15 per cent, but details on that are scarce. Previous Labour Governments made regular efforts to achieve governmental savings, but none ever materialised. Indeed, in almost all cases, expenditure on administration rose. As the Fraser of Allander put it, the spring statement is riddled with “optimism bias”.
There is a very large elephant in the room: how could we address the need to generate economic growth as a means to improve our economic health and tackle the international uncertainty that has been born of wars and Donald Trump’s tariffs? Perhaps a pre-spring statement survey from YouGov can help. Closer trade links with the EU were seen as the best option even by Labour voters, 65 per cent of whom thought it would pay greater economic dividends compared with a mere 15 per cent who favoured benefit cuts. The electorate seem to have a better grasp of economics than the chancellor.
Presiding Officer, you know that I favour using quotes to illustrate my points in a speech. To draw this time from the musical “Wicked”, Scotland is
“through with playing by the rules of someone else’s game.”
To quote the show again, I go as far as to say the fiscal event is a load of “old shiz”.
I will take advice on that one, Ms Thomson. We move to closing speeches.
17:46
This afternoon, I find myself in the unusual situation of agreeing with Liz Smith on the UK Government’s self-imposed difficulty over its fiscal rules. An article in this weekend’s Financial Times raised concerns about the OBR’s role in UK democracy and the absurdity of sticking to such rules when the game has changed, especially given the absence of good data for the OBR to use and its history of very poor predictions.
I will go through and comment on members’ contributions. Craig Hoy showed his sympathy for people who are on salaries of £100,000. He was clearly setting out his stall when we were mostly talking about the worries of the most vulnerable, who need benefits just to be able to wash and look after themselves. He challenged Labour to take a bold approach, but he does not think that taxing rich people is a bold approach, perhaps because it makes things awkward at Conservative dinner parties. Accusing Labour of implementing economic misery, given the economic misery that was imposed by Brexit and Liz Truss, was really something to hear from across the chamber.
I challenge whether a benefit system—a compassionate social safety net that looks after everybody and gives everybody a fair chance—can ever be described as unsustainable. What is unsustainable are tax breaks for fossil fuel extraction and use, while, at the same time, we have to spend more money to sequester the carbon away. We are paying twice: once for subsidising it, digging it up and burning it, and then to put it away safely so that it does not harm our environment too badly. That is an insane use of resources and priorities.
There is recognition across the chamber that North Sea oil and gas extraction is now in decline, and I hope that accepting the rate of decline will allow us all to focus on transition and building a green economy. If one thing is missing from the spring statement, it is the chancellor taking opportunities to grow and invest in the green economy.
Preventing climate catastrophe is not optional. Members might recall me sharing information a few weeks ago from the CBI, which reported double-digit growth in the green economy, and I will repeat the figures.
CBI Economics calculated that every pound that is spent on the green economy creates an additional £1.89 in gross value added across the wider economy. In other words, the economic benefits, including the ripple effect into the green economy, exceeded £157 billion. The future is green. If the chancellor is looking for growth, she will find it in the green economy.
The CBI report makes it clear that green industries are primed for rapid growth if policy makers create the right regulatory environment for them. It warns that, should policy makers fail to capitalise on the opportunities, the UK risks losing out to international competition. The CBI’s chief economist, Louise Hellem, said:
“It is clear, you can’t have growth without green ... 2025 is the year when the rubber really hits the road—where inaction is indisputably costlier than action. We are approaching critical points of no return for achieving essential outcomes in energy security and emissions reduction.”
In her spring statement, the chancellor could have made a feature of measures to bring about green growth, which would support the desperately needed transition away from the declining oil and gas industry to industries that have a long-term future.
I challenge some of the points that Michael Marra made. First, on the tax base, not thinking beyond income tax represents a lack of imagination. There could be pollution taxes, carbon taxes, wealth taxes and land value taxes. The growth that the economy has experienced for the past 200 years has created wealth, but most of it is being hoarded by very few individuals. When wealth is hoarded—whether it is invested in depreciating assets such as luxury cars, held in static assets such as mansions or hidden offshore in tax havens—it is not contributing to the economy. In order for money to contribute to the economy and for that wealth to do us good, the money needs to circulate. Cracking down on tax avoidance and winkling out that money through wealth taxation are the ways to get money back in circulation and ensure that the system works for everybody.
Secondly, Michael Marra mentioned the increase to the national living wage, but that is still not a real living wage. It traps all workers who receive it in poverty. That is nothing to brag about.
The chancellor missed opportunities in her spring statement to make the UK economy fairer and to support people in need while, at the same time, recognising that a new world requires new fiscal rules and new priorities. I am very disappointed by the impact that her decisions will have on the UK as a whole, but especially on Scotland.
17:52
I welcome all the contributions to the debate. I will begin where Lorna Slater finished, because the topic of the fiscal rules has underpinned much of the discussion this afternoon. A very significant change in the fiscal rules was made following the UK Government’s autumn budget. There was a change in the amount of money that could be used for long-term capital investment and in how it was counted against debt. That radically changed the prospects for capital investment in this country over the years to come.
I disagree with many members in that, at a time when we are seeking economic stability and leadership, I do not think that it would be credible to radically change the economic rules again within a matter of weeks. That would not send the right signals to people who deal with the markets, given our highly indebted economy.
The member is absolutely right about the markets. Liz Truss had an absolutely unmitigated disaster because she did not listen to what the financial institutions were telling her. However, there is a danger that Rachel Reeves will repeat that when it comes to listening to advice and responding to the changing world. Does the member agree that that could become a problem?
I certainly agree that we have to listen to expert learned advice on the structure and direction of our economy when we make decisions. That is absolutely clear. Liz Smith advocated a shift in the fiscal rules, but she did not answer the question about what policy approach should be taken. The challenge is how we achieve the higher amount of fiscal headroom that Liz Smith, Michelle Thomson and other members appear to be advocating. If that is not to be provided through cuts to public spending and higher taxes—finding a match between the two—where will it come from?
I thought that Michelle Thomson seemed to be simultaneously advocating higher debt in the UK economy and bemoaning the high indebtedness of the UK economy. I say to her that she will find that that is, to quote “Wicked”, indeed “Defying Gravity”.
Kenneth Gibson made similar points in bemoaning the situation regarding the fiscal rules. Again, no answer was given as to what the fiscal rules should be.
Some front-bench members asked, “What about Germany?” Of course, the situation in Germany is that it has indebtedness of 62 per cent of its GDP in comparison with indebtedness of 100 per cent of GDP in the UK economy. The change to Germany’s fiscal position has resulted in the largest increase in interest rates in 30 years. If that had happened in this country, that would have led to a £4 billion comparative increase in our debt. How would the Scottish Government deal with that?
What the member chooses to ignore is that other EU countries have similarly set aside defence spending outside their debt rules and have managed to do that successfully. Rachel Reeves had choices, and Michael Marra seems to be defending the fact that she has made the choice to fund her programme on the backs of disabled people. Is he comfortable with that?
That is certainly not what I am saying. What I am setting out is that the choice that is in front of the chancellor is between investing in fiscal competence and stability or moving away from those rules. The case that I am making, which I have set out quite clearly already, is that I do not think that this is the time to move away from those rules. We had a significant change to the fiscal rules only a matter of weeks ago, and to do that again at this point would cause chaos. We do not have to look too far for the example of that chaos: Liz Smith pointed out what happens when somebody like Liz Truss takes such an approach.
Craig Hoy was dismissive of the three interest rate cuts that have taken place under the Labour Government since it came to power.
Will the member take a brief intervention?
I am afraid that I do not have the time.
I gently remind Mr Hoy that rates were at 0.1 per cent in 2020 and that they peaked at 5.25 per cent in August 2023. I wonder what happened in that intervening period. I will tell members what happened: Liz Truss happened, and there was an absolute surge in interest rates. They are now down to 4.5 per cent, which is not as low as we would like them to go—we would like them to go further—but that decrease is the result of having a stable fiscal and economic policy that can deliver for the long term.
The challenge that we faced as a Government when we arrived last year was the trilemma of no growth in the economy for 14 years due to the horrific Tory Government; a massive in-year black hole in which the national reserve had been spent three times in the space of the first quarter; and public services that were in crisis. That is the context that Martin Whitfield was talking about, and it was a result of an utterly reckless approach that is similar to that which is being advocated by people in relation to the abandonment of the fiscal rules at this point.
In a fine speech, Martin Whitfield also pointed out the positive impact that using the capital headroom that we have created to invest in housing for the long term can have, and said that the budget has resulted in the biggest positive growth impact that the OBR has ever reflected in its forecasts. Overall, the budget in the autumn has resulted in £5.2 billion of additional spending for the Scottish Government to invest in public services in this country.
I have to say again to the SNP that being responsible with the public’s money does not mean demanding £70 billion of additional spending and then opposing every revenue-raising measure to enable that. Its latest idea is to change the fiscal rules to try to find a means to obtain more debt without ever recognising the impact that that would have on our interest rates. The suggestion is not serious, it is not credible and, frankly, it is impossible.
17:58
I start by reiterating a point that I made earlier this afternoon and which Alex Cole-Hamilton echoed in his speech. I hope that we will not see a trend whereby Government front benchers present statements to Parliament for 20 minutes, do not take any interventions, do not allow any interruptions, do not allow any questions and then steal Opposition time when it comes to the debate. That would be a very unhelpful development.
In her lengthy statement, the Cabinet Secretary for Finance and Local Government made some points that I agree with. She was quite right to make some of the criticisms that she made of Rachel Reeves and the Labour Government. Craig Hoy reminded us of some of the fiscal backdrop. Labour inherited a growing economy, with inflation down and unemployment low. Of course, there was a budget deficit that was inflated by all the payment support for the Covid pandemic, the furlough scheme and the cost of living payments that were made to individuals but, nevertheless, the budget deficit was half what the Conservatives inherited from the previous Labour Government in 2010.
What do we have now? In the UK, economic growth is barely above recession levels, inflation is up, growth forecasts have been halved and business confidence is in the doldrums. The fiscal headroom that Rachel Reeves thought she had has now gone.
All that is even before the national insurance increases kick in on Sunday—a veritable tax on jobs, as Liz Smith reminded us. That tax on jobs will deliver job losses; that is what the Federation of Small Businesses tells us when it surveys its members. The Office for Budget Responsibility estimates that the national insurance increase will lead to lower wages—76 per cent is expected to be delivered through lower wages for staff from 2026-27.
Against all that, we have the threat of tariffs. In a few hours, we will learn more about the impact that they will have. I say gently to Lorna Slater that it is really important that we do not inflame the situation in this chamber or elsewhere by making comments that might be unhelpful. We do not have to love or like Donald Trump or his regime, but it is very important that those in positions of leadership in the United Kingdom do not overreact to the action that he might take.
Murdo Fraser is right to say that it is important not to overreact in these days of turmoil, but does he also recognise that it is important that the Government does not overly kowtow to Donald Trump through decreasing the digital services tax or removing other payments that American companies pay in order to try to avoid the tariffs that are coming?
I know that Mr Cole-Hamilton bought and drove a Tesla and that he then sold it. I know that he then went over to campaign for Kamala Harris. Maybe he is a little bit embarrassed about his actions. I think that it is very important that we act in the interests of Scottish businesses that are looking to export to America and that we tread very carefully in that respect.
I turn to some of the comments that the cabinet secretary and SNP members made about rejoining the EU. At this particular point, when we are potentially facing the prospect of Donald Trump imposing tariffs on the EU but maybe not on the United Kingdom, nothing could be more misguided than looking at rejoining the EU, until we see where that develops. That would be a staggering proposal in terms of the interests of the UK economy.
I would just like to note that it is extremely unlikely that the UK would be able to rejoin the EU by 9 pm this evening, when the announcement about tariffs will be made. On a serious note, does he recognise that the UK has left itself between a rock and a hard place—aligned to the US, with Trump at its helm, and outwith the EU? That must surely be a concern for Murdo Fraser.
Surely the opportunity to strike a bespoke trade deal with the US that avoids the possibility of tariffs on Scottish and British exports is something that we should all welcome and not try to denigrate.
We have heard about Labour’s economic legacy: the broken promises that we have heard about from others; the winter fuel allowance that has been withdrawn; the farm tax that has been introduced, hitting farmers; the national insurance increases that I have referred to; the benefit cuts; and the promised £300 cut in fuel costs that has not been delivered. My good friend and our former colleague as an MSP Neil Findlay is, sadly, no longer with us in Parliament. He is abandoning the Labour Party because of its “vindictive and brutal policies”—at least he has some guts.
That is enough about Labour. Let us look at the SNP record. We now see a record tax gap between Scotland and the rest of the UK. At a time when people are struggling with the cost of living, we are seeing water charges going up and eye-watering council tax increases of 10 per cent or more, at the same time as people are seeing services being reduced.
Our universities are under threat. The University of Dundee faces 700 jobs being cut due to the funding settlement that it is getting from the Scottish Government. Still, the cost of Government goes up and up, with more civil servants—there have been 500 extra senior civil servants in the past two and a half years. If Mr McKee is looking for where to swing his axe, I suggest that he starts with the Scottish Government and makes progress from there.
The cabinet secretary dangled the carrot of a wealth tax, which is an interesting proposal. I wonder whether anybody on the SNP front bench can tell me how it would be implemented, who it would have an impact on and how much money it would raise. In fact, is there any country in the world that has successfully implemented a wealth tax? If anybody on the SNP front bench can tell me where a wealth tax has been introduced, I will give way to them now.
No, of course not, because that has not been the case—there is no country in the world that has successfully introduced a wealth tax. It is a chimera, which has been introduced just to give the SNP something to say. In fact, its record is one of tax, tax, tax. In the United Kingdom, we have the highest tax burden that we have ever had in our history. In Scotland, it is higher still.
There is a new policy from the SNP that did not get mentioned today—a new policy, or rather a reheat of an old policy: full fiscal autonomy. The cabinet secretary wrote to the Scottish Affairs Committee at Westminster on 16 January to say that the SNP wants full fiscal autonomy, with all revenues raised in Scotland to be retained in Scotland and all expenditure paid for by the Government here.
What does that mean in practical terms? According to the Scottish Government’s own figures, the gap between revenue and expenditure in Scotland is £22.7 billion. That is a deficit of 10.4 per cent, which is twice that of the United Kingdom. In relation to the United Kingdom, that gives us a fiscal gap of £8 billion, or 12.5 per cent of the Scottish Government’s annual budget, and the Scottish Government has no idea how that gap would be filled—by cuts or by tax rises. Let us remember that these are the people, in the SNP, who were challenging us all the way through the budget process by asking us where we would find £1 billion; they are proposing to cut the budget by £8 billion—by eight times more.
We have two left-wing Governments letting our country down, with more tax and lower growth. Whether it is under Labour or the SNP, we are paying more for less. You are better off with the Conservatives.
18:06
I welcome this afternoon’s debate and thank members for their contributions. I will cover some of them briefly later.
As my colleague the Cabinet Secretary for Finance and Local Government said in her own statement, the UK spring statement has caused widespread concern, as has been evident from listening to members this afternoon. We all have constituents who are very worried about the impact of the chancellor’s cuts to benefits for sick and disabled people, and we all have seen the alarming impact assessment that the UK Government has published on its own policies, which clearly shows the number of people who will lose out as a result of the changes.
The finance secretary also described how the UK Government’s cuts will impact on our budget for future years. That will mean less money to support our priorities and the investment that we are making to strengthen public services and tackle poverty.
It is yet another example of the UK Government taking bad decisions that impact on the funding that we have for our priorities in Scotland. The Scottish Government is already spending £210 million this year to mitigate damaging UK Government welfare policies, and we have committed to effectively scrapping the two-child limit from next year, but we are at the limit of what we can do with our current powers. The UK benefit cuts will reduce the funding that we receive for our devolved benefits; indeed, funding from the UK Government for social security is forecast to reduce by more than £400 million in 2029-30.
The funding challenges that we face are made worse by the fact that the UK Government is short-changing us on funding for the rise in employer national insurance contributions, to the tune of around £400 million. We have called on the chancellor to commit to fully funding the additional costs, but she has failed to do so, meaning that the Scottish Government faces having to take funding from front-line services to fill the gap.
As we are talking about taking money from front-line services and putting it elsewhere, if the Government sticks to its guns on welfare expenditure and continues to spend £2 billion more on welfare expenditure than it receives in Barnett consequentials, where is that money going to come from: front-line services or tax rises?
The Scottish Government will very shortly publish our medium-term financial strategy, our fiscal delivery sustainability plan and our public service reform strategy, which will clearly outline how we will continue to balance the budget—something that we have done every year for the past 17 years and something that we will continue to do into the future.
The finance secretary outlined earlier how we can expect our funding to be reduced in the years ahead, and that makes it essential that we focus on our priorities and ensure that our budget is spent effectively. All of us in this Parliament need to understand that we have to not call for additional spending—as we heard from Craig Hoy himself, who called for tax cuts in one breath and more funding for public spending in the next. Members need to understand the reality of the situation. Indeed, we face the prospect of further cuts and tax rises in the chancellor’s autumn statement, as she struggles to maintain her fiscal rules.
I want to talk briefly about our public service reform programmes, which have secured significant cost-avoidance and cash-releasing savings of more than £200 million over the two years up to the end of 2024-25. That is only the beginning; more work is being undertaken on a weekly basis to identify more opportunities to redirect resources to the front line.
Our £30 million invest-to-save fund will catalyse efficiency, effectiveness and productivity projects. We are also proactively addressing the need to control workforce size in order to remain fiscally sustainable. Since 2022, recruitment controls in the Scottish Government have reduced the size of the workforce by almost half a per cent in 2022-23; by 3 per cent last year; and by a similar number this year. That trend will continue in future years.
Is the Scottish Government in a position to produce some statistics about the savings that have already been made, and which the minister keeps referring to, so that we have a guide to what progress is being made? I am sure that the finance committee would welcome that, too.
Yes—absolutely. There is a full breakdown of that £280 million. I will send it to Liz Smith after this debate, and I will happily share it with the finance committee, too.
The Government is committed to working right across the economy to maximise the opportunities that lie ahead and to deliver economic growth, despite the constraints and policies of the UK Government. We remain laser focused on the vision set out in our economic strategy, which is to deliver fair, green growth for all of Scotland, and we are making good progress. Since 2007, GDP per person in Scotland has grown by 10 per cent, compared with just 6 per cent in the UK, and productivity in Scotland has grown by an average rate of 1.1 per cent, compared with a UK average of 0.4 per cent.
Our economy remains resilient, with low unemployment and strong earnings growth. Our unemployment rate of 3.8 per cent remains lower than the UK rate of 4.7 per cent, and proportionally more workers in Scotland are earning the real living wage compared with the rest of the UK.
As for inward investment, Scotland has been the most attractive destination in the UK outside of London for such investment for nine years running. Inward investment projects in Scotland grew by 12.7 per cent in 2023, which is more than double the rate across the rest of the UK. Even now, the latest three-month data in Scotland shows 0.5 per cent growth, compared with 0.2 per cent for the UK. The Tories have been talking about how great things were back in the day when they were in office, compared with where Labour has taken the economy since it has been in power. However, the data from July last year, when the Tories left office, shows that growth in the UK was at 0.2 per cent, and higher than that in Scotland.
In this year’s Scottish budget, we are laying the foundations for the long-term success of our people, places and businesses, including by investing in offshore wind to the tune of £150 million and providing a further £200 million to the Scottish National Investment Bank. However, we need the UK Government to use its reserved powers to support the Scottish economy by supporting tailored migration routes, such as the proposed Scottish graduate visa; accelerating the delivery of offshore wind and hydrogen projects; and giving the go-ahead for Acorn and the Scottish cluster’s carbon storage and utilisation project.
I also want to talk about Brexit, which is a hugely important issue. We might not be back in at 9 o’clock this evening, but Brexit—a misguided policy supported by both Labour and the Tories—has resulted in a £2 billion hit to the funds available for public spending in Scotland. Just think what we could do with that money.
With regard to members’ contributions, Kenny Gibson highlighted very clearly the discontent within Labour ranks; a number of Labour members highlighted the misguided nature of the welfare policies that are being taken forward by the UK Government; and Michelle Thomson expertly unpicked the optimism bias underpinning the UK Government’s spring statement. Liz Smith made, as always, an intelligent contribution, focused on the UK Government’s fiscal rules—it is true to say that we will miss her contributions in the chamber when she retires.
However, I think that, as is often the case, the prize goes to Kevin Stewart, for working his nautical theme to death. He told us that, as well as being in a sea of British despair and needing to chart a new course and escape from the UK sinking ship, we will be hit by even more waves of despair as we proceed to take that path.
It is deeply disappointing that we face the prospect of welfare cuts and reduced budgets as a result of the chancellor’s statement. The Cabinet Secretary for Finance and Local Government will set out our medium-term financial strategy at the end of May, and it is up to all of us in this Parliament to face up to those challenges.
As we move forward, the Scottish Government will remain focused on its priorities of eradicating child poverty, growing the economy, tackling the climate emergency and ensuring that we have high-quality and sustainable public services. Those are our priorities and the priorities of the people of Scotland, but if we are to deliver the full potential of Scotland, we need to have the full powers of independence.
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