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Economic Development
(Cross-cutting Expenditure Review)
A debate on motion
S2M-3031, in the name
of Des McNulty, on behalf of the Finance Committee.
The Deputy
Presiding Officer (Trish Godman):
The next item of business is a debate on motion S2M-3031, in the name of Des
McNulty, on behalf of the Finance Committee, on its second report of 2005,
entitled "Cross-cutting
Expenditure Review of Economic Development".
Mr Brocklebank: The debate is on the Finance Committee's report into
economic development. It is about the Executive's record, not any potential
or putative record that the Tories might have in the future.
If the Executive persists in claiming that the economy is its top priority,
it is vital that it provide detailed assessments and tackle barriers to
growth. As a matter of urgency, the Executive should at least cut
non-domestic rates to the level at which they are in England. I look forward
to an early announcement from the new Minister for Enterprise and Lifelong
Learning that he will be as good as his word and — as he promised in his
leadership campaign — that he will slash business rates. I am sure that he
will have the full support of Allan Wilson in that.
The Deputy Minister for Enterprise and Lifelong Learning (Allan Wilson):
Perhaps we should return to reality, although I was interested that Jim
Mather — whose speech was slightly more on this planet than Alex Neil's —
counselled us to look to Kansas, which he said was the best example of how
to proceed. That was a welcome departure from the cherry picking of small
European nations that usually goes on, and the cherry picking within small
European nations of those parts of their fiscal, economic and monetary
policies that SNP members like as opposed to those parts that they do not
like.
It is welcome that the nationalist policy on growing the economy has matured
from the famous sprinkling of fiscal fairy dust, which was the last
solution, to following Dorothy down the yellow brick road, where presumably
we will all meet up with our own wizard of Oz. I seem to recall — I could be
wrong — that the moral of that story was that there was no wizard of Oz. No
single supreme being existed who could wave a magic wand and make it all
right. The answer actually lay within. In Scotland and the UK, dare I say
it, we have to look to ourselves for the solution.
Stewart Stevenson: The minister is getting there.
Allan Wilson: I will add a couple of statistics, which I think suggest that
we are indeed "getting there". The number of unemployed people is an
important marker of the strength of the economy. I recall the days when
millions were unemployed in this nation. The claimant count for unemployment
in Scotland has gone down 45 per cent since May 1997, which means that 45
per cent more of our fellow citizens have not been consigned to the dole
queue since Labour came into Government. That number is down 35 per cent
since May 1999, when the present Scottish Executive came into power.
The number of people in employment, which is also an important indicator of
economic success, is currently 2,441,000. That seasonally adjusted figure is
up 8 per cent since spring 1997, when the Labour Government came to power,
and it is up 7 per cent since spring 1999, when the Scottish Executive
assumed responsibility for some of the supply side measures that we have
been discussing.
Alex Neil: Has the minister read the report from the University of Glasgow
that points out that the real level of economic activity and unemployment in
Glasgow is 28 per cent? After eight years of Labour Government, that figure
is seven times the claimant count.
Allan Wilson: Alex Neil and I have had a number of exchanges on this
subject. I have no doubt that one of the greatest tasks facing us in the
delivery of the economic growth that we all seek lies in giving those people
who are economically inactive the opportunity to make a contribution.
Glasgow is a classic case in point. We know that at least half of those who
are economically inactive would welcome the opportunity to get back into
employment and to make a contribution. Were we able to achieve even a
proportion of the growth that would come from getting those people back into
the labour market, growth rates would undergo a very welcome increase.
Population forms part of the same equation. Indeed, Jim Mather counselled me
in his speech to do something about it. Having a broader pool of labour upon
which to draw is an important feature of economic growth. In the context of
this debate, it is worth referring to the report from the Ernst & Young
Scottish independent treasury economic model club — the Scottish ITEM club
report — which came out just this week. The club's summer update predicts:
"Scottish growth will hold up better over the course of 2005 than that in
the UK as a whole".
The Scottish economy is expected to close the growth gap with the UK as a
whole from 1.2 per cent, as it was last year, to 0.7 per cent in 2005. The
Scottish ITEM club views the news of renewed migration as evidence that
Scotland's prospects are "not as gloomy as some commentators would like to
portray."
I wonder who the report's authors could have been talking about. The report
says that Scotland enjoyed a net gain of "26,000 migrants in 2004 ... an
unprecedented gain, with both domestic and international migration
contributing to the upturn."
Jim Mather: I hear exactly what the minister is saying, but I invite him to
consider, compare and contrast the performance of Norway, where the
population has grown from 2.2 million to 4.6 million over 100 years; that of
Scotland, whose population has been oscillating around 5 million over the
same 100 years; and that of Ireland, which is poised to double its
population in 50 years. Is the Executive's performance on population growth
adequate in that context?
Allan Wilson: Kansas did not last very long, it has to be said. All of a
sudden, it is Ireland and Norway. To help illustrate the point, I continue
to quote from Dougie Adams, the economic adviser to the Scottish ITEM club.
He says:
"The idea of an irreversible decline in the Scottish population needs to be
revised."
That is good counsel for the nationalists. Dougie Adams continues:
"Nearly 100,000 people arrived to stay in Scotland between the middle of
2003 and mid 2004, offset by just over 70,000 who left, 26,000 of whom went
abroad. In the past, periods of gain from migration have tended to coincide
with recession in the greater south, but this latest experience looks
different."
Therefore, the recent population increase is not a freakish one-off but
represents a success for our strategy of growing the economy and making
Scotland a place to which people want to come so that they can stay and work
here.
Murdo Fraser made some interesting points about current levels of public
spending on economic development. There is no universally accepted
definition of what constitutes expenditure on economic development, but it
is arguable that all public spending has some impact on the economy. Some
spending, such as our funding of Scottish Enterprise, is directed
immediately at promoting entrepreneurialism, dynamism, business growth and
skills development. However, although expenditure on things such as health
is not directed primarily at promoting economic development, such spending
has an important role to play in supporting such development because it
helps to maintain a healthy and productive workforce, which is a fairly
elementary prerequisite of economic activity.
The assumption that all public sector spending stifles private sector growth
is simply untrue. According to the OECD, many of the fastest-growing
European economies have public sectors that are of a similar size to, or
larger than, that of Scotland. For example, over the past decade, levels of
economic growth in Denmark and Sweden, which are the OECD countries with the
largest public sectors, have exceeded both the European Union and euro-zone
averages.
Who could credibly claim that increased investment in basic education and
skills and more resources for research and development, innovation,
investment in the electronic and physical infrastructure and for the
promotion of investment opportunities in Scotland is holding back growth? It
is not true. What stifles growth, in both the public and private sectors, is
waste and inefficiency. For our part, we are committed to do all that we
can, through the efficient government initiative, to secure better
efficiency, effectiveness and productivity for every
pound of public money that is spent in Scotland.
Murdo Fraser: Although the minister is right to point out that there are
exceptions to the general rule, in that countries such as Norway have shown
high levels of economic growth, does he accept that countries that have
lower levels of taxation and state intervention generally deliver higher
economic growth levels?
Allan Wilson: That is why we have one of the lowest levels of business
taxation of any of our comparator OECD countries.
The other myth, which Ted Brocklebank propagated and which is perpetuated
even in some of our more celebrated national newspapers, is that public
sector employment is necessarily a constraint on growth. I accept that that
could be the case if private sector development were restricted by virtue of
the fact that skills that would otherwise be available to facilitate growth
were denied to the private sector because they had been sucked up by the
public sector. However, an interesting statistic — on which the Presiding
Officer will be pleased to learn I will conclude — is that, of the 150,000
Scots who have entered employment since the creation of the Scottish
Parliament in 1999, some 110,000 are in the private sector.
Only one quarter of the recent huge expansion in employment has been in the
public sector and less than 3 per cent of the increase is accounted for by
central Government. The remainder represent those who now work in the
national health service and in local government, including front-line
personnel such as teachers, police officers, care workers and fire-fighters.
If the Tories really believe public sector employment to be a constraint on
growth, they should say how many of those front-line staff — teachers,
police officers, care workers, fire-fighters and
others — they would no longer require for delivering our public services.
On that progressive note, I conclude by commending the Finance Committee for
its insightful look at the Executive's spending plans.
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