Meeting of the Parliament 14 December 2016
Tomorrow, the Cabinet Secretary for Finance and the Constitution will deliver an historic budget. It will be historic not just because it will be the first budget to be delivered by the current finance secretary, but because the Scottish Parliament, for the first time, will use substantial new tax powers. It will be able, as never before, to vary the rates and bands of income tax. That is in addition to control over land and buildings transaction tax, over the aggregates levy and over business rates.
In advance of the budget statement, the Scottish Conservatives have a very clear message: we do not believe that families and businesses in Scotland should be taxed more highly than those elsewhere in the United Kingdom. It is time for the Scottish National Party to take its hands out of the pockets of hard-working Scottish taxpayers and to concentrate instead on measures that will grow the economy and therefore grow the tax base. That is how we will create a more successful and prosperous Scotland, and how we will raise the funds that are necessary for our vital public services—not by hiking taxes and making Scotland uncompetitive.
The backdrop to the debate is Scotland’s economic underperformance. I hardly need remind members about the extent to which the Scottish economy has lagged behind that of the rest of the United Kingdom. Despite there having been a shallower recession in Scotland, its economic recovery has been weaker than the UK’s, and economic growth in real terms has lagged behind that of the UK since the fourth quarter of 2009.
Today’s unemployment statistics tell us that unemployment is higher in Scotland than it is in the rest of the UK, and is rising when it is falling elsewhere. Economic activity is lower, productivity is lower and business confidence is lower—now it is at its lowest point since the 2008 recession. Overall, out of 30 economic indicators, the Scottish economy lags behind that of the UK on 25.
The prospects look little better. Last week, the EY ITEM club published its forecast for Scottish economic growth, which suggests that in the year ahead it will lag substantially behind that of rest of the UK. Only yesterday, we had the latest economic commentary from the widely respected Fraser of Allander institute, which states that Scotland’s recent growth rate has been just one third that of the UK, that growth will remain below trend and that unemployment is likely to rise. That is even before we consider the consequences—positive or negative—of Brexit.
The reason why all this matters in the context of the Scottish Government’s budget tomorrow is stated clearly in yesterday’s Fraser of Allander report. It says:
“With new tax powers coming on-stream in April, it is vital that the gap with the UK is closed.”
That is absolutely right because, from April, the performance of the Scottish economy will determine the overall size of the Scottish Government’s budget.