Scotland’s Economy

I beg to move,

That this House has considered Scotland’s economy.

It is obvious that Scotland has the greatest of economic potential. It has some of the best universities in the world; a brilliant energy sector, with the skills and ingenuity to be at the forefront of the energy transition across the world; and the businesses of the future, such as the gaming industry in Dundee. People across the world love our country. Brand Scotland is a brilliant brand, and people across the world buy our products and, in the modern economy, our innovation and know-how. Most importantly, we value hard work, education and enterprise immensely, and I see that every day across my constituency of Glasgow East. In Scotland, we have always been, and will always be, aspirational. We also have the perfect raw materials for a modern economy. Despite that, Scotland’s economy has barely grown over the last 17 years and Scotland’s public finances are in a catastrophic state, with emergency in-year budget cuts imposed for the third year in a row.

Education is the foundation of a thriving economy. Scotland’s education system was the envy of the world, but that is not the case now. Our universities face significant deficits. Universities Scotland and other experts have made that clear, with real-terms resources to teach each Scottish student cut by 19%, the lowest investment in teaching across the UK and underfunding of research activity by £328 million each year.

It gets worse. The SNP Government have failed to act on the recommendations from the Withers skills review. That recommended a series of critical changes to skills training in Scotland to make our economy fit for the future and our people able to get the work of the future. When it comes to giving people the skills to get good work, delivery of real training speaks much louder than talking and endless consultation.

As for schools, the respected PISA—programme for international student assessment—reviews compare Scotland’s standards with those elsewhere in the world, and they show that Scotland’s educational attainment is falling. The SNP’s response—like a bad premier league footballer—is to blame PISA. With declining educational attainment, you might invest more in teachers—I should declare a minor interest here, because my children go to state schools in Glasgow—but that is not the case in Glasgow. The SNP council has cut 172 teaching posts from our schools this year, with the support of the Greens, due to its mismanagement of the city’s finances and the Scottish Government’s decisions to starve local authorities of much-needed resources.

That has real-world economic consequences. At least a quarter of businesses in Scotland report skills shortages and a lack of qualified candidates for roles. That means less well-paid jobs and less economic growth in Scotland, and it puts Scotland at a real disadvantage against other countries.

The last Labour Government acted on Scotland’s green energy potential. The amount of onshore wind capacity increased sevenfold, and our Government launched support for offshore wind, which was a brilliant success. I was excited to work on some of Scotland’s first offshore wind projects. Brian Wilson, the then Labour Minister and Scottish Labour MP, who put so much of this in place, left a brilliant legacy. That shows the positive power of a Labour Government and Scottish Labour MPs fighting for Scotland year in, year out and day in, day out. The last Labour Government left Scotland and Great Britain with a thriving renewable energy supply chain and industry—the ideal foundations for the road to net zero.

The Conservatives’ response, I regret to say, was stop-start support for renewables and a ban on onshore wind across England. They held one support auction that attracted no bids for offshore wind. It is negligence like that that means that people cannot afford to pay their bills, because wind and solar are now the cheapest forms of power. No one in their right mind would turn down cheap, low-cost, fixed-price energy over 15 years, but the Conservative Government seem to have done exactly that. Small wonder that our supply chain in Scotland is in turmoil.

Supply chain investors do not actually ask for much—just a fair bet, a reasonable measure of predictability, and a reasonable basis on which to conclude that there will be customers to serve over a reasonable period so that they can recoup their investment. The Conservatives failed to provide even that—the so-called party of business.

However, it is not all about the Conservatives. The Scottish planning system is slow and cumbersome. The principal legislation for large wind farms and electricity transmission projects remains sections 36 and 37 of the Electricity Act 1989. Wind farm developers have for many years complained about delays to consent for their projects. Consent for wind farms and transmission projects in Scotland is the responsibility of the Scottish Government. Delays put at risk the next wave of projects that are critical to economic growth and good jobs in Scotland and to getting energy bills down. All of this results in lost jobs and damage to supply chains. All of this means that people in Scotland are paying much more for their energy. And all of this puts Scottish business at a real disadvantage, because energy is a material part of their costs, and those costs are higher than they should be.

Turning to public finances, in September the SNP was forced to fill a £1 billion black hole in Scotland’s public finances within the year—this is not part of planned year-on-year budgeting. They did so in two ways. First, they spent much of the remaining ScotWind receipts, which are not recurring income, but one-off, windfall income that was meant to be dedicated to the energy transition, which is absolutely critical for places such as Grangemouth and Aberdeen. They also made £500 million of cuts, slashing NHS funding and raiding the transport budget, when our transport system is already incredibly unreliable. That is the result of short-term, quick-fix solutions to balance the books, with no long-term plan, no public sector pay strategy and no vision for our economy. After 17 years in power, the SNP has failed to grasp the concept of proper budgeting and long-term thinking. I would not recommend marriage with the SNP: for the honeymoon, you would be offered the Orient Express, but you would not even get the National Express—you would be hitchhiking on the M8 in the rain.

When faced with brutal budget cuts, surely the Scottish Government would make sure that they had spent the money they had, but that does not seem to be their approach. The SNP has failed to spend at least £250 million of European structural funding and may have to hand back up to £373 million of unspent funding. Let us pause for a minute. The UK was a net contributor to EU funds. This is money that Scottish businesses and workers paid into Brussels. We then got some of that back to spend in Scotland, and the SNP is sending it back again. Now, I love Europe and I am pro-European, but even I would venture to say that this is taking love for our fellow Europeans a little too far.

Since the SNP came to power in 2007, it has wasted more than £5 billion of taxpayers’ money on pet projects, failed industrial interventions, incompetence, costly agency spend in the NHS, overspend on infrastructure projects and, of course, the two famous ferries that do not sail. Scots also face much higher taxes compared with the rest of the UK. If I have understood it correctly— I must say I find it difficult to follow—the SNP’s position seems to be that the oil and gas giants who have made billions of pounds of windfall profits due to elevated oil and gas prices should pay less tax, but someone working in Midlothian on £29,000 a year should pay more tax than their counterpart in Northumberland.

The SNP seeks to blame others, including our very new Government. However, culpability for the state of the public finances sits with the SNP. Hon. Members should not take my word for it. The Scottish Government have been persistently and consistently warned that their approach to public finances is simply not sustainable. The gap in public finances has long been predicted by a wide range of organisations and fiscal experts, including the Institute for Fiscal Studies and the Scottish Fiscal Commission—an institute in Scotland similar to the Office for Budget Responsibility, although I am glad to say that Liz Truss did not get anywhere near it. The Scottish Fiscal Commission said of the Scottish budget that

“much of the pressure comes from the Scottish Government’s own decisions.”

The Auditor General has warned that the SNP’s short-term approach to budgets is not addressing unsustainable public finances in Scotland. We can have no confidence that the Scottish Government are able to address these problems. As Audit Scotland said in 2023:

“Historically there has been an implementation gap between public sector reform ambitions and the ability of the Scottish Government to deliver change”.

Translated into more normal language, that means that the Scottish Government keep saying they will do stuff, but they never get round to doing it.

The terrible state of public finances and higher income taxes in Scotland do not concern only working people: 82% of Scottish business leaders are concerned about Scotland’s tax divergence from the rest of the UK. Why? Because it makes it harder to recruit talented people to come and live in Scotland. I would venture to say that that is what we are desperate to do: have more people living, earning and contributing in Scotland.

There are wider problems.

The figures on migration show the opposite, and the hon. Member will join me in recognising that we welcome people from all over the world to come to Scotland. Will he also join me in recognising something that is a good for Scotland’s economy? Before the Brexit referendum, the Conservatives promised a Scottish visa—something that business and the higher education sector are crying out for. For the recent election, Labour figures promised a Scottish visa. I know that the hon. Member is not in the Government, but is that something he agrees with, along with his Scottish Labour colleagues?

Scottish Labour and the Labour party are in favour of bringing talented people into Scotland, and the Scottish Government are welcome to work with us as we seek to ensure that that takes place. As I understand it, the Home Secretary is determined to ensure that it does, and I also understand that the Migration Advisory Committee is looking at the issue carefully. There is no doubt that we want to ensure that talented people can come and work in Scotland; the question is how to do it, and we are seeking to work with the Scottish Government productively on that.

One of the biggest challenges in the Scottish economy is productivity. One key way to get economic growth is to ensure that everyone can make more in the same time. The CBI-Fraser of Allander Scottish productivity index shows that Scotland is lagging behind the rest of the UK on 10 out of 13 productivity indicators, including business investment and business research and development spend. It is worth saying that business investment is simply not enough in the UK as it is, which is why our Government are so focused on increasing business investment and business research and development spend.

I regret to say that the problem comes down in significant part to the Scottish Government. In February 2024, Audit Scotland concluded:

“The Scottish Government’s 10-year economic strategy currently lacks collective political leadership and clear targets.”

That mismanagement has a terrible effect on Scotland’s public services. If Scotland’s economy had grown at the same sclerotic pace as the rest of the UK’s economy, it would be £8.5 billion larger. That would mean that there was more to invest in public services. As the Scottish Fiscal Commission’s work shows, Scotland would have £624 million more in tax revenues each year if we matched the UK’s abysmal performance under the Conservatives. Scotland desperately needs a Government who are pro-worker, pro-growth and pro-business, and that is what we will offer the Scottish people in 2026.

Will the hon. Gentleman give way?

I will make some progress, because I have another 26 pages to go.

The Scottish Government absolutely refuse to take responsibility for the catastrophic state of the Scottish economy and public finances. There is always some other factor, person or force majeure event to blame. I venture to say that the Scottish Government have an abundance of two things at the moment: brass necks and Teflon desks. There is no great mystery about who is responsible for the state of the Scottish economy: the SNP has been in power in Scotland for 17 years and, until July, the Conservatives had run this country for 14 years. The First Minister, the right hon. John Swinney, has been one of the central guiding minds and directing intellects behind those 17 years of incompetence; he was Finance Secretary for more than half of the SNP’s term in office and Cabinet Secretary for Education and Skills for five years.

Labour will take the steps needed to fix the Scottish economy. We are determined to bring outside investment into Scotland, which has been the focus of our international investment summit this week. We are developing a strong industrial strategy. Our new Employment Rights Bill will make work pay and protect the majority of Scotland’s business against competition from unscrupulous businesses that do not treat their employees fairly. An example of that is exploitative zero-hours contracts, which we will banish from Scotland.

GB Energy, headquartered in Aberdeen, one of Scotland’s amazing cities, will spearhead billions of pounds of investment in our energy system, including floating offshore wind, which is a brilliant opportunity for the north-east of Scotland, and hydrogen. We will work tirelessly to help our businesses export and to support our tourism sector. For the last 17 years, the Scottish Government have been selling Scotland to the Scots, but we know that Scotland is brilliant; we have to sell Scotland to the world, and that is what we will do. An early example of that is a deal with Brazil for the recognition of Scotch whisky worth up to £25 million.

Order. I remind Members that they should bob if they wish to be called in the debate. We have an hour and a half in total, and the Government and Opposition spokespeople will have 10 minutes each. Regrettably, given that at least 14 people have indicated that they wish to speak, the time limit on Back-Bench speeches will be two and a half minutes. I am afraid that I will be pretty strict about that in order to give everybody the opportunity to speak. Finally, I ask Members to bear in mind that if there are too many interventions, which should be brief, that limit may be reduced.

It is a pleasure to speak in this debate. People may ask why I have chosen to speak on this matter, but the phrase “a rising tide lifts all ships” applies to the links between the economy of Northern Ireland and that of our Gaelic cousins across the sea in Scotland.

Let me first put on the record my sympathies to the family of Alex Salmond. This is the first Scottish debate we have had since his passing, although we expressed our condolences in the Chamber yesterday. My thoughts and prayers are with his family at this time.

The links between Northern Ireland and Scotland are not simply cultural, although those links are displayed by the numerous Scots bands at the 12 July celebrations and in our shared love of pipe band championships, our shared love of poetry and our shared language, with our Ulster Scots. It is not simply that my Scots brethren and sisters in this House will know what I mean when I call someone sleekit or a gern—by the way, just for the record, there is nobody here who is sleekit or a gern.

We are awaiting an Ofgem decision on whether Northern Ireland electricity can be sourced from Scotland. The scheme would involve building two converter stations—one in Northern Ireland and one in Scotland—and a cable of about 80 miles, depending on the final route, linking the two. That would be a physical manifestation of the trade that takes place between the two nations, Northern Ireland and Scotland, on a daily basis.

One of my staff members is allergic to a number of antibiotics. After the birth of her second child, she needed a particular antibiotic and was told there were none in Northern Ireland. A phone call from the local pharmacy, Andersons in Newtownards, to a small pharmacy in Scotland meant that she had a prescription in the morning, and by the afternoon the antibiotic was with her. The links and the pathways are there, and so too is the friendship.

I congratulate my hon. Friend the Member for Glasgow East (John Grady) on securing this important debate. After 14 years of economic mismanagement, my constituents deserve to see their wages go further, their public services performing better and their local communities thriving. For those aspirations to be met, we need good-quality, well-paid jobs that provide the security people need to plan for their futures and to have the economic confidence to spend in their local areas—to purchase in their local shops, and to support local cafés, restaurants and pubs, such as the Yard House in Coatbridge, which I had the privilege of visiting recently. So many of those establishments are facing real challenges.

In my community, I want to see the creation of jobs, investment in the skills that people need, and support for people who are seeking to develop those skills or to start their own businesses. I am pleased to see the work of our Labour Government. So much good work has already begun towards building a stronger, fairer economy in Scotland, which will provide the foundations to create those jobs: the Employment Rights Bill, which is set to ban exploitative zero-hours contracts, end fire and rehire and fundamentally tackle the scourge of low pay; the creation of the national wealth fund and GB Energy; and the significant event yesterday, which will deliver £63 billion of investment. I am keen to see what that means in reality for people across Coatbridge and Bellshill.

However, critical to that is improving Scotland’s economic circumstances and working to reset the relationship between Scotland’s two Governments. We must not underestimate the scale of the challenge we face. Labour market statistics published in July make for sobering reading, with unemployment rates and inactivity rates above those in the rest of the UK. Those figures show that rebuilding our economy and, more importantly, our communities, household finances and public services will not be easy or achieved overnight. That will require a level of analysis, investment and co-operation between the two Governments, which, sadly, we all know has been absent for far too long.

It is a pleasure to serve under your chairmanship, Mr Dowd. I congratulate the hon. Member for Glasgow East (John Grady) on a very thoughtful speech. I want to make three brief points.

When the North sea oil came, the then Labour Government saw to it that oil fabrication yards were established in different parts of Scotland, two of which in the highlands, at Kishorn and Nigg, I worked in. They were important because they helped halt and reverse highland depopulation—the curse of the highlands and islands for far too long. Welding and fabrication skills were relocated from Glasgow and the Clyde, and other parts of the UK, to those yards, and some of the greatest structures still working in the North sea today were built there, including the Ninian Central and Magnus platforms.

We have the skills there today, but they are ageing skills. The hon. Member rightly talked about the potential of renewables in the North sea, but virtually none of the nacelles and blades are made in this country. We have the fabrication and welding skills, so we should utilise them, as was done in the 1970s. If we do not do that, we are missing a trick.

My right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) is rightly an avid exponent of the potential for space launch from Shetland. I, too, am a keen exponent of the potential of Sutherland in that regard. Orbex, which is based in Morayshire, currently employs 150 and hopes to have perhaps 500 by 2030. There is enormous potential, but the UK Government must match the level of funding coming from Germany and France for the space industry. That is a challenge for the Government, and I am sure they will do their best to meet it.

Lastly, so many of our skilled female workforce are unable to deploy their skills to the full to the betterment of Scotland’s economy because the care that they need for their children is simply not there. They cannot leave their homes to go out and make money for the family and serve Scotland in the best way they can. If we can get that right, we can realise the potential of our female workers; again, we would be very foolish not to.

Yes, well done. I call Graeme Downie.

It is a pleasure to serve under your chairmanship, Mr Dowd. I congratulate my hon. Friend the Member for Glasgow East (John Grady) on securing this important debate.

Back in the mists of time, in 2007, a new economic strategy for Scotland was announced by a new kid on the block, a certain Mr John Swinney, a member of a Government that would rely on Conservative votes for its survival. Let us see how it went.

In 2007 John Swinney promised a “wealthier and fairer” Scotland that would

“enable businesses…to increase their wealth.”

As has already been said, Scotland’s economy has performed far behind what we would have expected and hoped. Just this week we saw the latest NatWest regional tracker published, analysing economic activity across the UK, with Scotland languishing in eighth place out of the measured regions—not a good start.

John Swinney said Scotland would be “smarter”, yet in 2017, when he was Education Secretary, the Scottish Government admitted that young adults

“are more likely to experience low paid, precarious work, and cycling between this and unemployment”.

Just this week the Scottish Funding Council said that the

“reform of the post-school…landscape has not yet been implemented”.

So much for smarter and better opportunities.

It was said that Scotland would be “healthier”. As a former board member of NHS Fife, I could waste an entire speech explaining exactly how that has not been the case: £1.7 billion of NHS funding on agency staff, £1.3 billion on delayed discharge, and a chaotic, overreaching attempt to design a national care service. That makes it three down so far for the First Minister’s 2007 plan.