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The last full financial year showed Scotland's manufacturing sector output growing 2 per cent. faster than the rest of the United Kingdom. Scotland's share of United Kingdom-manufactured exports is considerably higher than its share of manufacturing employment. That can be explained partly by Scotland's success in attracting export-oriented inward investments; it is also attributable to the excellent productivity of Scotland's workers.
The Scottish National party argues that the Bank of England's Monetary Policy Committee takes decisions that favour the service sector in the south-east at the expense of the Scottish manufacturing sector, yet the fact that Scottish-based manufacturing industries are out-performing their counterparts in the rest of the United Kingdom is core evidence that the SNP's premise does not stand up.
Scotland's economy is integral to that of the United Kingdom and its success is due in large part to our competitiveness in the global market. Non-United Kingdom companies now produce more than 70 per cent. of all Scottish manufactured exports and 10 Scottish exporters account for roughly 50 per cent. of the total of Scottish manufactured export sales. The electronics sector is particularly important, accounting for about 53 per cent. of all exports.
Employer survey data suggests that manufacturing employment is still falling, which is worrying to those in that sector. There is no doubt that the difficult conditions in the global economy put pressures on all industrialised countries, as well as Scottish manufacturers. However, Scottish firms are performing well, all things considered, and are well placed to benefit from recent improvements in the global outlook.
That said, Scotland, in line with most developed economies, has seen a significant decline in employment in manufacturing in the past 20 years. During that period the number employed has fallen by a third to about 300,000. That represents 30 per cent. of total employment in Scotland. Much of the decline can be explained by the long-term trend of job losses in the large, labour-intensive industries such as shipbuilding, textiles and steel. However, during the same period, the total number of jobs in Scotland has increased as the growth of the service sector and new high-tech industries, particularly electronics, has more than compensated for the loss of traditional manufacturing jobs.
My constituency, Falkirk West, serves as a microcosm of the Scottish economy. Historically, the iron industry employed a high number of men in the area. In the past quarter of a century, conforming to wider economic trends, most of the foundries have closed. For many, that has been a painful process, and unemployment was high during the Conservative years. In the past four years, however, under the Labour Government, while there remains much to do, employment levels in Falkirk have grown well, and 74 per cent. of working-age people are now in work--the Scottish average is 72 per cent.--and unemployment is down by more than a third on 1997. Much of that is because local people have embraced the need to change with the times. New industries have moved in to replace older ones, taking advantage of central Scotland's excellent communications links and the productivity and enthusiasm of local workers. Jobs may be lost from time to time--for example, in the metals industries, and in the former Wrangler factory, at Camelon--others take their place, with substantial recent investment by companies such as Thomas Cook and Telecom service centres in Larbert, and Scottish Power.
There is no single response to the globalisation of services and products, however, and modernisation cuts across the whole of society and the economy. Our success or failure in the years to come will be based largely on our ability to adapt quickly to the changing nature of the world's economy.
It is therefore vital that we recognise the criticality of diversification. Exports are currently dominated by the electronics, drinks and chemical industries, so we must ensure innovation in new growth areas. That means continuing to address the business birth rate by creating an entrepreneurial culture where business success is recognised and rewarded and business start-ups are nurtured and supported. It also means ever-increasing--
Mr. Dominic Grieve (Beaconsfield): Is the hon. Gentleman aware that in 1997, when the Conservative Government left office, there were 6,600 business start-ups per annum in Scotland, and in the second quarter of 2000 the figure was 4,500 per annum? How does that square with the hon. Gentleman's eulogy of Government economic policy in Scotland?
Mr. Joyce : The hon. Gentleman will be aware of the development of local enterprise companies; my constituency is covered by Forth Valley Enterprise. There is a tight relationship between LECs and the Government. There have been several recent policy statements which would make good reading and encourage the hon. Gentleman in his projection of how well the Labour Government will perform in the coming years.
At the 1997 general election, the Labour party pledged not to increase the rate of income tax and it has not done so. It also introduced a new, higher starting rate of tax. We have always been committed to fairness in the workplace and to striking a balance between the interests of the employee and the interests of the employer. The Tories, on the other hand, have never recognised that protecting the interests of the employee is directly in the interests of the employer. Partnership with trades unions remains fundamental to the Labour Government's approach. In my constituency, that contrasts with the recent example of the SNP-Tory council in taking a major decision, which, in due course, could affect all its employees' conditions of service, without a single mention in advance to Unison, the relevant trade union.
Labour has introduced the individual savings account; far from attacking savings, the new arrangement will encourage many more people to get into the habit of saving regularly. That is a positive measure that will benefit Scotland and the rest of the United Kingdom.
Labour is committed to reforming welfare in a way that stresses the importance of individual productivity through work. The new deal has been a remarkable success. Labour is also committed to ensuring that works pays. That was clearly demonstrated by the introduction of the national minimum wage and its recent upgrade by the Chancellor. It is worthy of note that the Scottish National party was unable to send a representative on a day trip to attend either the original vote on the matter or the Secretary of State's statement on the upgrade of the national minimum wage to £4.10--
Mr. Joyce : Indeed, or to last week's debate on a similar topic. They talk the talk but they do not walk the walk. There is no meaning or sense in having representatives who do not come down to Westminster.
As my hon. Friends know, low pay and low skills go together and are the hallmark of the Tory approach to job creation. Scotland has suffered for too long from both unemployment and skills shortages before 1997. There is no future for Scotland as a low-wage economy. We will never be able to compete on wages with countries--particularly in the southern hemisphere--that pay wages that are a tenth or a hundredth of British wages. National boundaries mean very little in a world where capital can be instantly transferred from one continent to another at the touch of a button. In the modern world of work, both businesses and consumers increasingly interact on-line and across continents.
Scotland is well placed under the Labour Government to develop the education, skills and technological know-how that are central to the knowledge economy. Our universities produce 21 per cent. of Britain's computer science postgraduates and 11 per cent. of all British engineering and technology graduates.
Through the combined effort of the Labour Government, the Labour-led Scottish Executive and many other agencies including the local enterprise companies, Scotland is experiencing a learning revolution in which skills are continuously upgraded and lifelong learning is a reality. Of course, that must happen in a manner that enables people to balance the responsibilities of work and family life while learning. That is happening, and it is reflected in the wide participation in tertiary education. Almost 50 per cent. of Scottish young people attend higher education, and more people than ever are attending vocational courses later in life at institutions such as mine, the Falkirk college of further education. That ever-deepening pool of talent is a tribute to the quality of Scotland's tertiary education system, and it is a fundamental part of the excellent economic prognosis for the next years under a Labour Government.
Only by the practical application of the knowledge generated by our outstanding universities can we hope to generate a successful high-technology economy. By building on the model provided by Cadence and other emerging centres of excellence, such as the research centres for aerospace technology at Prestwick and for semiconductors at Livingston, we will continue to encourage partnership working. Those centres represent best practice in partnership between companies, educational institutions and the public sector.
The Scottish Executive, the DTI and the Office of Science and Technology operate a number of programmes and initiatives to support technology, technology transfer, business innovation and lifelong learning. To build the knowledge base, there are programmes such as the joint infrastructure fund, foresight, the foresight link awards and the Scottish Higher Education Funding Council research development grant. The main grant programme for business innovation is SMART, the small firms merit award for research and technology. The new tax incentive for small and medium-sized companies to undertake more research and development is of major potential importance to this part of the corporate sector.
Several Government initiatives aim to help companies learn from each other. Scottish Enterprise's cluster development action plans are of particular importance to firms in the manufacturing and services sectors. A great deal is being done to promote education
The backdrop for Scotland's economy has not looked so positive for decades. Labour's economic policy has shifted the UK from a boom-and-bust economic cycle to one of stability with a high employment rate, low inflation and low long-term interest rates. The success of the UK and Scottish economies has not happened by accident but most definitely by design. However, even with its inherently positive environment, Scotland still has much to do to maximise its economic potential. Our greatest challenge is, perhaps, the productivity gap. Scotland and the rest of the UK lags behind the productivity of our competitors. The growth of the United States economy over the past decade has been driven mainly by productivity. Scotland has some way to go to catch up.
Increasing productivity is consistent with Labour's idea of sustainable development. It is sound to use natural resources efficiently, while simultaneously increasing business competitiveness. We should note that Scotland's birth rate is persistently low, which means that we must maximise the entrepreneurship of the people that we have. Entrepreneurship does not come naturally to us, and more must be done to create a cultural shift in our attitudes to self-employment and risk taking.
The greatest challenge facing Scotland's labour market is the skills gap, which occurs when the skills of the labour force do not match job vacancies. The Government and the Scottish Executive are rightly attaching importance to stimulating demand for learning, and finding new ways of reaching out to workers who have not traditionally participated in formal education and training. Brains matter much more than brawn in today's labour market, and even low-skilled vacancies now require levels of skill that were not previously needed in equivalent jobs in the mid-20th century.
Labour stands for a higher skill, higher wage economy. The Tories were always happy to have a section of the economy that competed on the basis of cheap labour. We believe that lifting the level of employment for all will lead to higher standards of living and, ultimately, a more fulfilled society. The role of Government in that is to facilitate a strong and vibrant business economy, which can generate growth and promote social well-being. That has meant modernising the relationship between the state and the economy, although not along the lines of the Conservative free market economy or the Scottish National party's economics of independence. Such policies do not benefit the wider economy or society.
Labour has worked towards creating an economy that achieves the correct balance of supporting business and enterprise, while promoting social development. Economic development not only generates higher incomes and a better quality of employment, but helps us to achieve our goals of social justice and sustainability.
I close by referring to the Scottish microcosm of Falkirk, West. We must ensure that people who are affected by changes in the economy around them are well served by an imaginative and visionary approach by relevant regional development agencies. Next month, in Larbert, one of the last iron foundries in the Falkirk area will close with the loss of about 45 jobs. In numerical terms, those jobs will be replaced--and more--by jobs of a different type, as I previously described. However, for the individuals and families involved, it will be a painful experience. I believe that the company and the relevant unions have gone to some lengths to ensure that the workers get the best possible deal to help them through the difficult times ahead. However, I wonder why the workers' skills could not be employed on a project such as the Falkirk millennium wheel, which is a huge engineering project in my area. That would have utilised the skills of workers who come from a metalwork background. Forth Valley Enterprise may have been able to facilitate that and, although it is doing what it can to alleviate the plight of the relevant workers, I think that a small chance may have been missed. However, that must be set against the context of success that is reflected in the economic landscapes of Falkirk, central Scotland, Scotland and the whole of the UK. The success of the Labour Government to date has been a consequence of choice and planning--definitely not of chance. I believe that the Scottish public recognise that, and will act accordingly upon that knowledge at the appropriate time.
Mr. Eric Clarke (Midlothian): I am sorry for being late, Mr. Deputy Speaker, but I was watching the debate on the monitor. I congratulate my hon. Friend the Member for Falkirk, West (Mr. Joyce) on securing it. I do not know why there are not many people here, because there is great interest in the subject.
My speech will be brief. Scotland is a leader in the cluster system, which the Government support. I am referring to the electronics industry around Livingston--Cadence Design Systems and so on. An inquiry was held on the subject and feedback from Ireland and America suggested that people were envious of us and complimentary about what is happening in Livingston. The electronics industry involves not only manufacturing, but research and development, and in that we are ahead of the rest of the world.
We are part of what is called the Celtic corner, because we have a turn of phrase that is second to none. The Welsh, Scottish and Irish are seen not as competitors but as partners in the go-ahead situation of education. When the Livingston plant was established, Cadence told us that 60 per cent. of the graduates there were home-grown although many of them had returned from studying abroad. The development in the electronics industry augurs well for Scotland, and the potential spin-off is mind-boggling.
I want to discuss a parochial situation in Midlothian, my own constituency. The research and development departments of all the institutions involved in biochemistry have clustered together, and universities and industry are co-operating. The institutions on the Pentland and Bush industrial estates are clustered together and feeding off the universities of Edinburgh, Herriot-Watt and the Royal (Dick) School of Veterinary Studies.
We also have the Roslin institute, which was the creator of the famous Dolly. That is the one that got the headlines, but there are other projects that are just as important. We are lucky that other developments have come from the Dolly project, in manufacturing the enzymes contained in the beasts that have been created, which are beneficial to human beings in treating skin diseases and other things. Those developments are in their infancy, and the mind boggles once more at the thought of their potential. The Moredun and Lasswade institutes are involved in animal husbandry and agriculture; further scientific study of those subjects is clearly necessary, given the way things are at the moment.
I must declare an interest in the coal industry in Scotland. We always said that the British coal industry was the finest in the world technically and in terms of safety, and yet it has been partially closed down. However, I am happy that the Government subsidy allows the Scottish coal industry to continue. The Government are to be congratulated on that. I shall conclude my remarks now because I am running out of steam.
Sir Robert Smith (West Aberdeenshire and Kincardine): I congratulate you, Mr. Deputy Speaker, on successfully overcoming the hurdles of late-night debates in the House to arrive on the Order Paper with your proper title. I am pleased to follow the hon. Member for Midlothian (Mr. Clarke). Given all the present uncertainties, we face the danger of never quite knowing whether it is the last time that we shall speak in this Chamber. I congratulate the hon. Member for Falkirk, West (Mr. Joyce) on introducing the debate. I join him in expressing a slight worry about the lack of hon. Members present, but that again could be due to outside uncertainties, which could be focusing their minds on other matters.
When it comes to debating the economy, there is consensus about how the free market operates, although there is still worry about free trade and how that operates. In a sense, political debate can have a less direct effect on the economy and while Governments like to take a lot of credit for helping the economy, in many ways it is helped by their restraint rather than by their actions. The success of our economy is down to the ability, entrepreneurial spirit and the innovative ideas of the individuals behind the businesses that operate in the economy. We must not lose sight of the fact that our success lies on their shoulders.
Yesterday, I attended Shell livewire business start-up regional awards for the north-east of Scotland. One of my constituents, Julie Rendall, of the Roselodge Nursery in Aboyne successfully went forward to the Scottish final. Scotland often tends to dominate the
Some of the issues to which the hon. Member for Falkirk, West referred are now matters for the Scottish Parliament and the Scottish Executive. Many surround the problem of business start-ups. Lessons can be learned from different parts of Scotland about how to maximise potential and not throw away good practices. We are lucky in the north-east of Scotland, in the way in which we nurture business start-ups. We ensure that there is a good interchange of experience from different enterprise trusts and companies, to maximise support.
As for the reserved matters, the key worry concentrates on the roles of the Chancellor and the Department of Trade and Industry, our relationship with Europe, the wider infrastructure in terms of linking Scotland to the rest of Europe through our rail system, or what is left of it, improving the freight link through the channel tunnel and the direct link between Scottish business and the rest of Europe. There is a range of successful business in the Scottish economy and challenges must be faced. A big driver in the economy is the oil and gas industry and we shall discuss that industry and its future tomorrow in the Grand Committee. It plays a crucial role in manufacturing investment in the United Kingdom. Those of us who live in the north-east of Scotland see it on our doorsteps, but there is a great danger that for the rest of the country, industries that are out of sight are out of mind. It is important for all of us in politics not to lose sight of how much investment has come from the North sea and how much more there is still to come.
Any talk of a windfall tax on the oil industry must be considered carefully. It is tempting for those removed from the industry and its importance to see it as an easy hit for another tax. I pay tribute to the Secretary of State for Scotland for her previous role as spokesman for energy. It is recognised in the industry that her understanding played a crucial part in bringing together Government and industry in a dynamic and constructive way. At yesterday's awards, she was praised by a spokesman from Shell who said that in his experience she was unique in being the catalyst in bringing together different sectors of the industry--contractors and operators--to home in on how best to maximise the take for the state and for the industry. Although contractors and operators are in competition with each other, recognising the many ways in which they help each other may help them in areas in which they are competing.
The hon. Member for Falkirk, West raised the role of our high-tech industry. That is clearly an industry of the future. Business a.m. has issued a warning with its technology index. At the start of the Scottish Parliament the index was up in the thousands, but it is now down to 660. Clearly, there are challenges in getting wealth out of the technology industry and the Minister must tell us where he sees the problems facing that industry. As with
The financial services sector is another key industry in the Scottish economy that has not yet run away to other parts of the United Kingdom because of the creation of the Scottish Parliament, despite the pronouncements of the prophets of doom. As with the oil industry, we cannot see or touch the financial services sector, so we may underestimate its importance in underpinning our economy.
The drinks industry was touched on by the spokesman for the Scottish Affairs Committee and I do not want to prejudge the outcome of its inquiry, which has been affected by events beyond its control in terms of the timing of the report's publication. I was impressed by the witnesses who appeared before the Select Committee--by their entrepreneurial spirit and enthusiasm for driving forward their industry and their products. Now that Scotland produces 75 per cent. of the United Kingdom's spirit production, the drinks industry is part of the key cluster, to use the jargon.
The hon. Member for Midlothian rightly raised the importance of linking research, turning it into economic activity and recognising its value. Although many such matters are now devolved, there is a warning sign that when it comes to fundamental investment into pure research, it is crucial that short-term headlines are not the goal. Much of what is now exploited in Midlothian came from research that was funded with no particular idea of its benefits. Lord Rutherford did much to further our understanding of nuclear physics, but when he was challenged as to his motivation, he replied that it was pure research, purely for academic interest. A huge industry that has made an enormous impact on our country was established on the back of that work. He had no interest in the economic application of his research, but had he not received funding and been able to enjoy his pure research, we would not have the understanding and technological advances that resulted from it.
The biggest challenge currently facing the Scottish economy is the foot and mouth outbreak. Although it is based in our rural economy, its tentacles spread throughout the country. It has a direct effect on farming and a wider effect on the tourist industry. I am already getting feedback from tourist centres about people from abroad cancelling holiday bookings. Our key message must be the normality of life outside the direct impact of the crisis, but that is a hard one to get across. I am interested to hear about the Minister's role in the task force, and, while we have the Scotland Office, his role in providing the link to ensure that the challenges facing Scotland are not lost in the United Kingdom response. I was rather disappointed to read an advert in the Evening Standard last week that was designed to encourage people back to the countryside. In the traditional manner of unjoined-up government, towards the bottom a short line stated that the Scottish Executive would issue a separate advert on the issues affecting Scotland. I feel that--
Sir Robert Smith : That is the crucial message to send to the Government. Where people are welcome, information should be available to welcome them, and it should be clear when people are still advised to stay away from livestock. People need certainty. Scotland offers many other attractions, but I agree with the hon. Gentleman that if the key aspect that originally attracted someone to an area does not appear to be available, that person will not look further. It is important to have a joined-up strategy to market and reinforce the fact that we are still open for business and welcome careful tourist visitors.
On Friday, at a meeting of the Kincardine and Deeside enterprise trust with businesses from my constituency, I met an archaeologist, all of whose contracts have been cancelled as much of the land that he investigates is closed to him because it contains livestock. The need to get on top of the foot and mouth outbreak and eradicate its spread is extremely pressing for the Scottish economy.
The wider background affects the climate in which business operates. The organiser of the enterprise trust event pointed out that many businesses moan to him about developments that are in the realm of politics and Government. He suggests taking them forward, which is why he organised a meeting for Members of the Scottish Parliament and the local Member of Parliament to meet businesses. We need to increase that dialogue. Frustration is often felt at the coal face of a business, as those involved are so focused on running the business that they forget to go back to the political process and say that they have a problem as a result of regulation not having been thought through, and allow the political process to deal with their anxieties. It needs to be a two-way dialogue. The day before the Budget, I met a spokesman--I shall not name him, as that would be unfair--for a business that would be affected by the Budget. I said, "I hope we hear good news for you tomorrow", and he said, "Why, what's happening tomorrow?" The following day's Budget had completely slipped his mind. Business should engage in the political process in order to influence it. Although it must serve not only business, but the wider society, if our businesses and economy are not flourishing, we shall not have the investment required to underpin the benefits for the wider society.
I welcomed the proposal to create an independent central bank that appeared in the Liberal Democrat manifesto at the previous election, and which the Chancellor implemented almost as soon as the election was over. It helps to create more of a long-term culture for the underlying monetary policy and challenges of
That does not absolve the Chancellor of his responsibility in producing a Budget to be aware that he is setting criteria and rules by which the Bank of England will have to operate. For instance, the Bank sets interest rates in accordance with its interpretation of the Chancellor's fiscal policy. Therefore, if he proposes irresponsible policies, he cannot be absolved of influence over the Bank's subsequent decisions and their consequences.
Much of the Scottish economy would also benefit from currency stability. Exchange rate stability would be especially welcomed by exporters, the tourism industry, and farming and the broader rural economy. There is widespread disappointment in such sectors of the economy that the euro has not been more vigorously debated, and that the Government have failed to display greater leadership, although they are beginning to be more resolute about expressing their opinions.
However, the United Kingdom's currency belongs to the British people, and they will take the final decision on the euro in a referendum. I welcome that. My party advocated a referendum in the previous general election. It forces those of us who are involved in the political process to engage with the general public. We should not walk blindly into new political arrangements without taking the public with us because that could lead to an immense backlash.
Last week, the Confederation of British Industry emphasised that the Government's relations with Europe must be constructive and progressive to underpin much of our economy and trade. That is especially the case with regard to Scotland: farming and fishing constitute a large proportion of its exports and therefore the UK's relations with Europe are crucial to significant sectors of its economy.
Fishing is a particularly significant sector of the Scottish economy. With regard to that industry, will the Conservative spokesman explain why his party tells a different story in the Scottish Parliament about how it would tackle Europe than it does at Westminster? The Conservative party believes in the Union, but the United Kingdom has only a single voice in Europe and cannot therefore hold divergent opinions on the matter. That circle will have to be squared before the fishermen know where the Conservatives stand on the issue.
I have mentioned that, in terms of grand gestures, the political process has a less dramatic effect on the economy than it had 100 years ago. The Chancellor has therefore taken to tinkering with his Budgets. If the political process were more robust and confident, one might expect the Chancellor to tell the House that the economy is thriving and nothing further needs to be done. However, because grand gestures can no longer be made, there is a dangerous tendency to tinker by introducing a series of little pots of money, several tiny
The transport infrastructure is important because it links the Scottish economy with Europe. Freight links are especially important, but the UK's railway system is fragmented and in a depressingly poor condition. I am not claiming that everything was rosy before the previous Government intervened, but they did not leave as their legacy a railway structure that responded to the subsequent challenges. Individual freight companies have experienced some benefits, but it is necessary to secure the underlying investment so that proper height clearances on railway lines can be introduced and a uniform size of freight wagon can run from central Scotland to the heart of Europe. The opportunity for such a freight link is one of the most significant contributions of the channel tunnel.
The Government must be careful not to take too much credit. They must be keen to have an election because what is happening in the American economy will affect our stock exchange too. When economies turn around, Governments may not necessarily be at fault but, if they take all the credit in the boom years, they inevitably take more of the flak in the bust years.
One fundamental lesson about boom and bust is seen in the fact that, although the Government have smoothed out the economic cycle, they have certainly not smoothed out the public investment cycle in respect of investment in education. As was said earlier, it is important to underpin that. The Government spent the first two years imposing Conservative spending cuts that even the outgoing Conservative Chancellor said that he would not have stuck to, so as to present a nice smooth injection of cash into public services in the run-up to the election. However, that policy has meant that, as the Government reach the end of their term of office, they are spending less, as a percentage of the nation's wealth, than was spent under the policy that they inherited from the previous Government. One may compare this Government's capital spending and under-investment with the achievements of the previous Government.
Many challenges continue to face the Government in terms of underpinning the economy, but the greatest is to be cautious about interfering in and playing around with the tax system unnecessarily, to tackle red tape and to show more leadership in respect of our currency and exchange rate. Finally, they must recognise and pay tribute to the fact that the positive state of the economy is due the spirit and hard work of the individual people working in businesses.
The hon. Gentleman made a variety of other points based largely on his own experience in his constituency, which, I am sure, were valid and reflected in part the fact that his constituency has been historically very dependent on the old manufacturing industry base, as one can see when one drives through or past it. His speech was important, and I am sorry that such an important debate has attracted so little interest from his fellow Labour Members from Scotland and, perhaps unsurprisingly, zero interest from the Scottish National party. One has only to consider that party's basic proposals to realise that they are living on planet Tharg. It is not at all surprising that no SNP Members are present, because they do not want to engage in dialogue, as debate is a means by which one may be brought down to size and have to face up to one's shortcomings.
I hope that the hon. Member for Falkirk, West will bear with me if I am a little iconoclastic this morning, although that iconoclasm will be directed at my own party, too. It is my last opportunity to do that before the general election, and this forum may be appropriate, as we are having an informal and good-humoured discussion.
In 1997, the Conservative party experienced meltdown in Scotland for a variety of reasons, but mainly because the electorate were sick of us and wanted to get rid of us owing to our inability to grapple with the challenge of devolution and the extent to which we adhered on a philosophical basis to maintaining the Union in its old form. They also wanted to get rid of us because of the problems experienced in the economy during the period of recession that preceded that election.
It is noteworthy, however, that the available statistics reveal that in 1997 the Conservative party left Scotland with a series of economic indicators that were effectively unrivalled. I leave unemployment to one side and will return to it later.
Let us examine some of those indicators. In the four years after 1991, Scotland had a faster rate of economic growth than the rest of the United Kingdom. It weathered substantial parts of that recessionary period far better than elsewhere. In 1997, average earnings in Scotland were the fourth highest of the 10 UK regions, although I am the first to accept that some constituencies, such as the one represented by the hon. Member for Falkirk, West and others in Glasgow, had serious indices of social deprivation and poverty. We have such problems in the south-east of England, even in constituencies close to mine, which is the wealthiest in the UK in its heartland of south Buckinghamshire.
On top of that, from 1979 to 1996 earnings in Scotland had increased in real terms by 33 per cent. for men and a staggering 60 per cent. for women, although the latter increase was undoubtedly due in part to the
Although the decline in unemployment has undoubtedly been one of the most significant and important features of the past three years, it was already declining in the years immediately before the Conservatives left office, as the inevitable consequence of the growth of productivity, and of the economy in general, in the period preceding that. My experience is that unemployment starts to decrease after the economic indicators of growth rise. They do not work precisely in tandem; we know that, in many matters concerning the economy, one trend follows another.
With that in mind, we must examine, with a degree of caution, the situation today. Several factors demonstrate that the Scottish economy is not doing as well as it should, and they are inherently linked to the Government's economic policies. We start with the basic fact that, despite the faster growth in Scotland under the Conservatives, there is no sign that that has led to the parity in gross domestic product for Scotland that one might have expected. In fact, it has fallen back: Scotland is now at 97 per cent. of UK GDP. Much more worrying is the fall in productivity, which was increasing nationally at 2.2 per cent. per annum in 1997. The rate of increase has now fallen to 0.7 per cent. That is reflected in Scotland, and it is a much lower growth rate than that enjoyed either in Europe or, much more tellingly, in America. Either the hon. Member for Falkirk, West or the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) made a point about the American economy. Until recently, it was surging forward, but that surge was not matched in Britain.
Most worrying is evidence of the past year, which shows a growth in business failure. The hon. Member for Falkirk, West spoke about risk taking, which we need to encourage, although of course one of the consequences of taking risks is that one may come a cropper. Nevertheless, if one takes risks, one should do so in a financial climate in which there is at least some hope that they will succeed. The Grant Thornton report shows that last year the number of businesses in Scotland that went into receivership rose by 67 per cent. I should be interested to hear from the Minister to what he attributes that and whether he concludes that it may be partly a reflection of the Government's policies.
The number of new businesses being set up has fallen by a third since the second quarter of 1997; as I said earlier, we had 6,600 new business start-ups in 1997 and 4,500 in the second quarter of 2000. I am not sure whether further statistics have become available since then; if they have, I have not seen them. That is not the sign of an economy cruising into a higher gear; it is the sign of a faltering economy. Unless the problems are addressed, the trends that have been apparent over the
The Minister needs to explain why he thinks that those factors come into play but I shall highlight a number of points. First, Scotland is dependent on a number of key sectors, one of which is drink. There is no doubt that the whisky industry is a great money-spinner, not just for Scotland but, in terms of export, for the United Kingdom. Just before the Budget, I was involved in a delegation to the Financial Secretary for the Treasury on behalf of the whisky industry to raise with him that industry's concerns that they were being continuously handicapped--[Interruption.] Does the Minister wish me to give way? I thought that we were going on until 12.30 pm, Mr. Deputy Speaker.
Mr. Grieve : I am grateful, Mr. Deputy Speaker. The Minister's gesture made me think for a moment that I was lacking in courtesy by allowing him insufficient time to reply. A horrible sinking feeling came over me that we were going to finish at noon.
Mr. Foulkes : I abjectly apologise. That was not in any way my intention. I was just trying to indicate that it was the hon. Gentleman's Government that kept the duty on whisky up and our Government that have reduced it in real terms.
Mr. Grieve : Now that the Minister has interrupted me more coherently, I can say that I am prepared to accept that the level of duty, from which the Government derive a great deal of income, is difficult to fix. The fact remains that the key issue is the differential, which has been institutionalised at a European level, between the levels of duty on wine and on spirits. The Government have not taken full advantage of the opportunity that they now have to change that. I await with interest what the Minister has to say on the matter.
The whisky industry was deeply disappointed because it was hoping for a reduction in duty. The duty has been pegged, but when one considers the amount of income that can be generated, the Government seem in danger of killing the goose that lays the golden egg--or at least of not encouraging the goose to lay the golden egg. That is an example of poor fiscal management.
Mr. Malcolm Savidge (Aberdeen, North): Will the hon. Gentleman tell us in which years the whisky industry thanked the previous Conservative Government for changing whisky duty in the way that he suggests?
Mr. Grieve : My research does not go back over the whole history of the whisky industry, but extends to my involvement over the past 12 months. I am trying to deal with the issues that the industry raised with me. Together with the Minister of State, Scotland Office, the hon. Member for Cunninghame, North (Mr. Wilson), we went to discuss the issue with the industry prior to the Budget. There was disappointment that the level of duty
Mr. Grieve : I am afraid that I cannot agree with that, certainly not on the basis of the information supplied to me by the whisky industry. I leave the hon. Gentleman with that thought. Unfortunately, he was not present earlier and will not have time to make a proper contribution on that point.
Other issues go to the heart of taxation. Taxes have risen more heavily in Scotland than they have here. There is a new higher business rate, new parking taxes, new tolls on trunk roads and further projected tolls on urban roads, a new bed tax, a new sightseeing tax, a new compulsory training levy, and the Government's tax on pesticides. Nationally, the Government have raised taxes by £25 billion, of which £2 billion is being spent on Whitehall bureaucracy.
The whole picture adds up to one of increasing burdens on business, particularly small businesses. The current burden amounts to 31 hours per month of extra paperwork for a business with between 10 and 14 employees. That extra work is necessary to carry out the functions and responsibilities that the Government have placed on such businesses.
Does the Minister think we should worry about that or can we simply disregard it? Unlike in France, which some of my forebears came from, where they put gold coins in socks and hid them under the bed, people in this country have traditionally used their savings to invest. Investment is one of the key ways in which risk takers are benefited and encouraged to take risks. The savings ratio has collapsed. How does that bode for the performance of the economy over a five or 10-year period? It is a direct result of punitive and confiscatory taxation on pension funds, and the way in which the general financial and economic climate discourages people from saving. Those are key issues that the Government have failed to address.
Sir Robert Smith : The hon. Gentleman has again highlighted the problem of the exchange rate. It would be helpful if he could explain how he would tackle the exchange rate issue and the concerns that business has about it.
Mr. Grieve : I accept that the exchange rate presents challenges for business. All exchange rates always have done. I find with businesses in my constituency, and I have no reason to think that the position is different in Scotland, that if the general financial and fiscal climate encourages them to be competitive, the exchange rate is a problem that can be dealt with perfectly satisfactorily. It has to be balanced out against the problems of joining a single currency, which on current showing would have led by now to considerable inflation, as is being experienced in Ireland because we have no common economic cycle. It is all very well arguing that we should join the single currency.
I am not even sure what the Government's policy on the single currency is. It has become so murky and unclear. One thing is certain: if we surrender control over our interest rates to a European central bank, it may be an irritant in years of plenty, but if there is a downturn in the economy it will create serious problems if we are not in a common economic cycle with our European partners. What is happening to the euro at the moment suggests that there are serious problems. Business men in my constituency--and I see no reason why their problems should be different from those in Scotland--are virtually unanimous in their hostility to the single currency. A large number of them trade in dollars anyway, including with other European countries. They much prefer to be within a competitive environment with a Government who address their concerns.
Mr. Savidge : I thank the hon. Gentleman for giving way once again. He has been very generous. He talks about the importance of the general fiscal climate. How far does he think it important that in 1997 under his Government, 42p in every £1 of tax was spent on the cost
Mr. Grieve : I welcome that. First, it is a reflection of a booming economy and secondly, it is a reflection of the way in which those areas of expenditure have been reduced. That is why I find it so extraordinary that the overall take by the Government has risen from 35 per cent. to more than 37 per cent. of GDP. When the economy is doing well, the Government should look to cut taxes as much as possible, but there has been a complete failure to achieve that.
Mr. Grieve : It may be a reflection of those factors, but if the taxman is taking an increasing percentage of GDP when the economy is booming, that is a serious matter. It highlights a failure of the Government, which will translate into an inability to provide the right financial climate for business. I have spoken for far longer than I expected. I am grateful for that opportunity and I await the Minister's response. I again congratulate the hon. Member for Falkirk, West on raising those matters. The Scottish economy would be far better served by a Conservative Government at Westminster.
The Minister of State, Scotland Office (Mr. George Foulkes) : As you know only too well, Mr. Stevenson, this is the third Adjournment debate in about a week to which I have replied. Nevertheless, I warmly congratulate my hon. Friend the Member for Falkirk, West (Mr. Joyce) not only on obtaining his second Adjournment debate since he was elected, but on his interesting, positive and insightful introduction to this debate on the Scottish economy.
Hon. Members have mentioned the poor attendance. To be fair to the Liberal Democrats and Conservatives, they have attended all three Adjournment debates. Their spokesmen have participated well, although I do not agree with all that they have said. Given that the Tories have no MPs in Scotland, that is not a bad record. Labour Members have contributed extensively to the previous two debates and substantially to this one. I have a half-back line supporting me that is worthy of Heart of Midlothian football club. As hon. Members have pointed out, yet again the Scottish National party is not present. That is a real disgrace, and I shall return to it in a moment.
We have had a historic Budget, for which Opposition Members have not given my right hon. Friend the Chancellor of the Exchequer full credit. We must recognise that it represented the Government's policy of achieving economy stability, on which we can create opportunity and prosperity for all and improve public services. As I said in last week's debate on poverty, the best way of taking people out of poverty is to provide them with job opportunities, which is what we have been doing. At a time when the Scottish and British economies are creating jobs in record numbers, we have been focusing on help for more disadvantaged people, so that they can share in the prosperity of our stable economy.
My hon. Friend the Member for Falkirk, West is one of the most appropriate Members to secure a debate on this topic. As he said, his constituency is a microcosm of the Scottish economy, and he has had good news on that, even since his election. Walter Alexander, the coach builder, won a £23 million contract from National Express. Since May 1997, as my hon. Friend rightly said, jobs have been created by the Telecom service centre in Larbert, Thomas Cook in Larbert and Scottish Power in Falkirk. That shows how the Scottish economy has boomed under Labour. Falkirk is a good example. Indeed, I saw another example in the Borders yesterday with a colleague of the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith). Mainetti is increasing its employment from 100 to 200. Heriot-Watt university is doing well, and Hawick Cashmere is prospering thanks to support and guidance from the Labour Government. Clearly, there has been a sea change in Scotland in the past four years compared with the previous 18 years.
We cannot talk about the Scottish economy without mentioning our partnership with the Scottish Executive, which is key. Nowhere is it more important than in respect of our economic strategy. Although we are getting the economy right and dealing with macro-economic policy at UK level, we acknowledge that the Executive are responsible for many of the micro-economic levers affecting the Scottish economy. That interdependence is recognised in their document, "A Framework for Economic Development in Scotland", which was published in June last year. The foundation must be a coherent, effective economic policy from the United Kingdom Government.
Whatever the hon. Member for Beaconsfield (Mr. Grieve) says, we inherited an economy in the United Kingdom and in Scotland in a bad state of repair, with high unemployment, high inflation and high interest rates--the most volatile in the G7 countries. The hon. Gentleman spoke about wage increases, which must be set in the context of the high level of inflation at the time.
Mr. Grieve : The economic statistics show that underlying inflation in the April quarter of 1997 was 2.5 per cent. In the October quarter of 2000 it was 2.2 per cent. That does not suggest the galloping inflation that the Minister talks about.
In the past four years we have pursued a comprehensive and co-ordinated strategy and I shall set out its key elements, the first of which is to deliver macro-economic stability and to replace the boom and bust of our predecessors. As my hon. Friend the Member for Falkirk, West rightly said, it is a matter of fundamental choice, not chance, to steer a course of stability, prudence and responsibility. We have laid the foundations for a Britain where there is opportunity and security for all. We gave independence to the Bank of England, freeing interest rate decisions from political interference, which delivered the lowest inflation for 30 years, for which the hon. Member for West Aberdeenshire and Kincardine gave us credit, averaging 2.4 per cent. since 1997, the lowest in the European Union.
We have the lowest long-term interest rate for 35 years; mortgage rates that averaged 11 per cent. between 1979 and 1997 are now down to 6.75 per cent. or less. Economic growth is at 2.7 per cent. since the election and GDP in Scotland is now at its highest ever level. Employment has risen by more than 1 million in the United Kingdom and by more than 100,000 in Scotland; more people are at work than at any time in the past 40 years, but we have done even more: the Government's tough new fiscal framework has allowed us to make a record net debt repayment, as my hon. Friend rightly said, of £35 billion this year. We have cut the national debt from 44 per cent. of GDP to an estimated 31.8 per cent. That is prudence with a purpose at work, enabling the Government to release more funds for key spending priorities and public services. In Scotland, spending will be £3.4 billion higher by 2004, with an additional £200 million announced in this year's Budget.
The hon. Member for West Aberdeenshire and Kincardine, who mentioned world economic development, to which we are not immune, knows that there has again been an upturn in the stock market, but the Government's new macro-economic framework should help to continue to deliver stability, low inflation and sound public finances, which means that our policy is well placed to respond to global economic developments. While significant risks remain, especially from the United States, we have ensured that our budget forecasts take full account of the effect of slowdown in United States growth and its impact on world activity.
The hon. Member for Beaconsfield was talking Scotland down yet again, as seems to be his habit when he comes to these debates. Business investment has grown to 14 per cent. of GDP compared with 10 per cent. in 1994. Whole economy productivity grew by 2.6 per cent. in the third quarter of 2000, compared with 1997. The Economist Intelligence Unit ranked the United Kingdom first for its policies towards private
The hon. Member for West Aberdeenshire and Kincardine asked whether the Scotland Office was involved in dealing with the foot and mouth outbreak. I am a member of the task force chaired by my right hon. Friend the Minister for the Environment. I also attend MAFF meetings chaired by my right hon. Friend the Minister of Agriculture, Fisheries and Food. The Government's top priority is to control and eradicate the disease. I share his concern about the tourism scares. We should make it clear that people can quite safely visit substantial areas of the United Kingdom. Local authorities are making it clear which are the no-go areas.
Information about our help for businesses with income tax and custom and excise duties has been circulated in Scotland to local authorities, MPs and MSPs. The hon. Member for Beaconsfield should know that we recognise that there is a problem for small and new businesses. The Scottish Executive are tackling that. However, the evidence of the substantial new jobs created shows that effective action is being taken. The recent data from the Scottish Council for Development and Industry show that Scottish exports are £27.8 billion, a 9.1 per cent. increase on 1998 and current prices. That is much more than the hon. Gentleman described. He also spoke about whisky and had to admit that the Conservative Government did little about that. Spirit duty has been frozen in the last four Budgets. Steps have been taken not just to help the whisky and other spirit industries, but to deal with the duty on spirits vis-a-vis the duty on wine and beer.
Mr. Eric Clarke : My hon. Friend has not mentioned how the minimum wage has benefited individuals in Scotland. In Dumfries and Galloway, for example, which was a Conservative stronghold for many years, wages were well below the minimum wage.
Mr. Foulkes : My hon. Friend is right. Good employers were paying the minimum wage. The legislation ensured that the cowboys also paid it so there was no unfair competition. I did not mention it today because I mentioned it last week. I shall mention it again next week.
I hope that my hon. Friend does not mind me turning to absent friends. He will remember the events of 28 March 1979. The anniversary is just about to come up. We will never forget how nationalist Members trooped through the Lobby with Mrs. Thatcher to get rid of the Labour Government, heralding 18 years of Toryism. We remember Linwood, Corpach, Ravenscraig, Caterpillar and Invergordon. We remember the record of the Tory Government brought in by the SNP. One of my colleagues described them as Maggie's midwives. Now they are aiming to be Hague's little helpers, to ensure the return of a Tory Government.
The SNP has proposed a 45p rate of tax. That is to cover the uncosted pledges of £3 billion that the party made in the first five months of the Scottish Parliament. The setting up of separate embassies, Army, Navy and the Air Force establishments in Scotland, a separate social security system are costed at £4 billion, yet now, because of the belated recognition of the uncosted pledges and the cost of separation, the first of the SNP tax chickens is coming home to roost. It is the thin end of the wedge. If the SNP were ever to gain power, the hard-working people of Scotland would have to pay more taxes.
The SNP will go into the election saying that it will stand up for Scotland. How can it stand up for Scotland, when its Members of Parliament do not even turn up for their work here? What is happening is astonishing. Not even one of the six Scottish National party Members is here today to speak up for Scotland. Labour Benches are doing that and we shall continue to do so. The SNP deals in fantasy economics. It has been naive in its overestimation of the Scottish income tax contribution. It has ignored the share of United Kingdom national debt, which would be attributable to Scotland, and it is basing its financial plans on oil revenues that have fluctuated wildly from £12 billion in 1984-85 to £1 billion in 1991-92, then up again to £2.3 billion in 1995-96. That is putting the economy at the mercy of the world oil price and of OPEC. That is something that the Scottish people would embrace at their peril.
I hope that this message will get through to the people of Scotland. We depend on the United Kingdom single market. The importance of that to the Scottish economy is clear. More than half of all exports from Scotland go to the rest of the United Kingdom. More than two thirds of imports into Scotland come from the rest of the United Kingdom. Business organisations and employee representatives recognise that the Scottish economy draws its strength from being part of the United Kingdom. Scotland's economy under Labour is being
We must not forget that the finance and business sector now accounts for more jobs than manufacturing. Since 1991, the number of jobs lost in the manufacturing and construction sectors of the Scottish economy has been more than made up by the number of new jobs that have been created in the service sector alone. Through prudent, economic management and new measures to improve the climate of business, we have put in place in partnership with the Scottish Executive the economic conditions that encourage growth and employment. Devolution means partnership between us, and we are focusing on encouraging jobs in all sectors that add value to our economy, fostering a dynamic environment for the economy to grow and prosper.
If we are to have a successful economy, even more people need to be in work. I referred earlier to our employment record and low unemployment level. Much has been done, and we recognise that much more needs to be done. The Labour Government are committed to full employment. That is not a pipe dream; it is a realistic and achievable aim. We are determined to deliver such a goal. We have achieved the economic stability that is creating a record number of jobs. We now need to tackle the poverty of aspiration, the skills gap, discrimination and inequality of opportunity that hinder our drive towards full employment and a more fair and equal society. I am proud that the Government have made a significant start. I urge people outside the House not to put that in jeopardy. Voting nationalist or for any other party will at least allow for the possibility of returning to boom and bust and the high unemployment that existed during 18 years of Tory Governments. That would not just be bad for Scotland; it would be bad for the whole United Kingdom.