Malcolm highlights good measures in the UK Pre Budget Report

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Malcolm discusses the Pre Budget Report Malcolm Chisholm (Edinburgh North and Leith) (Lab):
I accept that the Government disagrees on the issue of capital acceleration; no doubt that point will dominate debate. However, does the cabinet secretary disagree with any other element of the pre-budget report?

John Swinney (The Cabinet Secretary for Finance and Sustainable Growth):
We are dealing with a fundamental point - fiscal stimulus and the support that the economy requires at a particular time. We must concentrate on the measures that we can take to support economic recovery.

It is clear that our capital spending - a key part of our economic recovery plan—has provided vital support for the Scottish economy. We urged the chancellor to allow us to continue our capital acceleration programme for a further year. Each additional £100 million of capital investment is estimated to support 1,500 jobs in the Scottish economy. That case was widely supported in Parliament...

Malcolm Chisholm (Edinburgh North and Leith) (Lab):
Economically and financially, we are where we are, first because of the worldwide recession of 2008-09 and secondly, as Wendy Alexander has emphasised, because of the Government's correct action in borrowing during those two years to stimulate the economy and support the banks.

The Conservatives have criticised Labour for borrowing too much both before and during the recession and are wrong on both counts. In 2007, before the recession, the level of debt was 36 per cent of gross domestic product, which was down 7 percentage points from the 43 per cent that we inherited from the Conservatives in 1997.

As I said, the Conservatives also criticised Labour's borrowing during the recession; however, if it had not done so, we would have had a 1930s-style depression with, it has been estimated, the economy contracting this year by more than 6 per cent, or two percentage points beyond the actual figure.

So the Conservatives have been wrong in the past about borrowing, and they are wrong when it comes to the future, which is why the forthcoming general election is so important. They want to cut the deficit too quickly, which runs the risk of causing a double-dip recession, and they want to make savage cuts to the current budget, which would put what the cabinet secretary described in his speech into the shade.

Unlike the Tories, the SNP supported the UK Labour Government's borrowing during the recession, so it has to support paying it back. To be fair, it does support that in principle, and its main disagreement is about accelerated capital expenditure, which I shall come to in a moment. I intervened on the cabinet secretary precisely to find out what other critique he had of the UK PBR, and he did not give us anything in reply to that question.

My sense is that the SNP Government supports in principle what Labour is saying for the years 2011-14. There have to be some tax increases but, of course, the rich have to pay the most and the neediest have to be protected, which is what Labour is proposing.

Equally, the deficit has to come down, but only when the economy is fully functioning once again, so it will start to come down from 2011 onwards. If the SNP accepts that general budget stance, it has to accept that Parliament will face some budgetary challenges in the years 2011-14, and so should not just use those difficulties as further ammunition against the UK Government.

I note that the cabinet secretary quoted the Institute of Fiscal Studies, but we must exercise caution about that. We do not really know what the level of annually managed expenditure is calculated to be during those years. Unemployment is not going up by as much as people expected it would, so we cannot have absolute confidence in the kind of expenditure reductions that the cabinet secretary described.

John Swinney (The Cabinet Secretary for Finance and Sustainable Growth):
If Mr Chisholm had been listening carefully to Wendy Alexander's speech, he would have heard her make a point that I agree with, which is that the proportion of expenditure that is going to go to annually managed expenditure is likely to increase because of the current economic circumstances, which rather undermines the analysis that Mr Chisholm has just come out with.

Malcolm Chisholm:
I am not saying that AME will not increase, but that we do not know what the precise level will be because we do not know what the level of unemployment will be, and that it will not go up by as much as was expected.

As we would expect, the cabinet secretary emphasised the bad news in the pre-budget report, but forgot the good. I hope that he welcomes the protection that has been given by the chancellor for health, schools and police in England, which will feed through into our budget. I hope that he and his cabinet colleagues will find a similar way to protect schools, as I said during Michael Russell's statement.

Gavin Brown:
Will the member give way?

Malcolm Chisholm:
I do not think that I have time: four minutes has gone already. I will give way if I have time, but I must get on to talk about accelerated capital expenditure.

The cabinet secretary also omitted to mention many other good measures, such as the job guarantee for all 18 to 24-year-olds who have been out of work for six months, the new low 10 per cent tax on the profits from new patents - which is very good news for many hi-tech industries in Scotland - and the investment from the strategic investment fund to support life science companies in Edinburgh and a video games centre of excellence in Dundee.

I must get on to the capital acceleration issue because it is the heart of the SNP's argument in the debate. I have four points to make.

First, the issue has to be seen in the context of a budget that is still growing. The SNP has forgotten to mention that.

Secondly, if there was to be accelerated borrowing, there would have to be 10 times as much in England, which would mean £3 billion at least going on to next year's budget deficit. The cabinet secretary flagged up £178 billion as a problem, so he must recognise that it would not have been very easy to increase that further in the way in which he suggested.

Thirdly, we should observe the way in which the supposed £300 million of capital expenditure is being used by the Scottish Government. When the Finance Committee was meeting in Glasgow, I asked the cabinet secretary what he was going to spend it on, and he said social housing. What did we hear from the First Minister? I do not have time in my final minute to read out the list of projects that the First Minister gave for that £300 million, but it included transport, health, conference centres, the Scottish exhibition and conference centre, the Dundee waterfront. We should note that.

If the cabinet secretary really believes, as he said to me in the Finance Committee yesterday, that the £300 million is the difference between the Scottish economy growing and remaining in recession, why on earth does he not do something with his budget to address the economic issues? I am trespassing on tomorrow's debate, but it is clear that he has let his economic growth budgets decline and that he has the power to address some of the issues. There will be more of that tomorrow, but my time is up for today. December 16th 2009, (Column 22200, 22217-9)