Business, Innovation and Skills CommitteeWritten evidence submitted by John Swinney MSP, Cabinet Secretary for Finance, Employment and Sustainable Growth, Scottish Government
Scottish Government Response
A White paper setting out the Scottish Government’s proposals for independence will be published this autumn with the referendum taking place on September 18th 2014.
The Scottish Government believes that the people who live in Scotland are the best people to make decisions about Scotland’s future and that Scotland should therefore have all of the responsibilities and rights of a normal, independent European state: such as economic, tax and social policies, as well as its own voice in the world and representation for Scotland in the European Union.
However, independence is not an end in itself, but a means to achieve change in Scotland. The Government has set out its vision for the Scotland it would work towards after independence. The Government believes that only independence would allow Scotland to fulfil its potential and to meet this vision.
Over the coming months the Government will set out the arguments for independence, and proposals for ways in which the powers of independence can be used to address the challenges in Scotland’s economy and society, and achieve the Scottish Government’s vision for Scotland.
Following the Edinburgh Agreement the Scottish Government has published proposals for the transition to independence http://www.scotland.gov.uk/Resource/0041/00413757.pdf to be complete by March 2016 and the Scottish and UK Governments are currently agreeing a statement on the principles to be adopted following a vote for independence.
As part of our constitutional work, The Scottish Government has published a number of documents which lay out our strengths and the opportunities for Scotland which will help inform your enquiry. These will be of particular assistance to the committee in your consideration of Scotland’s economy, Scotland’s finances and the macro-economic framework of an independent Scotland.
In its report on Scotland’s macroeconomic framework the Fiscal Commission Working Group (FCWG) analysis concluded that:
By international standards Scotland is a wealthy and productive country; There is no doubt that Scotland has the potential to be a successful independent nation;
Even when North Sea oil is excluded, GVA per head in Scotland is 99% of the UK average and the highest in the UK outside London and the South East;
However, over the last 30 years Scotland has grown more slowly than the UK as a whole, and
Many countries of a similar size have made use of the full range of fiscal and policy levers to perform more successfully.
Under independence, The Scottish Government will be able to use the full range of fiscal economic levers to improve the performance of our economy, which has persistently lagged the growth rates achieved in comparable countries.
The Scottish Government is clear that independence will bring significant opportunities to both to our business community and to the people of Scotland as a whole.
The full range of papers on economic issues relating to independence can be found below. The Scottish Government has been engaging with a wide-range of stakeholders, including those who are providing evidence to the committee throughout this enquiry, and we will continue with this engagement in the lead up to the referendum next year.
Fiscal Commission Working Group’s Report on the Macroeconomic Framework: http://www.scotland.gov.uk/Topics/Economy/Council-Economic-Advisers/FCWG
Economic and Competition Regulation in an Independent Scotland: http://www.scotland.gov.uk/publications/2013/02/1911
Scotland’s Balance Sheet: http://www.scotland.gov.uk/News/Releases/2013/04/BalanceSheet120413
Government Expenditure and Revenue Scotland: http://www.scotland.gov.uk/Publications/2013/03/1859
Scottish Government Response To The Fiscal Commission Working Group On Currency: http://www.scotland.gov.uk/Publications/2013/04/5881
Scotland’s Economy: the case for independence including Scotland’s Balance Sheet: http://www.scotland.gov.uk/Publications/2013/05/4084
The Scottish Government has also adopted a clear economic strategy. This can be found at: http://www.scotland.gov.uk/Publications/2011/09/13091128/0
The Scottish government believes key sectors of Scotland’s economy are currently unable to reach their full potential as a result of decisions by the Westminster government.
In a number of areas the Scottish Government believes current policy positions taken by Westminster are detrimental to Scotland’s interests. Independence would offer future Scottish Government’s the opportunity to adapt policies in support of Scotland’s economic interests.
Air Passenger Duty
Scotland’s airports and airlines serving Scotland have made a clear case that levels of Air Passenger Duty inhibit Scotland’s ability to attract new flights in a highly competitive market and increase costs for tourism and business. This position is supported by all of Scotland’s airports and is highlighted as a major concern in a recent report by SCDI. APD has also been identified as one of the economic levers that could help to rebalance the focus of the economy from London and the South East. Recent studies by York Consulting;
http://www.glasgowairport.com/static/Glasgow/Downloads/PDF/APD-York_Aviation-report-Oct-2012.pdf and PWC;
http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/content/APD-study-Abridged.pdf
demonstrate the negative economic impact of APD and the benefits that could come from better aligning policy to Scotland’s needs. APD has been devolved to Northern Ireland. Despite the recommendation of Calman back in 2009, the UK Government has still not seen fit to devolve Air Passenger Duty to Scotland. There is a strong body of support in Scotland for control of APD to be passed to Scotland including from our 4 largest airports. Control of APD would enable the development of a regime which is designed to reflect the needs of our aviation sector and passengers and the wider importance of aviation to our economy. A one size fits all policy does not work.
Capital Investment
The Scottish Government is clear that capital investment offers significant opportunities to boost economic growth. Despite significant real terms cuts to capital budgets by Westminster of 25.1% over the four years of the UK spending review (2014–15 compared to 2010–11, excluding financial transactions), we are maximising our capital spending to support infrastructure investment and jobs.
When the financial crash took place, the Scottish Government was quick to recognise that capital spending would be a key driver, both of the recovery and of long-term growth.
Both the former Labour government and the current Coalition government took the decision that capital spending would take a disproportionate share of the cuts. The Coalition has largely followed the Labour blueprint on capital spending since it came to office. The Scottish Government took a very different view. We saw capital spending on infrastructure as vital to supporting the economy and an important engine of economic growth. We took action to support capital investment.
Had the 2009–10 levels of capital spending been maintained, this would have produced cumulative increased investment of £7 billion in the five years to 2014–15. This corresponds to approximately £1.4 billion a year. Additional capital investment of such magnitude would have supported an additional 19,000 jobs over the subsequent five years. And, as Scotland’s Balance Sheet demonstrates, this increased level of investment could have been achieved in the context of Scotland’s £12.6 billion relatively stronger fiscal position vis-a-vis the UK in the five years to 2011–12.
Higher Education
Scotland welcomes international students and researchers to our world class universities and values the significant cultural, economic and intellectual contribution they make to our institutions and our nation.
Both Scottish Government Ministers and our university sector opposed, and continue to oppose, the UK Government’s changes to international student visas. It is vital that Scotland has an immigration and citizenship policy that suits Scotland’s needs.
The impact of the negative message that the UK Government’s student visa policies send to other countries is a significant concern for the higher education sector. There is evidence that student numbers from some countries which normally send high numbers of students to Scotland have decreased in recent years, which may reflect the changes to student visa rules implemented since 2010.
Higher Education Statistics Agency statistics show that the number of students from India in Scottish HEIs decreased from 3290 in 2010/11 to 2445 in 2011/12—a reduction of 25.8%; and the number of students from Pakistan in Scottish HEIs decreased from 860 in 2010/11 to 645 in 2011/12 —a reduction of 24.9%.
Postal Services
The Scottish Government is deeply concerned by UK Government proposals to privatise the Royal Mail and the impact this could have on the Universal Service Obligation, particularly in rural communities, and the availability of Royal Mail services through Post Offices. We are aware that such concerns have also been raised by the CWU and the NFPM. Scotland’s Post Offices have faced repeated rounds of closures by the UK Government. 149 closed in 2002–05 and a further 269 closed in 2007–09 whilst five crown Post offices are currently under consideration for closure.
In these areas—and others such as research and development, targeted tax incentives such as support for tourism or construction, regulation and the ability to incentivise economic growth in key areas it is only with the full powers of independence that future Scottish government’s will be able to properly support the Scottish economy, to counter the focus of economic policy on London and the South East, and to ensure Scotland reaches its full potential.
18 June 2013