Malcolm makes some far reaching suggestions for boosting the Scottish Economy
Debate on Government Growth Strategy Malcolm Chisholm (Edinburgh North and Leith) (Lab):
I welcome this debate and note that all political parties here and in London are now talking about the need for growth. However, there is no use talking about the need for growth if particular Governments are imposing policies that impede it. I shall talk first about the UK Government, because its actions still have a massive influence on what happens in Scotland.

The UK Government’s focus has been the causes of the deficit. A lot of political capital is still being made by the UK Government and the Scottish Government out of that subject, with the last Labour Government getting the blame. It is important to state from the outset that it was not fiscal laxity that caused the crisis. The budget deficit that so many people are worried about is the result of the financial crisis, not the cause of it. If the Tories or, indeed, the SNP doubt that, I remind both parties that they agreed entirely with Labour’s spending limits before 2008. In fact, I seem to remember the SNP wanting far more spending than Labour was carrying out.

More fundamentally, we must look at the consequences of trying to reduce the deficit - or aiming to reduce it too fast, because that is what we are basically living with now at a UK level. Many commentators who are not particularly on the Labour side of the political divide are now saying that the Government in London has fundamentally got that wrong and that it is implementing policies that are counterproductive from the point of view of reducing the deficit and bringing about growth.

Just yesterday, I was struck by the assertion by a Tory former adviser to Norman Lamont, when he was chancellor, that the UK Government’s fundamental mistake was to try to reduce the deficit too fast before growth had been achieved. He contrasted that with what happened in the 1990s.

I was struck also by the words of Martin Wolf in the Financial Times yesterday, when he said: “Fiscal tightening does not improve outcomes in shrinking economies. Thus, austerity is merely begetting more austerity.”

I note that the managing director of the IMF, and the April review of the National Institute of Economic and Social Research, both carry a similar message, which is that all the budget cutting is merely leading to increased deficits and less growth. There is a strong body of opinion now, not particularly on the left of politics, that the UK Government has got it wrong. We are living with the consequence of that in Scotland.

At UK level, the Labour Opposition is showing the way with its emphasis on reducing VAT, bringing forward infrastructure investment - especially in housing - and having a well-thought-out and costed jobs plan. That is the model that we need in Scotland, too.

Turning to the Scottish Government -

Gavin Brown:
Will the member give way?

Malcolm Chisholm:
I am exactly halfway through my speech but I had better give way since I have been criticising the Conservative Government.

Gavin Brown:

I am very grateful.

The member wants to reduce VAT. To reduce it to, say, 17.5 per cent would cost about £12 billion. Does he think that that money should be recouped through an increase in tax or an increase in borrowing?

Malcolm Chisholm:

The member completely fails to understand the basis of my argument. One of the fundamental problems is lack of demand in the economy. If we can reduce tax in a targeted way and boost growth, that will help the deficit in the long run. In a sense, the member’s intervention encapsulates what is wrong with Conservative, and indeed the coalition Government’s, thinking at Westminster.

I welcome much of what the cabinet secretary said about renewable energy in general and Gamesa in Leith in particular. However, where is the Scottish Government’s comprehensive jobs plan? Where is the Scottish Government’s action on the most important infrastructure element of job creation, which is housing? Where is the Scottish Government action on procurement?

To deal briefly with those three topics, we are all concerned that the projection for Scottish unemployment is that it will rise for the next four years. Gavin Brown mentioned the projection that unemployment in Scotland will be beyond the UK level by the end of the year. We desperately need a finalised strategy, particularly for youth employment. I welcome the fact that a dedicated minister has been appointed for youth unemployment, but the finalised strategy is nowhere in sight, notwithstanding a number of smaller announcements in that area.

In housing, we welcome the increases late in the budget process. However, from the Scottish Government’s point of view, the simplest way of bringing about a big jobs boost would be to put more money into housing. As Ken Macintosh mentioned, 30,000 construction jobs have disappeared in the past year. The number of construction jobs is still falling, and housing investment would help the economy in the most effective way and would fulfil an essential social need.

Finally, where is the action on procurement? I know that a bill has been promised, perhaps for next year, but we need action now, particularly to help SMEs. We need a simplified procurement process. The business gateway needs to give advice to SMEs so that they can come together to bid for contracts. Contracts that are too large and which therefore exclude SMEs need to be disaggregated. Where disaggregation is not possible, SMEs need to have the opportunity to get subcontracts. I do not know whether I have time to quote from -

The Deputy Presiding Officer:
You do not.

Malcolm Chisholm:
Therefore, I conclude by merely referring briefly to the Jimmy Reid Foundation report on procurement, which indicated that the Government could implement European Union directives far more flexibly and in a way that helped SMEs and the Scottish economy in general.
May 10th 2012