Scottish Parliament opposition views on Scotland's economy

Have lessons been learned from the 2008 financial crisis?

Jackie Baillie, Scottish Labour: We need to do more to fundamentally reform our economy if we are to broaden our economic base and create and sustain well-paying, high-productivity jobs. After eight years of the SNP, Scotland needs a government focused on the real challenges of the future: how to renew the link between economic growth and living standards, how to build broad-based productivity, and a real plan to tackle structural challenges in the economy, not an economic strategy that has no targets. We need to do things differently, because real wages have continued to stagnate throughout this parliament, with too many families still working too many hours with too little to show for it.

Patrick Harvie, Scottish Greens: There have been half-hearted attempts to better regulate the financial sector in the EU and the States, but the approach has been timid at best. We need proper reform of our finance system. In Scotland, 70 per cent of personal and SME banking is controlled by just two organisations, RBS and Lloyds. By contrast many other European countries have far greater diversity, including a far greater share of local and regional banking, as well as mutuals, co-ops and municipal banks. By breaking up the ‘too big to fail’ commercial banks we could create a more flexible local banking system that responds to community needs, and avoid the risks that come with the gigantic financial institutions that we cannot control.

Murdo Fraser, Scottish Conservatives: There is an ever-growing divide in UK politics between those who accept the lessons of the 2008 financial crisis and those who do not. Despite the clarion calls of opponents to change course, prudent fiscal decisions have not only reduced the deficit, but have delivered world-leading growth and employment. Going into the crisis our borrowing was far too high and we have had to deal with the consequences. We should beware the voices that have emerged since, selling a false prospectus of endless spending and unrestrained borrowing.

Willie Rennie, Scottish Liberal Democrats: One of the reasons behind the financial crash was the greed and recklessness plaguing financial services in this country. In coalition the Liberal Democrats made a big start in reforming the banking system, creating the world’s first green investment bank and introducing policies regulating financial services to help ensure the UK’s banking system supports customers and businesses while conducting themselves at the very highest of standards. But today’s government can’t get complacent.

Is the UK’s financial sector too big?

JB: No – it’s a huge source of jobs here in Scotland. We need to balance it by growing and supporting other industries.

PH: Yes, but more importantly, it is structured in the wrong way. The Tories seem to think that the wealth created in the financial sector will trickle down to the rest of society. This is clearly not the case. London has one of the most bloated financial sectors in the world, and still foodbank use is on the rise and homelessness is rife.  Despite some limited attempts to tax and regulate, the UK finance sector is still out of control. As long as we let the bankers and brokers do what they want and allow for City bosses’ bonuses to bloat, we let the economy balance on the brink of chaos. This is what led us to the worst recession since the 1930s, and unless we take proper action to control the financial sector, we risk another economic crisis.

MF: While the financial sector forms a sizeable chunk of our overall economy – it provides over two million jobs directly and indirectly supports millions more – it is also a key contributor to UK productivity. We should not underestimate its importance, or its mobility if we fail to provide a positive environment for business to invest here. It is, of course, important too that our regulatory approach continues to keep pace with the development of the sector, but overall it is vital that we maintain our position as one of the world’s foremost financial centres.

WR: No-one will tell you the financial services industry is not important in the UK. But what this country needs is a competitive banking sector, with alternative finance providers and improved access to finance for business and consumers. Liberal Democrats want to promote a new community banking sector to support small and medium-sized enterprises as well as social enterprises.

Is the Scottish economy too dependent on oil and gas?

JB: The oil jobs crisis has shown how important oil and gas is to the economy across Scotland, not just in the north east. The key now for the SNP government is to protect the jobs of those who have lost out, but we must also start to diversify our economy. There’s plenty of life left in the North Sea, but this crisis shows how we need to starting planning for how we keep high-value engineering jobs post-oil.

PH: The Scottish Greens have for years argued for a controlled transition away from the fossil fuel industry, and after hundreds of people losing their livelihoods in the North Sea over the past year, the case for this as clear as ever.  Scotland has the chance to become a leader in renewables and in decommissioning fossil fuel infrastructure, but we cannot rest on our laurels and wait for someone else to make the first move. If we don’t start investing in alternative industries and retraining our workforce now, we will miss out on key opportunities and drive ourselves deeper into economic insecurity and climate chaos.

MF: The oil and gas industry has a strong link to certain parts of Scotland, most particularly the North East. We have seen that downturns can have disproportionate local impacts in these areas. Oil and gas revenues have in the past formed over a fifth of Scotland’s total tax-take. The volatility of that revenue stream has been managed by being part of a broader tax base within the UK, but there can be little doubt that Scotland would be faced with very serious choices on tax and public spending if that was not the case.

WR: The oil and gas sector is an incredibly important part of Scotland’s economy and challenges facing it currently cannot be underestimated. Supporting the industry must be one of the top priorities for both the Scottish and UK governments. But let’s not forget about what agriculture, energy and construction bring to the Scottish economy. Food and drink manufacturing in this country is also booming, with over 800 businesses contributing billions to the Scottish economy. By investing in these other sectors we will be ensuring the country has a broad base on which it can thrive.

Is it realistic to have full employment & won’t there always be a need for casual or even zero-hours-type employment?

JB: Yes it is a realistic – not just full employment, but good employment. We’ve always recognised that some workers want the flexibility of casual work. That is why we would ban exploitative zero-hours contracts, giving regular workers a right to a contract after 12 weeks of work.

PH: The changes in our economy and the increasing automation mean that the job market and demand for workers is changing dramatically. At the moment, the consequences of unemployment and casual contracts can be disastrous for a person – poverty, insecurity, social exclusion. We need to learn to think about work, wages and human value in a new way. We absolutely should require employers to pay decent wages and provide good terms and conditions for workers, but we also have to be able to secure a dignified life for those who can’t find stable employment. A citizen’s income would be a good basis for this.

MF: Full employment is a positive aspiration, although some will inevitably spend time outside of the labour market. This need not be negative: there will always be a degree of turnover for people transitioning between jobs. What we have seen in the UK in recent years has been a genuine jobs revolution and while there is still much more to achieve, we can credibly aim to be a country where full employment is a practical reality.”

WR: The Lib Dems want to see the highest number of people possible who can work being employed. On zero-hours contracts, we understand that flexible employment contracts can work well for both employees and businesses, but there is abuse within the system that needs to be stamped out. Laws we made in coalition are still being implemented, but our ban on exclusivity contracts in zero-hours contracts has come into force, meaning employers can no longer both have no obligation to provide work and require that their employees don’t work for anyone else.

Are house prices too high?

JB: For lots of young people the dream of home ownership will remain just that, rather than the reality it was for their parents. That’s why Scottish Labour’s first election pledge was to commit to help for first-time buyers, effectively doubling the amount people can save towards a deposit by up to £3,000. The age of austerity has attacked aspiration and that needs to change, which is why we need bold policies like this heading into May’s election.

PH: If house prices had increased in line with general inflation since the 70s, the average house in Scotland in 2012 would have cost £78,000. The actual price was well over twice that figure. Investment is needed to build more social housing and we need a solution to make sure holding onto land is always less profitable that building good-quality, sustainable houses. We can bring more of Scotland’s 27,000 empty homes back into use and utilise more vacant land by ending tax subsidies which keep homes and land out of use.

MF: House prices are ultimately a question for the market, but it is a market that is heavily restrained by regulation. There is little dispute that housebuilding has not kept pace with demand or even need, and regardless of what is done, higher prices then become inevitable. However, we have a situation where many young people are finding home ownership out of reach. While those currently on the housing ladder may be comfortable with growing prices, it is not sustainable in the long term. We must be clear and ambitious about breaking down the barriers to homebuilding across all sectors of the market.

WR: There is certainly a real difficulty for many people to get a foot on the property ladder and this hasn’t been helped by successive SNP administrations which seem in denial about the extent of the country’s housing crisis. Of course we all want to see more affordable homes available, but we shouldn’t forget about the people on low incomes unable to get a mortgage who are being left out of the equation.

Why have successive governments found it so difficult to clamp down on tax evasion?

JB: We know it can be difficult to clamp down on tax evasion, but there also has to be the political will to do it in the first place. With the new tax powers coming to Scotland it is vital that taxes handled by the Scottish Parliament are properly delivered into the public purse.  HMRC has been clear that every measure will be taken to stop evasion; we will hold them to that standard.

PH: HMRC has been gutted of staff. It is no surprise that without the staff to pick though complex corporate structures and accounts that tax evasion remains stubbornly high. But it is not just a matter of staffing. HMRC has no minister directly responsible for it and no select committee to which it is directly accountable. Democratic oversight is lacking and the vital function of tax collection needs a UK cabinet minister who is accountable for its efficiency. Tax avoidance has also become socially acceptable to far too many people. Ministers in both governments have been accused of exploiting tax avoidance schemes for their own benefit, and government grants are handed over to tax-dodging businesses. This tacit acceptance must be replaced with a zero-tolerance approach.

MF: The vast majority of people and businesses pay the taxes they owe and it is a small minority who try to evade or aggressively avoid paying the tax they should. Tax compliance work is often complex, requiring public bodies to stay ahead of the curve, when ever more innovative avoidance and evasion strategies are created.

WR: Tough action is needed by governments against corporate tax evasion, otherwise it turns into an unwinnable fight of minnows against sharks. The Government should be pushing the UK’s tax investigators to aim much higher than relatively low-value prosecutions of those evading income tax, for example. In 2014 we secured a record £23.9bn from clamping down on tax evasion, as well as tax avoidance and fraud, but our work in government needs to be built on.

How much should Scotland’s new tax system differ from the rest of the UK’s?

JB: Scottish Labour would take different, fairer decisions on tax from the Tories and the SNP. We’d ask those lucky enough to earn over £150,000 a year to pay a 50p top rate of tax so we can cut the attainment gap between the richest and the rest in our schools. We would also cancel the SNP’s plan to cut air passenger duty and instead use the money to give a bonus of up to £3,000 for those saving for their first home.

PH: To start with, the Scottish Greens would scrap the unfair, regressive council tax and replace it with a land value tax. This tax could be used to encourage productive land use and recover the uplift in land prices which come from public investment or planning permission.

MF: With more tax powers devolved, the Scottish Government will have a range of fiscal choices to make. I do not want to see Scots disadvantaged and I will not support moves which place a higher tax burden either on individuals or businesses in Scotland than is present in other parts of the United Kingdom. While retaining a single domestic market across the UK is important, if the tax powers can be used to make Scotland a more competitive place to live and do business in, then they should get our support.

WR: Increased tax-raising powers are an exciting opportunity for the Government to make real changes and implement progressive and liberal forms of taxation in Scotland. But despite promises to tackle the UK Government’s austerity measures head-on, the Finance Secretary seems bent on making very little difference to lives of ordinary Scots. He cannot tell Scotland he is rejecting austerity when he is not raising a penny more, even though he has the new tax powers to do something.

Politics seems to be more and more about managing cuts. Is it a hard time to be a politician?

JB: I don’t agree with that. With the new powers coming to Scotland we can reject austerity rather than meekly manage it. For nearly a decade the SNP government has been a managerial government rather than a bold and radical one. There are no excuses for them anymore.

PH: Austerity is a political choice. There is no law of nature, or even of economics, that requires Osborne and Cameron to cut from public services and social security. In Scotland, the Westminster austerity agenda is already having devastating consequences. We want to build a nation that does things better and improves life for the people who live here. At the same time, we need to consider the most urgent priorities for using devolved powers to act against cuts coming from Westminster. Until Scotland is independent this is the balancing act Holyrood and the Scottish Government have to manage.

MF: Being a politician has always had its challenges, but few are particularly novel. Managing limited resources has always been a key part of decision making, and finding an acceptable balance in public spending is part of the business that we are in. Like in any job, politicians inevitably have the occasional gripe – but changes come with opportunities. Above all the political process still has the ability to surprise us. While in the not-too-distant past there was a near-consensus that British politics had become bland and predictable, that could not seem further from the truth today.

WR: Being a politician is never easy and it’s only right that we all work as hard as possible to represent the people who elect us. The current economic climate means that sometimes difficult decisions do need to be taken, but it’s important that governments do not penalise those they should actually being helping. The NHS, police officers and the local authorities who help school our children cannot be expected to have to scrimp and save on essential services because of ruthless budget cuts.

Can you remember the first time you ever borrowed money? What was it for?

JB: I borrowed money for a mortgage on my first flat. It was a significant undertaking and I remember being quite awed by the responsibility I was taking on, but that first step on the property ladder was the start of building an asset which I very much value today.

PH: I think I borrowed from my parents against my own future pocket money, but I’m afraid I can’t even remember what it was for.

MF: My mother always used to quote the proverb ‘neither a borrower nor a lender be’, so I have always tended to save for things rather than borrow to fund them. The first loan I had was the mortgage on our first house after we were married.

WR: I first borrowed money when I went to college to cover living costs. Then, the value of the maximum student bursary available to those living away from home was almost £3,000, but that dropped to £1,875 in 2015. The boast that Scotland has the best package of student support in the UK is starting to ring hollow and is doing nothing to widen access to higher education.