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Economic Trends

Volume 451: debated on Tuesday 7 November 2006

Although there is no room for complacency, the Scottish economy is in a strong position, with economic growth exceeding the long-term trend and a higher employment rate than the UK and almost all other countries of the European Union.

Annualised economic growth in Scotland has fallen behind that for the whole of the UK in seven out of 10 last quarters, and that is forecast to continue. Why do the Government sound so complacent despite the Secretary of State’s denials?

With respect to the hon. Gentleman, I should direct him to remarks made only yesterday by Tim Crawford, group economist at HBOS, who said:

“The pace of Scottish economic growth is set to accelerate in the final quarter of 2006 and into 2007, mainly reflecting the improvement in business optimism over the past 6 months.”

Growth is, according to that forecast, accelerating, against a backdrop of Scottish unemployment at4.8 per cent., which is the lowest ever and below the rate for the G7, the eurozone and the EU15. Frankly, the Conservatives should do better.

Does my right hon. Friend agree that the excellent growth and low unemployment figures to which he refers derive from investment in both the private and public sector? Will he take this opportunity to debunk the argument that investment and more jobs in the public sector somehow crowd out the private sector?

Yes, I am happy to take that opportunity. There is absolutely no evidence from the Scottish economy of the public sector squeezing out private investment. Indeed, growth in public sector investment, along with macro-economic stability over recent years, has been one of the critical success factors, bringing low interest rates, high levels of employment and steady growth. I believe that it is the rank prejudice of Conservative Members towards doctors, teachers, nurses, home helps and other vital public services that—[Interruption.]

To what extent does the Secretary of State agree that the constitutional stability that Scotland enjoys within the United Kingdom has contributed to our excellent economic record of recent years? Does he agree that the years of constitutional turmoil that would follow any move to independence would be deeply damaging to Scotland’s economic performance?

This might be a first, but I find myself in full agreement with a Liberal Democrat. Of course, the serious point is that the UK’s macro-economic performance over the past decade has been, as the OECD described it, a paragon of stability. Why would we wish to imperil that achievement by tearing up the macro-economic framework and, presumably, by establishing a Scottish pound, a separate set of Scottish accounting standards and a separate Scottish financial services agency? That seems quite beyond belief and is an idea that could be advanced only by a party bearing grudges and grievances rather than possessing a serious critique of what the Scottish economy needs.

The Secretary of State will be aware that the shape of the Scottish economy has changed drastically over the years with financial services accounting for 8 per cent. of the whole economy and dwarfing the traditional industries of mining, shipbuilding and even whisky. Does he agree that an independent Bank of England and a single regulatory authority have served the interests of Scotland well and that the only guarantee of a prosperous Scotland is a vote for the Union?

My right hon. Friend, in the light of his work in this place, speaks with real authority on these matters. Of course the Scottish financial community has been the fastest growing sector of the Scottish economy in recent years. Anyone who has worked closely with that community recognises the extent to which it is an export-based sector of the Scottish economy that relies dramatically on the ability to sell products on the market, and the largest single market is the rest of the UK. It would make no sense to make those markets foreign markets for Scotland.