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Budget 2009

Volume 492: debated on Wednesday 6 May 2009

2. What discussions he has had with Scottish Executive Ministers on the implications for Scotland of the measures contained in Budget 2009; and if he will make a statement. (271862)

Good morning, Mr. Speaker. The Budget included new measures to support Scots on modest and middle incomes through the recession, and I look forward to discussing those plans with the CBI, the Scottish Government and trade unions at our next meeting.

My right hon. Friend will be aware that there has been a lot of discussion in Scotland about the implications of the Budget for the finances of the Scottish Government. Will he make clear just how much the Scottish Government are getting as a result of the Budget? What assistance can he give the Scottish Government in terms of their own budget in the current financial circumstances that we are all facing?

My hon. Friend raises an important point. An international financial crisis is sweeping across the globe, but, despite that, the Scottish Government will continue to receive increased funding—an extra £700 million next year. That is a very important statement of intent of continued support. [Interruption.] Scottish National party Members may shout, but the fact is that the Scottish Government now have double the budget that Donald Dewar had when he was First Minister just a decade ago. The people of Scotland will judge whether their current Government are twice as good as Donald Dewar’s Government.

Does the Secretary of State agree that the one Government policy that is having no visible effect in Scotland is the temporary reduction in value added tax? Would not that money have been of greater economic and social benefit to Scotland if it had been spent on home insulation, replacing inadequate schools and building council houses?

I have great respect for the right hon. and learned Gentleman, but the fact is that the VAT cut is working in Scotland. Independent economists now assess that that is the case. The Centre for Economics and Business Research says:

“The figures are clear; the VAT cut is working.”

We have never argued that the VAT cut that helps so many Scottish families is, in and of itself, the solution. We have, of course, to continue to look for other ways to support Scots families through, and beyond, the recession, and the Labour Government are determined to do just that.

Largely as a result of this Government’s reckless tax and spend approach, the Scottish block grant has, indeed, grown to twice the size of 10 years ago. Despite some implausibly optimistic forecasts in the Budget, it is clear that the Treasury is now on course to run out of money, yet all the First Minister has done is attempt to persuade the Government that no cut at all can be made to the block grant. Has the Secretary of State informed the Treasury that, following this development, the Chancellor now looks like only the second most deluded politician in Scotland?

That is entirely pleasant. I wonder whether the hon. Gentleman has entered himself for the gold medal in that particular competition following his celebration of the 30th anniversary of Mrs. Thatcher’s ascent to power and the disruption of Scottish industry. I am glad to see him in his place following his celebration of that anniversary and Scotland’s commiseration of it over the weekend.

In the previous recessions of the 1980s and 1990s, a generation of young people were abandoned to a life of poverty and a life on benefit. It is our intention to do, wherever possible, the exact opposite to what the Tories did, so that a generation of young people are not abandoned to a life of unemployment free of any hope.

The Secretary of State can resort to all the old mantras that he wants, but they will do him no good because the public know where the buck stops for this crisis. Does he really disagree with the view of the Centre for Public Policy for Regions that the years of the Scottish Executive coffers being full to overflowing thanks to block grant increases are over? Will he confirm that, as a direct result of Labour’s financial mismanagement of the UK, up to £4 billion in real terms will have to be cut from the Scottish budget over the next four years? Is it not about time that he and his Prime Minister finally took responsibility for Labour’s catastrophic economic failures and, in particular, the damage that they have done to Scotland’s public finances?

The hon. Gentleman refers to relying on old mantras. I would never mention the old lady or the iron lady in those terms, but if he wishes to insult her in that way, he can do so. The fact is that Scots know what happened in the previous recession. They know that industry was destroyed and that instead of supporting that industry and the people who were made redundant, the Conservatives simply cast them aside. Hundreds of thousands of Scots were made unemployed; hundreds of thousands of Scots were deliberately pushed on to incapacity benefit and a life free of hope, which is why I am happy to announce today that we will be organising a jobs summit next month in Scotland to ensure that the lessons are learned from the previous recession, so that young Scots can benefit from the £1 billion announcement that the UK Government have made about preventing long-term youth unemployment in Scotland.

Further to the Secretary of State’s answer to my right hon. and learned Friend the Member for North-East Fife (Sir Menzies Campbell), can he confirm that if that VAT cut, which has had so little impact, had been reversed, it could have brought Barnett consequentials for the Scottish Government of almost twice the sum that has been complained of as a cut by the Scottish Government? Did the Government not realise that that VAT cut was doomed to fail when they enlisted the support of the SNP for it in the Lobby here?

The hon. Gentleman is just wrong; the economic experts say very clearly that the VAT cut is working. A philosophical disagreement is involved here. Of course the Scottish Government are getting more money and their budget continues to increase, but the UK Government’s view is that money should also be in the pockets and purses of Scottish consumers, so that they can spend and thus ensure that the Scottish economy is bolstered and that the recession is shallower and shorter than it would otherwise be. The VAT cut is, of course, one of a range of measures, another of which is the scrappage scheme for cars, which has been welcomed by the industry in Scotland. That is another important measure of a Labour Government who are taking decisive action to do what we can throughout this international recession.