Scottish Secretary speech at Fife Chambers of Commerce
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Secretary of State for Scotland delivered a speech to Fife Chamber of Commerce.
The Chambers of Commerce network right across the United Kingdom plays a vital role in growing British businesses.
I know that the network here in Fife is central to ensuring that the area attracts and supports its local businesses.
It’s a great opportunity for me to be able to talk with you about the measures we are taking to support our economy, and the future that we want to see for you and your businesses in the years ahead.
There is no doubt that the last few years have been a real challenge for us all: for individuals, for families and for businesses.
We have experienced an unprecedented global financial crisis; the UK’s largest ever peacetime deficit;
and a series of external shocks, both in the euro area and to commodity prices, that have continued to make our recovery a challenge.
Returning the whole of the UK to sustainable and balanced growth was the unifying objective for the two parties who came together in the national interest to form our Coalition Government.
We remain fully focussed on delivering that.
By reducing the deficit, restoring stability and rebalancing the economy we want to equip the UK to compete in the global race.
Recent news has shown that the economy is on the mend and moving from the rescue phase to recovery.
Last week’s UK GDP figures showing 0.6% growth in the three months to June were encouraging – above forecast and double the rate of the first quarter.
We have made substantial progress in our plan to cut the deficit, reduced by a third as a percentage of GDP since we came to power.
And we have seen significant progress over the past year in job creation and reducing unemployment.
To continue to make progress, the UK Government is ensuring the right business environment is in place for you, and for the families and communities who depend on you for their livelihoods.
We are supporting the recovery, reducing taxes remains an important priority – in particular by cutting the main rate of corporation tax to 20%.
This is helping to deliver on our objective of making the UK’s tax system the most competitive in the G20.
But tax reform is only part of the story.
It sits alongside the Bank of England’s monetary activism of recent years and our programme of financial sector reform, particularly of the banks, as key components of fixing the economy.
And we are determined to invest in our future, too.
I’ve already mentioned the UK Government’s support for the Queensferry Crossing, a less prosaic name than the previous working title of ‘the Forth Replacement Crossing’.
And the Queen Elizabeth class carriers, too. These are important parts of our investment programme.
But we have also provided over 1.7 billion pounds of additional capital spending power to the Scottish Government since the Spending Review of 2010.
It is for the Scottish Government to invest that money as it sees fit – including in the ‘shovel ready’ projects it has been so keen to promote.
Where responsibility sits with the UK Government, we are working hard to improve Scotland’s infrastructure links with the rest of the UK and to get the construction sector moving again.
In the housing sector, we are introducing the Help to Buy Mortgage Guarantee Scheme, which will offer up to 12 billion of Government guarantees to lenders who provide mortgages to people with a deposit value of between 5 and 20 per cent.
Helping to make more high loan-to-value mortgages available to potential home-owners who can’t save for the large deposits needed following the financial crisis.
And we have set out a clear industrial strategy to ensure that Government is working with the experts in our key industries: such as construction, renewable, oil and gas and life sciences.
We know that you - and businesses like you, right across the United Kingdom - have been working hard to do your bit too. We need to keep working together to ensure that the economic recovery gathers strength and is sustained – we are not complacent about the challenges that remain.
The Future of Scotland
In this environment I know that right now all of you remain focussed on addressing the challenges we face day to day.
But aside from that, I know that the next issue on everyone’s minds is ‘what future will Scotland choose in the referendum next year?’
It’s just over 400 days until those of us living here in Scotland will make our biggest ever collective decision.
It will be a big, bold moment.
Offering us the choice between staying within the most successful partnership of nations the world has seen, or an irreversible decision to leave the United Kingdom and go our own, separate way.
To my mind it will come down to one simple question: which of the alternatives is better for me, my family, and my country?
For me the answer to that is absolutely clear.
As a proud Scot I believe that we can enjoy a better future as a nation if we remain within the United Kingdom family.
With a strong Scottish Parliament and a strong voice in the UK Parliament giving us the best of both worlds
It is clear to me that, as Scots, being part of the United Kingdom gives us greater opportunities; greater security and an unrivalled platform on the world stage.
And I believe all that is worth keeping.
If you focus in on the economy, which I am sure will dominate your thinking, the argument for staying in the UK is a powerful one.
As part of the world’s sixth largest economy, Scotland has strength in numbers - our 5 million people have unfettered access to a highly integrated single market across the UK.
More than 300,000 Scottish businesses can sell goods and services in a domestic market of more than 60 million people.
And enjoy support from an unparalleled network of embassies and consulates boosting their trade around the world and creating thousands of jobs at home.
We have seen for ourselves the ability of the UK economy to absorb huge financial shocks like the banking crisis which devastated our two largest Scottish banks.
And, as has been debated at length – as part of the UK we have certainty about our shared currency.
Over the last decade and a half we have created a devolution settlement which maintains these inherent advantages of the UK, while developing our decision making here at home at the Scottish Parliament.
Since the landmark creation of the Parliament at Holyrood we have seen it anchored in Scottish public life and seen its powers enhanced – significantly by the Scotland Act of last year which brings major tax and borrowing powers north of the border, in the biggest transfer of financial powers from London to Edinburgh since the Act of Union sent them the other way. But it’s not just by milestone Acts of Parliament that powers have been transferred.
We have seen flexible, responsive arrangements evolve that have allowed economically important powers like the management of our railways come north, while ensuring that when it makes sense to legislate on a pan-UK basis, as we have done in relation to tackling organised crime, we can still do it in Westminster with the consent of the Scottish Parliament.
This ‘best of both worlds’ approach is a real strength for us. And I believe the settlement will develop further.
For me as a Liberal Democrat, seeing the commitment to further devolution coming from all three parties who support Scotland staying within our United Kingdom is a real milestone in our country’s development.
But before we can take decisions on changes to our devolution settlement we need to take the most fundamental decision: are we in, or are we out?
Scotland Analysis Programme
As the UK Government, our proposition is clear: Scotland should remain the integral part of the United Kingdom that it is, and has been for over the last 300 years.
That is why over the last six months we have set out in great detail on fundamental economic questions what Scotland has as part of the UK and what all of us need to weigh up as we consider our vote.
I recognise that before many people can make their choice they want information, and they want to hear the case for each option.
So far we’ve published four papers in our Scotland Analysis Programme, amounting to over 460 pages of argument and data.
I’ll admit the title isn’t all that catchy – but it reflects a really important point about the way we are approaching this debate.
Analysis. We are doing the homework,
We are examining the evidence
And we are setting out the facts.
Our first paper sets out the legal position of Scotland within the United Kingdom – and the legal realities of becoming a separate independent state.
Because it’s important for us all to be clear that independence means Scotland leaving the United Kingdom.
And leaving the United Kingdom, means leaving the state that we have built together, with our fellow citizens who live in England, Wales and Northern Ireland.
It means there are no guarantees that an independent Scotland would be a member of international organisations like the EU, NATO, G8 and G20.
A separate Scottish state would need to apply to join these organisations.
For the UN that could be a relatively simple process, but it’s a process that a newly independent state would have to go through none the less.
For other organisations there are detailed negotiations that would be required before an independent Scotland could be a member.
For the EU that would mean a newly independent Scotland negotiating with 28 existing Member States.
Simultaneously asking for fast-tracked membership, but also apparently expecting favourable terms:
An exemption from the euro;
An opt-out from the Schengen Agreement for the free movement of people; and
An agreement on Scotland’s contribution to the EU budget having left the UK’s rebate behind.
But it is not just the international implications of leaving the United Kingdom that need to be considered.
Our second paper in the Scotland analysis series examined in detail the currency arrangement we have, right now, as part of the United Kingdom, and the options that would be open to an independent Scottish state.
All of the options:
Seeking a formal currency union with the continuing UK state;
Using sterling outside of the UK, like the Isle of Man;
Adopting the Euro;
Or a separate Scottish currency altogether.
None of these options is the same as the shared currency we have now.
All are sub-optimal – for Scots and Scottish businesses and for the rest of the UK - to the current system we have of a shared pound sterling and a shared Bank of England.
And as the Chancellor made clear when he launched our currency paper, it is ‘unlikely’ that the continuing UK would choose to have a formal currency union with a separate Scottish state.
We’ve published a paper on our Financial Services sector
Setting out the importance of the sector to Scotland, where financial services contribute more than 8 per cent of Scottish GDP and support around 7 per cent of Scottish employment.
And the enormous benefit that this strong Scottish industry gets from being part of the UK financial sector, not least the support that the size and strength of the UK can provide in times of trouble.
We recently produced a fourth paper that examines the benefit of our shared single domestic market.
For whilst the border between England and Scotland means a great deal historically, it means nothing for our businesses large and small that operate across that border on a daily basis: Whether that be the 300,000 people that travel into or out of Scotland from the rest of the UK each day to work;
Or the lorries that transport goods to and from Scotland providing free unfettered access to a marketplace of 60 million rather than five;
Or the shared infrastructure we have like our broadband networks and energy markets.
Through our work to date, I believe we have established the key facts in the debate.
Independence would mean the end of devolution and Scotland leaving the UK, its institutions and its place in the world;
Independence would mean a fundamental change on currency;
A big change in regulation and the bodies we interact with every day
A big change for our position in Europe;
And – as we’ve seen reported extensively in recent days – some big challenges for our pensions.
Over the autumn period we will develop these and other arguments further.
The other side’s arguments
But we’ve not just been setting out our own case over the past six months.
We’ve been looking carefully at the arguments from the other side too.
We’ve looked carefully at the Scottish Government’s approach.
And you have to give them credit for some creative thinking about what independence means.
I have always taken it to mean a separate country making its way in the world, choosing new and different policy paths, which the proponents of independence have argued are necessary.
It’s that thirst for change, and recognition of the likely divergences, that lay behind the Chancellor’s thinking when he said that a currency union between the rest of the UK and Scotland was ‘unlikely’.
‘Unlikely’ because the simple truth is that, if we break up the United Kingdom, we will have turned our backs on our shared interests, so that we can instead develop separate interests.
And as everyone in business knows – you can get along very well;
You can be the best of neighbours;
But where you have separate interests you get divergence.
Doing things differently and creating differences is at the heart of separating Scotland from the rest of the UK.
It is the inherent logic of creating a separate Scottish state.
There is no hiding the upheaval independence would bring
Even if the advocates of independence spend rather a lot of time trying to assure us that all the good things we have as part of the United Kingdom can be maintained under independence – that there will be no change to speak of.
As I say, that’s a creative approach, but it doesn’t really add up, does it?
Those who advocate independence are surely not saying to people in Scotland – vote for independence to keep everything the same as it is now?
Indeed – even people in the yes camp are starting to question this vision of independence as a pale imitation of what they dream of.
And more to the point, it is something that the Scottish Government cannot faithfully promise or deliver. Common sense tells us that.
Looking at the detail of their work throws up more anomalies and contradictions.
We’ve looked at the work of the Scottish Government’s Fiscal Commission.
The Scottish Government like to highlight the Commission’s finding that keeping the pound would be the best starting point for an independent Scotland – but they refuse to set out their plan B or even what the long-term currency plan is.
Instead the Scottish Government say that they will unilaterally use sterling regardless – so called ‘sterlingisation’.
But if we then go back to their own Fiscal Commission report, those same economists pointed out the downsides of sterlingisation: no central bank or lender of last resort, no influence over monetary policy – in short this would be, in the Commission’s own words, ‘no long-term solution’.
Another group set up by the Scottish Government to review welfare made clear that it was given no guidance about the principles they should work from – so no plan for what the welfare system should look like in a separate Scottish state. And far from recommending radical change it proposed that an independent Scotland should keep the same system as we already have in the UK.
That’s the system that the Scottish Government like to say is flawed, but their own experts say should carry on under independence.
If we turn to look at one of the most fractious areas of debate, over the oil numbers, this is another area where the Scottish Government lauds the role of independent experts.
But when the independent experts in the Office for Budget Responsibility came up with figures, the Scottish Government didn’t like they cherry-picked the highest, most favourable figures to base their public arguments on.
Something their own Fiscal Commission warned against doing.
But of course we know from the leaked Scottish Government Cabinet paper that in private they are rather closer to our position on oil numbers and future spending than they care to admit in public.
In private they say that, quote, ‘there is a high degree of uncertainty around future North Sea revenues’… and
‘that Scotland would have a larger net fiscal deficit than the UK’
They also acknowledge, and I quote again, that ‘at present HMT and DWP absorb the risk…in future we will assume responsibility for managing such pressure. This will imply more volatility in overall spending than at present.’
I think that is a fair assessment by Scottish Government ministers – it’s just a shame they won’t face up to it in public.
I gave a speech at the start of 2013 saying that I wanted this to be the year we moved from process to substance in the independence debate.
That 2013 had to be the year of evidence and not assertion.
And that is exactly what we, as the UK Government, have done and will continue to do.
We are setting out the benefits we continue to enjoy and the contribution we have made working together for the last 300 years.
And we are setting out the opportunities and prospects that lie ahead if we choose to remain part of the United Kingdom family.
Our Scotland analysis papers are setting out the analysis and facts.
Together they make the positive case for Scotland within the United Kingdom.
We strongly and passionately believe that Scotland is better, safer and stronger within our United Kingdom.
That’s our case.
We don’t shy away from that – we don’t pretend to be arguing for anything else: we are making the case that we believe in, and we are making it clearly.
And that’s what I am going to be doing throughout the Summer – to groups like yours – right across Scotland.
Making the case that I am proud of.
The case that I believe in.
Thank you for the opportunity to set it out to you here in Dunfermline today.