Scottish Parliament, 4 December 2003

434 contributions from 75 members. The official report.

Introduction

Scottish Parliament (Financial Powers)

George Reid (None, Ochil)

Good morning. The first item of business is a debate on motion S2M-697, in the name of Mr John Swinney, on financial powers of the Parliament, and three amendments to the motion.

John Swinney (Scottish National Party, North Tayside)

This morning's debate reflects a wider critical debate that is taking place among the peoples and nations of Europe. That wider debate is a re-examination of the very purpose and powers of national governments and national parliaments in the face of great pressure from global forces. In that global context, the 15 full members of the European Union and the 10 accession states are making decisions about which powers should be held by the EU and which should be held by national Parliaments. It is a debate that we cannot afford to ignore. We cannot leave it to others; we must show leadership, ambition and self-confidence if we are to make our voice heard on such big and vital subjects.

The powers that we hold go to the heart of what we can achieve as a Parliament and how we see ourselves and our country. Do we see ourselves as decision makers, equals and participants and as a people and a Parliament with a contribution to make to the wider world, or are we satisfied with passing responsibility for our country to someone else?

Every member of the Scottish National Party joins our party because, first and foremost and above all else, we believe passionately in Scottish independence. We believe that only with independence can we deliver the prosperity necessary to defeat the evil of child poverty and deliver social justice. Two other parties in the Parliament now share that aspiration, but others who are not convinced about independence recognise the need for change, and I warmly welcome that movement.

The debate on the powers of the Parliament is dynamic; it is indeed a process. The purpose of this debate is to establish how much consensus exists in the Parliament on moving on from the clear limits of devolution, which, week by week, are becoming apparent to the people of Scotland.

The points of the debate are set out in the amendments before us today. Mr Kerr's amendment is the status quo—there is nothing wrong; everything in the garden is rosy. Tell that to the families who live in poverty, to the young people who have to leave Scotland to find work and to more than one third of adults in Glasgow who cannot find work. Things in the garden are not rosy.

Mr McLetchie's amendment is the classic fudge. He believes that there is a need for financial powers in the Parliament, but he cannot quite bring himself to say so. Although the terms of Mr Sheridan's amendment are correct, it does not address the point of this debate, which is to seek out where consensus exists on moving on from devolution. I take the view that we should not reject any additional powers for the Parliament just because we cannot get all the remainder at the one time.

Presiding Officer, your predecessor, Sir David Steel, said recently:

"No self-respecting Parliament should expect to exist permanently on 100 per cent hand-outs determined by another Parliament. Nor should it be responsible for massive public expenditure without any responsibility for raising revenue in a manner accountable to its electorate."

He is 100 per cent correct. Those comments are far from isolated, as members of the Conservative and Labour parties have argued similar points of view. Mike Rumbles for the Liberal Democrats goes even further. According to Mr Rumbles:

"The current situation is completely untenable. A Parliament isn't a Parliament if it isn't responsible for raising the money it spends."

I welcome those contributions to the debate.

Robert Brown (Liberal Democrat, Glasgow)

Is it not disingenuous of the SNP to put forward the policy of independence, which, as Mr Swinney said rightly, it believes in, to try to get support for what is effectively a federalist position? Is that his position or does he stick with the position of independence for Scotland?

John Swinney (Scottish National Party, North Tayside)

I do not know whether Mr Brown was in the chamber for the start of my speech, so I will remind him what I just said. I said that the SNP believes that only with independence can we deliver the prosperity necessary to defeat the evils of child poverty and deliver social justice. I have just delivered a paragraph in which I said that the purpose of the debate is to establish how much consensus exists in the Parliament on moving on from the clear limitations of devolution. I will be totally clear about the point: I believe in independence and I think that the Parliament should have the full powers of an independent Parliament. However, I accept that other people believe that we should move on from devolution, and the purpose of the debate is to examine whether there is an opportunity for a genuine debate in the Parliament among all the parties about how far people are prepared to travel on that road. My position has always been clear: I will never close the door on additional powers for the Parliament short of independence. My membership card of the Scottish National Party says that I have two objectives: one is to deliver independence for Scotland and the second is to further all Scottish interests, which is exactly what we are trying to do today.

Brian Monteith (Conservative, Mid Scotland and Fife)

I thank the member for that quite clear explanation in response to Mr Brown's question. If giving the Parliament more financial powers resulted in its working more effectively and more responsibly—as the member puts it—and therefore strengthened the union, would that really take us further down the road towards independence?

John Swinney (Scottish National Party, North Tayside)

That is a point of great debate. Devolution was supposed to strengthen the United Kingdom, but it has exposed some real practical issues and problems—which I will come on to talk about in a few moments—particularly in relation to university top-up fees. I know that Mr Monteith has taken a keen interest in that subject over the years and I am sure that he will be interested in what I have to say on that point.

Iain Smith (Liberal Democrat, North East Fife)

Will the member give way?

John Swinney (Scottish National Party, North Tayside)

I had better make progress, as I have taken two interventions already.

The Deputy First Minister made a speech the other week to the Universities Scotland conference, but he would have been better served listening to Mr Rumbles before he did so. During his speech he lambasted universities for lacking imagination about how to raise revenue. He said that they had to find money from sources other than Government. That must have been a puzzling experience for university principals: there was the Executive, which refuses to raise any of its own money, delivering an economics lecture to organisations that raise hundreds of millions of pounds every year. The issue of university funding has injected urgency into the debate on the financial powers of the Parliament.

George Lyon (Liberal Democrat, Argyll and Bute)

Will the member take an intervention?

John Swinney (Scottish National Party, North Tayside)

Given that I have mentioned the Liberal Democrats, I will take an intervention.

George Lyon (Liberal Democrat, Argyll and Bute)

Is it not true that we raise 15 per cent of our revenue here in Scotland through Scottish taxes, so we do not rely completely on a direct grant from England and Wales?

John Swinney (Scottish National Party, North Tayside)

The last time I looked, all we had was the council tax, which passes the burden to local authorities and they get all the stick for it, so Mr Lyon's argument does not stand up to much scrutiny.

The issue of university funding and top-up fees exposes the fatal flaws of the devolution settlement. A clear majority in the Parliament is opposed to top-up fees for students in Scotland; every party is opposed to them—except, of course, the Labour Party. The majority of us agree that rejecting top-up fees must not lead to an erosion of Scottish universities' competitive edge. That majority on policy and intent counts for nothing if the Parliament lacks the financial muscle to put the policy into practice. If top-up fees are introduced—and there is every likelihood that they will be introduced—a number of eminent experts have made it clear that there will be serious consequences for Scotland's public funds. Professor Arthur Midwinter said:

"there would be no Barnett consequentials for those fees, and there would be a funding gap between the Scottish and English universities."—[Official Report, Enterprise and Culture Committee, 28 September 2003; c 28.]

The lesson of all that is clear: when decisions that impact on Scotland are made at Westminster or in Brussels or Washington, we must have the means to respond. We cannot leave it to someone else to sort out; this is the national Parliament of Scotland and we must have responsibility for the national well-being of the people of Scotland.

At present, the Parliament's funding powers are among the most limited of any Parliament in the world. The Executive can allocate the tax base that it receives to different departments, but it has little or no power to expand that base by growing the economy and, for example, providing the universities with the funding they need to secure and maintain a competitive edge. To do that, we need full economic powers. For example, we need the ability to vary business taxes and incentives, such as corporation tax and research-and-development credits. Those powers are essential for any successful economy. How do we know that? We know that because both the Prime Minister and the Chancellor of the Exchequer tell us so regularly. The Prime Minister wrote recently in a joint article with his Estonian counterpart:

"making everybody follow the same tax rules would quickly diminish Europe's competitiveness by killing jobs and stifling growth."

The Prime Minister is absolutely right, but today he forces Scotland to follow the same tax rules as England, the result of which has been the loss of 50,000 manufacturing jobs over the past five years and one of the lowest growth rates in Europe.

George Lyon (Liberal Democrat, Argyll and Bute)

rose—

John Swinney (Scottish National Party, North Tayside)

It is astonishing that while the Prime Minister is fighting tooth and nail to protect Estonia's right to set its own taxes, he is fighting even harder to prevent Scotland from enjoying that self-same right.

If Mr Lyon wants to intervene, he is welcome to do so now.

George Lyon (Liberal Democrat, Argyll and Bute)

Week after week, Mr Swinney's party comes to the chamber and complains vociferously about the varying rates of business taxation north and south of the border. We already have a system in which we can vary tax rates north and south of the border.

John Swinney (Scottish National Party, North Tayside)

Absolutely. The Executive has made business taxation higher in Scotland than it is south of the border. No wonder it is killing jobs in Scotland.

The chancellor never makes a speech without highlighting the crucial role of tax competition. With full powers over taxation, the SNP would reduce corporation tax to a level below that of the rest of the UK in order to counter the huge gravitational pull of London, which sucks in Scottish jobs and investment. We know from the experience of small independent countries that that course of action will boost public expenditure. The examples of Ireland, Finland and Denmark prove that such a policy increases the tax contribution that business makes to the exchequer. That approach is an example of the healthy tax competition that the Labour Government advocates for everyone else, but not for Scotland.

Tommy Sheridan (SSP, Glasgow)

In relation to the lower corporation tax rates that Mr Swinney envisages for Scotland, what would be the marginal tax rates for the well-off?

John Swinney (Scottish National Party, North Tayside)

I want the power to set taxation to lie with the Scottish Parliament. I am coming to a section of my speech that will address personal taxation.

The power to vary business taxation is an essential component of creating wealth and growing the Scottish economy, but it is not the economy alone that drives our belief that this Parliament should have the power to decide fiscal policy—it is the basic Scottish principle of fairness that drives the agenda. We want control over business taxation to give our wealth creators a competitive edge. We want control over personal taxation to restore fairness and the progressive principle to the tax system.

The amount that people pay in tax should take full account of ability to pay, but successive Labour and Conservative Governments have favoured indirect over direct taxation. The Executive's own "Scottish Economic Statistics" report for 2002 says that the UK tax system has created a Scotland with one of the highest rates of inequality and child poverty in the developed world. Westminster tax policy has hit the poor to help the rich. If this Parliament does not have the power to tackle such deep unfairness, what on earth are we all doing here?

The old scare stories that are wheeled out to justify London control of Scotland—we have heard a few of them already today, and I am sure that we will be treated to a few more in the course of the debate—are losing their lustre as arguments. In truth, they crumble when confronted by the facts. Five of the six wealthiest nations on earth have populations similar to or smaller than that of Scotland. If countries as varied as Luxembourg, Norway, Ireland, Switzerland and Denmark can lead the world in living standards, why not Scotland, with all our talent and potential?

Despite the appalling publicity that has sometimes engulfed the Parliament since 1999, the people still want this Parliament to have more influence over their lives than Westminster has, but they know that, today, that is not the case. Let us display the self-confidence in ourselves that we all say we want to instil in the people, and take on the powers to meet the people's ambitions.

I move,

That the Parliament recognises that, in order to be properly accountable to the electorate, it should be responsible for raising its revenue as well as spending public money and agrees that making every country follow the same tax rules diminishes competitiveness by killing jobs and stifling growth.

Tavish Scott (Liberal Democrat, Shetland Islands)

Fiscal autonomy is a topic for which some members of the Opposition seem to have extraordinary fascination. They make it out to be their silver bullet for solving all Scotland's problems, short of independence—which Mr Swinney mentioned—when we will all live in eternal bliss. Unfortunately, despite all their fascination—obsession, even—Parliament today is no clearer about whether fiscal autonomy is a silver bullet, because Opposition members never tell Parliament or the people of Scotland how they will fire it. They talk about all the new taxes that they would excitedly get their hands on, but they do not tell us what they would do with those taxes. The questions that they need to answer—which Mr Swinney did not answer this morning—are what changes, how much and who pays.

Fiscal autonomy—or fiscal independence—would mean that the Executive had full power over all taxes that currently are levied by the UK. The main aim is to set up a different tax structure, as Mr Swinney alluded to, from that in the rest of the UK in order to spur economic growth. At least, that is what is promised. The Executive fully agrees that we should do everything possible to foster economic growth, but there is no reason to believe that fiscal autonomy can deliver the goods that the Opposition promises it will.

First, we already have full autonomy in our spending decisions. That is a fact that the Opposition conveniently forgets to mention. We can allocate funds according to the needs and wishes of the Scottish people. In the partnership agreement we committed ourselves to increase economic growth in Scotland. That is our primary aim, and our policies reflect that.

Secondly, we receive more funds through the block grant than we would be able to raise ourselves. Those spending levels hugely benefit our citizens and enterprises. We can have a debate about how we spend the resources, but that is the position. As we all know, Scotland's circumstances make higher spending levels necessary.

We support the present funding arrangement to deliver the stability that is needed for this new Parliament. Stability has delivered, but not for the SNP. Its official policy—agreed by the party in 2000—is to gain independence by the incremental accumulation of powers, which is stealth independence, if you will. However, the SNP needs to answer key questions about that policy-what changes, who pays and how much.

Jim Mather (Scottish National Party, Highlands and Islands)

rose—

Tavish Scott (Liberal Democrat, Shetland Islands)

Let me finish this point, because I know that Mr Mather will be interested in it.

In his recent lecture in Edinburgh, the eminent economist Paul Krugman advised against a tax-cutting policy to encourage growth. He believes that the costs outweigh the benefits. Evidence suggests that tax cuts work in such a cyclical way that they destabilise the economy. His advice is to build on our Scottish advantages and embrace Scotland's attractiveness as a place to invest and innovate in by capitalising on our universities, our cultural heritage and our infrastructure.

John Swinney (Scottish National Party, North Tayside)

Would Mr Scott care to address the point that I raised about the university sector in Scotland? With the onset of top-up fees—these are not my words, but Professor Arthur Midwinter's—it is quite clear that there will be a funding shortfall for Scottish universities because of a lack of Barnett consequentials. What will the Executive do within its fixed financial settlement to close that funding gap, because already the university principals are up in arms about the lack of support from the Executive?

Tavish Scott (Liberal Democrat, Shetland Islands)

It strikes me that Mr Swinney was near to advocating a tax increase to cover the situation. However, as we do not know yet what the proposals are—obviously, we are in contact with the relevant departments in London—we will monitor the effects closely and—[ Interruption. ] I will tell members about the other side to the issue. Why is it that Alex Salmond is today launching a bill at Westminster to stop Scottish MPs voting on the very measures that Mr Swinney is so concerned about? MPs from parties on the Executive benches will do something about the measures, unlike MPs from Mr Swinney's party.

Christine May (Labour, Central Fife)

Does the minister agree with me—

Christine May (Labour, Central Fife)

Thank you, gentlemen—when you are ready.

Does the minister agree that the Enterprise and Culture Committee's Scottish solutions inquiry obtained evidence from people other than Arthur Midwinter that there would be beneficial Barnett consequentials from the potential imposition of top-up fees in England, and that the committee should consider in its report what might be made of such consequentials to support the sector?

Tavish Scott (Liberal Democrat, Shetland Islands)

Christine May will forgive me for saying, as I did to Mr Swinney, that we do not know what the exact outcome will be, but there may or may not be Barnett consequentials—[ Interruption. ] Members may not like it, but neither I nor the Executive will prejudge the outcome—although I see that Mr Swinney is happy to do so.

Given those warnings from Professor Krugman, I am surprised that the SNP has embraced tax cuts with such enthusiasm. Apparently, the SNP will cut tax for almost everyone. Business rates will be cut. Corporation tax will be cut. Fuel duty will be cut. Whisky duty will be cut. Income tax for low earners will be cut. Indeed, the SNP even proposes a tax cut on do-it-yourself. I see SNP backbenchers behind Mr Swinney nodding in agreement with those tax cuts. All of us would like to live in a world without taxes and still receive the benefits of excellent public services, but even the SNP used to recognise that cutting tax and cutting public services go hand in hand.

John Scott might remember the Ayr by-election when Alex Salmond had a go at the Tories:

"They can't have it both ways. You simply can't have tax cuts and keep public services going."

Jim Mather (Scottish National Party, Highlands and Islands)

Does Mr Scott agree that we are not talking about a zero-sum game and that the stability that he offers us—low growth and population decline—is a real shame on the Parliament? Perhaps he will answer the question that Paul Krugman could not answer: to which state in the United States' union would he recommend the Scottish model?

Tavish Scott (Liberal Democrat, Shetland Islands)

I will not mention any state in the United States' union. Instead, I will quote from some of Mr Mather's fans. The SNP should re-read SNP Saltire paper 1 by the party's favourite economists, Jim and Margaret Cuthbert. According to that paper, fiscal independence

"poses an essential discipline on SNP policy ... SNP policy must avoid simply being a wish list of all the desirable things money could buy."

How the Cuthberts must be squirming now. Yet in the elections, we heard nothing but spending pledges from the SNP.

The wish list keeps growing. In the past couple of months we have had north-east nationalists wanting affordable housing, a Fife nationalist demanding more money to recruit more police officers and a Highland nationalist demanding a Dornoch rail crossing, but my personal favourite—and he is here today—is Mr Crawford's wish. Bruce Crawford wrote in the Stirling Observer on 20 August:

"The national park ... litter bins are not being emptied on a regular enough basis."

He continued:

"I would like to see a very small percentage of the Executive underspend being given to Stirling Council."

The bit I liked best, however, says a lot about the SNP's budgeting:

"Last year the Scottish Executive was left with an underspend of £500,000 million."

He claims—and it is here in black and white—that there was £500,000 million spare. That is £500 billion—nearly the half the gross domestic product for the entire United Kingdom.

We get many confused messages from the SNP. It wants to cut tax and increase spending, even though its advisers say that it cannot promise either.

Tricia Marwick (Scottish National Party, Mid Scotland and Fife)

Will the member take an intervention?

Tavish Scott (Liberal Democrat, Shetland Islands)

I want to make progress.

Even SNP members have been begging their leadership for answers. In Snapshot, another well-thumbed periodical that I am sure we all take to bed with us every night, is a picture of Andrew Wilson with an abacus—that makes a difference from the calculator that was used before—and I see that there is a picture of Mr Mather with an abacus on the next page. The magazine asks:

"Would financial independence mean taxes would go up or down?"

The answer is:

"Financial independence doesn't automatically mean an increase or decrease in taxes".

So that is clear. However, SNP members did not like that answer, so they asked a more precise question in Talking Independence:

"Will my taxes go up?"

The answer was:

"An independent Scotland ... will be more than able to maintain ... the current level of services within the overall level of taxation."

That is as clear as mud as well.

At the start of my speech, I mentioned how the SNP verges on getting overexcited about fiscal independence. For a moment earlier this week, we shared that excitement. On Monday, when Mr Swinney announced the start of his winter campaign, he said that he would tell us what powers we need and how he would use them. Today is one of the warmest winter days for a long time and Mr Swinney's is one of the shortest winter campaigns, even for serial relaunchers such as the SNP. His winter campaign has melted away already because he has not spelled out how he would use any new powers. He has failed to answer any of the questions posed. What change, how much and who pays? Despite having asked all the questions and having read all the pamphlets, we are left with John Swinney as the Howard—from the HBOS advertisements—of Scottish politics, telling us that taxes might go up as well as down under fiscal independence. That is not good enough.

This partnership Administration is determined to build on the stability that we have and to invest in public services, in growing the Scottish economy and in real solutions for the people of Scotland. I invite Parliament to contrast the approach of the partnership with that of the Opposition.

I move amendment S2M-697.3, to leave out from second "that" to end and insert:

"the significant benefit that Scotland gains from being part of the United Kingdom and notes that public expenditure in Scotland is at record levels and that this is helping to deliver the commitments in the Partnership Agreement to growing Scotland's economy; delivering excellent public services; supporting stronger, safer communities; and developing a confident, democratic Scotland."

David McLetchie (Conservative, Edinburgh Pentlands)

I am delighted to have the opportunity that has been presented by the Scottish National Party to discuss the financial powers of the Parliament. However, although that is a perennial topic for debate among the political chattering classes, it is far from being the most important issue that faces the Parliament today and it is certainly not a subject of pressing interest or concern to the vast majority of our voters.

The public are overwhelmingly concerned about the state of our schools and hospitals and the crime that blights far too many neighbourhoods in Scotland. The Parliament does not need any new powers to improve our public services or to take measures to tackle crime. That is why I will set out tonight how we Conservatives will seek to achieve those aims and why we will devote the whole of our business time next week to debating the reform and improvement of public services in Scotland.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

The member talks about improving public services, but is not the whole thesis of his argument that he wants to take people out of the national health service with his passport out of the NHS?

David McLetchie (Conservative, Edinburgh Pentlands)

We want to improve the national health service by extending choice and increasing investment in health services generally, in line with many models that are found to be highly successful on the continent of Europe. If the member wishes to learn more, he is welcome to come along to the debate next week.

I would not expect the Scottish National Party to do the same as us, because that would merely expose the poverty and limitations of its agenda. Instead of the fundamental reforms that are needed, all that the SNP can offer is the forlorn hope that it will run those failing systems of public services better than Labour and the Liberal Democrats can. At the end of the day, the Scottish National Party is a self-proclaimed left-of-centre, social democratic party, just like Labour and just like the Liberal Democrats. Theirs is hardly a recipe for the brave new Scotland that SNP members constantly talk about creating.

The SNP organises debates about what it could do if only it had the powers to hide the fact that it is a Potemkin party—a painted facade with nothing behind it.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

Potemkin?

David McLetchie (Conservative, Edinburgh Pentlands)

Members will have to get a bit more intelligent to participate in debates. We will send the explanation to Mr Rumbles in our press release.

When the SNP talks about extending the financial powers of the Parliament, the proposition cannot be treated as a genuine attempt to strengthen the devolution settlement because we all know that the SNP wishes to destroy that settlement. For the Scottish National Party, extending the financial powers of the Parliament is all about splitting up the United Kingdom. As members might expect, as a unionist, I reject the SNP desire to bring about independence, just as I object to the view that the Scotland Act 1998 is some kind of holy writ inscribed on tablets of stone. It is not—it is a piece of legislation, albeit important constitutional legislation. Like all such legislation, however, it will no doubt require review, amendment and consideration over time. My view has always been that we should introduce any changes only in the light of experience of how the new devolved settlement has worked in practice.

We must dismiss the two extreme positions of, on the one hand, seeking full financial powers—that is a Trojan horse for independence—and, on the other hand, the equally daft idea that we cannot touch the Scotland Act 1998, even if that idea flies in the face of all the evidence that suggests it would be desirable to make some adjustments.

There are perfectly good arguments for having a better balance between the Scottish Parliament's spending and its revenue raising. If we are honest, as Mr Swinney pointed out fairly, we know that there are members of all parties who are concerned that the current virtual reliance on a block grant from Westminster is not a healthy state of affairs. As a Conservative who believes in prudent, responsible and limited government, I fear that that encourages a spend, spend, spend mentality that is holding Scotland back. Sir Donald Mackay pointed that out in his excellent presentation to the cross-party group on the Scottish economy when he highlighted the imbalance between the private and the public sectors in Scotland.

We need to conduct further analysis of the implications of giving the Parliament the responsibility to raise more of its own revenue, particularly when we bear it in mind that our councils already raise a much higher share of their revenue. As part of that process, "Paying our Way"—the excellent Policy Institute document by Ross Harper and Iain Stewart—highlights the fact that countries such as Australia, Canada and Spain operate middle-way systems in which devolved administrations have revenue-raising powers that are greater than those that the Scottish Parliament has at present, but which stop well short of fiscal and financial independence. That demonstrates to me that it is perfectly possible to have greater financial devolution without undermining the integrity of the United Kingdom.

John Swinney (Scottish National Party, North Tayside)

Will Mr McLetchie be a bit more specific about the areas in which he would see the Parliament acquiring greater financial responsibility and about the areas of policy and taxation to which that might be applied? Can he inform us how far along that road he is travelling?

David McLetchie (Conservative, Edinburgh Pentlands)

No, I cannot, because I think that that is something that should be investigated by a royal commission or some other independent body that would take evidence from all shades of opinion in Scotland. Mr Swinney must acknowledge that the structure of the Scotland Act 1998 was established in the Scottish Constitutional Convention, in which neither his party nor mine participated, and that things have moved on. Nor was there any significant input to that process from the Scottish business community.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

Shame.

David McLetchie (Conservative, Edinburgh Pentlands)

Members may cry, "Shame," but that is a fact, and that is how the present structure arose. Many other people have a valid contribution to make to the debate, and I invite them to do so.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Will Mr McLetchie give way?

David McLetchie (Conservative, Edinburgh Pentlands)

I am sorry, but I must move on.

The problem with giving the Parliament greater financial responsibility is that most people believe that more tax-raising powers will inevitably lead to higher taxes, and we have had quite enough of them already, courtesy of Gordon Brown. One can hardly blame people for believing that, when all the other parties in Scotland believe that higher spending is the answer to all our problems.

The Scottish Executive has hardly helped, in that respect, by using the powers that it already possesses to increase taxes on people in Scotland. We have heard about business rates, but the Executive has also increased taxes in some remarkably stealthy manners; for example, it has introduced new taxes under a variety of deceitful disguises such as graduate endowments and congestion charges. The truth is that a tax is a tax by any other name, whether it is called a fee, charge, toll, levy or endowment. People are now expected to pay for things that were previously provided out of general taxation, without any offsetting reduction in the level of that taxation.

Iain Smith (Liberal Democrat, North East Fife)

Will Mr McLetchie give way?

David McLetchie (Conservative, Edinburgh Pentlands)

I would like to finish this point.

Equally, some services that are now provided out of general taxation—personal care and concessionary travel, for example—were not thus provided in the past. That demonstrates that the issue of financial powers and revenue raising is far more complicated than many people imagine. That is why we have argued consistently that we need to review the relationship between this Parliament and Westminster, and their respective powers and responsibilities, in a way that is sensible and can strengthen the United Kingdom.

Tommy Sheridan (SSP, Glasgow)

I want to simplify the complex process of revenue-raising powers. Will Mr McLetchie join his colleague Malcolm Rifkind in apologising to the people of Scotland for imposing the poll tax on them?

David McLetchie (Conservative, Edinburgh Pentlands)

No, I will not. As Mr Sheridan knows, we introduced the community charge when we were in Government. We recognised that it was not working successfully—

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

Was that a tax?

David McLetchie (Conservative, Edinburgh Pentlands)

Yes, of course it was a tax. We then substituted the council tax, which most parties in this chamber—or the majority of parties in the chamber—think is a perfectly satisfactory alternative.

John Swinney (Scottish National Party, North Tayside)

Mr McLetchie mentioned that there should be a royal commission or some such organisation to look at those issues. Does not he think that there is a role for the Scottish Parliament to form a view among its members about the powers that the Parliament requires? Is not that an issue for the elected representatives of the people of Scotland?

David McLetchie (Conservative, Edinburgh Pentlands)

The people of Scotland have various sets of elected representatives. They have many representatives in Scotland's other Parliament at Westminster, just as they have representatives in this Parliament here on the Mound, and in future at Holyrood. Parties in this Parliament, or this Parliament itself, can by all means make submissions, consider aspects of the matter through our committee system and come to conclusions. Of course they can—that would be perfectly sensible. The issue is whether now is the appropriate time for them to do so, and I think that that debate is premature. We should be focusing our energies on the delivery of Scottish public services, which are badly in need of repair, rather than talking about the taxing-and-spending arguments that Mr Swinney wants to highlight but which I think miss the mark in relation to what the public are interested in at present.

As the amendment in my name makes clear, we think that there is a need for a review, in time, of the relationship. That review should be conducted by an independent body such as a royal commission, which can consider all the implications. That is a sensible and rational course of action, which everyone in this Parliament should support.

I move amendment S2M-697.2, to leave out from "recognises" to end and insert:

"notes that it will only regain the confidence of the people of Scotland if it addresses the issues of most concern to them and that we must therefore concentrate on improving our public services, strengthening our economy and tackling crime; recognises nevertheless that the relative responsibilities of the Parliament and Westminster, including the financial relationship, should be the subject of review in light of experience; calls for such a review to be conducted within the context of making the devolved settlement work better and thereby strengthening the United Kingdom, and believes that the most appropriate mechanism for such a review would be a Royal Commission or similar independent inquiry appointed by the UK government."

Tommy Sheridan (SSP, Glasgow)

Last Sunday, I had the great pleasure of attending Eastwood cemetery to speak on the 80 th anniversary of the death of the great Clydeside socialist, John MacLean, who had a vision for Scotland of a Scottish workers' republic. Many in the SNP used to share that vision, and some still do, but that banner and that vision are now clearly carried in this chamber by the Scottish Socialist Party. We feel that it is absolutely necessary not just to establish an independent country and to take our place alongside the other 190 independent states in our world, but for us to have democratic and public control of the vast resources and revenues that are available to this country to tackle the grinding poverty that is a scar that all of us should carry.

It would appear that the SNP, unfortunately, is less ambitious and less radical than it once was. In his speech, John Swinney said that the debate goes to the very heart of what we can achieve as a Parliament. I ask the SNP to consider making full use of even the limited powers of this Parliament before it assembles arguments for greater power. We have the power, for instance, to change the local tax system and to scrap the unfair council tax. On that subject, David McLetchie's arithmetic is sadly lacking. Only two parties in this chamber—the old Tories and the new Tories—support the council tax system, whereas five parties want to change it.

We could use our powers to improve the minimum wage for public sector workers, or to create a national railway company, publicly owned and controlled, to improve the safety and delivery of our railway services. However, even if we used those powers to the full, they would not be enough to tackle the scourge of one in three of our children being brought up in poverty or the shame of many of our pensioners and pensioner households struggling to make ends meet. The fact is that the biggest growth area in this country is poverty among the working poor. Such is the shame of low wages.

That is why we have to address the need for a new Scotland in which we would assume the full powers and responsibilities of any independent nation. The shadow that falls over this debate is the Holyrood inquiry into the fiasco of decisions that were made—before there was even a democratic mandate in this chamber—to commit the Parliament to a building project and a blank cheque that now shows a total of more than £400 million. The irony is that that lavish and luxurious building will house a Parliament that does not even have the powers that we would expect of any small, independent nation in the world. In fact, it will house a Parliament that has even fewer powers than Clackmannanshire Council.

Phil Gallie (Conservative, South of Scotland)

In the light of his comments on the Scottish Parliament building, will Tommy Sheridan remind me whether he joined the SNP, the Labour Party and the Liberal party in the pro-Scottish Parliament referendum, when they all advocated the provision of a parliament building costing £40 million?

Tommy Sheridan (SSP, Glasgow)

The pro-referendum campaign was about delivering the idea of a Scottish Parliament; there was no publicity then about a building costing £4 million, £40 million or £400 million. As Phil Gallie has been here for four and a half years, I am sure that he realises that, as far as I am concerned, the Parliament should not have been sited in Edinburgh in the first place: it should have been in Glasgow, the centre of Scotland's population. If we had used the great city chambers of Glasgow, we would have had a parliament building that was unmatched anywhere in the world.

David McLetchie talked about the Scottish Constitutional Convention. Is it not a pity that the motion calls, in effect, for a return to the Scottish Constitutional Convention's proposals? Many members forget that the Scottish Constitutional Convention's original proposal, to which the Labour Party, the Liberal Democrats, the trade union movement and civic Scotland signed up, was for a parliament of assigned revenues—a parliament that would be responsible for its revenues—but the Labour Party in Westminster watered that down to a mere block grant system, which removed any fiscal autonomy from us in Scotland. However, fiscal autonomy in and of itself will not solve our problems.

David McLetchie (Conservative, Edinburgh Pentlands)

A system of assigned revenues would not give the Parliament the power to set tax rates—it would merely assign to Scotland the revenues that are collected in Scotland from taxes that are set at Westminster—so there is no point in Mr Sheridan preaching the virtues of assigned revenues if he wants a Parliament with tax-raising powers. He is barking up the wrong tree.

Tommy Sheridan (SSP, Glasgow)

I merely pointed out that what we have ended up with is even feebler than what was proposed in the Scottish Constitutional Convention's original plans. It would be better if we in Scotland were to decide how we allocate the revenue that is raised in Scotland than for Westminster to decide that for us.

At the end of the day, fiscal autonomy will have no effect on whether Scottish troops are committed to the killing fields of Iraq, whether we can close Dungavel children's prison or whether we can remove the scourge of nuclear weapons from the Clyde. We need full, independent powers. Those are what must be fought for. The consensus that John Swinney seeks in the Parliament is not evident, because those in the Parliament who oppose independence do not have the courage to live up to the responsibilities of an adult country in an adult world. It is time that we lived up to those responsibilities and fought for not only an independent Scotland, but an independent, socialist Scotland.

I move amendment S2M-697.1, to leave out from "making" to end and insert:

"acquiring additional powers to tax as well as spend would allow the Parliament to make the Scottish taxation structure much more progressive, begin the process of tackling the inequalities of wealth in Scotland and ending poverty; recognises, however, that fiscal autonomy alone would not overcome the serious distortions of the Scottish economy caused by our being part of the United Kingdom and will not allow the Parliament to stop the profligate expenditure of the UK government on immoral and illegal wars against the wishes of its people, nor the ongoing expenditure on weapons of mass destruction as typified by nuclear weapons at Faslane, and that it would still have insufficient fiscal powers to broaden its tax base and invigorate its economy and culture by adopting a policy of welcoming to Scotland the asylum seekers and other immigrants whom it requires, and further agrees that only an independent Scotland will give the Parliament the powers to tackle these economic and social issues."

Des McNulty (Labour, Clydebank and Milngavie)

I do not know what persuaded Mr Swinney to knit together into his motion quotations from Sir David Steel and a newspaper article jointly authored by the Prime Minister of Estonia and Tony Blair. No doubt it seemed like a clever idea at the time, but for those who sit in the Parliament week in, week out, it simply underlines the threadbare nature of Scottish National Party thinking. What price originality, if even the SNP's soundbites are borrowed from their political opponents? If Mr Swinney wants to get to be debater of the year, perhaps he should borrow some of Mr McLetchie's soundbites.

The Blair article makes two points: it suggests that flexibility and freedom to innovate are critical elements in enhancing competitiveness, and it underlines the fact that Britain and Estonia are opposed to the extension of qualified majority voting to taxation and the imposition of tax harmonisation throughout Europe. The position that Mr Blair sets out is entirely consistent with the approach that the United Kingdom Government has adopted in deferring entry to the European monetary system. Our Government accepts that there are advantages to further economic and monetary integration where it will lead to better functioning of the single market, which covers 500 million consumers, but until there is convincing evidence that the UK economy passes the five economic tests that the chancellor set, the Government is not prepared to risk destabilising the British economy or jeopardising levels of growth that, since 1999, have been 16 per cent above the Organisation for Economic Co-operation and Development average, 16 per cent above the European Union average, 20 per cent above the eurozone average and 29 per cent higher than the G7 average.

According to the SNP, talented people, intellectual property rights and fledgling companies have been leaving Scotland in droves in search of more competitive, higher-growth areas, but the data on the economic performance of the UK and Scotland within the UK show that, contrary to the gloom and doom that the SNP peddles, Scotland is performing well by most indicators. UK unemployment is 36 per cent lower than the G7 average, 44 per cent lower than the OECD average, and 60 per cent lower than the EU average. Scotland's unemployment is lower than it has been for generations, and we have witnessed the most rapid growth in incomes and wealth creation in our history. Public services are receiving record levels of funding; standards of health, education and housing are being transformed; and we are making much more use of our people's creative capacities.

Jim Mather (Scottish National Party, Highlands and Islands)

Des McNulty paints a glorious picture, but the registrar general for Scotland said in July this year that population decline was symptomatic of economic decline and a further spiral of decline. How does Des McNulty answer that and how does he respond to the fact that, if we applied the Chancellor's five tests to our joining sterling, we would not fulfil their criteria?

Des McNulty (Labour, Clydebank and Milngavie)

Jim Mather is aware that I do not believe that constitutional change is the key determinant of birth rates. If he wants to move beyond the SNP stork theory about how babies are made, I would be happy to have a word with him afterwards.

Only in nationalist never-never land could the figures that I have cited be presented as failure. Mr Swinney is correct to point out that Scottish economic performance has not quite kept pace with the most dynamic regions of the UK, but that scarcely helps his case, because those are among the fastest-growing areas of Europe.

George Lyon (Liberal Democrat, Argyll and Bute)

Is Mr McNulty aware that, as John McLaren pointed out in his excellent article in the June 2003 Fraser of Allander institute's economic commentary, if we look at Scotland's economic performance on a per-capita basis, which the OECD recognises as the best measure of an economy's success in raising individual living standards, Scotland has outperformed the UK over the past 40 years?

Des McNulty (Labour, Clydebank and Milngavie)

Scotland has the great advantage of being an integral part of the UK economy, which has enjoyed the most consistent growth performance in western Europe in the past 10 years. There are no barriers—whether in economic regulation, welfare systems, citizenship rights or political institutions—between us and the most important market for our goods. The rest of the UK is overwhelmingly the main export market for Scottish food and drink, chemicals, engineering products and other goods. I do not object to Mr Swinney trying to argue for independence on the basis of political ideology, but even a rudimentary examination of economics shows that the pursuit of a secessionist strategy would be extremely damaging to the Scottish economy.

There is, as Mr McLetchie pointed out, a real debate to be had on the balance of powers between the Scottish Parliament and the UK Parliament. Provided that a reasonable case can be made, there is no reason in principle why the Scottish Parliament should not be given additional powers. However, in considering that question, we must determine whether those additional powers would be to Scotland's advantage, and the level of debate that we have had from the SNP is thoroughly inadequate. In my view, the SNP's slogan "independence in Europe" is simply an oxymoron. The idea—voiced by the ex-leader of the SNP—that Scotland could opt out of the common fisheries policy as a condition of entry to the EU following secession is simply laughable.

Tavish Scott highlighted the comments of the eminent economist Paul Klugman, who demonstrated why reducing corporation and business taxes in the context of independence would not work to Scotland's advantage: beggar my neighbour is hardly a coherent strategy when our neighbour is bigger than us, his policy decisions will inevitably have more impact on us than ours will on him and our reliance on access to his market is much greater than his reliance to access on ours. It is naive to think that European Governments within the eurozone would be any more tolerant if Scotland, after secession, failed to adhere to economic disciplines when other states are painfully adapting to the surrender of precisely the fiscal freedoms that Mr Swinney claims are crucial to future economic success.

Perhaps the best way of assessing Scotland's prospects outside the UK is to return to the five economic tests that Gordon Brown has set out. I find it impossible to see what advantage there could be to Scottish companies in our complicating their relationships with suppliers, customers and Government by introducing different taxation arrangements, regulatory frameworks and other extraneous pressures when harmonisation has already been achieved in the UK marketplace. If convergence is a goal, secession is a backward step.

Is there sufficient flexibility to cope with economic change? Professor Klugman's suggestion that breaking economic links with the rest of the UK would not be in Scotland's interest is to me far more persuasive than the SNP's arguments.

There is a safety net in common welfare systems, which cover us in times of adversity and provide a springboard towards economic growth. Do Scottish pensioners, Scottish companies or Scottish patients want to put their sustainable circumstances at risk?

I think that the arguments that are advanced by the SNP fall apart as soon as they are subjected to any serious level of scrutiny and, to be honest, I think that some SNP members think so too.

Murray Tosh (Conservative, West of Scotland)

We are 14 minutes behind the clock—that will impact on members who expect to speak in the open debate, which begins now.

Fiona Hyslop (Scottish National Party, Lothians)

There are two main arguments in this debate on financial independence. The first of those arguments is about self-respect and responsibility, which—I suspect—a large number of members recognise are things that a normal Parliament should have. The second argument is about opportunity. Would financial independence provide greater opportunity than the status quo? I think that it would, although I acknowledge that not all members would agree.

I was disappointed by Tavish Scott's speech. He has been known to be erudite and intelligent, but he stooped to some schoolboy comments today. Perhaps the speech was his penance for daring to speak up for the Scottish fishermen earlier in the year.

Although there is a genuine argument in this chamber for federalism, it is yet to find its voice because the Liberal Democrats do not have the confidence to put it forward. That creates a vacuum in the debate.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

Will the member give way?

Fiona Hyslop (Scottish National Party, Lothians)

I will not take an intervention. The Liberal Democrats had the opportunity to lodge an amendment to state their case but they failed to do so.

In Scotland, we have low wages, low growth, widening inequality and high emigration. Most worrying of all, our number of births is the lowest ever recorded. Unfortunately, Des McNulty has rudely left the chamber following his speech—

Fiona Hyslop (Scottish National Party, Lothians)

I am sorry. He has moved seats.

I say to Des McNulty that this is an extremely serious issue; it should not be treated as a standing joke.

I will argue the case for the Parliament's aspirations to grow, because we need that growth to happen for the benefit of Scotland's families. We need it for Scotland's children who are going to university, for Scotland's children who are at school and for Scotland's children who face poverty.

George Lyon (Liberal Democrat, Argyll and Bute)

How will constitutional change increase the birth rate in Scotland?

Fiona Hyslop (Scottish National Party, Lothians)

If we have a growing, exciting and dynamic economy, people will want to stay instead of leave.

Some of George Lyon's constituents are young women who graduate with £15,000 of student debt. They cannot afford child care and they cannot afford to live in the country that they were brought up in. Is that an incentive for growth? Is that an incentive for our economy?

I will address three main areas: higher education, public services, and child care and poverty. The Herald today gives an interesting example of a situation in which Scottish students will lose out under the proposed tuition fees because they will have the worst of both worlds. Should the proposals in the English white paper go ahead, Scottish students would have to pay £9,000 up front, whereas if we were independent, we would be treated like any other EU country so the students would be treated the same and would be in the same position as English students. Unfortunately, Scottish students will have to pay £9,000 up front to study in England because we are not independent and we do not have our own powers.

There is disparity in funding. Regardless of whether England introduces tuition fees, we should ensure that we put our shoulder to the wheel to invest in higher education. We are competing not only with England, but with Europe and the wider world. It is extremely disappointing that Liberal Democrat ministers are sleepwalking into the situation, saying, "Let us wait and see what is in the higher education bill in England." Regardless of the contents of that bill, we should invest in Scotland so that we have a competitive edge.

Fiscal autonomy and financial independence would allow us to have more flexibility for investment in our higher education system; to look at the estates review; and to ensure that there is capital investment in our universities—we could do that cheaply under independence, because we would have the powers at our command.

Some people want a graduate tax to be used to help to finance education in Scotland. We need fiscal autonomy to do that. That is a clear example of why fiscal autonomy is needed, because it would give us flexibility and choice. We should consider what Quebec is doing as far as using taxation to invest in research and development is concerned.

Tavish Scott stated that we have

"full autonomy in our spending."

I argue that with public-private partnerships we do not. Why are we the private finance initiative capital of Europe? Because Gordon Brown ensured that when investment was being made in public services, it was necessary to go through an excess private profit model, which is PPP. Tell the students in East Lothian, who are having to ask for special dispensation in relation to their exam results in their applications to the SQA, about the benefits of PPPs. That is happening because of the controversial situation that is created by a PPP when the private sector partner goes belly up; it is not the private sector, but the public sector that has the risk. It is the students who have to face going into their exams penalised because of the problems with PPP contracts. David McLetchie questioned whether this issue is about public services. It is—it is about the Edinburgh royal infirmary and PPPs in schools.

Another example of an area in which fiscal autonomy could be used creatively is child care. Fiscal autonomy could be used to tackle poverty in this country and to ensure that families can work. I do not think that the current system of child tax credits is acting properly in the interests of our families. We have a crisis in child care in our rural areas; there are mothers who cannot get into work because of a lack of child care. We should be thinking creatively about how we use our fiscal levers of power.

I will finish by quoting Nora Radcliffe, who is still in the chamber. She stated:

"We have power without accountability. It's demeaning in a way—it's as if you're being given a penny to spend without having to earn it first".

I agree with Nora Radcliffe. The danger is that, as people know, he who pays the piper calls the tune. It is about time that the Scottish people, through the Scottish Parliament, start calling the tune. I support the motion.

Wendy Alexander (Labour, Paisley North)

I welcome the debate. I have a long track record of discussing the options for financing a devolved Parliament—I published on the subject in the mid-1990s, when the SNP was still hoping that we would be free by '93. Since the independence argument has run into the buffers, SNP members have become Johnnys-come-lately to the fiscal devolution debate, rather as they were to devolution itself.

Fiscal autonomy is now apparently the SNP's flagship act, although it has to be said that it was not worth a line of explanation in its manifesto. Indeed, members will search in vain for any document that explains what fiscal autonomy means to the SNP. Therefore, the question for the Parliament is: what is fiscal autonomy? It means an awful lot of different things to an awful lot of different people. Is fiscal autonomy—or FA—more than a fancy acronym? Does it mean the fuller accountability that we have heard about? Is it just a foolish act, or—more than that—a false appearance? For years, fiscal autonomy was about false appearances for the SNP. Tommy Sheridan talked about the argument for full fiscal freedom, no link to the UK, independence by any other name and full-blooded finances.

However, the SNP has had a road-to-Damascus conversion, and now fiscal autonomy, its new flagship act, is not about false appearances; it just means fuller accountability. Many of us have spent years trying to resolve how to bring fuller accountability to Scottish spending. Of course, honesty demands that we recognise the price of feeling accountable and face the fact that Scotland currently raises 8 per cent and spends 10 per cent of the UK's taxes. Therefore, feeling accountable would slash 20 per cent from Scottish services overnight. One of Scotland's poor or vulnerable must fear that fiscal autonomy might be a foolish act. Whether it would be a foolish act or mean fuller accountability depends on the proposals.

I have some questions about the SNP's flagship act—the one on which there is no document. In each of the past five years, UK spending—and Scottish spending—has grown by more than 4 per cent in real terms, while Scottish growth has been less than 2 per cent. Are we saying that the Scottish poor should pay all the price of the restructuring of the international semiconductor market?

Let us ask another question, on pensions. Are pensions in or out of SNP-style fiscal autonomy? Scottish pensioners will want to know whether their pensions would rise with Scottish spending or with UK spending.

However, pensions are not the big issue—

Jim Mather (Scottish National Party, Highlands and Islands)

How does Wendy Alexander reconcile her comment about the poor state that Scotland would be in with her earlier comment that

"A convincing case can be made for matching constitutional federalism with more flexible fiscal arrangements"?

Wendy Alexander (Labour, Paisley North)

The fuller accountability that I am discussing is about how we can reconcile those two aspects without penalising Scotland's poor.

I come to the elephant in the room of fiscal autonomy, which is oil. In the five years of the Parliament, yearly oil revenues have varied from about £1 billion to more than £5 billion. The problem with the idea that the Scottish budget would float on oil is that oil revenues have nothing to do with the performance of the Scottish economy and everything to do with the ebb and flow of international oil prices. Here is a serious point: every single published SNP budget in the history of the party has rested on floating the Scottish budget on oil, even though not one advanced oil-rich jurisdiction is daft enough to take such action.

As the SNP has wanted to talk about oil for many years, its members should tell us about oil and fiscal autonomy and examine the budget. The yearly revenue from oil ricochets from £1 billion to £5 billion, which means that the entire value of the Scottish health service could be wiped out, depending on the oil price. I ask SNP members to say how they would use oil to balance the books. I believed John Swinney's promise that the SNP would not produce a single policy commitment that did not have a price tag or for which the party would not say how the money would be found.

Would fiscal autonomy be a foolish act or would it provide fairer and fuller accountability? It is a foolish act to have no plans for pensions and oil revenues and to make no comment on collection costs or transition arrangements. Fuller accountability means progressively extending fiscal federalism to match the sort of constitutional federalism that the coalition parties have brought about. Those parties are determined to do that in a way that means that the Scottish poor are not made to pay the price of international oil price volatility. We wait for the SNP's answer in a single document.

David Davidson (Conservative, North East Scotland)

I am delighted to support my friend and colleague David McLetchie's amendment. Members from all parties will be aware of my many statements when I was finance spokesman for the Conservatives about the need to discuss fiscal autonomy at an early stage in this session of Parliament. I hoped that the debate would not take place on a petty ideological basis.

A business plan to deliver value for money and accessibility of public services on behalf of the Scottish people must be developed and scrutinised, but I hae ma doots about the plan that has been proposed this morning. The proposition before us is simply an evasive charade that hides an SNP appeal to its erstwhile followers and to its deeply disillusioned and diminishing band of supporters, who, I suspect, constantly harass SNP members to mention independence in every phrase that they utter, even if the issue has no bearing on the subject that is being discussed.

In the past four years, in the chamber and in Holyrood magazine, I have called for a serious—not frivolous—debate on the responsibility that members should share in inflicting taxation and deciding on the priorities for spending our people's hard-earned money. I have been more than astonished by the antics of the Lib-Lab convention, which has been supported in a tokenistic and opportunistic manner by the late-departed Alex "inventor of the oil industry" Salmond. In their utterances, they have failed to recognise the need for accountability, responsibility and—if Gordon Brown will forgive me—a passionate relationship with prudence.

I would like a new beginning in this expensive chamber. I want all members to view every pound that is spent as if it were their own. They should look on every pound as if it comes from someone who is in the awful poverty trap, from someone who has started to work and pay tax or from somebody's pension or redundancy payment. They should treat the money as if it comes from somebody who has just started a family or somebody with a fledgling business who has a good idea but little resource other than ambition and hope.

I want all MSPs to take responsibility on behalf of those who give us money. They should stop cheerfully spending that money or throwing it into the bottomless hole of electoral promises that will never be delivered without a radical overhaul of the systems that clog up the processes of public services in Scotland. I want an end to gesture politics, in which the pledge for another initiative or consultation or for more targets is a substitute for action on, accessibility to and delivery of our shared and once-respected public services.

Executive politicians' horrific devaluation of the work of those in public service in the past four years is turning public opinion against public services. That is not public service workers' fault. Unfortunately, the forces of the left, which are manifest throughout the chamber—especially on my immediate left among the Liberal Democrats—are administering voluntary palliative care to prolong the life of a failed and diminishing Government and are destroying any credibility that the Parliament had.

The Parliament has failed in its duty to deliver a proper debate about the issues for which local government should be responsible and accountable to communities. I ask Jack McConnell and his micromanagement freaks to let local government go and to stop interfering. They should allow local government to be accountable to communities—that is what devolution should be about, not the silly nonsense that we have heard this morning. The Lib-Lab pact interferes in every opportunity for diversity, enterprise and ambition, and deprives young people of opportunities and businesses of the ability to make our economy sustainable.

SNP members want more powers, but will they explain why they assume that somewhere in the shrinking but once-proud Caledonian forest there is a Tolkien-inspired money tree of fiction, myth and mysticism? I inform Ms Alexander that I suspect that that is where the SNP gets its ideas from. In SNP members' eyes, the tree would produce a never-ending supply of money from the public sector, with no enterprise, profit, risk or even taxation.

Alex Neil (Scottish National Party, Central Scotland)

That is all very interesting, but will the member say whether he agrees with Mr Monteith and Mr Murdo Fraser that we should have full fiscal freedom, or with his leader, David McLetchie, who wants a royal commission to take minutes and waste years?

David Davidson (Conservative, North East Scotland)

There is something to be said about all three positions. My two colleagues, one in front and one behind—I always like to know who is behind me—want responsibility to apply to tax-raising powers, but that will not be achieved under the present system. I fully support Mr McLetchie's idea of a royal commission, which would take the matter out of the grubby hands of party politics, consider the matter properly and bring back ideas to be debated in Parliament. As a Conservative, I can get the best of both worlds—there is no difficulty.

Why is it that we spend more per head on our people and get less for it than anywhere else in Europe? Given that the Parliament is in its fifth year, is it not time that we started to talk about value for money and what the people get? If we work back from that, we can review how the money is raised, but we also must play our part in a strong United Kingdom. The countries in the UK have a mutual responsibility and a lot in common.

Under devolution, Scotland has its own agenda, but the Parliament should use devolution to give Scotland's institutions more opportunity to be accountable to the people whom they serve, instead of everything being held and micromanaged by the Executive.

We have not heard anything from the SNP that justifies a radical change; nor have we heard anything from the Scottish Executive—although I am not sure which side Mr Scott is on today—about what it intends to do to rectify this painful situation.

Rob Gibson (Scottish National Party, Highlands and Islands)

In supporting John Swinney's motion, I will dwell on proper accountability to the electorate. At the outset of the May election campaign, the First Minister, Jack McConnell, was asked on television whether he would seek more powers for the Parliament in the coming four years. His answer was that it does not need more powers and that it must use the powers that it already has. That was predictable, for it was Jack McConnell who, as the voice of the Labour party, told the Scottish Constitutional Convention, "We have decided that you can't have control of personal income tax and VAT. We are going to stick with the block grant." Is it any wonder that the "No change; no more power" message delivered Labour's lowest vote since 1931, with a record low turnout of 49 per cent of voters? It is no wonder that the Electoral Commission is concerned. The commission reported that voter participation in the May 2003 Scottish elections

"leaves all those concerned with elections and electoral processes with a serious challenge."

There is further evidence of disillusionment. In 1999, 41 per cent of voters believed that the Scottish Parliament

"had the most influence over the way Scotland is run."

That figure has fallen to 24 per cent. Indeed, 57 per cent of the electorate believe that the Parliament has made

"no difference to the way Scotland is governed."

Is not that evidence enough to support a review of this young Parliament's powers?

Yesterday evening, Patricia Ferguson rejected an SNP move to debate the European constitution—a crucial issue for our fisheries and energy policies and for much else. She claimed that the SNP always seeks to have debates about

"issues over which the Executive has absolutely no control."—[Official Report, 3 December 2003; c 3881.]

Five years into the life of this young Parliament, it seems that Patricia Ferguson is unworried that she and her Cabinet colleagues have discounted Donald Dewar's pledge at the Parliament's opening ceremony, when he said:

"We are fallible. We will make mistakes"—

who will ever admit those, I wonder?—

"But we will never lose sight of what brought us here: the striving to do right by the people of Scotland; to respect their priorities; to better their lot; and to contribute to the commonweal."

If the majority of electors and the majority of members of the Scottish Parliament believe in their hearts and heads that we need full financial powers, when will Mr McConnell and company start to listen? Will they even heed their boss down south? Tony Blair told the Estonians:

"Making everyone follow the same tax rules would quickly diminish Europe's competitiveness by killing jobs and stifling growth."

Is that not what we are experiencing in Scotland?

We make the case again and again, because the emigration trail shows not only that our remote islands and Highlands are losing young people, but that the flight from the cities is blighting the nation's future. Those young people know—as do our farmers, fishermen and hospital patients—that the psychology of denial makes us pay a high price for an incomplete financial settlement.

Thousands of people turned out in Fort William to protest, and hundreds have already protested in Caithness, about the imminent downgrading of consultant-led hospitals. Those protesters are demanding that the underpowered Government wakes up. We need bigger levers—as that sensible Tory, Alex Johnstone, has put it—if we are to do anything about the situation, so that the modest medical demands in far-flung parts of the country can be met.

We need an end to the blame culture that our having partial powers creates. People say, "Oh, it's the quango's fault," or they say that it is the fault of the health board, Scottish Water or the European Union. No; it is the lack of financial clout, stupid.

This year we have been able to see how other countries use the flexibility of tax-raising, as well as tax-spending, powers. Let us consider the north of Norway. Norway is intent on retaining its population in the north and on ensuring that those people are supported so that they can have a vibrant way of life. Mothers receive higher child benefits and students who return to the area have their loans paid off more quickly. That tax flexibility to bring in such incentive taxation and targeted spend flows from having full financial powers.

In Scotland, our inflexible and shrinking block grant produces wooden responses. Just because it was decided in 1996 does not mean that it must stay that way forever—as Lord Robertson said at the time. When will the Executive wake up and listen to the people, who say that they want Scotland to have more powers? Frankly, it is time that the Executive started to answer that point.

It is a harsh judgment on the underpowered nature of the Executive and its stubborn refusal to seek full financial powers that so many of our brightest seek a future elsewhere. It is a harsh judgment that fewer and fewer voters bother to turn out because they do not believe that to do so will make any difference.

Surely, we should consider the potential to push the levers full on. We should meet the people's real priorities and give this place full financial powers to decide Scotland's future. At present, all that we are left with is the opportunity to deal with the block grant. That is not a future for Scotland; it is the past. It must remain in the past and we must have a new future.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

First of all, I apologise that I am unable to remain in the chamber until the end of the debate.

For much of last year, John Swinney travelled the country talking independence. In May, the country replied no, yet we are debating the constitution of Scotland yet again while the Parliament should be focusing on public services and the economy.

So far, the SNP's advocacy of full fiscal autonomy for Scotland has been a means by which to mask the call for independence. The SNP claims that full fiscal independence would allow Scotland to reap the rewards of North sea oil revenue, which, it says, will pull the Scottish economy out of fiscal debt and put it into fiscal surplus.

Patrick Harvie (Green, Glasgow)

On the suggestion that the Scottish people roundly said no to independence, does the member accept that there are more pro-independence members in the chamber than there were before the election?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Stealth independence arguments are not honest, and if a Green constituency candidate had stood in my constituency, that argument would have been tested. In fact, it was and I won. The argument—

Tricia Marwick (Scottish National Party, Mid Scotland and Fife)

Will the member take an intervention?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Not yet.

The argument about oil, which masks the call for independence, hinges Scotland's fiscal stability to the cash-crop economy of the oil barrel. Yet again, we hear the argument about Scotland's fiscal surplus. Professor Midwinter, whom John Swinney quoted, has said:

"Personally, I know of no academic paper which supports the SNP's fiscal surplus position".

In 1998, oil prices crashed to $10 a barrel. International forces can easily and almost instantaneously bring oil prices to lows that would undermine the Scottish economy. In the 1998 situation, for example, an independent Scotland would have faced a budget deficit of £3.9 billion. The SNP would have Scotland's future prosperity literally over a barrel.

Both David Steel and the respected economist Donald MacRae are right to argue that there should be a closer connection between spending and raising revenue in Scotland. They are right to reject full fiscal autonomy. No industrialised country, not even a federal state, has opted for complete fiscal autonomy.

Tricia Marwick (Scottish National Party, Mid Scotland and Fife)

Presumably, the member won his election on a Liberal Democrat platform. If the Parliament's financial powers are not part of the partnership agreement, why have the Liberal Democrats not lodged their own amendment, to argue their position?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

The member is listening to my speech, in which I am espousing the Liberal Democrat position. I suggest that she should pay attention to it.

Alf Young, in The Herald, commented on the SNP's argument that compares Scotland to Malta, Cyprus, Latvia and Estonia. The SNP wants to take Scotland on a route to compete on tax with Shanghai and Bangalore. What Scotland's economy needs is a flexible, highly skilled work force and better infrastructure.

Richard Lochhead (Scottish National Party, North East Scotland)

Will the member take an intervention?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

No, I will not.

Those needs are exactly what this party is focusing on: investment in public services and in growth, not the tax-cutting agenda that the SNP front bench espouses.

Countries such as Germany, Norway, Sweden and Denmark, and devolved regions such as Catalonia, have all adopted a three-tier system of taxation that combines—

Richard Lochhead (Scottish National Party, North East Scotland)

Will the member take an intervention?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

No, I will not. I am sorry, but my time is limited.

The three-tier system of taxation combines a degree of fiscal flexibility for each region with some central grants, to provide a system of needs- based funding. Models such as that allow for stability and greater accountability. The public expects the Parliament, as an elected body, to represent accurately, officially promote and serve their interests. The political truism that nothing is easier than spending the public's money, which does not appear to belong to anybody, is the SNP's fiscal policy. The Parliament must shy away from the irresponsible spending of the public's tax revenue and reject the making of irresponsible spending commitments, which the SNP is guilty of doing every time its members come to the chamber.

If there is to be a full debate about the future of public spending in Scotland, much clearer and more definitive information on the subject must be available to us all. It is right that the current constitutional settlement be reviewed after the next Scottish elections, as the Scottish Constitutional Convention and the consultative steering group both suggested. The Scottish Liberal Democrat policy commission on the constitution, under the chairmanship of Sir David Steel, which would feed into the work of a reconvened Constitutional Convention in Scotland, will thoroughly and objectively examine the granting of more fiscal powers to the Parliament within a federal United Kingdom, which will provide the public with a considered approach to the major questions for Scotland as part of an evolving federal UK.

Gone are the days when the public will swallow romantic separatist notions of independence. They want to see devolution work, with a Parliament that is empowered by a robust set of fiscal levels that allow it the flexibility to deliver high-quality public services—as mentioned in the Executive amendment—despite the current instability in global economics. I support enhanced fiscal powers for the Scottish Parliament, but I do not support a system whereby Scotland would be hamstrung at the first sign of a downturn in the global oil market. I do not support a system that would be unnecessarily complex and expensive to operate. I do not support the sentiments of the SNP.

Elaine Murray (Labour, Dumfries)

I welcome members to another groundhog day debate. This topic competes with the Scottish adjacent waters boundary and amnesic shellfish poisoning for the honour of the highest number of times that a subject has returned to the chamber. Yet again, the SNP has chosen to debate an issue for which the Parliament cannot legislate. Previous debates in the second session have been the same: on 12 June, we debated Europe—presumably, it was independence in, but common fisheries policy out, although I apologise to Tavish Scott for that reference; on 11 September, we had a debate on asylum seekers; and today we are debating fiscal autonomy and the number of Scottish seats in the European Parliament. Those might well be important matters, but they are all ones over which we have no legislative competence.

Richard Lochhead (Scottish National Party, North East Scotland)

Will the member explain why she once used a members' business debate in her name to debate a reserved matter?

Elaine Murray (Labour, Dumfries)

As I have just been reminded, that was four years ago. Members' business debates are somewhat different from party-political debates; there have been all manner of debates at members' business. Moreover, we do not actually—[ Interruption. ] Shut up!

We do not yet use the powers that we have. We already have tax-varying powers, and we have not yet used them. The tax that the UK Government raises from Scottish residents is redistributed and decisions on spending it in devolved areas are made by the Scottish Parliament.

It is perhaps instructive to consider the patterns of income and expenditure over the past four years. The figures I have used are from "Government Expenditure and Revenue in Scotland"—GERS. The last available figures, which are for 2000-01, show that total expenditure in Scotland was £36.3 billion, with total receipts of £30.9 billion. North sea oil revenue, which Wendy Alexander mentioned, came to £4.3 billion and the deficit was £1.1 billion. In the previous year, £33.8 billion was expended; £28.9 billion came in; £2.5 billion was added from North sea oil revenues; and the deficit was £2.4 billion. I could go on, but the point is that the deficit over those four years ranged from £4 billion to £1 billion. The new GERS figures will be out within the next few weeks, but official figures show a continual deficit in the Scottish economy over the past four years.

Jim Mather (Scottish National Party, Highlands and Islands)

The reality is that the UK economy is in substantial deficit, which applies through to the next five years. That is a total deficit of £118 billion. Does that mean that the UK should not be independent?

Elaine Murray (Labour, Dumfries)

I do not think that anybody is offering to take over the UK at the moment. The Scottish economy has been in deficit over the past four years and we must confront the consequences of that. We must also bear in mind the fact that, like shares, oil prices can go down as well as up. Oil revenues were as high as £12 billion in 1984-85 but, only seven years later, they stood at only £1 billion. That is a very volatile basis on which to plan our services. Oil revenues accounted for 7.9 per cent of total revenues in 1999-2000 and 12.2 per cent a year later. Scotland's percentage of total expenditure is higher than our percentage of the population, of total receipts excluding oil revenues and of gross domestic product. Fiscal autonomy would mean cuts in Scottish services of between £1 billion and £4 billion each year, judging by the most recent figures, which I quoted.

Given the fuss the SNP made earlier this year about the £394 million of end-year flexibility funding, I am surprised that its members are so relaxed about a sum that could be 10 times that. In committee, Fergus Ewing often likes to refer to such sums as the Holyrood factor. The Scottish Executive's total managed expenditure this year is £22.8 billion. We should bear in mind the fact that between 97 per cent and 98 per cent of that is fully committed, which leaves about £0.7 billion available for reallocation. Furthermore, 60 per cent of the budget goes directly to local councils and health boards. Would the SNP please advise us what it would cut?

The Tories often like to flirt with the idea of fiscal autonomy. I see that there is only one of them here, who will perhaps advise us on this, because their position is interesting. We know that Mr McLetchie is keen to expound the policies of his former leader, Iain Duncan Smith, so I presume that he, too, wishes to cut overall UK public expenditure by 20 per cent, which would necessitate a further £7 billion cut in the Scottish budget. With the Tories in power and with fiscal autonomy, Scottish expenditure would stand to be reduced by between £8 billion and £11 billion per annum.

Brian Monteith (Conservative, Mid Scotland and Fife)

Will the member give way?

Murray Tosh (Conservative, West of Scotland)

You have one minute of your speech left, Dr Murray.

Elaine Murray (Labour, Dumfries)

Sorry—I am in my last minute.

Rather than dancing on pinheads, we need to assure the Scottish people of our competence in the areas that are currently devolved. The public do not consider that we are using our finances particularly well at the moment. They see us as the numpties who are spending 10 times what we were supposed to spend on a building, and I suspect that they would not take terribly kindly to being asked for more.

My view is that devolution is evolutionary, and that, in 100 years' time, the Scottish Parliament might be a very different beast from what it is now. I suspect that it might have further powers and that the English regions might have more powers. I also suspect that the European Union will be more integrated. However, I do not wish to gainsay the decisions of future generations. The Parliament should be concentrating on getting on with doing its current job as well as possible.

Tricia Marwick (Scottish National Party, Mid Scotland and Fife)

On a point of order, Presiding Officer. Is it in order for Dr Elaine Murray to say to one of my colleagues, "Shut up"?

Murray Tosh (Conservative, West of Scotland)

I did notice that comment. I think that most members took it as an impromptu remark, rather than a calculated discourtesy. I am sure that Dr Murray would be apologetic if any offence had been caused to anyone.

Bruce McFee (Scottish National Party, West of Scotland)

We accept her apology.

Murray Tosh (Conservative, West of Scotland)

No—she did not apologise; I am diplomatically trying to get everybody out of this.

I am afraid that the clock has beaten us and that we must now go to closing speeches. My regrets go to the considerable number of members whose names were left on my screen.

Carolyn Leckie (SSP, Central Scotland)

I really cannot follow the previous speaker. There were more numbers than words in her speech; I will try to limit the number of numbers that I use in mine.

The contents of the SNP motion are revealing. I can understand the SNP wanting to put the other parties on the line with respect to fiscal autonomy, but I do not understand the emphasis that it places on increasing competitiveness. It seems that the SNP line is one of competition, not equality. In half an hour, we will start to talk about the number of bums on seats in the European Parliament, when we should be talking about poverty, inequality and what the Parliament cannot do.

I recently addressed a convention in British Columbia. The provinces of Canada have more powers and more financial autonomy than this so-called Parliament has. I will give members competition: the new, neo-liberal British Columbian Government's idea of competition means lower wages, increased privatisation, the massive sell-off of public utilities and tax cuts for the rich. I wonder seriously whether that is the SNP's vision of fiscal autonomy. Its emphasis on reducing corporation tax astounds me. Why does the SNP not emphasise redistributive taxes and moving wealth from rich to poor? That is something that the Scottish Parliament should be able to do and I would have hoped that the SNP would have the vision to do it.

Cutting corporation tax in Scotland would not end the spectre of multinationals locating their headquarters or offices here and paying corporation tax at lower rates here, but employing people elsewhere—whether in England, in Wales, in Northern Ireland or in India. That would do zilch for jobs, wages, pensions and so on.

Mr Swinney spoke about business rates and corporation tax, which disappointed me. Labour's response is that we can manage the status quo. In other words, Labour members are happy to take the salaries, the status, the initials after their name, the Mondeos, the handouts and the strings attached to money from Westminster, but they are not prepared to take responsibility—either because they are frightened or because they have no illusions about their capabilities.

Alex Neil (Scottish National Party, Central Scotland)

Did the member note what Elaine Murray said about waiting 100 years for any change? Obviously, Labour's new slogan is "Free by 3003".

Carolyn Leckie (SSP, Central Scotland)

I do not disagree with Alex Neil's reference to Labour's wishy-washy politics.

Tavish Scott made it clear that the Executive does not want the powers, because it has no intention of radically changing society. That is managerialist politics—the Executive wants just to manage the status quo. He also said that we were subsidised, which was the theme of a number of speeches. Wait a wee minute, for goodness' sake. Let us consider London, where £304 million from UK taxes is spent on museums and art galleries, £3.5 billion was spent on the Jubilee tube line out of docklands, and £17.9 billion from UK taxes is spent on the civil service. Also, £296 million is spent on the Arts Council England. Tavish Scott should not talk to me about Scotland's being subsidised. He is ignoring a vast amount of economic subsidy that London receives.

At least David McLetchie is honest and is prepared to talk about fundamental reforms—the sort of fundamental reforms that his pals in British Columbia have been able to introduce in the past two years. I am sure that that is the sort of autonomy that he might consider. The only reason why he is perhaps not persuaded of the case for fiscal autonomy at this time is that he knows fine well that there is no support in Scotland for the rabid right-wing policies that he favours. If he had any confidence that the Tories would be changed from the rump that they are, perhaps he would support fiscal autonomy.

I have raised the issue of competition and must refer to the speech by Wendy Alexander. A couple of weeks ago, she reminded SSP members that 20 years ago they were socialists. Twenty years ago, she, too, was a socialist. Now it is clear that she is a bleeding-heart neo-liberal.

Wendy Alexander (Labour, Paisley North)

Will the member take an intervention?

Carolyn Leckie (SSP, Central Scotland)

No—I am coming to the end of my speech. Wendy Alexander did not accept any interventions and we have heard enough of her whingeing.

Where is the ideology and the vision? Where is the abolition of poverty? Will we have low or high wages under fiscal autonomy? Will we have public or private ownership? Those are concrete questions. Would the SNP use extra powers to settle the nursery nurses dispute? Would it reverse privatisation? What would the SNP be like in government? Would we have more of the same—more managerialist politics and more of the status quo? That is not for me. From the motion, it is clear that fiscal autonomy would not make a jot of difference.

The SNP cites the Policy Institute, a right-wing think tank, in its support.

Trish Godman (Labour, West Renfrewshire)

The member must finish now.

Carolyn Leckie (SSP, Central Scotland)

I will.

This Parliament does not have the same powers as those of the Faroe Islands, Iceland or even the Isle of Man. Let us have some vision.

George Lyon (Liberal Democrat, Argyll and Bute)

This has been an interesting debate, with many good speeches and some that were not quite so good. We received few answers from Opposition members on what they mean by fiscal autonomy.

The Liberal Democrats have no doubt that there are a number of strong arguments in favour of greater financial powers for the Parliament. As David Steel rightly pointed out, we need greater accountability and must take responsibility for raising the cash as well as spending it.

Richard Lochhead (Scottish National Party, North East Scotland)

George Lyon's colleague Jeremy Purvis suggested that he did not support full financial powers for the Parliament, only some financial powers. Which financial powers would George Lyon like to be transferred to the Parliament?

George Lyon (Liberal Democrat, Argyll and Bute)

We are setting up the Steel commission to investigate these matters and to come up with answers to the very hard questions that we face before presenting our proposals.

Richard Lochhead (Scottish National Party, North East Scotland)

Will the member give way?

George Lyon (Liberal Democrat, Argyll and Bute)

No, I would like to make some progress—I have only six months. [ Laughter. ] I mean six minutes—I wish that I had six months, although it feels as if I have.

The second strong argument for greater fiscal powers for the Parliament is that they would allow us to put even greater focus on the need to grow the Scottish economy and increase our productivity. That said, there are a number of very difficult questions that need to be answered before there can be consensus on this matter. There needs to be such consensus before we can make progress.

The first key question is what we mean by fiscal autonomy, which in the Parliament seems to mean all things to all people. Does it mean that we assign a percentage of taxes raised in Scotland to pay for the devolved services for which we are currently responsible? That is one model that we could examine. There is a second model—that all Scottish tax revenues should be kept in Scotland and a payment should be made to the UK Government for UK functions. The debate would then shift and focus on the contribution to Westminster, rather than arguments about whether the Barnett formula is fair to Scotland.

There is a third model, which we have again heard proposed this morning. It is called the Trojan-horse model and is favoured by the SNP, which uses fiscal autonomy as a cloak for separation and divorce. The SNP knows that the language of separation scares off voters, so it uses fiscal autonomy as a cloak to hide its real policy, which is separation.

Kenneth Macintosh (Labour, Eastwood)

Does the member agree that as well as using fiscal autonomy to disguise the real policy, which is independence, the nationalists see it as creating a better environment for them? It would aggravate the constitutional settlement and create an annual round of bickering with Westminster that they hope would lead to greater discord and the break-up of the UK.

George Lyon (Liberal Democrat, Argyll and Bute)

That is exactly right.

Other fundamental questions arise once we start to try to define fiscal autonomy. If it is a halfway house, how would Scotland maintain its current spending advantage, which enables us to spend 21 per cent more per capita on health, education, transport and all the services for which we are responsible. That is a big advantage over England and Wales. How would we preserve that advantage in any negotiation to change the current system?

Alex Neil (Scottish National Party, Central Scotland)

George Lyon gives examples from devolved areas but, in defence research, Scotland receives only 1 per cent of current expenditure. If we had fiscal autonomy, we would have far more research jobs in Scotland in the defence sector alone. That is not to mention the £400 million—our share of the nonsense in Iraq—that we could have saved.

George Lyon (Liberal Democrat, Argyll and Bute)

I was just coming to that first point. If Scotland went for full fiscal autonomy, which the SNP has argued for this morning, we would be able to spend only what we raised here in Scotland. As GERS and Goudie have pointed out, over the past three economic cycles, the deficit between Scottish spend and what we raise is £4.2 billion. The last time that Scotland was in fiscal surplus was 1982. The question then arises: how do we bridge the gap? We need answers to that question. Do we put up taxes? Do we cut public spending? Or will Mr Swinney go to Westminster with the begging bowl to ask that Scotland can keep its current spending advantage?

In the commission that we are about to set up, we intend to examine such issues in detail and come forward with some rational answers to develop the debate. The nationalists will never answer the questions that have been asked this morning. In their surreal world, Jim Mather proposes to outdo the Tories on tax cuts. At the same time, Kenny MacAskill promises to outspend the Executive on roads and rail and tourism—you name it, Kenny will spend more on it than we will.

Scotland currently raises 15 per cent of its own revenues here in Scotland, through business taxes and council tax. If the SNP wanted to give Scottish business a competitive advantage—and there are question marks over whether that is a good idea—cutting the business tax rates would give £1.7 billion back to Scottish industry. That would be a bigger advantage than Irish businesses have through their cuts in corporation tax. There is the answer to that question. However, the SNP would then have to tell us what it wanted to cut.

In summing up, Jim Mather should answer the questions that the minister rightly asked earlier. What changes will there be? How much will they cost? Who will pay? Let us hear the answers.

Brian Monteith (Conservative, Mid Scotland and Fife)

I am delighted to be able to take part in a debate today on fiscal autonomy—or whatever everybody has been calling it. I am rather surprised to find such a topic being used in Opposition time. I share my colleague David McLetchie's view that it is not exactly what the public are interested in the Parliament discussing. I noticed that Iain Macwhirter said at the weekend that the topics of debates are a real problem. Do we find health, education or crime during SNP Opposition time? No, members will have to come back next week to discuss public services in Opposition time, during the Conservatives' debate. Instead of that, we debate today the powers of the Parliament, although the public tell us that they have more respect for local councillors than they have for MSPs. Perhaps we should take note of what the public want to hear.

George Lyon is correct. This debate is an SNP mask to hide the division and confusion that still lie in the party's ranks. Is this SNP a national movement for independence?

Brian Monteith (Conservative, Mid Scotland and Fife)

Is it a left-of-centre party?

Brian Monteith (Conservative, Mid Scotland and Fife)

Is that the independence-lite of Jim Mather? Is it the independence-regular of John "regular guy" Swinney? Or is it the independence-max of Fiona Hyslop? The party does not quite know. It says yes to all of those things. Does the party, like "Braveheart", rely on a distorted view of Scottish history and believe that it is all England's fault? Or is the party like a 1970s tribute band, stuck in a left-of-centre groove with only one song to sing—"Money, Money, Money"—which is the party's solution to everything? As Adam Ingram has asked, which cul-de-sac is the party going up?

Does the Parliament need more powers? Maybes yes, maybes naw. Does the Parliament deserve more powers? Well, after last week's debate on poverty, during which SNP members talked generally about, and extolled the virtues of, state intervention and spending more money, is it any surprise that many people—even including me—have doubts about the Parliament having more tax-raising powers.

Some scribes would tell us that the Parliament does not deserve more powers—just as they say, "Look at the Horlicks that it has made over Holyrood." Well, yes and no. I understand that line of argument, but I do not readily accept it. Politicians have to look beyond the length of their pencils. At times, we have to look 10, 20 or 30 years into the future and consider how the Parliament will work. The Parliament has to show that it is worthy of having more financial powers by being more restrained and by talking about tax cutting rather than just tax increases, but there is another side to the coin. I pose the question: would the MSPs who have spent £400 million—those who voted to spend that £400 million—have behaved more responsibly if we had had to raise the money ourselves for the devolved Scottish Parliament building?

Alex Neil (Scottish National Party, Central Scotland)

I accept Brian Monteith's criticism of the Holyrood cost, but is it not a fact that the poll tax cost the Scottish taxpayer twice or three times as much as even the Holyrood fiasco? And will he apologise for it?

Brian Monteith (Conservative, Mid Scotland and Fife)

I certainly will not apologise for it and I certainly will not apologise for voting against the £400 million every time.

As David McLetchie said at the outset, the Scotland Act 1998 can be changed. Indeed, the process has already started. Just as the bill was drafted to suit Labour and the Liberal Democrats, so too are the proposed changes being made to suit those two parties. The process exposes the fact that it is Westminster—not Holyrood—that will deliver any change to the Scotland Act 1998. That is why the SNP offers a false prospectus. The SNP will never deliver any form of financial devolution; it does not believe in it. It believes in independence—SNP members said yes to that. Even were we to suffer the misfortune of the SNP having enough power to be in a position where it could deliver some form of fiscal autonomy, it would also be in a position to deliver independence. It would be in power. What would the party choose? We all know the answer: it would choose independence. That is fair enough, but why can the party not be honest now and say that it does not support fiscal autonomy but is the party of independence?

Carolyn Leckie (SSP, Central Scotland)

Will the member give way?

Brian Monteith (Conservative, Mid Scotland and Fife)

Yes, I will.

Trish Godman (Labour, West Renfrewshire)

I am sorry, but you do not have time.

Carolyn Leckie (SSP, Central Scotland)

But he is letting me in.

Brian Monteith (Conservative, Mid Scotland and Fife)

Another time, another place.

Only the unionist parties can work within the devolution settlement to give more financial powers to this Parliament. So, in closing, I say to Jim Mather that he should come and join us. Jim sounds like a Tory pretty much 60 per cent of the time. His colleagues know that. If he comes with us, it is possible that we can build consensus and find a way of strengthening the devolution settlement by ensuring that the Parliament acts responsibly and prudently. However, if he believes in independence—run by Frankfurt and Brussels—he should stay where he is.

Let us be honest. The difference is clear. Independence is not fiscal autonomy and it is not financial devolution. That is a unionist cause.

Trish Godman (Labour, West Renfrewshire)

I call Andy Kerr.

John Swinburne (SSCUP, Central Scotland)

On a point of order.

Andy Kerr (Labour, East Kilbride)

Brian Monteith has exposed many of the problems at the heart—

Trish Godman (Labour, West Renfrewshire)

I am sorry, Mr Kerr. There is a point of order.

Andy Kerr (Labour, East Kilbride)

Oh my goodness. Already!

John Swinburne (SSCUP, Central Scotland)

I have sat here and listened to at least two members from every party extolling the virtues of the status quo or fiscal autonomy. Our party has not been allowed to speak at all. There are a quarter of a million pensioners out there who live below the poverty line and no one seems to give a damn.

Trish Godman (Labour, West Renfrewshire)

That is not a point of order, Mr Swinburne. I call speakers according to proportionality. Perhaps you can look at that later; you will find that it has been spot-on.

I call the minister.

Andy Kerr (Labour, East Kilbride)

As I was about to say, many members have exposed the big con at the heart of the big idea that John Swinney seeks to present to the chamber. There has been sound and fury in the debate, but a lack of detail on his idea. It is a con on ordinary taxpayers in Scotland. What he seeks to deliver for them is, I presume, tax increases because, if he were reducing taxes in every way for businesses, someone would have to pick up the tab. Perhaps he would reduce spending on public services and impose even more cutbacks than would be necessary because of the fiscal deficit. That is the con that lies at the heart of much of what has been said this morning.

We need to know the detail. Many people have asked him, so I hope that Jim Mather will take the time to tell us which tax he would increase and when, for how long and by how much it would increase. Those matters are at the heart of the SNP strategy. I take the point that Mr Swinney made. He talked about purpose and power, leadership and ambition, and decision making. Let us have a decision from John Swinney. Which tax, when and how much?

John Swinney (Scottish National Party, North Tayside)

The minister said that a country that runs a deficit is required to cut its public spending. Over the next five years, the United Kingdom's deficit will be £118 billion. Which services will he cut?

Andy Kerr (Labour, East Kilbride)

The deficit balances over the economic cycle. I think that we are in much safer hands with Gordon Brown than with Jim Mather or, indeed, Fergus Ewing—I needed to be reminded of him. I will let colleagues make the contrast for themselves.

As someone said—I cannot remember who it was—we come back to the fact that nobody has yet defined what fiscal autonomy is. Fiscal autonomy is everything to all people in Scotland. For the university vice-chancellor or principal, fiscal autonomy is about increasing taxation to fund higher education. For the business community, it is about reducing business taxation. Which do the nationalists say? That is the real question to which they are reluctant to give an answer because they do not have one. What would they do about the £5 billion-worth of public services that we would lose?

By contrast, look at the spending commitments in the nationalists' most recent manifesto. Indeed, look at those that they have made since that manifesto. They have been spending money hand over fist. I am sorry that Kenny MacAskill has not turned up this morning—perhaps he has been chained to a chair somewhere—because, every day of every session of this Parliament, Kenny the big spender comes into the chamber and seeks to spend more money. What is going on on the SNP benches?

More than anything, the debate is about John Swinney attempting yet again to reassert his leadership. He is now whispering independence while talking fiscal autonomy. However, as we have all recognised this morning, this is more about the SNP's desire to try and lift the Scottish people's eyes above the SNP agenda of independence, separation and divorce, which the Scottish people have constantly rejected.

Tommy Sheridan (SSP, Glasgow)

The minister referred to deficits. Does he believe that the deficit of a country is an indication of the financial ill health of that country?

Andy Kerr (Labour, East Kilbride)

No, it is part of the economic management of a country. We are part of a UK management structure that has delivered the lowest inflation rates and the highest employment levels in generations and the most stable economic environment for businesses to operate in for many generations.

John Swinney made many comments about taxation. As a share of GDP, taxation of the business community in Scotland is 7.2 per cent. The average in Europe is 10.2 per cent. Although our levels of taxation are higher than in Ireland or the US, they are probably comparable to those in Germany and the Netherlands and they are much lower than in many of the European countries and competitors that we seek to work with. The idea that Scotland is somehow an anti-business environment and that we are not creating the climate for economic growth is a myth that is propagated by the SNP, which constantly seeks to talk down Scotland's achievements. Many of my colleagues have sought to reverse some of that conversation during the debate.

It was ironic to hear from the Tories about fiscal prudence, given the pains that they put the Scottish economy and UK economy through over the years. I also found it somewhat ironic to hear David Davidson telling us to stop the micromanagement of local government. Under compulsory competitive tendering, the Tories used to tell us in which newspaper to advertise our contracts. In terms of micromanagement, I cannot think of anything worse than the ring fencing and capping that they used to impose.

Fiona Hyslop said that there was a vacuum in the debate. The vacuum is the lack of any detail on what exactly the SNP means by full fiscal autonomy and what that would mean for the delivery of public services in Scotland.

Tommy Sheridan made some interesting points in his speech. For instance, he raised the issue of a minimum wage for all public sector workers. Of course, that would cost the Scottish taxpayer £470 million per annum and would lead to reductions in public services. Those who are most in need of public services would receive less of them because of that strategy.

We also look forward to hearing the SNP's stock theory, which somehow relates fiscal autonomy to Scotland's birth rate. I find that somewhat odd, but let me quote Alex Neil, who has been popping up and down like a madman this morning. He said:

"It is neither gradualist nor fundamentalist impulses that make me cautious about endorsing the as yet ill-defined calls for fiscal autonomy."

If Alex Neil is doubtful about fiscal autonomy, those of us on the partnership benches are extremely doubtful about such a strategy.

Fiscal autonomy will not deliver for Scottish business or the Scottish people. Full fiscal financial independence or economic independence or whatever people care to call it will not deliver the investments that we are making in transport, skills and communication structures. The support to businesses that we seek to provide will grow our economy effectively. That is what the economic indicators point to at this time.

Let us hear some detail about the SNP strategy. Jim Mather now has the opportunity to tell us which taxes would rise, when and for how long that would happen, and who would pay.

Jim Mather (Scottish National Party, Highlands and Islands)

This important debate has exposed more negativity about our ability to manage our affairs than I have confronted in three years of presenting our economic case around the committees and boardrooms of Scotland.

In the months and years to come, people will trawl over what has been said today to see how members voted and to note the excuses of those who are willing to allow Scotland to sleepwalk into diminished competitiveness and decline. In particular, people will look at those who support Gordon Brown's opposition to European tax harmonisation while choosing to believe that UK tax harmonisation is a good thing for Scotland, in spite of all the evidence to the contrary. In fact, taxes here are higher, as we have higher business rates, water rates and council tax, the aggregates tax, a higher climate change levy and many other costs.

However, given the success of our analysis and of our arguments, I will not paint people into corners. I am here to show how we can co-operate and create a more competitive, more prosperous and fairer Scotland. I am also here to enjoy the moment, now that a majority of members privately or publicly accept the need for financial independence for the Parliament. We all acknowledge that Scotland can and must do better.

David Davidson (Conservative, North East Scotland)

Will the member give way?

Jim Mather (Scottish National Party, Highlands and Islands)

I am time constrained because of the next debate, so I will crack on and answer some of the questions.

I draw comfort from the fact that we now have a critical mass of MSPs who recognise the folly of sticking with a settlement that does not deliver for the people of Scotland, although one might not recognise that from all the amendments. Some amendments show signs of promise and have made some movement towards consensus, but careful reading shows real flaws. There are escape clauses that highlight old tendencies and do not do enough to quieten legitimate concerns.

The Conservative amendment wants to strengthen our economy without immediate access to the powers needed to do that. The Conservatives propose a royal commission that would be called at the whim of a UK Government, at a time of that Government's choosing. That is reminiscent of the delaying tactics used by Alec Douglas-Home in 1979 and by John Major when he promised to take stock. Our verdict on the Conservative amendment must be that it is not good enough. We need more urgency and commitment, given the perpetual low growth and declining population that we face.

Brian Monteith (Conservative, Mid Scotland and Fife)

Will the member give way?

Jim Mather (Scottish National Party, Highlands and Islands)

I want to crack on because 11.30 approaches.

However, my benign tolerance runs pretty thin when I look at the partnership amendment. It shows no movement; it is a culpable straight bat. The amendment implies that, after 300 years in the union, Scotland does not have what it takes to match the performance of other successful small countries; some union—some nurturing—if that were true, but it is not.

We have a fantastic array of positive attributes and, given the necessary powers, we are well able to match the best in the planet. The issue is about growth, but I can tell George Lyon that it is not about zero-sum growth. I suppose that I should be grateful that he and his colleagues are not in charge of Scottish Enterprise or the Bank of Scotland for, if we were under that sort of direct management, no one would ever start their own business and we would have seen the last management buy-out.

The Executive amendment also implicitly rejoices in the fact that Scotland's private sector has now shrunk to about 50 per cent of our economy and fails to see that it may fall even further. The amendment is complacent about public sector performance. We all know that, with proper leadership, vision and involvement, public sector staff could achieve so much more for Scotland and for themselves. Worst, the amendment ignores our branch-economy status. It chooses to ignore the fact that Scotland is like a ship, sitting low and slow in the water, falling behind other ships, and dependent on the towrope from stronger, more flexible economies to create the demand that will give us economic momentum. On this ship of state, our Executive has no plans to pump the bilges, build up steam or indeed change the currently charted course. Rather, the Executive tells us that it plans to lash the tiller to the old fixed course, hold on to the guardrail and hope that the towrope will be pulled taut and that we will lumber forward.

Andy Kerr (Labour, East Kilbride)

What the Executive is doing to tackle the bilges is to provide the highest ever spending on transport infrastructure and to complete the central Scotland motorway network. We are investing in rail, in skills and in higher education for the people of Scotland so as to provide the key things for business: a stable economic environment, a work force that is available and ready to work and a place in which to do business where quality of life is one of the key determinants. Do we want to compete with low-taxation economies in the Far East or are we going to compete at the higher end? What end of the economy does the SNP want to compete at?

Jim Mather (Scottish National Party, Highlands and Islands)

The minister can say all that, but at the bottom of the crucible, we have a declining population and have had 30 years of low growth. That is why we reject the Executive's strategy as one that will be satisfied with permanent second position. We reject the current philosophy that seems to class inertia and passivity as positive attributes.

George Lyon (Liberal Democrat, Argyll and Bute)

rose—

Jim Mather (Scottish National Party, Highlands and Islands)

I will come to George Lyon's points.

According to the registrar general for Scotland, the Executive's strategy risks tipping Scotland into an era of economic freefall, population decline, falling living standards and family fragmentation. So much for the constitutional stability that George Lyon wants to offer us; he cannot even offer us family stability.

The alternative is obvious and was clearly identified by the Irish author and academic Peadar Kirby on the BBC's programme "Good Morning Scotland" on 4 September 2002, when he said that dismissal of constitutional change ignored the fact that it was the increased powers of the Irish Parliament that transformed it, allowing it to set lower corporation tax rates, market Ireland effectively for the first time, and use its politicians and diplomats to win a disproportionate share of EU structural funds.

Wendy Alexander (Labour, Paisley North)

I invite Jim Mather to come back to the matter of fiscal autonomy. I am prepared to take him at his word when he says that that is the SNP's flagship policy, and that it is no longer seeking full fiscal freedom and is seeking simply fiscal federalism. I am willing to accept that road-to-Damascus conversion. However, if it is the policy centrepiece of the entire party, why is there not a single published paragraph on how it will operate? When can we expect that?

Jim Mather (Scottish National Party, Highlands and Islands)

Wendy Alexander has not read Alex Salmond's document on the economic case for independence, which lays that out categorically and clearly. She should go and read that document.

Meanwhile, while we are advocating a way forward, Gordon Brown is properly advocating tax competition for the UK and Europe. He correctly rejects the idea of a one-size-fits-all tax policy for Europe that would prevent the so-called periphery from competing with the central area between Paris and Frankfurt. Tony Blair agrees with that, and recently said that there cannot be tax harmonisation. Making everyone follow the same tax rules would quickly diminish Europe's competitiveness by killing jobs and stifling growth. However, that is exactly what UK tax harmonisation has been doing for Scotland for generations. Contrast that with our objective for Scotland where, as with every state in the US union, we would restore our competitive edge. That includes having lower business taxes relative to the rest of the UK.

George Lyon (Liberal Democrat, Argyll and Bute)

Jim Mather recently stood for election on a manifesto pledge to give businesses a competitive edge. Why did he not take that opportunity to say that he would do so by handing back £1.7 billion to businesses in Scotland?

Jim Mather (Scottish National Party, Highlands and Islands)

Because we aspire to a virtuous circle and a genuinely competitive Scotland. Scotland is still hamstrung; if we do something about business tax, we still have high water rates, aggregates tax, climate change levy, and high fuel and transport costs. George Lyon should look at what is happening in his constituency, where graduates are leaving in droves; 96 per cent of graduates from the Highlands have no future in their own part of the world. That is outrageous.

We want the strategy that helped Finland, Austria, Ireland and other nations with bigger neighbours to compete. That is the simple and obvious way forward. It is accepted by every fair-minded person we talk to, but not in the chamber. The people who are watching today's debate in the chamber and on television understand that when someone is in a hole, they should stop digging. The Executive does not understand that. The people also understand that when a strategy fails, it should be changed. We should change the strategy or change the Government. No football manager or chief executive would stand up and tell those who criticise that they are talking down the club or the business; the manager or chief executive would accept the reality that they should change their mind and change their strategy, or go.

The good news is that, as Susan Deacon said, the debate is on and it will not go away. There is now a cross-party group on the economy and that will find more supportive arguments as it goes on. To be a member of that group, to review the options, to listen to the case studies and then to reject fiscal autonomy would be a bit like being a member of a cross-party group on cycling and understanding all the benefits of that sport but then denying the need for wheels.

Fiscal autonomy is the defining attribute of any economy. Without it, we have only a branch operation that depends on external influences and decisions. That is why the sad Executive does not have a target for Scottish economic growth. I urge members to support the motion.

European Parliament (Number of Seats)

Trish Godman (Labour, West Renfrewshire)

The next item of business is a debate on motion S2M-694, in the name of Nicola Sturgeon, on European Parliament seat numbers. There is one amendment to the motion.

Nicola Sturgeon (Scottish National Party, Glasgow)

This debate is short because there was a full discussion on the issue during a members' business debate last week, when a clear view was expressed that Parliament should have the opportunity to vote on the matter. I hope that the Parliament can take this opportunity to unite to protect Scotland's already limited influence in the European Union.

It is no secret that we in the SNP are nationalists. We want Scotland to be independent in Europe; we want to be represented in our own right on all the decision-making bodies of the EU. If that is good enough for tiny Malta, how on earth can it be wrong for Scotland? Surely we do not have to be nationalists to want Scotland to have as loud a voice and as big a say as possible in the EU. That is what the motion is all about.

On Tavish Scott's amendment, the SNP supports EU enlargement enthusiastically and unequivocally. The accession of the 10 new countries, most of which are former communist states, is the most significant development since the European Economic Community was founded in the 1950s. Of course, there will be consequences for those already in the EU. It is right that existing member states should be required to compromise and to make concessions to accommodate the accession countries. The cut in the number of United Kingdom seats in the European Parliament must be seen in that context.

However, I do not believe that Scotland should share the burden of that reduction and agree to lose one of our members of the European Parliament. The debate is not just about numbers; it is about a matter of principle. My objection should be the objection of every member of the Parliament. In arriving at the recommendation to reduce the number of Scotland's MEPs from eight to seven, the Electoral Commission has treated Scotland as though it were just the same as every other electoral region in the UK. That approach is fundamentally flawed. Scotland is not the same as every other electoral region in the UK. Scotland is not a region at all, electoral or otherwise. Scotland is a nation with a Parliament that has extensive legislative powers in areas such as health, education, justice and fishing.

Irene Oldfather (Labour, Cunninghame South)

Does the member accept that many other regions and nations in Europe, such as the German Länder, have far greater powers than the Scottish Parliament? Is she recommending that we should increase the number of seats for those? Would that not take us back to where we started?

Nicola Sturgeon (Scottish National Party, Glasgow)

Some of those regions have far more power than we do. For example, the Belgian regions have the opportunity to lead debates and discussions in the Council of Ministers. A similar ability would be in the interests of our fishing communities right now—

Irene Oldfather (Labour, Cunninghame South)

Answer the question.

Nicola Sturgeon (Scottish National Party, Glasgow)

Rather than shouting at me from a sedentary position, the member should perhaps reflect on what I have said.

We have legislative powers in those areas on which the EU also has powers to legislate. European laws in those areas are binding in Scotland. The Scottish Executive has to implement those laws, so it is vital that Scotland's voice is heard in the decision-making process. We must be able to protect our national interests when the EU is legislating on matters that affect our people and that are already the responsibility of the Scottish Parliament.

We all know how laws are made in the EU. They are initiated in the Commission, by and large, and enacted by the Council and the European Parliament. We have no commissioner. If Scotland were independent, we would have one, at least until 2009. We have no direct representation on the Council and we have no guarantee that the UK—

Irene Oldfather (Labour, Cunninghame South)

Will the member take an intervention?

Nicola Sturgeon (Scottish National Party, Glasgow)

No, I am in my last minute.

We have no guarantee that the UK vote will be cast in Scotland's interests. If we were independent, we would have seven votes in the Council, like Denmark, Ireland and Finland. Where we do have a direct say in the European Union is in the European Parliament. We have eight MEPs at present; to cut that representation will reduce the already limited influence that we have in the decision-making bodies of Europe. When the decisions that Europe takes affect so directly our areas of responsibility, it is not just irresponsible but politically wrong for the Parliament to agree to such a move.

I am delighted that the European and External Relations Committee has agreed unanimously that Scotland should retain eight MEPs. The Parliament's duty is to unite behind that call and I ask members to do so today.

I move,

That the Parliament supports the European and External Relations Committee's unanimous call for Scotland to retain eight Members of the European Parliament.

Tavish Scott (Liberal Democrat, Shetland Islands)

It is important to reflect on Nicola Sturgeon's opening point about principle. The principle that she is engaged with concerns not the number of MEPs, but the matter that she went on about in three of the four minutes of her speech, which was an argument about independence. That is fair enough—I do not agree with what she said about that, but at least her position is clear. However, she should not use a large chunk of her speech suggesting that we are discussing a great matter of principle and then relate that to the number of MEPs.

The Scottish Executive is disappointed that the number of MEPs in Scotland will be reduced. All member states—

Nicola Sturgeon (Scottish National Party, Glasgow)

Will the member give way?

Margaret Ewing (Scottish National Party, Moray)

rose—

Tavish Scott (Liberal Democrat, Shetland Islands)

I have only three minutes.

All member states have agreed to reduce their quota of MEPs to enable the accession states to be represented in the European Parliament on a similar and equitable footing. I accept the points made by Irene Oldfather, Christine May and others in the debate last Wednesday, particularly those that relate to rurality, peripherality and geography. Those arguments are entirely legitimate. I have read Bill Miller MEP's contribution to the European and External Relations Committee. The minutes of the meeting that he attended state:

"Members agreed also to write to the UK Secretary of State for Constitutional Affairs to reiterate the Committee's views in respect of the number of MEPs".

As I said, the views on rurality and geography are important. However, we must start from the fact that Scotland is part of the UK. The UK is the member state and it has agreed to reduce its quota of MEPs for the 2004 European elections from 87 to 78 because of European Union enlargement. That point is agreed—at least I think that it is agreed—by all the parties in the chamber.

We hear the concerns that Scotland is different from other electoral regions. It is true that Scotland is different. We have the Parliament and we have a unique and separate legal system, but we also have specific advantages over other regions of the UK in relation to representation in the EU, through our direct links to the EU Government, to the UK

Government, to Brussels and to the Executive's EU office. Those are advantages that other European Parliament UK electoral regions do not have. As a result, rather than having less influence, we have enhanced influence.

Although Scotland's representation in the European Parliament will be reduced, our effective representation and influence in the other main EU decision-making body, the Council, is increasing in relation to the Nice provisions. Those points are important if we are to consider the matter in the round.

We have a strong group of MEPs, of all parties, who have worked persuasively and helpfully together on a range of important Scottish issues. However, in the context of a Parliament of 700 and of European enlargement, members of the Executive accept, in relation to the UK position, that the reduction will happen. The point is that Scotland enjoys the best of both worlds. We have the direct influence that we seek—and seek to enlarge on in relation to the intergovernmental conference—and we have an excellent and effective group of influential MEPs. I am sure that that will continue.

I move amendment S2M-694.1, to leave out from "supports" to end and insert:

"welcomes the accession of the 10 new member states of the European Union on 1 May 2004; notes that the elections to the European Parliament are a reserved matter; recognises that all 15 existing member states have agreed to reduce their quota of MEPs to enable the new member states to be represented on an equitable basis; notes the consequent reduction of United Kingdom seats in the European Parliament from 87 to 78, and considers that this is appropriate given the enlargement of the European Union."

Phil Gallie (Conservative, South of Scotland)

I have some difficulty in deciding how to vote, as I do not take exception to Nicola Sturgeon's motion; similarly, Tavish Scott's amendment meets the approval of Conservative members. Perhaps we are facing a relapse to my trade union past, when the solution might have been to have a composite motion.

My support for Nicola Sturgeon arises from Scotland's geographic and demographic make-up, which has been recognised in the UK Parliament over the past 300 years. Scotland's representation has been greater than that of other parts of the UK; the 72 members from Scotland represent constituencies of about 57,000 people, whereas members down south represent constituencies of about 70,000 people. That will be dealt with shortly, with the implementation of the relevant provision of the Scotland Act 1998. I support the reduction of the number of Scottish MPs, given the fact that the Scottish Parliament now exists. However, reducing the number at Westminster is a different matter from reducing the number in the European Parliament.

I have a bit of difficulty with Tavish Scott's position, because the other day he disagreed with our arguing for the retention of eight MEPs from Scotland. The Scotland Act 1998 recognises geography and location. Tavish Scott is here because we have separate MSPs for Shetland and Orkney. I do not think that any of us would dispute the separate representation of Shetland and Orkney but, when Tavish Scott opposes Nicola Sturgeon's arguments, he is opposing the argument that has enabled him to be here.

Irrespective of the deliberations here or at Westminster, to some degree the final decision is out of our hands, because it depends on the European constitution—to which the matter is an addendum or attachment—being accepted. If the constitution is not accepted, I presume that the numbers of MEPs will stay at the existing levels; if the constitution fails, there will be no argument and we will retain our eight members.

I am rather disappointed in the make-up of the constitution, which relates to the issues that we are discussing now—the membership of the European Parliament and the number of votes that the country has on the European Council. However, enlargement means that changes are needed. The constitution is spoiled by the extent to which it enables Europe to absorb new powers, but that is an argument for another day.

Nicola Sturgeon (Scottish National Party, Glasgow)

rose—

Phil Gallie (Conservative, South of Scotland)

I apologise, but I cannot give way.

Bruce Crawford (Scottish National Party, Mid Scotland and Fife)

What about the business motion yesterday?

Phil Gallie (Conservative, South of Scotland)

Bruce Crawford should check the Official Report .

Tavish Scott and the Scottish Executive should pay due regard to Nicola Sturgeon's motion. Every member of the European and External Relations Committee backed the view that the number of MEPs should continue to be eight, as did the Scottish MEPs who made representations. The Scottish Executive would be wise to support that position by making representations to the UK Government. The Conservatives welcome the enlargement of Europe, but I believe that, on this issue, a Scottish voice should be maintained.

Christine May (Labour, Central Fife)

My mother used to say about things that came round with monotonous regularity, "If that had an air, you could sing it." That is where we are on this issue.

As members will know by now, I am a committed Europhile and, as they can see, I have my Euro-anorak on today—it is black and white, unlike the position that I propose to adopt. I am delighted to have the opportunity to debate a European issue. I just regret that the scope and the nature of the debate engendered by the SNP is once again narrow and inward looking and takes no account of the many shades of opinion, potential solutions and co-operative working that are the reality of serious government.

Nicola Sturgeon (Scottish National Party, Glasgow)

Will the member support the SNP's position that the Executive should stage a full-scale debate on the European constitution before the UK Government moves to ratify it?

Christine May (Labour, Central Fife)

No, I will not.

Of course, the wider the sphere of influence and geographical extent of a Government or a Parliament, the more complex and difficult are the solutions that it needs to arrive at in order to resolve the issues. So it is in this debate: the Executive amendment reflects the breadth and complexity of the issue with which we are faced.

As I said last week, I regret that the eventual outcome is the loss of one of our MEPs. I seek an assurance from the minister that the Executive will continue to put forward the arguments of geographical challenge, rurality and peripherality until the very last UK decision is taken. Although those are valid arguments, the SNP does not mention them. I can only assume that, in its desperate rush to flag up independence at every stage of every debate, it ignores the sensible, pragmatic and grown-up arguments that can be put forward.

Nicola Sturgeon welcomed enlargement but then expressed concern about Scotland's limited influence. She did not talk about the difficult decisions that enlargement will bring. She said that Scotland was not the same as other electoral regions. However, in the current debate, we have to reflect the fact that we are a European Parliament electoral region; we should debate the issues on that basis.

The debate is complicated. We need a solution with which we can all live. I hope that, when the minister sums up at the end of this short debate, he will assure us that he will take forward the arguments until they are finally won or lost. We will be looking at what he says in his next meetings with his UK colleagues, to ensure that he does.

Trish Godman (Labour, West Renfrewshire)

Because of shortness of time, I can call only one back bencher. In terms of proportionality, that will be a Labour member. I call Irene Oldfather.

Irene Oldfather (Labour, Cunninghame South)

Apart from Christine May's anorak, there is a sense of déjà vu about the debate. I am still waiting for Nicola Sturgeon and the SNP to answer the question that I asked last week about the SNP's proposal for regions with legislative powers, such as Scotland, to have more seats in the European Parliament. The SNP has not said whether its proposal should apply across Europe. If it did apply across Europe, we would be back to where we started, with the European Parliament having many more than 700 seats.

In the debate last week, Nicola Sturgeon said:

"I am a nationalist ... I believe that Scotland should be independent in Europe and represented in our own right in all the European Union's decision-making bodies ... That is what the motion is about."—[Official Report, 26 November 2003; c 3659.]

My worry is that that is what today's motion is about, too.

The motion refers to the European and External Relations Committee. However, the committee has never discussed the principle of holding a debate in the chamber and committee members were not shown the courtesy of being asked whether we wanted the matter to be debated in the chamber. I know that Phil Gallie is considering his position on the matter. The grave danger, which should be resisted, is that the SNP is politicising the committees of the Parliament—that is completely wrong.

The European and External Relations Committee wrote to the Electoral Commission to make a plea on the basis of geography for eight MSPs to be retained. I note what the minister said about geography. Like Christine May, I seek an assurance that the minister will ensure that the issue is considered in the discussions with Westminster colleagues until the very last minute.

I would rather be represented by the UK's 29 votes on the Council of Ministers than by Slovenia's four. I would also rather be represented by the UK's 78 votes in the European Parliament than by Slovenia's seven. From the election results in May, it seems that so would the Scottish people.

Tavish Scott (Liberal Democrat, Shetland Islands)

Right at the outset, I say to Christine May, Irene Oldfather and others that the Executive—across the ministerial benches—will work closely with colleagues to ensure that representations continue to be made on the matter. I will not take sniping from Ms Sturgeon or anyone else on the sidelines about what we do or do not do.

Nicola Sturgeon (Scottish National Party, Glasgow)

Will the minister take an intervention?

Tavish Scott (Liberal Democrat, Shetland Islands)

No, I will not. [ Interruption. ]

Trish Godman (Labour, West Renfrewshire)

Order.

Tavish Scott (Liberal Democrat, Shetland Islands)

I have two minutes in which to try to deal with the points and SNP members just scream and shout like a bunch of wee bairns.

My ministerial colleagues and I will continue to work hard on the issue. As Mr Gallie requested, we will continue to make the appropriate representations in our discussions. I take on board the serious points that Christine May and Irene Oldfather made on rurality, geography and peripherality.

All the parties are agreed on the desirability of enlargement. The only debate that we have had this morning—including the one that started at 9.30 am—has been about independence. Stewart Stevenson said last week that the issue for the SNP is not about seven or eight members but about 14 members. I respect that position, although I disagree fundamentally with it.

It is important to separate the debate on the serious arguments in favour of Scotland making appropriate representations about the number of MEPs from the debate on independence. That is what our amendment seeks to do.

Margaret Ewing (Scottish National Party, Moray)

Although the debate has been short, it has been interesting. I will try to reply to the various points that members have raised.

I am sure that Phil Gallie has the draft European constitution off by heart—he must go to bed with it every night. I have heard many of his speeches on the subject. I appreciate the fact that he looked at the rationale of the argument that was so effectively propounded by my colleague Nicola Sturgeon. As a member of the European and External Relations Committee, Phil Gallie agreed that Scotland should retain eight MEPs and that we should not accept the proposed reduction.

Christine May said that she is a Europhile. However, she is not prepared to support the concept that Scotland should be as fully and as well represented in the European Union as possible. It is vital that we should have such representation.

Irene Oldfather, a colleague on the European and External Relations Committee, supported the committee's decision to continue to argue the case for eight MEPs. She seems to have difficulty with the basic language that is needed to define the difference between a region and a nation. As Nicola Sturgeon said clearly today and last week, even if someone is not a nationalist, they should support the case and the arguments for Scotland's retention of eight MEPs.

Tavish Scott came in as number 73 in the elections under the Scotland Act 1998. I say to him that the UK Government does not have to accept the Electoral Commission's recommendations, as Lord Falconer confirmed in his letter to the European and External Relations Committee.

The Executive did not make a submission, although I accept that the Liberal Democrats made one. I wonder whether, in this case, the Executive decided to say nothing but allowed its members to make submissions through their political parties. Tavish Scott's arguments show that he has no real determination to argue the case from a Scottish Parliament point of view that the eight Scottish seats should be retained. I believe that it is fundamentally important that the Scottish Executive as a whole should argue the case that Nicola Sturgeon propounded. I also believe that the vast majority of members of the Scottish Parliament, irrespective of party or allegiance, want to ensure that the Scottish voice is heard effectively in Europe.

I have great respect for the eight members who serve in the European Parliament and for the work that they do on the many issues on which the Scottish Parliament is asked to implement European law. We should show our appreciation of and our support for them by voting not to reduce the number of members who are elected from Scotland. We should continue to argue the case for eight. When the SNP wins independence for Scotland, we will argue for more members.

First Minister's Question Time

John Swinney (Scottish National Party, North Tayside)

To ask the First Minister what issues will be discussed at the next meeting of the Scottish Executive's Cabinet. (S2F-402)

Jack McConnell (Labour, Motherwell and Wishaw)

First, Presiding Officer, I am sure that everyone in the chamber will join me in congratulating you on your being made politician of the year. The award is richly deserved.

Next week, the Cabinet will discuss ministers' excellent progress in delivering the partnership agreement, and we will discuss our commitments for Scotland and how we can take those commitments forward into the new year.

John Swinney (Scottish National Party, North Tayside)

I cannot imagine that that discussion will take a terribly long time. However, I associate myself with the First Minister's remarks about the Presiding Officer and the well-deserved award that he received last week.

On Monday, the Minister for Communities and her deputy visited the incredibly successful Dublin Docklands Development Authority, which is the fastest growing area in Ireland. Before she left, the minister said:

"I am keen to explore with ... my Irish Ministerial counterparts what has contributed to this progress, and the lessons the Executive can learn".

What lessons were learnt on Monday?

Jack McConnell (Labour, Motherwell and Wishaw)

I have not yet received a report from the Minister for Communities, but I certainly look forward to doing so.

John Swinney (Scottish National Party, North Tayside)

Perhaps I can pre-empt the minister's briefing by sharing with the First Minister the contents of the Dublin Docklands Development Authority plan. Under the heading "Factors Contributing to Success", the plan says "Central to this success" is

"an attractive package of financial incentives to encourage high-quality ... investment."

The plan goes on to say that the introduction of a special rate of corporation tax

"was another major contributor to success."

In short, the authority says that control of tax policy is "essential" to achievement of that level of economic growth.

Given that the Minister for Communities and the First Minister are determined to learn lessons from Ireland's success, when will the First Minister introduce similar proposals that will give Scotland the powers to put our industry and business at a competitive advantage and which will deliver the opportunities that people in Scotland seek?

Jack McConnell (Labour, Motherwell and Wishaw)

The Scottish economy will be put at a competitive advantage partly because of the competitive advantage at which the UK has been put because of stable interest rates, low inflation, higher employment, lower unemployment and a better macroeconomic framework than has ever been the case in my adult life. Those factors make a serious contribution to economic growth in Scotland.

However, we in Scotland take our own responsibilities by pursuing the right economic policies such as developing skills, improving infrastructure, boosting research and development, doing what we can to improve productivity and ensuring that our Scottish companies can compete with the rest of the world. That is the right way to go. The low-tax—and ultimately low-growth—economy that Mr Swinney advocates would damage Scotland, employment and the people of this country.

John Swinney (Scottish National Party, North Tayside)

The problem with what the First Minister has just said is that he is currently presiding over low economic growth in Scotland. We have lost 50,000 manufacturing jobs in this country. In a recent newspaper article, the Prime Minister wrote:

"Making everybody follow the same tax rules would quickly diminish Europe's competitiveness by killing jobs and stifling growth."

The "same tax rules" for Scotland are

"killing jobs and stifling growth".

If the First Minister is remotely interested in putting Scotland at a competitive advantage, will he learn the lessons of Ireland, which is the fastest growing economy in Europe? Will he do something right for Scotland and give us the powers that will put us at such advantage?

Jack McConnell (Labour, Motherwell and Wishaw)

Mr Swinney does not want to put Scotland at a competitive advantage; instead, he wants to put it at a competitive disadvantage. He wants to have what he calls fiscal autonomy, but that is the wrong strategy for boosting economic growth. We know that the way to boost economic growth in Scotland is to improve skills, boost the infrastructure and ensure that we have productive and competitive companies that are investing properly in research and development. If we do that, we will be able to compete with high-value jobs and a high-value economy, instead of the low-value economy that Mr Swinney wants to be part of. His approach will always bring short-term success but long-term decline.

We have to learn the lessons of the 1980s and 1990s and ensure that the Scottish economy can compete in the 21st century. We do that by ensuring that our industry is competitive, not by trying to deceive industry by promising it greater public spending and the tax cuts that would never materialise under an SNP Adminstration.

John Swinney (Scottish National Party, North Tayside)

Why is it okay for the Prime Minister to go around Europe defending every country's right to have its own tax rules to avoid

"killing jobs and stifling growth"

when he will not allow the people of Scotland to take the same decisions? Why is that right for every other country but somehow wrong for Scotland?

Jack McConnell (Labour, Motherwell and Wishaw)

The people of Scotland voted for devolution, not for independence. They voted for a UK-wide tax regime that gives us the highest unemployment—sorry, the highest employment—

Jack McConnell (Labour, Motherwell and Wishaw)

It gives us the highest employment, the lowest unemployment, the lowest interest rates and the lowest inflation that most members in this chamber have ever experienced. That is a basis for serious macroeconomic growth. The way that we in Scotland build on that is to use the powers that the Parliament has to boost skills, boost infrastructure, boost R and D and boost productivity. If we do that, we will boost economic growth.

David McLetchie (Conservative, Edinburgh Pentlands)

To ask the First Minister when he next plans to meet the Prime Minister and what issues he intends to raise. (S2F-407)

Jack McConnell (Labour, Motherwell and Wishaw)

I hope to meet the Prime Minister shortly and I am sure that our discussions will cover a wide range of issues of importance to Scotland.

David McLetchie (Conservative, Edinburgh Pentlands)

I do not doubt that it will be a wee chat rather than a "big conversation".

Last month as part of the debate about the possible introduction of top-up fees in English universities, Jim Wallace told university principals that there would be no more money for universities in Scotland. However, on Monday of this week the First Minister claimed—I think I quote him accurately—that he would

"make sure Scottish universities retain a competitive edge, not just in terms of the UK but increasingly across the world."

Does the First Minister acknowledge that those statements are seen by many as being riddled with apparent contradictions, and will he tell Parliament which one represents the Executive's position?

Jack McConnell (Labour, Motherwell and Wishaw)

If Mr McLetchie reads the speech that the Deputy First Minister made last Tuesday he will find that his report of that speech is inaccurate. The Deputy First Minister did not say at any point that Scottish universities would not receive additional funds and he made the point that it is an issue that we will consider in the course of the next spending review.

David McLetchie (Conservative, Edinburgh Pentlands)

That might be the position, but it is certainly not the way that it is understood by Scotland's university principals, who are concerned about the policy divide that is opening up between north of the border and south of the border. There is a great deal of confusion on the issue. We now learn that if top-up fees are introduced, our students who seek to study south of the border could face an "education Hadrian's wall"—as it was described in the press this morning—because they would have to pay £3,000 up front to attend and pursue courses at English universities. If the Prime Minister drives his policy through, what are the First Minister and his Administration going to do to mitigate its impact and ensure that Scottish students can still attend universities in the British system without having to pay £3,000 up front for the privilege of doing so?

Jack McConnell (Labour, Motherwell and Wishaw)

Those who run the university systems in England and in Scotland have been able to use their basic intelligence to ensure that, despite the fact that we in Scotland have proudly abolished tuition fees—Mr McLetchie might not have noticed that we already have a different system in Scotland from the rest of the United Kingdom—we have managed to preserve the ability of Scottish students to study in England and of English students to study in Scotland. It is not beyond the wit of any Government or any university in the UK to ensure that that situation will continue.

It is certainly our commitment that the universities of Scotland will continue to provide the best possible education, that Scottish students who choose to study elsewhere will continue to receive it and that our universities will continue to be able to compete on the international stage with their research and teaching, as they do already. We will ensure that whatever proposals are finally agreed by the House of Commons, the Scottish university system will stay ahead of the game.

David McLetchie (Conservative, Edinburgh Pentlands)

I look forward to the First Minister telling thousands of students in Scotland that tuition fees have been abolished when the bills for the graduate endowment land on their doormat within the next year or so—they will have an entirely different perspective on the so-called abolition. The problem that we are discussing today is entirely of the Labour party's making. It was Labour that introduced tuition fees, Labour that abolished grants and it is Labour that proposes top-up fees in England. I urge the First Minister to use his powers of persuasion to convince the Prime Minister to adopt Conservative policy north and south of the border, which would mean no tuition fees or top-up fees for any student anywhere in the United Kingdom.

Jack McConnell (Labour, Motherwell and Wishaw)

What I want to see for Scotland is the best possible university and higher-education system: a system that is well funded but which generates its own income; that is funded by Government, but which also has commercial relationships with businesses that turn research into commercial projects; and which is flexible and imaginative not only in how it secures its income but in how it uses its expenditure.

If we achieve that, we will continue to have universities in Scotland that are ahead of the game. I am also pleased to see that some of the proposals that have been debated down south are already among the best aspects of the new system up here in Scotland, such as the abolition of up-front tuition fees and the introduction of more bursaries and grants for low-income families. Those ideas are being copied by our colleagues down south and I welcome their conversion to those ideas. I hope that over the next few weeks, as their policy becomes clearer, we in Scotland will get a chance to develop our policies, which will ensure that Scottish universities and Scottish students stay, as I said, ahead of the game.

Pauline McNeill (Labour, Glasgow Kelvin)

Does the First Minister agree that a Labour Government has forced major constitutional change in the UK for the benefit of our democracy, but that current proposals to create a new supreme court have wide-ranging implications for the Scottish legal system? Does he agree that Parliament requires as a matter of urgency a debate on how we propose to enhance our distinctly Scottish approach to civil and criminal justice?

Jack McConnell (Labour, Motherwell and Wishaw)

I agree absolutely that there should be a debate in Parliament; we intend to initiate such a debate early in the new year, but I also want to be absolutely clear about the proposal for a UK supreme court. It is entirely wrong of senior legal figures to describe the proposed court as being somehow an English court that will take powers away from the Scottish legal system. It will be a UK court that will have powers that are similar to existing powers at UK level. There will be no diminution of Scottish input or Scottish representation in that body and it is important that we ensure that that is the case. That is exactly the job that Scottish ministers and the Lord Advocate have been pursuing over recent months, which is reflected in the proposals that have been reiterated yet again by the UK Government.

Tommy Sheridan (SSP, Glasgow)

To ask the First Minister what the Scottish Executive's position is in response to the programme "Stop Chewin' the Fat" and recent reports that Scottish children are among the most obese in the developed world. (S2F-415)

Jack McConnell (Labour, Motherwell and Wishaw)

The latest figures on childhood obesity confirm what we already knew—that health improvement must be a long-term consistent priority for Scotland. Childhood obesity has significant implications for the future health of Scots and for our health services, but we will not tackle the problem overnight. It will take at least a generation of concerted action to turn round the eating and exercise habits of our nation. Flagship programmes in our school classrooms and playgrounds—such as hungry for success and active schools—demonstrate our commitment to improving the situation for Scotland's children.

Tommy Sheridan (SSP, Glasgow)

After four and a half years of the Labour-Liberal Government in Scotland, and two years of the First Minister being in charge, one in five 12-year-olds is defined as being clinically obese. In June, the First Minister rejected the advice of the British Medical Association, One Plus, the Child Poverty Action Group and a range of trade union organisations, which argued that we require a radical solution; namely, free healthy and nutritious school meals. Will he now display the level of courage and political maturity that is required to admit that he was wrong, that we need a step change now, and that every child in Scotland should be guaranteed a healthy and nutritious school meal to tackle the problem?

Jack McConnell (Labour, Motherwell and Wishaw)

I am determined to ensure that our schools and councils deliver healthy and nutritious meals for Scotland's school children. That is exactly why we are spending the money that Mr Sheridan would like to spend on the best-off and richest children on improving the quality of school meals, availability of school meals and take-up of school meals. Those priorities—getting nutritional quality right and improving take-up—are exactly the right ones for Scotland, but we must also ensure that children take more exercise and that they are fed better outside their classrooms. More than 100,000 Scottish school children are going to benefit by the end of this year from our free fruit in schools programme. That is the sort of initiative that will make a difference, unlike the tokenism of Mr Sheridan, who wants to benefit the rich but not to help the poor.