Inward Investment (Hansard, 28 February 1996)

§ 1. Mr. Nigel Evans
To ask the Secretary of State for Scotland what estimate he has made of the level of inward investment into Scotland in 1995–96. [15784]

§ 10. Mr. Ian Bruce
To ask the Secretary of State for Scotland what are the latest figures on inward investment to Scotland. [15794]

§ The Secretary of State for Scotland (Mr. Michael Forsyth)
Scotland continues to be a magnet for inward investment. In the current financial year, we expect an additional £1 billion or thereabouts of inward investment.

§ Mr. Evans
As a Welshman representing an English constituency and asking about Scottish affairs, I believe in the welfare of the Union and in inward investment for Scotland. Does my right hon. Friend agree that if we were to introduce the job-destroying social chapter and the minimum wage, that would be damaging to Scotland? Does he also agree that the final slap and insult to the people of Scotland would be the introduction of a tartan tax which would cost every Scottish family £6 a week?

§ Mr. Forsyth
Labour's proposals for a European jobs tax by joining the social chapter and for a minimum wage would be bad news for inward investment in Wales and Scotland, but the tartan tax in Scotland would give Wales an enormous advantage in attracting inward investment.

§ Mr. Bruce
Will my right hon. Friend tell the House what would happen to business investment in Scotland if local authorities were able to set business rates? Rather than being pegged at around the rate of inflation—3 per cent.—as they are now, would not they go up to 30 per cent., which is the rate that many local authorities have threatened to introduce? That would be an additional tartan tax, because if income tax were put up by 3p in the pound, it would be logical to put up corporation tax by the same amount. [Interruption.] Opposition Members do not care about the jobs of Scottish workers.

§ Mr. Forsyth
From memory, the Government have committed something like £0.5 billion to achieve a uniform business rate in Scotland to remove the competitive disadvantage that Scotland had. I agree with my hon. Friend that the Labour party's proposals, which were published this week—to allow local authorities to raid the Scottish business community to meet its funding proposals—would be a disaster for Scotland's businesses. It would make Scotland less attractive to inward investors and destroy jobs and businesses in Scotland. I hope that the hon. Member for Hamilton (Mr. Robertson) will take the first opportunity to distance himself from that ridiculous proposal, which flies in the face of all the advice that we have had from the Scottish business community.

§ Mr. Norman Hogg
How does the Secretary of State reconcile what he has just said with his proposals to 868 destroy Scottish local government as an effective mechanism which provides the infrastructure on which inward investment is built? He is setting financial limits on local government in a way that will destroy its ability to provide the base for inward investment.

§ Mr. Forsyth
No, that is not the case. Local authorities in Scotland are getting grant that is nearly 45 per cent. more per head than it is in England, and 21 per cent. higher per head than it is in Wales. It is a generous settlement, and it is more than local authorities would be entitled to under the Barnett formula to which the hon. Member for Hamilton has committed himself as the basis for funding Scottish local government and other services in the Scottish block. I found an extra £26.5 million over and above the formula consequences for local government in Scotland. If the hon. Gentleman were fair minded, he would recognise that. As he is fair minded, I am sure that he does.

§ Mr. Canavan
While I welcome inward investment, does the Secretary of State admit that the number of jobs created by it is not enough to replace the jobs lost through companies closing down or leaving Scotland? Bearing it in mind that the Government are always quick to take the credit when companies come to Scotland, but not so quick to take responsibility when companies threaten to leave, will the Secretary of State applaud the Cummins work force who yesterday voted overwhelmingly to fight the proposed closure of the Shotts factory? Will the Secretary of State follow that excellent example by intervening and trying to use every means at his disposal to save the 700 jobs?

§ Mr. Forsyth
Yes, Madam Speaker.

§ Mr. Nicholls
I must remind my right hon. Friend that, when one examines Government inward investment in Scotland and the subsidy for the tourism industry as represented by subsidy for the English and Scottish tourist boards, one sees that Scotland receives from the Government about 16 times as much subsidy as England. If we combine that with the fact that the Scottish Office is now subsidising sewerage charges for people in Scotland, from a west country perspective it looks a pretty poor do. Is not it time that we started to spend money on people who used to vote for us at the expense of those who never would?

§ Mr. Forsyth
I am grateful to my hon. Friend for his question, but he is quite wrong about what he described as a subsidy for water and sewerage. It is a simple transfer from local government. As my hon. Friend knows, water has not been privatised in Scotland and we have no intention of privatising water in Scotland. Because it has not been privatised, it is necessary for the taxpayer to meet the costs which in England are met by the private sector.

§ Mr. Salmond
Nothing can do as much damage to the Secretary of State for Scotland as Tory Back Benchers. Is the Secretary of State aware that, in a conversation with a senior executive connected with inward investment in Scotland, I was told that, over the past 10 years, only one firm out of hundreds had expressed any concern about constitutional change in Scotland, but that up to one third of those hundreds of companies had expressed concern 869 about the Government's hostile attitude to the European Union? As the biggest little Englander in the Cabinet, does the Secretary of State acknowledge that his hostile attitudes towards Europe are a real threat to inward investment in Scotland and to thousands of Scottish jobs?

§ Mr. Forsyth
I am not hostile to Europe, but I am hostile to the sort of Europe that the hon. Gentleman would like to see, which would add to business costs and drive out inward investment. The hon. Gentleman pretends to be a nationalist who wants Scotland to have a greater say over its affairs, yet his policy on Europe would transfer power to Brussels where the people would be unable to have a proper say.

§ Mr. Stephen
How can I justify to my constituents in Sussex the fact that central Government spend so much more on local authority services in Scotland than in England?

§ Mr. Forsyth
The allocations for Scottish local government are a matter for the Secretary of State and the priorities have to be set within the Scottish Office block. The Scottish Office block has provided for a generous allocation towards local government, in part reflecting the changes that local government is undergoing as a result of reorganisation.
My hon. Friend asked about the additional benefits that Scotland enjoys under the Scottish Office block, which mean that public expenditure by local authorities in Scotland is getting on for one third higher per head than it is in England. That relationship would undoubtedly be undermined if a Scottish Parliament with tax-raising powers was established, because that would mean for the hon. Member for Hamilton a reduced number of Scottish Members of Parliament—according to the Liberal Democrats—and no Scottish Office presence in Cabinet, to decide the allocation. As my right hon. and learned Friend the Chancellor pointed out in the Grand Committee, that would undoubtedly result in Scotland being disadvantaged and the difference between expenditure in England and Scotland being narrowed. That is the price that Opposition Members are prepared to make the Scottish people pay for their Scottish Parliament.

§ Mr. Menzies Campbell
Does the Secretary of State accept that the success of inward investment depends on the skill and confidence of the Scottish people? If, by a combination of skill and confidence, Scotland triumphs at Murrayfield on Saturday, will that not do much more for inward investment than any of the Government's policies?

§ Mr. Forsyth
I am sure that, when Scotland triumphs at Murrayfield on Saturday, we shall at last have found something on which all parties in the House can agree in so far as they represent Scottish constituencies.
On skills, the hon. and learned Gentleman will recognise that Scottish Enterprise has taken a 7.5 per cent. reduction in its budget but remains determined to deliver the same output in terms of training. That is the money that we have made available as extra money to local government. The hon. and learned Gentleman cannot have it both ways: criticising both the settlement for local government and the reduction in Scottish Enterprise funding, as he did when it was announced.

§ Mr. George Robertson
Will the Secretary of State accept that the Labour party welcomes inward investors 870 to Scotland and that the next Labour Government, who most inward investors assume will be taking power in the next 15 months, will also warmly welcome inward investment to Scotland? Just in case he starts to believe his own propaganda, will he listen to the words of Professor Neil Hood, the former director of Locate in Scotland, who said that he did not think that any inward investment would be frightened off by the current proposals for devolution? Surely that alone shows the bogus and empty nature of the propaganda that continues to be thrown by Conservative Members.

§ Mr. Forsyth
I do more than listen to his words. I have met him and discussed his ideas, and I think that the hon. Gentleman is not on such strong ground as he believes. If the hon. Gentleman is seriously arguing that an extra 10 per cent. on income tax in Scotland and additional costs on employing people will not put Scotland at a disadvantage compared with Wales and the north-east of England, he is not living in the real world.
Let us take as an example financial services, which are an important employer in Scotland. The hon. Gentleman is saying that savings income for pensioners would be taxed at 15 per cent. more in Scotland than in England. Savings institutions depend on savings income, and the hon. Gentleman's proposals for a tartan tax do not threaten just inward investment, but established industries such as the financial services sector, because they add to their costs and make them less competitive.