§ 1. Mr. Russell Brown (Dumfries)
By what mechanism he liaises with the Chancellor of the Exchequer in order to inform him about the state of the Scottish economy. 
§ The Secretary of State for Scotland (Dr. John Reid)
I meet my right hon Friend the Chancellor of the Exchequer regularly and discuss various matters. The last occasion on which I met him was in Cabinet this morning. We had a particularly fruitful discussion, and no doubt my right hon. Friend will share the details with the House later.
§ Mr. Brown
I thank my right hon. Friend for his reply, and was delighted to hear what he had to say.
When my right hon. Friend visits my constituency this weekend, will he tell the people of Dumfries that, as a direct result of the Chancellor's effective stewardship of the economy, thousands of families and individuals—including pensioners—have benefited from the working families tax credit, increases in child benefit, the national minimum wage and the pensioners minimum income guarantee? Will he ensure that the people of Dumfries understand that, if the Conservatives were ever returned to power, they would scrap each and every one of those measures?
§ Dr Reid
My hon. Friend is absolutely right. Labour's economic policies have not only established the best environment for business in Scotland for many decades, but given us an opportunity to start distributing some of 838 the wealth created in order to create a fairer and better society in Scotland. A great many pensioners in my hon. Friend's constituency have benefited not only from the restoration of the free eye tests so disgracefully abolished by the Conservative party, but from the guaranteed minimum income that pensioners now receive, and from the cuts in value added tax on fuel that we promised and the winter fuel allowance. Pensioners, like others, are benefiting from this Government's commitment to social justice.
§ Sir Robert Smith (West Aberdeenshire and Kincardine)
Obviously the Secretary of State cannot tell us what response he received from the Chancellor today, but he can tell us what advice he gave the Chancellor. Did he, as Secretary of State for Scotland, make clear how much damage is being done in Scotland by the cuts in public finance that his Government have imposed since the election? Did he convey the message from the Deputy First Minister in the Scottish Parliament that what the Scottish economy needs is not another tax cut in a pre-election period, but vital investment in education, so that we can give our children the skills that they need for their own and the country's economic benefit?
§ Dr Reid
The last thing that the Chancellor needs from me, and especially from the Liberals, is advice on how to run the Scottish economy.
It will not have escaped the hon. Gentleman's notice that in Scotland we now have the highest employment that we have had for 33 years, the lowest unemployment for 24 years, the lowest inflation for decades, and the lowest mortgage and long-term interest rates, all because of the stewardship of the present Chancellor. I should have expected the hon. Gentleman to wait with bated breath in anticipation of the next step in the step-by-step reconstruction of the Scottish economy under the Chancellor: getting rid, once and for all, of the boom-and-bust policies of the Tories.
§ Mr. Crispin Blunt (Reigate)
Given that Scotland's position relative to many English regions improved considerably during the 18 years of the last Conservative Government, does the Secretary of State believe that the Barnett formula can be justified indefinitely, especially in regions such as the north-east which have suffered so severely, in relative terms, because of this Government?
§ Dr Reid
The hon. Gentleman obviously thinks that the whole Scottish nation is suffering from collective amnesia. It is not: it remembers the 18 years of the Tory Government who decimated our industries and destroyed so many communities.
The hon. Gentleman is partly correct, in that since May 1997 there has been a marvellous recovery in Scotland, as well as throughout the United Kingdom. The Barnett formula ensures the fair and proportionate distribution of resources to Scotland in terms of need and sparsity of population, and there is no reason for us to consider us changing that distribution.
§ Mr. David Marshall (Glasgow, Shettleston)
Does my right hon. Friend agree that the biggest boost to the Scottish economy since the last election has been the substantial reduction in unemployment? Has he seen the latest research paper produced by the House of Commons 839 Library on unemployment by constituency? Does he welcome, as I do, the fact that my constituency has at long last lost its position as the constituency with the highest unemployment in Scotland, and is now number nine? More significantly, it has gone from number 15 in the United Kingdom to number 55. Does that not show that the Government's economic policies are working for the greater good of the poorest areas in the country?
§ Dr Reid
My hon. Friend has made a valid point not just about his constituency, but about the effects of the Government's policies in Scotland. Unemployment is not only an evil for those whom it affects, but a debilitating factor in any country's economy. We take some pride in the fact that, in the two and a half to three years during which the Government have overseen the stewardship of the Scottish economy, we have reduced youth unemployment by more than half—by up to 69 per cent. We have had massive reductions in long-term unemployment. We have the lowest unemployment for almost a quarter of a century and the highest number of jobs—2.3 million—for 33 years. Incidentally, all the old records were set under the previous Labour Government, just as the new records are being set by the present one.
§ Mr. John Swinney (North Tayside)
In his discussions about the Scottish economy, has the Secretary of State told the Chancellor that, since Labour came to power, Scotland has lost 22,000 jobs in the manufacturing sector due to the Government's economic policy? Does he think that that factor contributed to the Labour party's tremendous achievement last Thursday of entering a two-horse race in Ayr and coming third?
§ Dr Reid
I remind the hon. Gentleman that, in the global economy in which we work, there will be job losses as well as job gains, but he was slightly churlish not to point out that the job gains in Scotland under this Government far outweigh the job losses. Indeed, employment in Scotland is at a record high: 2.3 million people are in employment.
Ayr was a poor result for Labour, particularly as we are not used to losing, but I suppose that I should return the compliment to the hon. Gentleman and the Scottish National party. I congratulate them on having made it eight in a row: eight consecutive by-election defeats for the SNP under the present leadership. Any football manager in Scotland with that record would be swiftly dispatched.
§ Mr. Dominic Grieve (Beaconsfield)
In the light of the Secretary of State's last reply, I rather look forward to hearing him congratulate the Conservatives on their by-election success in Ayr—but I turn to the Scottish economy. Is it not true that Scotland has the lowest business start-up rate in the United Kingdom: 20 per cent. lower than elsewhere? Job prospects in Scotland for the coming year are the worst in the UK and it is likely that job losses will outweigh job gains. To what does the Secretary of State attribute that? Could it in part be the fact that £1,500 of taxation has been added to every job in Scotland since Labour came to power?
§ Dr Reid
No. As a matter of fact, Scottish manufacturing industry is recovering at a quicker rate than in the rest of the UK, as are Scottish exports. In terms of 840 gross domestic product, Scotland is now the third most prosperous region or nation in the UK. I repeat: employment in Scotland is at its highest level for 33 years.
The allowances that have been made, for example, on the roll-over tax for North sea oil and gas, the reductions in long-term capital gains tax, the reduction in national insurance and the reductions in income tax for working people in Scotland have had an enormous effect, so the hon. Gentleman is wrong on all those matters. He is right on one thing. I will congratulate the Scottish Conservative party. It has managed to achieve something that the British Conservative party has not achieved for many decades.
§ Dr Reid
The hon. Gentleman should not hold his breath. I congratulate the Conservative party without any churlishness on achieving its first by-election win and, indeed, its first win under the first-past-the-post system for the Scottish Parliament. It will be a lonely life for that Tory Member, but I am sure that he will have the character to sustain it to the next Scottish parliamentary elections. He will not need to sustain it after that.