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Ruth’s David Hume Institute Lecture

30 Jan 2018

ruth4

Can I first of all thank the Royal Society of Edinburgh for hosting us this evening.

And let me also thank the David Hume institute for – once again – setting up this series of lectures to kick of the 2018 political year here in Scotland.

It’s particularly good to see you with new management under Jane Frances Kelly.

I read that Jane Frances came back to Scotland from an eleven year stay in Australia to take over the reins at the Institute last year.

After all the talk of Remainers and Leavers these last 18 months, how nice it is to have a Returner in our midst.

That referendum  is – of course – going to continue  to dominate our public debate here in Scotland and will do so across the UK over the coming months.

There may be a few moments when domestic policy matters get a hearing.

But the great gong of Brexit is more likely to drown them out.

So I very much welcome the title of this series of lectures – “Scotland After Brexit”.

Because it reminds us that – thank Goodness – there may be a moment at some point in the not too distant future when Brexit negotiations will no longer be the only show in town.

When we aren’t forced to get an opinion on the latest sticking point coming out of a corridor in Brussels.

….a time when, dare I say it, we will no longer have to watch Jacob Rees Mogg or Andrew Adonis issue yet more dire warnings about the perils of either selling out, or leaving at all…

A moment – perhaps further away than most of us would like – when we will be able to focus on something other than the Brexit process.

Process is, of course, something we’re very good at talking about in Scotland.

But I’d like to use the opportunity of the lecture title this evening to try and focus on what we actually should DO in Scotland, after Brexit happens in March of next year.

I say “try” deliberately.

As we sit here this evening, clearly it is still too early to be definitive about the future.

As a former journalist who has covered the tortuous processes of EU negotiations in the past, my prediction is that we will have to wait some months yet before we see something clearer emerge.

Meanwhile, in Scotland, it’s also fair to say that we are yet to reach agreement on how the powers that are returned to the UK after Brexit are distributed to the nations and regions of the country.

Though I hope that is something we can be clearer about sooner rather than later.

Yes, despite this clouded picture, I still see no reason for us not to set out a broad strategy for approaching the aftermath of Brexit.

Indeed, I think it’s vital that we endeavor to do so.

So tonight let me focus on two broad areas of particular importance.

Firstly, I’d like to talk about some of the new policy choices we will likely have as a result of Brexit – and how I believe we should progress once they are here.

And secondly, I’d like to talk about what I believe is the biggest challenge of all facing us here in Scotland after Brexit – and that’s how we deliver economic growth as a country outside the EU.

According to the Scottish Fiscal Commission we are set to endure a less than 1% growth rate per year until 2021. Or, put another way, Scotland is currently staring down the barrel of the longest period of low growth for more than six decades.

This has huge consequences for our finances, for every public service we use, and for the quality of our lives – and I believe it is vital we start to debate now on how we prove the economists wrong, and show that Scotland can have a prosperous future.

…..

So – firstly – on the post Brexit choices we face.

And to a question we don’t hear an awful lot being asked at the moment.

What should the UK do differently once we leave the European Union next year?

As you will all be familiar with, the Prime Minister has set out our own negotiating position on the kind of Brexit she wants to deliver.

Outside the Single market and the customs union.

But, with all current EU rules and regulations being transferred into UK law, we will start off where we are right now: aligned with the EU 27.

Thereby paving the way for what I hope will be a deep and lasting trade agreement with the EU in both goods and services.

Naturally, almost all of the debate focusses on the rights and wrongs of this arrangement, and how and whether it will be delivered.

And I’m more than happy to take questions on this tonight.

But so far, remarkably little time has been spent on what we actually do after Brexit happens with the new menu of policy options open to us.

Brexit is happening.

So from whatever side of the argument you are on it’s clear we need to start talking about what we want to do with the new options open to us.

Take one of the biggest issues of all – immigration.

Freedom of movement from the European Union will end following the Brexit vote.

But it doesn’t follow that, as some might have it, immigration is going to end.

What Brexit means is that simply that the UK will design its own immigration rules for people coming into the country from the European Union.

How we decide to exercise those competences is a debate we now need to have.

I have made the argument before – and I do so again – that, especially at a time of near full employment, we must not just be open to people coming to this country, but we must attract them, too.

I agree with the Home Secretary that the UK needs to remain a hub for international talent and that we must be a bright prospect for the brightest and best from around the world.

The point is: this will be a choice for the Government of the day. Brexit sets the platform – it will be for government of the day to then decide what to do on the back of that

And this fundamental point holds true for numerous other issues too – including key areas for us here in Scotland.

What has struck me over the last few months is how little time and space has been devoted to debating the choices open to us.

I believe it absolutely vital that we start to do so.

Let me just mention three specific issues particularly relevant to us here in Scotland.

Firstly, agriculture.

When we leave the European Union, we will leave the Common Agricultural Policy.
After Brexit, we will therefore have to design a new system of support for farmers, something of massive importance to the economy here in Scotland.

Yet there is has been barely any debate here in Scotland about what this should looks like.

In the Scottish Conservatives, we are thinking our own way through this right now.

One thing even Remainers like me can agree on is that a Common Agricultural Policy which has to weigh Greek olive farmers against Welsh sheep farmers  is always going to struggle to be tailored to an individual country’s needs.

I do not seek to diminish the complications that arise from setting up a replacement but we believe there is an opportunity here….

….to design and implement a new system of support for farmers which works better.

We need a system that protects our farmers access to the UK internal market – we don’t need different regulations on fertilizer or animal health, to take a couple of examples.

We can take this chance to simplify administration in Scotland – so we can be spared a repeat of the IT fiasco we’ve seen over recent years.

And we need a system that takes into account our specific needs. The vast majority of land in Scotland is classed as less favoured area. In contrast, for example, to England where it is only 15%.

So we will be pushing for a system in Scotland that really targets support for low income farmers in some of our most remote communities.

…support which, in many cases, helps to ensure that rural communities in Scotland can continue to thrive and can retain young people living there.

At the same time, we want to ensure that a new support system boosts Scotland’s already enviable reputation for high quality food production and our growing food and drink export market…

And absolutely reinforces our reputation for environmental sustainability.

That leads me onto the second area which we need to think about: the wider question of the environment.

Again, a huge number of powers on environmental standards and regulation currently exercised at EU level will come back to the UK.

How do we want to change?

Now – I know there have been fears that Brexit will mean our environmental standards will drop…

…that, in a rush to sign trade deals with every Tom, Dick and Donald, we’ll all be eating chlorinated chicken, turning rivers into sewers, and opting for a low regulation, low standards economy.

But, again, I reject that as an inevitability of Brexit – How we choose to regulate our environment is a matter of choice.

And my choice is similar to those currently being put forward by the Secretary of State, Michael Gove….

… to show that, after Brexit, we should seek to improve Scotland and Britain’s environmental record, not squander it.

In short, we should think of the current EU regulations on the environment as the floor, not the ceiling for our own new system.

And, in Scotland, I’d like to see us be really ambitious.

To give one example –  one idea the Scottish Conservatives are considering is to improve on the current system of environmental rights by setting up of a new environmental court, here in Scotland, to hear cases for people who feel their rights have been infringed.

There is no reason why this couldn’t be done now.

But Brexit does provide a moment when we can make these changes – to ensure that power is held closer to people in Scotland and the UK.

Right now, environmental justice in Scotland is utterly inefficient – with some cases heard in courts, some by ministers and others in the Court of Session.

Creating a new Environmental Court would allow the judiciary to develop an expertise in environmental law and science, helping to ensure people can get redress where it’s right to do so.

They may choose to act over the state of our marine environment. And that brings me neatly onto a third area: fisheries.

Again, despite supporting Remain, I’ve always been clear that Brexit will allow us to design a better fisheries policy for Scotland.

Our choice should not be to erect a false border around our seas barring foreign vessels from entering our waters.

It should be to design a world class management system that delivers the maximum possible sustainable yield for UK fishermen while also protecting the marine environment and encouraging species growth.

And another thing.

This management system will need to be overseen from the UK, not from Brussels, as at present.

So another idea that the Scottish Conservatives are proposing is that the UK Government bases more of its civil service infrastructure governing fisheries here in Scotland.

I’ve very briefly picked out three specific issues – agriculture, fisheries and the environment – but I could have picked out many more.

The point in raising them is to highlight how many choices we have coming down the tracks.

And that we need to start, quickly, with debating HOW we are going to get on with delivering on them.

And if there’s one plea I would make this evening – it’s to encourage both the UK and Scottish Governments to step up their dialogue on how we make things work.

One that puts practical politics before ideology, and seeks to try and make this thing work as best it can.

For example, back on the issue of the environment, I mentioned that we could have a new environmental court here in Scotland to hear cases that apply here.

Equally, it’s clear to me there are plenty of environmental powers held by Brussels should come straight back to Scotland – for example over forestry.

But at the same time, it will be in our interests to ensure that we maintain the integrity of our UK wide internal market.

It’s not in our interests to have different regulations on animal health, for example – because it would only make it harder for Scottish meat to be sold in rUK shops. Similarly with food labelling – a Dumfriesshire chicken farmer wants to be able to sell breast-meat in the Carlisle Tesco as well as the Kirkcudbright one, without two different regimes.

Far better to see cooperation across the UK, so that the EU-wide standards we currently abide by are built on across Britain.

The natural world doesn’t recognise borders. Scottish fish do not turn back outside Berwick.

So let’s work together on this,

As Shaun Spiers, the chair of Green Alliance says of life after Brexit: “Scotland is and will continue to be an environmental leader.”

“But our environment – the world in which we live – is more important than any political differences between the Scottish and UK Governments.”

“I therefore urge both parties to work closely together to devise the best possible system of environmental protection as we leave the EU.”

So – broadly – I find myself in agreement with the former Labour Scotland Office Minister Brian Wilson.

Writing in the Scotsman last week, Brian declared: “There are real risks to Brexit which is why, on balance, I voted Remain. But sensible people can also see opportunities to do things better which are actually quite exciting if that is how events develop.”

I am afraid too many Remainers – and I include the SNP in this – too often project their own political motives onto Brexit.

For them, it can’t be – as David Cameron put it last week – that Brexit is a mere ‘mistake’.

There is a political imperative that it must be a calamity.

Now, I do not seek to downplay the risks involved in Brexit at all.

But while acknowledging the dangers inherent in such a huge change, I believe it’s important that policy leaders examine the horizon for areas where there may be opportunities too.

Once we are out of the EU, for example, it’s possible that more public procurement could be done locally – supporting local suppliers here in Scotland.

As a member of the UK internal market, it might be that Scottish firms will be able to benefit more from UK wide supply chains where, let’s remember, more than 60% of our trade is done.

This is why, ladies and gentlemen, the Scottish Conservatives are keen to ensure agreement between the UK and Scottish Governments on the Withdrawal Bill currently heading for the House of Lords.

Getting shared frameworks in place so we can start dealing with the very real practical issues that will come after Brexit and which require our urgent attention.

And – in dealing with these practical concerns – we can get on with life.

Scotland has been on pause for far too long. Almost my entire career in Parliament has been taken up either with political campaigns or questions of constitutional process.

We need to get on.

And we need to start focussing on the biggest challenge we face of all.

Not Brexit – but finding a path to real and sustainable economic growth.

Nothing else comes close.

So let me devote the rest of this evening’s lecture onto this: how, after Brexit, do we get Scotland growing.

As I mentioned at the start of this lecture, those growth prospects at the moment are nothing short of dire.

In December, the Scottish Fiscal Commission predicted a growth rate of less than 1% until 2021.

To put that in some context, research has found this is literally the lowest projected growth rate in the developed world – lower than every other OECD, G20 and EU nation.

If this does indeed play out, the impact on all of us will be enormous.

To give a flavour – after the Fiscal Commission revised February’s projected growth rates down in December, it reduced our expected income tax receipts over the next 4 years by fully £2 billion.

I would suggest – to put it mildly – , Brexit or no Brexit, hard of soft, we need to act with some urgency – because increasing prosperity is the single most effective way of improving people’s lives.

And central to the question of how we do that is to do something to boost productivity –the contribution people make per hour worked to the economic engine of the country.

Now, I should make this clear: this isn’t a Scottish specific issue – low productivity is problem that afflicts the entire UK.

To illustrate – for every hour worked, Americans generate about 28% more income than Britons, and Germans 35% more.

But our low productivity rate impacts us in Scotland at least as much as it does anywhere else in the UK.

It is costing us in lower GDP growth, low wage growth, low income tax receipts and therefore less money for public services.

So we need to turn this around.

In the Scottish Conservatives, we have recently convened a new economic commission, led by the former Scotland Office Minister Lord Dunlop to look at this every issue.

Our intention is to have properly researched policies ready for the next Holyrood election so that, if we are fortunate enough to form a government, we can prioritise this issue immediately.

And while the group has only begun its thinking on this, it’s fair to say we are already focusing on some specific areas, under the Scottish Government’s control, which we think can be improved…

… so that those growth forecasts I mentioned just now are proved to be entirely wrong.

Let me run through a few this evening.

Firstly – research and innovation.

I was lucky enough to host a dinner last Friday evening for Bill Gates during his visit to Edinburgh.

He came here to invest £28 million into Edinburgh University’s Easter Bush campus to support cutting-edge research into developing GM crops – for use in the developing nations.

It’s investment which will – I hope – see research made here in Scotland impact on millions of people in some of the poorest parts of the world. To not just feed the hungry, but lift people out of absolute poverty, increase economic independence and boost growth of developing nations.

And it points to one of our great Scottish strengths: the enormous intellectual capital we have stored in our Universities and world class research units.

We have more PhDs than you can shake a stick at in Scotland. We easily out perform other key regions of the UK.

Where we sometimes fail is in igniting this intellectual fuel so that it drives the Scottish economy forward.

We have got to do better at incubating this capital, turning world-class research into the products and industries of tomorrow.

Some pretty challenging questions need to be asked of our current economic development effort.

Each year we spend over half a billion pounds on skills, enterprise support and innovation.

The enterprise agencies alone spend £700,000 – every single day.

In Scotland, the amount we spend on economic development per head is more than double that across the UK as a whole.

Yet we have the lowest rate of business growth in the UK.
Why?

It’s not as if we don’t have enough enterprise agencies and business gateways and civil servants all tasked with supporting start-ups and entrepreneurs.

But – simply put – it’s because in Scotland, we do not have the right economic strategy to stitch it all together.

We are not maximising the work going on in research departments across Scotland to the benefit of all.

That is something we intend to address with proposals over the coming year.

Secondly – if we are going to boost economic growth, we need to look again at education and skills.

Constantly, we are told by businesses that our education and skills system is not aligned with the needs of industry.

…that by putting higher education on a pedestal, we have allowed Further Education and technical education to fall by the wayside.

Why is it that fantastic organisations like CodeClan – which teaches students coding skills – is still very much the exception, not the rule in Scotland?

Equally, why is it that places like Jim McColl’s Newlands Junior College in Glasgow – where school age pupils are given skills training suited to their needs – are growing despite, not because of, the system?

I believe it is time to look again at the arrangements for post 16 education in this country. To champion technical education and rebalance the further and higher education sectors.

It’s something we intend to talk about more over the coming weeks.

Thirdly – infrastructure.

Can we really grow as a nation when, as happens right now, any attempt to plan and build new housing and infrastructure is bogged down for unnecessarily long periods in planning?

That’s why we’re calling for a new Housing and Infrastructure Agency in Edinburgh to support local authorities in pushing ahead with new development – and, as we now have at a UK level, a Housing Minister in the Scottish cabinet.

Can we really grow as a nation when, as happens right now, large parts of the country are still denied broadband?

We must see speedier action from the Scottish Government to ensure that superfast broadband is available to all firms and households in the country.

Infrastructure – both physical and digital – is going to be vital in improving our country’s productivity.

Capital spending is now rising fast in Scotland – so I very much hope the SNP Government can get on with delivery.

So – Infrastructure, education and skills, research and innovation – three vital areas where Scotland needs to do far better if we are to solve the productivity puzzle.

But let me lastly focus on a final issue, one particularly current this week – and that is the question of tax.

The SNP Government’s budget is back in the Scottish Parliament tomorrow.

And, really, the only question hanging over it is – how much exactly will Scotland be paying more?

I think I have made my view pretty clear on the matter over recent weeks.

Tax rises may mean short-term revenue.

But I remain deeply concerned about the trajectory we are taking as a nation.

Business rates are already higher for larger firms here than they are elsewhere in the UK.

The tax on buying a home has also gone up.

Now, if this budget is passed we know that the income tax rates for anyone earning over £33,000 will rise too.

What will be the impact of this?

We will, I suspect, soon see firms offering to pay a Scottish surcharge for staff paying more tax than they would elsewhere in the UK.

That presents the question as to whether those firms will prefer Edinburgh and Glasgow to Manchester or Liverpool as places in which to invest and settle.

As Liz Cameron of the Scottish Chambers of Commerce has put it: “If Scottish businesses are taxed more and Scottish-based staff are taxed more, then that would not seem to be a situation designed to attract investment and grow Scotland’s economy.”

Or, as Sir Tom Hunter has added: “The perception, if you are a talented person sitting in London, Manchester or Birmingham and Scotland wants to attract you, is that you may think Scotland is a high tax economy.”

I fear he may be right.

As the First Minister has herself acknowledged, income tax powers in Scotland are not a toy.

Decisions on tax have consequences, often unintended, which can have a huge real world impact on a nation’s economic health.

The Scottish Government needs to be watchful that we don’t, in Scotland, put off investment thanks to our tax policy which – in the end – will only reduce the total tax take….

…cutting the amount of money we have available for our vital public services.

Better  – in our view – to focus on increasing the tax take, with policies focused on growing the economy.

Because the millions the SNP say will be brought in by raising taxes – and that’s assuming no big behavioural changes –  are utterly dwarfed by the £2 billion pound downgrade in the growth forecast unveiled in the same draft budget.

To sum up, ladies and gentlemen

While it may not seem like it – especially this week – there will be life after Brexit.

There is no excuse for inaction here in Scotland.

As the Fraser of Allander Institute has noted – “with any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s relatively weaker performance can be explained by the outcome of the EU referendum.”

With Brexit comes new choices – and we must start actively preparing the ground to take advantage of those choices where we can.

More importantly, with the huge powers at the Scottish Government’s disposal, we must capitalize on Scotland’s strengths in research and innovation to deliver lasting economic growth.

We must look to ourselves – and if all we hear from Scottish Ministers here is a counsel of despair, we will miss the opportunities which are in our grasp.

We must ask how we can contribute, not recriminate.

So – let me end on a more optimistic note.

I agree that Scotland after Brexit faces huge challenges. There’s a reason I fought for Remain, after all. This evening, I have mentioned two of those challenges: the fall out from our departure from the EU and our low economic growth.

To these I could add the challenge of social isolation, the challenge of industrial automation – or, across the world, the surge in populist nationalism or the continuation of mass global migration.

Certainly, we don’t have problems to seek.

But let us remember that- defiantly – progress has an uncanny habit of winning through.

Next week – to take one example – we mark a quiet but significant anniversary.

On February 5th, the Berlin Wall will have been down longer than it was up.

For those of us who can remember a time when half of Europe was under the yoke of Communism, it’s a remarkable thought.

Once seen as a threat to our way of life, now that era of a divided Europe is the stuff of history.

So at the risk of sounding Panglossian – here’s an alternative view of the coming years ahead.

One in which intergenerational unemployment continues to fall – with fewer and fewer children growing up in workless households.

In which global poverty also continues to fall – cutting infant mortality and boosting the chances of education for girls around the world.

Where, as nations develop, they priorities clean air and water, ensuring that the environment is considered as part of economic advance.

Where policymakers, journalists and qualified authorities begin to properly challenge the lazy and mendacious online – restoring faith in the body politic.

….and where a more activist generation emerges, willing and able to use new technologies to band together with like-minded peoples across the globe in order to change the world for the better.

Walls may get built, but they do have a habit of falling.

And while challenges may come our way, history shows we find a way to overcome them.

Idealistic or not, faced with the choice of focussing myopically on the undoubted challenges that Brexit will bring, or taking a broader, more uplifting view of the advances that can be achieved over the years to come, I emphatically choose the latter.

For many of us, the circumstances we find ourselves in are not of our choosing.

But as David Hume reminds us:

“He is happy whom circumstances suit his temper; but he is more excellent who suits his temper to any circumstance.”

In the months and years ahead, as Brexit unfolds and as the challenges and opportunities of these new conditions present themselves, all of us in public life would do well to remember those words, and adjust our temper to those new circumstances. And put our shoulder to the wheel.