Ruth Davidson: A Scottish Government with the powers to act – so act

Ruth Davidson, leader of the Scottish Conservatives, at David Hume Institute, Politicians & Professionals 2017, on Brexit, the Scottish budget, tax and the outlook for growth.

Text of her speech:

Ruth Davidson, leader of the Scottish Conservative Party, at Politicians & Professionals 2017, on January 31.

The political sound-bites of early 2017 sum up where public life is right now: ‘post-truth’; ‘alternative facts’; ‘fake news’.

We are at an unsettling moment, where it appears that choosing to believe things – or at least having enough social media shares – makes them so…

It means that the mission of organisations such as the David Hume Institute – to seek out the actual evidence and the actual facts – has rarely seemed more necessary and more urgent.

So I’d like to thank you for your work, and I would urge this organisation to step up its determination to remain faithful to the facts.And for my part, I promise this evening to refrain from claiming that there are far more people in tonight’s audience than there were for Patrick Harvie last week. Bigly.
Even if there are.

So – my speech is entitled “A Government with the powers to act” It’s about a government here in Scotland, that needs to take control. Control is another of the words we’ve heard a lot about these last 12 months. Specifically, about taking it back. Frankly, I feel like it’s a word that’s dogged politics this last year. It’s certainly dogged me.

It was a slogan which, of course, helped my opposite numbers in the Leave campaign win the EU referendum last year. But, this evening, I want to reflect on how we in Scotland must now take control ourselves of this moment; and turn away from the politics of uncertainty and division that we have seen afflict us for far, far too long.

Inconvenient facts labelled as Project Fear

Before I develop that point, however, let me begin by saying a few words on where I think we stand in Scotland right now. Quite obviously, it’s right to say first of all that we are in a very different place to the rest of the United Kingdom. It was something that came home to me very clearly last year when I was campaigning in the European referendum.

Not just because Scotland voted with Northern Ireland and differently to England and Wales. More fundamentally, it was clear that Scotland and the rest of the UK were operating on two different time lines. The rest of the UK was taking part in a play that it thought was brand new.

Here in Scotland, however, we were already familiar with all the lines. The labelling of inconvenient facts as Project Fear – yes, we remembered that one. Tub-thumping calls to seize our Independence Day – yes, that too. And the whole agonizing business of watching political debate retreat into a tribal contest over identity.

It was deja vu all over again.

For people in England and Wales, I know this all felt exciting – for many, it felt exhilarating. For many of us in Scotland, I suspect it was an unwelcome re-visiting of something we’d been trying to get past. Unlike the rest of Britain, we have now had nearly ten years when constitutional issues have dominated our political debate.

Ten years where the existential questions of who we are, and what country we want to be, have pre-dominated. And my hunch is simply that many people in Scotland had had enough. That partly explains why the campaign itself was far more muted up here than elsewhere. Why it felt like someone else’s war.

We’d HAD our referendum.

More fundamentally, it also explains the reaction in Scotland to the Brexit result in June of last year – a reaction that wasn’t expected. The SNP anticipated a massive surge of support for independence if, as happened, Scotland voted to remain, while the UK as a whole opted to leave.

Nicola Sturgeon predicted in April of last year that such would be the backlash, support for another independence referendum would rocket. Certainly, for a few weeks in the aftermath of the Brexit vote, it looked like she might be right. But now– seven months on – even the First Minister would have to admit that has not happened – at least I hope she would do so.

Try to make Brexit work

Now, I don’t think for a minute that this is because people in Scotland, on June 24th, suddenly decided they were all huge fans of Brexit after all: I doubt that very much. I think it is largely because – after ten years of constitutional division – people look at the prospect of yet more uncertainty over our future and think: no thanks.c

I repeat – I am categorically not saying that Scotland has converted to becoming cheerleaders for the prospect of our leaving the European Union. I simply make the point that most people do not want our departure from the European Union, and all the division that brings, to trigger another referendum on our own Union of nations, with all the division that brings too.

They include Unionists who believe that the question on our future was answered for good in 2014, and should not be returned to. But they also include many independence supporters who simply believe now is not the right time to be opening up another wound.

The message I am getting from people in Scotland is pretty clear. Try to make Brexit work. And, please, do not add to the uncertainty that we are already facing. This desire to put this division behind us is something I understand.

As you all know, I fought hard last year to keep the UK in the European Union. The result was – and remains – a tough one for those of us who believed it was in our national interest – and in Europe’s too – to remain within a reformed EU.

If the Brexit vote was tomorrow instead of last June – I would still vote Remain. But I do believe that, the decision having been taken, we all have to put in a positive shift to make this work – for all of us.

Either we respect the votes in referenda or we do not. Either we respect democracy or we do not. And either we seek to deny reality or seek to prepare for that the new reality as best we can – by ensuring that Scotland and the UK remain engaged with the heart of Europe, even if we are no longer to be seated at the EU table in Brussels.

And most of all, I believe we should avoid further instability and uncertainty. People do not want Brexit to be used to start yet another fratricidal conflict.

I do not want Scotland to join post-Trump America and pre-election France as this year’s focal point for global instability. I want to contribute to the best deal for Britain, outside the EU. I want to ensure our negotiation proceeds well and is done speedily

And, most of all, I want Scotland to move away from the rabbit hole of constitutional division we have dwelt in these last ten years, and ensure that we are focussed on achieving stability.

Last week, Liz Cameron at the Scottish Chambers of Commerce summed it up rather nicely. “If,” she said, “we allow ourselves to be drawn into tunnel vision on Europe, we run the risk of missing the chance to transform Scotland’s attractiveness as a place to do business.” That is absolutely correct.

We are in danger of falling prey to the idea that Brexit is such an important issue, all else might as well be forgotten about. It is an all-too familiar story in Scotland where constitutional conflict has often stopped us thinking about more immediate, pressing concerns.

Change is an opportunity too

I say: we cannot allow the grass to grow under our feetBecause such an attitude will only mean that, when Brexit comes, Scotland will be unprepared for the challenges it will inevitably bring. What I believe we need– in London and in Edinburgh – is a Government that decides to take control of the situation we find ourselves in.

Any entrepreneur will tell you that a moment of change is an opportunity too. And what we need right now is a government that has the spirit of the entrepreneur.. A government that recognises the landscape in which it operates – is mindful of the possible pitfalls and seeks out the opportunities that exist.

This is the better path for the SNP to choose. And I am only sorry they do not appear ready to take it.

Ever since the result of the referendum on June 24th, the SNP’s stance has been set by whatever it thinks will increase support for independence and for another independence referendum. The public has, as I say, proven stubbornly resistant to this plea. And I am only sorry that, in recent weeks, the party appears to have decided in response to double-down on their attempt to push for that second referendum.

Now it is not just about Brexit. Now, Mike Russell takes to the airwaves to declare that we need a referendum to escape what he describes as an “insular” “inward-looking” Britain. Indeed, if reports this week are to be believed, for the SNP hierarchy it is no longer about staying within the EU at all.

Instead, SNP sources are now proposing that an independent Scotland should exist in a no-man’s land, half-way between the UK and the EU, but part of neither – a position concocted purely to try and win back the many thousands of SNP supporters who voted to leave the European Union. And now – with support for a referendum falling off a cliff, the SNP is no longer saying the people should have the right to decide. Now, Nicola Sturgeon says a referendum is something we all “must confront”.

In other words, having failed to persuade people of the necessity of another referendum, the SNP is now hoping to soften us up by telling us we’ll just have to accept it. It is the language of the bully pulpit. The attacks on the UK are grave distortions. It doesn’t speak of a party confident of its case. It smacks of desperation – and I urge the SNP to take a different path.

Or, to put it another way: when you’re in a hole, stop digging. We are not helpless to act in the face of Brexit. And, what’s more, there are – frankly – so many more interesting things for us to talk about.

Just imagine for a moment that Brexit had gone the other way last June. What would be the dominant political narrative in Scotland right now? It would, I suggest, be about the huge new powers that are coming to the Scottish Parliament in April and the questions they throw up for us all.

Scottish budget – this year it is different

Something that will finally emerge into the public gaze later this week when Parliament will vote for the first time on the Scottish budget. It is what I consider to the first authentic budget since devolution. Until now, the budgets have been more accurately simple spending plans. This year, it is different – and the SNP will have to weigh up both sides of the balance sheet.

Of course, most attention has focussed on the levels of income tax that the Finance Secretary has chosen to set. But arguably of far greater importance is the fact that finally the Scottish Government will have a real stake in the performance of our economy.

From now on, the Scottish budget will now depend on two factors. Around a half will come from the block grant as determined by the Barnett Formula. The other half will come from the new devolved taxes, most notably income tax.

The Fraser of Allander Institute has set out what this means: that Scotland’s economic performance – or more accurately our relative performance – will have a greater bearing on the spending plans of Holyrood than ever before.

In short, if Scotland can achieve higher growth than the rest of the UK, we will reap the rewards. This is something I know I need not explain to the audience here. But it is a fact that, I fear, is still not cutting through at Holyrood itself. Indeed, given the lack of debate, it is as if the new powers are not coming at all.

My left-wing colleagues continue to rage against the inadequacy of the cheque from Westminster, as they see it. A cynic might suggest that the Tory bogeyman is a convenient scapegoat. Answers as to how we ourselves, here in Scotland, can boost public spending, or return money to taxpayers, by boosting economic performance have so far been thin on the ground.

My goal this year is to at the very least start that new debate – so that this country finally accepts we have control, and that we have the power to make defining choices for this country’s future. And my contribution to that debate is to focus relentlessly on ways to increase Scottish growth.

This is urgent. That we are falling behind the rest of the UK is now not in dispute. Figures two weeks ago showed that the Scottish economy grew by only 0.2% in the third quarter of 2006. That reflected a longer term trend: in the year to September last year, our growth rate was only 0.7% – compared to the UK rate of 2.2%.

How do we close the gap?

In the past, this level of growth could simply have been written off as a blot on our reputation for enterprise. Now, under the new powers coming our way, it could end up actively reducing the amount of money coming our way. So, as the Fraser of Allander Institute puts it: “With new tax payers coming on-stream, it is vital that the gap with the UK is closed.”

So – how do we do that?

I would like to focus my remarks this evening on two key issues: one long-term and one short-term. The short-term measures refer directly to the tax proposals in this week’s budget. There are three key tax measures being proposed.

The rate for the fledgling Land and Buildings Transaction Tax will be set – with buyers of larger homes paying higher sums than they would south of the border. The Large Business Supplement has been doubled overnight – meaning firms with high rateable values are paying more than they would south of the border.

And the SNP will not increase the threshold for higher-rate tax payers, and will instead use fiscal drag to net ever more earners into the 40p tax bracket. This too will mean they pay higher taxes than they would elsewhere.
There is, I would suggest, a theme developing here. In short, aspire to buy a decent sized home, build a modest company, or earn a decent wage – and Scotland will penalize you accordingly.

My question is: how exactly is this going to help us close that economic growth gap with the rest of the United Kingdom? To be fair, on income tax, the gap between people in Scotland and the rest of the UK will not, initially, be that large. By 2020, however, it will have grown to £800 a year.

It is this which has prompted some firms here in Edinburgh to suggest that, in order to attract people to come and work here, they will have to pay the Scottish supplement in order to convince them to do so.

This worries me. What message does it send? Come to Scotland to work – but first pony up nearly a grand more than you would in Manchester or London or Bristol. This is where – again – I have to challenge the SNP.

Regularly in recent weeks, it has sought to declare that Scotland is offering to be an open, welcoming country, in marked difference to the rest of the UK. I simply suggest that asking workers or their employers to pay extra each year for the privilege of living here is not much of a welcome mat. Indeed, I fear it will send out the exact opposite message, and will deter people from coming here.

With the consequence that we will end up reducing the free movement of people from around the UK into Scotland, not increasing it. For all these reasons, we will have no choice but to oppose this week’s Budget unless the SNP agrees to examine its tax proposals once again.

We will do so because we believe that taxes here should not be higher than in the rest of the UK– and, where affordable, should be lower. Because we believe this is what will boost growth and add to the Scottish Government’s coffers. Our own analysis has found that simply increasing the proportion of higher and additional rate taxpayers in Scotland to the UK average would increase tax revenues by £600m a year.

Of course it’s not going to happen with a flick of a switch. But that just gives you an idea of the extra money that could be flowing into the Scottish exchequer – to be spent on public services, or returned to taxpayers – if we were to put a rocket under our economic performance.

As Andrew Wilson, the head of Nicola Sturgeon’s Growth Commission has suggested, how do we increase tax revenue in Scotland? How about doubling the number of additional rate taxpayers? This is possible. And there is no reason why we should not find consensus in doing so.

On some things we agree

Whisper it, but there are areas where we and the SNP agree. On Air Passenger Duty, for example, both of us are supporting a tax cut for the same reasons: we both believe that lower taxes here will increase traffic, adding value to the Scottish economy. Specifically, we would target measures on APD at long haul flights because we think that would create new direct routes from Scotland to North America, the Asian economies and other high-growth markets.

I am sure we and the SNP can reach an agreement here to ensure this welcome tax cut happens. What I find odd about the SNP’s position is the lack of consistency. Because what’s right for APD is also surely right for income tax and business tax too.

I know many SNP figures concur with this point. Indeed they used to make the exact same arguments as I am making here when they supported a cut in Corporation tax in Scotland.

Sometimes it seems that the SNP only wants to cut taxes that are currently in Westminster’s hands – all the better to complain when they aren’t. This isn’t good enough any more. Scottish politics is now getting real.

There will be those – and Patrick Harvie is one – who take an honest approach to this on the other side of the argument. I don’t agree with him one bit, but at least he has acknowledged the scope of the changes that are possible.

What I fear we will end up with, with the current regime, is a government that is stuck somewhere in the middle of the highway. And we know what happens there. You get run over. So unless the SNP makes substantial changes in the next couple of days and show they are prepared to consider our proposals, we will be voting against the Budget on Thursday.

There has been speculation that this might prompt another election, given the parliamentary maths. We shall see. But if it does occur, and the government is unable to get its budget through, then it will have no one to blame but itself.

We need a Government with the boldness to set a course, to take control of these new powers. That does not seem to be apparent right now. So if tax is the short-term immediate changes we would like to see, what about longer-term reform?

I’d like to raise just one issue tonight and that is the question of our education system and skills.
And let me start with a visit I made yesterday which shows how to get things right – to the Newlands Junior College in Glasgow. The brain-child of entrepreneur Jim McColl, it was set up three years ago with a specific remit to help 14 to 16 year olds in Glasgow who are on the verge of dropping out of the education system.

Instead, the College provides them with intensive, vocational and personal training to give them the skills they need to get on in life. There are, says Jim, around 20% of our young people who fit this category– who will leave full time education with nothing to their name.

After two years at his college, these young people are guaranteed an apprenticeship or a place at college. I met a number of them yesterday, and it was a complete inspiration to see how young lives are being turned around by a great idea, brilliantly implemented. The problem is that, currently, Newlands Junior College is a one-off. Jim McColl is hoping to expand across Scotland and he has plenty of support to do so.

But in Scotland, rather than roll out the red carpet to innovation like this, instead the system is set up to frustrate and block it. As Mr McColl said recently, there was, “a typically Scottish socialist response from some quarters. When you get down to actually doing anything there are some people who believe any private-sector involvement in education is wrong.”

More accurately, it is a bureaucratic response. A response that says the interests of the producer, and its institutional survival, are more important than what works. I take several lessons from Mr McColl’s experience.

In education, one size does not fit all

Firstly, we need to end the one-size-fits-all shibbolteth that has dominated our approach for so many years in Scotland, and free ourselves up to new ideas and fresh thinking. The current approach is simply not working. If we needed proof of that, it came in the PISA statistics last year which showed – once again – that Scotland is falling in the international league tables.

And it has been followed up in the evidence given to the Scottish Parliament in recent months which has exposed the byzantine level of interference and top-down inadequacy which is afflicting our education system. In short, teachers are succeeding – and most of them still do – in spite of the system they are operating in, not because of it.

So, as the Scottish Government prepares to unveil its governance review, we are calling for far more autonomy and more freedom for schools and colleges to help drive better standards. To encourage initiatives like Newlands Junior College, not stifle them.

The international evidence is there: these reforms will free teachers up to do their job. It will lead to an education system that takes responsibility for rising standards – and doesn’t seek to pass the buck.

Secondly, investment does matter. Mr McColl’s College does not come cheap – in fact, it is just as well he has a few spare million to keep it going. So we, as a country, need to commit to investment in skills.

That is why the Scottish Conservatives have called for extra investment in FE colleges to reverse the cuts overseen by the SNP – in part supported by our call for a graduate endowment. It is also why we have called for every penny of the new Apprenticeship Levy to go exactly where it is intended: to fund skills and apprenticeships.

And thirdly, we should not give up. Even at the age of 16, there is a chance to steer a young person away from the dole queue or the criminal court – and back into the workplace.

That is why we’ve also proposed a new network of Skills Academies – similar to the Junior College model – to ensure that more young people get world-beating training in everything from IT to engineering to construction. This really matters.

Most firms in Scotland expect to have more jobs available for higher-level skills over the coming years. At the same time, two thirds of those same firms are not confident about filling those high-skilled vacancies in the future. And if we really are going to be “Brexit-ready” by the time we leave the European Union, we must turn this around. It can be achieved. But we do need to take action – not sit back, declare we’re doomed, and await the worst.

To conclude, this is a time when it is easy to give into the belief that we are all running out of control. The ruptures we have experienced in the last twelve months – from Brexit to President Trump’s latest plan – have smashed aside old certainties. And the question left hanging is: well, if that’s possible, what else is coming round the corner?

For Conservatives, our response to this must be to place a greater importance than ever on protecting institutions, and on reinforcing the stability on which our prosperity and security depends.

Our belief is founded on the need for those strong institutions. They have never felt quite so necessary as now. And I believe this preference for stability and certainty over yet more flux and insecurity is also what most people of Scotland want too.

I know opinion polls should be taken with a pinch of salt these days, but this weekend’s polling revealed this fully. On the independence question, opinion in Scotland remains where it did in 2014. There is churn within the numbers, but Scotland stands pretty much where it did.

The big change is the drop in the number of people who want that issue put to the test – barely a quarter say they want another early referendum, down from over 40% in the summer of last year.

All politicians – Unionist and Nationalist – are now getting a firm instruction from the Scottish people. Yes, we have our views. Yes, we differ. But no, this is not the right time to rip things up again.

Whether it is in demanding yet another referendum on one side, or in proposing a UK wide constitutional convention on the other, I see little appetite for more of the last five years. …no appetite for adding to the uncertainty that we already face.

I believe we now must focus on the challenges that we have, not on adding to them. That means facing up to the challenge on Brexit – the biggest public policy question this country has faced in a generation. But it also means action rather than paralysis – real or artificial.

Scotland is not helpless in the face of the challenges; it has more political power to act now than it ever has. To set a course for economic growth. To deliver the world class education system the next generation deserves. To equip our young people with the skills we need in order for Scotland to prosper.

We can take responsibility for this – or we give in to the easy luxury of grievance and inaction.

For my part, I hope very much over the next vital year that we set the former course.