UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 140-viii HOUSE OF COMMONS ORAL EVIDENCE TAKEN BEFORE THE SCOTTISH AFFAIRS COMMITTEE THE REFERENDUM ON SEPARATION FOR SCOTLAND WEDNESDAY 23 OCTOBER 2013 RT HON DANNY ALEXANDER MP, RT HON ALISTAIR CARMICHAEL MP, STEPHEN FARRINGTON and CHRIS FLATT Evidence heard in Public Questions 3666 - 3731 USE OF THE TRANSCRIPT 1. This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others. 2. Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings. 3. Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant. 4. Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee. 1 Oral Evidence Taken before the Scottish Affairs Committee on Wednesday 23 October 2013 Members present: Mr Ian Davidson (Chair) Mike Crockart Pamela Nash Sir James Paice Simon Reevell Mr Alan Reid ________________ Examination of Witnesses Witnesses: Rt Hon Danny Alexander MP, Chief Secretary to the Treasury, Stephen Farrington, Deputy Director, Economics Group, HM Treasury, Rt Hon Alistair Carmichael MP, Secretary of State for Scotland, and Chris Flatt, Deputy Director, Constitution, Scotland Office, gave evidence. Q3666 Chair: Ministers, welcome to this meeting of the Scottish Affairs Committee. It is perhaps unfortunate that we are in this room with so far between us, but I am sure the gap can easily be bridged. I understand that both of you have to be away, so we will try to rattle through a number of issues. One of the members of this Committee could not stand the pace and, therefore, we want formally to note that Eleanor Laing has gone off to be Deputy Speaker, which is an indication of this Committee being a stepping stone to lesser things. Could I start by asking both of you to introduce yourselves and briefly outline the key themes and purpose of the paper? Mr Carmichael: I am grateful to you for the invitation to be with you today. It is a happy coincidence of diaries that it has come as early in my tenure as it has. Indeed, I regard myself as returning to the Scottish Affairs Committee, having served with you on and off for most of the first two Parliaments: 2001 to ’05 and 2005 and ’10. I know that you took evidence regularly from my predecessor, and this is an appropriate point to pay tribute to Michael Moore for the tremendous contribution that he made in his time in the job. I very much look forward to continuing to have as warm and productive a relationship with the Committee as I know he had. I am very pleased to be here to talk about the “Scotland analysis” programme. As Secretary of State, I am going to continue to review closely and assess these papers and make sure that they provide people in Scotland with factual information based on evidence and analysis. I see it as an important part of my role over the next 11 months that I am able to promote this information right across Scotland, and I want to make sure that our detailed analysis is accessible to all. The programme we have embarked on is very open. All the workings-out are presented so that people can check and challenge them if they choose to. We are building up a substantial body of information in which the people of Scotland can put some trust. 2 Let me be quite clear. This programme is setting out the positive case for the continuation of the United Kingdom, despite what others may claim to the contrary. We have had five papers to date which show the benefits of economic integration across the United Kingdom. The UK’s true domestic market supports the free movement of goods, services, capital and people. Businesses benefit from this through access to a large domestic market; consumers benefit from a great number and variety of goods and services at lower prices. The paper we are discussing today contains full analysis, available to anyone to scrutinise, of the advantages for Scotland and the rest of the United Kingdom of our fully integrated economy. If I may say so, I think this contrasts with the approach taken by the Scottish Government. While they have been putting out their own papers, time and again we see that their story changes. They are prepared to say one thing in public but something very different in private. We have heard them talk of a new oil boom in public but subsequently found out all about John Swinney’s secret paper that set out only for his Cabinet colleagues, not for the rest of the people of Scotland, the realities of the fiscal challenge that an independent Scotland would face in future years. Indeed, it required use of the Freedom of Information Act to reveal advice from Scottish Government officials to their Ministers— advice that agrees with our own analysis that to run an oil fund would require substantial cuts to public spending in Scotland or rises in taxation. It surprises me that they put out their paper without explaining exactly what this cost would be to the people of Scotland. The United Kingdom Government will shortly be setting out detailed analysis of the costs of pensions in Scotland in the future. It seems to me that the Scottish Government will say anything if they think it assists in selling their cause of independence to the people of Scotland. I remind you that is why it is all the more important that we in the United Kingdom Government continue to set out facts and information in which people can place their trust. Q3667 Chair: Thank you for that statement. You have just reminded me of the existence of secret papers from the Scottish Government. I am just checking with the Clerk whether or not we have had copies of those. If we have, it would be appropriate to put them on the Committee’s website to make sure that they are publicly available. If we have not had them, we will ask the Scottish Government or yourselves for a copy thereof. Thanks very much for drawing that to our attention. Could you clarify first of all—[Interruption.] Sorry, I ought to find out who the other person with you is. Danny Alexander: My name is Danny Alexander, Chief Secretary to the Treasury and former Secretary of State for Scotland. Alistair has now been Secretary of State for almost as long as I was, so it is great to be here with him today. I join Alistair in paying tribute to the work that Michael Moore did as Secretary of State for Scotland; he did so much to prepare us for the historic year ahead of us with the referendum. The paper is a very significant one because the central argument it makes is an extremely positive one. It is about the strength of Scotland within the United Kingdom, and demonstrates in black and white that Scotland is a highly successful small country because it is part of the United Kingdom. It shows that Scotland’s economic output per head is 98% of the UK average; we are the third richest part of the UK after London and the south-east of England, but this strength is in part because of the strengths we get from being part of the United Kingdom. It analyses Scotland’s economic performance against other comparator countries in Europe. The Scottish Government set out its own set of seven comparator countries. The paper shows that, for example, as part of the UK, Scotland has a higher level of economic output per head than Denmark, Finland and Portugal; an employment rate of 71.1%, which is higher than Finland, Ireland, Portugal and Luxembourg, on 2012 figures; and the third highest growth rate since 1990, behind only Ireland and Luxembourg; and that the 3 recession following the financial crisis was less severe in Scotland than in all the Scottish Government’s comparator countries. The paper analyses the economic strengths of that integration with the UK—of being part of a completely integrated domestic market. It points out that we benefit from risks shared across the UK; resources being transferred to where they are most needed; and no borders to inhibit trade or the movement of capital or labour. Looking back over the last 50 years, it shows that output per head in Scotland has been slightly stronger, at 2% per year over that 50-year period, than in the UK as a whole, at 1.9%. It also looks beneath that at the performance of cities, which may be of interest to colleagues on the Committee, particularly you, Mr Chairman, because one of the arguments the nationalists make is that the UK economic model is all based on London. It shows, for example, that Edinburgh is a highly successful city with 95% of the economic output of London; and that Glasgow has achieved a higher growth rate and economic output per head than London since 1995. Overall, the argument in the paper is that Scotland is a highly successful small country within the United Kingdom and that independence would shatter one of the foundations of that success.