First Minister Alex Salmond
Donald Dewar Memorial Lecture
Edinburgh International Book Festival 2008
Tuesday, August 19, 2008
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Ladies and gentlemen, it is an honour for me to deliver this year's Donald Dewar Memorial Lecture - just as it is an honour to follow in his footsteps as Scotland's fourth First Minister.
First let me thank the Edinburgh International Book Festival for inviting me here this evening.
This is a special year for the Book Festival, falling as it does on the 500th anniversary of the first book printed in Scotland.
The National Library has a fine exhibition of 500 years of the printed word in Scotland - to my knowledge, the first collection bringing together, among others, Napier's logarithms, the Encyclopaedia Britannica and the Beezer annual!
We can look with pride at the success of the Edinburgh Book Festival - the largest festival of its kind in the world and now celebrating its 25th year.
And we can take heart in the success of so many Scottish writers who are enjoying recognition worldwide.
Next week we will have the pleasure to welcome a new literary star to Scotland - albeit a well kent face - when Sir Sean Connery launches his autobiography.
Of course that event has been the draw of the Book Festival. Those of you here this evening obviously couldn't get tickets for the main event - however second billing to Sean just like fourth billing to Donald Dewar is no disgrace.
Edinburgh Festivals and the Year of Homecoming
Tomorrow I and Scotland's Culture Minister, Linda Fabiani, will meet with the international media corps, which has We will talk with them about the continued and growing success of the world's greatest cultural festival.
And we will use the opportunity to give even greater exposure to the Homecoming celebrations in 2009.
Because next year marks the 250th anniversary of the birth of Robert Burns.
Scotland's national bard has had plenty of publicity in the past week - albeit not entirely on message - thanks to the aforementioned extremely well paid employee of the BBC. In the spirit of homecoming I wouldn't like to kick a man when he is busy fly fishing in Scotland- particularly one who cried on television when he found out that he had Scottish ancestry! However let me merely state my absolute confidence that in two hundred years an' mair there, of course, will be international celebrations of Jerry Paxman suppers!
What is really certain is that from Burns Night to next St Andrew's Day there will be events to celebrate the heritage and the achievements of this country and its people.
And we will be reaching out to a Scots Diaspora perhaps some 40 million strong - inviting them, and the perhaps as many again "friends of Scotland", to visit and to learn more about Scotland - and to see for themselves the new ambition and strength that Scotland is showing day by day.
Donald Dewar
My government has great hopes for the Year of Homecoming - for Scotland's culture, for our economy and for our international standing.
And I can say with some confidence that the pride and the ambition of Homecoming would have struck a chord with Donald Dewar. Because Donald was above all a proud Scot.
Born in Glasgow, he was one of many excellent debaters trained at Glasgow University - a golden generation featuring the likes of Ming Campbell, the late John Smith and my own Special Adviser Professor Neil McCormick- people who were drawn to a life of substantial public service.
Donald Dewar was an outstanding parliamentarian, over more than a quarter of a century as a Westminster MP, his time in Cabinet and as First Minister of Scotland.
And for all his achievements at Westminster, one has the strong sense that Donald's proudest moments surrounded his return home - on helping to reinstate the Scots Parliament and on leading this country as First Minister.
The reason for that, as Donald himself argued passionately, was that the restoration of the Scots Parliament - and the granting of greater autonomy to Scotland - could only strengthen this country and its people. That Scotland's potential could only grow.
So it is proving to be.
And today in Scotland we see a country not intimidated by its present constitutional position.
We see a restless nation, with new energy and confidence. A people and a Parliament with a new ambition.
Looking forward to the possibilities of further constitutional change.
And ready to take on responsibility for the future of Scotland.
Donald and I were never close friends - the nature of the competition between Labour and the SNP for the same political turf would have rendered that impossible. However we did have one brief period of close co-operation in the run up to the Devolution referendum of 1997.
I like to think that beyond Party interest - no small or unreasonable consideration for Party leaders - we were both convinced that the joint campaign in the referendum was in the national interest. It was simply the right thing to do.
Indeed Donald once said to his real friend Lord Elder that the process of devolution was like "holding onto the back of a tiger" but that it was "the right thing to do".
Donald delivered many fine Parliamentary speeches but the finest beyond any question was at the first official opening of the Scots Parliament on the Mound. Just listen to this:
"This is about more than our politics and our laws. This is about who we are, how we carry ourselves. In the quiet moments today, we might hear come echoes from the past.
The shout of the welder in the din of the great Clyde shipyards:
The speak of the Mearns, with the soul in the land;
The discourse of the enlightenment, when Edinburgh and Glasgow were a light held to the intellectual life of Europe;
The wild cry of the Great Pipes;
And back to the distant cries of the battles of Bruce and Wallace.
The past is part of us. But today there is a new voice in the land, the voice of a democratic Parliament. A voice to shape Scotland, a voice for the future."
There is nothing of Party or faction in that - rather a call to history in order to face the future - the sense that Scotland as a nation has the maturity and confidence to calmly weigh the arguments and make our own choices.
We often think of these choices which democracy has opened for us as being purely constitutional - and they are - but they already touch every area of our lives - education, health, social services, culture. My argument is that as people consider these choices on these practical issues then the case for having maximum control becomes obvious, axiomatic - the linkage between the constitution and the bread and butter issues.
However tonight let us take the economy - a subject which many would argue is still at the mercy of international events or a policy mix from the Treasury.
Even here we now have the ability if we so choose to impact on our circumstances - not completely of course but substantially in a way which would not have been possible without a Parliament and a Government.
In the past the best Secretaries of State had economic ideas. Tom Johnston wanted to harness the natural resources of the country to power the Highland into the 20th century. Willie Ross thumped the table and demanded regional policy concessions from Harold Wilson. George Younger sought to shield the Scottish economy from the policy excesses of his own boss.
But none were in a position to respond to, never mind to shape, big economic challenges.
That is why, in this difficult economic environment -certainly the most challenging outlook a devolved Scottish government has had to face - I want to use this part of the lecture to discuss the prospects for the Scottish economy.
To discuss the challenges that this country faces - in common with advanced economies around the world.
And to set out a programme of new measures that the Scottish Government will take to respond to and help overcome these challenges.
Commitment to sustainable economic growth
When this government was elected in May 2007, we committed to focus all our efforts toward a single, overarching purpose of increasing sustainable growth in Scotland.
That remains the central purpose of all our work in government. And in these tougher economic times, we will not falter in our resolve.
So the Scottish Government will do its utmost to support and sustain economic growth - and to work with the UK Government to relieve the pressure on households and businesses across the country.
And more than that - I want to restate a basic contention, a basic premise, of this government.
That there is every reason to be confident in the future of the Scottish economy - our workforce and businesses - and this country's ability to define and seize new economic opportunities.
Immediate economic challenges
All of us here this evening, whether from Scotland or much further afield, now hear regularly of a global slowdown, increasingly of potential recession. I was in America last year when the R word was used for the first time. Now we have heard it over here from the Governor of the Bank of England.
Growth in the advanced economies is certainly faltering.
In the euro area, output in the latest quarter fell - albeit slightly - for the first time since the inception of the single currency.
Meanwhile growth in the United States remains marginally positive but inflation is rising sharply - up to 5.6% last month. Having said that the recent appreciation of the dollar provides an indicator that the Fed's aggressive interest rate cuts have underpinned confidence in the economy.
Meanwhile the Governor of the Bank of England has warned that growth in the UK could be more or less flat over the coming year - the R word has now been mentioned.
The causes of this slowdown are by now familiar.
The impact of a global credit crunch - affecting financial markets from the most complex derivatives to the simplest loans and savings accounts.
And the effect of higher prices for key commodities pushing up the cost of household basics - food and fuel.
Across the UK over the past year, according to the Office of National Statistics, petrol prices have risen by almost a quarter while the cost of food has increased by 10%.
And of course, inevitably, this has fed through to higher inflation - currently running at 4.4% in the UK. And spurred on, not by least rising energy bills for households, inflation is forecast to rise further in the coming months - perhaps above 5%.
Just last week, however, there was a glint of light at the end of a pretty long tunnel. The Bank of England forecast that with base rates remaining at today's level of 5% - low by historical standards - inflation is expected to return to its target level of 2% within two years.
Thus the challenge facing us - and the challenge on which my government is firmly focused - is maintaining growth and business confidence in the Scottish economy as inflation comes back under control.
And ensuring that this year, next year and beyond, Scotland's economy continues its impressive resilience - and is well placed for strong, sustainable growth over the long term.
Resilience of the Scottish economy
Thus far, the evidence of resilience in Scotland's economy is encouraging.
Economic growth has slowed but remains positive - and at least keeping up with the UK.
Scotland's labour market continues to outperform the UK - with higher employment, higher workforce participation rates, and significantly lower unemployment.
Scottish house prices appear fairly stable in comparison to other areas - with prices in Scotland increasing by 2.9 per cent since the start of this year, compared to a fall of 2.8 per cent across the UK.
Meanwhile, high street spending is continuing to grow - with June's retail sales figures showing annual growth in Scotland of 7.8 per cent, against 2.1 per cent across the UK.
And the most recent trade figures showed Scotland's manufactured exports doing well - up by 2.3 per cent in the first quarter of this year alone. Then there is the rapid growth in our renewable energy sector, with £2 billion of new investment in the last month. And other similar developments, notably Scotland's population reaching its highest level since 1983.
Adjustment to the global slowdown
In short, the economic outlook for Scotland is still positive.
But clearly, we are not fully insulated from its effects of the global slowdown. We are resistant but not immune.
We don't have to look far to see impacts in the real economy of the credit crunch - just look at construction or the financial sector. But some of the bitter pills being swallowed now will help medium term recovery.
The recent recapitalisation of Scotland's big financial institutions is one such example. And this will help to restore confidence in their asset values.
Separately, despite the recent fall in oil prices, higher energy prices are here for the long term.
And that in turn will support the transition to a low carbon economy in Scotland, powered by clean green energy.
Need for action by the UK Government
However, economic adjustment can be extremely painful.
But, with active and judicious intervention, the effects can be limited or mitigated.
This is why John Swinney is taking action - and urging the UK Government to work with us - to dampen the most severe shocks and help maintain confidence.
So we have called for the UK Government to bring forward measures to boost the economy.
That means first, action to mitigate the impact of energy cost rises on household budgets.
And one idea gaining credibility at Westminster - supported for example by the all party enterprise committee - is a windfall tax on energy suppliers - with the proceeds used to help those at risk of fuel poverty. The rationale is clear. There were windfall gains from the carbon trading schemes. It is reasonable to expect the people to benefit.
It means second, putting the Chancellor's soaring oil tax revenues to immediate positive use by introducing a fuel duty regulator or similar sheltering measure.
It means third, allowing the Scottish Government access to last year's budget under-spend of £42 million to help manage the impact of rising energy costs across the public sector.
Fourth, it should mean granting Scotland a share of the additional North Sea revenues to support the creation of an oil fund - a long-term investment in the prosperity and security of this country.
And fifth, that requires the UK Government to take action to support the housing market and to seriously address the lack of liquidity in the financial system. John Swinney's recent letter to Chancellor set out our views on a range of actions which should be given immediate consideration.
What has been the response from the UK Government? So far, not much. But we will continue to put the case and in the wake of Glasgow East with other political challenges to come we may see economic necessity and political imperative become one and the same!
Taking the right action now on the economy will benefit businesses and households throughout the whole of the United Kingdom.
And if they do not act?
Twelve months ago, during the onset of the credit crunch, we had an object reminder of the huge costs of prevarication while economic confidence hangs in the balance.
The failure to provide adequate liquidity to the financial system exacerbated the UK banking crisis, causing major disruption in the real economy.
So at this critical juncture the UK Government must act to support the most vulnerable sectors of the economy.
If that means abandoning the Treasury's self-imposed 40% ceiling on public debt, then so be it. In times like these a Chancellor faces the choice between borrowing to stave off recession or borrowing to finance a recession. The first is better!
The UK's fiscal 'golden rules' had long become tarnished and buckled - and are due for an overhaul.
Because, despite so many years of sustained growth in output and tax receipts, they failed to safeguard any flexibility in the public finances to stimulate the economy in tougher times.
Policy response by the Scottish Government
As we know - and as I am particularly aware - Whitehall controls key levers of economic policy, which are crucial to Scotland's prosperity. That is a current reality. It should not be accepted as a future constraint.
The Scottish Government has considerably less discretion, particularly over tax policy.
But the attitude of my government is not passive or pessimistic. It is our aim and our duty to do all within our power to strengthen the Scottish economy. To use the authority that the achievement of self-government has brought to progress the economy. And so we will do.
In November last year, when we set out the Scottish Government's three-year spending plans, we put forward substantial measures to help households, including working with local government to freeze the Council Tax.
And to help firms, through the introduction of the Small Business Bonus Scheme, cutting or abolishing the rates on 150,000 business premises across Scotland.
These measures, which took effect in April this year, could scarcely have been timelier. They are part - just a part - of the reason why retail sales are higher in Scotland and why employment is still growing.
Programme to support growth and business confidence
But my government is determined to do more - to use our full range of economic levers for the benefit of Scotland. We cannot, on a fixed budget, change the scale of Government spending in Scotland - but we can change its timing. And in life, politics and economics, timing counts for a good deal.
And that is why, this summer, the Scottish Government urgently reviewed what measures we could take quickly to address the current difficulties.
The result of this review is a broad programme of measures to help Scotland meet the immediate economic challenges, to promote growth and to support business confidence. And of course we will continue to examine, particularly with our partners in local government, what more we can do.
The programme has four main aspects.
First, focusing our capital spending to support growth.
Second, adjusting the planning and regulatory environment to help businesses and individuals.
Third, taking action to boost confidence epitomised by next year's Homecoming which promises to turn tourist recession into a visitor boom.
And fourth, alleviating the effects of rising energy prices and promoting energy efficiency.
Focusing capital spending to support growth
One of our chief priorities is improving housing in Scotland - a central part of our ambitions to increase Scotland's rate of sustainable economic growth.
Six weeks ago, the Deputy First Minister, Nicola Sturgeon, announced major reforms to deliver lasting improvements throughout our housing system - and to help achieve our long-term ambitions to drive up the rate of housing supply.
Now the Government is going further.
Earlier today, we published a document setting out a series of new measures in support of affordable homes, first time buyers and home owners under pressure from the credit crunch.
As a critical part of that, the Scottish Government is bringing forward up to £100 million from our overall £1.5 billion Affordable Housing Investment Programme. Some £60 million of that we can commit to now from our own programmes. In line with the Concordat, the other £40 million will be subject to discussion with local government.
The aim is for the whole £100 million to be spent this year and next, rather than in 2010-11 as originally planned.
That will help first and foremost to accelerate the development of affordable housing in Scotland.
And it will also stimulate activity and help to maintain employment and skills in Scotland's construction industry.
Our focus must not just be on keeping up the supply of affordable housing in the short term, but also on creating the conditions needed for recovery when market conditions improve.
Furthermore, the Scottish Government will bring forward expenditure from our allocation of European Structural Funds.
On top of the £180 million we have already committed to spend from the 2007-13 Programmes, we will ensure that a high share of the remaining funds are front-loaded to support good-quality projects.
This will provide a direct stimulus to the Scottish economy as well as meeting the Programme's main objectives.
Adjusting the planning and regulatory environment
This government is committed to promoting enterprise and freeing Scotland's businesses to succeed.
So we will intensify our reforms to simplify the planning system, reducing the number of small planning applications and speeding up the process.
We will postpone our review of the system of developer contributions in Scotland, to avoid placing new burdens on development at this time.
The environment is one of Scotland's chief assets - a source of natural capital that can drive broad-based sustainable growth.
Scotland's huge potential in renewable energy generation - estimated at more than 60GW; ten times Scotland's peak electricity consumption - is a prime example.
This government is putting ever more emphasis on setting and applying rules in ways which will help business to promote faster sustainable growth.
As part of our wider simplification of the public sector, our regulators are coming together to reduce the numbers of visits and inspections.
And, together with stakeholders in our fishing, farming and other industries, we are working to cut red tape wherever we can.
Elsewhere, our own public sector procurement can be an important tool to help the economy, so we will work with businesses to boost awareness of, and improve access to, these opportunities.
And we will boost the legal services sector by opening the market and promoting new international opportunities for Scotland's world class legal services.
Action to support confidence
These reforms show this government's commitment to sustaining growth and employment in Scotland.
And across the economy we will work to support confidence - particularly in our sectors of competitive advantage.
In tourism, we are determined to use the Homecoming 2009 celebrations to deliver a substantial and immediate boost to the economy
And tomorrow I will announce new steps to help Scotland reap the full benefit.
In financial services we will bring together key players - including the major mortgage lenders - to examine the scope for easing the supply of credit to households and businesses.
And in fisheries, a vital industry that has been hard hit by rising fuel costs, the Scottish Government earlier this month announced new and targeted support - a £29 million package over three years to support adjustment and promote sustainability.
Alleviating the effects of rising energy prices
The final strand of this programme is important for businesses and households across Scotland - particularly those suffering from rising energy costs.
We will make it easier for businesses to increase their energy efficiency through our existing range of schemes.
We will encourage greater take-up of available benefits and focus the Scottish Government's own fuel poverty measures on helping the most vulnerable.
We will discuss with energy companies ways of increasing spend in Scotland on the Carbon Emissions Reduction Target initiative.
And lastly, will step up our promotion of 'greener' transport options to encourage less fuel dependency.
Long-term strategy for sustainable economic growth
This programme shows a government willing and able to respond to changing economic conditions.
A government that believes firmly in the potential of Scotland's people and Scottish business.
And they are firmly anchored in the government's overall economic strategy.
Like no other government before us in Scotland, we have set clear and ambitious targets on the economy.
Our commitment is to at least match the growth performance of the UK by 2011.
And by 2017, to match and even surpass the record of the small independent economies around us.
That is why - underpinning the actions to support confidence and growth in the near term - is a long-term programme to enhance the growth potential of the Scottish economy.
Focusing on human capital to ensure that all our people benefit for a world-class - and free - Scottish education.
Channelling record investment into transport infrastructure to improve the connectivity and flexibility of the Scottish economy.
Reforming the planning system to promote sustainable economic growth. And freeing businesses to respond to new commercial opportunities.
This is all at the heart of our economic strategy.
I believe it is the right strategy for Scotland - for the long-term interests our country.
And it is a strategy which is gaining substantial recognition and endorsement.
Conclusion
So we should remember when we consider the immediate challenges facing Scotland and the prospects for our economy, that others do not see Scotland in the chasing pack. They see us as front-runners.
That is why, this year, a major survey of international business - through the Financial Times FDi magazine - identified Scotland as Europe's place of the future.
Others believe in our potential. So too must we.
And so - lest there be doubt - does the Scottish Government.
Because there is no doubt that in its first decade since Donald Dewar reopened the Scots Parliament, this nation has grown in confidence and stature.
Today in our Parliament we see a new culture struggling to emerge. The old lobbying culture of looking to someone else to solve every problem is starting to give way.
And in its place an open, flexible and democratic chamber, based on multiple coalitions of ideas and aspirations.
In our people we see a new ambition. Taking pride in this country and its potential. And with the confidence to elect a government that puts Scottish interests first.
And globally we see Scotland's companies making strides in the industries and markets of the future. Building a platform for success in the knowledge economy.
In short, across the whole of our society Scotland is moving forward.
In government, we see these changes and we welcome them wholeheartedly. We welcome the new, confident nation. And we are proud to serve it.
So we will work tirelessly, in the months and the years ahead, to ensure that all of Scotland - all of our people - can achieve our full potential.
And see this country stand as one of the true successes of the twenty-first century.