Listening to this debate, I am struck by the contrast from when I, like many other Members, campaigned to be elected to this place, and was told that there is no such thing as a magic money tree. I now find out, in my first Budget, that in fact there is—absolutely remarkable.
The Budget was clearly funded in large part by a cancelled reduction to corporation tax, and by an unprecedented upswing in planned borrowing. I welcome the response to the coronavirus epidemic, which is measured and timely. My plea is for the UK Government to continue to work closely with the Scottish Government, and to make clear the specifics of the funding that will come through, so that those Governments continue to work together in the best way.
It is one thing to respond to a big exogenous shock such as coronavirus; it is quite another to mitigate a self-inflicted wound such as Brexit. In the report by the Office for Budget Responsibility I found figures that we would not normally expect to find on the side of a bus. Page 27 states that trade with the EU is estimated to be 15% lower after 10 years, with productivity down by 4%. Further to that, a free trade agreement would reduce Scottish GDP by 6% by 2030, and by 8.5% in the case of no deal.
The UK Government say they are prepared to leave without a deal, but as the hon. Member for Richmond Park (Sarah Olney) pointed out, the OBR’s outlook is predicated on the assumption that the UK will move in an orderly fashion to a new trading arrangement with
the EU. Page 30 of the Treasury Red Book states that the comprehensive spending review baseline scenario is that the UK will exit the implementation period without a future relationship being agreed, and no financial or fiscal provision has been made anywhere to seek to deal with that. Therefore, OBR forecasts depend on a deal that the CSR is about to discount. More significantly, those two documents make clear that the UK Government can either have their Budget and fiscal rules, or they can have their threat to walk away from negotiations, but they simply cannot have both.
I welcome the £800 million commitment to carbon capture, usage and storage, but I note that it is spread over four projects. In the second round of carbon capture and storage, which was pulled by the previous Government, the total was larger at £1 billion, but for fewer projects. We need clarity, and the Government must push on with this, because there is no route to net zero emissions that does not involve CCUS.
Similarly, for an oil and gas sector deal, we must decarbonise the extraction process. There is a proposal to connect Shetland to the main electricity grid on mainland Scotland, and if we did that, if would become possible to electrify the oil extraction processes west of Shetland and reduce emissions. That would allow for renewables to connect to the grid. There are a range of regulatory and technical stumbling blocks, but it is the sort of project that cries out for inclusion in an oil and gas sector deal, alongside promotion of the hydrogen economy, subsea, and decommissioning.
For me, the most worrying aspect of this Budget is the utterly insipid growth rate that has been forecast. After years of austerity, GDP growth has been reduced to 1.1%, which is 0.4% lower than was forecast last March. Even with an unprecedented level of borrowing, and the splurge we are about to see, the OBR is only able to estimate that GDP growth will be 0.5% higher than it would otherwise have been. That is a dismal and damning figure.
This Budget stands and falls on page 29 of the OBR report, and it is on that that I will conclude my remarks. Page 29 makes clear that fiscal loosening and its effectiveness depends entirely on the mix of projects shown. I am not sure that we have a bazooka; we have more of a blunderbuss, with a similar lack of focus and worry about where things land. If in that stimulus we end up with more proposals like the bridge to Northern Ireland, then heaven help us we will not see the impact there should be for that level of investment. That is the hallmark of the Budget: a lack of coherence and a lack of detail. With veiled threats to bypass the devolution settlement through the shared prosperity fund, there is a lack of respect, a lack of investment in social improvement, and a lack of compassion that is rapidly becoming the hallmark of this Government. That will not go unnoticed.
4.25 pm