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Creating an economy that works for all

Labour’s economic strategy is about delivering a fairer, more prosperous society for the many, not just the few.


For the many

We will measure our economic success not by the number of billionaires, but by the ability of our people to lead richer lives.

Labour understands that wealth creation is a collective endeavour – between workers, entrepreneurs, investors, and government. Each contributes and each must share fairly in the rewards.

This manifesto sets out Labour’s plan to upgrade our economy and rewrite the rules of a rigged system, so that our economy really works for the many, and not only the few. Britain is the only major developed economy where earnings have fallen even as growth has returned after the financial crisis.

Most working people in Britain today are earning less, after inflation, than they did ten years ago.

Too many of us are in low-paid and insecure work. In Scotland, 467,000 workers earn less than the living wage and 57,000 are on zero-hours contracts.

Too many of us fear our children will not enjoy the same opportunities that we have.

After years of Tory failure to modernise the economy, and SNP failure to grow Scotland’s economy, resulting in our Gross Domestic Product (GDP) falling below the UK average, Britain’s infrastructure is second rate and we are not doing enough to nurture business growth.
Labour will turn this around.

We offer the positive change Scotland needs.

We will upgrade our economy, breaking down the barriers that hold too many of us back, and tackle the gender pay gap.

Our National Transformation Fund (NTF) will see the creation of a Scottish Investment Bank with £20 billion of investment to nurture business growth and stimulate the economy and create jobs. The NTF will deliver the investment that every part of Britain needs to meet its potential, overcoming years of neglect.

Our industrial strategy will support businesses to create new, high-skilled, high-paid and secure work across the country, in the sectors of the future such as renewables.

We will stop our financial system being rigged for the few, turning the power of finance to work for the public good. And we will put small businesses at the centre of our economic strategy.

The growth created by our national investment plan, underpinned by the responsible economic management embodied in our Fiscal Credibility Rule, will create good jobs, drive up living standards and improve the public finances.

It is a plan that will deliver Labour’s vision of an economy that works for the many, not just the few – a Britain in which no one is held back

A fair taxation system

Taxation is what underpins our shared prosperity. All of us, including business, benefit from a healthy, educated and skilled population with access to basic services and secure housing.

We believe in the social obligation to contribute to a fair taxation scheme for the common good – and we will take on the social scourge of tax avoidance through our Tax Transparency and Enforcement Programme, and close down tax loopholes.

Thanks to Labour’s belief in devolution, income tax is now set by the Scottish Parliament and this year’s budget was the first time the SNP government could have used those powers progressively. It chose not to, and – with the help of the Scottish Greens – cut local government services by £170 million, bringing the total cuts since 2011 to £1.5 billion.

The newly devolved powers over income tax allow us to make different choices while continuing to benefit from the pooling and sharing of resources which come from being part of the UK.

Labour is the only party that will end austerity north and south of the border. Labour is the only party that offers the positive change Scotland needs.

Labour will ask the richest to pay their fair share. The Tories want tax cuts for the richest and the SNP won’t use the powers of the Scottish Parliament.

We will rule out rises in personal National Insurance Contributions and on VAT.  We renew our pledge not to extend VAT to food, children’s clothes, books and newspapers, and public transport fares.

Too many cuts have fallen on those with the least. We have seen child poverty rise to over four million in the UK and 260,000 in Scotland. Homelessness is rising, and queues are growing at food banks. This cannot continue.

Corporation tax in the UK is the lowest of any major developed economy.  Our settlement with businesses will ask large corporations to pay a little more while still keeping UK corporation tax among the lowest of the major developed economies.

In turn, we will meet the business need for a more skilled workforce with extra corporate tax revenues contributing to education and skills budgets.

Scottish Labour would use Scotland’s share of these additional resources to end the cuts to Scotland’s public services, and invest more money in our schools and our NHS.

We will protect small businesses by reintroducing the lower small profit rate of corporation tax. We will also exclude small businesses from costly plans to introduce quarterly reporting and take action on late payments.

Labour will give HM Revenue and Customs, which employs 8,000 people in Scotland, the resources and skills necessary to clamp down hard on those unscrupulous few individuals and companies who seek to avoid the responsibilities that the rest of us meet.

Balancing the books

Our manifesto is fully costed, with all current spending paid for out of taxation or redirected revenue streams. Our public services must rest on the foundation of sound finances. Labour will therefore set the target of eliminating the UK government’s deficit on day-to-day spending within five years.

But government must have a laser-like focus on how we earn, as well as how we spend.

At the same time as eliminating the current deficit, Labour will invest in our future, to ensure faster growth and help us to earn our way as a country again.

To maintain good fiscal health, we will have a firm rule in place to guide all our taxation and spending decisions. Our Fiscal Credibility Rule is based on the simple principle that government should not be borrowing for day-to-day spending, but that future growth depends on investment. It was designed in conjunction with world-leading economists. It also means we are committed to ensuring that the national debt is lower at the end of the next Parliament than it is today.

Compliance with the rule will be overseen by a strengthened and truly independent Office for Budget Responsibility (OBR) which we will make accountable to Parliament. We will also consult on implementing the recommendations of the Kerslake Review of the Treasury.

Infrastructure investment

Labour will make different choices. We will take advantage of near-record low interest rates to create a National Transformation Fund that will invest £250 billion over ten years in upgrading the economy. In Scotland that would mean at least £20 billion more to invest in our economy.

We will ensure that the huge potential of every part of our country is met.

The next Labour government will rebuild communities ripped apart by globalisation and neglected for years by government.

We will rebuild and transform our economy so that it works for the many, not the few. So we will put in place tight rules to ensure that investment is fairly shared around every region and nation of the UK. We will tear down the barriers that have held too many people back.

A Labour government will complete the HS2 high-speed rail line from London through Birmingham to Leeds and Manchester, and then on to Glasgow and Edinburgh, consulting with (and, where necessary, compensating) communities. We will aim to deliver rail electrification and expansion across the country.

We will transform our energy systems, investing in new, state-of-the-art, low-carbon gas and renewable electricity production. In Scotland we would deliver universal superfast broadband by 2021, with a focus on rural broadband coverage.

Labour will improve mobile internet coverage and expand provision of free public WiFi in city centres and on public transport.

We will improve 4G coverage and invest to ensure all urban areas, as well as major roads and railways, have uninterrupted 5G coverage. On day one we will instruct the National Infrastructure Commission to report on how to roll out ‘ultrafast’ – 300Mbps – across the UK within the next decade.

Scotland lags behind the rest of the UK with 4G coverage. Labour’s plans mean that those currently disadvantaged by the digital divide would see their service upgraded faster.

Upgrading our economy: Labour’s industrial strategy

Our economy is suffering from years of neglect by governments which refuse to support our industries, businesses and workers.

Britain’s manufacturing base has declined and we have relied too heavily on the financial sector, centred on London and the South East of England.

The failure to get all of Britain’s regional and local economies working can be seen in the deterioration of the country’s current account, weak productivity growth and underinvestment in infrastructure.

After a decade of mismanagement by an SNP government more interested in dividing our country than boosting our prosperity, the Scottish economy is in a fragile state. It is underperforming relative to the UK with growth revised downward, employment levels declining and economic inactivity increasing.

The latest figures show that Scotland’s GDP has slumped below the UK average. Scotland’s economy shrank in the final quarter of 2016 and barely grew over the year as a whole.

The collapse in oil prices, the possibility of a hard Brexit and a potential second independence referendum have created even more uncertainty for businesses and households across Scotland. Our economy must not be put at further risk with another destabilising independence referendum.

Scotland can only be stronger if it is given the resources and support to succeed. Only a Labour government with a credible industrial strategy can reach this untapped potential and deliver prosperity to every corner of our country, working with the devolved administrations.

Our industrial strategy will be built on objective, measurable missions designed to address the great challenges of our times. In meeting these challenges, we will move beyond the narrow approaches of the past, and mobilise the talents and resources of our whole country to deliver an economy fit for the future.

The first missions set by a Labour government will be to:

  • Ensure that 60 per cent of the UK’s energy comes from zero-carbon or renewable sources by 2030
  • Create an innovation nation with the highest proportion of high-skilled jobs in the Organisation for Economic Co-operation and Development (OECD) by 2030. We will meet the OECD target of three per cent of GDP spent on research and development by 2030

In order to create fertile ground for businesses to achieve these missions, Labour will take action across the areas we know are necessary for business and industry to grow:

  • Skills – Labour’s investment in education will see Scotland benefit by £2 billion
  • Infrastructure – Labour’s investment in infrastructure will see Scotland benefit by £20 billion through the creation of a Scottish Investment Bank
  • UK supply chains – Labour will target government support where there are gaps
  • Trade – Labour will negotiate a new deal with Europe that puts jobs and the economy first
  • Procurement – Labour will put the £15 billion worth of UK government contracts in Scotland to good use by creating high quality jobs
  • Research and development – Labour will commit extra research investment
  • Energy costs and security – Labour will cap costs and invest in new publicly owned energy provision

While our industrial strategy is one for growth across all sectors, Labour recognises that certain sectors are of strategic significance to the UK economy. For each strategic industry, the next Labour government will establish a council (modelled on the highly successful Automotive Council) to oversee its future security and growth.

In the UK, national and local government spends £200 billion a year in private-sector procurement. Labour will use this spending power to upgrade our economy, create good local jobs and reduce inequality.

We will require firms supplying national or local government to meet the high standards we should expect of all businesses: paying their taxes; recognising trade unions; respecting workers’ rights and equal opportunities; protecting the environment; providing training, and paying suppliers on time.

We will expect suppliers to reduce boardroom pay excesses by moving towards a 20:1 gap between the highest and lowest paid.

We will appoint a Digital Ambassador to liaise with technology companies to promote Britain as an attractive place for investment and provide support for start-ups to grow to become world-class digital businesses. Our Digital Ambassador will help to ensure businesses are ready to grow and prosper in the digital age.

Scotland’s hardest-to-reach rural areas are among the most digitally disadvantaged in the UK. Only 86 per cent of the Highlands and Islands area will have access to superfast broadband coverage by the end of 2017.

In Scotland, Labour would deliver universal super-fast broadband by 2021 to ensure no community is left behind regardless of remoteness or economic disadvantage.

Transforming our financial system

Labour will transform how our financial system operates. Following the successful example of Germany and the Nordic countries, we will establish a National Investment Bank that will bring in private capital finance to deliver £250 billion of lending power.

As part of that plan, Labour will establish a Scottish Investment Bank with £20 billion worth of lending power over the next decade.

These new banks, unlike giant City of London firms, will be dedicated to supporting inclusive growth in their communities. The banks will deliver the finance that our small businesses, co-operatives and innovative projects need across the whole country.

Labour will overhaul the regulation of our financial system, putting in place a firm ring-fence between investment and retail banking that will protect consumers.

We will take a new approach to the publicly-owned Royal Bank of Scotland, and launch a consultation on breaking up the bank to create new local public banks that are better matched to their customers’ needs.

Over 1,000 high street banks have closed in the last 18 months, including more than 250 in Scotland, yet the big four banks made over £11 billion profit from high street banking. Branch closures threaten our high streets, depriving communities of an essential service and damaging the local economy.

Labour will change the law so that banks can’t close a branch where there is a clear local need, putting their customers first.

Scotland has a successful finance industry, but we also need a strong, safe and socially useful banking system to meet the needs of our own regional economies and communities. We will commit to creating a more diverse banking system, backed up by legislation.

A new deal for business

The majority of businesses play by the rules: they pay their workers reasonably and on time and they operate with respect for the environment and local communities.

That is why it is vital that government ensures that businesses doing the right thing are rewarded rather than undercut or outbid by those unscrupulous few that cut corners, whether on taxes or workers’ conditions, environmental standards, or consumer safety and protection.

But our business culture doesn’t always work like this. Scandals such as the failure of BHS show how the long-term growth of a company can be sacrificed for the sake of a quick buck.

When shareholders are looking for quick short-term returns, they encourage companies to cut corners. That means they look to cut wages, instead of investing for the long term, or they spend longer inventing new tax avoidance schemes than they do inventing new products.

By reforming the rules our companies operate under, we can make sure they stay focused on delivering shared wealth.

Labour will amend company law so that directors owe a duty directly not only to shareholders, but to employees, customers, the environment and the wider public, and we will consult on bringing forward appropriate legislation within this Parliament.

Labour will amend the takeover regime to ensure that businesses identified as being ‘systemically important’ have a clear plan in place to protect workers and pensioners when a company is taken over.

Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay. Our small and medium-sized enterprises (SMEs) are the backbone of our economy, providing 1.2 million jobs in Scotland.

Technological changes, like the spread of digital manufacturing and rapid communication, mean smaller, faster businesses will be the future of our economy.

Yet this Tory government has taken small businesses for granted.

Labour is the party of small businesses. We understand the challenges they face.

In order to provide the support many small businesses need, a Labour government will:

  • Mandate the new Scottish Investment Bank, and other regional development banks, to identify where other lenders fail to meet the needs of SMEs, and prioritise lending to improve the funding gap
  • Reinstate the lower small-business corporation tax rate
  • Scrap quarterly reporting for businesses with a turnover of under £85,000

Declare war on late payments by:

  • Using government procurement to ensure that anyone bidding for a government contract pays its own suppliers within 30 days
  • Developing a version of the Australian system of binding arbitration and fines for persistent late-payers for the private and public sectors

We will also bring forward legislation to create a proper legal definition for co-operative ownership. The Scottish Investment Bank and other regional development banks will be charged with helping support our co-operative sector.

Labour will aim to double the size of the co-operative sector in the UK, putting it on a par with those in leading economies like Germany or the US.

Widening ownership of our economy

Britain is a long-established democracy. But the distribution of ownership of the country’s economy is too narrow.

More democratic ownership structures would help our economy deliver for the many and lead to a fairer distribution of wealth.

In government, Labour will give more people a stake – and a say – in our economy by doubling the size of the co-operative sector and introducing a “right to own,” making employees the buyer of first refusal when the company they work for is up for sale.

We will act to ‘insource’ our public and local council services as preferred providers. Many basic goods and services have been taken out of democratic control through privatisation. This has often led to higher prices and poorer quality, as prices are raised to pay out dividends.

For example, our private energy providers overcharged customers by £2 billion in 2015 and, in private hands, Royal Mail has increased stamp and parcel charges, and failed to meet its customer service obligations, while its owners trade shares at significant profit. The Tory government’s privatisation of Royal Mail was a historic mistake, selling off another national asset on the cheap.

Across the world, countries are taking public utilities back into public ownership.

Labour will bring key utilities back into public ownership to deliver lower prices, more accountability and a more sustainable economy.

We will:

  • Bring private rail companies back into public ownership as their franchises expire – a demand made by Scottish Labour when the ScotRail franchise ended. The SNP handed the 10-year £6 billion contract to the Dutch state-owned Abellio and passengers have faced a catalogue of problems, from late and delayed trains to stop-skipping and cancellations. Scottish Labour has called for a People’s ScotRail, for people, not for profit. We would take the Caledonian Sleeper franchise back into public ownership
  • Regain control of energy supply networks through the alteration of operator license conditions, and transition to a publicly-owned, decentralised energy system
  • Reverse the privatisation of Royal Mail at the earliest opportunity. Public ownership will benefit consumers, ensuring that their interests are put first and that there is democratic accountability for the service

Scottish Labour is committed to keeping Scottish Water in public ownership and we support municipal ownership of buses.

 

Sustainable energy

Labour’s energy policy is built on three simple principles:

  • To ensure security of energy supply and ‘keep the lights on’
  • To ensure energy costs are affordable for consumers and businesses
  • To ensure we meet our climate change targets and transition to a low carbon economy

The UK energy system is outdated, expensive and polluting. Privatisation has failed to provide an energy system that delivers for people, businesses or our environment.

Three-in-ten households are in fuel poverty, 748,000 in Scotland in 2015, yet the Competition Markets Authority found customers are overcharged an enormous £2 billion every year. Scottish Labour has won victories in the Scottish Parliament to get fuel poverty targets reset and forced progress on the Warm Homes Act to be delivered in 2017.

Labour understands that many people don’t have time to shop around, they just want reliable and affordable energy. So the next Labour Government will:

  • Introduce an immediate emergency price cap to ensure that the average dual fuel household energy bill remains below £1,000 per year, while we transition to a fairer system for bill payers
  • Take energy back into public ownership to deliver renewable energy, affordability for consumers, and democratic control

We will do this in the following stages:

  • Regaining control of energy supply networks through the alteration of the National and Regional Network Operator license conditions
  • Supporting the creation of publicly owned, locally accountable, energy companies and cooperatives to rival existing private energy suppliers, with at least one in every nation or region
  • Legislating to permit publicly owned local companies to purchase the regional grid infrastructure, and to ensure that national and regional grid infrastructure is brought into public ownership over time

Labour would improve upon Landlord Energy Efficiency regulations and re-establish the Landlord Energy Saving Allowance to encourage the uptake of efficiency measures.

Scottish Labour has proposed a Member’s Bill to ban onshore fracking in Scotland – which the SNP has refused to do. Labour at Westminster will introduce such a ban. Fracking would lock us into an energy infrastructure based on fossil fuels, long after the point in 2030 when the Committee on Climate Change says gas use in the UK must sharply decline.

Emerging technologies such as carbon capture and storage (CCS) will help to smooth the transition to cleaner fuels and to protect existing jobs as part of the future energy mix.

Labour will safeguard the offshore oil and gas industry, with a strategy focused on protecting Scotland’s vital North Sea assets, and the jobs and skills that depend on them. Decommissioning can be a thriving industry for the North East of Scotland but the government needs to act quickly to secure the investment and jobs the area needs.

We are committed to renewable energy projects, including tidal lagoons, which can help create manufacturing and energy jobs as well as contributing to climate change commitments.

The UK has the world’s oldest nuclear industry, and nuclear will continue to be part of our energy supply. We will support further nuclear projects and protect nuclear workers’ jobs and pensions. There are considerable opportunities for nuclear power and decommissioning both internationally and domestically.

Building a clean economy of the future is the most important thing we must do for our children, our grandchildren and future generations.

A Labour government will put the UK on track to meet the targets in the Paris Agreement.

The low-carbon economy is one of the UK’s fastest-growing sectors, creating jobs and providing investment across each nation and region. It employed an estimated 447,000 employees in the UK in 2015 and saw over £77 billion in turnover. In Scotland there are 58,000 jobs in the low carbon and renewables energy sector.

With backing from a Labour government, these sectors can secure crucial shares of global export markets.

Currently, the UK buys and sells tariff-free energy from Europe, an arrangement which saves families and businesses money, and helps balance the power grid. As part of the Brexit negotiations, Labour will prioritise maintaining access to the internal energy market.

Real change - for the many, not the few

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