Bill Jamieson: UK and Scotland: it’s shovels at dawn

By BILL JAMIESON
Published on 23/09/2012 00:00

TAKE a hot tip: fill your boots with Shovels plc. Shovels are all the rage. And the way things are going at Holyrood and Westminster, you won’t be able to buy one for love nor money.

A shovel shortage is my big prediction for 2013. Such will be the demand that even those shovels stored in the bowels of St Andrew’s House for ceremonial tree-planting, new home photo opportunities and ecological sod cutting for the next wind farm will be pressed into service. Shovels are not just for digging. Shovels are for national advancement. Shovels 2013 Are Us.

Last week, Scotland’s First Minister, Alex Salmond, and the president of Cosla, David O’Neill, wrote to Scotland’s councils to help them draft a “hit list” of shovel-ready construction projects that they could begin at short notice were the UK government to release funds.

Now there is of course no guarantee any such extra money will be coming. But after his meeting with Prime Minister David Cameron at Downing Street last week, clearly the First Minister suspects that something may be up – on or before Chancellor George Osborne’s autumn statement on 5 December.

There is no shortage of candidates for an infrastructure project wish-list. The problem there is the qualifying condition “shovel-ready”. This suggests projects where planning and regulatory protocols have been cleared. Without this the most admirable projects may take between a year to 18 months before the first shovel hits the ground. And that’s assuming no complications. Take, for example, the Aberdeen by-pass, announced by former first minister Jack McConnell way back in 2003. Not a single sod has yet been turned and the project is still trapped in a continuous legal loop.

Last week, cabinet secretary John Swinney announced a total of £40 million in government spending in his budget “for jobs and growth”. This emphasis on spending to promote recovery is to be applauded. However, we should remember it is only a partial restoration of the money previously cut from the capital element of the Scottish budget while current spending on welfare and other benefits such as “free” prescriptions and concessionary bus fares remains protected.

What has irked the Holyrood administration is that its claim to economic competence has been weakened by the rise of unemployment in Scotland to 8.2 per cent – above the level for the rest of the UK. It is difficult for ministers to argue that they are handling the economy better than their predecessors when such figures raise a major doubt.

This is another powerful reason for Mr Salmond to have to hand a list of “shovel-ready” works that can bring a swift decrease in unemployment and thus more resonance to his claim of economic improvement.

(For seasoned observers, this constant finger-pointing on economic indicators when something goes wrong and eager claim of responsibility when things go right fits an all-too predictable pattern. When there is an adverse statistic or economic development, the Holyrood administration can blame “the London-based parties” for doing Scotland down. When there is a development of benign consequence for Scotland, this, of course, is the indisputable result of the progressive policies of the SNP administration showing the rest of the UK the way.)

So whose economy is performing better – Scotland or the UK? Many might prudently opt for the sidelines on the view that the economic activities of the two countries are so intertwined and interdependent that it is absurd to treat them as two separate economies at all: what differences may exist are dwarfed by those swathes where activity is so intertwined that measuring separate economic performance is almost impossible. In any event, both are in recession, both suffering high youth unemployment, what’s there to discuss?

Tony Mackay, Inverness-based Scottish economy watcher, bravely tackles the question of whether the Scottish economy is really doing better in his latest monthly report. He concludes that he does not believe this to be the case, though the differences are very small. “The Scottish and UK economies are very closely linked and, for most of the time, the differences in economic performance are negligible.”

Of course, the oil and gas industry is doing well in the Aberdeen area. There is a high level of investment in Scottish wind farms. And the whisky industry is prospering with impressive exports.

But on the minus side there are problems over which we are slow to admit and slower still to address. One of these is the significantly larger share of the economy accounted for by the public sector. Because of its low level of productivity over many years, it has held back Scotland’s growth rate. And the financial services sector – in particular the banking sector – has gone from hero to zero with the financial crisis and the near collapse of Royal Bank of Scotland and HBOS – saved through a shotgun marriage with Lloyds TSB. Both banks have shrunk dramatically since 2008.

The latest ONS figures show GDP across the UK falling by 0.5 per cent in the second quarter of 2012. The Scottish Government’s estimates of second quarter performance are not due to be published until next month. However, the estimate for the first quarter of 2012 was a fall in GDP of 0.1 per cent. Ergo – Scotland “outperforming” the UK (or more accurately, performing less badly)?

Bring out the magnifying glass and Hubble telescope. We are surely here in some surreal corridor of reflecting mirrors and the narcissism of small differences. Once allowing for a margin of error either side of that 0.5 per cent figure – widely forecast to be further reduced this week – and the 0.1 per cent figure from the Scottish Government, it would be brave to draw a persuasive argument on Caledonian superiority – all the more difficult in the wake of latest labour market data showing unemployment in Scotland to be 0.2 per cent higher than the UK at 8.2 per cent.

Clearly, the sooner Scotland can get a start on those “shovel ready” projects, the sooner the impact on Scotland’s employment and economic performance figures. So stock up on shovels: there’s a Great Shovel-ready Grab coming to a site near you.