Bill Jamieson: Economic policy must take priority

New colleagues Nicola Sturgeon and Sir Harry Burns have a lot to deliver on the economic front. Picture: Getty
New colleagues Nicola Sturgeon and Sir Harry Burns have a lot to deliver on the economic front. Picture: Getty
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There was little to impress the Scottish business world in Nicola Sturgeon’s big speech, writes Bill Jamieson

What exactly, is Scotland’s economic policy? What is the big ambition? How is policy effectiveness to be measured?

These may seem strange questions to ask in the wake of what was billed as “a major economic speech” this week by our new First Minister: strange, but obvious.

The speech was hailed as a “clear signal” that strengthening Scotland’s economy is at the heart of the SNP’s agenda. Business, to judge from the muted response, has not discerned such a signal at all. So on this first big test, has the speech rallied business opinion behind Ms Sturgeon? It has done none of these things.

Now there are obstacles here to the sort of clarity that Ms Sturgeon would wish and for which the business community certainly yearns. We are still in the throes of constitutional uncertainty. We do not know in any detail how the new powers on income tax are going to be used. So if you are a business with a payroll spanning the Border, you won’t know what new systems you will need to put in place for tax and national insurance for your staff.

In fact, we do not even know if anything much is settled because Ms Sturgeon has vowed – sorry, wrong word – declared she would press on for more powers. She wants the full deck of cards, not just the hand Lord Smith’s Commission has dealt. She has re-stated the Scottish Government’s ambition to have control over Corporation Tax.

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So here is the problem at heart: this “major speech” cannot rest on sure foundations, because there are none. And it cannot be a priority, because it’s clear that more constitution politics is the unrelenting priority, no matter the outcome of the referendum.

So the nightmare of a neverendum is already unfolding, and this time with a decidedly leftward direction of travel. From the proposed Land and Buildings Transaction Tax to attacks on rural estates, the direction is clear: less an economy fired by investment and enterprise, more like an anti-business, anti-aspiration, grudge and grievance agenda.

Even within these limits, there was little about economic policy in this “major economy” speech. There was no lack of worthy aspiration to advance social goals. There was much on gender balance across the workplace, a declaration to tackle inequality, and a beefing up of the Council of Economic Advisers.

There’s to be a Scottish Development Bank. And there’s to be more money for apprenticeships.

Much was made of a pledge to extend the Small Business Bonus Scheme for the lifetime of the next parliament. But the fact is that business is being asked to cough up another 8 per cent in business rates over the next two years, up to more than £2.8 billion. When the council tax freeze was introduced in 2007-8, local business taxes and the council tax brought in similar amounts, about £1.9bn. By 2014-15, business taxes will have risen by 40 per cent.

What is needed here is a review of business rates. An announcement to this effect, with a pledge to consult and listen, would have been welcome. Instead, the ground was ceded to the coalition, with just such a review for England announced yesterday by George Osborne.

We may have more businesses being formed in Scotland, but there is no room for complacency. According to Office for National Statistics data for early 2013, Scotland has just 740 private businesses per 10,000 adults compared with 753 in Wales, 785 in Northern Ireland and 984 in England. As the Institute of Directors Scotland director David Watt pointed out, we heard little about wealth creation in the long referendum campaign.

Announcements on apprenticeships and plans for a Scottish Development Bank have a wearisome ring of déjà vu. Big questions need to be asked of the latest drive on apprenticeships. This week I received a plaintive e-mail from a businessman in the transport sector despairing of finding promising young apprentices to fill the vacancies he has on offer. What does it say of our education system that basic skills in numeracy and literacy are still lacking? What about a policy review and listening to the problems that businesses are facing?

A similar review would be welcome on Ms Sturgeon’s latest funding intervention. Her predecessor’s loudly trumpeted Scottish Investment Bank seemed to disappear into the bowels of Scottish Enterprise. What will a new Development Bank do that the Investment Bank should not already be doing? And how would we know, given the misty opacity that cloaks so many of these bodies once the initial excitement of their creation has worn off?

As for macroeconomic policy, we are told that Scotland’s former Chief Medical Officer, surgeon Sir Harry Burns, will join Professor Joseph Stiglitz in economic policy guidance. I don’t expect Sir Harry’s expertise with a knife will be much called upon in the realm of public expenditure. This is supposed to be a group of economic thinkers. If I had a sore knee I wouldn’t go to an economist. And if I wanted to boost economic performance I wouldn’t go to the NHS.

Here’s a wild idea: how about inviting economists familiar with Scotland’s current economic performance to join the Council of Economic Advisers? Professor David Bell would be an excellent choice. Or Professors Jo Armstrong and John McLaren, given their work on public finance? I would even recommend the Fraser of Allander Institute, for it is possible to respect its research while seeking a second opinion on its more dubious prescriptions.

Finally, there is the matter of Scottish Government debt where the Smith Commission has backed demands for “more powers”. That’s not exactly sent a reassuring frisson across the business world. Debt – as the Chancellor was obliged to concede in yesterday’s Autumn Statement – is the biggest single problem facing the whole of the UK.

However, I take comfort from the announcement that a new Financial Health Service offering money advice has been launched by business minister Fergus Ewing. A key part of the new website is a “financial education module” which aims to help people to manage their money. I do hope Mr Ewing passes it along to his ministerial colleagues.

Business organisations are too polite to say what they really think about the “big economy” speech. But the administration needs to grasp a simple truth: it is the economy and investment and growth and jobs that are the pressing priorities now.

Constitution politics must move along.

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