Bill Jamieson: Scotland’s growth requires more

John Swinney and Nicola Sturgeon launched the latest edition of Scotland's economic strategy
John Swinney and Nicola Sturgeon launched the latest edition of Scotland's economic strategy
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Scottish Government ‘policy’ is long on platitudes but short on real-world economics, writes Bill Jamieson

For those who have made it to the end of the Scottish Government’s “refreshed economic strategy” a medal surely awaits – a gong of some sort for endurance.

The opening section gives a clue to what lies ahead. The word “sustainable” appears six times in the first seven paragraphs. Readers are well warned: you will need to be “sustainable” because this document runs to no less than 82 pages.

First, the bouquets. This really is a lavishly produced affair. Production values are high. No expense has been spared on pictures, presentation and graphic design.

And there’s nothing here that we would not like to see. It is ambitious. And it is very positive about what Scotland can achieve.

But will it deliver the goods? And is it an economic strategy at all?

Doubts soon set in.

There’s little here that relates to the real-world problems of business. There’s more to growth than public sector outcomes. Indeed, there’s more to business than government.

In its constant repetition of the objectives to tackle wealth and income inequality, it confuses economic aims with vote-pleasing social engineering.

The Scottish Government, the document declares, will “develop the Scottish Business Pledge, by supporting businesses in return for a private-sector commitment to a range of business and social policies” including paying the living wage; committing to an innovation programme; not using zero-hours contracts and making progress on gender balance. But ideas for jobs and investment? These might help.

It hammers away with pages of text and graphs on gender balance and “cross generational inequality”: worthy concerns. But they do not themselves create growth, investment, jobs and wealth. That’s what an economic strategy should be helping to do.

The commitment to a lower rate of corporation tax – for so long the lynchpin of the SNP’s plan for economic growth – is gone. It is replaced by an exhaustive unending list of admonitions on social targets and tasks.

It bemoans “austerity” throughout. But there’s no mention of the debt and deficit mountains that we have to face, or the constraints these of necessity impose.

Businesses looking for guidance on tax and fiscal policy will search in vain. Business wants to hear how the Scottish Government’s new tax powers might be used to make us more competitive. Yet there is nothing here that might guide them. As for regeneration, there’s nothing about a key factor that has contributed to the boarded-up shops, closed businesses and blight in many of our towns and villages: business rates and levels. These are of major concern to business as another rise looms in April. Planning application fees have risen by 25 per cent over the past two years, and water and sewerage charges are set to be levied on empty shops and commercial premises. On top of this are government admonitions to introduce a living wage. The system is screaming out for reform.

Instead, the refreshed strategy proposes “a ministerially-led innovation hub”: doubtless a vital, pulsating node on our dear old friend of such documents past and forgotten: the “over-arching strategy”.

And there’s to be a Scottish Business Development Bank – already announced five times. What happened to the Scottish Investment Bank announced with such fanfare back in 2007? How many banks do we need when there’s a subdued business appetite to invest?

There is one bleak shaft of light that informs the whole. It comes at the end. “As required by the Environmental Assessment (Scotland) Act 2005”, we are solemnly informed, “the Scottish Government has considered the requirement for Strategic Environmental Assessment (SEA) of the refreshed strategy. Given the overarching [ding, dong!] role of the strategy, it has been concluded that the strategy itself will have no or minimal environmental effects and can therefore be exempted through pre-screening.”

What a relief – if not for the trees chopped to produce this lamentable dirge.

What makes all this truly depressing is the missed opportunity to catalyse a transformation in our prospects through a modernisation of our road, rail and energy infrastructure.

This would dynamise growth both immediately and well into the future. The English northern cities powerhouse plan has the potential to halt and reverse the concentration of infrastructure spending round London and the south-east of England. We really do need to think big on this to keep us competitive and improve the productive potential of the economy.

Instead, this refreshed “economic strategy” is wearisomely familiar: long on lofty commendable purpose, short on how proposals would work in practice.

Instead we have page after page of graphs and statistics on income and wealth inequality, laced with quotes from Professor Joseph Stiglitz and repeated assertions that economic growth will flow from re-distribution.

Of course more should be done to lift opportunity and aspiration for those on the lower rungs of the ladder. But these baleful comparisons overlook the fact that we have one of the most advanced welfare services in the world. Welfare is the single most important activity of government. Across the UK we spend £165 billion a year on it – almost 14 per cent of GDP.

Such spending commitments have risen materially faster than the rate of growth in GDP. And until we raise this, the “refreshed economic strategy” sets us down a road that is truly, and ruinously “unsustainable”. That is the contradiction at the heart of this document. It is a naïve and toxic view of the future that has been put before the Scottish people.

As for re-distribution, there is barely any recognition that the number of wealthy people in Scotland is tiny – barely 14,000 qualified for the top rate of tax in 2010-11. Nor does it recognise that much of this wealth is in the form of pension saving on which hundreds of thousands of Scots are counting to see them through retirement. So how is re-distribution to be effected without swingeing tax rises and on a far wider base than back then?

If this is truly the path that the Scottish Government is set on, prepare for an exodus of business, investment and capital.

What the authors of this document should have done is to have talked with business organisations across the waterfront – chambers of commerce, FSB groups, CBI Scotland and Business Gateway. Draw up a list of practical, real-world, specific, deliverable proposals that would spur investment and expansion. What a truly “refreshed economic strategy” might then have emerged.

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