DOES the SNP’s latest economic policy document stack up? Former Chancellor Alistair Darling thinks not.
He accuses the SNP of “fantasy economics”, especially in the light of this week’s report from the Institute for Fiscal Studies. The IFS makes a persuasive case that an independent Scotland that wished to retain high levels of public spending would face a challenge to find the money without raising taxes.
However, the SNP’s new paper has the merit of starting in the correct place, by targeting fiscal measures aimed at improving the supply side of the economy rather than boosting consumption or public spending. Quite rightly, the paper emphasises a rebalancing of the economy back towards manufacturing and exporting. Yet the true test of the SNP’s economic vision is not its laudable aim to introduce a fiscal policy that prioritises investment and boosts productivity. Rather it is the willingness of the Nationalists to put such a plan into practice even if it means ditching some of their populist spending promises.
This is a test other parties have grappled with none too successfully. Despite its own pretensions to rebalancing the economy, the Westminster coalition has shifted direction and introduced measures to boost the property market, hoping to encourage consumers to feel wealthier and spend more. Meanwhile, the UK is coasting towards a record trade deficit and wilting industrial productivity – hardly indications of a manufacturing renaissance. Nor can Labour claim to be the saviour of industry – during Gordon Brown’s regime as Chancellor, the UK lost 40 per cent of its manufacturing jobs.
Unfortunately, the new SNP policy document marks no real improvement over Westminster’s failed supply side economics. Despite running to some 200 pages, it remains strictly aspirational, more of a wish list than a genuine economic blueprint. Doubtless the SNP will argue it is impossible to be more detailed about precise tax changes in advance of any independence negotiations with the UK Treasury.
That is true. But it does not preclude the SNP being brave enough to tell the electorate that boosting investment and exports actually means shifting resources – in the short term at least – away from personal consumption. Or that boosting labour productivity means replacing some jobs with machines, painfully relocating workers geographically and making graduates with useless degrees retrain. If there is partnership between bosses, unions and government, all this can be achieved reasonably quickly, as happened in Germany in the previous decade.
The SNP is correct to refocus the Scottish debate on the issue of improving our economic performance. But we are still a long way from anyone in Scottish politics being brave enough to tell the voters what that demands in practice. Again, voters are left needing more information.
EU budget cut a welcome surprise
Across the industrial world, cash-strapped governments have been paring budgets for the last five years. So it should not come as
a surprise that the European
Parliament has just voted for a modest 3.5 per cent cut in the EU’s huge £805 billion spending programme. Yet surprised we should be – for this is the first ever real-term cut in the European Union’s budget since the organisation was formed. Perhaps this is a sign that finally the great European monolith is beginning to respond to outside pressure.
Even more symptomatic, the European Court of Justice (the EU’s constitutional court) has just vetoed a 1.7 per cent pay rise for the civil servants who
staff the European Commission bureaucracy. The proposed increase might have been small but it is surely right that Europe’s well-remunerated civil servants feel some of the pain being felt across Europe as a result of their austerity policies.
Everywhere we look, European institutions seem to be responding to common sense rather than the traditional self-interest of the European political elite. Most significantly, the European Central Bank – under pressure from countries with mass unemployment – is edging towards introducing the sort of quantitative easing policy pursued by the Bank of England, in order to prevent recession turning into depression.
It is still far too early to think that EU institutions will, from now on, respond automatically and correctly to popular concerns. Nor should we believe
that all MEPs in the European Parliament are happy with spending less. But a modest start has been made in the right direction. Let us hope it continues.