Michael Fry: Converts to Scotland’s cause

OCCASIONALLY, when wandering round my own neck of the woods in the West End of Edinburgh, I bump into old Tory chums, all grown a little greyer in the whiskers – just like myself.

We might talk about the glory days of Thatcherism, and the evil of the Lib Dems and how David Cameron is letting everything go to pot, so that there is no end in sight to the withering away of Scottish Conservatism. Some of these stalwarts keep the faith even yet, and might pluck up the courage to ask me: “Are you still supporting the Nats, then? How on earth can you bear that shower of lefties?”

Mine may appear to be a perverse political position, but I am not alone in occupying it. One of the most significant successes of Alex Salmond as leader of his party, especially in his second stint, has been his conversion of a fair number of prominent business leaders to his cause, or at least to taking Scotland well beyond where we are today in terms of great fiscal powers: Jim McColl, David Murray, Peter de Vink, Brian Soutar, Sir Tom Farmer, Mohammed Ramzan.

No doubt there is a greater number of businessmen who remain unionists, the sort of people whose views are voiced by the CBI. But it is noticeable how the converts to independence or greater independence are self-made men, the kind of entrepreneurs Scotland used to produce in droves. In the long decades of national decline, such figures became much rarer: they just went somewhere else to make a fortune.

They were replaced as Scotland’s economic driving force by the branch managers of multinationals, by the administrators of quangos and by the civil servants dishing out regional aid. The last defined this as a backward region and spent their money accordingly: on steelworks, shipyards, paper mills, all outdated schemes designed to keep us in the 19th century, where they assumed we belonged.

No wonder the driving force seldom got out of second gear. Luckily, as the nation has awakened from its slumber, it has shown that its spirit of enterprise has merely been dormant, too.

The reasons I will vote for independence in 2014 will be much the same as the reasons given by these new business leaders when they announced their own conversion to the cause, except that perhaps I can add a little historical perspective. Economically, the whole of the 20th century was for Scotland a century of stagnation, which brought no remedy for the status it had accepted as a dependency of the British state relying on subsidies from London.

Since that policy has failed as a means of solving Scotland’s problems, it is unlikely yet more subsidies will ever do the trick. We are locked into a cycle of failure. The referendum in 2014 is probably the only chance to break out of it that people now living will ever get.

That said, the SNP does not seem to me to have learned the lessons of this history so very well either. Among the party faithful are those who in effect believe that if only the referendum gives the answer Yes, their task is done. We can all then bask in an eternal sunshine of independence, where oil revenues will mean more or less unlimited public expenditure, universal welfare, guaranteed jobs for all. Really that is just a reheated version of the old, failed policies, this time with more money to throw away on them. Even if the policies were any good, an independent Scotland would still be quite constrained in following them just as all countries are constrained in their policies, today and for the foreseeable future.

What clues do we have to that future? The present Scottish Government does not in any serious sense need to deal with fiscal policy, though it has introduced tax cuts so far as it has the power to: in business rates and, indirectly, in the freeze on the council tax. What it has recently been obliged to do is air its thoughts on the currency – with which monetary policy and hence fiscal policy are, of course, intimately connected. If an independent Scotland keeps the pound, then the Treasury in London, as Chancellor George Osborne has just announced, will insist it should wear a fiscal cap, that is, accept spending limits.

Should Scotland prefer to have its own currency –something economists have started to argue it should – then it might need to borrow in international financial markets, which dislike countries that spend too much. Scotland might not be obliged to join the euro straight off, but it could still be advantageous to join the European Union’s fiscal pact, which brings with it money for bail-outs if necessary. In that case, Scotland would have 
to accept German spending limits, and would find them stricter than British ones have ever been.

In short, there is no way an independent Scottish government of the future can have a fiscal splurge, just wave a magic wand and spend what it likes. In that case, improvements in welfare will have to arise from something else. They can only arise from the hard-earned proceeds of a more rapidly growing economy. This is where our entrepreneurs come in.

Salmond already has a target of raising the growth rate in the Scottish economy to the same level as the growth rate in the UK economy. But even this minimally modest goal has not been achieved in a single year since 2007. The times have been uniquely hard, of course, and, under devolution, the room for manoeuvre is limited.

Yet, it is hard to see what greater extensive fiscal fiddling can do. What we need is to shrink the public sector – a sector that consumes resources rather than produce them. The shrinkage is not a shrinkage in the whole economy, however, because it creates the scope for entrepreneurs and their enterprises to produce resources rather than consume them.

Shock? Horror? Could this really happen in our lefty Scotland?

But the scheme of devolution in operation since 1999 already enforces prudence in public spending. Finance secretary John Swinney has proved himself a master of the art. Restraint has not seriously damaged programmes of expenditure. It has probably made them more efficient, by cutting out the waste previously tolerated. If one day we match the regime of fiscal prudence with a regime of low taxes, for business and individuals, that itself will be a path to growth.

Why? Because, for a start, of the many opportunities Scottish entrepreneurs would then have to provide for Scots the services that their state will no longer be providing. There is plenty more scope for privatisation or contracting out in health, in education, in utilities.

To take a small example from the last sector, private Scottish companies already provide an excellent service here and round the world by selling our water in bottles. So, what on earth can be the economic – or any other – objection be to private Scottish companies selling water out of the tap? If the companies can sell water to Saudi Arabia, they can surely sell it to Scots.

Those – nationalists and others – who would object to such free markets in a Scotland of the future need to answer a serious question. If the raising of economic growth to make this a wealthier country is not among the prime aims of independence, then of what use is independence to ordinary Scots as opposed to political obsessives? And if economic growth is not to be raised by encouraging enterprise, then by what other means? Answers on a postcard, please, to any of the entrepreneurs I have named.