Bill Jamieson: Planet Indyref versus the real world

Scotland’s economic problems are being pushed aside to discuss the complexities of a referendum, says Bill Jamieson

HERE in Scotland we are coming to live in two parallel worlds. And the gap between them is growing. There is “Planet Indyref” – the world of an increasingly preoccupied political class and commentariat obsessed with constitutional reform: independence, Devo Max, Independence Light, Scotland Bill Devo Light semi-skimmed, and now Devo Plus. Just how many questions will there be on that ballot paper?

Between these finely drawn positions is a rainbow of legal opinion as to whether we will be in the EU, out of the EU, staying with the pound or shadowing the pound with a new currency. Each week another constitutional lawyer tumbles out of the New Club with a new take on whether Scotland can or cannot call an independence referendum.

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Will there be border controls? Or no border controls? Or EU-imposed border controls whether we like them or not? Will we be Scottish taxpayers? Or UK taxpayers? If both, to whom do we send the tax return? Or will there be two tax returns? Each week seems to bring a fresh constitutional souffle for our delectation. On Tuesday, Phillip Blond, a policy wonk described as David Cameron’s “philosopher king”, brought a particularly exotic side dish. He called on the Scottish Parliament to adopt a second chamber. A unicameral parliament is not enough. We need, it seems, more politicians – as if we do not already have more than enough.

Constitutional change, advocacy and analysis are now our hottest manufacturing activities and there is no let-up in this disputation. We have arrived at the Caledonian equivalent of brawling verbal fights over the fine distinctions between the People’s Front of Judea and the Judean People’s Front. And it is all set to run till autumn 2014.

How long before the BBC Newsnight Scotland studio is given over to a sandpit of the battle terrain, with Gordon Brewer pushing model tanks and armoured divisions with their cardboard commanders to and fro across our tribal and fractured landscape? Behind him is a vast convoluted Jim Mather mind map of Devo Max, Devo Plus and independence. To some this may be paradise. To others it is reducing our politics to a Hieronymus Bosch depiction of Hell. When friends from down south casually inquire of me “How are things in Scotland?” I have to tell them to lie down with Lucozade and an aspirin. “Do you have three hours?”

And then there is the other world: the debt-laden, over-borrowed real world in which we live and work. And this world is not in a good state at all. It is perhaps to escape from this debt-saturated planet and its austerity legacy that “Planet Indyref” has become so populous. Let’s discuss anything other than the world we’re actually living in and the problems we have to deal with on a daily basis.

The latest Fraser of Allander Economic Commentary is a good place to start. This is the world of Scotland it describes: the basic picture remains one of weak recovery. There are shards of improvement in recent weeks, but little to alter a deteriorating picture in the near term.

The Institute has slashed its 2012 forecast for economic growth in Scotland from an already miserable 0.9 per cent to just 0.4 per cent – weaker than the UK overall. Scotland’s Gross Value Added (GVA) now stands at 3.3 per cent below the pre-recession peak nearly four years ago. It forecasts unemployment will rise by 34,000 this year to 265,250 before trending down – an unemployment rate of 9.8 per cent, rivalling the trough of the recession in May-July 2010 when unemployment reached 236,819. Within that total more than 100,000 young people are unemployed.

The near-term prospects for production output (circa 15 per cent of GDP) do not look promising. Both consumer durables and non-durables are contributing little to growth, with no sign of an upturn. This, says the Commentary, “reflects the state of UK consumer demand as households continue to pay down debt and deal with declining real incomes”.

With inflation falling, consumer spending may embark on a gradual recovery. The time taken in returning to the pre-recession peak is now greater than in the Great Depression in the 1930s. And the Institute’s new forecast suggests that overall Scottish GDP will not return to its pre-recession peak for another three years. We are thus barely halfway through the elongated timescale of recovery from a financial crisis-induced recession envisaged by Carmen Reinhart and Kenneth Rogoff in their seminal work This Time is Different: Eight Centuries of Financial Folly. But there is one ray of sunshine for the First Minister. Fraser of Allander says the pre-recession peak could be reclimbed in the third quarter of 2014: coincident – well, guess what – with the independence referendum. Good timing or good luck?

For the time being there is little connection between these two parallel worlds other than this: a conviction – or blind faith – that constitutional alteration (and more borrowing powers) will wreak an economic transformation. Claim and counter-claim will now be advanced suggesting that this or that configuration of powers will deliver an improved economic outcome. But why should we believe this?

In the coming months, and years, how are we mere mortals in the here-and-now world to distinguish bold claim from actual likelihood, firm evidence from political assertion, dreams from truth?

Professor Arthur Midwinter has suggested setting up an independent Office for Budget Responsibility for Scotland, where data on the economy and our public finances can be impartially and neutrally assessed and disseminated.

I am grateful to Professor Brian Ashcroft, of Fraser of Allander, for the suggestion that we should go further: set up a US-style Congressional Budget Office, established in 1974 to provide reliable, non-partisan data to Congress. Its advantage over the OBR is that it also undertakes modelling of alternative policies and the costs of competing policy choices. Here at last could be a bridge between our two worlds. But in the constitutional cacophony, does it stand a chance of being heard? That would be bad for Planet Indyref. And it will certainly be bad for the rest of us, seeking properly researched solutions to our very real problems.