Forget John Swinney's big economy speech. Here’s what SNP should do – John McLaren
John Swinney’s flagship speech on the economy was, as expected, somewhat underwhelming. A hodge-podge of woolly ambitions and ideas with little to tie it all together. It didn’t feel like a heartfelt expression of strongly held economic beliefs, rather a speech cobbled together by spads and officials under some vague direction. A strategy, it was not.
His repeated harking back to the eradication of child poverty sat awkwardly within it. Does that mean without a return to higher growth – a big ask, largely out of his hands – the child poverty pledge will falter? Not that it really matters as the pledge is simply words, with no real intent to undertake the action, and find the funds, required to succeed.
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Hide AdThere was however, one interesting point he made (although its true relevance seems to evade him) on the reasons for other small countries’ economic success. These have, he said, “strong political institutions supported by high levels of trust in decision-making” (ahem). They also take the economy seriously and make tough decisions, whether it be in Finland, Austria, Belgium or wherever. Such prioritisation of the economy is the clearest difference with Scotland at present, even more so than the absence of full economic powers – also an issue for small nations in the eurozone.


Sensible growth planning
What needs to happen? First, get serious, then, get a growth plan, and then, keep that growth plan on track. None of this is easy, especially the first bit, which has always been Holyrood’s Achilles heel. Witness the plethora of plans and strategies to transform the economy over the years, with zero buy-in and little interest expressed after the publication day.
At the core of this revolution, if it is to happen, will be a Scottish Government and a Scottish Parliament that are truly invested in the cause. This entails at least three crucial elements.
First, it is not enough that Kate Forbes has become Economy Secretary, she needs to be the equivalent of the UK Chancellor – driving both economic and budget decisions – and a clear second amongst equals in terms of ministerial power. But with a Cabinet and a parliament comprised of MSPs with a long record of disinterest in the economy, then outside forces also need to be introduced to push forward the agenda.
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Hide AdSo, second, the government needs to be strongly directed (and evaluated) by outside experts. Other countries find sensible growth planning hard too, including the UK. That is why the National Institute of Economic and Social Research (NIESR) recently recommended that the UK Chancellor should publish an annual state of the economy report outlining progress against objectives at the national, household, and regional level, based on the advice of a council of experts. The International Monetary Fund recommended something similar – an independent growth commission – in their latest report. This would be a good model for Scotland to follow.
To be clear, it is for politicians to decide what are the key issues they want to address – the child poverty push belongs elsewhere as a budgetary and social policies issue – and then it would be for the new expert council to translate this into policy and hold the government to account in its evaluation.
‘Growth for a purpose’
Third, money is limited, so politicians should be clear on what they want to do and why. Some of the difficulties posed here are discussed in the latest book by the economist Daniel Susskind, Growth: A Reckoning. He too wants “growth for a purpose” rather than for its own sake idea, ie to make us happier. His route to faster growth highlights the role of ideas, rather than objects, shifting the focus from tangibles to intangibles.
To this end, he proposes that much more in the way of resources, people and technology should be devoted to research and development. In contrast, he finds little evidence that, at this stage of development, greater resources being spent on infrastructure, land use planning or education will be anywhere like as effective. Equally, be wary of favouring the likes of universities, whose capacity to innovate, rather than invent, is questionable and where funds may exacerbate the drift towards 'administration bloat’.
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Hide AdSo yes, invest in ways to generate more ideas – the engine of improving productivity over time – but take time to understand where such investments will give the greatest return, rather than simply repeating past investments that may now be out of date. Again, the expert group has a role to play, with their decisions based on “the best available evidence” as Swinney puts it.
Make no mistake, this is not a group like in the past, where such experts met very occasionally and had no real teeth. This is a permanently staffed, independent body, along the lines of the Office for Budget Responsibility. The existing Scottish Fiscal Commission may provide a start but only a start.
There are some other, non-traditional, areas where more money might be well spent. Health for example. The NIESR has highlighted the link between reducing NHS waiting lists and reversing the rise in economic inactivity due to long-term sickness. This is even more important at the Scottish level, where inward migration has less of an impact on taking up the slack.
On the subject of migration, Swinney made much of the UK’s negative stance and he has a point. However, the numbers coming to the UK remain high, but Scotland doesn’t attract its population share, so make a push to appeal more to those who do make it here, as well as lamenting those who do not.
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Hide AdGrowth for a purpose – fine – but first you have to (re)discover growth. What Swinney has come up with so far doesn’t cut it. A revolution in political institutions is needed, just to kick things off.
John McLaren is a political economist who has worked in the Treasury, the Scottish Office and for a variety of economic think tanks
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