State ownership of private firms can only be a stop-gap measure – leader comment

In the coronavirus-induced economy crisis facing Scotland, radical measures like the Government buying stakes in private firms may be necessary but only as a temporary measure.

Benny Higgins chairs the Scottish Government's Advisory Group on Economic Recovery

Few would disagree that Scotland now faces “an economic challenge of monumental scale”, as Benny Higgins, chair of the Scottish Government’s Advisory Group on Economic Recovery said at the launch of its new report.

However, some might have cause for concern over one of the group’s more radical statements that “there is likely to be a need for the Scottish Government to take on some ownership stakes” in private businesses to help them survive the coronavirus financial crisis.

The problem with state intervention is always that, however considerable the power wielded by a government can be, it will always eventually lose if it attempts to struggle against market forces. So when contemplating buying shares in private firms, ministers will need to be extremely careful to pay attention to the reality of market conditions that Covid may have changed for some considerable time.

Governments from across the political spectrum have taken ownership of private companies in the past to prevent the loss of strategically important services. For example, few politicians countenanced the idea that trains on the East Coast main line should simply stop on the recent occasions when the private operators found themselves in difficulties. The crisis we now face is much broader and so the response may need to reflect that. However, ministers will need to make difficult decisions about which firms have a long-term future, which are strategically important to the economy as a whole, and which are not.

It should be obvious that the young generation is of strategic importance to Scotland and it is clear that steps need to be taken to prevent lasting damage to their prospects. The report commented on the success of the Edinburgh Guarantee – in which the council and businesses worked together to offer work placements to young people – and suggested this should be a model for a “more ambitious, nationwide approach”.

Scotland’s already somewhat anaemic economy has taken a severe blow, but the worst of the damage should be temporary, so it is right that the Government seeks to use its power to get the country back on its feet. However, such state intervention has to be a carefully managed, stop-gap measure. We must live in the real world, where market forces are extremely powerful, and not succumb to any temptation to wish our troubles away.

A message from the Editor:

Thank you for reading this article on our website. While I have your attention, I also have an important request to make of you.

With the coronavirus lockdown having a major impact on many of our advertisers - and consequently the revenue we receive - we are more reliant than ever on you taking out a digital subscription.

Subscribe to scotsman.com and enjoy unlimited access to Scottish news and information online and on our app. With a digital subscription, you can read more than 5 articles, see fewer ads, enjoy faster load times, and get access to exclusive newsletters and content. Visit www.scotsman.com/subscriptions now to sign up.

Our journalism costs money and we rely on advertising, print and digital revenues to help to support them. By supporting us, we are able to support you in providing trusted, fact-checked content for this website.

Joy Yates

Editorial Director