Economic imperative

THE SNP Government rightly argues that it lacks the necessary powers to make a real difference in improving the Scottish economy. Fiscal powers and borrowing powers, say Scottish ministers, would allow them to provide an impetus where it is required by Scottish economic circumstances. This newspaper agrees – more power for Holyrood is an essential step towards making our democracy more effective and accountable.

In the meantime, however, it is beholden on the Scottish Government to do all it can within its existing competencies, examining every means possible to fuel-inject an economy which – as figures released this week are likely to confirm – is still in recession while the rest of the UK steps out on the road to recovery.

So it is dismaying to find that opportunities to prime the pump in Scotland have been passed up by the SNP administration. The report we highlight today by respected economists Jim and Margaret Cuthbert shows that the SNP promise to reform the PFI system of using private finance for public sector construction projects has failed to make the changes that would substantially benefit the Scottish design, construction and catering sectors. Instead it has repeated the mistakes of the two previous Lib-Lab administrations (and, before that, the Labour and Tory governments at Westminster). One of the biggest failings of the PFI system, the Cuthberts argue, was the scale of the contracts, sometimes amounting to hundreds of millions of pounds. This made it near impossible for medium-sized Scottish firms to find the necessary resources and financial backing to make a bid. As a result, much of the work generated by a multi-billion-pound construction programme went elsewhere. What the SNP Government has failed to do, according to the Cuthberts, is parcel up the work in bundles that matches the capabilities of Scottish businesses.

Surely the one thing we could have expected of a Nationalist administration was that its flagship policies were implemented in a way that gave the maximum possible advantage – within strict European competition rules – to home-grown Scottish firms. This does not appear to have been the case. The criticism of Alex Salmond and his administration is all the more cutting given its source – the Cuthberts have in the past provided analysis extremely useful to the Nationalist cause, and they can safely be described as the SNP's favourite economists.

Such oversights might have been understandable had the Scottish Futures Trust – the SNP's PFI replacement – been introduced in a rush, but that is not the case. It took an age to deliver as ministers attempted to match their fanciful pre-election promises of a not-for-profit scheme with hard reality. As a result, Scotland has suffered the worst of both worlds. Because of the SNP's rigid adherence to its ideological opposition to PFI but inability to come up with a working replacement there was a hiatus in major public projects. And it now appears the result of this long deliberation is the creation of a system that disadvantages Scottish firms. It remains a matter of debate how much the SFT is an improvement on PFI, which – although flawed – has been constantly tweaked since the Tory days and has of late represented an improved deal for the public purse.

John Swinney, the Finance Secretary, insists he is doing all he can to gear up the Scottish economy, supporting weak sectors and boosting stronger sectors. At a conference tomorrow he will claim Scottish Government capital projects are supporting 57,000 jobs. But the failings identified by the Cuthberts tell a rather different story. Altogether this is a disappointing state of affairs. It speaks of a lack of imagination and creative thinking by the SNP administration in an area that deserves the fullest attention and focus. It was Otto von Bismarck who said that politics was "the art of the possible". What the SNP need to do is take on board the Cuthberts' views and reform the SFT, but more importantly they need to accelerate the work of the SFT so that what can be done to stimulate the economy within existing powers is done. Pragmatism would be the mark of a mature administration.