How we can lift the black gold curse

The phrase “full fiscal autonomy in due course” hardly makes for a convincing political slogan let alone a manifesto commitment as its opponents have been quick to point out. It needs a coherent economic rationale.

The reason why Scotland should not have FFA right now is basically because it did not have it before.

Any Scottish Government, not just an SNP-led one, with sufficient control of its economic levers would already have followed the lead of commodity-rich nations such as Norway and Chile (or states such as North Dakota and Western Australia) and set up a stabilisation fund to see the country through temporary or permanent dips in commodity values.

The failure to do so means that now is one of the worst times to go for FFA.

I warned eight years ago in invited evidence to the finance committee of the Scottish Parliament about the widely documented phenomenon called the “resource curse” in which countries and states with a rich endowment of natural resources often tend to be slower growing than resource-poor countries.

The reasons for the resource curse are complex but one contributory factor of relevance to Scotland is that a dominant commodity-based sector can crowd out what would have been the more innovative high technology sectors seen in high growth economies such as South Korea and Singapore.

The resource curse has teeth even in good times but it can really bite hard in bad times having left a hole which will take time to fill with the kinds of firms and industries that a modern, hi-tech, growing economy needs.

Even if an oil fund for Scotland was started tomorrow, by now any eventual benefits would be correspondingly weaker and distant – which is why the Barnett formula is still needed and FFA should be phased in over time.

Meanwhile, the Scottish Government still needs to knit together policies and plans needed for a modern, high-growth economy. There is one Westminster select committee for science and technology, and another with innovation in its title, reflecting the remit of UK government departments. But despite shadowing many other Westminster select committees, these have no clear parallels in any Holyrood committees and indeed you will be hard pressed to find much mention of innovation in the last SNP manifestos for Holyrood or Westminster elections.

Maybe the Scottish Government thinks these issues also are still reserved to Westminster, in which case we are truly in trouble.

The SNP ’s phenomenal electoral success in the May general election might encourage it to think the Scottish Government does not need to make technological innovation a number one policy priority. The government may not need this, but the country does.

(Prof) Neil Kay

Shore Road

Innellan, Argyll