The future of the left since 1884

Missing the fundamentals

Scotland needs a fresh approach to economic policy, writes Daniel Johnson MSP



The Scottish National Party has long cultivated economic competence as part of its brand. Yet the Scottish Fiscal Commission’s report in December punctured this image, showing growth in wages and employment that is slower than the UK average and lags behind the other devolved nations. Digging further reveals huge regional inequalities in productivity, workforce engagement and wages. The renewed interest in regional economic development exposes the reality of SNP economic policies – they are heavy on spin and light on substance.

A ‘Brand Scotland’ approach may be designed to look superficially impressive but it does little to tackle the looming crises in the Scottish economy. This matters, not just because it has real world consequences for opportunities and incomes, but because it impacts on public finances. Since 2016, Scotland has had control of income tax rates and bands with income tax receipts setting resource allocation through the fiscal framework. But with receipts growing more slowly than the UK average, that will leave Scotland almost £200m worse off this year than if income tax had not been devolved. That figure will rise to over £400m over the next five years.

The disparity between Scottish cities and regions is unsustainable for the future. The productivity gap between Edinburgh and Dundee stands at 35 per cent. And while it may always be hard to outpace London, Scotland now lags behind the North East and North West of England and the other devolved nations in productivity. Yet this is an area completely unexamined by SNP policymakers.

There is also a failure to acknowledge the fundamentals of the Scottish economy. The public sector represents half of our economy and the private sector is dominated by small firms that have negligible growth in productivity. Therefore, failing to address continuing low pay amongst key workers in the public sector is short-sighted, ignoring the wider economic impacts. The absence of direct policies to assist SMEs with training and technology is ill-advised too. The SNP talks in the language of entrepreneurialism and productivity but fails to understand both the impact of its decisions in the public sector and the fundamentals of the private sector in Scotland.

Finally, there has been a failure to ensure supply chains and investments are retained in Scotland. It is ironic that, after a summer in which we were given a new Minister for a Circular Economy – and a Scottish Green party minister at that – the incredibly valuable asset of our offshore wind was sold to BP, Shell and Vattenfall, an auctioning-off of assets that is short-termist and provides no retained value or interest for our public purse. It represents neither a circular spend in Scotland, nor value for money for the Scottish taxpayer. In the 1970s, the SNP popularised their cause by saying: “It’s Scotland’s oil”. Well, why is it no longer Scotland’s wind?

Within these agreements, there is little room for government control in the future. There were no golden shares, which could have given the Scottish government a  substantial amount of control over the projects while still attracting investment.

Within the English devolved model, Labour mayors such as Sadiq Khan and Andy Burnham have been able to use development corporations to regenerate urban areas using expertise from a number of sources, including local councillors and borough mayors. As is often the case with their view of local government, the SNP treats such measures with contempt, preferring instead to use central government funds for entrepreneurial ventures that, however noble in their efforts, do not offer a circular spend in Scotland.

This should be home turf for the Labour party, both here in Scotland and the rest of the UK. Investment in technology and infrastructure that enriches communities long-term is what we do best. We are the party which balanced the ‘white heat of technology’ with the development of the New Towns and ushered in the era of devolution that should be being used by the SNP to keep asset value in Scotland. An ‘entrepreneurial people and culture’ is all well and good, but it needs to be tempered with real investment in our local communities and ensuring that such spending retains value for them and for Scotland.

If we do not take action now to stimulate our economy and our ailing productivity, there will be little recourse in the public finances to do so in future. Of course, Scotland must always remain open to investment, but that must not be at the expense of retaining value and long-term benefit for Scotland’s public purse.

Image credit: Flickr/Giuseppe-Milo

Daniel Johnson MSP

Daniel Johnson is the Labour and Co-operative MSP for Edinburgh Southern and shadow finance secretary


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