As I See It
Who should we blame for avoiding recession?
So, who’s going to take the blame for Scotland avoiding recession? Yup, the forecasters and hand-wringers got it wrong – again – and had us all preparing to hide under the duvet until the gloom passed.
In fairness, the Scottish economy was teetering on the edge. It only needed a nudge for it to fall off the cliff. With the oil industry so dominant and still shaky, it looked almost certain that the figures would show a second quarter of negative growth.
Well, it didn’t happen. The 0.8% growth for Q1 may not be much, but it was better than Germany, Japan, France, the US and, yes, the UK which came in at 0.2%. Growth in Scotland is now at a two-year high, boosted by better performance among manufacturers.
That was another surprise, given the low levels of productivity across the whole of the UK, though a recent survey pointed to a belated upturn in exports as Scotland finally benefits from the low pound.
Arguably the most welcome news was that the oil industry appears to be returning to growth. There have been a number of reports recently of a bottoming out in the sector as it begins to reap the reward of cost-cutting, lean practices, and collaboration.
A dip in the oil price today will not have helped sentiment, but we should be grateful for small mercies.
Scottish Labour reveals its industrial strategy on Thursday under its slogan “For the Many” which is enough to send a few shivers through those who will expect this to mean another list of tax hikes on the country’s wealth creators.
Let’s hope instead that it spells out some imaginative policies to persuade businesses to invest, which is what the country really needs in order to turn a reasonable quarter of growth into something more substantial and sustainable.
Scottish Labour, however, must not pretend it holds a magic wand. To make a difference will require some joined up thinking with Labour in London and a Labour government at Westminster.
As I said in this column last week the Scottish government alone cannot fix the Scottish economy, so a Scottish Labour administration at Holyrood could not be expected to do much more than the SNP government, unless the real driver was a UK Labour government providing the investment, taxation and structural policies the party promises.
Even with its new ‘powers’ Holyrood simply does not control the levers that can effect economic change. Scotland does not have an independent central bank with powers over interest rates, the currency, money supply etc. It cannot influence consumer and industrial regulation, export policy, corporation and petroleum taxes. It is stuck with the austerity budget and the broad fiscal and monetary policies laid down by Westminster. As things stand it can’t do much about the impact of the Brexit decision and negotiations,
This is why Scottish economic policy is largely restricted to job creation grants (regional selective assistance), business rates relief (offset by punitive higher rates for bigger firms) and developing “growth funds” which turn out to be dependent on matched funding from a private sector that ministers are determined to penalise with higher taxes. It does have some flexibility to invest in infrastructure, but a fifth consecutive quarter of decline in the construction sector suggests that this is not really working.
Sadly, few our of decision makers and commentators bother to acknowledge any of this, so expect the tub-thumping “something must be done” accusations to continue flying even when the economy defies all of them by performing not too badly.