As I See It
Economic growth requires prudence not independence
With a gestation period only rivaled by the elephant, the SNP’s Growth Commission report is certain to underwhelm. As many Scottish businesses will recognise, the problem faced by the great and the good involved from its conception to delivery is that they have been asked the wrong questions.
I have no doubt that an independent Scotland could, with the right economic policies, be prosperous. Identifying the required policies is not rocket science after all; one just has to step off a plane in certain parts of the world and you can smell the economic freedom in the air, the sweet smell of success, the tangible sense of a can-do mentality. Even now in ‘communist’ Hong Kong it is still obvious, it embraces you in Singapore, while in Switzerland they are more German than the Germans in their efficiency but leavened by their French joie de vivre.
Arrive in Scotland and freedom to create wealth is not quite so obvious, you are assaulted by exaggerated chauvinistic greetings that rest too often on past glories such as great inventions or discoveries, the development of world-known brands, and visions of classical and gothic architecture that just reeks of old money and old achievements. Attempts are being made to modernise Scotland’s reputation, but because we are in the United Kingdom, not despite it.
The reason Scotland’s growth is lagging the UK’s is simple; it is because in every respect our politicians, consciously or subconsciously, seek to diminish those that turn a buck. Making a profit is hardly admired, never mind extolled. Such entrepreneurs are simply a source of funds for the far more important job of spending taxpayers’ money.
The Scottish state living beyond its means is the real problem Scotland faces and how it will address the challenge of matching spending with revenue is the question the SNP should have been asking. Otherwise our national deficit as a proportion of GDP would become greater than that of Greece and double that of the UK – becoming the highest in the developed world.
Let me repeat, growth in an independent Scotland should not be a problem. As the report states, other countries achieve it, and then some, although there is a need for restraint and caution in comparing the growth of small economies that have been modernising with large, older economies that achieved huge growth in the nineteenth century.
The Scottish Government is addicted to spending beyond its means
No, the question an independent Scotland faces is how it manages to have enough economic growth to match the high and unsustainable spending of a sovereign Scottish government.
Thanks to the financial transfers from London that come through Scotland being inside the UK – worth regularly about £10bn year-on-year – the Scottish Government is addicted to spending beyond its means.
If independence became a reality the full responsibility for that gap between spending and revenues would need to be financed. Sure, successful economic growth may, in time (probably over a generation), be enough to fund that sort of spending. But what happens in the meantime?
Who bears the severe hardship from the likely austerity that will be required until revenues are sufficient to finance Scotland’s greater spending per head – worth £1,437 per person? Something has to give, somebody has to lose out to find savings, and these must include public sector payroll savings because that is where the vast majority of spending goes.
More troublesome for those backing independence without prudence is the reality that encouraging economic growth Scotland will require tax cuts and deregulation. This is Green Kryptonite to Nicola Sturgeon and her cohorts who only know how to tax, spend and tie anything down that moves with red tape. Banning two-for-one pizzas and adopting minimum pricing of alcohol will not reduce obesity or prevent alcoholics buying booze – but it will hit business activity and depress economic growth – and there’s more of this to come.
If the UK leaving the EU will require a period of economic adjustment then consider the turmoil if Scotland leaves the UK
I wonder just how financial exchange reserves estimated at £300bn can be found when we need to fund that spending gap – not least the liabilities for OAPs’ pensions and other welfare benefits – which would overnight become Scotland’s responsibility. Then there is the risk in value to the private pensions and mortgages held with English institutions that will become subject to the vagaries of currency movements and speculation.
These are not idle or partisan questions but the hard challenges that need to be faced. As people begin to look at how their pensions, mortgages and benefits are affected by currency changes, capital flight and business relocation (a la Edinburgh Woollen Mill) the Growth Commission will become an irrelevancy.
If the UK leaving the EU will require a period of economic adjustment then consider what turmoil will be faced if Scotland leaves the UK. Scotland is a major financial recipient of £10bn from the UK and needs to fill that hole, whereas the UK is a major net contributor of £10bn to the EU and will realise that saving.
Politically and economically the SNP must convince one generation to endure severe hardship as a sacrifice for the prosperity of future generations – that is unlikely to be any better than what people have now – and certainly could be achieved for every generation whilst under the devolution settlement. Independence is realisable only if the Scottish Government would live within its means.
Brian Monteith is a former member of the Scottish Parliament