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As I See It

Growth Commission: Learning from lessons in self-determination

An exercise as big as that set for the Sustainable Growth Commission was never going to please all the people. The inevitability of raising the political temperature was factored in from the minute SNP leader Nicola Sturgeon asked the former party high-flyer Andrew Wilson to produce a route map to growing the economy.

The long-awaited publication of this 353-page tome was indeed met with a mix of outright support and outright hostility, much of it premature, most of it predictable, though even among the naysayers there is a grudging acceptance that it should at least be treated as a serious analysis of where we are, and where we may be heading.

As with all journey planners the commission has spotted a few bumpy roads, hold-ups and twists and turns along the way. There are a number of cautionary messages among the forecasts, including the cost of separation, and recognition of the limits to Scotland’s power, for instance in its establishment of a central bank without control over monetary policy.

This identification of the hurdles to be overcome is a crucial brake on expectations, as the document avoids the scenario set out in the 2014 Scotland’s Future white paper which was nothing more than an SNP manifesto based on fantasy economics.

That paper imagined a milk and honey paradise, most famously around what turned out to be hopelessly optimistic predictions for oil revenues. The new report takes a more measured view of income from the North Sea, though ironically it is published just as the oil price has recovered amid some bullish forecasts that it might once again break through $100 a barrel.

Even so, opponents have seen the cautionary admissions in the Commission’s report as the SNP’s Achilles Heel, providing ammunition to shoot down the independence case because its biggest advocate is seeing weaknesses in its own argument. That is a flimsy reason for killing an idea before it has had time to breathe, but it does sound alarm bells among those who prefer the status quo.

The independence opposition, which includes a large swathe of business opinion, takes issue with the longer term currency plan and the ability of Scotland to cut its rather large deficit to something even close to EU acceptability without the need for deep public spending cuts or tax rises.

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‘Opponents have now set the current level of public spending as a yardstick’

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These warnings are not without some justification and the paper accepts that spending will have to come down if Scotland is to get serious about ‘sustainable growth’, and how it hopes to achieve it without an honest inward-looking examination of how it finances the public and social sectors.

There was always a fear that a parliament in Edinburgh would be too focused on spending and in scattering benefits from free prescriptions to concessionary travel in order to woo voters without worrying too much about where the money was coming from.

Opponents have now set the current level of public spending as a yardstick. Any cuts are fiercely opposed as eroding the nation’s quality of life, when in fact many of the benefits were never requested – for instance, baby boxes and free prescriptions for the rich – and would be willingly sacrificed.

Without much in the way of growth, and with an unwillingness to cut the ‘benefits’ budget, the Scottish government has resorted to higher taxes, sold to grateful voters as creating a fairer Scotland.

Against this backdrop the Commission had to conclude that there could be other ways to build a stronger economy, such as improving productivity and infrastructure. As I have argued here numerous times, the ability of the Scottish government (whichever party is in power) to create growth is constrained by not having access to the main levers of the economy. It cannot control interest rates and the flow of credit. It cannot adjust national insurance, corporation tax or capital gains taxes.

This lack of flexibility gave the Commission a starting point for arguing the case in favour of more powers though it states that ‘independence should never be seen as a magic wand or quick and easy step to success”.

Even so, it has inevitably taken independence, rather than a better deal within the union, as its focus and compared Scotland’s potential against the record of similar small, independent nations such as Denmark and New Zealand which have these powers.

The remit of the Commission, in essence, was to “assess projections for Scotland’s economy and public finances…and make recommendations for policy on measures to boost economic growth and improve Scotland’s public finances.”

Mr Wilson says that “bridging the gap between potential and performance” is the purpose of the report and this statement alone acknowledges that whatever the country has achieved so far is not good enough and that new solutions have to be found.

These are set out in a 50-point list of proposals, including new productivity and infrastructure commissions, and some re-prioritising of public spending, for instance on nuclear defence.

Critics have pounced on this as a fanciful “wish list”, an admission of years of failure, a recipe for spending cuts and impoverishing the nation. The currency “transition” ideas has been damned for creating more uncertainty.

Did the critics not expect the Commission to propose any ideas and set out long term goals with suggestions as to how we might get there?

Any board of directors or custodians of an institution would be accused of a dereliction of duty if they did not prepare a five or ten year strategy. Or is Scotland plc expected to just muddle through and hope for the best?

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‘With the uncertainty of Brexit hanging over us it is surely essential that we are prepared for what may lie ahead’

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That is harsh and, might I say, naive. Everyone, even those on the unionist side, accept that Scotland is under-performing and with the uncertainty of Brexit hanging over us it is surely essential that we are prepared for what may lie ahead.

The influence of Brexit is apparent, no more so than in the Commission’s proposal for a proactive immigration policy. Given the SNPs’s outrage over the restrictions on the movement of labour following Britain’s withdrawal from the EU, this surely was an inevitable position to adopt.

An invitation to Come to Scotland is not entirely new – I even recommended it myself in a column for The Sunday Times at the time of the Hong Kong handover and Jack McConnell subsequently adopted a policy of welcoming foreign labour during his time as First Minister.

This time, however, the issue is more urgent as Brexit will impose the most draconian curbs on the movement of labour. The Commission’s call for incentives such as tax reliefs is a determined effort to counter the potential loss of skilled workers. Of course, it is not a uniquely Scottish problem and to that extent the Commission has thrown down the immigration gauntlet to the other nations and regions which would risk seeing the Scots soak up the best talent. It raises interesting questions as to how the Westminster government, particularly one still run by the Conservative party, would respond.

The biggest hurdle this paper faces is overcoming its undeniable attachment to the independence debate. Had it been produced by, say, the Fraser of Allander Institute there would have been much less of the politicking and hostility we are now witnessing.

Mr Wilson has called for a balanced and measured response. To a degree he is playing the card of the PR man that he is, attempting to take the sting out of the debate. Balance is required, but critics of his report should not be seen as somehow irrational and unreasonable.

Balance must not be a substitute for a lack of conviction which leaves us standing at the crossroads not knowing which direction to take. The last thing we want are leaders leaving us in limbo, or a debate cheapened by a failure to accept criticism on either side.

None of the Growth Commission’s ideas may come to fruition, but if the country learns more about its potential and its expectations as a result of this exercise in self-determination then it will have made a valuable contribution to the national debate.



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