AS I SEE IT: Terry Murden says worrying trends in Scotland’s economy are being overlooked in an election campaign dominated by one issue
The election campaign is more or less running according to tradition. Lots of promises on health, crime – even more trees – and with the SNP a dead-cert to be the biggest party on 6 May we will be expected to skip along its yellow brick road to meet the wizard who’ll fix our problems. So, what about promises to rebuild the economy?
The politicians should stop spreading fantasy stories and spend some time reading a sobering new report by Oxford Economics which will tell them how far Scotland has sunk and how much needs to be done just to keep up with countries of a similar size.
These are the ones the nationalists like to quote when pursuing their dream of an independent future. The study reveals that Scotland’s GDP per head is a mere 44% of Singapore’s, 48% of Ireland’s, 68% of Norway’s and 75% of Denmark’s. If these are the premier league small independent nations to which Scotland aspires, then it is struggling at junior league level and has a long journey to get to the top.
The report, commissioned by the Hunter Foundation, says this will only happen if there is “radical and ambitious” policy change. No one should under-estimate what is required. It states that Scotland would need to make changes equivalent in their impact to creating a business comparable in size with Google’s total global output to bring its GDP per head up to the level of Norway’s.
Of course, those campaigning for Scottish independence argue that with the chains of Westminster removed Scotland could thrive and would soar up the league tables.
There is also a big question to be answered about who is really responsible for the slide in performance. Is it successive governments and, if so, which is the most culpable? Holyrood or Westminster? Or is it more fundamentally about the natural evolution of the economy and Scotland losing out as globalisation forces a concentration of activity around London, Silicon Valley, Frankfurt and south east Asia?
Stephen Ingledew, who plays a pivotal role at FinTech Scotland and Scottish Enterprise, as well as being an adviser to the Scottish government, argued in an interview for the Scottish Business Network’s Tartan Day sessions, that progress can best be made if all interested parties collaborate.
That means bringing business and industry fully into policy making, not just sitting on the sidelines waiting for it to be delivered, silo-fashion. He says that more focus should be on the “how” rather than the “what” and “why” that is typical of policy papers. Going further, he sees a sharing of knowledge in areas such as data science and AI across all sectors – finance, space, renewables – as a means of building the economy through connectivity.
This approach may be crucial in optimising talent to the broader good in the longer term, but what the Oxford Economics report focuses on is a fundamental weakness in policy at ground zero. Without laying strong foundations for growth nothing much can be built.
It argues that this must start with government acknowledging the need for a three-pronged approach – more borrowing, lower taxes and a huge increase in government infrastructure spending. The assumption is that a lack of these in current policy is holding the country back.
Unfortunately, at least one of these – lower taxes – does not figure in the policies of most of the political parties now trying to tell us they have the silver bullet to recovery and, for the most part, the focus of economic debate is on how money is spent, rather than how wealth is created.
Regardless of how many leaflets are stuffed through letter boxes Scotland is almost certain to re-elect an SNP government, the only uncertainty being its ability to rule as the majority party. On the evidence of its track record and pledges on public spending, it will continue to run up a deficit and will raise, not lower, taxes on those in the middle and higher brackets – the wealth creators – in order to pay for it.
If the Oxford report is not enough to scare future generations, or if critics argue that it is one-off, there is other research suggesting that a key industry in Scotland’s capital city, far from being poised to grow, is also slipping behind competitors.
The Global Financial Centres Index, a twice-yearly ranking of the competitiveness of financial centres published last month and based on over 29,000 assessments, ranks Edinburgh 21st of 126 centres. It is based on a rating judged on “business environment”, “financial sector development”, “infrastructure factors”, “human capital”, “reputation and general factors”.
The survey “shows a relatively high level of stability in the top half of the index, with few centres changing 10 or more places in the rankings”. The top three are unchanged, the next three are up one place. Edinburgh is down 8 places, the second worst performer in the top 20 after Boston (down 9). What is behind this? Is this the outcome of the city’s loss of independent head offices and decision makers in recent years, such as Bank of Scotland, Scottish Widows, Scottish Life, Scottish Provident, and even RBS, now rebranded NatWest? Is anyone in government taking note?
A third survey published this week by the savings platform Raisin UK, a fintech innovator, reveals which parts of the UK have the strongest local economies and are likely to recover the fastest from COVID-19. Tewkesbury, Winchester, Bristol, St Albans and Hackney are among those with the brightest prospects. But as the report notes, “things aren’t looking as good in Scotland”. North of the border, there has been just 2% business growth over the past five years, with Aberdeen actually seeing a 12% decrease in large companies in operation.
Taken together these three surveys are a worrying compilation of Scotland’s performance and prospects. It should be getting more attention. The economy is supposed to win and lose elections, but as I wrote here on 27 March and repeat today, there is only one story in town.
One day, Scotland may wake up to find it is an independent country, having sent the English homewards and beating its chest in anticipation of rising again, only to ask: what happened to all those great financial institutions that used to be based here?
Terry Murden formerly held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business