Inverness: the new Shangri-La?

It's the fastest-growing city in western Europe - a dazzling beacon of new opportunity and enterpris

"Vibrant, exciting and cosmopolitan. Fabulous mountain scenery. A very low crime rate, and the schools are excellent. Without doubt a great place to live and work . . ." Stuart Black, area director at Highlands and Islands Enterprise, sounds genuinely excited, as well he might. Inverness, the unofficial capital of the Highlands, is now the fastest-growing city in western Europe. Scotland's new Shangri-La is expanding at a dizzying pace.

The A9, the longest and most dangerous road in Scotland, stretches from the central belt to the Highlands, taking you through some of the most dramatic and awe-inspiring scenery imaginable - gnarled mountain ranges, pine forests, castles. Beyond Perth is a desolate and sparsely inhabited world until, roughly 120 miles further north, the road climbs steadily, curves to the right and there, somewhat out of the blue, is Inverness.

In 2001, the population was 51,000. In the six years since, it has climbed to more than 60,000, and there are plans to double it over the next three decades. In many ways, it is an extra ordinary success story in an area where depopulation is the norm. Two new towns, a huge business park and a new university campus are planned; a £20m culture and conference redevelopment is nearing completion; numerous cultural festivals are taking place; major golf courses are being designed; the airport is on course to reach its target of a million passengers a year. The city has a booming healthcare industry, boasting one of the world's leading centres for diabetes research.

You would expect a director of Highlands development to paint it as a picture of paradise, but there are many others who agree with him, es pecially the large number of "downshifters" and retirees who have swapped life in the south-east of England for the far north of Scotland.

On the outskirts of Inverness, plush Wisteria Lane-style housing developments have appeared. Spacious three- and four-bedroomed detached homes, which would cost millions in the south-east, are being snapped up for between £250,000 and £300,000.

Stuart and Alayna Robins moved to Inverness three years ago after 20 years in London working in the City and the civil service, respectively. They were able to sell up and, with the proceeds, buy a much bigger property, start a schoolwear clothing company and still have cash left over. "We got sick of the rat race," says Stuart, 42. "We got sick of the long hours, the constant commuting, not being able to drive anywhere, constantly being stuck in traffic jams."

Alayna, who is two years younger, loves the different pace of life. "I regularly go down to London to see friends and I can't wait to come back. My friends are all stressed out and depressed. Here you get the best of both worlds. It has the economy of a city, but maintains the feel of a town."

Indeed, the cobblestoned city centre is quaint, compact and, apart from some awful 1960s town-centre development, a singularly attractive place. The waterfront on the broad and silvery River Ness is undergoing a major revamp. The west bank is lined with a host of stylish restaurants, which might not seem at all out of the ordinary, until you remember that, until recently, the concept of "dining out" in Inverness amounted to little more than eating a fish supper on a bench after a night in the pub.

The new inhabitants

So change has come, but it is not just those from south of the border that regard this as their utopia. Although English incomers account for a significant proportion of the new inhabitants, the vast bulk of the influx is made up of im migrants from eastern Europe, mainly Poland. At least 5,000 (some say as many as 8,000) have flocked to these parts since 2004, when the Scottish Executive launched an aggressive marketing campaign.

Many of them are qualified professionals: teachers, engineers, social workers. The unemployment rate in Poland, however, is running at just under 20 per cent, and white-collar workers who manage to find work there earn only about £120 a month. Highly skilled Poles can earn more in a week at a Highland fish factory, on a building site or as a cleaner than they do in a month in schools and offices back home. And, despite their qualifications, that is exactly the sort of work that many are doing. The majority are here for the short term, earning as much as they can before they return home.

There are exceptions. Monika Gajda and Gab riela Cabaj, both 28 and both graduates, are employed by Orion Engineering, one of the world's leading oil-industry recruitment agencies. They are planning to settle long term in Inverness. Monika says the quality of life is far higher here. "I sometimes miss big-city life and the weather could be better, but here we don't have to worry about having enough money to pay bills and buy food."

Gabriela joined her husband, who is also from Poland, in Inverness two years ago. "I wouldn't like to live anywhere else," she says. "Life in general is much easier here than in Poland. It's a very nice and pretty area and Scottish people treat foreigners very well."

But naturally one person's heaven is another's hell. There are many native Invernessians who lament the loss of their old way of life. There is no doubt that the population boom has brought problems and there is, at least among a minority, a simmering resentment towards those who have relocated here.

Local people call this "Tescotown", such is the dominance of the retailer. With no competition from Asda or Sainsbury's, 51 pence out of every £1 spent on food shopping in the High-land region goes into a Tesco till. There are three superstores already in the city, and only after fierce protest have planners refused permission for a fourth.

This is the kind of place where people go home for lunch, resulting in the previously unknown problem of gridlock four times a day. The roads are often seething with traffic and the infrastructure is urgently in need of investment and modernisation. Road and rail links to Glasgow and Edinburgh are appalling, and with only one main road through the city, a journey that used to take five minutes can now take an hour.

Drugs and homelessness

Crime has also increased. For the first time, the police are threatening to use dispersal orders to tackle the growing antisocial behaviour problem in some of the more run-down parts of the city. Homelessness is another issue. Figures released in February showed a 200 per cent increase in the number of people living on the street. Although the council has a policy that requires 25 per cent of any new housing development to be made available for social and affordable accommodation, there is a sense that this is too little, too late. The manager of one housing association told me that, for the 11 new flats he had just been given, he had a waiting list of 400.

Drugs are another problem. Dealers from northern England, aware that Scotland's main cities are saturated, see the Highlands as an area of huge potential. Rarely a day passes with out news of a drugs bust at the bus station or on the A9.

There is also concern over the influx of Poles. Zosia Wierzbowicz-Fraser is a teacher at a secondary school in the city and the founder of the Inverness Polish Association. She is dismayed at what she sees as the gross exploitation, in many cases, of young Polish workers and feels many have been lured to the Highlands under false pretences.

She recounts horror stories of Poles sleeping in the bus station, under bushes, and five or six to a caravan, and claims there are unscrupulous landlords charging ex orbitant rents for dorm-style accommodation. "Some of these young Poles," she says, "are living like pigs."

Wierzbowicz-Fraser also says many highly qualified Poles who thought their skills would be put to good use have ended up doing menial jobs. "Poles will do the jobs that no one else wants to do," she says wearily. "They are excellent workers and they are so desperate for money, for a better standard of living, that they will never complain.

"They work the extra hours, the long hours, because, even at the minimum wage here, it is 37 per cent higher than in Poland."

There are, she says, some excellent employers who provide accommodation and language assistance for staff, but they are few and she fears that unless urgent action is taken to address this it will become a big issue.

But perhaps the biggest problem for Inver-ness and the Highlands as a whole is one that is rarely talked about: the stubbornly high and rising suicide rate among men. Young and middle-aged men in this area are three times more likely to take their own lives than their coun terparts in London. New Scottish Executive figures, published at the beginning of this month, showed that the male suicide rate across Scotland as a whole had risen by 22 per cent over a 15-year period, with the Highlands and the Western Isles suffering a disproportionately high rate.

End of a way of life

The researchers blame isolation, alcohol and drug abuse. Other experts have suggested the death of the old Highland way of life. Not long ago, women here raised the children while men supported their families as farmers or fishermen. Such traditional industries have all but disappeared, however, and it is often women who support the family, working in seasonal service industries, while men struggle to find employment and spend long periods on the dole.

There is also the fact that Highland men are notoriously proud and self-reliant. They would never dream of visiting their GP if they were feeling anxious or lonely, and it is still seen as a sign of weakness for a man to talk about emotional difficulties or to say he needs a helping hand.

Drugs and alcohol are undoubtedly another huge factor. Much of Highland life centres on drink, and there is a well-known local say- ing about man's relationship with the bottle: You've got an alcohol problem only if you're drinking two bottles a day instead of one. The most recent figures show that there were 50 suicides last year, and many more attempts.

John Burnside is the reluctant founder of the Inverness Suicide Awareness Group. A former psychiatric nurse-turned-publican, he lost his son, Richard, who was 36, to suicide three years ago. In the three months leading up to his death, two of Richard's closest friends, Ivor Robertson, who was 35, and Mark Thow, who was 40, had taken their own lives.

All three had known each other since primary school and had played for a local pub football team since 1998. They lived within walking distance of each other in Hilton, a housing estate on the outskirts of the city. Their deaths stunned Inverness. At Mark's funeral, Richard turned to his father and gave him some unexpected words of reassurance.

"Dad," he said, "I know I've caused you and Mum a lot of problems over the years, but that is one thing you don't have to worry about - because I would never dream of doing that. I couldn't."

Burnside put a comforting arm around his son and thought, "Thank God", because he didn't believe that he or his wife, Edna, would be able to cope. Three months later Richard, too, had hanged himself. Like Mark and Ivor, he left no note, so those left behind have had to fathom their own explanations.

His father says: "'Why' is the hardest question to answer. Richard had had long spells of unemployment and a painful relationship break-up. Drink was also a problem, but you never expect this."

These days, Burnside devotes his time to raising funds for suicide awareness and support. "Inverness used to be this lovely royal burgh where everyone knew everyone else and always had time to talk," he says. "That has gone. Everyone's rushing about trying to keep up with each other and feeling like a failure if they don't have the big house, the big car and all the material trappings.

"That is the story I'm hearing more and more often - our young men and women feeling like failures."

As the editor of the Inverness Courier told me: "This is no longer Brigadoon." To some, that is a blessing. To others, it is a curse.

Lorna Martin is Scotland editor of the Observer

See also What does Scotland mean to you? - a selection of interviews with Scottish personalities.

This article first appeared in the 26 March 2007 issue of the New Statesman, Scotland: Time to break free?

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt