Alex Salmond delivers his speech to delegates at the SNP's spring conference on April 12, 2014 in Aberdeen. Photograph: Getty Images.
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On the economy, the SNP is starting to sound Osborne-esque

Like the Chancellor, the party has a vested interest in convincing voters that the crisis is over. But it isn't.

The SNP has made a concerted effort recently to emphasise the “strength” of Scotland’s economy and the apparent resilience of its post-crash recovery. In the last few weeks alone, I’ve received a series of press releases highlighting how employment in Scotland has reached “record” levels, how Scottish output will soon “surpass its pre-recession peak” and how “business optimism” is steadily returning.

At first, this struck me as an odd strategy for the nationalists to pursue so close to the referendum. Why should Scots vote for independence if even the Yes campaign (or a large part of it, at any rate) thinks Scotland is thriving within the UK?

But it’s actually consistent with the psychology of the party. It’s no coincidence that support for the SNP boomed in the 1970s following the discovery of oil and gas in the North Sea then crashed in the 1980s as the UK entered a severe downturn. There is a relationship (albeit an inexact one) between how confident Scots feel, economically, and their enthusiasm for constitutional change. SNP leaders understand this, which explains why they are so keen to persuade voters that Scotland’s economy is in such good health.

The problem, however, is that Scotland’s economy is not in such good health. It is, in fact, in a pretty bad state.

Take the report published in the Guardian last week suggesting that just 30 per cent of the Scottish economy is domestically owned. If true, this means Scotland is essentially being asset-stripped by foreign capital, as a significant proportion of the wealth generated by Scotland’s key industries - from North Sea oil to whisky and finance - is channelled down south or overseas.

Equally troubling is the STUC’s estimate that as many as 120,000 Scots are currently employed on zero-hours contracts. This reflects the growth of insecure work in Scotland over recent years and confirms Scotland’s status as one of the lowest pay economies in the OECD.

Then there’s the complicated issue of Scotland’s public finances. Scottish spending is not subsidised by English taxes, nor are oil revenues declining as rapidly as some claim, but Scotland’s overall fiscal position is still relatively weak. Even with a geographical share of North Sea oil, Scotland’s 2012/13 net fiscal deficit was a massive 8.3 per cent of GDP, while its national debt remains upward of 60 per cent of GDP, which is substantially higher than that of many other small northern European countries, including Denmark and Norway, the poster-boys of Nordic social democracy. 

This is not an attempt to “talk Scotland down”. Scotland’s unemployment rate is lower, by about 0.4 per cent, than the rest of the UK’s, until recently its economy was growing slightly faster and its trade balance is considerably stronger. (As Craig Berry, a research fellow at the Sheffield Political Economy Research Institute, told me in January: “Primary responsibility for the UK’s £30bn balance of payments deficit lies with southern England, whose main contribution to Britain’s export base - financial services trade - is far too dependent on the crisis-hit Eurozone”.)

But the SNP’s insistence that Scotland’s economic prospects are brighter than the evidence suggests is beginning to look Osborne-esque. Like the Chancellor, the SNP has a vested interest in convincing voters that the crisis is over, even if the challenges they face on a day-to-day basis, from finding permanent work and to paying household bills, tell them it definitely isn’t.

The Yes campaign’s narrative is not, of course, exclusively economic. A couple of weeks ago, Yes Scotland rolled out a new poster campaign highlighting levels of child poverty in Scotland, and the SNP itself regularly criticises the coalition’s “heartless” spending cuts and welfare reforms. But these attacks don’t sit easily with the Scottish government’s panglossian account of Scotland‘s economy: either Scotland is being devastated by Tory austerity or it’s heading for another boom - I’m not sure it can be doing both at the same time.

Last year, Alex Salmond told the Observer that independence would be won on the back of a “rising tide of expectations”. The question nationalists have to ask themselves now, with less than four months to go until the vote, is this: how far are people’s expectations likely to rise when their lives are being ruined by a failing and dysfunctional economy?

James Maxwell is a Scottish political journalist. He is based between Scotland and London.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation