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30 March 2018updated 06 Aug 2021 3:14pm

Nicola Sturgeon will soon have to confront Scotland’s sluggish economy

The statistics do not lie: 10 years of SNP government hasn’t brought much economic dynamism. 

By Chris Deerin

The big debates in Scotland have rarely centred on wealth creation. Since the advent of devolution the main focus has, wearingly, remained on the constitution, and to a lesser degree on areas such as education and healthcare (though without much progress on either). The state of the economy has been something of a Cinderella subject.

There are a few reasons for this. First, the national conversation operates within parameters that are well to the left of those down south: it is about how much more the state can do and how much more it can spend. Scotland’s is a public sector culture (the Tories apart) in which the private sector is viewed with significant suspicion – capitalism is just so grubbily English. How the money spent by government should be raised has not often troubled our tribunes.

Second, with most of the big economic decisions taken at Westminster, Holyrood has felt itself to have limited ability to act: Scotland’s performance would adhere, to a greater or lesser extent, to wider UK trends. The only real annual economic set-piece has come with the Scottish government’s publication of the controversial Government Expenditure and Revenue report (better known as GERS), loathed by separatists because it lays bare the subsidy Scotland receives from Westminster, and loved by Unionists for the same reason.

This has all bred an unfortunate environment. There is limited economic expertise in public life, and much political immaturity around the subject – most evident in the amateurish projections and arguments deployed in the White Paper published by Alex Salmond during the 2014 independence referendum campaign.

In the past year, though, a new seriousness has begun to emerge. Inevitably, the passing to Edinburgh of control over income taxes has focused minds. Nicola Sturgeon is introducing changes across the system in an effort to bring in more revenue from higher earners and ease the burden on those at the lower end of the scale. Soon, we are likely to see the fruits of the Growth Commission charged by the First Minister both with devising ways to grow the economy within the devolved settlement and figure out solutions to the knotty economic problems involved in creating a new independent state.

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On top of this, Sturgeon – who lacks her predecessor’s natural sympathy with business people (while first minister, Salmond liked to hang out with alpha males in his mould) – has made efforts to take ownership of Scotland’s economic story. Her government’s most recent budget announced a large increase in Research and Development funding, the creation of both a National Manufacturing Institute and a National Investment Bank, and changes intended to make business rates more competitive.

Action is badly needed. In the past 12 months, according to a report by the Fraser of Allander Institute, an economic think tank, Scotland’s economy grew by just 0.6 per cent, compared to 1.7 per cent for the UK as a whole. This gap, said the Institute’s director, Graham Roy, is in no small part down to the approach taken in government by the SNP, which has been to create a “proliferation of different strategies, advisory groups, and bodies which have arguably cluttered the policy and delivery landscape.”

Roy added: “The risk with such an approach is that it can lead to confusion, a lack of alignment, duplication and weakened accountability. It also makes evaluating what actually works all the more difficult. Strategies and advisory groups are no substitute for good policy delivery based on evidence, data and impact.”

A number of other economists I’ve spoken to agree with this critique – one described the report as “a polite kicking”. It was all the more embarrassing because Roy only left the devolved government, where he was senior economic adviser and head of the First Minister’s Policy Unit, in 2016.

Sturgeon is admittedly playing a difficult political hand. Richard Leonard, the newish leader of Scottish Labour, has followed Jeremy Corbyn’s lead in turning leftwards and has promised much higher taxes and government spending, in an attempt to win back former voters who have so effectively been lured by the Nationalists in the past few years.

Some point to evidence that Sturgeon is rattled – it was announced this week that her government will use the welfare powers recently transferred to Holyrood to increase benefit payments to Scotland’s poorest families. The SNP has admitted it doesn’t yet know how much the plan will cost, but it will be expensive and the money will have to come from somewhere.

But Sturgeon must also address the continuing popularity of and threat from Ruth Davidson’s Tories, who still seem likely to be the strongest challengers at the next devolved election in 2021. If she wobbles too far to the left, the First Minister will end up in a square go with Labour, leaving the centre ground open for Davidson (whose natural instincts lie there anyway). If Sturgeon tries to stay in that centre ground, she could lose her radical support to Leonard’s party.

And on top of this, she is First Minister and must deal with the world as it is. The statistics do not lie, and they suggest that 10 years of SNP government hasn’t brought much dynamism to Scotland’s economy. The wealth creators and risk takers in the business community do not regard Sturgeon as their friend. There is real concern about a drift leftwards towards higher taxes and state spending, and the impact that could have on both domestic and foreign investment and jobs.

And then there are the unknown consequences of Brexit to be faced. Productivity, as across the UK, is a problem. Getting more out of Scotland’s universities in terms of commercialising research is yet another challenge. How much of a milch cow are the middle classes willing to be?

All of this is far from Sturgeon’s forte, and her political instincts are statist. But all the left-wing showboating in the world won’t create new jobs, drive up government revenues, or make Scotland an attractive climate for investment. To govern is to choose – and that’s what she’ll have to do, one way or another.

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