The Scottish Government's unsustainable delusion

The Scottish Government's unsustainable delusion

by Bill Jamieson
article from Wednesday 4, March, 2015

THE MINUTE the Scottish Government’s refreshed economic strategy popped up on the screen I knew I was in trouble. 

In the opening paragraphs alone the word “sustainable” appears no less than six times. Readers will certainly need to be “sustainable” because this document runs to 82 numbing pages – a “sustainability” marathon. 

We have tireless commitments to new strategies, updated frameworks and, yes, our dear old friend, “over-arching objectives”.

But a set of ideas for lifting economic performance? For encouraging investment and growth? For anything that might relate to the real life of business and wealth creation?

Search in vain. For this document suffers from truly major flaws. In its constant repetition of the objective to tackle wealth and income inequality it confuses economic aims with vote-attracting social engineering. Another is its deeply embedded belief that economic growth is something that only government action can achieve. “Only by working in partnership with the wider public sector in Scotland, the third sector, trade unions, businesses and communities”, it declares, “will we be able to create a society where the benefits of economic growth are shared more equally and where future economic growth is stronger and more sustainable”.

And the third is that there is little here to address business concerns or indeed that connects with the real everyday world of business. 

A refreshed “economic strategy”? It is all wearisomely familiar. In its mindset and approach it is little different from the rhetoric churned out by successive Scottish Labour/Lib Dem administrations – long on commendable purpose, short on how proposals would work in practice – and devoid of anything that might encourage or inspire investment and growth. 

Businesses looking for some guidance on tax and fiscal policy will waste their time looking. Business wants to hear how the Scottish government’s new tax powers might be used to make us more competitive. Yet there is nothing about income tax or about business rates. 

This is a glaring omission given the cash-strapped state of councils and requests from the independent Scottish Fiscal Commission for more evidence from the Scottish government to support the current projection of £2.7 billion from non-domestic rates by 2015-16. 

Scotland’s business rates system is screaming out for reform. You only have to look at the depleted state of many high streets in Scotland’s towns and villages, the vacant premises and the boarded up shops to see we have a pressing social as well as economic problem. But business rates are set to increase once again from April. Planning application fees have risen by 25 per cent over the past two years, and water and sewerage charges are set to be levied on empty shops and commercial premises. On top of this the administration is keen to introduce a ‘living wage’.

Instead of a document that tackles these issues, we have page after page of statistics on income and wealth inequality, laced with quotes from Professor Joe Stiglitz and repeated assertions that economic growth will flow from re-distribution. 

There is barely any recognition that the number of wealthy people in Scotland is tiny – barely 14,000 qualified for the top rate of tax in 2010-11. Nor that much of this wealth is in the form of pension saving, on which people are counting to see them through retirement. So how is re-distribution to be effected without swingeing tax rises and on a far wider base than back then?  

If this is truly the path that the Scottish government is set on, prepare for an exodus of business, investment and capital. 

Of course more should be done to lift opportunity and aspiration for those on the lower rungs of the ladder. But to present pages of graphs on international comparisons of income inequality overlooks the fact that we have one of the most advanced welfare services in the world. Welfare is the single most important activity of government. Across the UK we spend £165 billion a year on it – almost 14 per cent of GDP.

Such spending commitments have risen materially faster than the rate of growth in GDP. They are, in the truest sense, “unsustainable” – the word that dare not speak its name throughout 82 pages. 

Meanwhile, denial is everywhere. All we see in this new “strategy” is a constant harangue against “austerity”. What has sustained Scotland and Britain’s welfare budget has been a relentless resort to debt and deficit. Yet these words barely feature in this “economic strategy”. As such it is a naïve and toxic view of the future that has been put before the Scottish people.

As for specific business proposals there is nothing here that would engage the business community. What specific measures proposed are devoid of substance once the public sector rhetoric has been stripped away. 

Instead, businesses are urged to tackle “cross-generational inequality”.  Meanwhile the Scottish government, the document declares, will “develop the Scottish Business Pledge, “by supporting businesses in return for a private-sector commitment to a range of business and social policies” including paying the Living Wage; committing to an innovation programme; not using zero-hours contracts and making progress on gender balance.

Beyond that, we are left with such numbing oxymorons as “a ministerially-led Innovation Forum” and the trumpeting of a Scottish Business Development Bank. But this, as Shadow economy spokesman Gavin Brown has pointed out, is the fifth time this has been announced in two years – and with a further announcement due in the autumn! In any event, whatever happened to the Business Investment Bank launched with much fanfare years ago?  

There is one bleak shaft of light. It comes right at the end. “As required by the Environmental Assessment (Scotland) Act 2005,” reads, the text, “the Scottish government has considered the requirement for Strategic Environmental Assessment (SEA) of the refreshed strategy. Given the overarching role of the strategy, it has been concluded that the strategy itself will have no or minimal environmental effects and can therefore be exempted through pre-screening.”

Well, that’s a relief – but not for the trees chopped to produce the hard copy of this lamentable dirge.

 

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