Flatlining economy, high taxes and little to show for them... the failures that will cost the SNP dearly

SCOTTISH politics is so highly strung about trivial things that it seems perverse to complain about an under-reaction. Yet there is no other way to describe the response to the Scottish Fiscal Commission report, published last week and subject of little more than tepid retreads of old soundbites at Holyrood.

Admittedly, fiscal forecasts are not the most scintillating subject, but the latest deserves our attention.

The economic health check delivered a worse than expected prognosis. Growth will fail to exceed 1 per cent annually for the next five years, underperforming the UK economy. Wages will dip and not pick up again until 2020, a decade low in real terms, and the expected tax take has been slashed by £209million.

The Commission described the outlook as ‘subdued’, which is economist-speak for ‘buy canned goods’.

Ministers were more sanguine, characterising a trifecta of low growth, low wages and lower revenue as merely ‘challenging’. Finance Secretary Derek Mackay laid the blame on ‘continuing UK Government austerity, Brexit uncertainty and an inhumane, hostile approach to immigration’. If that sounds like another cry of ‘a big Parliament did it and ran away’, it is but it’s also not wrong.

Even some on the Right question whether austerity has outlasted its usefulness and Brexit, whether you’re for or agin it, is by its nature a disruptive act.

What Mackay conveniently left out were the Scottish Government’s contributions to the forecast. It takes real chutzpah to blame Brexit for creating instability when your government has just published a 354-page proposal for Scexit, which would remove Scotland from the UK single market and erect an economic border along the Tweed. Is it any wonder growth is lagging behind the rest of the UK?

Penalised

Investors in Sunderland have to factor in Brexit but investors in Scotland must reckon with Brexit and the possibility Scotland will be a foreign country in a few years’ time. Raising the prospect of another constitutional poll turns off companies that might otherwise bring jobs and revenue to Scotland.

In trying to piece together the mystery of why the economy he is presiding over is faring so poorly, Mackay somehow managed to miss rather a large clue. He is the minister who has made Scotland the highest-taxed part of the UK. Growth means retaining businesses and attracting new ones but that is made all the more difficult when successful businesspeople are penalised for living here.

We keep putting out signals that Scotland is not open for business and business has finally taken the hint. We allow a productivity gap to go unaddressed and growth and wages do what they always do when productivity fails to keep up.

Scotland finds itself in the middle of a perfect storm of internal and external factors, bad politics and worse policy.

Nationalists object that Holyrood lacks the necessary levers to drive economic growth. There is some truth to this. Immigration is reserved to Westminster, where the Tories favour a cap on numbers and Labour complains about ‘cheap agency labour’ being ‘imported’ to ‘undercut existing pay and conditions’.

This imposes a one-size-fits-all regime unreflective of Scotland’s needs. Nationalists urge the devolution of powers so the Scottish Government can attract skilled migrants to key sectors.

The SNP is convinced of Scotland’s moral superiority to its neighbours and assumes, contrary to a stout body of research, that voters north of the Border are more liberal on immigration. In fact, there is a complicated and awkward conversation to be had with the electorate.

Unionists dismiss the idea of transferring immigration to Holyrood as impractical and a concession too far to the soft nationalism of devolution without end.

Not only does this sidestep the question of how we grow our population to meet demographic and revenue demands, it neglects a more damning point. Namely, that the Scottish Government can already attract internal migrants from the rest of the UK. Yet across the five most recent years for which data is available, net annual migration from England, Wales and Northern Ireland was a rough median of 8,000.

Why, if Scotland is fairer and better governed than down south – as we are constantly assured – can’t it manage to pull in even 10,000 more people than it loses every year?

To understand that, we have to look at the package we’re offering. Imagine a radiologist from Gateshead looking at a vacancy in NHS Lothian. His wife, a detective superintendent in Northumbria Police, is from Edinburgh and they’ve always toyed with the idea of bringing up their two children in Scotland. All that fresh air and low (recorded) crime.

We want this family to come here. NHS Scotland has a shortage of radiologists and the Scottish Police Authority wants more women in senior positions in Police Scotland. But these would-be New Scots have noticed a move northwards would cost them in higher taxes. Not ideal but they’re both in vocational careers; money isn’t everything to them.

Besides, isn’t the NHS better in Scotland? Not necessarily. Ninety-six per cent of A&E patients in Gateshead get seen within four hours; in NHS Lothian, it’s 82 per cent. What about schools for the children? Less than half of 13- and 14-yearolds in Scotland are performing well in writing and results for primary seven pupils are worse than four years ago. Maybe we should think this over…

If the SNP got its hands on the ‘levers’ of immigration tomorrow, its ability to sell migrants on Scotland would be hampered by the Scotland it has created.

The First Minister justified tax rises by appealing to the ‘social compact’ but her compact is one-sided: the voters agree to pay more but the Scottish Government fails to provide better services in return.

The SNP has severed the link between input and output, between taxation and a better society. Ask not what your country can do for you, ask what you can do for Nicola Sturgeon.

Opportunity

The Nationalists have got away with this for a long time but my senses tell me their luck is about to run out. As they become increasingly schismatic over independence, an opportunity may present itself for Ruth Davidson to put forward a sensible centrist alternative to another decade of Nationalist rule. Expect the Scottish Tories to talk a lot less about the constitution and a lot more about the economy and public services from now on.

Meanwhile, Richard Leonard will deliver a speech in Glasgow this morning aimed at coaxing Left-wingers away from the SNP. He will tell those who bought into the promises of socialism after independence the Nationalists deceived them.

Now their Growth Commission speaks the language of neoliberalism and abandons any hope for a radically different Scotland outside the UK.

Leonard’s challenge is to connect the SNP’s political shiftiness to the underwhelming economy it has delivered – it neither can nor is willing to pursue social justice. Once he does that, defectors can return to the Labour fold with the righteous indignation of the betrayed.

The SNP has prospered by being all things to all people but that same polysemic pandering now allows the Tories to damn them as tax-happy profligates while Labour assails them as sellout centrists. Pincered from Left and Right, threatened by internal strife, and failing to deliver, the SNP should at least be able to point to 11 years of competent economic management. That it can’t do even that is damning and is what will eventually cost it government.