The state of Scotland
The ruling party north of the border has grand ambitions but a lousy record in office. Can the new first minister turn things around? Simon Wilson reports
What’s happened?
The Scottish National Party’s (SNP) new leader, Humza Yousaf, set out his priorities in his maiden speech to the Holyrood parliament as Scotland’s first minister on Tuesday – promising a “fresh start” that would “seize the opportunities of net zero to build a green wellbeing economy”. Yousaf, formerly the health minister under Nicola Sturgeon, said his government would reduce poverty, support small businesses and use all his government’s power to mitigate the effects of what he called the UK’s failed economic model. But the speech was overshadowed by the ongoing ructions engulfing the governing party (see page 10). Hours before Yousaf delivered his speech, police arrested the SNP’s treasurer, Colin Beattie, for questioning over the party finances.
What’s going on?
Beattie’s arrest was part of a police investigation that has heated up in recent weeks, with the arrest for questioning of the party’s ex-chief executive, Peter Murrell, who is Nicola Sturgeon’s husband. The inquiry relates to complaints and allegations made over the party’s use of a £600,000plus fund raised by activists that was supposed to be ring-fenced for campaigning on Scottish independence. No one has yet been charged, but the arrests of Beattie and Murrell, and the police search of Murrell and Sturgeon’s Glasgow home, have destabilised the already fractious party.
How has the SNP done to date?
The great paradox of the nationalist cause, says The Economist, is that a “movement which dreams of building a wholly new and different state” has, after 16 years in government, a distinctly modest record of improving the existing one. On education, where Scotland used to boast attainment levels well above other similar rich countries, its performance is now distinctly average. According to the Pisa rankings, where teenagers sit a standardised test, it has now fallen behind England in both maths and English. Meanwhile, the share of 18-yearolds going to university has grown faster in England, despite Scotland using public funds to underwrite free tuition. Scotland has lower and falling life expectancy, compared with England and European peers, while deaths from drug misuse have trebled since 2007 to more than 1,300 a year. Scotland spends 27% more per capita on public services than England, and 13% more than Wales. To afford this, it relies on fiscal transfers from the UK. Yet Scotland has one of the lowest life expectancies in western Europe, and the highest proportion of preventable cancers in the UK.
Can Yousaf turn things round?
The signs aren’t good. Scotland’s biggest challenges are economic, and many of the UK’s problems are amplified north of the border, says Melissa Lawford in The Telegraph. For example, almost a third of economically inactive people are out of work because of ill health, compared with a quarter in England. Meanwhile, Scotland faces a greater demographic challenge, with an older population putting more pressure on taxpayers, and GDP growth forecast to be consistently below the UK’s for the next 40 years (according to the Scottish Fiscal Commission, the official spending watchdog). Since the UK devolved power to Holyrood 25 years ago, Scotland’s growth has trailed the rest of the UK. Stripping out the offshore oil industry, GDP has risen 38% since 1998 versus 48% for the UK as a whole, on Bloomberg figures. Scottish GDP per capita rose 11.5% between 2010 and 2019, compared with 14.7% in England, 13.8% in Northern Ireland and 18.3% in Wales. Critics say Yousaf, a self-described “socialist” with no business or economic experience, is hardly the man to get to grips with the challenge.
How are the government finances?
Terrible, with a deficit at 12% of GDP – double the UK’s 6% and far higher than the single-digit norm in most European countries. “The outlook for the Scottish government’s budget, even within the union, is really, really difficult,” says David Phillips of the Institute for Fiscal Studies. According to Phillips, Holyrood faces a funding crunch in 2024, and government funding will fall year-on-year by 1.6% for the next four years. Yousaf’s government can’t expect a growth spurt to turn this round. The Scottish Fiscal Commission forecasts five years of weak growth all the way to 2027-2028 (when it predicts the growth rate will still be just 1.5%). Graeme Roy, chair of the commission, warns that long-term structural issues, such as the ageing population, will hold back Scotland’s prospects relative to the rest of the UK.
Could they put up taxes?
Income tax is higher than in England, and the gap widened this month – increasing the risk that the wealthy will head south. The higher rate is now 42% (40% in England) and it kicks in at just £43,663 (£50,271 in England). The additional rate is now 47% (45% in England); this kicks in at £125,140. Overall, says the IFS, the SNP’s tax and benefit changes mean the richest 10% of households will be £2,590 poorer in the current fiscal year than English and Welsh counterparts with the same income, but the poorest 10% will be £580 better off.
“The SNP dreams of building a new state, but has a poor record of running the existing one”
Is independence the answer?
Independent economist Richard Marsh, who worked for Nicola Sturgeon’s Sustainable Growth Commission and advises the Scottish government on statistics and modelling, recently produced a report concluding that a Scottish exit from the UK would lead to significant fiscal consolidation – meaning hefty spending cuts or a combination of spending cuts and tax rises. Marsh’s central estimate is that leaving the UK would cost Scotland over 250,000 jobs, a near £30bn hit to economic output, and a loss in gross value added of more than £16bn. In other words, secession means the Scottish economy “shrinking by at least 10%”, says John Ferry in The Spectator. “Talk about shock treatment.”