Governments must work together to boost economies

The Finance and Public Administration Committee at Holyrood is currently very heavily involved in analysing the trends within the Scottish economy.

It is a worrying picture which is evidenced by the following information from the Scottish Fiscal Commission (SFC).

The SFC forecast shows the income tax revenue funding shortfall which is expected over the next few years.

In 2022-23, the shortfall will be a loss of £190m, in 2023-24 this will have fallen to -£257m, and, by 2026-27, the income tax revenue shortfall is expected to be an eye-watering -£417m.

In its report, the SFC highlights four main reasons for Scotland’s failing economy.

Firstly, it points out that Scotland’s changing demographics present a real problem with a growing share of the population among older age groups, which means the percentage of people in the working population is falling.

Secondly, it highlights worrying issues about inflexibility in the labour market participation of younger age groups which, in turn, has a knock-on effect to the third issue highlighted by the SFC and that is slower growth in Scottish average earnings.

However, it is the fourth issue that is causing the greatest concern and that is the impact of the declining North Sea oil and gas industries which have traditionally been a very productive sector, delivering higher average earnings and, therefore, higher tax revenues.

Some of the current problems relate to long-term structural issues in the Scottish economy which, incidentally, were present long before Brexit or Covid, but some are exacerbated by current Scottish Government policy.

For example, the Scottish Government will no longer prioritise the sustainability of the oil and gas sector, thereby threatening thousands of jobs in the north-east and the accompanying investment that we so desperately need.

There was a day when the SNP made its case for independence on the income generated from oil and gas but that has now been blown out the water.

It is fair to point out that neither the recent IMF nor G7 forecasts for the UK were particularly strong either, but the Scottish trends are much worse and still lag behind the rest of the UK.

So both governments must work together to reverse the trend of falling income tax revenues to ensure we have the finances to invest in Scotland’s public services in the future.

Included in this approach must be much greater willingness on the part of the SNP to open the books and be transparent about where taxpayers’money is being spent.

We simply cannot afford another ferries fiasco – or the “loss”of the relevant paperwork–or the £40 mon the malicious prosecution of Rangers’ administrators, or the problems related to Bifab or Prestwick Airport.

It is little wonder that Audit Scotland is so concerned.

Part of that joint approach should be a welcome for the UK government’s Shared Prosperity Fund which is aimed at helping many of the poorer areas where employment is lower and investment weaker than elsewhere.

That money is desperately needed for economic regeneration -far more than being spent on preparation for IndyRef2 which most commentators believe isn’t going to happen any time soon.

A recent CBI Scotland productivity report found that Scotland was behind most other comparable nations in nine out of 13 productivity categories.

That urgently needs to be addressed.

Which is why the finance committee has been working so hard to scrutinise the public finances and issue warnings about what will happen if the serious failings are not addressed.

The SNP is very fond of the mantra‘Stronger for Scotland’.

If it really wants to deliver that then it needs to change its whole approach to economic policy-making.