Three key reasons why growth report fails to add up
THE aims of the report by the Sustainable Growth Commission are clear: to create a credible plan for an independent Scotland; to convince us that, as an independent nation, Scotland can be among the great small nations of the world; to put the disaster of Alex Salmond’s absurd referendum economic white paper into the past; to persuade us.
The job has been done much better this time. Pick a sensible, decent chairman, surround him with some relevant academics, perfectly gender balanced Nationalistinclined business people and then produce a document so lengthy, so comprehensive, so well presented that nobody actually reads it in detail. The report becomes tablets of stone, its conclusions to be debated but not the rightness of its arguments or the rigour of its analysis.
The report is well written and isn’t all bad. The case for a Scotland more open to immigration is well made and right. Some of the micro policy initiatives are also worth further development.
The report accepts Scotland’s fiscal position is difficult and a public spending bonanza not on the cards. This speaks directly to No voters, who sensed in
2014 that Salmond would lead us on to the economic rocks. This starting point also annoys the extensive socialist fringe of the SNP. Hardline Nationalists flouncing out of the party as a result of the report are exactly what the SNP want. If a reasonable No voter sees the loonies on the Nationalist side hate the report then surely the report must be sound?
Which is why it is rather disappointing, having fought your way past the elegant prose, quotations from third parties, graphs and summaries to find that the economic foundations on which the report is built are not sound at all.
There are many flaws but let me give you three of the key ones:
The report says an independent Scotland would not start off with any Government debt because the very nice English said in 2014 that they would deal with that. Except they didn’t. In 2014 investors holding UK Government debt were questioning who would stand behind what they were owed in the event of a Yes vote and the UK Treasury confirmed they would do so. What this does not mean is that an independent Scotland would be let off its share of the debt and only need to pay an Annual Solidarity Payment.
The second giant dollop of wishful thinking is on growth. For years Scotland’s economic growth has lagged that of the UK but, according to the report, its Mcviagra all round for the Scottish economy and we accelerate past the tired old UK.
We are assured the more positive growth aspirations are not built into the figures – but neither is a recession and, even more so, neither is the dire effect on the Scottish economy of decoupling from the UK single market. Look at Brexit, a divided UK Government and country damaging its economy as it extracts itself from the EU which it has been a member of for less than 50 years.
The truth is that Scotland leaving the UK, cutting ties that have lasted for more than 300 years, would be much more disruptive to our economy than Brexit – and disruption cuts jobs and growth. Where the report finally falls on its face is the currency issue. For about 10 years we will freeride on the back of sterling. We could do that but, in doing so, we would not be emulating Sweden or New Zealand but instead we would be in the company of Montenegro, Monaco and Zimbabwe. Is this really progress?
We would have no lender of last resort so we could have no banks. As a result, all of our credit would come from foreign banks. What happens when a crisis in England makes the English banks reduce their foreign lending? The consequences for Scotland would be truly catastrophic.
The real schoolboy error in the report is its proposal that after a few years of hanging on to sterling we would move to our own currency. This will not happen. If a country joins the EU – I assume still SNP policy? – one of the things it has to sign up to is the euro. Not immediately, it can keep its own currency for a transitional period but one day it must use the euro.
If we follow the report’s recommendation an independent Scotland joining the EU would have no currency. The EU will not permit in a million years a new member to transition away from a currency borrowed from a non-member state to anything o ther than the euro. It is fantasy – obvious fantasy – to pretend otherwise. The real currency choice in the report is the euro. Please, let us not go there.