Scotland’s economic policy is in crisis

by | 15 Sep 2021

More news of industrial failures casts a harsh light on how well economic policy in Scotland is performing

Failure in Scotland’s economic policy must now be accepted as endemic. The rate and consistency of economic outcomes which indicate something being seriously wrong and the repeated failure to create or deliver policy to correct this should now be a matter of urgent national concern.

Today we learn that the Scottish Government is commissioning two ferries but there is already no chance that they will be built in Scotland. Last week the news that plans for a National Energy Company (which would have provided a vehicle for capturing renewable energy manufacturing jobs in Scotland) was being dropped came almost simultaneously with the closure of the only remaining wind turbine manufacturing capacity.

Last month Scotland saw two domestically-owned high growth potential start-up companies sold to foreign corporations. The Scottish National Investment Bank, designed by Common Weal to address these kinds of problems, is doing the opposite (it’s latest loan is to a multi-billion-pound London-registered private equity company which will be selling forestry services to large landowners in Scotland).

Meanwhile the Scottish Government is constantly setting up new ‘advisory groups’ with almost exactly the same remit as the advisory group each is replacing. But in each case the recommendations of the previous advisory group seem not to have been taken seriously, producing a revolving system of initiatives on top of an almost static economic policy.

The result of this is a barely-navigable clutter of poorly interconnected initiatives which do not sum up to a coherent policy landscape. This clutter is almost universally condemned and yet the response to condemnations is to produce a new initiative which increases the clutter.

Failure in Scotland’s economic policy must now be accepted as endemic

This creates a cyclical failure in which Scotland’s economy is faced with a number of serious structural problems but the nature of these structural problems has the effect of prolonging the policy agenda which is creating them.

Looking at just today’s news we can see these playing out. One of the major structural problems with Scotland’s economy is low rates of domestic ownership. The UK has one of the lowest rates of major business ownership in the developed world and Scotland has a much lower rate of major business ownership than the UK.

This creates a hollowed-out domestic industry base – as we see in so many cases like BiFabMcVitie’srenewable energy manufacturing and now shipbuilding. We do not have the critical mass of industry to sustain a workforce and be competitive so when the Scottish Government forces price-led competitive tendering on public procurement, Scottish business fails to win the contract, preventing these industries from growing to a critical mass – and so round and round it goes.

Scotland has generally low rates of manufacturing and no coherent industrial strategy and so workforce training and development is largely unconnected to strategy for what is ahead. Today the Scottish Government claimed that one of the biggest barriers to decarbonisation in Scotland is workforce limitations – a point made forcefully by Common Weal in 2019 when we counted and costed the scale of need.

We indicated that the only way this could realistically be addressed is through coordinated public action – training, supply chain development (another barrier ahead), planning, surveying and delivery all integrated into an industrial strategy for decarbonisation (with an added social policy element making it a Green New Deal).

But the Scottish Government didn’t act. In fact it started to do the opposite – indicating that it was aiming to withdraw the public sector from electric vehicle charging infrastructure. It is now for the free market to deliver this, or at least that’s what the Scottish Government hopes.

Underneath all of this, the crucial concept of Community Wealth Building and the need to prioritise smaller, domestic businesses is paid lip service but is largely absent as a key plank of public policy. Even worse is the seeming disinterest in the regions of Scotland being left behind – Dumfries, Galloway, the Scottish Borders, Ayrshire, Fife and many other places are not served by the corporate-friendly policies of government nor the ineffectual and too often self-serving enterprise networks.

Scotland seems utterly disinterested in the big economic debates playing out in the world

On top of this Scotland seems utterly disinterested in the big economic debates playing out in the world. The IMF is issuing warnings about the threat to recovery of dominant economic monopolies and there is a fast-growing debate about the extent to which globalisation is in retreat. Many economists are taking increasingly critical looks at the economic impacts of wealth concentration, private equity at the global level, property ownership at the domestic level.

And these are only a few of the debates a nervous world is engaging in which Scotland seems to sit out. Perhaps this is unsurprising in a nation which does not seem to have a single, widely identifiable ‘economic commentator’ and where economic debate is largely reported by political correspondents who do not properly understand the issues on which they’re reporting.

This is why Scotland’s economy is measured largely through the politically-charged lens of deficit comparisons with the rest of the UK and not in terms of its own economy and what is happening in it. Thus most people broadly know that something is not right but they don’t really know what it is.

Today’s loss of ferry contracts should be a wake-up call, but so should have been almost everything since Scotland failed almost entirely to achieve anything like the number of renewable energy jobs which politicians promised in the past.

The most sensible voice on this has actually been Jim McColl. He has not pulled punches in expressing his view that the Scottish Government is PR-led, short-term in its thinking and lacks an obvious vision beyond photoshoots.

To understand what this means in practice it is worth reading the link this analysis began with in conjunction with this one. In it, McColl’s former Director of Business explains that a large part of McColl’s plans for Fergusons were about loss-making investment now to develop future capacity so that the entire business is not a purely political one (trying desperately to build a ferry to save political embarrassment) but a serious ongoing economic prospect.

Today’s news shows Fergusons has taken the political patch-up route, not the sustainable business one. Unfortunately, in Scotland, this leads to calls for heads to roll (though no-one is ever held accountable in Scotland) but not for a fundamental, root-and-branch rethink of the nation’s entire industrial strategy.

And yet nothing short of a root-and-branch rethink is going to get us out of the perpetually-recurring litany of failure.

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