The depth and breadth of Scotland’s economy
Today the Scottish Government has published a new economic analysis showing the depth and breadth of Scotland’s economy, which confirms that Scotland’s got what it takes to be a successful, independent country. And, as the paper points out, despite this wealth and potential, “despite our significant array of human, financial and natural resources we are not as prosperous a country as we should be”.
Scotland’s long term growth rate has lagged behind the UK as a whole and our economic performance has also trailed other countries of a similar size to Scotland. This is despite the fact that these other similar nations have no greater pool of talent and no more resources. The advantage they have is that they are independent and able to take decisions suited to the needs of their own economy – delivering better results over the short, medium and long term.
Speaking today, First Minister Alex Salmond highlighted, “our economic strengths - our ingenuity, our natural resources and our advantages across a range of growth sectors" meaning "that we should be confident about our economic prospects as an independent country”.
As Scotland’s Fiscal Commission Working Group – made up of leading economists from around the world, including 2 Nobel Laureates – made clear: “….by international standards Scotland is a wealthy and productive country. There is no doubt that Scotland has the potential to be a successful independent nation.”
The UK’s one-size-fits all economic policy, with all the key decisions taken in Westminster, deprives Scotland of the levers it needs to set our economy on a path to higher growth and employment. But these advantages will come with independence – this will be one of the main gains of being independent, allowing us to make the most of Scotland’s many blessings and strengths, creating more jobs and opportunities for people across Scotland.
As the First Minister sets out, “a Yes vote will mean endorsing the view that people who live here - equipped with the powers that other countries take for granted - will do a better job of running Scotland than politicians in London".
Scotland can well afford to be an independent country. As even those who argue against independence now acknowledge, the viability of an independent Scotland is not in any doubt. The Prime Minister, David Cameron, has said:
“Supporters of independence will always be able to cite examples of small, independent and thriving economies across Europe such as Finland, Switzerland and Norway. It would be wrong to suggest that Scotland could not be another such successful, independent country.”
Scotland has strong financial foundations – we are in a stronger fiscal position than the UK as a whole over the last five years to the tune of £12.6 billion.
Scotland has enormous potential. The paper highlights them, including our natural resources, our world class university sector, our highly educated population, our global reputation and our strong growth sectors.
It is also clear that the status quo is not working. There is a dangerous geographic imbalance within the UK that holds Scotland back and growing income inequality that has a negative impact on growth and prosperity. This means families across Scotland are facing greater financial pressure than they should be: today, because of Westminster policies, people in Scotland are losing out.
This is the result of the weaknesses of current and past UK economic policy. Scotland is being held back economically in the Westminster system. The consequences of not becoming independent will be damaging for our economy in the future.
In contrast, the powers of independence will better enable us to harness our economic strengths and fulfil our economic potential.
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Key parts of the report:
A competitive economy and a fairer society: two sides of the same coin
We believe our economy must be both more competitive and fairer. Indeed, we believe tackling inequalities will enhance our competitive position by increasing opportunity and participation.
In a report published in 2011, the OECD concluded:
“Income inequality among working-age persons has risen faster in the United Kingdom than in any other OECD country since 1975.”
The Fiscal Commission Working Group was clear about the impact of the growing gap between rich and poor:
“Such patterns of inequality will continue to have a negative impact on growth and prosperity over the long-term.”
The Westminster system has also generated another stark inequality: the gap between the best and worst performing areas of the UK – a gap which appears to be bigger than other comparable countries – with London becoming increasingly dominant.
In these circumstances it is the Scottish Government’s contention that a “one-size- fits-all” economic policy has neither worked in the past nor is it the best prescription for the future.
Economic policy-making: six examples of why Westminster isn’t working for Scotland’s economy:
- The failure to establish an oil fund for future generations. Norway has been able to use its oil wealth to establish an oil fund, now worth close to £450 billion, equivalent to approximately £90,000 per person.
- The decision to allow the UK economy to engage in, in the words of the current UK Business Secretary, a “massive boom in credit and debt expansion” which allowed a “very dangerously unstable position” to develop. Over the period 1996 to 2007, household indebtedness in the UK rose from 103 per cent of gross disposable income to 176 per cent in 2007 – a rise of 71 per cent – the highest level of all G7 economies.
- The decision to allow income inequality to grow dramatically. Research, based on United Nations findings, has shown that the UK has the fourth highest level of income inequality among the world’s richest countries with a population of one million or more.
- The decision to concentrate so much economic activity in London and the South-East of England, which, according to the current Prime Minister, is “fundamentally unstable and wasteful”.
- The decision to impose a policy of austerity on Scotland, which according to the former Chancellor, Alistair Darling, is causing “immeasurable damage” to the economy.
- The decision to cut capital spending. The Scottish Government’s paper points out that had capital spending been maintained at 2009-10 levels in real terms it would have supported an additional 19,000 jobs.
You can find out more about the strength in depth of Scotland’s economy – strengths that should be adding up to a higher standard of living for families in Scotland.Independence - Scotland's Future In Scotland's Hands
The purpose of becoming independent is to deliver a more successful economy, with the benefits felt by people across Scotland. That means an economy that is diverse and grows sustainably, with high value jobs that pay decent wages, leading to greater equality of income and wealth and a higher degree of social cohesion.
A. Why countries of Scotland’s size can and do succeed – when they are independent
The UK government says:
“Economic size is not, in and of itself, an important driver of an economy’s success.”
However, there is interesting evidence that shows small countries (defined as having populations of less than 20 million) have been particularly successful in recent decades.
The economic development specialist, Dr David Skilling, noted last year that, “these small countries currently make up 11 of the top 15 advanced economies by per capita income, 4 of the top 5 positions in the World Economic Forum’s global competitiveness ranking, and 14 of the top 20 positions in the UN’s Human Development Index.”
He has suggested a number of reasons these countries have succeeded. For example, they “tend to adopt a more deliberate policy approach that is focused on competing in the global economy", and they also understand, he says, “that their economies need to be distinctive in some way.”
The report points out that there are some characteristics which successful northern European countries seem to share: “they have a strong external focus and are active globalisers.
They have relatively high levels of trust and have lower income inequality. They have effective government.
There is a strong emphasis on innovation and technology.”
In contrast, Westminster economic policy-makers have been criticised for, among other things, creating an economy which fails to invest sufficiently in research and development, which has high levels of inequality and which runs large trade imbalances. As the Scottish Government argues, “perhaps more fundamentally, the policy framework for an economy of the size of the UK is simply inappropriate for a country of Scotland’s population”.
B. Policy Levers in an Independent Scotland: the benefits of integrated policy
The evidence tells us that the “lack of policy levers has constrained the ability of Scotland to perform as well as it could have over the past few decades”.
Other similar European countries have been able to implement economic strategies designed for their particular circumstances and based on their own priorities, involving a wide range of policy levers “alongside incentives for innovation and R&D, all of which were aligned well with education policy and set within a tailored set of industry regulations. These strategies were able to focus on each nation’s specific strengths and addressed any barriers facing them”.
With so many economic and social levers remaining in Westminster’s hands it has not been possible to pursue the same effective strategies for Scotland. Being independent will allow expenditure and tax policy to work together. The Scottish Government makes clear that policies are likely to be more effective if public expenditure is able to work in tandem with reforms to the tax, welfare or benefits system.
An independent Scotland would be able to bring together financial and other policy tools to make Scotland a more prosperous nation. These include:
- Oil and Gas Taxation
- Excise Duty
- Value Added Tax (VAT)
- Air Passenger Duty
- Capital Borrowing
- Welfare and Social Security
- Corporation Tax (base and rate)
- Public Sector Pay/Pensions
- Capital Gains Tax
- Rural and Environmental Taxation
- Consumer Protection
- Industry Regulation
- Energy Markets and Regulation
- Implementation of EU Legislation
- Competition Law
- International Trade
- Public Provision and Procurement
The Herald reports that the Yes campaign has been “boosted” after the chief executive of insurance giant Aviva said the referendum was not an issue for his company. Mark Wilson, whose firm employs 2500 staff north of the Border, said last night: "We operate all around the world and in many jurisdictions and in many places so I really think that's not an issue for us to focus on."
Mother-of-two Pat Bremner explains why she has decided to vote Yes on 18 September.
Mark Wilson, Chief Executive of the UK's biggest insurance company, Aviva "We operate all around the world and we operate in many jurisdictions and in many places"
There is a hauntingly familiar ring to the No campaign’s attempts to recruit business leaders to forecast woe and destruction after a Yes vote for Scottish independence. I, for one, have been through it all before.