Does Scotland have an economic plan B?

There’s an awful lot of scary news out there regarding the economy.

Apparently we missed a double dip recession by the skin of our teeth.  In the last few months of 2010, the country ground to a standstill – all that snow remember? – and the economy went into reverse.  The first three months of 2011 experienced willo’ the wisp growth, a paltry 0.1%, which lagged behind the UK as a whole which had (drumroll please) nearly half a per cent of growth to celebrate.

All those commentators (and politicians) gnashing their teeth about the SNP Government’s performance are conveniently ignoring the fact that for years now under devolution, Scottish economic growth has been less than the UK’s.  Yes, the SNP came to power in 2007 promising to address this but that was before the big crash and recession of 2008 and beyond.

Still, some growth has to be good news, particularly when set beside decent employment figures.  There have been fewer people losing their jobs than we expected and more people getting jobs.  Cue much head scratching, especially since economic wisdom suggests that unemployment is a lag indicator.  In other words, given the recession, the weakness of key economic sectors, higher prices and public service cuts, we should be experiencing jumps in unemployment.  Why are we surprised that a recession that was caused unconventionally is behaving unconventionally?

It may be that this good news is only partial, with many of the supposedly new jobs being part time ones (I suspect that many of them are actually full-time ones being converted into part-time, hence the lower unemployment and apparent jobs gains).

In this area, Scotland is definitely trumping the UK, and our unemployment rate has just fallen below the UK average for the first time in aeons.  But do GDP growth and employment tell the real story of what is going on?  While the wonks examine their spreadsheets, flowcharts and graphs for evidence, the economic state we are in can also be discerned by taking a real time look at real lives.

People – real people – are not going on holiday;  they’re staying put in the houses they have, nor are they buying stuff for their homes; they are not spending anything much in the shops, except on food, and even then they are skimping and cutting back.  Despite all this cutting back, their debts are growing, credit is hard to get or maxed out, wages are largely frozen, many are being squeezed by welfare and tax changes, and others are seeing their pensions and savings shrivel.  Women in particular seem to be suffering the worst consequences;  by default, that means children are too.

The figures can say what they like – folk are definitely telling us they are not feeling good about their current finances nor the future outlook.  Some of the current scrimping is a display of caution.  It might be bad now but we all know it’s going to get a whole lot worse before it gets better.  Definitely a safety first approach being taken.

And as we limp along financially in the real world, in the political hothouse, the Scottish Government is growling impatiently at the UK Chancellor demanding to know where the plan B is.  As sceptical as the rest of us, that the ConDems plan A of sucking the financial blood out of everything using a leech-like approach  to individual well-being and public services, the Scottish Government would like a plan for growth that enables more capital investment and allows jobs and wealth to be created.

The SNP is right – or at least I think so, being Keynsian minded – to call for one.  So far, it has been single minded in its pursuit but their economic approach is also a bit one track.  Efficiency savings + no compulsory redundancies + public sector capital investment = growth (in a nutshell).   But what if the savings run out?  What if the only way to save money is by sacking people?  What if the UK Government does not hear the pleas for more money to invest in infrastructure?

In short, are there options and alternatives sitting in John Swinney’s in tray?  If the current Scottish Government plan doesn’t work, does he have an economic plan B for Scotland?

Yes, McPlan A is kind of working at the moment but it is pretty marginal.  If things are this tight and we are yet to be hit by the really big dips in Scottish budget allocation, then what hope for our economy when we hit rock bottom sometime about 2014?   The private sector can hardly be described as being in rude health – is it really going to be in a position to pick up the slack from the public and third sectors?

The Scottish Government’s plan is predicated on pretty common sense economic proposals but to work fully, it needs the UK Government’s help.  In short, the SNP’s McPlan A can only really work if the Tories do produce a plan B.  But if the UK Government insists on sticking to its plan A, surely it makes it imperative that the SNP prepares a McPlan B of its own.

Just in case.

8 thoughts on “Does Scotland have an economic plan B?

  1. UK Plan A is suicidal and McPlan A has only a limited shelf life. My suggestions would be to wallpaper over George Osborne and continue with a McPlan A but only while there are infrastructure maintenance and improvements worth doing. These should probably focus on transport and housing.

    For the avoidance of doubt this does not extend to a tramway. I would halt that and redesign it as non-fossil fuel only lane – just for a laugh.

  2. Some links to various ‘Limits to growth’.

    There is no growth left in the world as we have known it and what is left is being shared by an ever increasing world population. If we accept that prognosis then one work to find an equitable solution otherwise when the crumbling ledge finally gives way who knows.

  3. Independence so the SNP can slash corporation tax is hardly a Plan B.

    Best bet is to use the substantial (and workable) powers in the Scotland Bill, but Swinney isn’t exactly a Keynesian. He’s not economically illiterate like Osborne and accepts the central insights of 20th century economic development but can you see him raising income tax rates when we get them back? Can you see Alex Salmond letting him?

    I’m biased, but I think the SNP are playing this more for positioning than honest disagreement about broad economic strategy – remember they want to cut corporation tax even further, which would have to be balanced by more cuts to services.

    • He’s not economically illiterate like Osborne and accepts the central insights of 20th century economic development but can you see him raising income tax rates when we get them back?

      Ha ha not like GB the historian who thought that borrowed money goes on the income side whilst the cost is kept hidden showing an overwhelming ‘profit’!

  4. Independence

    • Ah yes, so it does. But then if it’s a referendum in 2015 and how many years til it actually happens – at best another two or three… we are talking 2020.

      My request for a plan B was somewhat more immediate. Are you seriously suggesting you are happy for the country to go to rack and ruin while waiting for independence to “solve” it?

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