The largest question which should face the SNP at its spring conference in Edinburgh at the end of this month – but probably won't – is the story the leaders tell Scots will be the likely economic situation in an independent Scotland. Now is the time to break the habit of a political lifetime, and present the facts – as far as they can be reasonably determined, about the future.
That the party's members have been fed a fatty diet of baloney, and seem to accept it, is their business. There's something of an honourable excuse: to be a responsible party member is, while one remains in place, to accept the party's policies – so long as party internal democracy provides plenty of space for argument and opposition. That this should be presented with a straight face to the public is another matter.
The most extreme example of SNP baloney was the extraordinarily energetic exercise of persuasion contained in the 650 pages of 'Scotland's Future' – the economic document produced just before the 2014 referendum on independence. From the preface by the then first minister Alex Salmond to the 387 end notes, the people of Scotland were flattered and seduced, showered with optimism and assured, over and over, that everything – economy, education, democracy, health, civil society, transport, environment, culture, media, social services, and relations with the neighbours – would vastly improve.
The first minister told the Scots that theirs is 'an ancient nation, renowned for the ingenuity and creativity of our people, the breathtaking beauty of our land and the brilliance of our scholars. Our national story has been shaped down the generations by values of compassion, equality, an unrivalled commitment to the empowerment of education, and a passion and curiosity for invention that has helped to shape the world around us. Scots have been at the forefront of the great moral, political and economic debates of our times as humanity has searched for progress in the modern age'.
That isn't baloney, but it's old: Scotland was at the cutting edge of the Western world in applied scholarship – creating new disciplines, as sociology and economics – in the 18th century. The great moral and political debates of the 18th and 19th century were disproportionately held in Scotland: and the number and quality of inventions – usually severely practical and useful – was extraordinary for a small and still poor country in the 19th and early 20th century, in part due to the quality of both school and university education. But that was then: now, the urgent challenge in Scotland is to grasp the relative failure of the education system – at the base of the country's poor performance.
Unionism is what Salmond, and the 'Scotland's Future' authors, wanted most to render irksomely confining. Thus the document claims that Scotland's public finances are markedly stronger than the rest of the UK; the GDP per head, with the receipts of oil added in as if Scotland were independent, one fifth bigger than the rUK; taxes in Scotland would remain at or below then present UK levels and pensions would be increased; 'health inequalities' – a shorter life expectancy, especially for men – would be reduced by the creation of an independent, fairer society; money saved by sharply reducing spending on defence and expelling the nuclear submarines and warheads from the base at Faslane, on the Clyde.
There is much else in this vein. The claims are rarely without some foundation: but they depend on optimistic assumptions, of Scots post-independence capacity, world economic conditions and a settlement with rUK favourable to Scotland. They also depended on a large revenue from oil, estimated for 2016/17 at between £6.8-7.9bn: actual revenue was £0.2bn. This was the easiest claim to refute, since it was precisely spelled out; but oil revenue goes up as well as down, and the oil price rose from 2017 onwards, making the estimated revenue to Scotland, had it been independent, to be around £1bn – a modest bonus for an independent Scots Treasury, but on a spend approaching £50bn, no more than that.
The second pass at a description of Scotland's economy after independence was published in May 2018: the Sustainable Growth Commission (SGC) report was authored by Andrew Wilson, a former MSP and head of a successful consultancy, Charlotte Street Partners. The report he wrote was overseen by a 14-person board which contained five academic economists: it was by common consent, including its many critics, much more realistic than 'Scotland's Future'. It did, however, firmly say that Scotland would, in a decade or a little more, join a group of rich, small Western democracies – Denmark, Finland and New Zealand – as an equal in GDP. It would also would join the EU and would be able to sustain, or better, the level of social and public service provision the country presently enjoys within the union.
Within the SNP, Wilson has been a leading moderate and pro-business voice – arguing for the continuation of 'Britishness' as a cultural attachment for Scots even after independence and insisting that an independent Scotland would need to be an unambiguously pro-market economy. More than most other senior SNP figures, he is part of the Scots – even British – establishment: he was head of communications for the Royal Bank of Scotland and took a senior position in the PR company WPP. He is the opposite, both in person and in past political positions taken, of a shining-eyed zealot: he has written in support of Scots supporting English teams in international matches (except when playing Scotland, of course), an unpopular stance within the SNP, and in broader Scots society. He is a fellow of Scotland's Chartered Institute of Bankers, as well as the London-based Institute for Fiscal Studies.
The last of these organisations, in commentary on the SGC report, praised its relative moderation and sobriety but was politely sceptical of its optimism. An '
observation' by David Phillips, an associate director, thinks it 'sensible' that the report bases its projections on the Government Expenditure and Revenue Scotland (GERS), the official description of the country's public finances; commendable that it uses the Office of Budget Responsibility forecasts for public expenditure, quoting its figure of 7.1% as the deficit in 2021-22 – that is, the gap between the receipts and the expenditure of the Scots government, one presently covered by the Barnett Formula.
This would be – were nothing else to change – the deficit Scotland would carry when independent, and shorn of the Barnett money – three times higher than the present UK deficit. The SGC reduces that figure to 5.9% on various assumptions – with which the IFS 'could quibble' – but, taking one thing with another, Phillips concedes that the projections are 'not implausible'.
What is implausible – though the IFS doesn't use such language of its fellow's report – is the report's assertion that a reduction of spending of 4% would see the deficit fall to 2.6% in 10 years, but would avoid the current 'austerity' visited upon Scotland by the UK government, because public spending would still continue to rise in real terms.
Phillips writes that it's: 'inconsistent to claim that these plans do not amount to austerity but the UK government's current policy does. While the UK government did reduce total public spending by an average of 0.2% a year in real-terms between 2009–10 and 2016–17, since then, it has eased off somewhat. Between 2016–17 and 2022–23, total public spending excluding debt interest payments is forecast to grow by an average of 0.7% a year in real-terms. The commission's proposals for 0.5% increases per year therefore look remarkably like an extension of current policy in the UK: indeed they imply slightly slower real growth in spending than the UK Government is currently implementing'.
The economic slogan the SNP could most truthfully promote in a future referendum would have to be: 'It's Scotland's Austerity'. Between the lines, the IFS argues, the SGC is arguing for greater austerity for Scotland than that planned by the UK government.
Though a 2.6% deficit doesn't seem much, and many countries, including the UK, can run one of that size or larger for years, they are able to do so because of their size, their past record and their assumed ability to service the debt. Smaller states, especially unproven ones as Scotland would be, don't have that luxury and probably wouldn't get away with carrying it for years. To eliminate it, however, would take almost another decade, with growth of spending held at 0.5% – another long bout of austerity.
The other assumption, however, is that Scots GDP growth will be about 1.5% – double the UK's figure for 2017-18. But if Scotland leaves the UK and joins, (or re-joins) the EU, it will, says the report, avoid the hit the UK will receive when it leaves. But the report doesn't discuss the much larger loss of a considerable proportion of the more than 60% of its present trade with the rest of the UK, four times more than EU trade. Trade, of course, wouldn't cease with England, Wales and Northern Ireland – but the loss would be substantial, likely to be more than any quick – or even longer-term – gain from increased Scotland-EU trade.
The prominent (Scots-born) economist and Financial Times columnist, John Kay – a former member of the SNP's board of economic advisers – wrote that the SGC report was 'like watching a teenager grow up' – leaving behind its fantasies of success and glory – in this case, the 2013 'Scotland's Future' – and beginning to confront life as it is and will be. Yet even so, the SGC 'falls short of presenting an economic case for independence'; Kay notes that 'Scotland needs a single market with England more (than with the EU)'.
Kay's gentler critique finds a match in a longer and more detailed analysis by John McLaren, an economist, former adviser to Scottish Labour and now a visiting fellow at the University of Manchester: McLaren's periodic 'Scottish Trends' reports provide a sharp and informed commentary on the Scots economy. He has worked with Andrew Wilson, and even provided a paper for the commission's deliberations, on Scottish balance of payments – though had no hand, he writes, in the final report.
He thinks the SGC report is right to say little on oil, since future revenues will be limited – even an oil price of $100 a barrel would yield a revenue to government of only £3bn. He sees the fiscal projections as appropriately modest, and the pro-migration policies liberal and sensible. But he thinks that the costs of health, social care and education will rise more quickly than foreseen, that the SGC underestimates future debt and that there is 'a lack of analysis of the negative implications of breaking up the UK free trade area'.
In an interview with me, McLaren was highly critical of the accountability of Scots politics and society: he doesn't think there's the close attention and a resulting critical commentary essential to a developed democracy. 'There's far too little holding to account. The parliamentary committees worked okay before the SNP took over. The opposition parties are branch parties with little money or expertise. The press had been tough on us when I was a special adviser – but now they, too, have no money. "Newsnight Scotland" had been quite good, but now they fill it with celebs and sports stars. The think tanks are few, small and only one – the Fraser of Allander Institute – has the resources and expertise to do well on the economy.'
McLaren said that 'everyone accepts that the Growth Commission report was a lot better than "Scotland's Future". It accepted the challenge: said there would be a decade of austerity. The biggest criticism came from the SNP left – they had been deprived of the promised land. The focus of the report and the very fact that it's more realistic means that the party is worried about losing part of its support. Will it lose the harder left, who think it’s all about austerity? Or the hard-line nationalists, who just want to get out and think it’s too cautious. The squeeze might come on them from Corbyn's Labour party – people returning to it now it's more radical. (John) McDonnell (the shadow chancellor) made a speech last week saying the SNP is now the austerity party:
"The detail is where the report came unstuck. The small country stuff was fluff – meaningless. And – an example – health spending in a country like Scotland will have to rise by three to 4% a year – and GDP growth is put at 0.5%. People don't know about debt but they do know about health – and if they demand more, what gets less?"'
The economy is a large part of how people live. How Scots will live if independent is unlikely to be as comfortable as the nationalist leaders' forecasts promise. This is the more urgent, as every forecast of the European and the world economy is grim – and they get grimmer. The party conference in Edinburgh this month is the time for frank speaking.
