ourEconomy: Opinion

Scotland must use its devolved powers to turbocharge a green recovery

Instead of squabbling over irrelevant statistics, the Scottish Parliament should unite behind a bold programme of economic transformation.

Laurie Macfarlane
27 August 2020
The Scottish Parliament, Edinburgh.
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Image: Graeme Pow, CC BY-NC-SA 2.0

In recent years politics has become increasingly unpredictable. But in Scotland, there are some events that can be predicted like clockwork. One of them is the annual controversy surrounding the publication of the Government Expenditure and Revenue Scotland (GERS) statistics.

This week saw the publication of the 2019-20 set of figures, which estimated Scotland’s notional fiscal deficit to be 8.6% of GDP. In what has become a regular feature in Scotland’s political calendar, the ensuing debate generated a lot of heat and precious little light. For those who want Scotland to remain part of the UK, Scotland’s large deficit is incontrovertible proof that Scotland cannot afford to become an independent country. For supporters of independence, the same figure illustrates how Scotland’s economy has been woefully mismanaged as part of the UK, which only strengthens the case for going it alone.

The reality is rather less exciting. While the GERS statistics provide valuable information about Scotland’s economy under the status quo, they tell us little about how things would look under hypothetical future arrangements. With polls showing support for independence rising, the debate about Scotland’s constitutional future isn’t going away anytime soon. But in the meantime, there is the small matter of a global pandemic and related economic emergency to deal with. And time is of the essence.

Like the rest of the UK, Scotland is staring in the face of the deepest recession in living memory. As with so many crises before it, the impact of COVID-19 has fallen unevenly along gender, race, and class lines. While the virus itself may not discriminate, the economic model we live under does.

Next week, the Scottish Government will set out its priorities for the year in its Programme for Government. There are no doubt some who would like to see the economy return to normality as quickly as possible. But attempting to restore the status quo would not be a neutral act – it would be an active decision to deepen our multiple crises. Any plan for economic recovery must aim to tackle the fractures in Scotland’s economy that long predate COVID-19. The Scottish Government has acknowledged this, stating that “the economic crisis provides an opportunity to re-imagine Scotland and to begin building a greener, fairer and more equal society: a wellbeing economy.”

Turning this rhetoric into reality will require a radical departure from the economic orthodoxy of recent decades, and an armoury of bold new policies to transform how Scotland’s economy operates – and in whose interest.

Attempting to restore the status quo would not be a neutral act – it would be an active decision to deepen our multiple crises

To this end, this week Miriam Brett and I published a new paper outlining a series of policies that could be introduced under the present devolved settlement as the first step towards building a new economic consensus.

At the core of this must be a public-directed programme of rapid decarbonisation that builds the foundations for a zero carbon future. This means supporting a managed phase out of oil and gas as part of a jobs-led just transition; scaling up Scotland’s renewable energy potential; rapidly decarbonising the housing stock; and moving towards low carbon ways of producing value, such as investing in the caring economy.

It also means breaking with the model of privatisation and outsourcing that has been such a crucial component of the UK’s economic model in recent decades. While the Scottish Government has taken ownership stakes in firms on an ad-hoc basis, as in the case of Ferguson shipyard and Bifab, there is a need to move away from a patchwork of individual interventions and towards a broader strategy to integrate democratic public ownership at the heart of a comprehensive, planned transition to a new economy. In addition to taking sectors such as rail and social care into public ownership, this should also include establishing a new public-led model of development to build a new generation of affordable, zero carbon housing.

There are also synergies that can be exploited from pursuing a more joined-up approach to state intervention. One example is transport. Scotland’s largest bus manufacturer, Alexander Dennis, recently announced that it will be cutting up to 650 jobs due to the economic impact of the coronavirus pandemic. With transport now the highest-emitting sector in Scotland, a key priority is to accelerate the decarbonisation of existing transport networks, and invest in the roll out of low carbon alternatives.

An obvious solution is for the public sector to place a large order of green electric buses, which would provide a lifeline to Alexander Dennis. At the same time, the Scottish National Investment Bank could be called upon to provide the company with debt and equity to ramp up production to meet this new demand. Scaling up the roll out of low carbon buses across Scotland in this way would have the dual benefit of aiding the economic recovery, creating jobs and reducing carbon emissions.

Similarly, the Scottish Government should take proactive steps to prevent struggling but otherwise viable Scottish SMEs from becoming insolvent or falling into the hands of multinational incumbents and predatory capital. Failing to do this could result in greater concentration of Scotland’s business landscape, and further decline of Scotland’s towns and high streets. Here a range of solutions are possible, including establishing a state holding arm of the new Scottish National Investment Bank to take equity stakes in struggling but viable firms; creating Public Commons Partnerships to bring underutilised assets into productive use; and repurposing properties made vacant by COVID-19 into part of the social housing stock.

Devolved budget constraints mean that there are limits on the ability to introduce all of these policies at once. But that’s not an excuse for inaction: Rome wasn’t built in a day, and Scotland’s economy won’t be transformed overnight. But it must start now.

There are also a range of policies that would not require any upfront spending, and could even raise revenue. This includes passing a Community Wealth Building Act to scale up the economic strategy being pioneered in North Ayrshire across the country; introducing an immediate rent freeze and subsequent rent controls to tackle spiralling rents; and overhauling local taxation to replace business rates and council tax with more progressive alternatives.

Taking Scotland’s land reform agenda forward will also be key, not least because it is essential to the zero carbon transition. Much of the land that would be suitable for nature restoration in Scotland is currently managed as part of private estates for grouse shooting or deer stalking. Measures that can be taken to tackle Scotland’s concentrated pattern of landownership include introducing an upper limit on the total amount of land in Scotland that can be held by a single private landowner; strengthening the existing Community Right to Buy powers to enable communities to acquire land at below market values; and granting local authorities the legal power to issue Compulsory Sale Orders.

Scotland does not have the full array of powers it needs to fully transform its economy. But it is clear that the suite of devolved powers it already has could be used far more strategically to turbocharge a green recovery. Instead of squabbling over irrelevant statistics, it's time for the Scottish Parliament to unite behind a bold programme of economic transformation.

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