The Growth Commission: First impressions
While we look over full report in more depth, here are some of the main take aways from the SNP’s independence blueprint.
It’s been masterminded by lobbyist Andrew Wilson, and is widely regarded as a victory for the SNP’s right wing. The report looks at 13 ‘small economies’ over a period of 25 years. It has already drawn scorn from economists, including pro-independence economists like Richard Murphy. The white paper was criticised for being all things to all people - this time the right wing is firmly in the driving seat.
The commission has recommended that the deficit be cut to 3% of GDP. This is a requirement for ascension to the European Union. But getting Scotland to a mere 3% will be a tall order: Scotland’s deficit currently stands at 8%. The commission argues that means ‘disciplined finances’ rather than austerity, but when you’re using another country’s currency, that’s one and the same. So a lot of pain in the short term, but what about the long run? As Keynes said, in the long run, we’re all dead.
‘Flexible’ Labour Markets
The countries examined range from nordic social democracies to free market utopias like Hong Kong and Singapore. They’ve committed to ‘flexible’ labour markets, but with ‘strong protections’. Unfortunately these two goals are at odds with each other - flexibility is a euphemism for cutting red tape and removing protections.
They commission’s attempt to square this circle rests on ‘flexicurity’ - the ability to hire and fire, but with a strong welfare state taking up the slack. This takes the power out of hands of workers and unions and puts it firmly in the hands of bosses. It was widely criticised in Denmark during the recession for failing to live up to its promises. It shifted the risk from entrepreneur to worker, and removed sectoral wage bargaining.
Tax Breaks for rich immigrants
This commitment has already drawn criticism, particularly as taxes have increased in Scotland. But without spending cuts, because they’ve committed to reducing the deficit, further tax rises will be needed just to maintain current public spending. This is essentially an invite to oligarchs.
Sterlingisation, which we covered on Sunday, means using sterling without any say over monetary policy. In essence, this means the Bank of England sets Scotland’s interest rate, and that the UK economy would determine Scotland’s exchange rate. It also means that all of Scotland’s debts are denominated in a foreign currency, which means, you guessed it, austerity. Can you see a pattern here?
We’ll be bringing you in depth analysis of the commission once we’ve gone over the full paper. But this report is already a million miles away from the Nordic utopia promised in 2014 - less Norway, more Hong Kong in the North Sea.