Scotland’s National Strategy for Economic Transformation (SNSET) was delivered by the Scottish Government in April 2022, plotting a course for Scotland’s economy for the next decade. It is in danger of being forgotten or at least overlooked. In this post, we detail what it contained.

I have to admit to being initially very sceptical of an economic strategy that took the constitutional status quo as its starting point, especially as it was to be delivered in the same year as an announcement on an independence referendum. Couldn’t the Scottish Government have waited so that it could be the first economic paper plotting a  transition under independence? 

However, there is an argument for the “status quo” approach (if not the actual timing of the paper) that makes sense. There are things that the Scottish Government can do now to start to transform the Scottish economy and should a no vote be delivered in a referendum, this strategy would still be valid (assuming that powers weren’t stripped from Holyrood post defeat).

From a political point, rather than an economic one, It is great to see a Government trying to cover all of the bases and not being blinded by what it would “like” to happen. It the definition of getting on with the day job!

So to put this paper into some context, let’s look over the Irish sea – as we often do when we talk about how other small nations are doing. Almost 75 years ago, a civil servant named TK Whitaker delivered the Programme for Economic Expansion to the Irish Government. It was pretty much a one-person effort and was written in a personal capacity to save the civil service any embarrassment should it be laughed out of the room. There were no laughs, only tears, as Whitaker laid bare the problems facing Ireland:

“Without a sound and progressive economy, political independence would be a crumbling façade.”

So successful was Whitaker’s 250 page strategy that it is still revered, discussed, and debated in Ireland today. For a complete discussion, listen to one of our guests David McWilliams chatting to Fintan O’Toole.

After reading Scotland’s version, there is no doubt that fate has a different role for Kate Forbe’s vision. The Scotland’s National Strategy for Economic Transformation report will slip into back drawers and dusty folders. The reason is not the determination to write a worthwhile strategy, but rather that the Scottish Government is trying the impossible: economic transition without the ability to pull all of the most critical levers. In essence, the report is set up to fail.

A score of Scottish Government papers are expected to be delivered over the next twelve months (the first one Independence in the modern world – Wealthier, happier, fairer: why not Scotland? dropped in June) assures that not only will the grand vision fail, but it will also quickly be forgotten. 

Back to Whitiker. He produced a truly remarkable strategy, delivered to a Government overseeing an economy in a truly dire state. Owing to the very different political times and economic conditions – Ireland in 1958 with its small agricultural economy doesn’t resemble Scotland’s mid-sized multi-sectoral economy in 2022 with a GDP per head bang in the middle of OECD countries (1). So perhaps that alone makes the comparison unfair.

However, the Scottish Government often views Ireland – it’s referenced a remarkable 117 times in the “Independence in the modern world” paper – as an inspirational economy and SNSET includes a line that Whitiker could have written all those years ago:

“The time for brave and bold action is now” 

The Scottish Government have set up the comparison with strategies that proved to be both brave and bold. Other Scottish Government documents mention SNSET saying it is an “ambitious ten-year agenda of economic transformation” (2). 

There is much to admire about the strategy

It is a reasonably lightweight document – 56 pages in total (less than a quarter the size of Whitiker’s report), but it packs a punch:

Scotland will “significantly outperform the last decade” in terms of GDP.

This sums up the whole report. It is shamelessly growth-based, which, as we will cover in a later blog post, creates a clear conflict with the environmental niceties also mentioned in the report. 

However, when it comes to growth, most people are looking for that upwards line: the more growth the better. Bold and brave be the Government that launches a transformation strategy that doesn’t supercharge GDP!

The report has five policy programmes:

  •  establish Scotland as a world-class entrepreneurial nation founded on a culture that encourages, promotes and celebrates entrepreneurial activity in every sector of our economy;
  • strengthen Scotland’s position in new markets and industries, generating new, well-paid jobs from a just transition to net-zero;
  • make Scotland’s businesses, industries, regions, communities and public services more productive and innovative;
  • ensure that people have the skills they need at every stage of life to have rewarding careers and meet the demands of an ever-changing economy and society and that employers invest in the skilled employees they need to grow their businesses;
  •  reorient our economy towards wellbeing and fair work, to deliver higher rates of employment and wage growth, to significantly reduce structural poverty, particularly child poverty, and improve health, cultural and social outcomes for disadvantaged families and communities.

These are powerful policy statements. “Fair work”, “high rates of employment”, and “well-paid jobs”. This is inspirational stuff for part of the wider UK economy where one in five, or over 5.5 million people, earn below the real Living Wage (3).

Perhaps the most explicit message that comes from the report is the desire to grow the economy primarily to reduce poverty. It is a significant moment to see this in black and white in a major economic paper from the Scottish Government, and for that alone, this is a document that should not go unnoticed.

The transition of the economy is also solidly placed within a Just Transition framework (leaving no one behind as we decarbonise our economy) with a clear focus on upskilling to make the most of the innovations from industry.

Scotland’s Finance Minister outlines on page 4 how Scotland’s economic transformation would take place during a “decisive decade”: now really is the time to transform our economy. 

The report focuses on the Scottish industries that are currently doing well and supports specific sectors with significant potential for growth. 

This transition will be achieved via a planned partnership between Government, business, international capital and communities. There is a clear realisation that the Scottish Government can only do so much and the report sees the Scottish Government as the captain of “team Scotland” helping allocate resources and putting labour and capital in the right places including the role of the Scottish National Investment Bank which we have covered in relation to natural capital. 

The Scottish Economy is desperately in need of significant investment. As the Scottish Government is not a currency issuer, an economic strategy has to focus on pulling in external capital to invest in Scotland. The country has to be seen as a place where capital likes to hang out, a place which is “good for investment”.

There’s a sense of confidence, maybe even gallusness, about the report as it focuses on Scotland’s strengths, from its history as a trading nation to the depth and wealth of its natural resources.

There is an incredible 77 action points within the report. The Government has committed to 72 of these, with the other five to be carried out by Business and Partners. They range from “promoting the best available project-based entrepreneurial learning across the school and post-16 education curricula” to “Providing an efficient and resilient digital infrastructure.”

These 72 actions show that the Scottish Government is set to invest significantly in time, resources and finance to transform Scotland’s economy. There is much to commend the Scottish Government for these wide-ranging commitments. If a score or more of the most impactful action points were completed successfully, Scotland’s economy would undoubtedly grow.

Already some of its action plans are in place and Kate Forbes’ announced the adoption of a wellbeing monitor to sit beside GDP measurements only a few months after the report.

What did others think of the report?

After its publication, we discussed it with Dr Lucas Hardt to see what the Transform Our Economy Group thought of the report. You can head straight to the 3min discussion here as part of a wide ranging episode:

 

 

Here are the ten things that his group wanted to see in the strategy:

1. The goal: wellbeing for all within environmental limits

2. Setting specific economic objectives to care for people and the planet

3. Using all the tools available to Government to meet those objectives

4. Policies must show how the objectives can be achieved

5. Combat economic pressures which are helping cause the problems

6. Public priorities must lead the direction of development of the economy

7. Clear tests for all investment programmes

8. Measure performance through metrics which matter

9. An economic strategy for all sectors – economic transformation as a national mission

10. An inclusive and participatory process

After scanning the April report, I scored it one out of ten. And Lukas tended to agree.

I am sure even Kate Forbes would agree that judging the report by these progressive measures would see the report fall short. And that was always likely to be the case. This is a report based, secured, and proudly underpinned by neoliberalism and the desire for Growth.

It will be different this time round

The message of the report is that growing the economy will reduce poverty. But unlike the last decade, growth this time will be fairer. 

Another way you could frame this is to say the Scottish Government wants to ‘level up’. I know independence-supporting readers will be thinking, surely not! But unfortunately, at its heart, the economic strategy for Scotland places its hope at the feat of the same false neoliberal God as the UK’s failed economic strategy. 

By increasing the size of the pie, the Scottish Government will ensure that everyone gets their share. For this lesson, please turn to page one of the totally debunked neoliberal playbook. Most OECD countries (all following a neoliberal doctrine) have seen income inequality widen during the past two or three decades. (4)

As well as the neoliberal-minded strategy, it is also underpinned by some favourite neoliberal buzzwords. ‘Productivity’ (51 times) and ‘productive’ (18 times) pepper the report. The Scottish Government even wants to appoint “Productivity Ambassadors” No, it really does! 

Entrepreneur/ial is mentioned a whopping 79 times, which is pretty impressive for a 56-page document. 

The vision is for Scotland to become a more productive, entrepreneurial nation. But one with a heart. It is strikingly similar to David Cameron’s “compassionate conservatism” and his vision for the UK in the early 2010s.

You can see the neoliberal overtones everywhere you look. Attract capital, pay healthy profits and allow the workers and communities to reap some benefits. In fact, Scottish Government money has the role of “crowding in” international capital, effectively underpinning foreign investment and giving it a pleasant, comfy low-risk environment.

The report significantly focuses on attracting private capital, including international investment. As Scotland does not issue its own money, this is the only way that Scotland can realistically attract the finance necessary to invest in the economy. 

Scotland could replace some of this capital with public funds if it were monetary sovereign. Unfortunately, this most crucial economic fact is not directly mentioned in the National Strategy for Economic Transformation.

The acknowledgement that Scotland lacks all of the levers to transform the economy points to a different strategy post-independence

“Our ability to address these long-term structural challenges is made more difficult by a lack of economic powers.”

The report highlights the significant issues the Scottish Government has in transforming the economy, as many of the most critical powers reside in London. There are five areas mentioned in the report:

  1. Unable to directly affect change in the labour market 
  2. Without migration powers, the Scottish Government cannot design and implement an immigration system to address the demographic challenges.
  3. Few macro-economic levels – the ones that really make a difference.
  4. Lack of control over energy policy (how can you do a Just Transition without this?) and finally
  5. The majority of revenue-raising powers sit in Westminster.

There is much to admire about the strategy, but it can only be seen as being “bold” if you hold a very classical neoliberal view of what will work to transform Scotland’s economy.

In reality, the strategy is like changing the doors and the windows on a house with subsidence. To truly transform Scotland’s economy, the Scottish Government needs to take a very different approach from what has, over the last forty years, proven to have damaged our country and the planet.

The report not only highlights the nutered nature of a devolved administration but underscores that once independent, Scotland must issue its own currency.

In a future post, we will dig deeper into the report, focus on the issues with a growth-based strategy, and cover what was missing from Scotland’s National Strategy for Economic Transformation.

REFERENCES:

(1) Fraser of Allander, 2019. [online] Scottish GDP Guide. Available here: https://fraserofallander.org/scottish-gdp-guide/

(2) Scottish Government, 2021 [online] A fairer, greener Scotland Programme for Government 2021-22. Available here: https://www.gov.scot/publications/fairer-greener-scotland-programme-government-2021-22/#:~:text=We%20will%20take%20forward%20an,a%20driver%20of%20fuel%20poverty.

(3) The Living Wage, 2020. [online] life on low pay. Available here: https://www.livingwage.org.uk/sites/default/files/LWF%20Life%20on%20Low%20Pay%20Report_0_0.pdf

(4) OECD, 2014. [online] growth and inequality close relationship. Available here: https://www.oecd.org/economy/growth-and-inequality-close-relationship.htm