Tommy Sheppard | MP for Edinburgh East

Scottish independence: Boris Johnson cannot maintain the Union by coercion rather than consent

In 2016, Nicola Sturgeon announced that there would be a Growth Commission to explore Scotland’s economy and the potential that might occur after Independence. Andrew Wilson chaired the commission and in May this year they published their final report – you can read it in full here.

There have been many commentaries on the report, from different political persuasions. Below is my contribution – written for the Scottish Left Review in July 2018.

“Criticising the Growth Commission report for not being left wing is somewhat missing the point. It was never meant to be a manifesto for a socialist Scotland. And it isn’t - nor is it SNP policy. There’s good and bad in the report and a lot that needs more debate and thought. Without doubt, though, it has provoked a necessary contemplation about the economics of independence.

If anything, the Growth Commission asks not how to transform Scotland’s economy but whether it is possible for Scotland to become an independent country without fundamentally changing the economy. Its objective is to widen the political base for independence.

Let’s start with two big qualifiers though. The first is it doesn’t really matter who says what now; the whole point about independence is that people get the government they vote for. So whether Scotland runs a left or right-wing economic policy after independence is up to the Scottish electorate. Admittedly that decision will have a genesis that starts now, and it is up to all sides to start putting together convincing propositions.

Secondly, whilst many – I’d have thought most – on the left now see the merits of independence, it is very much a means to an end. No-one ever argued that independence would of itself achieve transformation of the socio-economic structures which exist today. All independence provides is a better toolkit for socialists. A more advantageous starting point for change with the aspirations of the people of Scotland decoupled from a Conservative majority in southern England.

So, for people like myself there are two questions. How do we create a political majority for independence, and then, how do we use the powers of independence to achieve social and economic change. It’s best not to get the answers mixed up.

There are some positive suggestions in the report which everyone on the left should welcome. An emphasis on boosting immigration into an independent Scotland as a driver of growth in population and GDP is essential. Setting serious and ambitious targets for reducing poverty and ending the gender pay gap is not seen as an add-on to economic policy but central to it.

The two areas that have provoked the most hostile criticism are the prescriptions to reduce the spending deficit and the intention to use sterling for an interim period before establishing an independent currency.

Let’s take the deficit first. Some question whether a deficit even exists. It’s certainly true – in fairness, as the report acknowledges – that the official GERS (Government Expenditure and Revenue Scotland) figures are a description of a regional economy within the UK and at best can only be an estimate of the budget of an independent country. There are many things wrong with using GERS to calculate a deficit. But the political point is that if we use the figures which have ‘til now been owned by our opposition then we effectively silence them. GERS offers in effect a worst-case scenario for the finances of a newly independent Scotland. But, if it works on this basis, then anything that’s wrong with GERS becomes a bonus.

The report does makes several important adjustments to GERS, such as reducing defence spending, and suggests a measure of the probable actual difference between current Scottish spending and revenue is about 6%. It aims to reduce this over ten years to 3%. Now, some have said that even if there is a deficit there’s no need to set targeted reductions for it. But there’s nothing left about running a deficit if you don’t need to and once spending and income align then it’s easier to have a debate about shifting the proportion of GDP that goes to the public realm.

The report proposes to steadily reduce the deficit by stimulating growth and suggests that public spending should grow by more than inflation. This means a real terms increase in spending on public services each year as compared to a real terms cut each year since 2010. It’s also worth noting that North Sea revenues have been taken out of the equation altogether to create an investment fund of up to £5bn over the first ten-year period. Spending that on infrastructure would offer an additional stimulus to growth, meaning the targets could be achieved quicker. And, of course, the report is politically neutral in that it does not suggest either raising or cutting taxes – do that and things move even quicker. Calling this a prospectus for austerity is just wrong. Austerity is when you aim to reduce the deficit by a real terms contraction in public spending.

Perhaps the most problematic aspect of the report is currency. Critics are right to point out that there are many dangers in using a currency you have no control over. It leaves an independent Scotland hitched to the British economy and at the mercy of its turbulence, which might be very rocky indeed depending on how Brexit pans out. But, in truth, what would be the real difference between this and an agreed sterling zone where Scotland has a say in the governance of the Bank of England. Do we really believe a vote on the Monetary Policy Committee will make that much difference?

The only real alternative proposed by critics of the report is to go straight to a Scottish currency during the transition period. But no-one should pretend this is simple and we would need to be prepared to defend the new currency against devaluation, which in turn means major borrowing at less than optimal rates from markets that would be sceptical at best and hostile at worst. But, as others have argued, the scale of this could leave a Scottish government financially strapped for a generation.

The merit in delaying the introduction of a Scottish currency is that the new country has time to establish competence and stability perhaps engineering a situation where markets have sufficient confidence to take a benign attitude towards it. If that sounds like playing by the rules of capitalism, it is. But in case no-one has noticed, they run the world a fledgling Scotland would be entering.”

SNP members will now have the opportunity to debate the report at three National Assemblies taking place in the late summer. You should have received an email from Keith Brown providing the dates and information on how to register.  The wider Yes movement will also be consulted as we all consider our vision of the economics of an Independent Scotland.

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