Scotland Needs an Industrial Strategy

We shouldn't let business decide what’s best.

by Adam Ramsay

27 May 2024

Scotland’s new First Minister John Swinney and Deputy First Minister Kate Forbes, May 2024. Lesley Martin/Reuters

SNP support has plunged in the polls after Humza Yousaf’s shenanigans, followed by John Swinney’s ascent to the first minister’s office and his appointment of Kate Forbes as deputy.

As recently as 2021, while Nicola Sturgeon was going through her lengthy Covid love-in phase, the party was consistently sitting on around 50%. Indeed, it managed 48% of the constituency vote in the 2021 Holyrood election. Now, the latest Westminster survey puts it on 29%, 10% behind Labour.

For the party’s MPs, these figures mean panic: should they play out, the vast majority will lose their jobs. There will be a few causes for hope: Labour is doing what it can to control Scottish candidate selections from its London HQ. Perhaps, the thinking goes, as voters find that Keir Starmer has dumped a snivelling Blairite turd on their doorsteps, they might decide they prefer their SNP incumbent. Maybe, as in England’s local elections, Gaza will play more of a role than the polls are picking up, and the SNP’s broadly anti-genocide position – compared to Labour’s support for arming child murderers – will help out some of its MPs.

But maybe not. Perhaps the SNP is genuinely facing a Westminster wipe-out on the scale Scottish Labour experienced in 2015. With most voters now seeing the parties as fairly similar, it is certainly possible.

For SNP MSPs, and so the Scottish government, there is a little more time to turn things around: the next Holyrood election isn’t due until 2026, and the gap in the polls isn’t quite as stark. Perhaps – they will be hoping – 18 months of Starmer in Downing Street will be long enough for Scottish voters to remember why they went off his party in the first place.

But it would seem foolish to rely on that.

A simple way to understand what has happened is that the SNP has ridden the four great crises of the last two decades tremendously well: the bank crash, the independence referendum, the Brexit vote and Covid. But because the party was consistently convinced it was on the verge of winning independence, it never really developed a serious strategy for governing within the confines of devolution.

Instead, the SNP has adopted a sort of continuity Brownism: let the market do what it will, and try to redistribute the proceeds.

The results are decidedly mixed. One success is the Scottish government’s changes to the tax and benefits system – sometimes under pressure from the Scottish Greens. Among the poorest 30% of households in Scotland, those with children are now, on average, £2,000 a year better off than their English and Welsh equivalents due to measures the human-geographer Danny Dorling has described as the most significant attempt to reduce child poverty anywhere in Europe since the fall of the Berlin Wall.

And yet real terms median wages in Scotland are £10 a week lower than they were in 2008.

For where there is a vague economic strategy, it obsesses with ‘foreign direct investment’, as though selling off your assets is necessarily a good thing. The result, in reality, has been a disaster: ensuring that overseas capital owns our means of production, and profits are sucked offshore. As Common Weal’s Craig Dalȝell has shown, Scotland has experienced a net outflow of wealth every year since records began in 1998 – totalling around £277 billion. The only other advanced economies with similar levels of extraction are tax havens. The most recent example of this came from the Scotwind fiasco – where the rights to vast offshore renewable assets were undersold by billions.

And as the economist Laurie Macfarlane points out, actual investment (‘gross fixed capital formation’, to use the jargon), rather than foreign capital buying up our assets, is just 18% of GDP: one of the lowest rates in the OECD, and on a par with Europe’s economic basketcase: the rest of the UK.

There is a clear solution to all of this: the Scottish government needs a serious industrial strategy. For years now, countries across the western world have been using the levers of the state to steer broad national economic strategies, drive investment and transform their industries. Ever since the 2008 economic crash, the idea that the free market knows best and should be left to get on with it has been replaced across the planet with muscular government setting clear direction.

The Scottish government’s meek approach of leaving it up to business to decide what’s best (beyond a few flimsy strategy documents) has long felt anachronistic. But as the SNP leadership surfed each of the major crises of the last two decades, they never had to renew it.

It is absolutely true to say that the Scottish government doesn’t possess all of the powers it needs to deliver all of the elements of what might be involved in constructing a full industrial strategy. Most notably, it’s hard for Holyrood to borrow.

But it does have a lot of power, and it already owns a lot of industry: unlike in England and Wales, in Scotland we own our railways and water.

Any serious industrial strategy will need a broad understanding of the economy in which we actually live, and the one we need. It will need to address the crises in child and elderly care as well as the climate and nature emergencies. That means revolutionising how we do nursery school and vast public transport expansion. It will require the expansion of Scotland’s Green Investment Bank, and bold decisions from ministers.

And the good news is that one of the main barriers holding private investment from following public investment has gone. For decades now, Scotland’s economy has been plagued by rapidly rising house prices. The result was that anyone who came into some capital would pump it not into something productive, but into speculating on the housing market, and rent extraction – that is, the buy-to-let market.

As in England, the housing market has stalled in recent months. Investors are, largely, a cowardly herd, in need of leadership. If the Scottish government steps up, it can drive a transformation of our economy. And that could save its electoral prospects, too.

Adam Ramsay is a Scottish journalist. He is currently working on his forthcoming book Abolish Westminster.

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