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15 April 2003
Growing the economy - instead of milking it
The Scotsman, Leaders, 15 April 2003
(Filed 15 April 2003)
www.land-care.org.uk
www.scotsman.com
AS THE fog of the Iraq war dispels, smack in our
path is revealed a big iceberg called the deteriorating Scottish
economy. We are headed toward this calamitous ice mountain at full
speed, but the politicians on the bridge seem oblivious. Yesterday
came two more pieces of bad news for Scotland. First, the Royal
Bank of Scotland announced that private sector output - covering
manufacturing and the service sector - contracted in March for the
third successive month in a row. Ominously, the 570 companies polled
by the Royal reported a decline in overall employment. The main
causes are rising input prices and a drop in business investment
arising from the fall in consumer spending. This recessionary trend
is exemplified by the sudden closure of the Motorola plant at South
Queensferry.
The second piece of news is that Scotland’s
small and medium-sized enterprises are now the worst-performing
in the UK, contributing the lowest amount to Britain’s GDP
and recording the largest drop in staffing levels, according to
a new survey published by the accountancy firm PKF. This data suggests
that the Scottish economic deficit is not purely the result of external
factors such as the international situation. Rather, it implies
that despite investing half a billion pounds a year in the Scottish
Enterprise agency, the Executive is no nearer than it ever was to
improving Scottish productivity.
Why is this crisis not at the centre of the election
debate? The answer is partly that most Scottish politicians are
too fixated on bribing the electorate with the electorate’s
own money, rather than rolling up their own sleeves and fixing things.
Few MSPs had any personal experience in business. None of the mainstream
parties is willing to contemplate serious cuts in income tax or
business rates to offset rising business costs and boost consumer
spending. The Labour/Lib Dem coalition spent four years in office
talking about improving transport infrastructure but actually did
very little because it lacked a sense of urgency. That indifference
to the economy has to change, and quickly, before we hit the iceberg
and the economy sinks.
What action can be taken? A good start would be
to recognise the sheer magnitude of the economic problem. For its
part, Labour is still mostly in denial. The Scottish Secretary of
State, Helen Liddell, euphorically hailed last week’s Budget
with the words: "Today’s Budget builds on the foundation
of economic stability created over the past six years." The
closure of Motorola, recession in the private sector, and a failing
SME sector constitute a funny kind of economic stability. Perhaps
Ms Liddell has been taking lessons from the former Iraqi information
minister, Mohammed Sadaf.
True, the First Minister has talked about making
economic growth his priority. He might begin, when he meets Mr Blair
this week, by asking for a reduction in the crippling 10 per cent
increases in national insurance contributions which have just kicked
in. It is surely no accident that this coincides with UK retail
sales falling for the first time in four years. It is now more clear
than ever that the Scottish Parliament needs a greater degree of
fiscal control, to make our politicians focus on growing the economy,
not milking it. And to provide the tools to motivate our private
sector.
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