2007 - 2020

Jeremiah Wilson and the Scottish Economy in Lockdown

WHAT’S the state of the Scottish economy three months into lockdown?  We got new hard data this week from the UK Office for National Statistics (ONS) and the evil Department of Work and Pensions (DWP), covering the quarter till the end of April.  The headline Scottish unemployment rate is now 4.6%, up from 3.1%.  The employment participation rate has fallen to 74.3% of the working age population, down nearly three quarters of a point.
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While the headline unemployment rate (4.6%) is higher than the UK rate (3.9%).  Predictably, this gave the Unionist media a chance to crow about how bad things were north of the Border.  The unemployment numbers were published at the same time as new GDP data for Scotland.  This showed that Scotland’s Gross Domestic Product contracted by 2.5% in real terms during the first quarter of 2020. This compares with a contraction of 2.0% in the UK.  The relatively worse performance in Scotland prompted Andrew Wilson (author of the notorious SNP Growth Report) to tell the BBC that Scotland would soon have “the worst performing economy in the developed world”!
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Andrew Wilson – a founding investor in the Charlotte Street Partners corporate PR firm as well as a key advisor to Nicola Sturgeon – makes a practice of being a Jeremiah preaching bad news. He thinks that the more “realistic” (i.e. pessimistic) the national movement is about Scotland’s economic prospects, the more the media and business community will come to respect and have confidence in the SNP and independence.  So far, there is little evidence Andrew’s approach is working.  The Unionist media was only to happy to seize on his vision of economic Armageddon as proof that independence is a daft idea.
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Others are more optimistic.  Amazingly enough, the anti-independence Fraser of Allander Institute at Strathclyde University was laid back about the new unemployment data, suggesting the numbers were less bad than expected.  The relative calm in the new Scottish data suggests the furloughing subsidy from the Treasury is protecting jobs – some 600,000 here.  Anyone “on furlough” is classed as being “in employment but temporarily away from work”.  It is what happens after the lockdown that is important.  We simply don’t know how many furloughed jobs will still exist when the economy unlocks.
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As to Scottish unemployment rising faster than for the UK, always remember the jobs data is compiled using a crude sampling measure which (in the short-term at least) is not reliable after the decimal point.  Never, never get excited about the first employment estimates – good or bad – because they will be revised ad nauseum in later years.  Which suggests Andrew Wilson’s rush to cry disaster is a mite premature, even if it garnered him the odd headline.
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As for the latest GDP estimate, there hangs a tale.  The numbers are “seasonally adjusted” and have price changes removed to allow for comparisons over time.  But this is only reliable if we are comparing two points in time when the economy is behaving normally. Alas, we have just seen the biggest economic shock to the global economy probably ever.  If anyone thinks you can “seasonally adjust” or properly calculate price changes, they are up a statistical creek without a slide rule.
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In other words, the latest GDP data is utterly unreliable, and Andrew Wilson should know that as a former economist with RBS.  As to Scotland’s place in the economic rankings, our 2.5% drop in GDP in Q1 certainly looks poor compared to Ireland’s 1.2% growth in the same period, but it is in much the same ballpark as Denmark’s 2.1% GDP contraction.
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To be strictly fair to Andrew, he actually said that the UK economy as a whole is set to be the worst performing anywhere, though he went on to stress that “Scotland’s probably going to be a bit worse because of the nature of our sectors and how the virus has behaved north and south of the border”.  That is what got him the dire headlines because the Unionist media is always alert to bad news in Scotland, true or false.
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To play Devil’s advocate, the makeup of the Scottish economy is indeed weighted towards industrial sectors that are being particularly hard hit by the lockdown and its aftermath.  In this Andrew is correct to a point.  In particular, Scotland’s extensive hospitality industry could be looking at the loss of tens of thousands of jobs.  Paul Waterson of the Scottish Licensed Trade Association warns that the current tide of redundancy announcements could turn into a torrent by August, with as many as 40% of jobs in the sector under threat.
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Ditto the oil and gas sector.  A total of 30,000 jobs are predicted to be cut from the industry by October 2021 as a result of the virus wiping out demand, with the heaviest losses being felt down the supply chain.  That’s a big hit.  The Scottish government has responded with a £62m support package has been unveiled to help oil and gas firms make a green recovery from the Covid-19 crisis.  The cash is focussed on the north-east and will be available over the next five years to help the industry deal with the “dual economic impacts” of the pandemic and crash in oil prices.
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There’s the rub, of course – a mere £12.4m per annum is not going to save or transform the situation.  It is a mere drop in the North Sea ocean.  Some good net zero projects will be helped by the new cash – such as creating a Global Underwater Hub, boosting the Acorn Carbon Capture and Storage project near Peterhead, and setting up an Energy Transition Zone in Aberdeen.  But converting a whole industry to net zero requires billions not tiny millions.
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Which brings us back to the inevitable conclusion.  Unless the Scottish Government can control all the levers of economic and financial management we are stuck where we are.  Everything points to a hard Brexit and a trade deal with America that favours Washington.  Rather than preach economic pessimism, the SNP leadership needs to be charting a rapid break with the UK.

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  1. Douglas Wilson says:

    It’s just the usual SNP double act routine: Nicola Sturgeon says one thing, and the SNP gov does another quite different thing entirely… Nicola pitches a few choice sounding social democratic lines in one direction, chiming with most Scottish voters, while the SNP actually goes about the business of running Scotland in another direction, a direction indistinguishable to that of New Labour..

    For example, Nicola Sturgeon says that she wants a fairer Scotland, while her husband and CEO of the party Peter Murrell commissions a Sustainable Growth Report to Andrew Wilson’s Charlotte Street Partners.

    Wilson isn’t even really an economist as far I can see. His CV is extremely vague on academic detail, but I would consider an economist to be someone who has actually studied the dismal science at Phd level, or Masters level at the very least – which is to say, someone well versed in theory, not just practice – and there is nothing like that on Andrew Wilson’s bio that I can see to suggest this (though maybe George can fill us in). Wilson’s Wikipedia entry mentions that he studied politics and economics at Strathclyde University, but that can hardly count as “being an economist”.

    So what justifies Wilson heading up a sustainable growth commission? Well, the man had two stints at the Royal Bank of Scotland as far as I can see, so that means he knows about banking, and the neoliberal view of the economy that goes with casino banking, but that really isn’t the same thing as being an economist, is it? By that definition, Alex Salmond is also an economist and so is almost anybody and everybody who has worked in banking. The only thing which is clear from Wilson’s CV is his vaunting ambition…. all those boards, trusts and charities he is on…

    It’s just the very tired and by now stale SNP double act routine which we are so used to by now and is testing the patience of hundreds of thousands of us, maybe even millions of Scots…

    It’s not at all inspiring and in fact extremely boring and tedious.

    I don’t know, is an independent Scotland something worth spending much time over given the evidence? I see nothing to get enthusiastic about in the SNP’s record in office. It is dismally conservative…

    1. Douglas Wilson says:

      PS: Correction, vaulting ambition not “vaunting”….

      But seriously, Andrew Wilson is not an economist by any normal definition. An economist will have published either books or academic papers which have been peer reviewed and thoroughly scrutinized by other professional economists. Has Andrew Wilson done any of that? No, I don’t think so. if he had, he would have been sure to plaster it all over his CV.

      Andrew Wilson heads up a consultancy firm, which is to say, he is in the business of presentation and packaging and marketing. He is a glorified window dresser. Nothing at all like an economist.

      Joe Stiglitz is an economist, you can buy his new book on-line and read what he thinks about the future of the euro for example. Thomas Piketty is an economist, and a very interesting one for a new independent nation State like Scotland aims to be.

      You might expect a government trying to persuade its citizens to tear up a 300 year old Union and embark on journey to full independence to take the matter seriously enough and set up a real independent growth commission – not some embarrassing joke of an old boys network cobbled together by Wilson and co – fronted by someone like Joe Stiglitz or Thomas Picketty (and no doubt there are others).

      But we don’t get that. We get Wilson and his Royal Bank of Scotland cronies and a gaggle of other second raters, who Peter Murrell tries to pass off to us as an expert commission when in fact what it really is, the Sustainable Growth Commission, is a big nasty stick to wield against the Scottish Left who want the kind of social democratic independent Scotland which Scots have been voting for all of my life, and never actually got…

      Wilson isn’t an economist. He is an ex-bank employee come promoter come bullshit artist…

      1. All true Douglas though it hasnt really worked. The Growth Commission is widely exposed and discredited.

      2. florian albert says:

        ‘the kind social democratic independent Scotland which Scots have been voting for all my life’

        Plainly, Scots have not been voting for an independent Scotland. The vote in 2014 showed that.
        I am doubtful that Scots are – in any real sense – social democrats. When a social democratic party, the SDP, was set up in the early 1980s, it did noticeably less well in Scotland than in England.
        Scots want a large public sector. There is a good bit more to social democracy than that.

        1. Douglas Wilson says:

          Sorry, I wasn’t trying to suggest the Scots voted for independence back in 2014 without any of us realizing it, you’ve misread me.
          The Scots have been voting to the left of England all of my life, you’re suggesting that it’s not for political reasons but out of some kind of tribal loyalty to this party or what, that it’s all about presentation and style and nothing about ideology? I think not.

          As for a more general point about the Sustainable Growth Commission, it is dreadfully lacking in ambition both in the composition of its members and its orientation at this critical time in human history in the country of Adam Smith no less. It is amateurish beyond belief. Adam Smith’s “Wealth of Nations” was an epoch changing book written to inform governments as to how they could increase the wealth of nations. It had a very practical purpose and was written to be read by policy makers. Smith researched it for 17 years and wrote it in 10. That’s ambition.

          Thomas Picketty might well be a comparable figure today, he is someone who is proposing a whole paradigm shift, like “The Wealth of Nations” was in its day.

          One of his ideas is to give every person once they come of age 25,000 euros (or dollars) or something like that, which is a lot better than a Baby Box. He proposes it as a way to equal out the huge inequalities in society, basically created by the inheritance of property. It is one of the many different ideas he has come up with to address vast social inequality which is actually bad for the economy according to Picketty.

          From time to time, someone in the press makes a reference to the Scottish Enlightenment and how we need a new one to move on to a new future independent country. We might start just by going back to the old one, and learning how it came about, how it functioned at a social level – the various social clubs were vital to the exchange of ideas – and look at how all of these very gifted thinkers came up with some very practical ideas about how to make our country, and others, wealthier and happier.

          It wasn’t just The Wealth of Nations. Sir John Sinclair’s Statistical Account of Scotland (1790), the first of its kind, described itself as “an enquiry into the state of the country for the purposes of ascertaining the quantum of happiness enjoyed by its inhabitants, and the means of its future improvement”.

          So, really, a well-being index or economy is nothing new EITHER…. but, certainly, nothing suggests Andrew Wilson has the profile to deliver anything like the kind of fresh thinking we need and why anybody pays any attention to him is a mystery to me (but maybe they don’t).

          1. florian albert says:

            Scots have been voting to the left of England for political reasons – but not social democratic ones. Scots support a statist economy. Scottish political culture does not value wealth creation must. 60 years ago, Scotland was much wealthier than Ireland. Now, the positions have been reversed.

            I have not read the Growth Commission Report. My understanding is that it was – in part – an attempt to nudge Scotland in the direction of more wealth creation.

            I am pessimistic about Scotland’s future. It is a country which wants the fruits of modern capitalism but has too little to contribute to the global economy. Not much more than a century ago, Scotland had one of the great industrial economies of the planet.

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