2007 - 2020

Benny’s Blueprint for Scottish Capitalism

THIS week saw the publication of the Higgins Commission report to the SNP Government, outlining proposals for rebooting the economy after COVID-19.  Mr Higgins is the former boss of Tesco Bank and current chair of Buccleuch Estates, Scotland biggest feudal landowner.  He is also the FM’s top economic advisor, being also a leading member of the Scottish Government’s Infrastructure Commission.
Read the full report here: “Towards a Robust, Resilient Wellbeing Economy for Scotland: Report of the Advisory Group on Economic Recovery”.
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The Higgins Report received a morning’s worth of tepid headlines before disappearing from the news agenda.  It’s proposal for a limited job guarantee for 16-25-year olds garnered most of the press attention, but the vagueness of the idea left the pundits with little to say.  Most of the 70-odd pages of the report (plus 40-page statistical appendix) consisted of reheated data on the likely impact of the lockdown on the economy (“bad”), complete with coloured diagrams.  The report is written in the verbose, repetitive, jargon-ridden style typical of Scottish Government documents.  I bet Benny never sanctioned such a rambling document during his time at Tesco.
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I suspect the real reason the media trail went cold on the Higgins Report is that its recommendations are now in political limbo till the Scottish Government digests them and issues a verdict sometime towards the end of July.  As there is no prospect that the economic situation is getting any better – indeed, the secondary infections spring up around do not bode well at all – I would suggest that any caution and delay on the part of the Scottish Government would be dangerous.  Bold steps are required to keep the economy going.
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Alas, the Higgins Report is sketchy at best, despite attempts by some SNP elected members to talk it up.  My old mate Alyn Smith MP called the Higgins Report “a rich and energising series of real ideas to get out teeth into”.  Had he read?  At the same time, Alyn damned (with the faintest of faint praise) the alternative and fiendishly detailed Common Weal proposals for restarting the economy, saying they were “interesting, as far as they go”.
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For the record, the multi-part Common Weal plan for restarting the economy is not only longer than the Higgins Report but comes complete with a forensic economic model as guide plus detailed sectoral proposals.  Read it here.
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[see also the Wellbeing Alliance’s critical response to the report here: ‘WEAll Scotland’s Initial Response to the Scottish Government’s Recovery Report’ – Ed]
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The SNP Government should give as much attention to the Common Weal plan as to Higgins. I trust the relevant Holyrood committees will take evidence from both.
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HIGGINS’ BIG IDEAS
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What are the “big ideas” in the official Higgins Report?  Buried deep in the report’s appendix is a key starting point: In 2016, public and private investment in Scotland was a miserly 17% of GDP.  That is the fifth lowest investment rate among EU countries – only Greece, Cyprus, Portugal, and Lithuania invest less. In fact, Scotland ranks 118th in the world for investment.  Without capital investment we are condemned to low productivity, flat-lining incomes and no ability to build the good society.
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Of course, the blame for this is a UK economy based on financial manipulation – gambling, in other words – rather than making things.  Eventually, as happened in 2008, our speculative economy will implode.  Certainly, independence is a necessary waypoint in escaping from this nightmare economy.  But we have to ask why, after 13 years in power, the SNP Government has not addressed this question more fully?
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To give Higgins his due, the report offers a tentative way forward: lifting Treasury limits on Scottish Government capital borrowing to boost infrastructure spending; plus using the new state-owned Scottish National Investment Bank (SNIB) as a way of channel capital into private business.  (Note to Alyn Smith: the SNIB was originally a Common Weal idea and together with Robin McAlpine, I attended meetings with civil servants and Mr Higgins to push it along.)
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What’s wrong with this agenda?  Certainly, Scotland desperately needs to increase capital investment in housing, renewables, medical and educational plant, digital systems, and high-tech manufacturing.  And certainly, in the current framework, this can only come via public intervention.  But we are stuck inside a UK whose present regime was created by City bankers and hedge funds to do their bidding.  The Chancellor of the Exchequer is a former investment banker and hedge fund gambler.  Conclusion: Scotland can only solve its economic problems – including the post-covid reboot – by breaking free of this City financial control once and for all.
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The Higgins Report contains a trap.  The Treasury may well grant permission to uncap Scottish borrowing – but only provided subsequent interest payments are guaranteed by the SNP Government (i.e. the Scottish taxpayer).  That is an obvious poisoned chalice.  A devolved Holyrood does not have the full economic and taxation powers to cover such a guarantee, while costs the UK Treasury nothing. Yet if Boris refuses a second referendum (which he will), a too cautious SNP leadership might be willing to accept unrestricted capital borrowing powers as a compromise – and claim a very Pyrrhic “victory”.
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Moves to expand Scottish Government and SNIB borrowing powers will only succeed in the context of a determined move to seize independence and, with it, full democratic control of the economy.  The Higgins Report is deeply ambiguous on this political point, as we might assume from the Duke of Buccleuch’s chief factor.  Higgins is at pains to demand that any new borrowing and investment priorities are controlled by big business and the market rather than democratically -determined.  The Higgins Report also wants the SNP Government to establish “a top-level Council of Business Advisers” to decide on economic priorities lest the ugly word “socialism” appear anywhere.
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JOBS GUARANTEE
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What about the proposed Jobs Guarantee for young people?  Higgins wants the youth job guarantee to be underwritten by public subsidy: “There should be targeted funding support from the Scottish Government to set up the scheme, and to assist small and medium-sized businesses, as well as larger firms, to participate.”  In other words, this is a plan to reduce wage costs at taxpayer expense.  Higgins is also at pains to ensure this job guarantee scheme is “led by businesses” – trade union involvement is conspicuous by its absence.
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Certainly, a jobs guarantee is an important response to the mass unemployment we are likely to see in the post-pandemic world.  But young folk won’t (and shouldn’t) work for starvation wages.  Neither could current, “devolved” Holyrood budget pay for it.  Alternatively, an independent Scotland – with its own currency – could offer such a jobs guarantee and recoup the cost via higher corporation tax and a wealth levy.
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Those of us who criticise Higgins will be accused of “sniping from the sidelines” and “empty sloganising”.  On the contrary, we will not secure a majority for independence during a post-covid economic crisis unless we have a practical plan to restructure the Scottish economy.  Higgins is not that plan.

Comments (11)

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  1. aayawa says:

    As far as I can tell from this the Higgins report is a sketchy and incomplete proposal for moving money the Scottish Government does not have into the pockets of businesses located outside Scotland via, among other things, subsidised low wages.

    It would also seem that some influential parts of the SNP are keen to move in this direction but not look at alternatives like the common weal report

    I am wholly in favour of independence and lending the SNP my vote till then. I sincerely hope that my perception that some in the SNP have got too comfortable fighting for independence to want to win the fight and wish these people a long and happy retirement after independence should they feel unwilling or unable to continue.

    1. Bill says:

      I would agree. We do not want a referendum, we want independence. The SNP should be looking forward with some of the ideas of Common Weal and tackling the problems that lost the last referendum eg currency. Instead they continue to beat their heads against the ‘let’s have a referendum door’ and blame the austerity and paucity of Tory policies for anything that goes wrong.

      They have become complacent in government and are enjoying the trappings of power. They are now what the Labour party were up until twenty years ago. Of course they do not want independence, because with independence the reason for their existence vanishes and we are in a new ball game. George has delivered an interesting insight into ‘Bennys’ half-baked set of proposals, which will not aid the battle for independence but will persuade some that at least the SNP are trying.

      The FM should realise that her window of opportunity will exist as long as Boris and that bunch of charlatans are tolerated. After Brexit, things will change dramatically and the SNP better be ready to move. ‘Bennys’ paper does not bode well as a game plan.

      Bill

  2. Josef Ó Luain says:

    I only speak for me, of course: the S.N.P. are doing my fucking head in.

  3. Douglas Wilson says:

    This is the same Benny Higgins as the Duke of Buccleuch’s factor-in-chief, who is holding the people behind the buy-out of Langholm Moor to ransom for a few million quid, despite their manifestly sound and progressive plans to turn that land into a major new nature reserve?

    The Duke of Buccleuch is the biggest private landholder in Scotland, with some 280,000 acres. His main man is drawing up the plans for a post Covid recovery for the SNP government, who claim they want a fairer (but not fair) and greener (but not green) Scotland…

    Ok, I get it… it’s EXACTLY what New Labour would have done…

    1. Its quite staggering isnt it? Writing on the covid recovery plan for Sunday publication.

      1. Douglas Wilson says:

        The same people keep popping up on all these committees and enquiries and more or less say the same thing every time. Nicola and Peter need to get out more and meet some new people. Social distancing allowing….

        The fact is, there seems to be a fairly widespread consensus that we need a paradigm shift to meet the challenges of the future. We need big and bold ideas. Adam Smith back in his day was unorthodox, he challenged the prevailing view of the British government. He didn’t just eternally rehash the same old ideas….

        I see the Duke Buccleuch was given much of his land from back at the time of
        James II in medieval Scotland. A time when most believed in divine intervention . To give more weight to the Duke’s ancient titles than a project which does its bit to guarantee a sustainable future for our planet is deeply irrational and harmful.

        There seems to me to no more philosophical basis for the Duke to own all his land than for witches to be burned at the stake as they were back in the day…. It’s all irrational nonsense, superstition and cannot be allowed to hold away over the needs of the nation on every single bloody occasion….

        We need a revolution.. .a peaceful one obviously….

  4. florian albert says:

    George Kerevan looks at youth unemployment and at borrowing by the Scottish government. Youth unemployment is likely to be the worst since the grim days of the early 1980s. Then, attempts to find work for young people mostly failed. There were programmes, YOP and YTS the best known , but they had a poor reputation.
    In 2020, the most likely way of keeping young people in work will be to prop up existing employers. As the economist, Raghuram Rajan, has pointed out, this is a risky strategy. It is investing in businesses which are failing – hoping they will prosper in due course. It is probably the least worst option available. However, it uses up money which might have been invested else where.
    George Kerevan’s attitude to state-directed investment strikes me as hugely over-optimistic. Investing in hi-tech manufacturing is enormously expensive and far from guaranteed to succeed. It also produces few jobs today. Investing in ‘educational plant’ was done in the early 2000s without making a worthwhile impact on attainment or on the attainment gap.
    Finally, borrowed money has to be paid back. If at a time of ‘secular stagnation’, productivity does not rise, Scotland will come to more and more like Greece and Italy;
    running hard to avoid regressing.

    1. Thanks for the comment Florian. What would you suggest as a response to the global pandemic landing on a society already hollowed out by austerity and disfiguring poverty and inequality imposed on us by a government we didnt elect?

      1. james sinclair says:

        You can start by calling out the hysteria over a Corona virus which has supposedly accounted for a death rate of 0.06% in the UK.

      2. florian albert says:

        I have suggested that we prop up businesses rather than let them collapse. Stopping things getting worse is the immediate concern.

        It is worth noting that the inequality we have in Scotland is not simply due to the actions of Westminister. Scots are – unhappily – fairly relaxed about the level of inequality in our society. (There is a large number of very prosperous people in this country. Much of Edinburgh oozes wealth.)
        The rise of the SNP is closely connected to this. In 1999, Alex Salmond led the SNP campaigning on a tax increase; ‘a penny for Scotland.’ He got nowhere. Eight years later, he won power campaigning on a council tax freeze – which lasted almost a decade. Council tax is a tax which hits the propertied middle class.

        A more equal Scotland will require comfortable Scots to take ‘a hit.’ Not to be impoverished, but to accept paying a bit more in tax.
        Persuading them to do this is – I know – the hard bit.
        (One unspoken problem is that people do not want to pay taxes because they feel they do not get good value for money, e g from councils. There is truth, as well as self-interest in this claim.)

        1. Very true Florian, much of the debate about the possibilities explored about a Scandic model for Scotland (re) focused on the reality that in order to achieve this we would need to pay higher taxes.

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