Are you sitting down? For you are in for a shock. I want to do something quite unusual with today’s column, possibly even unique. I want to congratulate our SNP Government.
I know, I know, I’m maybe not my usual self, maybe I’ve had too much festive glühwein but it is the time for peace and goodwill and I thought it only right that I show some charity.
You see, our Scottish Government has done us all a great favour. The establishment of the Scottish Fiscal Commission in 2014 was one of the most important developments following devolution.
The Commission’s job is to provide twice-yearly forecasts and reports on Scotland’s economy and the taxes that can be varied by the Scottish Government.
I know, it is all very dry stuff, but the detail of what the Commission is able to tell us, with its own powerful stamp of independent officialdom, means that the Government has to respond.
Quite literally there is now no hiding place for any Scottish Governments now or in the future when they decide what decisions to make about influencing our economy.
Last week we saw the first results and it was very entertaining, almost a pantomime – although nothing like as funny as what’s on at the King’s Theatre. The Fiscal Commission reported it expects Scotland’s economy to grow at less than one per cent for the next five years. I suppose we should console ourselves that we are bouncing just above a technical recession – but Scotland’s growth will be half that of the UK’s.
Over the five years that are forecast this means our economy will be £2 billion smaller than if we were performing as well as the rest of our country. With a more sluggish economy comes poorer tax revenues – and it is for this reason that the Commission report informed the Scottish Government it needs to raise an extra £200 million next year (or make spending cuts of a similar amount).
According to the Commission, the main reasons for Scotland’s poorer economic growth are that our productivity is poorer than the rest of the UK’s, and we have an older population with fewer people of working age. A lower proportion of people working less productively means a poorer economy. So what should we do about that?
The answer is to retain and attract more skilled people to expand our private sector, to start and grow their businesses here, and discourage them going to other parts of the UK or abroad. In short, Scotland needs to be a magnet for successful people who create wealth and create jobs for others who will create wealth too. These people will raise our productivity levels and they will expand the number of working-age contributors to our tax revenues.
It’s at this point you are maybe realising my generous congratulations to the Scottish Government are about to run out. My Christmas cheer is over, for the SNP budget announced last week goes in completely the wrong direction if we are to retain and attract young skilled workers – instead it will worsen productivity and reduce the proportion of working-age people.
Giving more money to public sector workers without a corresponding improvement in their output must mean a fall in productivity figures.
Taxing more heavily those creating wealth must, over time, encourage skilled workers to leave Scotland and discourage others who might come here. It hurts public services too – we badly need teachers, doctors and nurses, but why come to Scotland for less take-home pay?
As was argued by the Conservatives, reports by Audit Scotland point towards £200 million of possible savings – or more – so the tax rises could be avoided, but that requires bottle the Scottish Government does not possess.
Have a lovely Christmas when it comes, for economically the New Year might not be as good as we would want it.