THE most important economic event of the past few days was not the Scottish budget – a timid, footling thing – but the announcement by Standard Life Aberdeen that it is flogging off its insurance business to concentrate on asset management.

This news needs to be unpicked to understand its significance. SLA is a new kid on the block, born a year ago after the merger of its two parents – Standard Life, the capital’s leading insurer since 1825, and Aberdeen Assets, which was formed just in 1983 but grew prodigiously to become Europe’s second largest fund manager (after Schroders in London). Now SLA dwarfs the general run of companies in Scotland. The Royal Bank alone is larger – but mostly owned by the UK Government – while Scottish and Southern Electricity has about the same market capitalisation. SLA rates as twice the size of the next biggest fund manager, Scottish Mortgage Investment Trust. These four corporations are the only members of the FTSE 100 headquartered in Scotland.

SLA is of political note too. The old Standard Life always fiercely decried any degree of Scottish self-determination. It balked even at the feeble form of devolution we had back in 1997, threatening to leave Edinburgh. It never did, but only the formation of SLA tamed its implacable Unionism. The driving force behind the merger was Aberdeen’s Martin Gilbert, a supporter of national independence. He also supports promoting the best and brightest of our young talent, whose ambition might otherwise lead them to leave their homeland.

All the better, then, that SLA’s change of direction promises a fresh phase in our financial history. Without any intervention by government, it is a fine example of the Scottish spirit of innovation that The National is currently showcasing.

Traditional Scottish finance has in the last decade suffered heavy blows. In 2008 I wrote a book about Edinburgh and, the way I saw things then, I gave the prime rank to banking, the second to insurance, the third to asset management. The scale and the variety were what made the capital a leading European financial centre.

Since then scale and variety have been lost. The Scottish banking system, which survived 300 years of the Union, has collapsed and in effect been absorbed by the English banking system. The Royal Bank still owns its rustic estate at Gogarburn and the baroque palace of the Bank of Scotland (now a museum) continues to grace prospects of Princes Street. But both banks are run from London with no Scots at the top of them, after the disasters they brought on in the great financial crisis that broke just after I finished my book.

Once Scotland is independent the English bosses will without doubt shift even their nominal head office and their legal registration to London, so that for the new nation some new banking system will need to be built. The southward shift will take place for one simple reason: that only the UK economy can absorb losses and mount rescues on the scale these banks have shown they may need. It is going to be far into the future before anybody really trusts a Scottish bank again. This is not Scotland’s fault exactly, but Scotland will take the rap.

As for insurance, it had long been a Scottish speciality. It suited the temperament of a certain type of Scotsman – modest, trustworthy, diligent. He played a crucial part in the UK’s financial supremacy during the age of imperialism. Having devised the basic principles of the insurance industry, he took it round the world: Standard Life was in Canada by 1833 and in India by 1857. It was not a career to offer many thrills, though it remained essential to the operation of everything else, from the trading voyages to the satanic mills. Yet beyond the core business there’s still not much more you can do, certainly nothing liable to increase risk. This is a drawback today when other financial products are so sexy.

I can recall the days when there were nine Scottish life insurance companies, all but one of them mutual, that is, owned by their policyholders rather than by shareholders. You might say mutuality seems a structure better suited to our more socially responsible outlook in Scotland, and I might agree with you. But we should have said this long ago to New Labour, with its devotion to casino capitalism. Tony Blair and Gordon Brown heedlessly changed the regime of regulation so that mutuality turned unprofitable, and in 2006 Standard Life demutualised to become a normal joint-stock company, now with its policyholders as its shareholders. Other former mutuals soon succumbed to takeovers but Standard Life, the biggest of them, survived. All the same, one financier I spoke to said it was a “piddling anachronism” in the Edinburgh of the 21st century.

So now SLA has followed the correct assumption that asset management is an inherently more attractive business than insurance. There are a number of reasons. The first is that revenues are much more “sticky”, as they say in the trade, which means investment funds generate fees year in and year out, whereas revenues in insurance are much more loaded towards the point of sale. At that point the insurer may have more capital than he really knows what to do with, but will still avoid anything too risky (though the returns would be higher).

It follows also that asset management needs less capital, so that the returns on the capital, apart from being longer lived and more stable, are higher. This is the whole point of successful management in the industry. It is as well to remember that an insurance company for which claims exceed premiums and reserves will need to call on its shareholders to make up the deficit so that claims can be paid. Bankrupting shareholders to pay claims is not just a theoretical risk, but is more or less what happened in 2000 to the English company, Equitable Life. In asset management there is no such risk.

It seems, then, that asset management, with a dozen or so firms in Edinburgh and more in the other cities, is going to be the financial future for Scotland. Though this may be a niche market, in some ways more vulnerable than those in the past, still it will give us a finger in every pie, from pension funds to investment trusts, from unit trusts to ISAs. It will offer more security to the punter, and make a lot of clever young lads and lassies rich. It will start to restore our battered reputation as canny Scots, which can be no bad thing in a world where every small country will need to find its niche markets.

It does differ from a favourite Scottish self-image, as a nation of hard men clad in boiler suits and carrying oil cans (but remember how in that sort of Scotland women were expected to know their place and stay in the steamie). Yet I agree with Alex Salmond that we should, after independence, seek to restore manufacturing industry and give ourselves a more balanced economy better able to face crises. Great idea, except that the present Scottish Government, with its suspicion of capitalism and hostility to profit, has not the faintest idea how to set about it – as last week’s budget shows.

While it continues to chase its own will o’the wisps of sustainability, inclusiveness and whatever, it will also put off the day when Scotland resumes an adequate rate of growth and therefore the day when we will have equipped ourselves to face the challenges of independence.