THE UK’s existing economic development framework, centred on London and the south-east, has failed Scotland for decades and a new one – led by investment – should be drawn up for an independent Scotland, according to a major new report.

Drawn from the policy work of the Common Weal think tank, the document criticises the UK economic model, which it says is based on “short-term profit maximisation”, in the belief that public benefit will be provided through good jobs and tax revenues.

However, it claims the economic case for Scottish independence should be based on illustrating that the basic elements of an advanced economy are strong in Scotland and showing that public policy could make better use of them were the country independent.

READ MORE: Common Weal: Radical payment plan could boost economy by £40m a year

The paper – An Investment-led Economic Development Framework for an Independent Scotland – paints our new economy as being designed in the interests of everyone; as humanistic, promoting wellbeing and security, regenerating our environment and improving the quality of jobs, goods and services for everyone.

It argues that such an economy would be productive, combining Scotland’s natural resources with our high-quality workforce, an excellent research and innovation base in our universities, a national industrial strategy and the strength of our creative industries with an internationalism that encourages them to reach further heights.

An “optimal environment” must be created to adopt the investment-led model, according to the report.

Its authors state: “This must begin with managing monetary and tax policy to incentivise long-term productive investment and minimise the incentives to short-term rent-seeking or speculative behaviours.

“Then we should create a financial system which is geared towards stability and long-term investment.”

READ MORE: SNP clash with Common Weal over post-independence proposals

A key role would be played by the Scottish National Investment Bank, which would be a “mission-led development bank” offering large-scale lending for the new economy.

The report sees a future independent Scotland importing fewer poor-quality goods – especially foodstuffs – and making more of what we consume ourselves, which would create jobs, protect the environment and improve quality.

A level playing field would be created by reforming the tax system, allowing Scottish businesses to compete fairly with multinationals.

The belief that much more of Scotland’s economy would be owned in Scotland is a major selling point, along with its environmental credentials. And a principle of “local wealth building” would seek to recycle as much national wealth as possible back into the economy.

This report rejects what it calls the failures of the last 40 years, and outlines how Scotland can improve its economy, investing in development to build something better.

The National:

HOW INDEPENDENCE WOULD LET US TICK ALL THE BOXES

MAINSTREAM economic theory identifies 12 “standard pillars” of a developed economy and the Common Weal report goes through each, pointing out the extent to which Scotland meets the criteria of a successful modern economy and how independence could improve its performance.

Three forms of stability are key for an advanced economy – legal and contractual consistency and enforcement, a reasonable degree of predictability and stability of political leadership – and the report says Scotland passes them all with flying colours.

Our advanced legal system is compliant with EU norms and greatly policed, but it could be improved by independence, “because UK law is not consistent enough in areas such as tax avoidance and evasion”. It says Scotland has a stable, modern and advanced western democracy and a more consensual political culture than Westminster, adding that the highly ideological shift in political balance which has paralysed decision-making in the UK Parliament “would be unlikely to be replicated in an independent Scotland”.

Sterling’s poor, long-term international performance and decline, which is usually indicative of an economy being subject to suboptimal monetary policy, are borne out by the currency’s “wildly different” performance across the UK.

“Since monetary policy has for many decades focussed on managing under and over-heating of the London economy, it is hardly surprising that this has not matched the needs of the economic cycles in other parts of the UK,” states the report.

“If Scotland was independent with its own currency it would be able to create a genuinely optimal currency area and match monetary policy to the economic cycles of the Scottish economy.”

READ MORE: Currency issue is a big one for voters – so it's essential that we get it right

A Scottish Government’s ability to raise revenue and spend it on public services and infrastructure – fiscal policy – has been the Unionists’ target for most of their attacks on independence. However, the report highlights: “Many of the arguments against Scotland’s ‘fiscal readiness’ for independence are based on the impacts of UK economy policy, a tautology which can only be resolved by independence itself.”

It criticises the UK’s “inordinate” amount of key infrastructure – such as roads, bridges, schools, hospitals, communications and power grids – owned by private, and in many cases foreign, companies.

Independent Scotland could “undoubtedly” manage its infrastructure better.

Energy and connectivity can also be classed as infrastructure, but the report says human resources are the single most important resource to any economy, and adds: “The potential of an independent Scotland to increase its human capital is substantial by creating better markets in housing and food, by creating employment rights more conducive to health and equality and by developing an immigration strategy which is geared to the needs of the Scottish economy and not to the ideological obsessions of the UK’s right-wing media.”

READ MORE: Derek Mackay: Timing must be right for Scotland's new currency

The National: Policies which suit the London Stock Exchange don't necessarily suit the rest of the UKPolicies which suit the London Stock Exchange don't necessarily suit the rest of the UK

FAILINGS OF THE LONDON MODEL

SHORT-TERM maximisation of profit is the cornerstone of the UK’s current economic model, which sees policy favouring a small number of industry sectors which can quickly generate the biggest surplus (profit) with the smallest investment.

The report says this result is achieved through financial speculation, inflating the value of assets, debt-fuelled consumption and monopoly and concentration. This incentivises forms of short-term economic activity which crowd out longer term investment in the real, productive economy.

The authors say this leads to reduced productivity, capital replacement and investment in research and development.

However, they do increase profits in areas where “the finance industry is based, where monopoly industry is headquartered and where assets whose value is inflating are based and owned” – in all three cases, London.

While the paper points out that many London residents do not reap these economic benefits, the UK’s whole economic strategy is based on pursuing models of economic growth which primarily benefit the city and harm other geographical areas which do not have its advantages.

But that is not the only problem, it says, highlighting that measuring economic progress becomes reliant on what is good for the dominant economic centre: “Economic performance becomes more and more reliant on measuring profits which are derived in that centre; measures of over or under-heating of the economy are assessed on the basis of what is happening in the economic centre rather than what is happening in the overall economy; labour supply issues are assessed in terms of labour supply in the economic centre and so on.”

Also, crowding out productive investment creates a downwards spiral in areas of the UK not served by the London-centric economic model.

“The economic case against the continued economic management of Scotland by the UK is straightforward; the macroeconomic management of the UK has been calibrated to the needs of London, not Scotland, and this has crowded out investment in Scotland, suppressed the development of the economy and led to a low-wage, low-productivity economy which greatly underutilises Scotland’s economic assets and natural and human resources.”

The National: The report calls for a new national housing policyThe report calls for a new national housing policy

REPORT'S KEY IDEAS

  • SCOTLAND must invest in its workforce, end zero-hours contracts and look to Nordic areas for policy ideas.
  • The role of women in the workplace must be altered and a specific national strategy put in place.
  • Economic strategy should focus more on an economy built upwards from the micro-level rather than the opposite.
  • Scotland must state that it wants an economy based on the principle of “do no harm” and move towards it as quickly as possible. The report cites examples such as pesticide use and the damage caused by discarded plastics.
  • An ethical and cultural policy for migrants coming to Scotland which is not focussed on the economy.
  • Postal services should be brought back into public ownership and a plan devised for the impending arrival of increased automation.
  • A national housing policy should be put in place with a policy of reducing the ratio of average house prices to average salaries.