Economic policy recalibration is the true test in SNP leadership race

I was disillusioned by the lack of internal democracy, the disdain of the leadership for the grassroots independence movement, the lack of a coherent strategy to gain majority support for nationhood, and – my pre-occupation as a professional economist – the abject failure of the SNP government’s economic policy.

Where are all those promised North Sea renewables jobs?

So I feel diffident from outside about expressing any preference regarding the next SNP leader.

However, I note the three contenders are starting to realise the party and government will have to refocus on matters economic if we are to have a hope in Hades of 1) retaining existing support for independence, and 2) pushing sympathy for creating a new Scottish state towards the 60% mark that will guarantee success and national unity. It’s the economy, stupid!

This need to recalibrate economic policy is heavily reinforced by the so-called cost of living crisis. This is code for a dramatic fall in living standards. The OBR, the nearest thing we have to an objective economic forecaster, is predicting that UK household incomes will fall by 7% over the next period.

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For many households, the effect will be much worse. The OBR thinks household incomes will still be lower than pre-pandemic levels, even in 2028. In other words, we will not only be poorer absolutely, but poorer for a long time.

Worse (if that’s possible), this economic implosion is particularly bad in the UK. Compared to the pre-pandemic level, UK GDP at the end of 2022 was down 0.8%. This compares with the eurozone countries where GDP was 2.4% higher than pre-pandemic times and the US where GDP was actually 5.1%. These numbers are from the House of Commons Library.

We can debate the causes of this inferior economic performance – Brexit, an incompetent Tory government – but the reality is that Scotland is trapped on a sinking UK ship.

Harsh times lead people to either slump into the daily grind of survival or to seek radical solutions. If the SNP and the national movement do not provide a vision of economic recovery, the Scottish electorate will become disillusioned with the political status quo.

The candidates (L-R) Ash Regan, Humza Yousaf and Kate Forbes (Image: PA)

That could mean a dramatic fall in SNP electoral support, after a long 16 years in power. It might mean a revival of support for Labour, though Keir Starmer’s inability to offer any economic solutions to the crisis suggest otherwise. Most likely we will see a rise in voter apathy. Or an increased threat from the ultra-right.

The ludicrous aspect of this political dilemma is that Scotland has long possessed all the ingredients to establish a strong, fair economy: bounteous natural resources, globally renowned universities, significant capital, and a talented, creative workforce.

Our descent into penury is self-inflicted. An already independent and richer Scotland would 1) meet the present international economic crisis from a stronger base and 2) possess the levers of power to respond to that crisis in a more timely way. Instead, we are chained to Tory Britain and a new era of Sunak or Starmer austerity.

The case for independence has always rested on the economic. The modern national movement (including the demand for devolution) rose on the ashes of the forced decline of our manufacturing base in the 1970s and the theft of our oil riches by Thatcher and the foreign energy monopolies.

Alex Salmond revived the national movement in the 1990s by preaching the successful example of Ireland’s “Celtic Tiger” – though this was a risky strategy as it implied hitching Scotland’s economic fortunes to the neoliberal, globalist agenda.

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The SNP’s rise to Holyrood power in 2007 came after Scottish Labour failed to use devolution to grow the economy. A talented SNP ministerial team including economist Alex Neil and entrepreneur Jim Mather offered a downpayment on the economic advantages of full independence.

But after that, things went wrong – very wrong.

Under Sturgeon, pandering to overseas investors led to much of our manufacturing base being sold to carpetbagging foreign capital and a red carpet was laid out for international banks.

Local control of the economy has been sharply reduced – the opposite of what independence is for. One result was the infamous Growth Commission report that kicked creating a Scottish currency (and with it control over interest rates) into the long grass, lest it upset the foreign banks.

Above all, the SNP government became risk averse on economic matters, preferring platitudes to taking on vested interests. John Swinney promised 100,000 jobs from North Sea wind that did not materialise because he was too unwilling to challenge Treasury and EU rules on state intervention.

SNP members voted for a national energy company but Nicola took it out of the 2021 Holyrood manifesto – just months before soaring gas bills made it a necessity.

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True, there was the creation of a National Investment Bank but this was immediately handed over to professional bankers – the very folk who caused the 2008 financial crisis. The NIB is window dressing.

Instead, it should be pioneering a massive social house-building programme and taking over the energy industry.

The truth is that a successful economic policy requires an industrial policy and that requires state intervention, fiscal incentives and generally opposing vested interests everywhere.

It demands local control for local needs, not pandering to foreign interests. It requires taking on the energy monopolies and giant English-based housing companies that deliberately hoard land.

It means using the National Investment Bank to prioritise strategic projects in key industrial sectors – ones that create global competitive advantage for Scotland, including battery production and AI.

It means making hard choices, not pretending a wee country can do everything while being scared you upset somebody. It means redirecting cash from consumption to capital investment. It means thinking long term.

Whoever wins the SNP leadership contest has to refocus on the economic. Firstly, by prioritising the re-industrialisation of the Scottish economy away from the debt-fuelled, consumptionist model imposed by the City banks.

Scrap Scottish Enterprise and create a proper Industry Ministry. Abandon the propaganda exercises of creating “independent commissions” chaired by failed business people.

Hire the best economic brains and tell them to get on with the job. Scale up the National Investment Bank to provide Scottish industry with the resources it requires. Take risks, knowing some will fail and some will succeed.

Secondly, challenge UK Treasury rules on borrowing and investment. Pick a proper fight with Westminster where every voter knows it is in their interest that the Scottish Government wins. Fight Westminster on our (economic) ground. It’s heads we win, tails they lose.

Third, officially bin the Growth Commission Report and tell folk what we need to do to solve the cost of living crisis – as an independent nation. Independence is about controlling our economic destiny, or it is not independence.

That means controlling our own banks, our own currency, our own interest rates, our own trade and our own taxes.

But all that will be useless unless we have a government prepared to act. That is the true test for the next SNP leader.