Fraser of Allander Institute Blog

From the Fraser Commentary – Scotland’s domestic policy agenda

One consequence of the Brexit debate is that it has left little room for discussions of the emerging structural challenges and opportunities our economy is facing.

So what are these big policy questions?

First and foremost, the sustainable growth challenge is arguably still something that remains inadequately addressed in the political discourse in Scotland.

For all our economy’s documented successes, the backdrop is an economy that has grown slowly for the best part of a decade.

We have clear strengths in sectors and firms across the Scotland, from food & drink, financial services, energy and tourism. Our workforce is highly skilled with our university sector world class.

From the Fraser Commentary – the policy challenges

Next month will mark the 20th anniversary of the first elections to the devolved Scottish Parliament.

There will no doubt be some reflection on the successes and failures of the parliament since then. But whatever your view, it is hard now to imagine Scotland and Scotland’s economy without Holyrood playing a central role.

The significance of this role is only likely to increase in the years ahead. With Brexit, major structural shifts in our economy, the continuing recovery from a decade of austerity and the possibility of a 2^nd independence referendum, further upheaval is inevitable.

Today’s Fraser of Allander Economic Commentary in 10 bullet points

Today we published our latest Economic Commentary.

In this blog, we summarise some of the key points from our latest outlook.

We also publish a series of articles from guest contributors.

Latest nowcasts of the Scottish economy

With 29th of March now behind us, but with the uncertainty remaining rather than resolved, we have produced a new nowcast for the Scottish economy for Q1 2019.

Since our last nowcast in early March we have received official estimates of GDP growth in 2018 Q4. These place growth in Q4 at +0.3%, slightly ahead of UK growth in Q4 of 0.2%.

This is in line with our last nowcast for Q4 2018 which put growth at 0.29%.

Services growth again outpaced the overall economy with growth of 0.5% in Q4 of 2018, but production sector growth was down -0.9% for the second quarter in a row.

These latest official data put overall growth in Scotland in 2018 at 1.4%, still significantly below long-run trend growth.

Turning to growth in Q1 2019, our latest estimate puts growth at 0.31%, or at an annualised rate 1.26%.

Scottish child poverty targets

Tomorrow, new statistics on poverty and income inequality will be published. All indications are that levels of poverty and inequality are on the rise in the UK over the longer term, and Scotland is no different.

These statistics matter for a variety of reasons, not least because back in 2017, Holyrood voted to put into law a target to reduce relative child poverty in Scotland.

Publication will no doubt be overshadowed by the ongoing Brexit debate. But it’s important not to lose sight of the domestic policy agenda.

Too often the debate over poverty collapses down to a simple discussion about the level of re-distribution in the tax and benefit system.

But in reality, if Scotland is to meet its poverty targets then it’ll require a much more fundamental look at the Scottish economy and how it functions. For instance, we have record people in employment in Scotland, but rising poverty.

Ultimately, tackling poverty isn’t just a moral or societal problem, but also an economic problem that requires a system-wide look at how jobs are created, levels of investment in the economy, productivity growth and wage growth.