Scottish Economy

A trip back in time…….

The Scottish Government’s Economic Strategy sets out to have a ‘distinct Scottish approach’.

A strategy that is based upon supporting the “wellbeing” of the people of Scotland and ensuring that the framework for the economy is –

  • “inclusive: it should be concerned for the economic opportunities of all the people of Scotland – throughout society and in all regions and sectors of activity – and for the sustainability of economic development.”

Interestingly, this quote isn’t from the latest Scottish Government State of the Economy. Or the 2020/21 Scottish Budget. Or the 2015, 2011 or 2007 Economic Strategies.

It was actually from the Framework for Economic Development in Scotland (FEDS), first published by the then Scottish Executive 20 years ago this very month.

If you have the time, it’s worth a read.

2000 was the year RBS took over NatWest, it was the year of fuel protests as prices rocketed to a whopping 80p per litre(!), and it was the year when Madonna married Guy Ritchie. Many of the current Fraser team – including our big Madonna fan – were still toddlers.

On the one-hand, a quick skim of FEDS highlights how much things have changed.

Understandably issues such as the constitution and Brexit are absent. At that time, the fiscal powers of the Scottish Parliament were extremely limited so taxation is barely mentioned. The Budget of the then Executive was some £16 billion (compared to a budget nowadays of £36 billion, reflecting in part the transfer of additional responsibilities).

The document is much warmer to the UK macroeconomic or economic policy context than anything you would see today. Indeed, it’s highly unlikely we’ll see a current Scottish Government document listing the key economic policies of the UK Government anytime soon as FEDS did!

And of course, the individual policies chosen by the then Executive look different to the priorities of the current administration.

On issues of substance, one jumps out. Climate change was much less prominent back then. Indeed, it only features once in the entire document, and even then, it is only a passing reference. There’s no mention of renewables, the low carbon economy, natural capital or green jobs. Sustainability back then appears to be very much about the local natural environment as oppose to the transition to net zero or the global climate emergency that dominates debate today.

On the other-hand, 20 years on, it’s remarkable how many enduring similarities there are. Particularly around the economic principles underpinning the overall strategy.

It talks about focussing upon “the well-being of the Scottish people and on the quality of their lives.”

It aims to do this by “increasing economic opportunities for all on a socially and environmentally sustainable basis.”

It talks of tackling poverty and of breaking the link between social deprivation, poor economic outcomes and health.

It advocates a partnership approach with public sector bodies as well as the private sector.

It discusses how the strategy aims to tackle barriers on regional economic performance.

It describes how encouragement of enterprise is based around practical support, mentoring and access to finance.

It talks about the importance of skills and training, the planning system and the challenges in getting more women-led enterprises.

It highlights the importance of infrastructure to the economy and the demographic challenges that Scotland faces.

It talks of the need to grow Scotland’s export base and the challenges of commercialising university research alongside Scotland’s weak business R&D figures.

It questions where or not the reliance upon inward investment is a good thing, whilst also highlighting the benefits of social enterprises.

All of these wouldn’t look out of place in a government publication today.

It’s not just on the strategy where there are similarities.

It’s remarkable how many of the key economic facts civil servants listed back in 2000 could be recycled to describe the pre-pandemic Scottish economy – a strong and resilient economy compared to other parts of the UK, but one where growth has lagged key competitors; a gradual shift away form manufacturing to services; strong performance in activities tied to chemicals, tourism and financial services; and a long-standing productivity challenge. [NB: see our June 2019 Commentary for a discussion of Scotland’s economy since devolution].

It also raises challenges around inequality, social exclusion and poverty, and the links between the economy and these outcomes.

So, what do we take from all this?

Firstly, clearly the political priorities of the current administration vis-à-vis previous administrations are quite different. People will also have their own views about the effectiveness of delivery at different points in time.

And there are important administrative differences. The Scottish Government’s Economic Strategy is now underpinned by a National Performance Framework (NPF) which is designed to measure progress against a broad spectrum of outcomes, rather than just one measure such as GDP.

But what a look back in time does reveal, and contrary to what is often asserted that economic policy is (and was) motivated by simply boosting GDP, is that even back in 2000 the goal of the strategy was to hit a broad suite of outcomes rather than economic growth at all costs.

Secondly, another interesting reflection re-reading FEDS 20 years on, are the questions it poses about evidence to inform future policy making –

“There needs to be a more sophisticated and evidence-based analysis and understanding of the contribution that different elements make to the aggregate economic performance of Scotland. What are, for example, the economic returns of different types of education? In what ways, more particularly, is primary education central to broader based growth in the longer term? What precisely is the contribution of small firms and larger firms to dynamic competitiveness in the Scottish economy? What are the economic benefits of different forms of cluster? Page 84

It’s not clear we have the answer to any of these questions. 20 years since its publication, one might expect to see a bank of evidence that allows us to look at the success (or otherwise) of the economic policies of successive administrations (of all political colours).

Finally, and arguably what is most interesting, is how remarkably similar FEDS is in its underlying theoretical underpinnings to the current thinking today (for better or worse). This isn’t a political point, but more a reflection on the broad institutional framework in Scotland that (again for better or worse) shapes and delivers economic policy. What is also interesting is that, despite two decades of change – a financial crisis, major constitutional change – many features of the Scottish economy haven’t changed.

At the very least, all this suggests that the next time you hear someone describe a radical new idea or economic strategy, take a look back in time.


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The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.