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Scottish Economy

Weekly update – New FM – new approach on the economy?

Today, the new First Minister John Swinney set out his broad economic aspirations for Scotland. In a speech at the impressive Barclays Glasgow Campus (which he said embodied the ambition he wished to have for the economy), he set out the vision he had for Scotland to have a strong, successful, innovative and dynamic economy.

For people who were after specific policy actions, the speech was light on detail, but it was not perhaps fair to expect the FM to outline these sorts of specifics in a speech like this.

The FM also had a difficult line to tread, given (as he himself pointed out) that he has been a Minister in government for 16 of the last 17 years and wanted to talk about successes in a record he is “immensely proud of”. At the same time, he needed to recognise that there were failings in the previous administration that had led to him being in office as First Minister.

Economic Growth is front and centre

The First Minister had said as he took office that eradicating child poverty was his key policy objective. This morning he was keen to set out that there is no conflict between eradicating child poverty and boosting economic growth – rather, they go hand in hand. He set out that boosting the economy will create opportunities for people and raise living standards and that reducing poverty raises spending power and boosts productivity. This is to a large degree true, but there will at times be trade-offs that will require one to be prioritised over the other.

Given the key stakeholders from businesses and business organisations in the room for his speech today, he was very keen to set out that his government was going to work collaboratively with businesses and other organisations to design and implement policies to strengthen the economy. Even more broadly, the FM said that he wished to bring more consensus building back into Scottish politics to try to achieve outcomes – to “build up, not tear down” as he put it.

There was a clear “Scotland is open for business” from the FM today. Supporting more investment in Scotland (particularly related to the Energy Transition and Housing) is clearly a priority for this new administration. This featured heavily in this speech and has been supported by some of the policy announcements made earlier this week.

We will do, rather than write strategy documents

A widely welcomed aspect of the speech is likely to be the FM’s acknowledgment that his government could probably do with carrying out “more concrete actions and fewer strategy documents”.

We have been on record a number of times as saying that the Scottish Government produces too many and too weighty strategy documents. So this is a crowd pleaser to a room of people who are likely to want to see action rather than just warm words and have seen endless strategies come and go.

However, it is important to remember what the problem sometimes was with these documents. Sometimes, in the case of recent economic strategy documents, the problem is that they aren’t really strategies – if they set out high-level principles that no one can disagree with, but don’t provide a meaningful framework for prioritisation and dealing with trade-offs, then they aren’t particularly useful.

In other cases, even where strategies are set, they can often gather dust on a shelf rather than meaningfully drive activity in government.

All of this from the FM is likely to be broadly welcomed – it’s an easy sell to say there will be less bureaucracy. But let’s not forget that we still need a clear economic strategy from the FM and the DFM – and that a strategy is not a strategy unless it rules some things out and recognises trade-offs and carries through into day-to-day activity. This clarity and policy stability is what is likely to be required to inspire the confidence in investors that this new administration would like to see.

Looking forward, not back

Many of the questions from journalists in the room today were designed to get the FM’s views on what went wrong with economic policy under the previous leadership, In addition, he was asked what his government was likely to do on policies like rent controls, short term lets legislation, and tax increases (specifically income tax) that have been put in place at the past budgets. Essentially, people were keen to hear what, in these specific areas, might change under a John Swinney government.

The FM said clearly that he was “looking forward, not back” in response to the question about what went wrong under Humza Yousaf.

With regards to specific policies where regulation was impacting businesses, he said his Cabinet colleagues were looking at lots of areas of policy and that more details on specific policies would be following in the weeks and months to come.

On tax, he was more forthcoming – acknowledging that the higher tax rates on above-median earners in Scotland are an important component of raising revenue in straitened fiscal times, but also saying that “we can’t keep raising taxes”. It will be interesting to see how this approach to tax is reflected in the Government’s Draft Tax Strategy, which is due alongside the Medium Term Financial Strategy (date currently tbc). That is if these two documents survive the cull of strategies…

Evidence-based approaches

The FM today said a number of times that the government he leads will be more practical and will be driven by the evidence of “what works”. We are very supportive of this, of course, and hope it signals a shift of more meaningful appraisal and assessment of policy options within the Scottish Government, with the associated investment in evaluation.

In doing this, unintended consequences, whether economic or otherwise, are more likely to be identified and can be proactively mitigated, and/or it can allow the government to change course at an earlier stage.

In addition, progress and continuous improvement can only happen in a culture of meaningful evaluation and being prepared to learn from what worked and what didn’t work.

For example, how well has the policy on rent freezes and caps worked to date? It would initially appear from rental costs that it has had the opposite effect on rents than the government presumably desired, and it would also appear to have had an impact on investor confidence in the sector. Given the FM’s focus on housing in his speech today, and his commitment to be evidence-based, it will be interesting to see how this policy area progresses.

Is this a meaningful shift in approach?

With his speech today, that is certainly what the FM is trying to convey. He was saying many of the right things to hearten those who want to see the government focus on economic growth.

However, the proof will be in the policy action that is actually taken. So, let’s wait for these details in the weeks to come.

New research this week on drug deaths

This week, in collaboration with The MRC/CSO Social and Public Health Sciences Unit at the University of Glasgow, we published some descriptive analysis looking at socio-economic trends and drug deaths by cohort. We’ve pulled together existing data on drug deaths and household incomes and looked for trends, by cohort, to identify how living standards over the life course may affect health outcomes.

This analysis has not been designed to provide any proof in itself of causality between the deterioration of relative incomes and the recent peaks in drug deaths. However, there are some observed correlations in the data which are potentially of interest. In particular: Cohorts born in the 1970s entered young adulthood in the early 1990s at a time when relative incomes for single adults had dropped significantly compared to previous cohorts. Cohorts beginning with those born in 1970 have so far been the most affected with regard to drug deaths.

Authors

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.

Emma Congreve is a Principal Knowledge Exchange Fellow and Deputy Director at the Fraser of Allander Institute. Emma's work at the Institute is focussed on policy analysis, covering a wide range of areas of social and economic policy.  Emma is an experienced economist and has previously held roles as a senior economist at the Joseph Rowntree Foundation and as an economic adviser within the Scottish Government.