“Growth, growth, growth”.
Speaking in London last week, that was how Sir Keir Starmer summed up his three priorities for government, echoing the famous “education, education, education” call by Tony Blair nearly three decades ago.
Sir Keir’s signalling demonstrates of the very different circumstances he finds himself in compared to Sir Tony back in 1997. It was summed up by the former PM himself in an interview this week with Andrew Marr in which he contrasted then and now. “The economy had been through a very difficult period,” he said of the period before he came into power, “but to be fair to (former Chancellor) Ken Clarke and John Major they had stabilised it somewhat. And so the prospect was that you could grow at a reasonable rate….that was the one big difference with today.”
There is no such inheritance on offer to Sir Keir today. True, there was a small flicker of good news this last week: the International Monetary Fund no longer thinks the UK will sink into recession this year – instead we are expected to grow by a whole 0.4%. Their upward revision is in part due to the signing of the Windsor Agreement and the hope that trading relations with our EU neighbours will improve.
But we are far from leading the global race. The IMF puts our growth at second bottom in the G7 club, with only Germany behind us. The rapid return to growth in the USA seems a long, long way off.
Step back from the day to day picture and, whether it’s 0.4 or 1.4%, the bigger problem remains the fact that the UK’s long-term growth trends are way below what is needed if we’re to carry on spending in the manner to which we’ve become accustomed. A political consensus is there if you look hard enough: all the governments across the UK know that with our ageing demographic profile and low productivity rates, we have created what Sir Tony has called “the unsustainable state”.
This is something the SNP has also acknowledged: it is over a year since the then Finance Secretary Kate Forbes laid the set out the coming crunch starkly in her spending review. The sums we will need to feed into the NHS are going up, spending on new devolved benefits is soaring, cash for net zero is rising, and the cost of our “free” entitlements also must be paid for. Add to that the pay settlements agreed by Humza Yousaf in recent weeks and the outlook for “non-protected” services looks very shaky. The Institute for Fiscal Studies says that by 2028, Ministers need to find £2.8bn from somewhere or they’ll have to wield the axe.
So while, also this week, we’ve looked on at the debate over whether the UK Government or the Scottish Government should pay to end the two-child cap in Scotland, without growth – and the extra millions that would accrue to the Scottish Government from boosted tax revenues – it is hard to see where the money comes from without brutal cuts to other services (unless, of course, you decide on even more creative ways to tax people.)
The blunt bottom line is that it only is by finding ways to grow the economy, create jobs and add to our national wealth that we can find that extra £2.8bn which can keep public services afloat. Far, far more attention in Scotland is needed on this question: not on how we spend money, but how we earn it in the first place.
Why do we spend so much on economic development and get so little from it? Why is our rate of scale-ups so low? Are our Universities and industry properly connected to exploit the brilliant research and development that’s being worked on? These are questions that need some focus. They’re ones that OSF is keen to examine this coming autumn.
Register for our upcoming conference with Gordon Brown 👇
Together with Edinburgh Chamber of Commerce, we’re going to host a new conference on the Scottish economy on November 30th. Further details will be announced in the coming weeks, but you can guarantee your place at the conference now by signing up here. Key business and economic speakers will come to give their thoughts and we will aim to publish some of our ideas on how a growing economy can pay for those anti-poverty measures which, currently, seem beyond our reach.