Saturday, 3 September 2016

A Unionist tries to help out the nationalists - Part 3 - The silver bullet of growth

The SNP do a very good line in "if we only had the powers".

If we only had the powers over X we could solve these problems in Scotland, but because we're denied powers over X we cant actually solve Y, oh if only we had the powers. 

We saw this with the introduction of SRIT. The SNP gave the impression that they wanted to have a more progressive taxation system in Scotland and to stop austerity - we know that to be very far from the truth - and when the time came the SNP remained "fiscal conservatives"

We heard the "if only" chorus when GERS 2016 was released. Rather than confront the problem of the loss of the fiscal transfer the SNP jumped to their favourite line: GERS wasn't about an independent Scotland. We would do things differently, if only we had the powers. With the full spectrum of powers provided for by independence then the SNP could grow the economy out of the loss of the fiscal transfer, or so the theory goes. 

In the long run all are dead
With independence then, with the full spectrum of powers available to the SNP, we could simply grow the economy using "different economic levers" to make up for the loss of fiscal transfer. So good is this line that Nicola Sturgeon recently appointed Andrew Wilson (former MSP and centrist -for which read right winger in SNP terms) to head up a growth commission to actually come up with policies which will miraculously improve growth in Scotland.

But, back to GERS, there is a fundamental problem with this solution: growth to compensate for the loss of the fiscal transfer will take a VERY, VERY long time. 

Taking the current fiscal transfer of £9bn and the Scottish Government's target of increasing growth levels by 2.2% to 2.4% then we can trace how long it would take an independent Scotland to catch up with a Scotland in the Union.

58 years. 

Now of course that time period could be shortened by a more heroic assumption about growth or public spending cuts or tax rises which wouldn't have any impact on the economy (but no one seems to be able to point to these). Furthermore the figures take no account to the deeply damaging and painful consequences of leaving the Union, of capital flight, or the higher costs of debt due to Scotland's higher interest rates.

On this basis 58 years is a really low estimate.

Now I'm sure some could make the case that this is all worth it, suffer now for the sake of our grandchildren, or perhaps their grandchildren, but it's not exactly tempting nor it is a practical solution to a real problem. 

Furthermore the theory of growing out of the fiscal transfer suffers from one fundamental problem. 

Fairy dust economics
What are these "different economic levers" that the SNP would pull to get the extra growth to bring our rates up to the levels of small EU nations? Especially as we're anything but small. When asked what these miraculous growth giving policies are most nationalists struggle to come up with anything of substance. There is vague talk of intervention (difficult within a free and open market) or targeted tax relief, all well and good if it works and pays for itself. 

Before you know it you are into the realms of fairy dust economics that seems to believe that Scotland will grow because.... it will. 

Given that higher growth for an independent Scotland is absolutely fundamental to a nationalist case you would think that they would have an answer to this? But it's all just sadly lacking and betrays that for many independence isn't actually about a better Scotland, it's more just about ideology. 

Perhaps Wilson's Growth Commission will come up with something of substance, and I'm here to help!

Because ironically, there is a silver bullet for nationalists which can encourage more economic growth. The trouble is the SNP have backed themselves into such a corner over Brexit that they can't go near it. 

People & places
Economic growth comes largely from people, productive people in an economy. Scotland has a lot of space and not enough people. The solution then is immigration, lots of it, far, far more than we have been used to in the past. 

Furthermore the immigration needs to be directed. 

It's no good having immigration into Scotland then for those people moving out of the Scottish economy to say an EU economy or to England. Nor is it any good if they move to the densely populated central belt, that just exacerbates the issues we have in providing uneconomic public services to our rural economies. 

The solution then is to use our exit from the European Union and the requirement for the free movement of people to direct immigration to the places we need it. Think of the case of the Brains, were they living in the centre of Edinburgh then their visa expiring would not be particularly remarkable, the fact that they are living in a remote Highland community that needs all the people it can get makes it noteworthy and tragic. 

But there is a solution to this, as Michael Gove proposed during the European Union referendum and Tom Harris outlined in his open letter to Nicola Sturgeon. Scotland could take control of immigration either within or outside the UK (provided it was outside the EU) and direct immigration to our rural communities that need skilled and unskilled labour to flourish, grow and generate revenue to pay for their services. 

This is nothing unusual, the Australian visa system regularly directs immigrants to rural communities or specific areas of the country. Why can't it work for Scotland? It needs to, it's the silver bullet that deals with the problem of our size and universal provision of public services. 

Why wont the SNP fire the gun?
So what's stopping the SNP from embracing and campaigning for this policy, a policy that would at a stroke solve the problem for the Brains? Well it's simple; the European Union. This policy is incompatible with free movement of labour which the SNP have no choice but to argue for. 

In their opportunism over Brexit they've painted themselves into a corner. If the SNP had Scotland's interest at heart, rather than the SNP's, they would be embracing the opportunity that Brexit offers and arguing for a directed immigration policy to Scotland's rural communities. 

A very, very, very different Scotland
Make no mistake about it, this is the method of transforming the Scottish economy, solving the loss of the fiscal transfer and enabling the additional growth that Scotland needs if it is to take its GDP above its level within the UK. 

However at the same time we should not underestimate that transformation. This would represent a profound change to Scotland, its people and its landscape. All of this would change, radically, in a short space of time. To make this work Scotland would need immigrants in the millions over a small number of years, our rural landscape would need to be transformed with new housing and strong transport links. 

This would no longer be the Scotland of the wide green open spaces but a landscape of New Towns and a multicultural, multiethnic Scotland closer to the populace of London rather than Livingston (I've nothing against Livingston, it was just nice alliteration). 

This is nothing so simple as Scottish independence but a complete reinvention of what Scotland means in terms of people and place. It's radical, it's a huge change - nothing short of a revolution - and it's a case that works. 

The question is do the nationalists have the courage of their convictions to argue for this, in the past they have dodged the silver bullet so my hopes aren't high, but perhaps Andrew Wilson will rise to the challenge. 


  1. Interesting post ! But its not clear why immigration to highlands and islands would lead lower public expenditure per capita relative to central belt immigration.

    Also an independent scotland in eu would presumably be able to direct non eu immigration ?

  2. Thanks Al. more people in the central belt doesn't help the position of vast areas of Scotland not being economic exploited effectively. Pushing more people to the central belt would help but their marginal contribution would be greater in sparsely populated areas. The idea is to spread out the population not to compound the existing issue.

    An independent Scotland in the EU wouldn't be able to direct non EU immigration to a particular area of the country as it would violate free movement. such policies would be possible short term but if you want to bring immigrants into rural Scotland on a long term basis this wouldn't be possible under the EU and we'd a radical new policy. Right now the people who should be arguing for that radicalism are currently playing games on independence to further the ambitions of the SNP, not those of Scotland.

  3. Increasing population density in highlands and islands for example would presumably allow more efficient public service delivery in these areas, but it is a fallacy of composition to think directing immigration there would lead to more efficient service delivery on aggregate. As service provision is most efficient in cities (and worker productivity higher), isn't the solution to increase the urban share of the population (i.e promoting immigration to the central belt)?

    It seems strange that EU freedom of movement rules prevent members from directing non EU immigration within country but otherwise allow control over entry and exit, but i'll take your word on it.

  4. I'm not saying it would lead to more efficient delivery I'm saying there would be wealth generation in the area to pay for the local services provided. If we are to provide for local services in these rural areas the the solution is to reduce them as rural areas and make them urban so the service provision achieves the kind of efficiencies that you are looking for.

    I'm happy to be shown that EU rules would allow the sort of permanent settlement of immigrants into a member state but having their rights restricted to employment in a specified area of a member state. I haven't found any such latitude within FoM.

  5. Opinion polls suggest a majority of Scots want to see immigration reduced. We are less opposed to it than people in rUK, but still against it.

  6. My point is that increasing the urban share of the population through immigration to Scotland's existing cities would both be more achievable and desirable to 'grow out of the fiscal transfer'. This of course wouldn't require the immigration controls that you discuss since migrants are naturally drawn to these areas (i.e EU membership would not be an impediment).

    If, as I understand you have argued, the fiscal transfer largely reflects comparatively inefficient service delivery in Scotland (due to the population share in remote communities), then it follows that the hypothetical transfer would be further reduced through the compositional effects of urban immigration (in addition to GDP growth).

    At any rate, given the vote for brexit and the direction the UK is heading, I don't imagine the case for immigration reform in Scotlands favour will be met with much enthusiasm in Westminster.

  7. Thanks Al.

    I don't disagree that is a possible method of getting rid of the transfer, however I don't see it as the most efficient method. Concentrating more wealth in the cities and then creating a fiscal transfer from them to the rural areas is not an efficient method. You get much more bang for your buck by effectively urbanising the rural areas, eliminating the extent of the intra nation fiscal transfer. Your policy is more expensive and just overcrowds already crowded cities and doesn't enable the economic exploitation of what is currently rural Scotland.

    I think you are wrong about immigration reform within WM, but we'll never know unless the SG start making a case for it and they aren't remotely starting that. That's the problem in my view.

  8. I agree theambler which is why I'm concerned about the SNP trying to spin down the extent of their very modest immigration plans during the indyref.

  9. I won't pretend to be an expert on these issues, but further development of urban areas would and satellite towns would presumably enable the use of existing infrastructure, as well as proximity to existing industrial clusters, universities and business services. Scottish cities are neither large nor crowded by international standards (although bad planning may give the perception). If Glasgow had the same population density as Paris for example, it would support a population of approximately 8 million - Aberdeen half that.

    While the land is cheaper, development of Scotland's remote communities on the scale you are talking about would require significant amounts of new investment, would be significantly more challenging in terms of industrial strategy, and as far as I know would have few historical precedents on which to draw upon. As you also point out, it would probably involve plastering over Scotland's valuable natural heritage with Barrett homes.

    I am sure the SG could do a lot more in making the case for immigration reform (and making the best use of existing powers). However I remain skeptical of reform on the scale desired while much of the overton window is determined by the daily mail and retrogrades on the tory right. (This article a case in point: )

  10. I take your point about increasing the population density of existing cities however my point remains that if you want the bigger bang for your buck then it is better to introduce people (on a large scale) to rural areas (and make them urban areas) rather than into existing urban areas. I have no doubt that this would require significant investment but it is the point, it's an investment that would reap rewards over a relatively short period of time.

    I couldn't agree more that the policy would involve "plastering over Scotland's valuable natural heritage with Barrett homes" and that was my point. Our natural heritage is costly, vast tracks of land that hardly anyone goes to and doesn't pay for itself creates our need for higher public spending. Now we can either accept that is the country we are (and I for one do) and accept that means higher public spending or we can do something about it. Mass immigration into these areas is the something that actually works.

    I can't agree that limited migration will do the trick, it's at best a sticking plaster for a much more fundamental problem if you want to reduce the fiscal transfer to effectively zero. However I also agree that it's not popular (my job isn't to come up with what's popular in this blog) as we can see your your article and the SNP's spinning of the required immigration figures during the independence referendum.

    My concern is that the SNP are happy to talk positively about immigration but only on a marginal basis. The kind of immigration that this country needs is transformational and the SNP (like all other parties) just refuse to recognise that.

  11. I'm operating on the assumption that it's easier to rapidly expand the population in and around Dundee with net fiscal contributors (skilled immigrants), than populate a new metropole (and economic ecosystem) around Dornie. Of course expanding Scotland's urban centers in the order of millions would be challenging, and require a very different architecture to increase the efficient use of land (i.e an end to cookie cutter housing developments with patios and conservatories).

    At any rate the need for immigration remains a dilemma regardless of independence. If voters down south at some point decide the end the 'inefficient' fiscal transfer between London/SE and rural Scotland, should the SG respond with radical immigration (assuming it has the means) or radical spending cuts/ tax increases?