Thinking differently about the economy

Oxfam Humankind IndexTomorrow, the Parliament holds its first debate on the Scottish Government’s proposed budget for the coming year. Most of the MSPs’ speeches we’ll hear will be about specific taxes or expenditures, but I hope some will take the opportunity to question whether the prevailing economic strategy as a whole is the right one.

We got an insight into how Ministers think about the economy in a Government-led debate two weeks ago entitled “Boosting the Economy”. MSPs were discussing and voting on this motion by John Swinney, the Deputy First Minister and Cabinet Secretary for Finance, Constitution & Economy:

Motion S4M-11993: John Swinney, Perthshire North, Scottish National Party, Date Lodged: 06/01/2015

Boosting the Economy

That the Parliament welcomes the continued growth of Scotland’s economy and the fact that Scotland’s unemployment rate is the lowest in the UK; further welcomes the fact that, since 2007, Scottish exports have increased by a third, business research and development has risen by 29% and that the total number of registered businesses in Scotland has grown by 10%; agrees that delivering sustainable economic growth and addressing longstanding inequalities are reinforcing, and not competing, objectives, and welcomes the actions that the Scottish Government is taking to foster a supportive business environment, invest in infrastructure, support entrepreneurship, innovation and internationalisation, and to help to ensure that economic growth is characterised by income, regional and social equality.

I was hoping to speak in the debate, but I wasn’t called by the Presiding Officer – instead, here are some thoughts on what I think are two vital issues in creating an economy that works for ordinary people: small-business-friendly government procurement, and seeing past GDP figures to measure what really matters.

Human-scale government contracts

42% of private sector workers in Scotland are employed in firms with fewer than 50 employees, and that’s much higher in the Highlands and Islands:

  • Orkney: 72% (the highest in Scotland)
  • Eilean Siar: 64%
  • Shetland: 59%
  • Argyll & Bute: 57%
  • Highland: 50%
  • Moray: 48%

Small businesses are particularly essential if we’re serious about the ambitions in the last line of John’s motion. They have far lower wage inequality than big firms, and being locally-based means they don’t suck money out of regions like the Highlands and Islands and into their headquarters in Edinburgh, Glasgow, London or beyond.

Governments have sought to make public procurement contracts more accessible to small and medium-sized enterprises, with varying success. But what is notable in these efforts, for example the Scottish Government’s Suppliers’ Charter, is that the focus is always on information and process, not on the contracts themselves.

Things like simplified tender processes and adequate advertising of tenders are very welcome, but don’t help much if the job can only reasonably be fulfilled by a large firm. It would be good to see a commitment to delivering more public spending through smaller-scale projects which smaller businesses are able to deliver. That means things like encouraging schools to serve locally-produced food instead of demanding massive bulk orders; or ordering new social housing in tenders of a few houses at a time, instead of massive estates of identikit boxes.

The energy sector has particularly low small-business involvement. Perhaps there was really no alternative to that when it was about oil-fired power stations or nuclear reactors. But our renewable future can and should have a huge contribution from community-scale clean energy facilities. There’s no reason to assume we have to replace giant corporately-owned nuclear power stations with nothing but giant corporately-owned windfarms.

In general, smaller projects have more opportunity for community involvement, provide more local jobs, and have a host of other social advantages over huge contacts. But they do require a bit more work on the part of the government. I think that extra effort is worth it.

Measuring what matters

John Swinney’s motion starts with the ‘growth’ of the economy. For the Scottish Government it is ‘growth’, measured by Gross Domestic Product (GDP), that is the most important measure of economic success or failure. That’s not surprising, because that’s also the attitude of almost every other government in the world. But they’re all wrong.

GDP is a terrible indicator of whether the economy is doing its job, which is delivering the things that people want and need, from physical goods like food and shelter to social ones like security and community.

It measures only the size of monetary transactions in the economy, regardless of what the money was spent on. That means if all of a sudden the number of car crashes doubled, GDP would tell you things were going great – all those repair bills and new cars would ‘boost the economy’. But would people actually be happier, safer, better off?

And because it only measures the bits of the economy that run on money, it pays no attention to the value of the work done by carers, stay-at-home parents, grandparents who babysit or volunteers who run sports clubs – who are all benefiting the real wellbeing of Scots as much as any paid worker.

GDP was never intended to be used as the paramount measure of economic success. Its inventor, Simon Kuznets, recognised the shortcomings I’ve mentioned, and warned that “the welfare of a nation can scarcely be inferred from a measure of national income.”

I give credit to the Scottish Government for beginning to recognise more useful economic indicators, for example including them in the National Performance Framework. But the fact remains that these aren’t mentioned in John’s motion, while the GDP figures are the first clause.

Encouragingly, there are alternatives. Oxfam’s Humankind Index provides an excellent example of how we could measure the performance of the economy in terms of things that actually matter to people’s lives.

It’s difficult to imagine us achieving a country, in John’s words, “characterised by income, regional and social equality” until we make the clear decision that that equality, rather than an abstract and abused 1930s econometric, is the yardstick by which we judge our economic success or failure.

Advertisements

Speech: The Scottish Budget 2014

Jean spoke in the final debate on the Scottish Budget, emphasising again the importanmce of preventative spending, and secure funding for the charities that provide so many preventative services.

She also addressed the Bedroom Tax, which the Scottish Government has successfully mitigated but which remains effectively a tax paid by Scotland to the UK Treasury.

You can watch her speech below (start at 1:45:48), and read the transcript of the whole debate at TheyWorkForYou.com.

Jean Urquhart (Highlands and Islands) (Ind): As always, I pay tribute not only to the hard work of the cabinet secretary in putting together the budget but to the efforts of the Finance Committee clerking team in helping those of us who are on the committee to scrutinise the budget and shed some light on the issues at hand. I am pleased to have the opportunity to go over some of those issues in this stage 3 debate.

The Scottish Government is to be congratulated on producing a positive and ambitious budget despite the tough economic environment and Westminster’s disastrous austerity agenda. Once again, vital components of Scotland’s social wage—free prescriptions, free personal care and public transport for the elderly, and free university education—have been protected. When household budgets are being squeezed by rising food prices and energy costs, those measures are not only welcome but necessary.

As a member of the Finance Committee, I am particularly pleased that the Scottish Government has strengthened its commitment to prevention, spending to stop social and health problems before they start instead of relying on expensive cures once it is too late. That philosophy is increasingly being followed in Government strategy, and the budget includes £30 million over two years to support the voluntary sector’s vital work in that area.

However, far too many charities are still being given funding settlements for just one year at a time, which makes it hard for them to plan and invest in future services. For example, the Badenoch & Strathspey Community Transport Company, which is extraordinarily good, faces an uncertain future despite providing an essential service that is well used by hundreds of people every week. We need to move to an expectation that funding for community projects will be for several years at a time, which will create the security that these brilliant voluntary sector services need and deserve.

On a more general note, I was pleased to see so many parties voting for the principles of the budget at stage 1. That is a testament to the cabinet secretary’s ability and his determination to get the best deal that he can for Scots from all walks of life. It also demonstrates that, despite differences of opinion on Scotland’s constitutional future, a solid majority in this Parliament believe that there is such a thing as society, that we cannot slash and burn our way to a better economy and that a healthy economy is based not on how those at the very top weather the storm but on how those at the bottom are protected from the harsh winds of an economic storm that continues to wreak havoc on communities up and down Scotland.

I am still angry that the bedroom tax was imposed on Scotland in the first place. I am angry that other welfare cuts, which are driven by ideology and lack compassion, are causing tens of thousands of Scots to turn to food banks. I am angry that a party that has been consistently and overwhelmingly rejected by the Scottish people for years continues to hold the purse strings. No matter what sterling work the cabinet secretary is able to do within the confines of our financial settlement and no matter how much we may agree with the second-largest party in this Parliament, the fact remains that, until Scotland has the full economic powers of any other nation, there is only so much that can be done to counteract the me-first attitude of Westminster’s right-wing orthodoxy.

At the end of her speech, Jackie Baillie declared with great aplomb—I hope that I am quoting her correctly—

“Today we can vote in effect to end the bedroom tax”.

Well, we cannot. We cannot simply vote to end the bedroom tax—that is the point of wanting Scotland to have independence.

Jackie Baillie (Dumbarton) (Lab): Does the member accept that, because of the Scottish Government’s actions in putting the £50 million on the table, we have effectively ended the bedroom tax in Scotland?

Jean Urquhart: No, I do not accept that at all. We have mitigated some of the worst outcomes of the bedroom tax, but we have not ended it. In fact, Scotland is going to pay dearly, to the tune of possibly £50 million from other services, to mitigate the bedroom tax. Let nobody be under any illusion that we have ended the bedroom tax.

The Conservative members who have spoken so far have pointed out that the cabinet secretary has not mentioned business or the economy, and they have said that this is not a budget for business. However, it seems to me from all the reports—those in what I might choose to call the English papers as well as those in the Scottish papers—that the big issue today is not the business community. The biggest issue—the one that is hitting everyone’s mailbox—is the bedroom tax and its effects on housing associations and local authorities.

I highly recommend the budget. I can only repeat what many other members have said: the only way to mitigate the bedroom tax is to abolish it, and the only way to guarantee that it will be abolished is to vote yes on 18 September. The budget lays the groundwork for a fairer and more prosperous Scotland. I support the Budget (Scotland) (No 3) Bill and the Government in its efforts to ensure that all future budgets can freely set Scotland’s priorities.

Budget: Jean calls for a better deal for Highland charities

Jean Urquhart has welcomed cross-party support for the principles of the Scottish Budget, after it passed the first stage of the parliamentary process this evening. MSPs from the SNP, Labour, Greens and Liberal Democrats, as well as Jean and her fellow Highlands and Islands independent MSP John Finnie, voted to pass the Budget (Scotland) (No.3) Bill at Stage 1.

Jean highlighted the Budget’s focus on preventative sending to reduce health and social problems in the future, but warned the voluntary organisations that are key to that effort need the security of longer funding agreements.

Jean said:

“The Scottish Government is to be congratulated for producing a positive and ambitious budget despite the tough economic environment and Westminster’s disastrous austerity agenda. Once again, vital components of Scotland’s social wage have been protected – free prescriptions, free personal care and public transport for the elderly, and free university tuition.

“Unusually, four out of the five parties at Holyrood voted for the principles of the Budget. That’s a testament to John Swinney’s ability and his determination to get the best deal he can for Scots of all walks of life. Only the Tories, insisting upon yet more cuts, opposed it.

“As a Finance Committee member I am particularly pleased that the Scottish Government has strengthened its commitment to prevention – spending to stop social and health problems before they start rather than relying on expensive cures once it’s too late. This philosophy is increasingly being included in government strategy, and the Budget includes £30m over two years to support the voluntary sector’s vital work in this area.

“However, far too many charities are still being given funding settlements for just one year at a time. This makes it hard for charities to plan, and to invest in future services. For example, the Badenoch and Strathspey Community Transport Scheme faces an uncertain future, despite being an essential and well-used service. We need to move to an expectation that funding for community projects will be for several years at a time, creating the security these brilliant voluntary-sector services need and deserve.”

You can read the full draft Budget document on the Scottish Government website.

Speech: Stage 1 of Budget Debate (January 23rd)

Jean Urquhart (Highlands and Islands) (Ind): I will use the time that I have in this stage 1 debate to reflect on the difficult choices that the cabinet secretary and the Government have faced in preparing the budget.

I am mindful of Professor David Bell’s conclusion in his report on the budget back in September:

“The Cabinet secretary is largely constrained by the settlement from the UK government, which in turn reflects its policy towards the UK’s current fiscal deficit.”

In the face of those constraints, and as I said in the Finance Committee debate on the draft budget before Christmas, I fully support the cabinet secretary’s budget for 2013-14 and the choices that he has made. We do not have the flexibility of normal countries as our budget is handed to us from on high. For example, restoring money to our colleges would mean cuts elsewhere—cuts that others have failed to outline or propose. In many instances, the choice that we have is Sophie’s choice, where money that could be used in so many different areas cannot be allocated to them all.

I was pleased to see the cabinet secretary’s thoughtful and considered written response to the Finance Committee’s report, which was debated in the chamber on 20 December, as the response answered many of the points that were raised in our report. I was particularly heartened by the information that the Government outlined on the economic impact of public sector investment in next generation broadband, with almost 14,000 indirect jobs being created between 2013 and 2028. That might seem a long period of time, but the ambition is welcome.

As a Highlands and Islands representative, I very much welcome the cabinet secretary’s recognition of the need to deliver improved connectivity in areas where next generation speeds are not yet possible. A reliable broadband service in the Highlands and Islands is the greatest gift that the budget could deliver to the region, as it would open up opportunities for small and medium-sized enterprises that are currently at a disadvantage due to their geographic location. It is no use having superfast broadband in Kilmarnock if Kiltarlity does not even have a dial-up service. The Government’s commitment to all parts of Scotland is to be lauded.

I was also glad to hear, in response to recommendations that were made by the Economy, Energy and Tourism Committee, more details of the work that the Government is undertaking on public procurement. As Jim and Margaret Cuthbert attested to in their evidence to the committee, Germany’s strategy of breaking down larger contracts into smaller chunks to enable small and medium-sized enterprises to bid for them is eminently sensible. Given the preponderance of SMEs in the Scottish economy, I am keen for the Government to continue to consider the idea as part of its bid to make the most of what we have.

As a member of the Finance Committee, which agreed its report on the budget, I hoped to see the helpful and constructive tone of our evidence-taking sessions extend to the chamber. I think that, in taking evidence from various organisations and other committees, every member of the committee was acutely aware of the difficult decisions that are being faced in these difficult times. I am convinced that the cabinet secretary has produced the best possible deal for Scotland, but I look forward to hearing positive, constructive and costed suggestions from the Opposition parties on how they would propose to improve it.

BLOG: Position on College Funding

There’s been a lot of press coverage recently for NUS Scotland’s “Fund Scotland’s Future” campaign on the issue of college funding. As an organisation, the NUS does a lot of excellent advocacy for students the length and breadth of the country, attempting to secure the best possible deal for our young people. Their steadfast advocacy for an education system free of up-front or back-end fees was just one campaign I was privileged enough to support and to continue to support. However, I’m afraid that I cannot support their most recent campaign around college funding, and I wanted to state my reasons for this publicly.

Scotland’s budget is under extreme pressure. As well as the overall budget for Scotland being shrunk by more than 11 per cent between 2010-11 and 2014-15, the UK Government is cutting its own Further Education budget by £1.1bn over the same period, which affects the Barnett consequentials for Scotland.

In the face of these unavoidable cuts, the Scottish Government is doing what it can to invest in, and help, Scotland’s further education sector. The extra £11.4m allocated to student support in last year’s budget, as well as the Scottish Government funding for over 116,000 full time equivalent (FTE) students in 2013/14, will help colleges preserve wide access at a time of significant challenge.

In particular, due to my experiences as part of the University of the Highlands and Islands board, I strongly support the reforms being made in college regionalisation. The process of regionalisation will help to target resources where they are most needed, breaking down institutional silos and improving the learning experience for students. While support for this process is not universal in the sector, it has been welcomed by many principals and will undoubtedly lead to long-term benefits for students and colleges alike.

Although it is disappointing that more money cannot be found for colleges at this time, I fully believe that the money that has been invested in future years will help to shield the further education sector from the cuts being imposed by UK Government decisions. I’m also wary that, due to the restraints on the Scottish Parliament’s financial powers and the severe cuts being made to its budget, extra money for further education would result in cuts elsewhere, reflecting the incredibly difficult decisions that must be made by the Scottish Government in maximising the impact of the money available within these constraints. Reversing a £34.6 million cut in colleges would just mean £34.6 million worth of cuts elsewhere, a Sophie’s Choice that none of the other parties have proposed a solution to. All that we can do with the current powers available to Scotland are re-arrange the deckchairs on the Coalition’s Titanic.

Having said all of that, I’m still very open to meeting with students and student leaders from across the sector to discuss the challenges and opportunities facing our young people. It’s vital that the energy and engagement these issues develop in our young people is harnessed and encouraged, and that no citizen is ever made to feel disconnected or discouraged from taking part in the political process.

BLOG: The Finance Committee Budget Votes

A number of press outlets have carried a story regarding a vote that took place at the Finance Committee last Wednesday. As reported, I did vote against an SNP amendment to our Committee’s budget report that would have explicitly supported the budget; however, I also voted against an opposition amendment that would have explicitly condemned the budget, a fact that seems to have somehow been missed out by the media.

The Committee system, in common with the Parliament’s original ethos, was designed to engender consensus and to encourage co-operation among MSPs regardless of their party affiliation. Holyrood’s Committees are also intended (perhaps optimistically) to be the yin to the Chamber’s yang, allowing thoughtful debate free from the partisan point-scoring that can, on occasion, take place in the Chamber.

The Budget Report, so ably distilled into a concise document by the Committee’s staff from the hours of expert evidence taken by the Committee on the impact of the Government’s proposed Budget, is a fair and balanced analysis of the Budget. It recognises that there are a range of opinions on the strength of the Budget, praising it where it deserves to be praised and offering constructive suggestions for change or further thought where the Committee considered that would be useful.

It’s a report that I am proud to put my name to, and that I was determined to keep clear from any amendments which would seek to change the spirit of the Report for pointless political point-scoring without any empirical evidence to back them. Michael McMahon, whose scrutiny has been an asset to the Committee, unfortunately put forward an amendment seeking outright criticism, an amendment that could not be backed by any interpretation of the evidence. To counter this, John Mason, who has been an able and thorough Deputy Convener of the Committee, put forward an amendment offering outright praise, which would also not have been fair given the evidence taken by the Committee.

In both instances, I voted to retain the original Report. Had the Report been altered by either amendment, it would have been difficult for the whole Committee to agree to support the Report, which would have been incredibly damaging and only added to the partisan cloud hanging over Holyrood these days. I’m delighted that the original report was wholeheartedly endorsed by the Committee, and hope that this consensus can be built on in the New Year.