Post referendum Scotland: an STUC perspective

Stephen Boyd, Assistant Secretary, STUC

Nevin Economic Research Institute, 18 November 2014

Content

• The Scottish economy – some background • Political economy of the referendum

campaign • Referendum aftermath – Smith Commission,

themes driving new political economy

1 WHIRLWIND TOUR OF THE SCOTTISH ECONOMY

Structure of the Scottish economy, 2009

GVA per head (£), 2012

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Wales NorthEast

NorthernIreland

WestMidlands

EastMidlands

Yorkshireand TheHumber

NorthWest

SouthWest

East ofEngland

Scotland UK England SouthEast

London

Output per Head across UK Countries, 1999 to 2011 (excluding North Sea Output). UK =100

Key facts: Scotland/UK

Employment rate (%), July-Sept, 2014

64.0

66.0

68.0

70.0

72.0

74.0

76.0

78.0

NorthernIreland

North East Wales WestMidlands

NorthWest

Yorkshireand TheHumber

London UnitedKingdom

England Scotland EastMidlands

SouthWest

South East East ofEngland

Unemployment rate (%), July-Sept 2014

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

South East SouthWest

East ofEngland

EastMidlands

Scotland England UnitedKingdom

NorthernIreland

London NorthWest

Wales Yorkshireand TheHumber

WestMidlands

North East

Current Revenue (total £47.56bn) 2012-2013

22.8%

6.0%

17.9%

19.7%

4.7%

4.2%

4.2%

20.5% Income tax

Corp tax (excl North Sea)

NI

VAT

Fuel duties

Non-domestic rates

Council tax

Other taxes

Total revenue (£m)

Total current revenue (excluding North Sea revenue) 47,566

North Sea revenue Per capita share 552 Geographical share 5,581

Total current revenue (including North Sea revenue)

Per capita share 48,118 Geographical share 53,147

Spending on services, Scotland total as

% of UK

0

50

100

150

200

250

Total services Health Education Enterprise& Econ Dev Transport Public order and safety

Estimated total public spending as a percentage of GDP in Scotland and the UK

Net Fiscal Balance: Scotland and UK 2008-09 to 2012-13

2 THE INDEPENDENCE REFERENDUM

The economy was the key issue

"I firmly believe who wins the economic argument will win the referendum” Nicola Sturgeon, January 2014

Independence referendum

• Economic issues at forefront of debate • Huge, diverse (in origin and quality!)

associated literature: HMT, SG, NIESR, IFS etc • Macroeconomic issues dominated: especially

currency & fiscal sustainability • Micro/economic development issues largely

ignored (although Scot Govt did try!) • Debate reflected lack of capacity at Scottish

level: political, media, academic, civic

Yes/No key themes

• NO: emphasised macro framework and fiscal sustainability; pooling and risk sharing; integration of UK market; transition and set up costs; PROJECT FEAR!

• Yes: aspirational; emphasised social policy; independence as austerity avoidance mechanism; animal spirits/productivity dividend; reindustrialisation; Nordicism (childcare); social partnership

STUC ‘A Just Scotland’

• Launched summer 2012; aimed at 1) informing trade union members and wider society 2) shifting debate firmly onto grounds of social justice

• Three reports: December 2012, February 2014, September 2014

• Seminars & policy conferences across Scotland • Didn’t take a Yes/No position but not neutral!

Key STUC views

• Heavily critical of Scot Govt/Yes on macroeconomics (currency, fiscal sustainability, oil fund) and of UK Govt/No on Project Fear approach

• Sceptical of sector specific analysis: financial sector; energy; defence

• Positive about Scot Govt’s economic development plans (e.g. reindustrialisation) & aspirational social policies

• Emphasis that No didn’t necessarily mean endorsement of constitutional status quo

3 POST REFERENDUM – NEW POWERS?

Current devolution settlement

Devolved to Westminster • agriculture, forestry and fisheries • education and training • environment • health and social services • housing • law and order (including the

licensing of air weapons) • local government • sport and the arts • tourism and economic

development • many aspects of transport

Reserved to UK • benefits and social security • immigration • defence • foreign policy • employment • broadcasting • trade and industry • nuclear energy, oil, coal, gas and

electricity • consumer rights • data protection • the Constitution

Scotland Act 2012

• The ability to raise or lower income tax by 10p in the pound. Any change is applied equally across all tax bands

• Other minor tax powers: control of stamp duty and landfill tax.

• The ability to borrow money, up to £2.2 billion a year. • Guaranteed Scottish representation in the BBC

and Crown Estate. • Legislative control over several more issues including

limited powers relating to drugs, driving, and guns.

Smith Commission

“To convene cross-party talks and facilitate an inclusive engagement process across Scotland to produce, by 30 November 2014, Heads of Agreement with recommendations for further devolution of powers to the Scottish Parliament. This process will be informed by a Command Paper, to be published by 31 October and will result in the publication of draft clauses by 25 January. The recommendations will deliver more financial, welfare and taxation powers, strengthening the Scottish Parliament within the United Kingdom”

STUC Smith Submission – key features

• Very critical of process: timing and lack of civic engagement

• No to Devo-max! But support devolution of… – …and assignment of taxation amounting to at least

two thirds of Scottish public spending – employment law, health and safety, trade union law,

NMW – Housing Benefit, Attendance Allowance, Carer’s

Allowance – the Work Programme

Themes driving post indyref political economy

• Astonishing level of political engagement (growing Left influence?)

• Austerity and welfare reform • Inequality – new ‘purpose aim’ of the Scot Govt? • Labour market reform – new Scottish institutions

e.g. the Fair Work Convention • Economic development – reindustrialisation; the

Foundational Economy • Newly invigorated English cities/regions?