HERALD ARTICLE OF 4th JULY 2020

A NEW DEAL FOR SCOTLAND

Following the Great Depression of 1933, Franklin D. Roosevelt tried to kick-start the American economy by launching his New Deal. Boris Johnson is keen to follow FDR’s example. Britain is facing a potential quadruple whammy, involving the coronavirus pandemic, the collapse in oil prices, the greatest recession we have ever faced and the threat of a cliff-edge Brexit. It is going to take a humungous New Deal to get the UK economy back on track.
It is interesting to examine how the Great Depression came about in America and how FDR attempted to combat it. After the Roaring 20’s, the real-estate boom and a huge surge in stocks and shares, the bubble burst, with the resulting Wall Street Crash, the banking crisis and the Great Depression. There was up to 80% unemployment in some cities. FDR asked Congress to end prohibition and began mammoth government intrusion into the economy with huge infrastructure projects. He introduced a succession of large-scale relief programmes, including an agricultural act to help farmers. It was Keynesian economics writ large, with increased government expenditure and lower taxes to stimulate demand and pull the US economy out of the depression.

In his inaugural address in 1933 FDR said “We have nothing to fear but fear itself.” This message seems to have resonated with Boris Johnson, who has reduced the 2-metre social distancing rule in England to 1-metre+, thereby dramatically improving the sustainability of pubs, restaurants, hotels, cafés, hairdressers and a host of other businesses, all of which are being allowed to trade again, echoing FDR’s end to prohibition. Sadly, the same message has only slowly penetrated Nicola Sturgeon’s conscience and Scotland’s return to work crawls along at a snail’s pace. The First Minister’s glacial approach is beginning to grate with business and industry who recognise that post-pandemic Scotland is going to face massive unemployment. FDR’s fear warning has been forgotten by Scotland’s political leaders.

The First Minister says all of her emphasis is on getting Covid-19 under control. Meanwhile, Benny Higgins, chair of the Scottish Government’s economic recovery panel, has suggested that a new government agency should be set up, ready to take an equity share in many vulnerable SMEs. He wants a guaranteed 2-year jobs lifeline for 16 to 25-year-olds. These ideas are worth exploring further, particularly his emphasis on Scotland’s failing education system, where he says schools will have a vital role to play in our economic revival. But Sir Tom Hunter has perhaps made a more cogent suggestion that Scotland’s business leaders, rather than SNP ministers and civil servants, should lead plans for our economic recovery.

Any New Deal for Scotland will have to include big infrastructure projects. Let’s start with government support for the vertical launch space port on the old RAF base at Unst in Shetland and not at the Mhoine site in Sutherland, which inexplicably seems to be the preferred location by Highlands & Islands Enterprise. From every safety and environmental aspect, Unst is the UK’s top site and it would be a huge boost to the Scottish economy if the SNP government threw their weight behind it. The lockdown has also raised public awareness of the need to pay more than lip service to the climate emergency. Significant reductions in harmful emissions due to the grounding of aircraft and the sharp fall in road traffic has awakened everyone to the benefits of good, clean air. We can capitalise on this by underwriting rapid development of the hydrogen economy. Scotland is well placed to be a world beater in hydrogen fuel-cell technology, producing carbon-free sources of energy.

Scotland must quickly catch up with the rest of the UK in re-opening our pubs, hotels, restaurants and cafés. Until the lockdown began almost four months ago, tourism was one of Scotland’s major growth industries, pumping over £4 billion into the Scottish economy every year, with over 200,000 people directly or indirectly employed in the sector. Social-distancing must be reduced to 1 metre+, similar to England and the ‘Visitors Not Welcome’ signs that have sprung up around the country should be immediately removed.

FDR realised the need to protect America’s farmers in his New Deal and Nicola Sturgeon must now pledge similar support to Scotland’s agricultural sector. They worked without a break throughout the lockdown, to keep us supplied with healthy, nutritious food. The SNP government’s policy of simply cutting and pasting current EU farm-support schemes until 2024 is not sufficient for a long-term industry like agriculture. Scotland’s farmers need a clear message that support will continue for at least the foreseeable future.

But all of these ideas require funding and all require a sharp focus on our post-pandemic economic recovery. The Westminster government’s Coronavirus Job Retention Scheme covered furlough payments of 80% of wages for millions of workers, together with the abolition of business rates and generous cash grants and loans. The cost to the UK will be around £300 billion in this financial year alone, a deficit bill that is split across the whole of the UK, with Scotland as a net fiscal beneficiary. An independent Scotland could never pay this bill and the SNP’s demand for further devolved borrowing powers is symptomatic of their predicament. If Westminster grants Scotland those borrowing powers, we need to acknowledge that international financiers will only ever lend money to Scotland if they have the insurance of UK government backing and the credibility of the Bank of England as the lender of last resort.

Yet if there is one area in which the First Minister is truly blinded by fear it is on standing up to vested interests in her own party over the constitution. Now is not the time for further navel-gazing, or messing around with constitutional change and she knows it. If Scotland had severed its links with the UK in 2014, we would now be adrift in a sea of austerity and crippling taxation for years to come. Economic recovery can only be achieved by all of us pulling together, not just here in Scotland but across the UK. Therefore, the most significant part of any New Deal that Nicola Sturgeon strikes with the people of Scotland must be to find a way to put another independence referendum on ice. The threat of Indyref-2 must be taken off the table, to reassure business and industry that their future is secure and that jobs and prosperity are the key focus.

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