Growth Commission, really? Here's how to create new Scottish growth

Growth Commission, really? Here's how to create new Scottish growth

by Eben Wilson
article from Thursday 7, June, 2018

MY FIRST REVIEW of the Sustainable Growth Commission revealed its inherent centralism; a stance that forces it into the error of trying to improve innovation, growth and productivity by state planning.  Economic experience tells us that that simply will not work. 

Growth is generated by people, not the state. The “small country/big country” distinction used by the Commission is a macro-economic smokescreen; endless graphs and charts offering analysis of yesterday. Again, Scotland’s macro-economists love what Hayek called “constructed scientism” but the history tells us very little about tomorrow which no-one has yet invented. 

Geography ensures that large and small market clusters exist in the economic world.  The goal for any cluster on the periphery is to use a position of lower overheads to compete and grow faster than the centre. A difficult concept to grasp is that Ricardo’s comparative advantage even tells us that it is not necessary to be more productive. (That only helps when you start making products identical to others; something that most companies try not to do).  That’s what Asia, once on the periphery, has done up against the West and built itself up as a new regional core.  Scotland PLC managed from Edinburgh cannot achieve this; the state cannot know where our advantages lie.  

So what should the Commission have offered? In short, a way of discovering advantage through the freedom to innovate in our thinking and boost the supply side. At the broad-brush macro level, to set a tone and a framework, here is what I would have liked to have seen:

  • A recognition that we need to reduce marginal tax rates across the board.
  • A policy recommendation to reduce the total level of state spending
  • A proposal that there should be more localism in the delivery of all public services.  
  • A determination to re-negotiate Scotland’s membership of the UK’s one-size-fits-all nationalised policies and institutions and so create the freedom to innovate.

I realise that last recommendation might be seen to be “nationalist”, but it should be thought of as further enhancing public choice options, putting service consumers first and not the UK, or Scottish, state.  Even Unionist Scottish Ministers should be battering at the door of No 10 to get them to stop deciding on the colour of our wallpaper. 

The real issue for improved governance of Scotland (as in any nation) is the need for a focus on micro-economic factors; whether independent or not we need more freedom to use independent policies that affect individuals, not encourage state planners. Four of these should be:

  • Reducing payroll taxes.They destroy jobs, especially for the poor, and curtail growth.  
  • Allow personal opt-outs from all state pensionsand social support structures into personalised, but mandatory, alternative wealth account savings. 
  • Replace Corporation Tax with a Corporate Income Tax. Profits re-cycled into new investments are thereby freed to create new value; profits moved to tax havens are taxed.  
  • Allow a flexible VAT regime.(Brexit required). Scotland already has half of VAT receipts allocated to its budget; we should be allowed to adjust this tax rate for better outcomes. This again could especially help the less well-off. 
  • Gain control of inheritance tax from HM treasury so it can be abolished in Scotland. This would lower long-term interest rates for entrepreneurs willing to use family equity for long term investment plans. 

Today, these options are not open to Scotland, but this was an SNP report purporting to support the case for independence. Stuck in its socialist hole all it seemed able to offer was to pull its punches and offer more top-down socialism.  That’s pathetic. 

At today’s devolved level there is existing scope for endless micro-economic measures. Some of the suggestions below may seem wild, but that’s precisely the point; it seems that no-one in Scotland, statists or not, is willing to kick out the old and bring in the new.  To innovate we need to change old ways of thinking and look to genuinely localised control, using liberalism to catalyse innovation, and let all Scots people change their futures. 

  • Scrap LBBT completely, this would re-vitalise the businesses of our trades people. It would also release housing throughout the ladder in property values.  Houses are the backbone of small business investment collateral that firms need to grow. Tax revenues would rise, mostly through VAT and NIC because there would be a strong growth in employment across multiple trades – exactly the sort of small artisan companies that are prevalent across Scotland.
  • Reverse local planning in favour of a presumption of development. Introduce a localised democratised planning process whereby the NIMBY wealthy have to buy the right to non-development by paying the less well-off to host alternative developments. 
  • Set up Roads Trusts, part-owned as co-operatives by local residents and civil engineering contractors, to operate trunk routes with electronic tolls.  Medium term certainty would allow these companies to invest and grow and residents to obtain dividends.  Extend this to Local Street Trusts as soon as possible once the approach is understood. Take back control.
  • Divide public housing up into small Housing Management Associations within a national framework of transferrable capital rights in those property assets for their tenants.  This would massively increase social and worker mobility in Scotland; and allow the less well-off to build up their personal capital. 
  • Pluralise education by putting all state schools into separated cluster groups under contract to their parents. Make all educational quangos tender to supply their services to the groups, while allowing the latter to scrap the centralised curriculum if parents agree, and decline the services of the former if they are then not needed.  Encourage new entrants beyond the initial autonomised groups; let them teach as they wish. 
  • Propose that all schools teach domestic science and home economics to all children. This would do more to improve the lives of the vulnerable than the billions we spend on social support payments. 
  • Give doctors and teachers a “capital stipend” that they take with them into their work postings. Give these professionals control over what that money is spent on. This requires all such services to be made public transparently through “virtual pricing”. We’d then know a lot more about productivity within these monoliths. Reduce the budgets of schools and hospitals and GP practices accordingly. These institutions need to trust and be contracted by their consumers and working professionals. 
  • Allow GP surgeries to introduce prescription charges – let them keep the money for new technology-based care services that keep people out of hospitals. 
  • Adopt the proposal by COSLA’s Commission on Strengthening Local Democracy to divide Scotland into hundreds of local management entities.  Channel all local funding through those entities and make our present local councils tender for their public services business. Allow localised entities to refuse those services and organise their own privately if they can do it more cheaply. 
  • Adopt tradeable and freely-priced quotas for fishing. (Brexit required).
  • Declare an end-date for all state employee final salary pension schemes even if that change only takes place a decade or more into the future. 
  • Charge student fees up to a proportion of the total spend on teaching services agreed annually through sunset legislation by the Scottish Parliament. Publicise the cost of this support both as a gross value but also its redistributive effects from poor to rich.  Reduce those public fund payments to any University that does not perform to a contracted output target for degree success. 
  • Separate out all innovation research spending within universities into audited R & D industrial units. Close Scottish Enterprise and all other taxpayer-funded innovation quangos and initiatives; the state cannot innovate. Distribute any innovation funds as long-term endowments to be held by the universities and used as core equity for their industrial units. Top those up each year based on audited outcomes of the R & D units.  Leave the core teaching and research functions of the universities alone and free with secure academic tenure. 
  • Set up a Thorium Reactor Development programme.  Accept the nuclear waste of all countries in the world and store it under Wanlockhead in the old lead mines. Process it when the Thorium reactors become available and rid the world of Plutonium. No-one should then need to use coal of gas anywhere worldwide when we sell them our Thorium reactor technology. 
  • Plan a gradual decline to zero of all wind, wave or tidal energy production subsidies. Invest the money in space research based at Prestwick Airport. 
  • Cut income tax to a flat 15 per cent. Less if possible. It could be scrapped within twenty years if welfare funds were saved in individuated welfare accounts. 
  • Strengthen the Fiscal Commission to become a genuine constitutional entity dedicated to fiscal rule-making (limited to a defined role of economic constitutionalism) with democratic control through independent non-party senators elected by regional populations. 

This report deserves to be buried in the hole of its own making; it is partisan, based on false assumptions and has little value, as it offers no new ideas that would help Scotland grow.

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