When it first arrived in government, in 2007, the Scottish National Party claimed its central purpose was “to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth”.
It set out Scotland’s Economic Strategy, covering context, priorities and implementation, in a single document, with admirable clarity.
The original vision survived until March 2015, when the strategy was updated. Whenever crises arose, like the global banking crash of 2008/09, sectoral action plans began to appear. But that core strategic approach to economic policy making still prevailed. However, by 2018 the SNP government’s whole approach to nurturing the economy was changing dramatically. Strategic focus was losing out to a plethora of micro strategies and sectoral action plans.
The economist Graeme Roy had served SNP governments throughout the strategic years, latterly as its senior economic advisor and head of the first minister’s policy unit. In 2016 he returned to the University of Strathclyde as director of its Fraser of Allander Institute (FAI). In March 2018, in the FAI’s quarterly commentary, he criticised a ”proliferation of strategies and advisory groups…which have arguably cluttered the policy and delivery landscape.” All this clutter, he warned, “could lead to confusion, a lack of alignment, duplication and weakened accountability.”
Much of this economic clutter and confusion – the FAI critique listed 16 distinct strategies, all with an economic focus, across Scottish government and its agencies – was mounting after the UK had voted to leave the European Union (June 2016} but before Brexit’s impact on trade and investment could be experienced for real. And it was happening before any of us had any experience of the profound economic impact the Covid pandemic would have as it claimed its mounting toll of victims around the world.
Feng shui
Ironically, when the SNP first tasted power at Holyrood in 2007, it immediately set about implementing a manifesto commitment to declutter Scotland’s two main economic development agencies, Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE). Both were stripped of their 21 business-led Local Enterprise Companies (LECs). In their place came six vast regional presences. Five served chunks of SE territory. In the sixth, HIE effectively became its own LEC. The roles that LECs had previously performed were hived off to local government through control of a revamped Business Gateway portal. In addition, SE and HIE lost their role in skills which was transferred to a new agency, Skills Development Scotland (SDS).
The instinct to declutter didn’t last. By the time Professor Roy was warning of strategic proliferation SNP ministers were already adding fresh clutter to their economic policy landscape. In November 2017 a new Enterprise and Skills Strategic Board was created “to align and coordinate” the work of SE, HIE, SDS and the Scottish Funding Council. And the tinkering didn’t stop there. In April last year South of Scotland Enterprise (SOSE), carved out of SE’s borderland territory with England, formally came into existence in its own right after a lengthy gestation.
What impact has all this structural churn in enterprise and skills support since 2007 had on Scotland’s ability to flourish economically through sustainable growth? In October 2018 the Fraser of Allander Institute examined the state of Scotland’s economy a decade on from the great financial crash and the recession that followed it. Overall FAI analysts judged it “a tough decade.”
Then came the really sobering detail. “Today, GDP per head in Scotland is just over 1½% greater than it was 10 years ago – an average growth rate of less than 0.2% per year. This compares to growth of around 20%, or around 2% each year, in the decade 1998 to the end of 2007,” FAI concluded. That’s a ten-fold slowing in growth over a whole decade since banks imploded in the great financial crash. The shuddering standstill Covid has since wrought on great swathes of economic activity must mean the overall hit is now even more profound.
Industry 4.0 or not…
Scotland’s grim growth picture is compounded by a series of specific industrial interventions by ministers, designed to save jobs in sectors deemed to be vital to Scotland’s overall economic future. Among the most prominent are the fate of the Lochaber aluminium smelter at Fort William and the Ferguson Marine ferry saga on the Lower Clyde.
The Lochaber smelter is the last operational unit of its kind anywhere in the UK. It was acquired in 2016 by Sanjeev Gupta, Cambridge-educated former commodities trader turned saviour of unwanted metal making plants – notably steel and aluminium – around the globe. Lochaber was one of a pair of small smelters, both powered by their own hydro-electric schemes, built by the British Aluminium Company in the early decades of the last century. The other, at Kinlochleven, was opened in 1909, but closed in 2000. Its hydro scheme now feeds its electricity direct into the national grid.
Then owners, Rio Tinto, were close to shutting Lochaber down too. It had first opened in 1929. Like its sister plant, it had done well to keep producing aluminium for nine full decades. But Gupta wanted it as a going concern. He had big plans for downstream manufacturing plants promising lots more jobs. He was prepared to pay £330m for the lot, including a 115,000-acre shooting estate from which the smelters drew their hydro power.
Gupta, who had earlier been given a £7m loan through Scottish Enterprise to acquire two steel-rolling mills in North Lanarkshire, did even better in his foray into the West Highlands. The Scottish government, through Rural Economy cabinet secretary Fergus Ewing, offered a guarantee that ministers would underwrite power supplies to the smelter for 25 years, at a headline cost of some £575m. For a 92-year-old plant, employing just 170 people, that’s a remarkable level of state support.
Gupta’s mission to revitalise unwanted metal making assets across 30 countries relied on massive borrowings running into many billions. His main financial backer, Greensill Capital, the creation of a young Australian merchant banker, Lex Greensill, specialised in supply chain finance. It would lend those billions on the security of unpaid invoices sent to Gupta’s customer base. And it would raise more capital by tapping mainstream financial markets with bond issues backed by state-grade commitments, like the Scottish government’s 25-year power purchase guarantee in Lochaber.
The whole Greensill house of cards collapsed into administration last month, claiming “severe financial distress” after its main insurer refused to renew its contract and lender Credit Suisse was refused immediate repayment of a $140m loan and subsequently froze $10bn of funds linked to Greensill. The group’s lawyers claimed the other major pressure point was another $5bn of exposure to Gupta’s GFG Alliance empire on which the metals magnate had “started to default”. GFG is now desperately seeking new lenders to fend off its own collapse.
By comparison, the travails at Ferguson Marine at Port Glasgow and its two troubled ferries rumble on. Scotland’s SNP government took the yard into public ownership in August 2019. The prime mover was then Finance Secretary Derek Mackay who made clear a core objective was to save hundreds of skilled shipbuilding jobs on the Clyde. By the following February Mackay himself had resigned from ministerial office after contacting a 16-year-old boy on social media. Suspended from his party membership, he was barely seen at Holyrood since. Last month he ended his SNP membership.
Ferguson Marine’s turnaround director Tim Hair last month told MSPs: “We have effectively created the shipyard from a standing start in the space of a year”. But efforts to recruit 120 additional skilled workers locally to staff a weekend shift and complete the long-delayed Hulls 801 and 802 is not going so well; only 29 of the 120 weekend workforce have been found. And even the main weekday workforce is still “over 30 people short of our requirements” Hair now insists “it is not therefore possible to provide a definitive schedule for the completion of the vessels at this time.” With the two ferries, ordered way back in 2015, already years late, Ferguson Marine is now expediting plans to fill the yard’s skills shortages through “subcontracting and the introduction of non-UK labour.”
Conclusion
We all have a big decision to make on May 6. For me, the evidence of the last 14 years of Scottish Government is that, for all the institutional clutter of proliferating advisory boards, agencies and task forces, not to mention the burgeoning mountain of plans and strategies for what comes next, the 2007 promise of a thriving economy, a greener lifestyle from which all could benefit is further away than ever.
Growth is slowing. Inequalities are rising. With Covid adding its own malign legacy to the challenges ahead, we need to sweep away a lot of that accumulated institutional clutter. And we need politicians prepared to face much more forensic scrutiny of what they are actually delivering. I fear that is not what’s on the ballot paper next month.
Featured image: Newark Castle, Port Glasgow, with MV Glen Sannox on the slipway about to be launched at Ferguson Marine Engineering by Dave Souza via Wikimedia Commons CC BY-SA 4.0; Gupta by liberty2017 via Wikimedia Commons CC BY-SA 4.0
Leave a Reply