{"id":8693,"date":"2019-06-28T11:58:24","date_gmt":"2019-06-28T11:58:24","guid":{"rendered":"https:\/\/sceptical.scot\/staging\/?p=8693"},"modified":"2026-04-18T19:34:31","modified_gmt":"2026-04-18T19:34:31","slug":"devo-20-and-the-economy","status":"publish","type":"post","link":"https:\/\/sceptical.scot\/staging\/2019\/06\/devo-20-and-the-economy\/","title":{"rendered":"Devo 20 and the economy"},"content":{"rendered":"\n

It is 20 years since the devolved Scottish Parliament was established.<\/strong><\/p>\n\n\n\n

In many ways, the\nScottish economy has been greatly transformed over that period.<\/p>\n\n\n\n

What the next 20 years\nwill hold is obviously uncertain. But with Brexit, the possibility of IndyRef2\nand major structural shifts in our economy guaranteed, it is clearly going to\nbe a period of further upheaval.<\/p>\n\n\n\n

Economic\nand fiscal performance over the past 20 years <\/strong><\/h2>\n\n\n\n

The first eight years of\nthe parliament, from 1999 to 2007, were characterised by a strongly performing\neconomy (in Scotland and the UK), and a growing Holyrood budget.<\/p>\n\n\n\n

But in 2008, the global\nfinancial crisis tipped Scotland into a sharp and damaging recession.<\/p>\n\n\n\n

What has been\nparticularly challenging has been the fragility of the subsequent recovery \u2013\nnot just in Scotland but across advanced economies.<\/p>\n\n\n\n

On top of this, the oil\nprice shock of 2015 had a particularly negative effect on Scotland by dampening\ngrowth just when confidence was returning. A year later, in June 2016, the EU\nReferendum ushered in a renewed period of uncertainty.<\/p>\n\n\n\n

Scotland\u2019s long-term growth rate is now well below trend. Chart 1.<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

The one bright spot has\nbeen the labour market, with employment at near record levels.<\/p>\n\n\n\n

But unpicking the data\nreveals some concerns.<\/p>\n\n\n\n

Whilst participation\nrates have risen sharply, a combination of weak wage growth, cuts to in-work\nbenefits and fewer hours worked means that for many households, employment is\nno longer the route into a secure economic future it once was.<\/p>\n\n\n\n

How have the Scottish economy and labour market changed?<\/strong><\/h2>\n\n\n\n

Much of Scotland\u2019s\nlong-term improvement in employment, unemployment and inactivity rates has been\nas a result of a sustained and significant uplift in female labour market\nparticipation.<\/p>\n\n\n\n

The employment rate for\nwomen was 64% in 1999, now it is 73%.<\/p>\n\n\n\n

Our labour market is\nalso getting older \u2013 with a 40% increase in the number of people employed who\nare over 50 in the last 15 years.<\/p>\n\n\n\n

With relatively weak growth in the wider economy, but a strongly performing labour market, this has had consequences for Scotland\u2019s productivity performance. Chart 2.<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Scotland has, however, \u2018caught-up\u2019 with the UK. Back in 1999, Scotland\u2019s labour productivity was 91% of the UK\u2019s. In 2017 it was 97%. Chart 3.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Unpicking\nthis reveals some interesting trends that unfortunately increasingly get\nignored. In particular, Scotland\u2019s relative improvement in productivity\nvis-\u00e0-vis the UK as a whole can largely be explained by changes in hours worked\nrather than a sustained uplift in relative economic efficiency.<\/p>\n\n\n\n

As a result, people in Scotland\nmight be relatively \u2018more productive\u2019 but this has been eroded by other means,\nincluding weaker growth in working hours.<\/p>\n\n\n\n

A key driver of the growth in the\nnumber of people in work in Scotland has been the turnaround in Scotland\u2019s\npopulation.<\/p>\n\n\n\n

The population of Scotland has\nincreased significantly since the turn of the century, reversing the decline\nsince the 1970s to be at the highest level ever.<\/p>\n\n\n\n

This increase has been driven by\nmigration, both from the EU Accession countries and the rest of the UK. In general,\nnatural change (i.e. births minus deaths) is negative, and therefore any\npopulation growth comes from migration.<\/p>\n\n\n\n

So how much has devolution changed Scotland\u2019s\neconomic fortunes?<\/h2>\n\n\n\n

Answering such a question easily\nis clearly fraught with difficulties, given the lack of a counterfactual and\nthe significant wider structural change that has taken place over this time.<\/p>\n\n\n\n

Scotland continues to remain the\nwealthiest part of the UK outside of London and has had notable successes in\nareas such as renewable energy and attracting international investment.<\/p>\n\n\n\n

On a number of key macroeconomic indicators, Scotland has improved its relative position within the UK \u2013 both in terms of comparisons to the UK as a whole and to the other devolved nations and English regions. This includes on productivity and most labour market measures. Table 1.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Future\neconomic and fiscal challenges<\/strong> <\/h2>\n\n\n\n

What are the next 20 years likely to hold?<\/p>\n\n\n\n

Of course, the immediate change\non the horizon is Brexit. And for policymakers at Holyrood this will mean not\nonly dealing with the implications for the economy and society, but handling\npotentially significant legislative and fiscal changes.<\/p>\n\n\n\n

The fallout from the \u2018Great\nRecession\u2019 and fiscal austerity have illustrated that \u2013 in many key areas \u2013 the\nmajor macroeconomic and fiscal policy levers remain at Westminster. But many of\nScotland\u2019s long-term challenges lie within devolved powers.<\/p>\n\n\n\n

We highlight three \u2013 demographic\nchange; climate change; inequalities and well-being.<\/p>\n\n\n\n

Tackling Scotland\u2019s unequal economy<\/strong> arguably remains the biggest challenge.<\/p>\n\n\n\n

Some of this reflects the\nlong-term nature of many of the interventions that we know will make a\ndifference (e.g. in education).<\/p>\n\n\n\n

But there is also a question\nabout how bold and truly transformational the proposals being put forward are \u2013\nby all political parties \u2013 particularly if Scotland is to meet its objectives\nin areas such as reducing child poverty.<\/p>\n\n\n\n

For example, despite it being\nnearly five years since the Scottish Government launched \u2018inclusive growth\u2019 as\nits key policy agenda, the Poverty and Inequality Commission have raised\nconcerns that the Scottish Government has not been sufficiently clear about\nwhat it means by inclusive growth, concluding that \u201cinclusive growth appears to\nbe more of a concept than something which results in a tangible outcome\u201d.<\/p>\n\n\n\n

Conclusion<\/strong><\/h2>\n\n\n\n

The next 20 years are likely to\nsee economic change at least as significant as the past 20 years, as well as\nfurther change to the constitutional settlement.<\/p>\n\n\n\n

If Scotland is to meet the challenges of the next decade and beyond \u2013 and take advantage of the undoubted opportunities that will arise \u2013 it is likely to require a much bolder economic policy agenda.<\/p>\n\n\n\n

First published by the <\/em>Fraser of Allander Institute<\/em><\/a> where you can also read David Eiser and Graeme Roy on the next fiscal review<\/em><\/p>\n\n\n\n

\u00a0Read the full discussion on 20 years of Devolution and the rest of the latest commentary here:\u00a0<\/em>httpss:\/\/www.sbs.strath.ac.uk\/download\/fraser\/201906\/20190626-Commentary.pdf<\/em><\/a><\/p>\n\n\n\n

Image by Molly Bones CC BY-NC-ND 2.0<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

‘If Scotland is to meet the challenges of the next decade and beyond \u2013 and take advantage of the undoubted opportunities that will arise \u2013 it is likely to require a much bolder economic policy agenda’
\n.<\/p>\n","protected":false},"author":146,"featured_media":7624,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[319],"tags":[72,85,179],"class_list":["post-8693","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","tag-holyrood","tag-scottish-devolution","tag-scottish-economy"],"_links":{"self":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/8693","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/users\/146"}],"replies":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/comments?post=8693"}],"version-history":[{"count":1,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/8693\/revisions"}],"predecessor-version":[{"id":18755,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/posts\/8693\/revisions\/18755"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media\/7624"}],"wp:attachment":[{"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/media?parent=8693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/categories?post=8693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sceptical.scot\/staging\/wp-json\/wp\/v2\/tags?post=8693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}