Economy: SNP’s ambition dwarfs Tory estimate but can it deliver?: Ian McConnell

It was reported that some critics believed this was not a huge amount.

Of course, it is one thing to estimate that something could happen and quite another to deliver it.

Entrepreneur Sir Tom Hunter described the strategy as “a wish list begging for a magic wand that is not in our grasp”, adding the “lobbyists, politicians and vested interests have had their say and a panacea of 70 action plans awaits us if anyone can actually manage their delivery”.

Time will tell whether or not “Scotland’s national strategy for economic transformation” delivers the estimated benefits.

However, contemplating the scale of what the Scottish Government believes it can achieve in terms of the additional boost to gross domestic product from the strategy, £8 billion or 4.9% on a 10-year timeframe is a big ambition.

What was particularly striking this week was the contrast between this 4.9% uplift estimate and the UK Government’s updated projection of the benefits it sees from its now-signed trade deal with New Zealand.

Remember, this is a trade deal which has understandably caused significant concerns in the farming and food production sectors in Scotland and the UK as a whole.

And the UK Government has, to put it mildly, made quite a song and dance about the New Zealand trade deal. As if it is a very big thing.

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Secretary of State for International Trade Anne-Marie Trevelyan certainly appeared not to be holding back as she proclaimed the UK Government’s view of the deal signed this week.

She declared: “Our trade with New Zealand will soar, benefiting businesses and consumers throughout the UK and helping level up the whole country.

“Like all our new trade deals, it is part of a plan to build a network of trade alliances with the most dynamic parts of the world economy, so we set the UK on a path to future prosperity.”

You might be forgiven for thinking that this promise the New Zealand deal will see trade “soar” and help “level up the whole country” means a major boost to GDP.

That is, however, not the case.

In its assessment of the impact of the finalised trade deal with New Zealand, the Department for International Trade (DIT) says: “UK gross domestic product (GDP) could increase by around £0.8 billion in the long run. This is when compared to projected levels of GDP in 2035 (in today’s prices) without the agreement. The estimate indicates the value of a 0.03% increase in GDP (as a central estimate) as a result from the FTA (free trade agreement) in 2035. The estimate is subject to a high degree of uncertainty.”

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The DIT observes its “sensitivity analysis…suggests the estimated impact on long run GDP could vary between 0.02% and 0.03% (0.023% and 0.034% respectively, to three decimal places)”.

Taking these percentages to three decimal places obviously does not make them that much bigger.

The DIT adds: “As the analysis does not capture important sources of uncertainty, the actual long run impacts could fall outside of this range.

“The point estimates and ranges presented do not represent precise estimates; they represent an indication of the direction of impacts and broad orders of magnitude.”

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Whether precise or not, we can certainly get the overall picture: the estimated boost to GDP is tiny.

That said, it has been upgraded from the projected boost in a document published by the Johnson administration in 2020 entitled “UK-New Zealand Free Trade Agreement/ The UK’s Strategic Approach”.

This document stated: “A trade agreement with New Zealand is estimated to have limited effects on headline gross domestic product (GDP) in the long run, with the estimated impact on GDP being 0.00% under both scenarios.”

However, while marginally higher than zero, the updated 0.03% “central estimate” is most certainly nothing to write home about.

The 4.9% projected uplift that some seemed to think was a bit small in the Scottish Government economic strategy publication is 163 times 0.03%.

Of course, the scale of the Scottish Government’s projected benefit suggests a very significant challenge indeed in delivering the strategy.

The five broad policy thrusts of Scotland’s economic strategy seem perfectly sensible.

The Scottish Government is seeking to “establish Scotland as a world-class entrepreneurial nation founded on a culture that encourages, promotes and celebrates entrepreneurial activity in every sector of our economy”.

It is also aiming to “strengthen Scotland’s position in new markets and industries, generating new, well-paid jobs from a just transition to net zero”.

And it wants to “make Scotland’s businesses, industries, regions, communities and public services more productive and innovative”.

The Scottish Government is looking to “ensure that people have the skills they need at every stage of life to have rewarding careers and meet the demands of an ever-changing economy and society, and that employers invest in the skilled employees they need to grow their businesses”.

And it plans to “reorient our economy towards wellbeing and fair work, to deliver higher rates of employment and wage growth, to significantly reduce structural poverty, particularly child poverty, and improve health, cultural and social outcomes for disadvantaged families and communities”.

Tackling inequality is often underestimated as a way of boosting economic growth. People on low incomes often have to spend all they have to live, and, if they have more money in their pockets, this feeds through directly to demand.

The Scottish Trades Union Congress swiftly signalled its view that this week’s economic strategy does not go far enough on tackling inequality, and its views should be taken on board.

There has, also, rightly been much debate over Scotland’s success, or otherwise, so far in generating green jobs in key sectors.

It will also be no mean feat to establish Scotland as a “world-class entrepreneurial nation”. That is not to say it cannot be done, and Scotland has a proud history when it comes to innovation and invention.

However, past campaigns to boost the business birth-rate have shown how difficult it can be to shift the dial on this front. And many Scottish businesses are sold, for good prices, before they scale up to anything like their full potential.

Given the breadth of the stakeholders involved, it was always going to be difficult to please everybody with the economic strategy.

However, while delivery will be crucial and can certainly not be taken for granted, the scale of the ambition in terms of that projected boost in economic output is not in question.

In the context of the New Zealand trade deal, we should look again at the Theresa May government’s projections of the damage caused to the UK economy by Brexit.

The May government forecasts, published in November 2018, showed Brexit would, with an average free trade deal with the European Union, result in UK GDP in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries. Sadly, the Tories have since clamped down on immigration.

These percentages, covering projected reductions in GDP, are respectively 163 and 223 times the 0.03% figure for the upgraded estimated benefit of the New Zealand deal.

It is crucial, when it comes to political noise around things, to look at the numbers. That is not to say projections will be realised, but they are certainly a better starting point than politicians’ proclamations.