Does style overshadow substance in Scots economic debate?

With encouragement from a colleague at the University of Glasgow – David Waite – and my former boss in the Scottish Government – Andrew Goudie – our paper: "Scotland’s Economy after 25 Years of Devolution," is now published by the journal Scottish Affairs.

It’s free to access for the next few weeks on the Edinburgh University Press website.

It was great fun writing with Andrew. He is a former director-general of economy and chief economic adviser to the Scottish Government, from a time when the civil service’s research and engagement were at the forefront of debates on the Scottish economy. His insights and reflections are remarkable.

We sought to examine both Scotland’s economic performance and the evolution of policymaking. What were some of our conclusions?

It goes without saying that the last 25 years have been anything but smooth sailing. The first decade of devolution was a period of relative economic calm and significant increases in public spending. But since 2008, a financial crisis, Brexit, global pandemic, cost-of-living crisis, and constitutional frictions have created a more turbulent backdrop.

The policymaking environment has also changed significantly. Devolution sparked an expansion in Scotland’s policy infrastructure, including (positively) the coverage of economic statistics and (less positively) a proliferation of advisory boards and working groups.

The landscape is now dominated by Scotland-specific strategies in a way that would have been unthinkable prior to devolution. Alternative language has come to the fore, with “inclusive growth” and “wellbeing economy” shaping the dialogue in Scotland, though less prominent in UK policy circles.

We have also seen the transfer of new economic powers, most notably on taxation. Back in 1999, very little of the Scottish Budget was funded by own-source revenues. The "Tartan Tax," voted for in the 1997 Referendum, was never used. Fast forward to today, and we now have substantial tax devolution, including on income tax, where rates and bands increasingly differ from those elsewhere in the UK.

A question often asked is: “Has devolution been good or bad for Scotland’s economy?” Of course, from a statistical point of view, it is impossible to answer this question definitively either way. Pinning down an exact counterfactual is nearly impossible. Instead, we look at the data to see where things have changed over the years.

As in 1999, Scotland still performs as one of the "best" parts of the UK on core metrics of economic performance. In some areas, our performance relative to the UK has improved slightly (e.g., productivity); in others, we have made little progress, if any (e.g., exports, business dynamism, and innovation); and in some, performance has ebbed and flowed (e.g., labour market). A notable negative outcome has been a gradual erosion of headquarter functions within Scotland’s corporate base.

But Scotland’s economic performance needs to be viewed through the lens of a UK economy that has become increasingly unequal in recent decades. That Scotland has maintained or even marginally improved its relative position within the UK, while most other regions have fallen back, might be seen as a qualified success. However, long-standing gaps with international comparators remain. The UK itself has fallen behind on global league tables. Many of the economic “problems” that Andrew and his colleagues were mulling over in 1999 persist today.

Finally, we looked at the evolution of government strategies over time. Some things have changed, most notably the focus on climate change and the environment. In recent years, there has also been greater emphasis on the interaction between economic outcomes and inequalities.

But what is striking is just how consistent the underlying approach to economic policymaking has remained over the past 25 years. We track the key priorities, ambitions, and objectives in each of the five main economic strategies published during devolution and show how much – or, in fact, how little – they have changed. You would find it difficult to look at the approach set out by the Dewar administration in 2000 and find much disagreement with the general ambitions and intent of current government policy.

But despite a broad similarity of approach, there has been little assessment or evaluation of which policies truly “work.” New strategies and action plans have been launched with regularity, but concrete assessments of outcomes are rare. The enduring sense is that, over the years, style has often overshadowed substance in the Scottish economic debate.

Graeme Roy is professor of economics at the University of Glasgow’s Adam Smith Business School