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by Tom Freeman
20 January 2015
What economic models do the parties favour?

What economic models do the parties favour?

In an extract from our Q & A on the economy, we asked the party finance spokespeople what they saw Scotland's main economic priorities to be. To always get the full picture first, subscribe to Holyrood magazine

Patrick Harvie (Scottish Greens): Creating satisfying jobs, affordable homes to live in, closing the income inequality gap, and ending our reliance on fossil fuels in both economic and energy terms. We need to break from the economics of austerity, insecure work and low wages. A successful economy should be judged on whether it is fair and providing opportunity for all, not just on the narrow metric of GDP growth which tells us nothing about how wealth is being generated or whose interests the economy is really serving. 
Unemployment and underemployment must be tackled, as must energy efficiency. We have an opportunity to join these two priorities by investing in measures such as insulation and double glazing. This would cut household bills, tackle fuel poverty, and create thousands of new jobs in construction and new opportunities for young people through the Modern Apprenticeship scheme.

Willie Rennie (Scottish Liberal Democrats): Anchoring the economy in the centre ground is one of Scotland’s main economic priorities. Liberal Democrats want to build a stronger economy so that we can create a fairer society which delivers opportunity for everyone. In the UK Government we are making progress on both. In Scotland, employment is up 168,000 since 2010. In the last year alone, unemployment has fallen by 44,000.
Britain was one of the countries hardest hit by the financial crisis but now has the strongest recovery in the European Union, the best recovery in the G7, the best job creation in Europe, more jobs created in the United Kingdom than in the whole of the rest of the European Union combined. 
The Liberal Democrats will borrow less than Labour and cut less than the Conservatives. We will balance the budget by 2018, cut taxes for low and middle earners and ensure decent public services, creating opportunity for everyone. Anchoring the economy in the centre ground is how we do it.

Gavin Brown (Scottish Conservatives): We shouldn’t ignore any sector but the bulk of government effort must go where it will make the biggest difference in the long term to jobs and growth. Scotland’s main priorities must be the key sectors of its economy, such as financial services, food and drink, tourism and energy, to name a few. One sector that merits more attention than it currently gets is retail, given the number of jobs involved. It is our primary role to ensure the conditions are right for businesses to compete. That means joined-up policies on taxation, skills, transport, wider infrastructure, technology and housing. On top of that we need to be alive to new industries that emerge; for example, we cannot allow ourselves to fall behind in the area of e-commerce.

Jackie Baillie (Scottish Labour): My twin priorities of greater prosperity and less poverty go hand in hand because the most effective anti-poverty measure is a successful economy. I want to support our businesses and encourage economic growth but take steps to ensure that everyone shares in that success and we drive down inequality. Experts tell us that the more inequality there is, the more likely that economic growth is slower. That is how we build a Scotland that is the fairest nation in the world.

John Swinney (Scottish National Party): Our main priorities are to make Scotland a wealthier and fairer nation. These are mutually reinforcing goals. 
Equality is essential for the long-term health of our economy, a fact that is supported by OECD and IMF analysis and findings of experts such as Professor Joseph Stiglitz who show that more equal societies enjoy stronger and more sustainable growth over the long run.
That’s why in our Programme for Government there are a broad range of measures focused on ensuring sustainable economic growth, promoting business, as well as building a fairer society.  

We also asked what lessons have been learned from the banking crisis, subsequent unprecedented public borrowing and what’s happening with the oil industry?

Patrick Harvie: Have any lessons been learned? It seems with banking and oil price fluctuations governments have been desperately trying to return to business as usual rather than take a new direction. There’s no excuse for not breaking up the big banks that took us to the brink, and we should be implementing a transition away from the burning of fossil fuels and towards clean technology and new industries. 
There’s also a consensus on austerity from the three biggest UK parties, all of whom will cut public spending despite our ageing population and the growing demand for healthcare, social care and of course pensions. 
If lessons really had been learned, we’d be seeing an urgent energy transition, a fairer redistribution of wealth from highly profitable businesses and rich individuals along with a cut in unnecessary spending such as Trident, a banking system which works in the public interest, and a shifting of power from unaccountable markets back to democratic control.” 

Willie Rennie: Whilst these are three relatively separate and complex issues, the fundamental lesson we’ve learnt from them all is the need for stability in our national economy. Labour will always borrow too much, risking the economy and the Conservatives will cut too much, sacrificing the least well off.

"We need to fix the roof while the sun is still shining"

Gavin Brown: One lesson learned from the crisis has to be that we need to fix the roof while the sun is still shining. In the better economic times, there should be a tighter approach to public finances and money needs to be set aside for tougher days. Economic shocks will always potentially be around the corner and you cannot predict when they will hit. There is always a temptation to assume that economic growth will last forever and that boom and bust has ended. So far as oil goes, we are seeing just how volatile it is and how little control we have over price. Government needs to do all it can to assist at this stage. It shows, though, how foolish it is to base the lion’s share of your public spending plans on a hopelessly optimistic price.

Jackie Baillie: One lesson I draw from the global financial crisis, and the pressure this places on government budgets throughout the world, is the need for urgent action on the part of government. Responding to any crisis, taking care of the interests of the economy for businesses and workers alike, requires clear direction and boldness of action. For example, bailing out the banks and protecting the savings of families across Scotland was the right action for the economy and for our people. It was bold and necessarily so.
Today, however, the Scottish Government in Edinburgh have been silent on the oil crisis, refusing to take any action and denying responsibility. Scottish Labour has outlined how to tackle the oil crisis, with a range of measures including the establishment of a resilience fund to protect local economies faced with a significant jobs crisis.

John Swinney: The 2007-08 financial crisis highlighted the fundamental role that the banking sector plays in the overall economy, and the importance of having a well-functioning banking system. Important steps are now being taken at an international level to reduce the risk of such events, and put in place the necessary co-ordination across the international financial system. It is also important that we ensure that consumers are adequately protected. The banking strategy for Scotland promotes sustainable and responsible banking. 
As in many other countries, the financial crisis and its aftermath saw a sharp increase in public borrowing. These challenges were even greater in the UK due to the previous UK Government’s decision not to manage government borrowing more prudently during the years prior to the financial crisis. This position has since been compounded by the current UK Government’s decision to cut public expenditure too quickly and before the recovery had gained momentum which damaged economic growth and resulted in borrowing exceeding forecasts.
The Scottish Government has made substantial progress on delivering our commitments to the oil and gas industry using our current powers, and we are dedicated to continuing to enable the industry to capture future opportunities in Scotland and overseas. This has included extensive measures in supporting innovation, boosting the skills available and investing in infrastructure. We will continue to take all measures we can to support the industry. 
However, fiscal policy is the main lever for incentivising investment, exploration and production in the North Sea, and this is reserved to the UK Government. One of the key issues that has become apparent from the UK Government’s mismanagement of the oil and gas tax regime, is the importance of stability and predictability. 
The Scottish Government has made repeated calls to the UK Government to undertake a fundamental change in the way oil and gas fiscal policy is formulated. These calls for action were predicated on the range of challenges that the industry has faced in recent years, such as declining production efficiency and rising operating costs. However, the recent fall in the oil price increases the urgency with which reforms must be progressed.

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