Four years on, Scottish ministers have yet to learn this crucial lesson

Things are not quite so delusional in Scotland, but last week our government’s own Poverty and Inequality Commission sought to jog ministers out of any complacency they may be feeling. In particular, it told them to come somewhat cleaner about how they plan actually to achieve an aim they set themselves four years ago, to deliver inclusive economic growth. The commission found that on the ground in Scottish society “very little has changed”.

The commission’s chairman, Douglas Hamilton (pictured below), commented: “There is still a lack of clarity around what inclusive growth means, making it all things to all people. As a result, it appears to be more of a concept than an approach that results in real change in people’s lives.”

I agree with this, and refer also to another of the unsung backroom boys who, despite everything, try to make Scotland work. Three years ago Dr Graeme Roy gave up his job as chief economic adviser to the Government in order to return to the Fraser of Allander Institute as director. It may be that directors of institutes are no more listened to than chief economic advisers, but at least they can say in public what they want to say.

One thing Roy has said is that the Government launches too many initiatives which get nowhere, and are forgotten about once they have generated the desired headlines in the next day’s media. This superficial approach to policy could be one reason for the lack of “real change in people’s lives”. Instead such displacement activity is pressed into a narrative that everything could be wonderful if only the Government in London abandoned austerity and let us in Scotland get on with what we wish to do, in other words, spend money we haven’t got.

It is not an argument likely to strike home for much longer. According to the latest data, the UK budget deficit is down to 1% of gross domestic product, compared with 10% in 2010 during the aftermath of the financial crisis. In 2019-20 that could in turn offer scope for public spending to hit its fastest growth rate in a decade, with the threat from Brexit giving an extra incentive to make sure it does. So, by any standards, austerity is about to be abandoned.

I just hope austerity does not then join the rather too long list of economic problems we worry about in Scotland which we do not need to worry about. Above all, income inequality is not rising. The standard measure, the Gini coefficient, shows that the gap between high and low earners has actually fallen over the past decade. Even if we include housing costs it is still close to where it was in the late 1990s.

And because we largely lack the class of super-rich who cluster in and round London, Scotland is a more equal country than England – or indeed than France and Germany, though less equal than the Scandinavian countries. We’re simply an average north-west European society.

Next, there is no crisis of wealth inequality either. As an average north-west European society, a majority of us should by global standards be classified as wealthy (ask the Somalis). We tend to hold our wealth in the form of housing equity or of pension plans, so it is quite hard to flaunt. A small minority can afford to go beyond that, to invest their money in Highland estates or in works of art. Nearly all of these have earned their fortune for themselves rather than inherited it.

The share of wealth held by the richest 1% is one-fifth of the total. Again, this is about average for developed countries, and lower than in Denmark or Germany.

Though inequality exists in Scotland and the UK as in every western country, I wonder if Jeremy Corbyn (pictured above) was right to speak recently of “the scandal, and it is a scandal, of inequality in modern Britain”.

There are many scandals in modern Britain: the way we regulate planning and housebuilding, the lack of competition in the banking sector, the funding and management of social care. But it’s hard to find much evidence of an inequality scandal, at least none that is worse than the global average for this stage in the evolution of the capitalist system.

When last month the great and good Sir Angus Deaton, son of Edinburgh, professor at Princeton, Nobel prizewinner in economics, unveiled an inequality review for the Institute for Fiscal Studies, he said the sort of inequality measurements we used to employ in the 20th century are less helpful in the 21st century than other metrics. Mass poverty is gone, along with such markers of it as high unemployment, slum dwelling, malnutrition and infectious diseases.

Today fewer middle-aged people die of heart attacks than die of self-harm in its various forms: suicide, drug overdoses and alcohol abuse, each of them especially prevalent in Scotland. This is a penalty not of poverty but of affluence, or at least of psychological failure to cope with an affluent society.

Some governments, full of good intentions, deepen this malaise by raising expectations beyond what it is feasible for them to deliver. They then take measures to meet those expectations which are bound to fail. Do not imagine the Scottish Government is immune from such miscalculation, in all its bossy benevolence.

It has embraced an official policy aim, for example, of raising economic growth in such a way as to produce equality. This is conceptual nonsense. At any given time in any given economy, there are companies that are expanding, companies that are at their productive peak, companies that are declining. According to the type, they will pay higher wages, the same wages or lower wages in real terms: inequality, but inescapable inequality. In fact it is right for the companies to act as they do, because inequality has its advantages as well – to signal to existing workers where they should seek jobs, to new workers how they should qualify themselves, to the education system what training to offer. To foul up this delicate capitalist mechanism with political demands for equality will impoverish us rather than enrich us, by making the economy less co-ordinated, less productive.

In the end it comes as no surprise that, in a Scotland seeking to run itself on these lines, “very little has changed”.

It will be the same in future too. I’m not arguing that governments should never intervene in the economy, only that they should recognise there are limits to what they can do and to the range of spots where they can sensibly do it. By announcing they mean to do the impossible, they are less likely to achieve the possible: a lesson the Scottish Government is still a long way from learning.