Scotland cannot fight Omicron while Westminster holds the purse strings

AS Omicron spreads at terrifying speed it is making a mockery of conventional economics. That subject claims to be a science. In my opinion that is nonsense.

I think that because most of what economics is about is opinions, and they are based on judgment and not facts. However, I also think this because what economics studies is people and the last thing people are is either rational or predictable.

Don’t despair though. If my description of economics is right (and I, of course, think it is) then economics is about something much more interesting than cold-hearted finance. It is, instead, about how we react to the crises we face in the way we go about our business.

This has to be put into the current context. Most of the time when we look at how we address crises we are working within the parameters of what we might call "normality". Right now though there is nothing remotely normal about the situation we face, and the only thing that it seems certain that we can be sure of is that things are going to get very much stranger still.

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What we do know is that the reasonable reaction when facing the unknown is to worry. I noted an epidemiologist who I follow on Twitter say this week that if you are not worried at the moment you need to wonder if there is anything wrong with you. As an economist I would agree with that. We should worry in the face of serious uncertainty.

There is, though, a reasonable response to worry, and that is to look for help. In some cases when it comes to the economy that might mean asking "the usual culprits" for advice, whether they be colleagues, an accountant, or a mentor, family or friends. In the current crisis situation it is, however, likely that all of them will also be struggling to appraise the risks that we face. In that case the reasonable place to look for help to is the government.

At this point I now need to explain why I am worried. There are two reasons.

The first is that in the current UK constitutional setup there is almost nothing that the Scottish Government can do to address the issues that we face given the scale of the new Covid crisis. Nothing in the devolution settlement comes close to providing the flexible resources that are needed to tackle the economic crisis that the disruption resulting from Omicron is likely to create across the Scottish economy.

I stress that I am not criticising Kate Forbes (above) or anyone else for this. I am merely stating facts. The Scottish Government is required to balance its budget. That usually leaves a little wriggle room for the unseen, but the crisis that we are facing requires a lot more than a little wriggle room. Holyrood is going to be out of its depth on this one unless it gets help from London.

That then brings me to my second concern. This is that Rishi Sunak is showing no intention to act with regard to this crisis. In fact, instead of acting he is at present in California on what is, supposedly, a business trip. And whilst he is away there is no hint of any real new money coming to Scotland to address this crisis. The best that has been offered looks to be an advance on next year’s block grant, and that simply promises austerity to come.

This worries me enormously. Sunak spent hundreds of billions of pounds seeking to save businesses across the UK, plus the jobs that they support, over the last 21 months. This programme, imperfect as it might have been, was a rare really useful response from the government to Covid. It does, however, now seem that the government has no intention of repeating this, and in that case Scotland will not get the money needed to help its businesses.

Restaurants which would normally be full at this time of year have reported being extremely empty

The consequences are dire. Many small businesses have hardly recovered from the crisis that we have already endured. If no support is now forthcoming then the number of businesses that will fail will skyrocket. The resulting potential loss of jobs might be horrendous.

Of course, Sunak might make a U-turn. The Westminster Tory government is used to making these. However, whatever happens the point is clear. It is that Scotland cannot now protect itself from harm whilst depending on Westminster.

Not only is Westminster not to be relied upon to protect anyone, nor are they willing to use the tools available to provide that protection, including more quantitative easing that could provide the finance that is now so essential to keep Scottish businesses afloat.

In that case it is now clear that only independence can really deliver the economic policy that this crisis requires, but that is subject to just one condition. That condition is that Scotland must have its own currency. Without that Scotland would remain as dependent on England for finance as it now is.

If the Covid crisis teaches us anything from observing economics, it is that a comprehensively independent Scotland is now essential. That is the way out of its economic worries.