Humza Yousaf's speech showed SNP's economic contradictions

In failing to mention a just transition or a well-being economy, the First Minister’s recent major speech on the economy highlights the deep economic contradictions at the heart of the SNP’s independence plans.

Yesterday, Humza Yousaf delivered a major speech on the economy. It was structured in two parts. The First Minister highlighted the weaknesses of the UK economy, pointing to a more prosperous future for Scotland as an independent nation. He then focused on the promise of a new industrial policy in an independent Scotland.

In summary of the first section, Brexit continues to be the boogeyman. Brexit has undoubtedly reduced the UK’s growth, estimated at 2-3% GDP or around £33 billion. However, it is widely recognised that Brexit was a symptom of the economic decline in the UK rather than the cause.

Yousaf's speech highlights the structural issues with the UK economy, including low productivity growth, an economy that is too centralised, and massive income and wealth inequality. His diagnosis is shared by the vast majority of economists across the UK.

Humza pointed to Scotland’s huge economic potential but did not address the significant additional issues that Scotland faces as an independent nation. Those include the high levels of foreign ownership among Scottish industries, the low proportion of UK companies headquartered in Scotland, and the large annual outflow of capital. These are Scotland-specific structural issues that must be addressed if we are to become a prosperous independent nation.

Humza’s new policy announcement focused on industrial development, which is to be built on three foundations: Joining the EU, a government ministry to drive industrial policy, and large-scale public investment.

Under current conditions, EU membership for Scotland is impossible for more than a decade after independence as we first must demonstrate our ability to manage our own economy, which will likely necessitate establishing and using our currency and central bank.

Assuming we become independent next year, EU membership would likely arrive around 2040. EU membership is, therefore, irrelevant to Scotland's industrial policy in the near future. It is peculiar, to say the least, to include this in any short to medium-term discussion on any economic aspect of an independent Scotland. Besides, it is difficult to see how being part of the EU is necessary to develop a successful industrial policy. Humza puts forward a very strong argument for Scotland being part of the European single market. Still, he seems to believe this is only possible as a member of the EU.

A Ministry for Industrial Policy is a practical response to the changing global approach to industrial development. This pragmatic approach sets the Scottish Government ahead of the economic dogma-inspired intransigence of the UK Government, which refuses to engage in industrial policy at a strategic level.

READ MORE: Anger at SNP plan for oil to bankroll £20bn independence fund

Finally, Humza highlights the need for large-scale public investment or, as he later defines it, “targeted capital investment." To pay for this investment, the Scottish Government would create a “fund” to spend around £2 billion annually. Humza states: “It would be financed through oil revenues and if needed borrowing”. This short sentence is the most important in Humza’s 5000-word speech.

Our First Minster has directly connected Scotland’s prosperity to oil, locking in the Scottish Government’s support for an increase in North Sea oil extraction. Our infrastructure will only arrive by continuing to damage the climate as we capture a chunk of the global commons. It comes at great moral cost as we ignore every single aspect of global climate justice. Our economic future is built on an asset that will likely be stranded for years before we set up a fund. But that’s only half of the problem.

“Borrowing” means something very different in Scotland than it does for the UK or any other currency-issuing country. “Borrowing” in Scotland means taking on debt in a foreign currency. Borrowing in pounds to fund our infrastructure is guaranteed to weaken the social contract Humza supports by ensuring that only income-generating infrastructure is built and our economy dances to the tune of foreign governments and investors.

The current economic policy exists in a world of contradictions

As stated by our FM, Scotland's government has "very limited borrowing powers for capital investment”, yet we settled on a new fiscal framework arrangement during the first few months of Humza’s term.

The 2022 National Strategy for Economic Transformation maintains that Scotland - with the current set of powers - can “significantly increase GDP growth” while we simultaneously lack the capacity to create a Ministry for Industrial Policy now.

At every opportunity, the administration bemoans Westminster’s economic control of Scotland, yet for perhaps a decade after independence, it will retain the Bank of England and the UK Treasury as paymasters.

Our economic future is being positioned towards EU membership, while our decision to use Westminster’s pound stymies this process.

We need substantial government deficits to create a prosperous Scotland. But by signing up voluntarily to the EU’s Stability and Growth Pact, we ensure we cannot create those deficits even when we have our own currency.

We seek to lead on climate change while placing continued fossil fuel extraction at the heart of our economy.

We are told to believe in our long-term consistent plan for a post-independent Scottish economy. At the same time, our FM can make a lengthy speech on the economy and fail to mention a just transition, a well-being economy or community wealth building.

These contradictions are quickly coming into sharper focus.

In his speech, Humza says that he is open to “properly listening to opposing points of view,” and we hope this extends to those with significant and well-founded concerns about the current administration's plans for a post-independent Scottish economy. As our FM adds: “There is much to learn from an opposing perspective”.