ECONOMIC RECOVERY

OPINION: JOHN LEE, HEAD OF PUBLIC AFFAIRS, SGF

MORE HASTE, LESS SPEED

THE SCOTTISH GOVERNMENT’S RESPONSE TO THE RECENT ECONOMIC ADVISORY GROUP REPORT ONCHARTING A WAY FORWARD POST-PANDEMIC WAS CERTAINLY SPEEDY, BUT THAT’S ABOUT THE ONLYPOSITIVE COMMENT THAT CAN BE MADE ABOUT IT, SAYS JOHN LEE.

The slogan ‘It’s the economy, stupid’ was at the front and centre of Bill Clinton’s successful campaigns for the US presidency in the 1990s. That message cut to the heart of the matter: businesses and the jobs they provide are of fundamental importance to everyone and are the cornerstones of national prosperity.

Unfortunately the economy is always at risk of a severe shock to the system – the financial crisis of 2007/8 being a classic example – and there is no doubt that the Covid-19 pandemic is yet another of these shocks, potentially the most severe we have ever seen.

To give credit where its due, the Scottish (and the UK) government moved quickly to put a range of business support measures in place; these measures now amount to some £50bn worth of support.

The Scottish government also realised that new approaches to managing the economy would be required and, with commendable speed, set up an expert panel to analyse the impact of Covid-19 on the economy and chart a way forward. The subsequent report from the Economic Advisory Group (EAG) contained a series of recommendations which had a strong focus on a ‘green recovery’. The report was criticised by some as being insufficiently bold and underestimating the size of the fiscal stimulus which would be actually required to deal with the Covid-19 shock.

The Scottish government has now published its response to the EAG report. Again, this was done with a speed that deserves a lot of praise. Unfortunately, that is where the praise begins and ends. Much of the report is essentially a list of what the Scottish government is currently doing. While there is surely some great stuff going on, the list also reveals a bewildering range of programmes, projects, frameworks, strategies, plans, schemes, and funding streams. The modern economy is a complex entity and it is probably inevitable that the policy landscape will also be a complex one. However, not only is it massively challenging to try to map out this landscape and make sense of it but there must surely be a significant danger of a lack of joinedup activity, duplication, and built-in inefficiencies.

The economic winter might be coming but it seems certain that the post-coronavirus economy will be based on the small and local.

The main thrust of the government response is that there will be a key focus on jobs: both sustaining jobs and creating jobs. There is also an explicit recognition that it is business which will deliver the economic recovery. This cannot be argued with, but one thing that is missing – from a convenience retailing point of view – is that too often government policy (from both Holyrood and Westminster) can make things worse. A good starting point for recovery would be to ensure an end to policy and legislation which piles more unnecessary cost and restrictions on retailers.

Perhaps the elephant(s) in the room as far as both the original ERG report and the response are concerned are the real constraints on government: the Scottish government is not permitted to borrow money to invest in the kind of ‘fiscal stimulus’ which the scale of the pandemic demands. Meanwhile Westminster is constrained by the fact that UK national debt now equates to more than 100% of GDP and is creeping slowly towards an eye-watering £3tn.

The economic winter might be coming but it seems certain that the post-coronavirus economy will be based on the small and local. There is no doubt that convenience retailing can benefit from this.