Scottish Government
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UK economic policies hold Scotland back

Analysis shows failings of UK economy.

Launching a major new report on economic policy choices in an independent Scotland, Finance Secretary John Swinney will say that Scotland “may have missed out on economic growth worth more than £900 a head as a result of not being an independent country."

The report, which contrasts Scotland’s performance as a region of the UK with the performance of other comparable independent countries, shows that;

  • Had Scotland grown at the same rate as other small independent nations between 1977 and the start of recession in 2007, GDP per capita would now be 3.8 per cent higher, equivalent to an additional £900 per person.
  • Had Scotland simply matched the UK growth rate between 1977 and the recession of 2007, GDP per capital would have been 3 per cent higher, equivalent to an additional £720 per capita

In an comprehensive analysis of trends in the Scottish and UK economy, the Scottish Government report finds that the UK is one of the most unequal countries in the developed world with smaller independent countries delivering both higher levels of economic growth and a fairer distribution of the proceeds of growth.

The report also shows that in comparison with other key European nations the UK is failing to rebalance the economy and deliver a more stable future.

The report states:

“On the basis of the evidence the UK is clearly failing to rebalance its economy to a more sustainable model, with the reliance on the service sector increasing, continued weakness in the manufacturing sector, increased levels of debt and further concentration of investment and policy design in London and the South East.”

And adds that remaining with the status quo would:

“leave the people of Scotland exposed to the risks of an economic system that is likely to continue to be one of the most unequal in the OECD, is prone to instability, is increasingly unbalanced, is less resilient than competitors and has significant imbalances in regional prosperity. Scotland’s economy is likely to become ever more a regional hub – or branch-economy – of the UK economy.”

Finance Secretary John Swinney said:

“Scotland is a wealthy and productive country. We have paid more tax per head in each of the last 30 years than the UK as a whole, and even without North Sea oil our output is 99% of the UK.

“As new experimental figures issued just last week show, Gross National Income per head in Scotland in 2010 is estimated to have been approximately £26,000. In comparison, UK GNI per head is estimated to have been approximately £24,000.

“We are doing OK but we could do so much better. As these figures demonstrate, Scotland may have missed out on economic growth worth more than £900 a head as a result of London economic management and not being able to take the same approach as other independent countries in supporting our economy. Sticking with the status quo has seen Scotland lose out on significant opportunities for growth, job creation and increased wealth that could have transformed Scotland’s economy and reduced inequality.

“Instead, as part of the UK we face one-size-fits-all policies designed to suit the needs of the economy in London and the South East - not Scotland - and Westminster governments that have continually failed to support our key industries. Scotland simply cannot afford to continue as a regional part of the UK economy.

“Under the status quo we have witnessed the decline of major manufacturing industries, a continual trade deficit with the rest of the world and ever rising levels of debt that are holding the economy back.

“With independence we will have the full range of economic tools we need to target all of our efforts and resources at increasing investment, boosting long term job opportunities and creating a more prosperous Scotland.

"We have the opportunity now to break out of the low growth trap of London government , rebalance our economy and establish both a more prosperous and just society."

On debt, the analysis shows that:

  • The UK remains one of the most heavily indebted nations in the world. The OECD estimate that UK household debt as a proportion of disposable income was 160% in 2011, the second highest rate in the G7 and significantly higher than the G7 average of 122% in the same year.

On failure to rebalance the economy and invest in growth, the paper demonstrates;

  • Over the period 1970 to 2011, manufacturing share of UK output declined from 29% to around 11%. In 2011, UK manufacturing output was just 2.4% above 1990 levels.
  • UK manufacturing output is below Germany, Sweden, Austria and Finland.
  • UK business investment is below Germany, Sweden, Austria, Denmark and Finland.
  • UK exports are below Germany, Sweden, Austria, Denmark and Finland.
  • UK Gross investment in research and development is less than in Germany, Sweden, Austria, Denmark and Finland.

On equality levels it shows;

  • The UK has one of the greatest levels of income inequality in the OECD – ranked 28th of 34 nations.
  • Small – and particularly Scandinavian - countries dominate the top 10 (ie have the lowest income inequality)
  • In 2011, output per head in London was more than 70% of the UK average. In the Nordic countries, income levels in the lowest regions and average income levels are higher than those found in the UK, and the highest income regions are not dramatically richer than the rest of the country.
  • London accounted for nearly 22% of the increase in UK employment between Jan-March 2010 and July – Sept 2013.

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