Economic policy for politicians is much like fashion, things come and go. What’s in vogue now in Scottish politics is productivity. That’s perhaps a little glib – it’s a global challenge, as set out by the IMF. Like much of the Western world, Scotland and the UK are increasingly dependent on the services sector. In the post-crisis world, services are not delivering the productivity they once did, often in favour of retaining jobs and reducing investment. Opting to play safe, when confidence is timid.
However, Holyrood parties want to sell the benefits of productivity gains to every corner of Scotland’s economy. At a recent economy hustings, what’s clear is that Scotland’s politicians have differing emphasis on methods to improve productivity, but they have much in common.
To make great strides in productivity requires something which is thin on the ground in a post-recession economy – public and private sector investment. To increase productivity requires better infrastructure, better, more efficient machinery and a higher level of education and skills. These measures create the stepping stones to productivity gains through the innovation of products and services.
At the hustings, John Swinney was at pains to emphasise the need for a national productivity boost. Like every good Keynesian, Swinney is looking to grow productivity and spend his way out of the current “acute and challenging” Scottish economy (as he described) through investment in physical infrastructure. For example, the transformational role that digital connectivity will play is translated into the SNP’s commitment to superfast broadband for 100% of premises.
Murdo Fraser sought to focus on education, perhaps purely to reference the “slashed” further education sector under the SNP. But which he genuinely sees as a missing piece in the productivity puzzle. Murdo also stressed the need to get more of the private sector on-board, advocating his party’s policy for businesses to lead a new set of skills academies.
Patrick Harvie, whilst supportive of improved productivity, asked the more profound question of, who are we doing this all for? In whose interest is the economy structured? In this vein, he argues that capital is locked-in by the wealthy; making it unproductive capital. The Green solution is higher taxation to redistribute wealth and put it to better use, rather than just accumulation. Cue much heated exchanges between Harvie and Murdo Fraser.
From a positive start at nursery to bringing unemployed people back into work through re-training, the first line in Labour’s playbook is long-term investment in education. Labour’s Lesley Brennan stressed the economic multiplier effect of investing in education to develop the highly skilled, highly productive economy Scotland could be.
For all the positive reinforcement and agreement, there remains a formidable challenge – how can Scotland be geared to innovate? Productivity is more intangible and delivers long-term benefits than more cash in the till at the end of the day or higher figures in the books at the end of the month. In a time of uncertainty, how can Scottish businesses be persuaded to get their cheque books out and invest?
Increasing productivity makes better products and services, workers more efficient, drives up living standards and pushes up wages. This has a knock-on effect in the rest of the economy. However, Scottish businesses will need to be convinced of the case for investment in a time when the national (living) wage is increasing and the political climate is uncertain.
Productivity is a tool to shape Scotland’s economy through addressing the challenges of an ageing population, improving the quality of work and public services. It will be up to the next Scottish Government to make the case for productivity. As John Swinney laid out at the hustings, we’ve got to make it Scotland’s business to innovate.