JEREMY PEAT

There have been some recurring themes in my column in recent months. Uncertainties are rife – primarily related to Brexit and a possible second referendum on Scottish independence – causing problems for an already decelerating and (relatively) under-performing Scottish economy. Sad to say but these themes are becoming more accentuated and continue to merit our attention. Further, and again sadly, insufficient attention is being paid by our policy makers to the necessity of re-vitalising our economy, stimulating innovation, investment and higher productivity; and hence encouraging faster growth, higher employment and opportunities for enhanced welfare for all.

The UK economy looks set for deceleration during 2017. The main momentum last year came from the consumer. Now inflation is rising significantly, the labour market is becoming less buoyant and welfare payments are to be cut. All these factors will work to constrain consumption. The Ernst and Young ITEM Club suggest that consumer spending will fall back to a four year low. That is clearly plausible, and with households’ energy costs set to spike upwards, the slowdown in consumer spending could be even more marked – even if the Bank of England manages to resist the temptation to raise interest rates as inflation rises further and further above target.

Neither public expenditure nor investment is likely to rebound to cushion the effect of the consumer problems. The former is set for more cuts as the Chancellor seeks a return to sustainable finances; while survey evidence in Scotland and elsewhere points to a reluctance from domestic and overseas companies to invest while Brexit and independence risks remain.

The UK slowdown comes from a reasonably strong starting point. That is much less the case in Scotland. We await the report from Andrew Wilson on how to revitalise investment and innovation. That cannot come soon enough. And when it comes we must hope that our Government re-focuses attention to this area. There is already a risk of growth close to zero as the economic story for 2017 unfolds.

Given this troubling economic context I shall not apologise for returning to my recurring themes. The uncertainties become greater month by month. On the Brexit front the die is now cast, the Article 50 letter has issued, and the real negotiations between EU and UK may commence. Virtually everyone now seems to accept that nothing like the status quo in terms of trading and wider economic relations can be retained. Failing to reach agreement within 2 years could result in an horrendous period of turmoil across the UK, but exactly what agreement is feasible is mired in uncertainty.

Turning to the prospect of another Scottish referendum, the Scottish Parliament has approved the concept, but the UK Prime Minister has pronounced that no referendum should be held before the Brexit outcome is clear. That makes sense to me. Indeed if we are to have another referendum then we need to know with reasonable clarity what the two options – Scotland in or out of the UK - will actually mean for us all.

If we stay within the UK then what will be Scotland’s trading and investment relationship with the EU (via the UK) and other key partners; and which of the powers being returned to the UK from the EU are to be further devolved to Scotland? That will not be known until at least 2 or 3 years from now. If we exit the UK then what is Scotland’s planned and plausibly anticipated relationship with the EU. Is the Government intending to apply for EU entry as soon as feasible? Or planning to apply for the European Free Trade Area as a first step towards future EU membership? Or will Scottish exit from the UK mean a Scotland independent from the EU as well as the UK? I have no clear idea as yet as to which is the Scottish Government or the Scottish Parliament’s preferred option.

Without clarity on both options, those casting their votes will be doing so without adequate understanding. Any referendum will be flawed. Nobody should be forced to vote for some venture into wholly unknown territory.

It has been suggested that there should be two referenda in Scotland. The first would decide whether Scotland exits the UK and the second whether an independent Scotland then applies for EU membership. To me this makes little sense. For a start many folk might have a different view as to the merits (economic and otherwise) of an independent Scotland in Europe as compared to an independent Scotland outwith the EU. Further, this way forward would add yet another layer of uncertainty and a further number of years in which individuals and businesses would have no real idea as to their future working and investing environment.

If we are to have another referendum then let it be on the basis of two clearly articulated and fully plausible alternatives. Voters must be in a position to weigh up, from their perspective, the economic, financial, social and political consequences of these two options. And thereafter we can all get on with trying to make the best of whatever outcome results, for our future and that of further generations. We have had the massive and destabilising financial crash; and the first independence referendum; and the Brexit vote; and now we have the Brexit negotiations and the prospect of further referendum or referenda in Scotland. No wonder investment and growth have stalled.

Jeremy Peat is visiting professor at the University of Strathclyde International Public Policy Institute