THE Bank of England's cut in interest rates to 0.25% last week had desperation written all over it. It could be argued that Governor Mark Carney is deploying the kitchen sink approach to financial management, throwing everything he can at an economy sinking into recession: more quantitative easing; £100bn in bank lending, buying company debt and so on.
So where stands Scotland? The truth is that Scotland's growth rate has long trailed that of the UK. With the crisis in the oil and gas sector, following the crash in oil prices, Scotland will be extremely lucky to avoid a recession this year, as the Fraser of Allander think tank has pointed out. Brexit has up-ended the Scottish Government's economic strategy, which was premised on remaining within the single European market. First Minister Nicola Sturgeon hopes Scotland can retain a relationship with the EU, but few economists agree.
Many will conclude that the only answer is to leave the UK so that Scotland can seek to re-enter the European Union as an independent country. However there seems little prospect of another independence referendum before 2018, and the Scottish Government cannot sit on its hands until then. Holyrood's economic powers are limited but ministers must explore bringing forward investment programmes and using what borrowing powers the Scottish Parliament possesses to immediate effect.
The tax-raising powers which the parliament has just acquired will be of limited use since Holyrood lacks powers over business taxes such as corporation tax. Slashing income taxes across the board might appeal to some free market economists, but would be unlikely to find favour with Scottish voters because of the cuts in public services that might result. As it is, the new UK Chancellor, Phillip Hammond, is expected to announce new austerity cuts in his autumn statement.
The Scottish Government should be similarly wary of continuing with cuts in air passenger duty, APD. The economic value of this tax cut to generally well-off fliers is unclear and the environmental costs could be considerable. Some have urged the Scottish Government to press ahead with fracking in order to breathe life into Scotland's hydrocarbon industry – but the reality is that there is no majority in the Scottish Parliament for fracking and the Scottish Government's moratorium should remain.
Perhaps the most useful move would be for the SNP to add its weight to the demands by the Labour Party in Westminster for a significant boost to economic expansion through public borrowing. Nicola Sturgeon can seek some satisfaction at least that her 2015 general election call for a £180bn infrastructure-led expansion of the UK economy, rejected as too radical by Labour, has been vindicated.
Before the Holyrood election, the First Minister pledged that if elected, her government would "use every power at our disposal to boost our economy and create more and better jobs here in Scotland". It is time for those powers to be exercised.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here