Face to face

The professor of economics at the University of Strathclyde spends a lot of his time thinking about those questions, and others, as head of the International Public Policy Institute (IPPI), a new body which collects experts in economics, health, science and other fields as a resource for politicians. The aim isn't to aggressively influence policy, it's to inform the important decisions on the big global challenges with some deep research. It's not a think tank, it's a think bunker.

On the day I meet the professor, the First Minister Nicola Sturgeon has been calling for a £180billion increase in spending at Westminster by 2020 to protect public services, which brings up the three-letter word which Professor McGregor believes Scottish politicians are not talking about: tax. He thinks it very strange that amid all the talk of increased public spending, there is never any mention, or very little, of the increased public taxation that would be required to pay for it.

"It's an interesting point that I thought was absent from the referendum debate," he says. "There was quite a bit of reference to Scandinavia as if it were a positive example, and it does have good public services, great conditions for working mothers, but that comes at a price which is higher taxes.

"When you talk about moving to Scandinavian levels of spending, you're talking about substantial cuts in real take-home pay - okay, the quality of services would be much better but it raises the question: how feasible is that the Scottish people will want that outcome? People are arguing that the Scandinavian model is a great example and they talk about doing some things that would emulate it, but tax rises are never a part of the story."

Professor McGregor also believes there is a big question mark over whether the new tax powers coming to Holyrood under the Scotland Act and the Smith Commission will ever be used and cites as evidence the fact that the Scottish Parliament has never used the tax-raising powers it already has.

"It wasn't just that they didn't use the power," he says, "the parties committed themselves to not using the power and yet what have we got with the Scotland Act and the Smith Commission? A major part of the devolution is on income tax - the tax that they all committed themselves not to changing when they had the right to. There's a big question mark over whether it will be used."

If it is ever used, Professor McGregor believes it could be in unexpected ways: to lower tax rather than raise it, to turn Scotland into a Switzerland rather than a Sweden. "If you believe high tax-paying individuals are highly mobile," he says, "then a rational strategy might be not to hike the highest rate of tax as the Labour leader Jim Murphy is suggesting but to lower the highest rate of tax. Just suppose there was big response of people moving from the south, rich people, entrepreneurs, to relocate in Scotland. That scenario might generate an increase in tax revenues that could allow them to implement the social policies they prefer."

Professor McGregor enjoys talking through these different scenarios on tax, and is also interested in how energy (both the dirty, old kind and the new, renewable kind) impacts on the Scottish and global economies. The 63-year-old professor, a Scot who grew up in Paisley and London where his father was a police officer with the Met, recently visited Cuba and Brazil where he saw thriving economies of all kinds. Cuba, he says, is increasingly built on tourism and has a double currency (one for the locals and one for visitors), while in Brazil, there is a massive black market in energy. He tells me about visiting a favela in Rio that was covered in electricity cables connected directly to the Grid, and it brings up the old dilemma: how can we balance economic growth in the developing world with tackling global warming?

For a start, Professor McGregor believes it would a bit rich of us to lecture the Cubans and Brazilians or anyone else about the environment, considering our economy is still fuelled mostly by dirty energy such as oil. In the week we meet, the oil price seems to have stabilised a little, but it is still at a record low and Professor McGregor broadly agrees with Mark Carney, the governor of the Bank of England, that Scotland's economy will be harmed by the low price but that it will be good for the rest of the UK.

The professor is also highly conscious of the kind of effect the low oil price could have had on the economy of an independent Scotland. Would an independent Scotland have been bust? "We have done some work in the area of the economics of constitutional change, and I would say 'bust' is rather a strong way of putting it," he says. "Would the fall in oil prices have had a significant effect on the revenues of an independent Scotland? Absolutely. Very significant. And this was always one of the issues about independence. How do you deal with the votalitity of oil prices if your public revenues are significantly dependent on that?

"An independent Scotland would have been much more dependent on oil than the UK - at least ten times as dependent. So that in that sense, here is an example of one way in which Scotland does benefit from being part of the Union. It's one instance where being part of the Union has insulated us to a significant degree from a shock which would otherwise have been much bigger still on the Scottish economy."

Professor McGregor says our long-term aim should be to move away from dependence on oil, but he also says we have to be realistic about how quickly it can be done. He thinks it likely, for instance, that the Scottish Government will miss its target of generating 100 per cent of the country's electricity from renewable sources by 2020, which will mean relying on a range of old and new energies for some time to come. We should have a portfolio, he says, that includes nuclear and wind and he is supportive of experimenting with new sources, including the most controversial, fracking, partly because it could benefit the poorest in society.

"It's not advisable to operate with one hand tied behind your back and rule out absolutely any technology," he says. "Ruling out fracking means you are saying no to a potential resource that could help deal with energy crisis, and fuel poverty. Look at the impact that the US development of shale gas has had on the world market, the price of fuel has been going down and it has benefits. You still have the environmental challenge, but we know that low-income households spend much more of their income on energy."

These questions, and others, are right at the heart of the Professor's work with IPPI, which represents the newest project in his 40-year career in academia, mostly spent at Strathclyde. The organisation includes a range of experts drawn from across the university, but it has also drawn in experts from elsewhere, including Sir Harry Burns, the former chief medical officer of Scotland, and Andrew Goudie, former chief economic adviser to the Scottish Government. The aim, says Professor McGregor, is to be independent, dispassionate and authoritative, help change government policy where it's heading in the wrong direction and encourage government intervention where it is necessary.

On the oil industry, for example, Professor McGregor says he is concerned about the effects the oil price is already having in Aberdeen. Should government in London and Edinburgh be doing more? "No government can control the oil price," he says, "this is a world-determined price so any attempt to do it is madness. But you can mitigate some of the consequences - the oil industry is heavily taxed and you could temporarily reduce those taxes, but that has implications for government revenues. What matters is to what extent this is a blip and the one thing you will understand if you look at oil prices is that they are volatile and all over the place. Is the low price very long term? I wouldn't think so because there's growing demand for energy and there's a lot of oil in the North Sea."