:00:00. > :00:00.you hear her 3 o 0 minute radio document, A Road Trip To War, on the
:00:00. > :00:17.Tonight, on Newsnight Scotland. Lower business taxes, a fairer
:00:18. > :00:19.society and lots more jobs. The Scottish Government's ideas for an
:00:20. > :00:22.independent Scotland couldn't be further from the hair shirt
:00:23. > :00:28.suggested by a think tank only yesterday. But is this latest report
:00:29. > :00:34.on the economy a manifesto for a future Scottish Government? Or the
:00:35. > :00:37.product of civil servants with over fertile imaginations? I'll ask the
:00:38. > :00:41.Finance Secretary. Good evening. Casual viewers might be forgiven a
:00:42. > :00:43.sense of through the looking glass. Last night, a lengthy analysis which
:00:44. > :00:45.concluded an independent Scotland would face serious economic
:00:46. > :00:47.problems. Tonight, a lengthy analysis which concludes
:00:48. > :00:50.independence will provide unbounded opportunity. But does it make sense?
:00:51. > :01:00.Here's Suzanne Allan. After the economic case for
:01:01. > :01:06.independence took a battering yesterday, today, Alex Salmond and
:01:07. > :01:11.John Swinney had their hard hats on. They were touring a new life
:01:12. > :01:25.skrientss -- sciences centre. Earlier in the morning, at the
:01:26. > :01:30.launch of a 200 page document, Alex Salmond told an audience and an
:01:31. > :01:34.independent Scotland would create a jobs boom and the future was there
:01:35. > :01:40.for the taking. But the future and what we do with the future is for us
:01:41. > :01:44.to make. The First Minister said an independent Scotland would have the
:01:45. > :01:47.freedom to cut taxes in order to attract big companies and boost the
:01:48. > :01:52.economy. This is about how we can change the circumstances of
:01:53. > :01:55.Scotland. Since devolution, since we established a parliament, Scottish
:01:56. > :02:01.economic performance has been getting better, lower unemployment,
:02:02. > :02:04.higher employment, higher labour participation than the UK average.
:02:05. > :02:10.Compared to other small independent countries we are not doing enough.
:02:11. > :02:13.This document lays out a menu how the resources of Scotland, resources
:02:14. > :02:18.which other countries would give their eye teeth, the natural talent
:02:19. > :02:23.of the Scottish people, bring these two things together and create a
:02:24. > :02:27.more prosperous society. According to the Scottish Government, if it
:02:28. > :02:35.had controls of the economic levers, corporation tax would be cut by 3%.
:02:36. > :02:40.There would be 27,000 extra jobs. 1.4% of extra economic output would
:02:41. > :02:45.be created. Scotland, for example, and the question of our ageing
:02:46. > :02:49.population has a better dependency ratio than the rest of the UK until
:02:50. > :02:54.2030s. Some of the measures set out today, we talked about the measures
:02:55. > :02:58.to increase economic abg dift by better childcare services. If we
:02:59. > :03:02.increase the level of economic activity by 1% it creates over
:03:03. > :03:07.20,000 new jobs in Scotland which contributes to our economic future.
:03:08. > :03:11.I think we've got to... People have to consider the depth of the
:03:12. > :03:14.analysis we set out today in the context of the current economic
:03:15. > :03:18.performance of Scotland, which has got better since Scotland was a
:03:19. > :03:24.devolved country because we have more control over these issues here.
:03:25. > :03:27.Other ideas include, using tax incentives to support growth in
:03:28. > :03:32.areas like tourism and the creative industries. Reforming air passenger
:03:33. > :03:37.duty and a plan to increase the value of Scottish exports by 50%
:03:38. > :03:43.that could boost output by ?5 billion and create more than 100,000
:03:44. > :03:49.jobs in the long-term. Yesterday, a report from the Institute for Fiscal
:03:50. > :03:53.Studies raised serious questions about Scotland's long-term economic
:03:54. > :03:57.health should we be independent. It said declining North Sea oil
:03:58. > :04:01.revenues and a population ageing more rapidly and slower immigration
:04:02. > :04:09.than the rest of the United Kingdom would leave an independent Scotland
:04:10. > :04:11.with a serious fiscal deficit. Yet again, the Scottish Government has
:04:12. > :04:17.failed to answer the questions that the people of Scotland want to hear.
:04:18. > :04:20.Yesterday, the Institute for Fiscal Studies, one of the most respected
:04:21. > :04:23.bodies in this area, said that an independent Scotland would face a
:04:24. > :04:27.situation where either our taxes had to go up or our public spending had
:04:28. > :04:31.to go down. That raised serious questions for the Scottish
:04:32. > :04:38.Government. Today, we needed to hear them answered. They failed to do so.
:04:39. > :04:41.At this point there are still a lot of questions unanswered. The
:04:42. > :04:45.Government say all will be revealed in next week's white paper. It's
:04:46. > :04:51.blueprint for an independent Scotland. A short while ago, John
:04:52. > :04:56.Swinney came into our Edinburgh studio. I asked him if this is it,
:04:57. > :05:00.if this is the long version of what will be in the white paper as far as
:05:01. > :05:04.the economy is concerned? What we've done today is set out a range of
:05:05. > :05:09.economic policy options that would be available to Scotland if the
:05:10. > :05:14.country votes for independence in 2014. What we've tried to do, is to
:05:15. > :05:18.give the most comprehensive analysis we can of the Scottish economy. Of
:05:19. > :05:21.some of the issues - There won't be anything different in the white
:05:22. > :05:26.paper? The white paper will be based on the policy options we set out
:05:27. > :05:31.today. What the paper we have done today is designed to do, is to give
:05:32. > :05:34.an extensive range of ideas and propositions to Scotland that could
:05:35. > :05:39.be supported and - I get. That my point is, you would say... If people
:05:40. > :05:43.want to know what your thinking is on the economy you don't need to
:05:44. > :05:47.wait for the white paper the expanded version is what you
:05:48. > :05:51.produced today? People will get a sense of what the opportunities of
:05:52. > :05:54.independence are and we will set out further propositions in the white
:05:55. > :06:00.paper next week. There was this argy-bargey about the IFS paper on
:06:01. > :06:03.the medium to long-term future of the Scottish budget. I was quite
:06:04. > :06:07.interested in your paper today that you seem to accept that an
:06:08. > :06:12.independent Scotland would have an unsustainable level of debt right
:06:13. > :06:17.from day one? Well, clearly, the levels of debt that an independent
:06:18. > :06:22.Scotland would inherit would be a product of the current levels of
:06:23. > :06:28.debt within the UK. Those will be high levels of debt because of the
:06:29. > :06:35.way United Kingdom affairs have been mismanaged by successive
:06:36. > :06:38.Governments. Like many other countries, restoring the public
:06:39. > :06:43.finances to health will be a key challenge and would have to be a top
:06:44. > :06:48.priority in the short to medium term. What would you do, raise
:06:49. > :06:51.taxes, cut spending more? We would concentrate on growth, which is what
:06:52. > :06:56.the paper is about today. That does it in the immediate medium term it
:06:57. > :07:00.doesn't solve your short-term problem of an unsustainable deficit?
:07:01. > :07:06.If we improved the productivity of the Scottish economy by just 1%, we
:07:07. > :07:10.would create over 20,000 new jobs. That would be people paying into the
:07:11. > :07:14.public finances in their taxes. You are trying to reassure creditors
:07:15. > :07:19.potentially of an independent Scotland that you have a fiscally
:07:20. > :07:23.sound regime, talk of increases in productivity, which again are medium
:07:24. > :07:26.term, is all very well, if I'm a banker who wants to give you money,
:07:27. > :07:30.I want to know what you will do to get your ensustainable deficit down?
:07:31. > :07:36.If you look at other parts of the paper, what we set out are the two
:07:37. > :07:39.basis upon which debt in the UK could be apportions if Scotland
:07:40. > :07:43.votes for independence. One is on the basis of a per Capita share of
:07:44. > :07:47.debt. The other would be on a historic analysis of who had run up
:07:48. > :07:52.the debts and who was responsible for. It on both of these measures
:07:53. > :07:55.the proportion of our GDP allocated towards debt would be a lower
:07:56. > :07:59.proportion in Scotland than the rest of the UK. That is good. You concede
:08:00. > :08:03.it would be higher than most comparable countries. You would be a
:08:04. > :08:09.newly independent country. It seems to me you would have to have some
:08:10. > :08:22.proposals you could propose to potentialal creditor -- creditors of
:08:23. > :08:25.Scotland? In the reaction of the better together campaign of the
:08:26. > :08:29.Labour Party, the Conservatives and the liberals, their documents today
:08:30. > :08:34.have all essentially endorsed austerity. I watched your programme
:08:35. > :08:38.last night. The Labour Party participation wasn't endorsing - Or
:08:39. > :08:41.whoever I'm quoting your own document. You are saying that
:08:42. > :08:46.restoring the public finances would be a top priority in the short to
:08:47. > :08:50.medium term. You don't have proposals as to how you would do
:08:51. > :08:55.that? Yes we do. Productivity is all very well. It's admirable. It is
:08:56. > :08:59.great you could raise productivity in the Scottish economy. It's not an
:09:00. > :09:02.answer to the question, I am a creditor of an independent Scotland,
:09:03. > :09:07.I want to know how you will get your debt down. Best of luck with the
:09:08. > :09:12.productivity increase that is will not happen in the next 12-18 months?
:09:13. > :09:17.Productivity proposal I have set out to you is one aspects of what we are
:09:18. > :09:20.setting out which can make a direct contribution to improving the public
:09:21. > :09:24.finances. That would be a signal to international markets and creditors
:09:25. > :09:28.we were serious about boosting the scale of the public finances and
:09:29. > :09:33.their ability - Maybe or maybe not. Are you ruling out raising taxes?
:09:34. > :09:35.Another example, which is about the linking of employability, welfare
:09:36. > :09:39.reform and benefit services together. Which are currently
:09:40. > :09:45.disjointed in Scotland. I think causing a great deal of duplication
:09:46. > :09:48.and lack of focus. If we improve as a consequence of integrating those
:09:49. > :09:53.services, the economic activity level in Scotland by 1% we create
:09:54. > :09:58.over 20,000 jobs in Scotland. That contribution to the public finances.
:09:59. > :10:02.Still ruling out rises in personal taxation? I made it clear on
:10:03. > :10:06.numerous of your programmes and numerous of the bulletins today I
:10:07. > :10:11.don't think there is any necessity for Scotland to increase taxes. No
:10:12. > :10:16.matter how wonderful your ideas are for a medium term you have a
:10:17. > :10:20.short-term problem. Cutting corporation tax creates a hole in
:10:21. > :10:25.your budget. It may be all the wonderful things you say it would
:10:26. > :10:28.achieve in the medium term happen, how much would the hole be in the
:10:29. > :10:32.budget if you cut corporation tax by 3%? What we have to take forward is
:10:33. > :10:36.a programme of measures - How much would it cost in the short-term to
:10:37. > :10:41.do that? You must know that? What we have to do is bring forward, as part
:10:42. > :10:46.of the prosignificances we put to people in Scotland, which we would
:10:47. > :10:49.bring forward as the administration, a set of balanced proposals to
:10:50. > :10:52.ensure we have stability in the public finances to ensure we take
:10:53. > :10:56.the proper measures to improve the scale and size of the Scottish
:10:57. > :11:02.economy. They are not in your document today? Well... You would
:11:03. > :11:06.tell me what the hole in the budget would be by cutting corporation tax
:11:07. > :11:09.license Well. You are not prepared to tell me? What the document is
:11:10. > :11:12.designed to do today, I set it out at the beginning of this interview,
:11:13. > :11:15.is give Scotland a range of the economic options and opportunities
:11:16. > :11:20.that exist if we vote for independence. What independence
:11:21. > :11:24.fundamentally is about is about giving people in Scotland choice,
:11:25. > :11:26.choice to decide whether or not we want to go down the route of
:11:27. > :11:29.austerity, which all the other parties are signed up to. Or whether
:11:30. > :11:34.we want to take economic control in Scotland and boost our economic
:11:35. > :11:38.performance. I understand that. Wait a second. Why not tell me what the
:11:39. > :11:41.short-term hole in the budget will be? If we look at the performance of
:11:42. > :11:46.the Scottish economy since devolution - You are not going to
:11:47. > :11:48.tell me. Scotland has improved its economic performance as a
:11:49. > :11:53.consequence of having control here in Scotland on a limited range of
:11:54. > :11:56.areas in the economy. My point, the whole point of our document today,
:11:57. > :12:01.if we have a further range of economic levers at our disposal it
:12:02. > :12:04.will strengthen the economic - You won't tell me what the hole in the
:12:05. > :12:07.budget will be? It's about mapping out the economic options and
:12:08. > :12:09.opportunities for people in Scotland to make an informed choice next
:12:10. > :12:19.September. Another problem I noticed is that
:12:20. > :12:22.you sort of assumed that being a small country and independent is
:12:23. > :12:26.somehow better, but I think you would be the first to agree that
:12:27. > :12:29.your problem is that you have to win over people who don't share your
:12:30. > :12:35.convictions. There is nothing in this paper that does that. For
:12:36. > :12:39.example, you compare Scotland to a whole list of small countries and
:12:40. > :12:43.say they have done a bit better than Scotland. You could equally compare
:12:44. > :12:47.the UK with a list of other countries and say they have done
:12:48. > :12:51.better than the UK. If you change policies in the UK, we may have
:12:52. > :12:55.better economic growth. There is no actual argument here for the
:12:56. > :12:59.proposition that somehow or other independents is important. What the
:13:00. > :13:04.prospect of independence does is give Scotland access to a range of
:13:05. > :13:12.economic powers that enable us... Yes, but you don't argue the case
:13:13. > :13:15.for why that is necessary. Why it is necessary is informed by the
:13:16. > :13:20.comparison that is available between Scotland and other small, European
:13:21. > :13:25.countries. When you quote the native Nations development index, the
:13:26. > :13:28.figures you produced, some large countries like the United States and
:13:29. > :13:31.Germany are actually ranked higher than almost all of the small
:13:32. > :13:40.countries that you compared Scotland with. Iceland, Sweden, Ireland,
:13:41. > :13:48.exception. The logic is that size has nothing to do with it, it is...
:13:49. > :13:52.Therefore, the arguments about independence are you make lots of
:13:53. > :13:56.interesting points, but it is not clear why independence for Scotland
:13:57. > :13:59.is relevant to the points you make. It is relevant as it gives us the
:14:00. > :14:05.powers to do something about the facts were locked into an austerity
:14:06. > :14:08.agenda and we have no focus growth. .2 is the fact that we are living in
:14:09. > :14:13.a country just now which is the fourth most unequal country in the
:14:14. > :14:17.OCD and that for me is something that is unacceptable. A comeback to
:14:18. > :14:20.the point that unless people are already agreeing with you, there is
:14:21. > :14:24.nothing in this document to give... Let me give you an example. They
:14:25. > :14:27.discuss at one point the crisis and the effect it had in Iceland and
:14:28. > :14:31.Ireland which was quite catastrophic. At that point, having
:14:32. > :14:34.done all of this stuff was wonderful small countries, is eight is nothing
:14:35. > :14:40.to do with the fact they were small, it is the wrong policies. The logic
:14:41. > :14:43.of that is that in any country, large or small, you can hardly...
:14:44. > :14:47.Lots of people would agree that the UK should adopt some of your
:14:48. > :14:51.policies, but size has nothing to do with it and whether Scotland is
:14:52. > :14:59.independent or not is irrelevant. What it is about is about... What we
:15:00. > :15:02.have demonstrated since the Scottish parliament was established is the
:15:03. > :15:06.economic performance of Scotland that has improved. If you take the
:15:07. > :15:13.last year, the Scottish economy grew by 1.8% compared to the UK at 1.3%.
:15:14. > :15:16.We don't get the fruits of that increased activity. It gets
:15:17. > :15:20.swallowed up in the Treasury and the Treasury decides how much money we
:15:21. > :15:25.get back. I think that is unacceptable. It distracts our
:15:26. > :15:31.ability to tackle... I'm not quite sure how that is as -- and string
:15:32. > :15:36.the question. How it is answering the question is that you asked me
:15:37. > :15:40.about what independence is about. What I'm telling you is that it is
:15:41. > :15:43.about where powers lies and how we can use power to advance the
:15:44. > :15:47.interests of people in Scotland to tackle inequality and develop a
:15:48. > :15:50.better society. We have to leave it there. Thank you very much indeed.
:15:51. > :15:53.I'm joined now by economist and commentator Jo Armstrong, of the
:15:54. > :16:00.Centre for Public Policy for Regions, at Glasgow University.
:16:01. > :16:06.People can be forgiven for being confused. Only yesterday there is a
:16:07. > :16:10.report saying it will be a disaster and now it is going to be wonderful.
:16:11. > :16:16.What are we supposed to make of this? We have been bombarded with a
:16:17. > :16:19.lot of numbers over the last 24 hours. I think it is fair to say
:16:20. > :16:22.that both documents give us something that we should try and
:16:23. > :16:27.understand a bit more about the Scottish Government's document gives
:16:28. > :16:31.a detailed analysis of the potential options that an independent country
:16:32. > :16:36.could follow in terms of economic and fiscal policy. The ISS tells us
:16:37. > :16:42.that if we currently continue to do what we are doing, Scotland has a
:16:43. > :16:46.big challenge. What he did not get from the Scottish Government is any
:16:47. > :16:50.indication of what policy options are there and what they would choose
:16:51. > :16:55.and the impact on Scotland in the short and long-term. Maybe we should
:16:56. > :17:02.adopt a less serious attitude to some this. If we take the ISS thing,
:17:03. > :17:05.it was difficult to read that and keep a straight face. All of these
:17:06. > :17:09.supposedly serious economists projecting what will happen in 50
:17:10. > :17:14.years. A sensible reaction may be to say, sorry, that is silly. They are
:17:15. > :17:18.mapped to talk about 50 years hence, it is silly as it would affect me
:17:19. > :17:21.clearly. What they were trying to show is that if we do not do
:17:22. > :17:27.something sooner rather than later, the economic position is
:17:28. > :17:32.unsustainable, but so is the UK's. I suppose on the other side, if we
:17:33. > :17:39.took the other same approach this thing, it is arguable that there's
:17:40. > :17:43.not much analysis here. It is a list of some things that or may not work.
:17:44. > :17:48.There is no indication of which ones are the right ones for Scotland. All
:17:49. > :17:52.what the impact of those would be kind who would be the winners and
:17:53. > :17:59.losers. I wonder if this is slightly selective. This idea that Alex
:18:00. > :18:03.Salmond referred to that since devolution, the Scottish economy is
:18:04. > :18:08.doing better. It seems to be the figures in their own documents show
:18:09. > :18:11.it has been doing it since the late 1980s, it looks to me that it was
:18:12. > :18:14.the clear out of manufacturing in the 80s that paved the way for
:18:15. > :18:22.Scotland catching up with the rest of the UK and does it have anything
:18:23. > :18:26.to do with evolution? It would be difficult to say that devolution has
:18:27. > :18:30.been the effect. There have been benefits, but not to say the whole
:18:31. > :18:35.effect that we are seeing now, , you are right. Politicians don't like
:18:36. > :18:40.talking about tough subjects. Dealing with austerity is one. If we
:18:41. > :18:43.are going to have an open debate, again, the point I made to John
:18:44. > :18:49.Swinney in his own documents he accepts that there is a problem from
:18:50. > :18:53.day one. At some point, there has to be a bit more openness on both sides
:18:54. > :19:00.about how to deal with some of these tough decisions rather than just
:19:01. > :19:04.trying to say that, if you like, productivity issues on medium term,
:19:05. > :19:08.they do not get around the immediate thing. The IFS analysis is very
:19:09. > :19:13.useful to start to look at the issues as they flagged up whether we
:19:14. > :19:18.improve productivity, improve revenues from the North Sea, if we
:19:19. > :19:22.are as productive if not more productive than we have been in the
:19:23. > :19:27.past, we still have a fiscal problem, so we still have serious
:19:28. > :19:31.challenges, irrespective of the Scottish Government's document. We
:19:32. > :19:36.have to leave it there. A quick look at the front pages. The Scotsman,
:19:37. > :19:43.Salmond 's plan to create 200,000 job. The Daily Telegraph and big
:19:44. > :19:48.Guardian,