19/11/2013 Newsnight Scotland

you hear her 3 o 0 minute radio document, A Road Trip To War, on the

Tonight, on Newsnight Scotland. Lower business taxes, a fairer

society and lots more jobs. The Scottish Government's ideas for an

independent Scotland couldn't be further from the hair shirt

suggested by a think tank only yesterday. But is this latest report

on the economy a manifesto for a future Scottish Government? Or the

product of civil servants with over fertile imaginations? I'll ask the

Finance Secretary. Good evening. Casual viewers might be forgiven a

sense of through the looking glass. Last night, a lengthy analysis which

concluded an independent Scotland would face serious economic

problems. Tonight, a lengthy analysis which concludes

independence will provide unbounded opportunity. But does it make sense?

Here's Suzanne Allan. After the economic case for

independence took a battering yesterday, today, Alex Salmond and

John Swinney had their hard hats on. They were touring a new life

skrientss -- sciences centre. Earlier in the morning, at the

launch of a 200 page document, Alex Salmond told an audience and an

independent Scotland would create a jobs boom and the future was there

for the taking. But the future and what we do with the future is for us

to make. The First Minister said an independent Scotland would have the

freedom to cut taxes in order to attract big companies and boost the

economy. This is about how we can change the circumstances of

Scotland. Since devolution, since we established a parliament, Scottish

economic performance has been getting better, lower unemployment,

higher employment, higher labour participation than the UK average.

Compared to other small independent countries we are not doing enough.

This document lays out a menu how the resources of Scotland, resources

which other countries would give their eye teeth, the natural talent

of the Scottish people, bring these two things together and create a

more prosperous society. According to the Scottish Government, if it

had controls of the economic levers, corporation tax would be cut by 3%.

There would be 27,000 extra jobs. 1.4% of extra economic output would

be created. Scotland, for example, and the question of our ageing

population has a better dependency ratio than the rest of the UK until

2030s. Some of the measures set out today, we talked about the measures

to increase economic abg dift by better childcare services. If we

increase the level of economic activity by 1% it creates over

20,000 new jobs in Scotland which contributes to our economic future.

I think we've got to... People have to consider the depth of the

analysis we set out today in the context of the current economic

performance of Scotland, which has got better since Scotland was a

devolved country because we have more control over these issues here.

Other ideas include, using tax incentives to support growth in

areas like tourism and the creative industries. Reforming air passenger

duty and a plan to increase the value of Scottish exports by 50%

that could boost output by ?5 billion and create more than 100,000

jobs in the long-term. Yesterday, a report from the Institute for Fiscal

Studies raised serious questions about Scotland's long-term economic

health should we be independent. It said declining North Sea oil

revenues and a population ageing more rapidly and slower immigration

than the rest of the United Kingdom would leave an independent Scotland

with a serious fiscal deficit. Yet again, the Scottish Government has

failed to answer the questions that the people of Scotland want to hear.

Yesterday, the Institute for Fiscal Studies, one of the most respected

bodies in this area, said that an independent Scotland would face a

situation where either our taxes had to go up or our public spending had

to go down. That raised serious questions for the Scottish

Government. Today, we needed to hear them answered. They failed to do so.

At this point there are still a lot of questions unanswered. The

Government say all will be revealed in next week's white paper. It's

blueprint for an independent Scotland. A short while ago, John

Swinney came into our Edinburgh studio. I asked him if this is it,

if this is the long version of what will be in the white paper as far as

the economy is concerned? What we've done today is set out a range of

economic policy options that would be available to Scotland if the

country votes for independence in 2014. What we've tried to do, is to

give the most comprehensive analysis we can of the Scottish economy. Of

some of the issues - There won't be anything different in the white

paper? The white paper will be based on the policy options we set out

today. What the paper we have done today is designed to do, is to give

an extensive range of ideas and propositions to Scotland that could

be supported and - I get. That my point is, you would say... If people

want to know what your thinking is on the economy you don't need to

wait for the white paper the expanded version is what you

produced today? People will get a sense of what the opportunities of

independence are and we will set out further propositions in the white

paper next week. There was this argy-bargey about the IFS paper on

the medium to long-term future of the Scottish budget. I was quite

interested in your paper today that you seem to accept that an

independent Scotland would have an unsustainable level of debt right

from day one? Well, clearly, the levels of debt that an independent

Scotland would inherit would be a product of the current levels of

debt within the UK. Those will be high levels of debt because of the

way United Kingdom affairs have been mismanaged by successive

Governments. Like many other countries, restoring the public

finances to health will be a key challenge and would have to be a top

priority in the short to medium term. What would you do, raise

taxes, cut spending more? We would concentrate on growth, which is what

the paper is about today. That does it in the immediate medium term it

doesn't solve your short-term problem of an unsustainable deficit?

If we improved the productivity of the Scottish economy by just 1%, we

would create over 20,000 new jobs. That would be people paying into the

public finances in their taxes. You are trying to reassure creditors

potentially of an independent Scotland that you have a fiscally

sound regime, talk of increases in productivity, which again are medium

term, is all very well, if I'm a banker who wants to give you money,

I want to know what you will do to get your ensustainable deficit down?

If you look at other parts of the paper, what we set out are the two

basis upon which debt in the UK could be apportions if Scotland

votes for independence. One is on the basis of a per Capita share of

debt. The other would be on a historic analysis of who had run up

the debts and who was responsible for. It on both of these measures

the proportion of our GDP allocated towards debt would be a lower

proportion in Scotland than the rest of the UK. That is good. You concede

it would be higher than most comparable countries. You would be a

newly independent country. It seems to me you would have to have some

proposals you could propose to potentialal creditor -- creditors of

Scotland? In the reaction of the better together campaign of the

Labour Party, the Conservatives and the liberals, their documents today

have all essentially endorsed austerity. I watched your programme

last night. The Labour Party participation wasn't endorsing - Or

whoever I'm quoting your own document. You are saying that

restoring the public finances would be a top priority in the short to

medium term. You don't have proposals as to how you would do

that? Yes we do. Productivity is all very well. It's admirable. It is

great you could raise productivity in the Scottish economy. It's not an

answer to the question, I am a creditor of an independent Scotland,

I want to know how you will get your debt down. Best of luck with the

productivity increase that is will not happen in the next 12-18 months?

Productivity proposal I have set out to you is one aspects of what we are

setting out which can make a direct contribution to improving the public

finances. That would be a signal to international markets and creditors

we were serious about boosting the scale of the public finances and

their ability - Maybe or maybe not. Are you ruling out raising taxes?

Another example, which is about the linking of employability, welfare

reform and benefit services together. Which are currently

disjointed in Scotland. I think causing a great deal of duplication

and lack of focus. If we improve as a consequence of integrating those

services, the economic activity level in Scotland by 1% we create

over 20,000 jobs in Scotland. That contribution to the public finances.

Still ruling out rises in personal taxation? I made it clear on

numerous of your programmes and numerous of the bulletins today I

don't think there is any necessity for Scotland to increase taxes. No

matter how wonderful your ideas are for a medium term you have a

short-term problem. Cutting corporation tax creates a hole in

your budget. It may be all the wonderful things you say it would

achieve in the medium term happen, how much would the hole be in the

budget if you cut corporation tax by 3%? What we have to take forward is

a programme of measures - How much would it cost in the short-term to

do that? You must know that? What we have to do is bring forward, as part

of the prosignificances we put to people in Scotland, which we would

bring forward as the administration, a set of balanced proposals to

ensure we have stability in the public finances to ensure we take

the proper measures to improve the scale and size of the Scottish

economy. They are not in your document today? Well... You would

tell me what the hole in the budget would be by cutting corporation tax

license Well. You are not prepared to tell me? What the document is

designed to do today, I set it out at the beginning of this interview,

is give Scotland a range of the economic options and opportunities

that exist if we vote for independence. What independence

fundamentally is about is about giving people in Scotland choice,

choice to decide whether or not we want to go down the route of

austerity, which all the other parties are signed up to. Or whether

we want to take economic control in Scotland and boost our economic

performance. I understand that. Wait a second. Why not tell me what the

short-term hole in the budget will be? If we look at the performance of

the Scottish economy since devolution - You are not going to

tell me. Scotland has improved its economic performance as a

consequence of having control here in Scotland on a limited range of

areas in the economy. My point, the whole point of our document today,

if we have a further range of economic levers at our disposal it

will strengthen the economic - You won't tell me what the hole in the

budget will be? It's about mapping out the economic options and

opportunities for people in Scotland to make an informed choice next

September. Another problem I noticed is that

you sort of assumed that being a small country and independent is

somehow better, but I think you would be the first to agree that

your problem is that you have to win over people who don't share your

convictions. There is nothing in this paper that does that. For

example, you compare Scotland to a whole list of small countries and

say they have done a bit better than Scotland. You could equally compare

the UK with a list of other countries and say they have done

better than the UK. If you change policies in the UK, we may have

better economic growth. There is no actual argument here for the

proposition that somehow or other independents is important. What the

prospect of independence does is give Scotland access to a range of

economic powers that enable us... Yes, but you don't argue the case

for why that is necessary. Why it is necessary is informed by the

comparison that is available between Scotland and other small, European

countries. When you quote the native Nations development index, the

figures you produced, some large countries like the United States and

Germany are actually ranked higher than almost all of the small

countries that you compared Scotland with. Iceland, Sweden, Ireland,

exception. The logic is that size has nothing to do with it, it is...

Therefore, the arguments about independence are you make lots of

interesting points, but it is not clear why independence for Scotland

is relevant to the points you make. It is relevant as it gives us the

powers to do something about the facts were locked into an austerity

agenda and we have no focus growth. .2 is the fact that we are living in

a country just now which is the fourth most unequal country in the

OCD and that for me is something that is unacceptable. A comeback to

the point that unless people are already agreeing with you, there is

nothing in this document to give... Let me give you an example. They

discuss at one point the crisis and the effect it had in Iceland and

Ireland which was quite catastrophic. At that point, having

done all of this stuff was wonderful small countries, is eight is nothing

to do with the fact they were small, it is the wrong policies. The logic

of that is that in any country, large or small, you can hardly...

Lots of people would agree that the UK should adopt some of your

policies, but size has nothing to do with it and whether Scotland is

independent or not is irrelevant. What it is about is about... What we

have demonstrated since the Scottish parliament was established is the

economic performance of Scotland that has improved. If you take the

last year, the Scottish economy grew by 1.8% compared to the UK at 1.3%.

We don't get the fruits of that increased activity. It gets

swallowed up in the Treasury and the Treasury decides how much money we

get back. I think that is unacceptable. It distracts our

ability to tackle... I'm not quite sure how that is as -- and string

the question. How it is answering the question is that you asked me

about what independence is about. What I'm telling you is that it is

about where powers lies and how we can use power to advance the

interests of people in Scotland to tackle inequality and develop a

better society. We have to leave it there. Thank you very much indeed.

I'm joined now by economist and commentator Jo Armstrong, of the

Centre for Public Policy for Regions, at Glasgow University.

People can be forgiven for being confused. Only yesterday there is a

report saying it will be a disaster and now it is going to be wonderful.

What are we supposed to make of this? We have been bombarded with a

lot of numbers over the last 24 hours. I think it is fair to say

that both documents give us something that we should try and

understand a bit more about the Scottish Government's document gives

a detailed analysis of the potential options that an independent country

could follow in terms of economic and fiscal policy. The ISS tells us

that if we currently continue to do what we are doing, Scotland has a

big challenge. What he did not get from the Scottish Government is any

indication of what policy options are there and what they would choose

and the impact on Scotland in the short and long-term. Maybe we should

adopt a less serious attitude to some this. If we take the ISS thing,

it was difficult to read that and keep a straight face. All of these

supposedly serious economists projecting what will happen in 50

years. A sensible reaction may be to say, sorry, that is silly. They are

mapped to talk about 50 years hence, it is silly as it would affect me

clearly. What they were trying to show is that if we do not do

something sooner rather than later, the economic position is

unsustainable, but so is the UK's. I suppose on the other side, if we

took the other same approach this thing, it is arguable that there's

not much analysis here. It is a list of some things that or may not work.

There is no indication of which ones are the right ones for Scotland. All

what the impact of those would be kind who would be the winners and

losers. I wonder if this is slightly selective. This idea that Alex

Salmond referred to that since devolution, the Scottish economy is

doing better. It seems to be the figures in their own documents show

it has been doing it since the late 1980s, it looks to me that it was

the clear out of manufacturing in the 80s that paved the way for

Scotland catching up with the rest of the UK and does it have anything

to do with evolution? It would be difficult to say that devolution has

been the effect. There have been benefits, but not to say the whole

effect that we are seeing now, , you are right. Politicians don't like

talking about tough subjects. Dealing with austerity is one. If we

are going to have an open debate, again, the point I made to John

Swinney in his own documents he accepts that there is a problem from

day one. At some point, there has to be a bit more openness on both sides

about how to deal with some of these tough decisions rather than just

trying to say that, if you like, productivity issues on medium term,

they do not get around the immediate thing. The IFS analysis is very

useful to start to look at the issues as they flagged up whether we

improve productivity, improve revenues from the North Sea, if we

are as productive if not more productive than we have been in the

past, we still have a fiscal problem, so we still have serious

challenges, irrespective of the Scottish Government's document. We

have to leave it there. A quick look at the front pages. The Scotsman,

Salmond 's plan to create 200,000 job. The Daily Telegraph and big

Guardian,