Photo: Harris Morgan. CC BY 2.0
THERE’S nothing like an economic crisis for persuading warring political factions to bury the hatchet. When Alex Salmond and John Swinney, the finance secretary, first held a round-table meeting with Jim Murphy, the Scottish secretary, and senior representatives of CBI Scotland and the Scottish TUC in October 2008, relations between Westminster and Holyrood were distinctly frosty.
At the time Salmond was at loggerheads with Gordon Brown’s government over funding. The first minister was raging about the £1 billion of what he called “Scotland’s money” that he said had been wrongfully seized by Westminster and must be returned. The money included £120m that Salmond claimed was Scotland’s share of the fossil-fuel levy. He wanted the cash back to help reflate the Scottish economy.
Four months on, relations have slightly thawed. If a blind eye can be turned to their divergence over cuts of £500m in each of the next two years in Scotland’s budget, it would appear that London and Edinburgh are increasingly finding “scraps of common cause” when it comes to battling the recession.
Together they are trying to break the impasse over the new Forth crossing, and even looking at a joint legislative solution to the ongoing cost of compensating Scottish prisoners over slopping out.
The SNP government’s main hope is that it can accelerate its six-point path to recovery, which includes bringing forward infrastructure spending. Last week Salmond also announced plans to help reinvigorate the construction industry with plans to spend £644m on building at least 6,500 affordable homes.
I am told the prevailing mood at the second economic summit, held in Glasgow last Wednesday, was one of economic realism. The 15 to 20 people present, including Salmond, Swinney, Murphy, the CBI’s Iain McMillan and David Lonsdale, and the STUC chiefs Grahame Smith and Stephen Boyd, seem to have shared the view that the best response to the recession is a neo-Keynesian, reflationary one — despite differences of opinion over the possible extent of taxpayer munificence.
The talks are said to have been “constructive”. One of those present added there was at least “a facade of unity”.
Lonsdale, the assistant director of CBI Scotland, said both sets of ministers listened attentively to the confederation’s proposals for ensuring cash-strapped firms can survive tough times ahead.
This was despite the fact that several CBI proposals would imply lower tax revenues for Westminster — for example, scrapping plans to raise corporation tax for smaller companies from 21% to 22%.
Murphy apparently pledged to raise such matters with Alistair Darling, the chancellor, prior to his budget on 22 April. It remains to be seen how powerfully Murphy will advocate such changes at a time when the UK government is under great fiscal pressure as a result of the downturn and the generosity of Brown’s banking bailouts. And it’s moot whether Darling will pay any heed to such pleas.
But, unlike some of his predecessors as Scottish secretary, at least Murphy can be bothered to act as Scotland’s emissary and make such a request.
See the light
Given the failures of our banks, the collapse in business start-ups, the closure of NCR’s Dundee plant, disappointing figures from the purchasing managers’ index and some dire economic predictions from the Fraser of Allander Institute, it would be easy to be overwhelmed with despondency.
The unemployment numbers for Scotland out this week will only reinforce the gloom.
In such a climate it is easy to become impervious to good news. Yet in recent days a raft of Scottish plcs, including Aggreko, Axis-Shield, IndigoVision, Standard Life and Weir Group, all revealed strong performances for 2008. Standard Life is now seen as the strongest of the UK life insurers. Weir Group last week revealed that its 2008 profits surged 53% to £176 million. Mark Selway, the chief executive, told reporters that he has a £300m war chest with which to fund acquisitions. We should not allow such points of light to be enveloped by the prevailing gloom.
Hunter shoots first
In a new global ranking of billionaires by Forbes magazine, Sir Tom Hunter has seen his fortune shrink from $1.3 billion (£930m) to $800m. If anything, this might be an underestimate. Hunter made making money look effortless during the credit bubble years.
However, he has made losing it look even more effortless. His equity stakes in Crest Nicholson, the housebuilder, and McCarthy and Stone, the retirement homes builder, have been wiped out. USC, West Coast Capital’s clothing business, went bust in December — although Hunter did buy back a few stores from the administrators. To make matters worse Peter Cummings, Hunter’s favourite bank manager, has lost his job at HBOS. It seems unlikely that Diana Brightmore-Armour, Cummings’ successor a Lloyds Banking Group, will be at his beck and call in the way Cummings seemingly was.
Last week Hunter reportedly asked for his name to be removed from lists of Britain’s wealthiest people. That may be wise — after all, better to ask for it to be removed before it is removed for him.
This Scottish Agenda column was published in The Sunday Times on 15 March 2009.