Scotland’s economic potential is blocked by a failing UK

There is a fundamentally different policy consensus north of the border — and different rules apply.

This year’s World Happiness Report once again shows the top three places occupied by European countries with a population size similar to or smaller than Scotland’s. Small advanced nations tend to dominate this particular measure of national success.

Indeed, while all countries have their problems, the general economic resilience of independent countries the size of Scotland is striking, particularly given the volatile global environment since the financial crash.

When the Scottish Government compared the performance of the UK with smaller advanced European economies across a range of measures, we found those countries — including the Scandinavian countries, Ireland, Austria and a number of others — enjoyed both higher gross domestic product per head, holding up over time, and lower inequality. Delving deeper we found evidence of outperforming the UK on a range of other measures including productivity, business investment and poverty.

Scotland can look at other nations the same size to find lessons for improving our own performance. And 2024, which marks 25 years of devolution and 10 years since the independence referendum, seems a particularly good year for both reflection and forward thinking.

The policy programme enacted under devolution seems to break the self-imposed rules for what is deemed politically possible at Westminster.

We’ve introduced a more progressive income tax system and abolished university tuition fees. Less well known is the use of limited social security powers to bring in the Scottish child payment of £25 per week per child for eligible families — unlike in England’s welfare system, there is no two-child cap. In terms of overall economic performance, both gross domestic product per head and productivity in Scotland since 2007, when the SNP entered government, have risen faster than in the UK as a whole.

But, as the Resolution Foundation and others have shown, living standards for typical households across the UK are way behind comparable countries. When that analysis is extended to independent countries similar to Scotland the gap is even larger.

The economic historian Professor Kevin O’Rourke, re-examining Ireland’s record as an independent state, said “a plausible candidate” for its economic underperformance between 1954 and 1973, when both it and the UK joined the then-EEC, was “excessive reliance on the sluggish British economy”.

I would argue it is not just a sluggish UK economy that Scotland is in danger of being excessively reliant on, but a failing one. And oddly, while the Labour Party’s rhetoric about the economic difficulties it will face in government becomes ever more alarming, its policy response is ever more timid.

This offers further evidence of a fundamentally different policy consensus in Scotland and Westminster. Take two key issues that the Scottish Parliament has no control over: EU membership and migration. There was, and is, overwhelming opposition to Brexit in Scotland; on migration, Scotland and the UK as a whole are facing very different population challenges. At its simplest, the Scottish government is keen to see more people coming to Scotland while the contest at Westminster appears to be over cuts to immigration.

We face an increasingly stark choice: the continued failure of a Brexit-based UK economy or, if we use our resources and decision-making powers wisely, the opportunity as an independent country to reach the more normal living standards of our peers.

And, if Scotland made the choice in favour of independence, it might just be the kind of jolt Westminster policymakers need to re-examine the economic and social model that is proving so damaging for the UK.

This article by First Minister Humza Yousaf was originally published 30th March in the Financial Times.