What can Scotland do to tackle Westminster's economic crisis?

So what is to be done, and by whom?

As far as the trade union movement is concerned, the priority is clear. At a time of price inflation stoked and worsened by the Westminster government’s failure and ill will, the requirement for those who have been living with the cost of austerity for too long is a decent pay rise. That will boost the economy, too.

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The cost of this should be borne by cutting the record profits of large companies, windfall taxes on the energy giants, public borrowing concentrated on investment and services, and community-focused quantitative easing (as set out cogently by banking expert Frances Coppola in The Case for People's QE, Polity Press, 2019).

We know, of course, that Liz Truss’s (below) new administration, shaped by a plethora of wealthy and malicious right-wing think tanks, will continue to do the opposite of that. Its intention is to bail out big business, cut taxes for the rich, trap the poorest in energy debt, and use the economic crisis and Brexit to deregulate further and slash the state and public services.

So far Labour’s hazy alternative proposals simply freeze an already unbearable cost crisis, and there is no prospect of immediate electoral change at UK level, despite shifting polls following Kwarteng’s disastrous “fiscal event”.

This puts the devolved government in Scotland in a real bind. Its room for manoeuvre is strictly limited by lack of economic and borrowing powers, and the fact that the purse strings and the majority of tax powers still lie with Westminster. It has already pumped many millions of pounds into mitigating Tory cuts in recent years. The current spending review and the costs of (necessary and justified) public sector pay settlements signals a further squeeze of up to £500 million or more, with local authorities – which have faced real terms cuts and an unreformed revenue system over the past decade and more – pushing that figure up considerably.

It is important to recognise that Scotland’s two governments wish to head in very different directions in their response to the economic turmoil, and that they are not equally culpable or capable. In this context, differences over constitutional politics can be a real obstruction to the kind of united response we need to the crisis.

Some independence supporters have been shamefully criticising unions and excusing lack of bolder action by the Scottish Government. Some Unionists, on the other hand, seem to wish to pile as much blame as possible on Holyrood for “channelling Tory cuts”, without acknowledging the actual bind it is in. Neither of these responses faces the true challenge.

First, the Scottish government should not be let off the hook in pointing the finger at Westminster, however justified that is. It has limited room to operate in, but is not powerless.

Raising marginal tax rates on the wealthy, granting local authorities tax and borrowing powers, a land value tax, longer term rent and price controls, and levies such as one which could raise up to £1 billion from “Big Whisky” (most of whose profits are hidden in overseas subsidiaries) are among the moves needed. It should be recognised, however, that most of these measures cannot be implemented immediately. Tax changes are not made until spring 2023, for example. But the commitment to bold and redistributive action can and must start now, in addition to ameliorative action and emergency measures.

At the same time, those who wish to see a real shift in wealth and power in Scotland must face up to the limits of devolution and think afresh about what could be done with the kind of economic powers and resources that only independence can bring.

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A renewables-based and publicly-owned national energy company is a good example of the “join” between powers we have and powers we need. This is about taking our green industrial future into our own hands, rather than selling or renting it to global capital. The Scottish Government continues to avoid the challenge here, by confusing an asset-based energy company with a retail one. It is the former we undoubtedly need. A start can be made now – but full capitalisation and development requires economic muscle we do not yet possess.

On this and on many other issues, we should be pressing those in power at Holyrood – the SNP in cooperation with the Greens – to do everything within their power to mitigate the current crisis and move in a progressive direction. We must push hard for better and bolder. At the same time, there is no justification in failing to demand the kind of powers which would enable Scotland to further resist the neoliberal tide at Westminster and begin to model an alternative. Those can only come with independence.

Simon Barrow is director of the politics, ethics and beliefs think tank Ekklesia, and secretary of the SNP Trade Union Group. He is co-editor with Gerry Hassan of A Better Nation: The Challenges of Independence (Luath, 2022).