I spoke at the COSLA conference this afternoon. COSLA represents local authorities in Scotland. This was my second visit to their conference. It was good to be invited back.
I emphasised during my presentation that in my opinion Scotland needed a cross-party New Deal to ensure it can face the challenges coming its way, with or without independence. There were my speaking notes:
- The challenge
- Scotland is at a crossroads
- Devolved with some economic powers
- Debating its own future
- If GERS is to be believed running a strong deficit
- If trade is to be believed in a good place
- And I would say sitting on all the fundamental assets that make a modern economy
- People
- Education
- Energy
- Enterprise
- Identity
- The reality
- There's a crisis coming
- Externally
- Brexit
- A tottering world economy
- A world without a plan
- Domestically
- An economy constrained by Westminster and the South East
- In need of a plan of its own
- And having to address the real issue that faces Scotland - that people in the country just don't earn enough because not enough has been invested in productivity in its economy
- That's the beginning and the end of the Scottish economic crisis
- There is €33 trillion saved in cash in the world right now (Allianz Global Wealth Report)
- As they say, this is because the owners of that cash don't trust the financial products available to them in the market
- These people would rather lose money holding cash then invest it in financial products
- If you want the surest sign of the failure of current capitalism then this is it
- At the same time Scotland is crying out for investment
- To replace PFI
- To fund new infrastructure investment e.g. rail infrastructure
- To build new social housing
- To create the renewable energy infrastructure for the country
- To insulate existing housing stock
- Whatever you want to add to the list
- The question is how can that wall money that can't find a home end up invested in Scotland
- First it needs a policy
- To clear PFI
- To create investment opportunities
- Of any of the types noted
- To create a structure for investment
- Like an infrastructure bank
- Nationally
- Or regionally
- And then it needs a financing mechanism
- Like local authority bonds
- Or national bonds
- At low rates of interest
- Backed up by government guarantee
- And People's QE if necessary
- And some incentives / sticks
- Like a requirement that pension funds invest 20% of all their new member contributions in investments that deliver new jobs and technology within the UK
- And the reduction of ISA incentives for useless cash and share based investments that deliver not a penny of new investment into the economy
- And instead to have tax relief solely for new technology / green / job creation / social housing and infrastructure funds so that tax policy aligns with social need
- Plus local accountability for the funds invested in this way - and yes, that includes a role for councils
- And the backstop is People's QE
- Where, if need be, the government's buys the bonds issued by projects to ensure that they have sufficient support to achieve their goals
- We have done £435 billion of QE to bail out banks and inflate asset prices in the South East of England. No inflation followed.
- People's QE is the weapon left to deal with the next downturn.
- http://www.taxresearch.org.uk/
Blog/2015/03/12/how-green- infrastructure-quantitative- easing-would-work/
- The political assumptions in this
- I am assuming Brexit because I think we have to
- I am assuming that there is a broad cross party consensus on the need for investment in Scotland - even though I know there will be difference on the detail
- I am assuming that there is a willingness to create real economic powers for devolved and local government involvement in Scottish economic development
- I am assuming Scottish parties will be willing to work together on a New Deal for Scotland on the basis of the threat Brexit and the economic crash it will create will bring to you
- The political realities of this
- I know how massive my assumptions are
- But as someone who's not a Scot and not a party politician I'll say that this scale of vision is what the people of Scotland do, I am sure, expect of you
- I want Scotland to grasp its own economic future - devolved or independent - and whichever party is in government here or in Westminster - and I can't see how it is going to face the post Brexit world without a plan like this
- I'd suggest it falls to you to deliver it
- There is a need for a New Deal for Scotland
- I'd suggest that together you can make it happen
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I’ve got a fair dod of cash sitting in various accounts earning sweet all. I would be more than happy to put it into bonds, gilts or whatever in the Reserve Bank of Scotland even at a nominal/non-existant interest rates. I just need the ScotGov to create the the bank and ask for the money!
I will let them know
Aberdeen Labour Council issued a Bond to raise £130M, and introduced a clause saying if Scotland became Independent then the money would need to paid back in 6 months. This burden would fall on their own constituents.
i think your intelligent suggestions for financing will hit a brick wall of political stupidity and ignorance from many Councils.
“… brick wall of political stupidity and ignorance from many Councils…..”
In the first place you only need ONE to have the wit to see the possibilities. In this context I agree that one may be an over optimistic target.
Councils in general see themselves as parsimonious spenders of what they are given. The thought that they might actually generate income seems to be out of the box and out of the imaginative range. (IMSCO)*
*In My Somewhat Cynical Opinion
Good work, Richard. I’d put my cross in the box next to your box any day.
I got an extremely positive response today
I think I will be back in Scotland soon
…..and on gaining independence it will be possible to act upon much of your New Deal. Under devolution the SG lack many of the levers of political and economic power; after Brexit there is a strong possibility (see Lord Kerr today) that the devolution settlement will be emasculated; Labour and Tory in Scotland are British Nationalist parties who are creatures of the English Tory/Labour parties and have a visceral hatred of the SNP which will prevent the kind of co-operation required.
That said, it’s a clear, concise, comprehensive economic/social manifesto.
The idea about ISA incentives is a good one. Not just specifically, but generally and in principle.
Thanks
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33 trillion works out to be about 4000 per person. Is that really such a staggering figure? If anything it seems low to me. I like to keep enough in the bank to cover a year of bills and only then seek out riskier investment opportunities. I suspect that many people have similar amounts in cash or short-term deposits. Don’t banks then lend this money out, subject to reserve requirements?
You know that is a sum beyond the imagination of the vast majority in the world?
Do you have any clue about wealth distribution?
Do you also have any clue about how banking works and that deposits are not lent out?
Your comments are not just ill-informed, they show a staggering naivety
Bloody Hell, Graeme!
“I like to keep enough in the bank to cover a year of bills..”
I don’t have the figures but most people ( I mean the vast majority) would struggle to cover a month.
If your financial situation is due to a repeatable formula or system please tell how you got there. Because most people don’t know how to and would dearly love to join you in your comfort zone.
If you were just lucky have the grace to admit it.
That report has an interesting comment on the Eurozone:
Also, with regard to the emerging economies, which do not include Scotland, the report agrees with you about the need for more savings products:
And so local opprtunities have to be created
“Unlike a traditional high-street bank that uses deposits as the basis for its lending, Northern Rock had been relying for funding on an intense schedule of bond sales, securities issuance and short-term credit.” Patrick Jenkins, FT, 31/08/2017.
What chance does the ordinary Jo/Joanna have in trying to understand?
I am not sure he does
G Hewitt, found this somewhere
“Unlike a traditional high-street bank that uses deposits as the basis for its lending, Northern Rock ……Patrick Jenkin”
Hell’s bells he had been spokesman on economic and trade affairs !
You keep having to point out this is not how banks work. However this deposit and loan model is the traditional model of the Building Society isn’t it?
If so then presumably Patrick Jenkin and a lot of other, even less (theoretically) economically savvy, politicians had not the faintest idea how the implications of demutualisation of the mutuals would affect the financial sector?
It appears not….