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Economic advice: who needs it?

Douglas Fraser | 10:54 UK time, Saturday, 11 December 2010

There's too much anecdotal evidence of banks ramping up charges unreasonably on business borrowing for it to be wrong.

So says one who knows a thing or two about the banks' dark arts, but who now engages from the other side of the relationship.

Sir George Mathewson, one-time chief executive and then chairman of the Royal Bank of Scotland, was commenting on the debate about whether banks or smaller businesses are right about the level of lending.

He found common ground with Jim McColl of Clyde Blowers, in calling for the Office of Fair Trading to look at the dominance of Scotland's two big banks.

Both men conceded RBS and Lloyds Banking Group have good reason to rebuild their troubled balance sheets, but both could think of companies that have breached loan covenants, and find excessively high arrangement fees for re-negotiating, added to interest rates - according to Mr McColl - that can be three times higher than the previous facility.

Irish role model

The two men were together on Friday for the publication of the annual report of the Council of Economic Advisers (CEA), reflecting on how different things look from the time they were appointed to the task.

Back then, Ireland was the role model for a small European nation with its own tax and fiscal autonomy.

The latest report reflects that it hasn't quite turned out that way.

"The Irish experience illustrates both the opportunities and challenges available to small nations in the European economy and has been - and will continue to be - a useful benchmark for discussion," the report understates.

The early days were in 2007, when Alex Salmond was a freshly-minted First Minister, playing to his personal economic strength by getting together an impressive gathering of business and economic thinkers.

Helped by the calibre of Mathewson and McColl, and with two Nobel prize-winners on board, he showed himself significantly better connected and advised on the private sector than his predecessor.

Sex and pornography

Critics have since focussed on the considerable cost of their meetings and fine dining.

They are unsurprised to find that the Nationalist leader's personal appointees have been enthusiastic about increasing the powers of the Scottish Parliament, and doing so far beyond those recently proposed by the UK Government.

Council member Professor John Kay penned the most eye-catching criticism of Whitehall's devolution plans, comparing them with the difference between sex and pornography, in that it "looks like the real thing, but it isn't".

But is it fair for those critics to dismiss the CEA so glibly?

It's true that in providing a challenge function to the Scottish government, punches have been pulled.

After all, the council meets with the First Minister and others from the government.

They have disagreed on little, beyond nuclear power and immigration.

Members privately question whether it's been clear what it was there to do.

And looking at the Scottish government's responses to two previous CEA reports, you read the depressing effect of officialdom defensively pretending that it's already got an answer to everything the council suggests, as if it has little or nothing to learn.

That defensive syndrome ("we've got it sorted already - nothing to see here, move along please") seems to afflict every government - perfectly illustrated by transport minister Stewart Stevenson's problems this week in articulating a response to the deep frozen roads network.

Grim fiscal outlook

The council has, however, addressed some tricky issues, pushing gently but firmly against SNP ministers' resistance on university funding, forcing ministers to address the case for at least graduates contributing to the cost of their education.

The most recent report says higher education is "particularly vulnerable in the face of the grim fiscal outlook" on public spending and immigration curbs, requiring "wide-ranging policy re-appraisal within Scotland".

That's what Education Secretary Mike Russell has to set out in the next few days.

Sticking with education, the CEA has asked some searching questions of Scottish schooling.

Sir George's assessment is that the focus on class sizes has been misguided, that a lack of money is not the problem afflicting the performance of schools, and that teacher quality must remain an overarching focus, even in the face of obstacles from the profession and politics.

The answer so far has been "wait and see what the Curriculum for Excellence delivers".

We're still waiting.

The CEA chairman cites the council's most obvious success as tackling the shortcomings for business of the planning system.

Central government has upped its game, concludes the third annual report, but local government has much more to do. It needs incentives.

It seems unlikely, however, that one such incentive is to have planning as a spending line in John Swinney's draft budget that's taking one of the biggest cuts next year.

The CEA's sectoral focus has been on finance and on life sciences.

It's added weight to a report out this week from the Royal Society of Edinburgh calling for government to use its procurement power, as much as research funding and tax incentives, to help innovation in life sciences.

Finance has been been given extensive attention by others, given its acute challenges.

Less so life sciences. There are some meaty ideas in there, for instance about re-focussing on those areas with the best productivity prospects: agriculture, diagnostics, bio-manufacturing, for instance, meaning a steer away from mainstream pharmaceuticals.

There's more to be explored there in a future episode of The Ledger.

And there's more there where expert advice can inform the next Scottish government after May.

Alex Salmond sounds keen to keep the project going.

What about others who want his job?


  • Comment number 1.

    “Sex and Pornography”, Douglas, in my view and I'm sure many others, perhaps that theory could also be applied to BBC Scotland news, particularly in relation to Scottish politics and sometimes even weather ;) ”comparing them with the difference between sex and pornography, in that it "looks like the real thing, but it isn't".”

    But is it fair for those critics to be dismissed by the BBC so glibly?

  • Comment number 2.

    PS; I hope your not going to start talking about 'balls' next :) some of your friends might not approve, you might get away with it though, if you can convince them that you were really refering to how hard Paul Hegarty can kick one.

  • Comment number 3.

    Nothing is going to be allowed to rock the boat in the meantime. A precedent was definitely set by Gordon Brown when he refused to do anything to help the economy until after the election, whatever the cost. It looks like the same philosophy will be followed by the present regime in the hope of surviving intact as a governing body ; though this is of course preferable to Scotland being governed by the failed and incompetent Labour party. The punter can't win in Scotland.

  • Comment number 4.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 5.

    My innocuous post at 12.41 was removed because it 'broke the house rules'. What pray, would that rule be? I await with bated breath, the reason, but not holding it at the same time!!
    If that post breaks any BBC house rule, then its hardly worth the bother of reading Douglas Fraser's musings


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