We will hit our economic targets – oops, we've hit one of them already
The headline target represents a big leap. It is for Scottish economic growth to match British growth rates by 2011, and to match the growth rates of small independent EU countries by 2017. On the trends of the past decade, this implies that Scottish annual growth needs to be 0.5 per cent faster to reach the 2011 target, and a full 1 per cent faster to reach the 2017 target.
I have previously noted that when the British economy is slowing, as appears certain in 2008, the Scottish economy tends to be less badly hit. So a closing of the gap next year is probable. None the less, the overall targets are still impressive.
Beneath this headline target, however, are six others, dealing with productivity, employment, population growth, solidarity, cohesion and sustainability. And these targets range from improbably ambitious to downright pedestrian.
I'll concentrate on two goals. First, the productivity target. This has changed from the pre-election goal, which was to see Scotland ranked amongst "the top 15 most competitive countries in the world". Now the goal is "to rank in the top quartile for productivity amongst our key trading partners in the OECD by 2017".
Beyond saying that the change had come after internal discussion of what best fitted the government's overall priorities, John Swinney, finance and sustainable growth strategy, was remarkably unforthcoming about the reason for this and other changes when quizzed on the matter at a parliamentary committee. I presume that the reason is that measuring competitiveness involves subjective judgments about the variables to use whereas productivity – defined as gross domestic product (GDP) per hour worked – is fairly standard.
It is a very ambitious target. In 2005, Scotland's productivity was the 14th best out of the 30 OECD countries, or at the bottom of the second quartile. Getting into the top quartile involves not only overtaking British productivity, which is 2.5 per cent better than Scotland's, but at least matching Germany's record, which is about 15 per cent better than Scotland's.
I am not at all sure how that can be done. The Government can do its bit by making the public sector more efficient. But since that is less than a quarter of output, the private sector, over whose productivity the Government has little influence except for transport and skills investment, will have to make the bulk of the efficiency gain.
Second, the employment target. Pre-election, the SNP talked about increasing the number of Scots in work from 2.45 million to 2.65m and aiming for about 80 per cent of the working age population to be in work or training. The goal now is: "To maintain our position on labour market participation as the top performing country in the UK and close the gap with the top 5 OECD countries by 2017."
The reason for the difference in aspirations is that the employment rate – the proportion of working age people in a job or training – is actually a big Scottish success story. In mid-2007, Scotland's employment rate, on the measure used by the OECD, had reached 77.2 per cent, nearly 3 per cent ahead of the rate in England, outstripping Wales by nearly 5 per cent and Northern Ireland by nearly 7 per cent.
Between the time the SNP wrote their original aspiration and now, an extra 100,000 people went into work, causing the total number in work to rise to 2.56m. Interestingly, only about a quarter of these seem to have come off the dole queues, showing that pushing up the employment rate does not reduce the jobless rate by the same amount.
Nevertheless, in December 2007, National Statistics said that Scotland had an employment rate of 76.8 per cent. This is lower than the OECD rate, because the OECD excludes women aged 60-64 from its workforce definition. So using the OECD definition, the Scottish employment rate looks to have risen to about 77.5 per cent.
How does that compare with other OECD countries? We won't know for sure until later this year when the OECD figures are published. But if you look at the last available statistics, for 2006 when Scotland was in ninth place with an employment rate of 72.2 per cent, you find that the fifth best country was New Zealand with an employment rate of 75.2 per cent, more than 2 percentage points below the current Scottish rate.
New Zealand (and the other countries in the top five – Iceland, Switzerland, Denmark, Norway) may also have improved their employment rate, but there still seems to be an extremely good chance that Scotland will get into the top five.
The seems a remarkably easy hit for our self-proclaimed ambitious Government. What's the reason? The cynical explanation is that Salmond does not want to face the 2011 election having missed all his economic targets. And getting a couple into the bag after a year or so means he can brag away about his administration's economic prowess, so prolonging the dewy-eyed admiration he seems to be getting from the business community.
A less cynical explanation is that it is a piece of national psychological management. If you know that you face a hard job convincing people that they can raise their game by 50 per cent, a good ploy is to set easily attainable intermediate goals. Then when these are achieved, it becomes easier to convince them that the apparently impossible is in fact possible.
Either way, it still seems odd that the Government should have set its jobs sights so low.
Happy New Year to all. Comments, as usual, welcomed at: [email protected]