Humza Yousaf is tackling economic problems that Winston Churchill raised a century ago – Stewart McDonald

The main Westminster political parties seem congenitally incapable of delivering good government and sustainable economic growth

Humza Yousaf is tackling economic problems that Winston Churchill raised a century ago – Stewart McDonald

Capitalism, one 19th-century observer noted, “has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.” It wasn’t David Ricardo or Vilfredo Pareto who said this. It was Karl Marx.

Even 200 years ago, capitalism’s most vociferous opponents could bring themselves to recognise the immense positive potential that free markets have brought to the world. Free markets are the most successful poverty alleviation mechanism in history, with almost one billion people lifted out of poverty in the 20 short years between 1990 and 2010 alone.

Yet even as the rising tide of economic growth lifted the fortunes of people across the world, it also has fuelled political polarisation and extremism by creating vast divides between the richest and poorest citizens and driven us so close to the brink of an irreversible climate crisis that the very question of our species’ long-term survival is now debated in the newspapers and on television.

US National Security Advisor Jake Sullivan recently addressed this head-on in an era-defining speech I have written about before in these pages. “There was one assumption at the heart of all [economic] policy,” he said. “We assumed that markets always allocate capital productively and efficiently – no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down.” We know now that this is not true.

Outsourcing responsibility to the market

At home, the painful effects of an untempered free market have been exacerbated by successive Labour and Conservative governments, which have tolerated, encouraged and sometimes even facilitated the creation of economically damaging private monopolies and rent-seeking behaviour. The UK economic model has been completely broken as a result, with the link between hard work and reward eroding further each day. Young people today, as they transfer half their income to a landlord their parents’ age each month, are shown explicitly that being born in the right place and time provides more reward than any vocation they could devote their life to.

I would say that something has gone badly wrong with the UK’s economic planning for this to be the case. But the problem, as the First Minister made clear in his recent speech at the University of Glasgow, is that there has not been any kind of viable long-term economic strategy for a long time, with successive UK Governments preferring instead to outsource that responsibility to the market.

But the powers of the Scottish Government to rectify this wrong, as the First Minister also highlighted, are severely constrained by the devolution settlement. Scotland’s economic potential is hobbled by Westminster. From the decision to withdraw from the European Union and leave the Single Market that holds almost half a billion consumers to the dogged and economically irrational pursuit of reduced immigration, Humza Yousaf’s conclusion that Westminster political interests will always over-ride Scottish economic interests is unarguably correct. As the First Minister also noted, Scotland has no macroeconomic powers, no control over migration, employment policy or competition policy, and only very limited borrowing powers for capital investment.

Holyrood not entirely powerless

This is, and will always be, the reason that Scotland needs independence. As the Conservatives, Labour and the Liberal Democrats have each taken their chance to demonstrate, a UK Government based in Westminster is congenitally incapable of delivering good government and sustainable economic growth for citizens across these islands. The ancient and adversarial model of politics practiced in Westminster has collided with the modern world and lost.

But the Scottish Government is not entirely powerless. It does have some limited powers to act to build a better economy in Scotland now and must show that it is willing to use them. The recent announcement of “fundamental” council tax reform, for example, was very welcome but it must be the first of many steps taken to create an economy with prosperity and fairness at its heart. I hope that the Scottish Government will seriously consider the suggestion put forward by the newly established, non-partisan think tank Future Economy Scotland to re-evaluate residential property values for taxation purposes and replace council tax with a progressive property tax calculated as a flat-rate, percentage tax on property values.

In the new spirit of 21st-century economic governance, they must also be willing to show more muscle to ensure that land and property across Scotland are used efficiently and fairly. This means continuing to push the Westminster government to finally act on shadowy Scottish limited partnerships and taking action themselves to end the scourge of absentee land ownership. From leafy Barnton to the old dockyard area around Leith, there is barely a corner outside the centre of Edinburgh where land has not been banked for sale in some far-off, more profitable year.

Years of mismanagement

A young firebrand by the name of Sir Winston Churchill addressed this problem over 100 years ago, in a speech given at the King’s Theatre in this very city. “Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains – all the while the landlord sits still,” Churchill said. “To not one of these improvements does the land monopolist contribute, and yet, by every one of them the value of his land is enhanced… The unearned increment on the land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done.”

The economic problems that we face, as Churchill’s speech makes clear, are not new. What is new is the emergence of governments increasingly willing to tackle them head-on and build an economy that works for everyone. The First Minister’s recent speech on industrial policy was a very welcome antidote to the years of economic mismanagement practiced by Westminster governments. It must only be the start.

Stewart McDonald is SNP MP for Glasgow South