Scots Independence Tour - Towards a Better Scotland

Towards a Better Scotland

The third in a series of three papers published by the Scottish National Party to explain the economic case for Independence. Return to other papers

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Introduction

The Scottish National Party's four-year economic programme - entitled Towards a Better Scotland - details our strategic ambition for the Scottish economy. It is a powerful illustration of what Scotland could achieve, freed from the constraints of Westminster control.

This is the third and final paper in the SNP's For The Good of Scotland series. In the first paper, the SNP demonstrated that Scotland pays her fair share - and more - within the United Kingdom. The second paper, commissioned by the Party from Mackay Consultants, detailed the economic benefits which would flow from the process of Independence itself, in terms of additional employment and wealth creation.

In this paper, we detail the fiscal policy changes which the SNP advocate for the first four years of Independence. We aim to improve the competitiveness of the Scottish economy, generate employment growth, boost social welfare, and deliver fair taxation, targeting assistance towards low and average paid workers, and giving practical assistance to the small company sector in particular.

The SNP's proposals in this document are offered with the aim of seeking consultation with the widest possible range of groups and interests in Scottish society. It is the SNP's aim to switch the focus of economic debate in Scotland away from how we fare as a regional outpost of the UK, and towards what we could achieve as an independent nation, with real power at home and the influence of a Member State in Europe.

Scotland is a wealthy country, with a large and varied resource base, a traditionally good education system, and an export perforrnance 30 per cent ahead of the rest of the UK. In terms of GDP per head, Scotland is the twenty-first richest country in the world - with a similar per capita gross national product as that of Sweden.

Independence will enable us to advance from our subordinate position within the UK, and generate a new prosperity for Scotland.

The SNP's vision, which can only be realised with the power of Independence, is of an economically-successful and socially-just Scotland - a Scotland whose wealth is put to the use of the people of the country, creating jobs, building houses, improving education and health services, and encouraging Scotland to look outwards to the world.

Towards a Better Scotland details our ideas about how an independent Scotland can make the nation's wealth work for all the people of Scotland. This document shows how we will all be better off with Independence.

Alex Salmond MP
National Convener
Scottish National Party

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Key Summary Points

This publication is the third and final paper in the SNP's For the Good of Scotland series, which has explained the economics of Scottish Independence.
It details the SNP's ideas for a distinctively Scottish economic strategy, with the aim of lifting the Scottish economy onto a higher plane of activity, boosting prosperity and social welfare.
The report costs the policy changes which the SNP are advocating for the first four years of an independent Scottish Parliament, in terms of additional revenue and expenditure compared to present tax and spending flows within the Union.
At a series of meetings of the SNP's Scottish Cabinet in recent months, the Party's economic policy programme has been distilled into the priorities identified for the first four years of Independence.
Our proposals form the basis for an extensive consultation exercise with key interests and groups throughout Scottish society, as we finalise our plans for the General Election.
The measures in this report have been analysed by Mackay Consultants, a leading economics and management consultancy in Scotland, using their model of the Scottish economy. We intend further to test our programme against the Edinburgh University capital accounting model, which is particularly sensitive to environmental sustainability.
The main findings are that the total employment impact would be 116,500 over four years, economic growth in Scodand would be 0.5 per cent higher per year than it is forecast to be within the Union, and that this could be achieved without leading to inflationary pressures.
The difference between the growth levels which Mackay Consultants calculate that the SNP's measures would generate for an independent Scotland, and their projected growth figures for Scotland within the UK, represents a cumulative £3 billion in Scottish gross domestic product (GDP) over the four years.
The sources identified for financing the measures are increased tax and reduced social security flows as a result of job creation, extra Corporation Tax generated by enhanced economic activity, additional North Sea revenues, defence savings, and the positive economic spin-off from establishing Scotland as an independent nation.

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A New Economic Strategy for Scotland

This is the third and final paper in the SNP's For the Good of Scotland series. The first two papers addressed the "static" and "transitional" aspects of the economics of Scottish Independence, and this details the SNP's "dynamic" programme, i.e. the policy changes that the SNP advocate within the context of an independent Scotland, and how they would affect the Scottish economy.

In producing this paper, the entire economic policy base of the Party has been distilled, and the priorities for the first four years of an independent Scottish Parliament selected and costed.

It is the SNP's intention for this paper to form the basis of the widest possible consultation with key interest groups in Scottish society. The ideas contained in it detail how we think Scottish economic and social priorities can best be delivered. We now intend to move to a consultative period in order to discuss and develop the detailed implementation of our programme with those groups and individuals who have in-depth experience in the areas concerned.

The SNP's contention is that the Scottish economy will never reach its full potential under the economic mismanagement of the Union, and that only Independence in Europe can deliver an economic strategy which is right for Scotland.

The aim of a distinctively Scottish economic strategy would be to build on the strengths and advantages of the Scottish economy. It is possible to identify six clear areas where a Scottish Government could lift Scottish economic performance:

A real Scottish economic strategy would ensure that our resources were used to give Scottish industry access to one of the cheapest energy bases in Europe, with all the competitive benefits that would follow. This could be done for at least the next fifty years by a combination of natural gas, hydro-power and low sulphur coal.

However, within the UK, subsidies to the CATS line have already ensured that a significant part of the central North Sea gas reservoir has headed direct to Teesside. Instead of enjoying a gas bonanza, Scotland has experienced a gas robbery.
A real Scottish economic strategy would ensure that Scotland's reputation in educational achievement was matched by real excellence in skills training. But skills shortages affect key sectors of the economy, while across Scotland the local enterprise network struggles with a flawed design. We need both to spend more on training, and to spend it better.
A real Scottish economic strategy would give Scottish exporters the financial backing required to maximise the enormous potential of marketing the Scottish identity internationally.

With 30 per cent stronger productivity in manufactured exports than the rest of the UK - and stronger even than Germany or Japan - Scotland is capable of sustaining an expansionary macroeconomic strategy, which would not run into the sands of a UK-style balance of payments brake on growth.

We should also be aiming to extend this success into the small and medium enterprise sector through a powerful Exports Unit, and broaden the base of our manufactured exports.
A real Scottish economic strategy would secure the value-added decision-making jobs from the industries in which we have a natural or competitive advantage. For example, the presence of the most powerful energy department in Europe in Aberdeen would bring thousands of private sector jobs to Scotland. And the downstream petrochemical facilities arising from gas condensate should also be in Scotland. In far too many of Scotland's key sectors, our resources generate quality jobs elsewhere.
A real Scottish economic strategy would give our economy on the north west of Europe the best physical infrastructure in the European Union. But instead, the UK directs transport subsidies towards the south east corner of England. For a country in which exports play such an important part, we have put up with a poor transport infrastructure for too long.
A real Scottish economic strategy would ensure housing provision which both conformed to human decency, and met the requirements of a modern, flexible economy.

Given that the Achilles heel of the south east of England economy is a housing market which has traditionally swallowed capital in periods of recovery, and dampened consumer confidence during recessions - and which has led to the present problem of negative equity - it would be perverse to follow that unusual model.

Housing support should be equal across the variety of ownership structures, but major investment is urgently needed in Scotland's neglected public housing stock, providing a major short-term boost to the economy, and a long-term gain in labour mobility.

These areas represent a real Scottish economic strategy - getting every drop of economic benefit from our natural resources, doing more of what we are already good at, and giving Scottish companies a competitive advantage: a downhill playing field, not one that slopes uphill to London.

Over much of our output, Scotland is already a competitive economy internationally. We need not fear increased international competition, provided we have a strategy to meet it, instead of economic policies imposed by Westminster which are oblivious of the Scottish interests.

Within a framework of sustainable development, the SNP are presenting a series of balanced initiatives which would deliver economic growth and social justice, while taking due account of environmental impact.

The principles which underpin Towards a Better Scotland are:

returning Scotland towards full employment; (see Note 1)
giving high priority to investment in education, training and skills, in order to ensure that people are able to develop their potential;
using public sector-led investment, where appropriate in partnership with the private sector, in order to create high-quality infrastructure;
developing an economic strategy which will ensure economic growth and equity, while at the same time decreasing environmental impact, and intensifying our exports focus;
providing reassurance to the public and business community that the SNP will create a stable and prosperous economy, and commiting the SNP to a more competitive corporate tax regime than that prevailing south of the Border, which is a major market and competitor for Scottish business.

In terms of the key groups and interests within Scottish society, there are six key themes which the SNP's strategy addresses:
1. Returning Scotland to full Employment
The proposals contained in this paper would lead to total job creation over four years of 116,500, involving a new economic development strategy, leadership in research and development, investment in housing and infrastructure, skills training for young people and adults, the creation of a Scottish Exports Unit, a doubling of the Scottish Tourist Board's marketing budget, and structural support for the fishing industry.
2. A Pensioners' Package
The SNP aspire to a standard of living, pensions and comfort for Scotland's pensioners in line with the high standards that are the norm in comparable European nations. We recognise that, given the position our pensioners have been reduced to by the Westminster Government this will take time. But we intend to make a radical start.

Note 1. Full employment is a shifting target - and the phenomenon of frictional unemployment will exist in any modern economy - but we would equate it with a 5 per cent level of real unemployment. We believe that, with the measures outlined in this programme, many of the capacity bottlenecks in the economy would be removed in the medium term. This would clear the way for an even lower level of unemployment, without introducing inflationary pressures.

In terms of the first four years of Independence, we are proposing specific incremental, improvements, including increases in the state pension of £3 for a single person and £5 for married couple; weekly Cold Climate Allowance payments during the winter months of £7.40 in southern Scotland and £11.15 in northern Scotland; and an end to mean-testing for the residential care of the elderly.
3. A Fresh Start for Scotland's Youth
Scotland's youth have been neglected under the Westminster system, and robbed of opportunities. Scotland's future depends upon the young, and it is our aim to restore a sense of optimism and hope by creating a National Apprenticeship Scheme, restoring student grants to their pre-loans level, and giving 16 and 17 year olds an automatic right to benefits.
4. A New Deal for Scottish Business
The SNP's ambition is to create an environment in which Scottish business flourishes. Our policies advocate using the taxation regime in order to give business in Scotland a competitive edge, and encourage employers to take on more people.

We would achieve these aims by cutting the tax on jobs - employers' National Insurance Contributions - by half-a-point over four years; and giving small businesses 100 per cent capital allowances, with 50 per cent allowances for larger companies.
5. Rebuilding Scotland's Housing
Since 1979, homelessness has spiralled, while council waiting lists have grown. Dampness and condensation are rife, and new build has declined dramatically. Scotland's housing urgently needs investment, which the SNP argue would be best achieved by transferring the local authority housing debt from local to central government. New money would enable an additional 11,200 new houses to be built, and an additional 10,000 existing homes to be refurbished
6. Renewing Scottish Education
Scotland has a tradition of high-quality education, but Tory ideological meddling is undermining and fragmenting a national system that has served Scotland well. The SNP's aim is to build on Scotland's integrated education system, and extend it to the pre-school sector.

In order to deliver these, the SNP propose the provision of local authority nursery education places for three and four year olds, and extra childcare places targeted at under-three year olds and after-school provision; additional resources to employ rnore teachers in Scottish schools; and an additional £80 million to be spent on the fabric of Scotland's schools.

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The Impact of the SNP's Programme

The SNP's economic programme has been analysed by a major Scottish economic consultancy - Mackay Consultants - who used their model of the Scottish economy in order to calculate its impact on the main economic indicators in Scotland. The analysis studied the effect of the SNP's proposals on employment growth, gross domestic product, and inflation:

          Employment Growth                

     Year 1	40,800
     Year 2	35,100
     Year 3	22,600
     Year 4	18,000

     TOTAL	116,500

According to Government figures, seasonally-adjusted unemployment in Scotland currently stands at just under 200,000, or 7.9 per cent of the workforce. Employment growth of the level forecast in this report, would lower unemployment on the official count to around 80,000, or 3.2 per cent. On this measure, full employment would be achieved.

However, the Government have changed the method of counting unemployment thirty times since 1979, and there seems little doubt that they underestimate the true extent of the joblessness problem. In the first Scottish Parliament, the SNP support moving to a method of counting unemployment which can command confidence, and it may well be the real level of Scottish unemployment means that real full employment would be achieved in the second term of a Scottish Parliament.

Employment growth under the policies proposed in this report would average 2,400 per month over four years, which compares with a reduction in seasonally-adjusted unemployment of 1,600 per month in Scotland over the past six months.

	 
         Gross Domestic Product	

1995 (est) £47,965 m
Year 1	  £49,395 m	3.0%
Year 2	  £50,926 m	3.1%
Year 3	  £52,199 m	2.5% 
Year 4	  £53,400 m	2.3%

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Over the four years, the average annual level of GDP growth in Scotland would be just over 0.5 per cent higher than Mackay Consultants' forecasts for Scottish growth within the Union, in the absence of these policy changes, giving a cumulative increase in growth over the four years of 11 per cent.

This represents £3 billion which would be gained to the Scottish economy through applying this programme, or alternatively lost because of our continued under- performance within the Union.

It is instructive to contrast the performances of Scotland and Norway in this regard. Since 1979, the Scottish economy has matched UK GDP growth of 2 per cent on average per year. In contrast, Norway - the only comparative hydrocarbon rich economy in northern Europe - has experienced growth of 2.9 per cent per year. This has meant that Norwegian GDP has grown by over 20 per cent more than Scottish and UK GDP have since 1979.

The following inflation figures show that - due to the considerable slack in the Scottish economy at the present time - the significant employment and GDP growth which our proposals would generate would not be achieved at the expense of an inflationary boom.

          Inflation

Year 1	3.2%
Year 2	4.0%
Year 3	3.3%
Year 4	3.0%

In terms of the United Kingdom's record on inflation - currently standing at 3.9 per cent - these figures are well within acceptable limits.

Other Aspects
There are, of course, other aspects of the SNP's Independence programme which are not directly related to this report, which is confined to our fiscal and budgetary intentions.

In particular, there are issues such as the minimum wage and monetary policies. We will be bringing forward proposals on these matters in the near future, which we will also wish to discuss with employers' organisations, trade unions and the wider community.

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Consulting with Scotland

In publishing this document, we have become the first opposition party to reveal our taxation and expenditure plans. In the run-up to the General Election, we want to discuss these plans directly with those concerned. We will now be taking this document to a wide range of organisations and individuals in order to receive their comments.

In place of the secretive and closed approach of Westminster, openness and consultation should be key principles which underpin the way in which economic strategy is devised and pursued in Scotland.

Governments of countries which are far more dynamic and successful than the UK- in the United States, Scandinavia and elsewhere in Europe - conduct their policy-making in this manner, and this is the process that the SNP advocate for an independent Scotland.

It is interesting to note that the Armstrong Committee on Budgetary Reform - established by the Institute of Fiscal Studies in 1978, and which reported in July 1980 - supported what they described as a "green Budget", where tax and spending proposals are published as a basis for public discussion and debate.

One example of the SNP's commitment to consultation will be our discussions with business groups, where we wish to enter into a dialogue over our proposals, and also seek views on other possible ways of achieving the same objectives.

The thrust of the SNP's business tax measures - involving taking half-a-point off employers' National Insurance Contributions, and reintroducing Capital Allowances - is to give Scottish business a competitive edge vis-a-vis business in the rest of the present UK. However, there will also be views on other matters which we have under close consideration, such as:

the relative merits of providing tax breaks for investors versus direct grant assistance;
the case for VAT relief for the tourist industry;
the arguments for straight Corporation Tax reduction as against our plan to reduce National Insurance.

It is only by engaging in such a dialogue that the best interests of Scotland can be identified, and subsequently implemented. One of Scotland's problems within the Union is that it is impossible to engage in a meaningful discussion with government, since the key decision makers are located in London, and the Scottish Office is little more than a telephone extension of Whitehall.

Scotland is a small and cohesive nation, and provides the ideal context for the kind of consultative, fast-moving decision-making process which is so much a part of the economic success of other small nations.

Increasingly, informed opinion is arguing that the best size for an economic unit is a country the size of Scotland (see, for example, "Why the minnows are making a splash " by Hamish McRae, The Independent, 2 November 1995).

The reasons for this are varied, and include such factors as small countries being far better able than large states to adapt speedily to changing circumstances and new opportunities; to build up specific areas of excellence, both globally and regionally, aided by falling costs of telecommunications; to benefit from the development of regional trading blocks, such as the European Union; and to be able to use a distinctive identity as a positive economic asset.

Just as the SNP wish to consult with business on our business proposals and views on the future of the Scottish economy, and with trade unions across the range of our policy programme, so we also wish to consult on relevant parts of this document with interest groups concerned with housing, health, education, social policy and other matters.

In publishing this document as a basis for consultation, it is the SNP's aim to involve all of Scotland in the process of Independence, so that all of Scotland can travel Towards a Better Scotland together.

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TOWARDS A BETTER SCOTLAND
ADDITIONAL INCOME AND EXPENDITURE MEASURES

PART ONE - ENTERPRISE & EMPLOYMENT

                                      Estimated Cost/Yield (£ million)

				Year1   Year2  Year3  Year4   Total
1. Industrial Strategy

Economic Development Fund	60	60	60	60	240
Research & Development		60	60	60	60	240
Defence Diversification		25	25	25	25	100
Export Promotion		25	25	25	25	100
Tourism				3	5	7	10	25
Fishing				5	5	5	5	20


2. Infrastructure
 
Housing				95	189	283	378	945
Infrastructure Projects		100	125	150	150	525

3. Education and Training

Pre-school Education		26	27	56	85	194
Childcare			7	14	21	28	70
Primary & Secondary 
Education			20	20	20	20	80
National Apprenticeship 
Scheme & Adult Training		70	70	70	70	280

4. Scottish Lottery		30	30	30	30	120



SUB-TOTAL			526	655	812	946	2,939

EXPLANATORY NOTES TO ENTERPRISE & EMPLOYMENT MEASURES

1. Industrial Strategy

* Economic Development Fund This would cover funding for investment in priority projects in the Scottish economy. Projects would be for industrial expansion, modernisation, agricultural diversification, and the introduction of new technologies, such as clean production systems, as well as for industrial relocation.

This Fund is in addition to the Scottish Enterprise budget for investment in enterprise, which (including enterprise training) stands at £165 million in 1995/96 (Serving Scotland's Needs, The Scottish Office, The Government's Expenditure Plans 1995/96 to 1997/ 98).

Also included in this Fund is the reservation of sufficient funds in order to restore Railtrack's assets in Scotland to full public ownership, should the Government privatise it in advance of the General Election. Assuming that the Government retain a 49 per cent stake, we estimate that a maximum figure to restore the rest to public ownership would be £75 million.

The SNP have two further proposals regarding public ownership. First, the Private Finance Initiative on the Skye Bridge has deeply antagonised a rural community, who rightly resent having to pay high tolls on a road which is vital in the life of the local area. The SNP propose to bring the bridge fully into the public sector, and would set a fair toll, comparable with other publicly-funded bridges in Scotland. Pending the availability of further financial information, we would propose allocating £15 million for this purpose.

Second, there is growing evidence that the British Gas-run Transco is not prepared to operate the pipeline network in Scotland in the public interest, with landing charges for Scottish terminals which can be up to fourteen times those south of the Border. Clearly, we cannot allow the situation to continue where Scotland's vital natural resources are not value-added in Scotland because of a discriminatory pricing policy.

If it is not possible to reach agreement on a level playing field for gas companies wishing to supply the Scottish market, or to export through landward pipelines south of the Border and to mainland Europe, then the SNP are prepared to take a public initiative in order to protect that strategic interest.

By establishing priority criteria, SNP policy is to gradually restore to public control and ownership key sectors that have been or will be privatised by the Tories. Within a priority programme, we have set out in this document what can be afforded within the first four years. For the other utilities, we propose turning to regulation as the best means of protecting the public interest, and will judge the success of that policy before making any further initiative.

As we indicate in this document, we are prepared to regulate for the abolition of standing charges for the pensioner community, which are levied by companies supplying gas, electricity and telephone communications, and we will be publishing further regulatory suggestions in due course.

We believe that this specific proposal is far better than implementing a "windfall tax" on the utilities, since it directly benefits a group in society who are particularly adversely affected by standing charges due to pensioners' relatively low consumption). It directly relates to the activities of the utilities themselves, thus ensuring transparency in the impact of policy decisions. And, of course, it is a continuing commitment, not a once-and-for-all windfall.

* Research & Development The SNP's Research and Development Fund is intended to be geared towards higher education, science and engineering, healthcare and biotechnology, nanotechnology, the environment and energy, transport, and food and agriculture. The Programme is designed to develop a sound Scottish base in high value-added goods.

Specific projects include a contribution of £50 million towards the likely £100 million cost of establishing a Highlands & Islands University, and £40 million for alternative energy research activities. Grants and development support for new technology applications would also be a priority.

* Defence Diversification Scotland requires substantial naval base and dockyard facilities, in order to protect our interests in the North Sea and the Atlantic. Therefore, the restoration of the Rosyth Naval Base would be an essential measure for an independent Scotland.

However, in the post-Cold War world, a Vefence Diversification Fund is also vital, which we propose would be financed by savings in the defence budget. The SNP propose such a Fund until such time as the areas of the Scottish economy adversely affected by the end of the Cold War attain full employment.

Because of the imbalance in UK defence expenditure in favour of the south of England, an independent Scotland would be able to cut Scots' current defence commitments in financial terms with no net effect on jobs.

Scotland does not get anything like her fair share of defence spending. One-third of the defence budget is spent on equipment, of which Scotland gets just 7 per cent. It is possible to allocate just under three-quarters of the total defence budget (£17,265 million in 1992/93 out of £23,762) on a "regional" basis. This shows Scotland getting less than 8 per cent (House of Commons Library, Social and General Statistics Section, ref: 94/7/99SG/MN, 21 July 1994). If this figure is applied to the entire defence budget for 1995/96, it shows that £1.7 billion was spent on defence in Scotland, whereas a per capita share would be £1.9 billion - a difference of £200 million.

* Export Promotion The SNP propose the creation of a Scottish Exports Unit, to operate in a similar fashion to the highly successful Dutch Foreign Trade Agency. The Exports Unit is designed to supersede Scottish Trade International. Through generic advertising and promotion, the Exports Unit would concentrate on boosting sales of Scottish goods and services. It would also undertake the role of an enabling agency for firms which do not yet export any of their produce.

* Tourism The SNP aim to double the budget of the Scottish Tourist Board for advertising and promotion over a four year period. In 1993/94, spending on advertising, promotion and other operating costs was £9.5 million (Scottish Tourist Board Twenty Fifth Annual Report, 1993/94).

It would be the SNP's intention to phase in an extra £10 million over four years, as a major step towards Scotland achieving her full potential in the international tourism industry, with the specific target of doubling the number of visitors to Scotland over the planning period.

* Fishing Scotland used to have the most modern fishing fleets in Europe, but now we have a rapidly ageing fleet. There used to be dozens of boatyards, but now there are just five members left of the boatbuilding association - and only two that are actually building boats. Thus, skill levels in this industry have now reached critical level.

The additional £5 million per year - on top of the existing decommissioning scheme - is for a "scrap and build" policy, allowing old boats to be scrapped and replaced with new boats, thus boosting work for boatyards. It could also allow decommissioned boats to be converted to other useful purposes.

An independent Scotland would develop proper structural support for the Scottish fishing fleet, and secure our fair share of European funding. Due to the Government's failure to develop a decommissioning scheme in the late 1980s, the UK received only 2.8 per cent of European structural aid for fishing between 1987 and 1993. Denmark received over three times the UK figure, and Spain ten times. Thus, the expenditure proposed would be likely to attract substantiai additional European funding.

2. Infrastructure

* Housing The SNP policy is to transfer the capital housing debt from local authorities to central government, thus freeing up substantial resources for investment in housing (including new build) and tackling homelessness.

The capital housing debt as at 1 April 1495 was £3.9 billion. Overall loan charges in 1995/96 are estimated at £505.1 million. Rental income is estimated at £941.1 million, which means that over half of rental income is being used to service debt (Council House Income and Expenditure 1992/93 to 1995/96, The Scottish Office Statistical Bulletin, Housing Series, July 1995).

Over the first four years of an independent Parliament, the SNP advocate transferring three-quarters of the debt, with the remainder being transferred in a second parliament.

In terms of the capital costs of housing, this would enable an additional 11,200 low-cost rented homes to be built, 10,000 empty homes to be returned to use, and an additional £250 million to be targeted at tackling dampness and condensation, disrepair, and general improvements including repair grants.

The extra funds released would be available to local authorities to be used by them according to plans to be agreed in partnership with Housing Associations, and other actors in the housing field. The SNP aim is to have balanced system of housing tenure, and we will be bringing forward further proposals in this regard in due course.

* Infrastructure Projects The SNP propose an increase of £100 million per annum for spending on specific infrastructure projects, rising to £150 million by the end of the four year period.

Specific projects which the SNP advocate are £80 million allocated for the repair of school buildings, and support for the electrification of the East Coast rail line in Scotland. Other initiatives would be focussed on developing the public and transport infrastructure, strengthening environmental management facilities, and undertaking priority road renewal work.

Depending on the nature of the projects, they would be financed either by direct capital funding, or by allocating additional borrowing consent to the appropriate bodies.

3. Education and Training

* Pre-school Education The SNP have a long-standing commitment to the provision of education and appropriate childcare services for the pre-fives, in order to bring Scotland into line with our neighbours in mainland Europe. We are committed to providing nursery education for all three and four year olds whose parents want this provision. Additionally, we recognise that many people with young families, particularly women, need childcare facilities in order to be in a position to work.

In terms of the extra revenue costs required, the SNP's budget would ensure a nursery school place within four years for all three and four year olds whose parents wish this provision.

Additional spending of some £116 million per annum in Scotland is needed to extend nursery education to all three and four year olds (House of Commons Library, Social and General Statistics Section, ref: 95/1/166/SG/BM, 23 January 1995). Netted out from this is the £3 million pilot voucher scheme which will take effect in 1996/ 97, and the £31 million per annum which will be the full cost of the voucher scheme in subsequent years.

* Childcare Services The SNP believe that nursery education and childcare services should become the responsibility of local authorities, with co-ordination and co-operation sought among employers and the voluntary sector. We endorse the view that the education element of pre-five care should be supervised and staffed by trained teachers, but we also appreciate the benefits of the delivery of childcare services through integrated provision.

In order to increase the availability of day care places for under-four year olds, and increase the number of out-of-school places, the SNP advocate a funding increase to 50 per cent above current levels over a four year period (House of Commons Library, Social and General Statistics Section ref: 95/1/266/SG/BCM, 6 February 1995).

* Education Services The SNP would increase the level of central government support for local authorities in order to allow them to employ approximately 700 more teachers, with the necessary additional administrative requirements of local government also provided for. We believe that increased staffing levels should help to provide better support for children with special needs within mainstream schools.

In terms of tertiary education, we are committed to providing assistance for the establishment of a Highlands & Islands University. In addition, the higher education sector would have access to the Economic Development and R&D funds detailed in this document, and to the facilities of the Exports Unit.

With the fast development of new information technologies educational services are now highly marketable commodities in the global market. With the proper backing, the tertiary education sector would be able to market Scottish skills internationally.

* National Apprenticeship Scheme and Adult Training The SNP policy is for a National Apprenticeship Scheme, which would encourage employers to take on school leavers and train them for a recognised vocational qualification, by providing employers with both a training and employment subsidy.

For adult training, the SNP propose a Scottish Integrated Training and Employment Grant Scheme (SITEGS), to take over from Training for Work and related programmes. SITEGS would provide a subsidy of up to two-thirds of a new employee's wages for an agreed duration of training, provided that a full-time job was made available at the end of the training period.

The SNP's expenditure commitment is for an additional £70 million on top of the Scottish Enterprise youth and adult training budgets of £171 million in 1995/ 96 (Serving Scotland's Needs, The Scottish Office, The Government's Expenditure Plans 1995/96 to 1997/ 98). Included in this is an additional £25 million for the benefits element of adult training, in order to increase the payments for trainees.

Such funding would enable Scotland to meet both the qualitative and quantitative elements of training need, providing around 30,000 adult places and 40,000 youth places.

4. Additional Lottery Projects

The proportion of UK lottery ticket sales which go to the Treasury is 12 per cent. Based upon sales figures, around £330 million is likely to be raised for the Treasury in a full year, of which the Scottish share is some £30 million.

The SNP proposal is to forego these tax receipts as part of a Scottish National Lottery - a "Scot Lot". These additional funds would be available for enhanced revenue support as well as capital funding for the arts in Scotland, including assistance with the establishment and running of a Scottish National Theatre, the only mainstream cultural institution which Scotland currently lacks (House of Commons Library, Social and General Statistics Section, ref: g5/1/190/SG/BM, 27 January 1995).

5. The Arts

The SNP view the arts as an important part of Scotland's economic as well as cultural life. We are committed to emulating the example of Ireland (under Section 35 of their Finance Act) and providing tax breaks for film-making in Scotland. Since this measure would attract activity to Scotland which would not otherwise come, it carries no significant budgetary implications.

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PART 2 - SOCIAL JUSTICE & WELFARE REFORM

                                Estimated Cost/Yield (£ million)

                                       Year1   Year2   Year3   Year4   Total
1. Benefits

Child Benefit (£12 for every child)	35	70	105	140	350
16 & 17 Year Olds (benefit restored)	20	15	10	5	50
Student Maintenance (pre-loan levels)	90	90	90	90	360
Retirement Pension (£3+£5 increase)	110	110	110	110	440
Cold Climate Allowance			170	170	170	170	680

2. Health				65	65	65	65	260



SUB-TOTAL				490	520	550	580	2,140

EXPLANATORY NOTES TO SOCIAL JUSTICE & WELFARE REFORM MEASURES

1. Benefits

* Child Benefit In Scotland, Child Benefit is paid out for over one million children, and is set at £10.40 per week for the first child, and £8.45 per week for subsequent children. The SNP proposal is to increase Child Benefit to £12 for every child (in terms of today's prices), which we would achieve over a four year period. The annual cost in year four would be £140 million (House of Commons Library, Social and General Statistics Section, ref: 95/6/176/SG/RJC, 27June 1995).

* 16 and 17 Year Olds The SNP would immediately restore full benefit entitlement to 16 and 17 year olds in Scotland, at an initial annual cost of £20 million (House of Commons Library, Social and General Statistics Section, ref: 95/1/164/SG/RJC). Owing to the impact of job creation and enhanced training provision, this sum would be expected to decrease rapidly in a four year period.

* Student Maintenance This expenditure commitment provides for the restoration of benefit entitlement to students - estimated at £20 million - and also restores the level of the grant to its real 1990 level, i.e. the year before student loans were introduced.

The level of the "elsewhere grant" would thus be £2,630 per annum, instead of average maintenance payments currently of something over £1,500. The SNP are committed to phasing out Student Loans and returning to a system of index-linked grants (House of Commons Library, Social and General Statistics Section, ref: 95/1/165/SG/AC, 24 January 1995).

* Retirement Pension The SNP proposal is to increase the Retirement Pension for a single person by £3 per week, and for a married couple by £5 per week. This would move pension levels to £62.10 for a single person, and to £99.40 for a couple (House of Commons Library, Social and General Statistics Section, ref: 95/6/175/SG/RJC, 27June 1995).

* Cold Climate Allowance The level of Cold Climate Allowance is based upon the service charge for fuel included in Housing Benefit. This is currently set at £12.15 per week. On a weekly basis, the SNP's allowance represents 20 per cent of this level in central and southern Scotland, and 30 per cent in northern Scotland, including the islands communities.

However, rather than make the payments every week of the year, it is proposed to concentrate them in the seventeen weeks frorn December to March inclusive, in order to give the greatest benefit to recipients when they most need it.

In central and southern Scotland, the Cold Climate Allowance would thus be £7.40 per week, and £11.15 per week in northern Scotland. This would be paid automatically to households in receipt of the Retirement Pension, Income Support, Family Credit or Housing Benefit (House of Commons Library, Social and General Statistics Section, ref: 95/1/16/SG/RJC, 12January 1995).

2. Health

The SNP's priority for additional expenditure on health is abolishing means testing for the residential care of the elderly. At present, the elderly are means tested for their care - with assets of above £8,000 taken into account - because of a political decision to reduce the number of long-term National Health Service beds.

Our investigations show that the cost of employment of staff to means test the elderly is 5 per cent of the total cost of community care of the elderly. When the charges are broken down, 66 per cent of those who are means tested pay the minimal charge of about £45 per week. We believe that this "hotel charge" is acceptable, and is usually recovered by handing over the pension. Thirty per cent of the elderly contribute part payment, and 5 per cent pay the full cost of residential care.

We estimate that the total cost of abandoning all but the "hotel" or minimal charge in Scotland would be £45 million per annum.

The SNP also propose restoring to the health service money which was removed as a result of the cut in the Barnett Formula in 1992. Prior to that time, Scotland received 11.76 per cent of any changes to health expenditure in England, whereas now the formula stands at 10.66 per cent - exactly equal to the Scottish ratio of England's population. It was this change which was instrumental in the recent difficulties in Scotland over meeting the 3 per cent pay award for nursing staff.

In 1993/94, the most recent year for which outturn expenditure figures are available, spending on health and personal social services in England increased by £1,746 million. While the old Barnett Formula would allocate Scotland an extra £205 million, the new formula would only automatically provide for £186 million. Increasing this in order to maintain the relative level of health spending in Scotland could only be achieved at the sacrifice of another service. Therefore, the SNP propose additional expenditure on the health service of £20 million per annum in order to compensate for the Barnett cut.

Additional resources for the health services would be generated by reversing the internal market, which has seen administrative costs soaring. In the early 1980s, administration represented 4-5 per cent of the total health budget, whereas now it is running at 10-11 per cent.

Scotland has a tradition of excellence in health care, and Scottish rnedical skills would be an integral part of the expanded international aid programme which the SNP envisage for Scotland.

There is also tremendous potential to market overseas the skills and know-how of the health service in Scotland - assisting health service development overseas and boosting Scotland's public NHS - as opposed to the attraction of "white elephant" projects, such as the ill-starred HCI private hospital at Clydebank, which do neither.

3. Standing Charges

It would also be the SNP's intention for a Scottish Parliament to regulate for the removal of standing charges from the gas, electricity and telecom utilities from pensioners, with the costs being met from the profits of the companies concerned.

This would cost the utilities £100 million per annum in total, encompassing £55 million for telephones, £25 million for electricity, and £18 million for gas (House of Commons Library, Social and General Statistics Section, ref: 95/11/21SG/GV, 7 November 1995).

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PART THREE - FAIR TAXATION

                                Estimated Cost/Yield (£ million)

                                Year1   Year2   Year3   Year4   Total

1. Income Tax

Lower 20% Rate to 15%		90	135	180	225	630
Expand Basic Rate Limit		78	78	78	78	312

2. National Insurance

Abolish Ceiling for
 Employees' Contributions	(304)	(304)	(304)	(304)	(1,216)
Reduce Employers' Contributions
 by half-a-point over 4 years	38	75	112	150	375

3. Capital Allowances

For investment up 
to £50,000 pa			20	20	20	20	80

4. Value Added Tax

Cut VAT on Fuel to 5%		52	52	52	52	208

5. Tobacco Duties

Increase by 15%			(121)	(121)	(121)	(121)	(484)

6. Alcohol Duties

Reduce Spirits Duty by 10%	13	13	13	13	52



SUB-TOTAL			(134)	(52)	30	113	(43)

PART FOUR - INTERNATIONAL DEVELOPMENT

                                Estimated Cost/Yield (£ million)

                                    Year1   Year2   Year3   Year4   Total


1. 0.7% of GNP for Overseas Aid		50	100	150	200	500

EXPLANATORY NOTES TO INTERNATIONAL DEVELOPMENT MEASURE

1. Overseas Aid

The UK's overseas aid budget was planned to be £1,719 million in 1996/ 97, of which the Scottish share would be £150 million. The UK gives 0.30 per cent of GNP in overseas aid. Thus, the additional expenditure required in Scotland to meet the UN target of 0.7 per cent would be £200 million.

Spreading this substantial increase over four years would involve £50 million in year one, rising to the full £200 million by year four (Foreign & Commonwealth Office, Departmental Report 1995, The Government's Expenditure Plans 1995/96 to 1997/98).

In such a radically-expanded overseas aid budget - which would begin to reach the levels of assistance achieved by our Scandinavian neighbours - there would be an important role for the traditions of excellence and skills which have been built up in Scotland's public services, particularly health and education, and the expertise we have in the water industry.

Only with Independence can Scotland look out towards the world, and make a positive contribution to the wider international community.

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PART FIVE - THE COST OF THE SCOTTISH BUDGET MEASURES

£ million	                        Year1   Year2   Year3   Year4   Total



1. Enterprise & Employment		526	655	812	946	2,939
2. Social Justice & Welfare Reform	490	520	550	580	2,140
3. Fair Taxation			(134)	(52)	30	113	(43)
4. International Development		50	100	150	200	500



TOTAL					932	1,223	1,542	1,839	5,536

PART SIX - PAYING FOR THE SCOTTISH BUDGET MEASURES

£ million

1. Altered Tax & Social Security	367	683	886	1,048	2,984
2. Additional North Sea Revenues	400	400	400	400	1,600
3. Additional Corporation Tax		26	52	78	104	260
4. Defence Savings			63	63	63	63	252   
5. Independence Impact			265	287	310	332	1,194


TOTAL					1,121	1,485	1,737	1,947	6,290

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EXPLANATORY NOTES TO PAYING FOR THE SCOTTISH BUDGET MEASURES

1. Altered Tax & Social Security Flows

The Mackay Consultants' analysis of the SNP's economic programme, using their model of the Scottish economy, shows that 116,500 jobs would be created directly and indirectly over the four years of the programme.

The analysis further shows that the impact of employment growth would be phased in over the four years, with 40,800 jobs created in year one (both direct and indirect), 35,100 in year two, 22,600 in year three, and 18,000 in year four.

Each unemployed worker costs the Exchequer over £9,000 per year in lost taxes and unemployment-related benefits (A Price Worth Paying?, David Piachaud, TUC/Employment Policy Institute Full Employment Conference, July 1994).

Thus, in full year terms, the gross cost of the programme would be reduced by £367 million in year one, by £683 million in year two (the cumulative effect of both years), by £886 million in year three (the cumulative effect of three years), and by £1,048 million in year four (the cumulative effect of four years).

In practice, there would obviously be a lagging effect in terms of additional revenue, although this would be a diminishing factor over the four years. However, there would also be a lagging effect in terms of the additional expenditure detailed, but the purpose of this document is to provide the illustrative impact of a four year economic programme. In any event, the estimates allow for a significant degree of comfort, in terms of the substantial surplus which the programme would generate over the four years.

2. Additional North Sea Revenues

Domestic oil production has increased substantially in recent years. Apart from the previous peak in 1985, annual output in 1995 is likely to set a new record, with a further increase in 1996. Government revenues should continue to increase over the next few years.

The last UK Budget statement forecast total North Sea revenues for 1995/96 of £2.2 billion. More recently, UBS Global Research published a forecast of £2.3 billion for 1995/96. From 1996/97 through to the end of the century, the UBS forecast is for total North Sea revenues of £2.7 billion per annum - £400 million above current, i.e. 1995/96, levels (UK Economic Forecasts, UBS Global Research, August 1995).

Taking 90 per cent of the UK North Sea revenue figures for Scotland - based on the principle of equidistance, contained in the 1958 Geneva Continental Shelf Convention, which has determined national boundaries in the North Sea - gives forecast additional revenues for Scotland of the same £400 million per annum.

3. Additional non-oil Corporation Tax

As well as boosting employment and increasing direct and indirect taxation - detailed above - enhanced economic activity will obviously boost Corporation Tax receipts. There is clearly a relationship between the rate of economic growth and the change in Corporation Tax receipts.

From 1979/80 to 1994/95, the annual average increase in UK Corporation Tax receipts was 4.3 per cent, while average annual GDP growth was 1.8 per cent (House of Commons Library, Economic Policy and Statistics Section, ref: 95/8/31/EP/SCW, 11 August 1995).

This suggests that each percentage point in GDP growth is likely to yield an increase in Corporation Tax of approximately 2.4 per cent. In 1995/ 96, Corporation Tax receipts in Scotland are some £2.2 billion.

On the basis of Mackay Consultants' analysis of the SNP's programme, GDP growth in year one would be 3.0 per cent, 3.1 per cent in year two, 2.5 per cent in year three, and 2.3 per cent in year four.

In the absence of the measures contained in this report, Mackay Consultants expect GDP growth of 2.5 per cent, 2.2 per cent, 2.0 per cent, and 2.0 per cent over the next four years.

Thus, on average, the SNP's programme would lead to GDP growth in Scotland in each of the four years of just over 0.5 per cent above the level it would otherwise be within the UK. On this basis, a cumulative £26 million in additional Corporation Tax receipts per annum would be generated.

4. Defence Savings

Except for Greece and Turkey, UK defence expenditure accounts for a higher proportion of GDP than any other NATO country in Europe.

Hence, an independent Scotland could make significant savings in defence, which - because of the imbalance in spending in favour of the south of England - would have no net effect on jobs in Scotland. As detailed above, the gap between the pro-rata share of the UK defence expenditure in Scotland and the actual expenditure is some £200 million in 1995/96.

A key element of SNP defence savings would involve the Trident Programme. Based upon official figures, our estimate of the capital cost of Trident over the next four years is £1,418 million, of which the Scottish share is £125 million. In annualised terms, the capital savings to Scotland of withdrawing from the Trident Programme would thus be £31 million per annum, over the next four years (Progress of the Trident Programme, House of Commons Defence Committee, July 1995).

Second, while the defence personnel of an independent Scotland would have a national role in United Nations operations, Scotland would not be involved in maintaining the UK's overseas garrisons, which would also generate savings. The UK spent £361.5 million on its commitments to overseas garrisons in 1995/96 (involving Belize, the Falkland Islands, Gibraltar, Hong Kong and Cyprus). A pro-rata Scottish share of this is £32 million per annum (UK Defence Statistics 1995, Ministry of Defence).

Taken together, savings generated for Scotland by withdrawing from the Trident Programme and spending on the UK's overseas garrisons would be £63 million per annum, over the next four years.

5. Current Budget Surplus and Impact of Transition to Independence

In the first two reports in this series, the position of Scotland within the Union and the transitional benefits of Scotland becoming independent were analysed.

In Paying Our Fair Share - and More !, the SNP calculated a fiscal surplus in Scotland relative to the UK as a whole of £200 million for 1995/96. Assuming that this relative position did not deteriorate - and all of the empirical evidence suggests that it will strengthen - this allows Scotland to allocate an additional £200 million expenditure per annum, while remaining on the UK's PSBR path.

In Counting the Benefits of Independence, Mackay Consultants forecast that the process of Scotland becoming independent would of itself generate 4,550 new jobs and additional GDP of £185 million per year.

Increased private sector activity, as a result of new functions and activities located in an independent Scotland, would boost these figures to up to 11,500 jobs and £375 million in additional GDP. With the positive measures for business detailed in this programme, we would expect these higher figures to be realised by year four.

In other words, we would expect the Independence process to boost GDP by the lower figure in year one, rising to the higher figure by year four. Given that the tax/GDP ratio stands at 35.25 per cent, this would boost tax revenues by a further £65 million in year one, £87 million in year two, £110 million in year three, and £132 million in year four.

In other words, the static and transitional benefits of Independence total œ265 million in year one, £287 million in year two, £310 million in year three, and £332 rnillion in year four.

Top Index

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Towards a Better Scotland

Introduction

Key Summary Points

A New Economic Strategy for Scotland

1. Returning Scotland to full Employment

2. A Pensioners' Package

3. A Fresh Start for Scotland's Youth

4. A New Deal for Scottish Business

5. Rebuilding Scotland's Housing

6. Renewing Scottish Education