Sturgeon’s economic council is a fig-leaf for independence

This month's announcement of a new economic advisory council formed by the Scottish government came with the usual flow of superlatives. The 17-member group will publish a strategy paper later this year to help deliver the ‘transformational change Scotland needs’, according to economy secretary Kate Forbes. We are promised ‘bold ideas’ that will bring ‘new, good and green jobs’.

We have been here before. This group replaces a previous Council of Economic Advisers set up by Alex Salmond in 2007. It too had a remit to galvanise the Scottish economy. It provided 14 years of strategic advice (seven of those under Nicola Sturgeon’s leadership) to the SNP administration with no obvious corresponding uptick in Scotland’s economic performance. The Sturgeon administration has taken no time to reflect on why that might be the case. Instead, they are repeating the process with some new faces.

You could be forgiven for asking what the point is. To figure that out, it is again instructive to look at Salmond's group and how that was used. Its aim, it seems, was not so much to turbo-charge growth but to suggest that bold change was on the horizon. Second, and perhaps more importantly to the SNP, it lent credibility to separatist economic arguments in the event of a future referendum.

Salmond's star recruit was the Nobel-prize winning US economist Joseph Stiglitz. Having been wooed onto the advisory council in 2011, Stiglitz found himself defending the SNP's flawed currency union plan in the subsequent 2014 referendum. The Salmond-Sturgeon plan for separation then was to be part of a formal currency union with the remaining UK, under the assumption this would be acceptable to London. That proved naive, with the UK government making it clear there would be no post-separation joint currency.

Stiglitz sat on a subset of the council of economic advisors which put forward the plan to share the pound. When the currency union was rejected, he came out fighting for the Nationalists, saying the rejection was a bluff. Two years later, he subsequently acknowledged that the currency union idea ‘may have been a mistake’ and, perhaps tellingly, appears to have been absent from Council of Economic Advisor meetings for several years.

Unsurprisingly, Stiglitz is not part of Sturgeon’s new group. It consists mainly of trusted insiders, some of whom sat on the previous group, but also one or two interesting new recruits. Among these is Mark Blyth, a Scottish economics professor at Brown university in the US. Blyth is known for his anti-austerity writing and is co-author of the book Angrynomics, which examines anger and moral outrage in western democracies in the context of economic change. Last year he publicly endorsed Scottish secession.

Another significant new recruit is Nick Macpherson, former permanent secretary to the Treasury from 2005 to 2016, and now a crossbencher in the House of Lords. Ironically, it was Macpherson who wrote a letter to then-Chancellor George Osborne in February 2014 ‘strongly’ advising against a currency union with a newly independent Scottish state.

Why bring Macpherson into the SNP's inner circle now? The answer likely lies in a comment piece he published in the Financial Times just after the Brexit vote in which he stated there was now a ‘golden opportunity’ for Scottish nationalists to recreate the economic case for breaking away. It is unclear whether Macpherson, like Blyth, is now a full convert to the cause, but his stance received a positive reaction from Sturgeon, which may well have led to this month’s appointment.

The SNP will hope that in any future referendum they will be able to lean on the likes of Blyth and Macpherson to defend the economic case for independence, as Stiglitz did for Salmond in 2014. It would be an even bigger irony if the man who kiboshed the SNP’s currency position in the first independence referendum ended up being the key economist defending a new separatist currency position in the second.

It is notable though that neither Macpherson nor Blyth have backed the SNP's current currency policy of ‘sterlingisation’ – the policy of unofficially continuing to use sterling outside of a monetary union – before eventual movement to a new currency. In his FT article, Macpherson made the case for a new Scottish state launching its own currency. Blyth also backs a new currency. It seems even on-side respected economists aren't crazy enough to back the sterlingisation plan.

Will the SNP successfully woo Macpherson and Blyth further to get that backing in coming years? Who knows. In the meantime, Stiglitz's tenure on the last advisory group should serve as a salutary warning that separatist economics and rational economics don't mix.

As to whether the new advisory council will discover the elixir of economic growth the last one failed to harness, that looks to be the last thing on Nicola Sturgeon’s mind.