Thursday, August 26, 2010

J'accuse - Iain MacWhirter

How did this ever come about? How did Edinburgh become the biggest welfare state in history? By what divine right did it gain access to unlimited sources of public funds just at the moment when Britain is on the verge of national bankruptcy through excessive public spending?

The wailing sound above which comes from atop a columnular high horse in today's Herald is that of Iain MacWhirter. As he goes on to disparage the city I called home for almost 30 years and an industry in which I worked for 6, I think a riposte of some kind is in order. But first, if you haven't already, go and take in the flavour and fact of his epistle. I'll stick the kettle on while you do...

Finished? Then we can get down to business of taking his argument to bits. First of all, he's just plain wrong to contend that Edinburgh is sustained by public cash to anything like the extent that he does. The House of Commons Library helpfully provide some stats on this front for Westminster seats on mainland Britain and although they're from 2008, the proportions will still hold up pretty well.

While Edinburgh South is top of the GB pile having 67% of workers in the public sector, that compares to a city-wide average of just over 30%. Edinburgh South, of course, contains nearly all of the jobs at Edinburgh University. Therefore, if you base your observations of Edinburgh's economy on what you'd see during a bus journey from, say, the King's Buildings to Potterrow passing the National Library and Historic Scotland on the way, then you're unlikely to get a very representative view of things.

For the purposes of comparison, Glasgow and Aberdeen are both at around 30%, with Dundee on 37%. Overall, the Scottish total from these figures is 30.3%, which isn't too out of step with the Scottish Government's figure, which is calculated on a different basis, of 27%. For what its worth, up here in Gordon, which takes in some of the northern suburbs of Aberdeen, the figure is 12%.

So if his argument about the size of Edinburgh's public sector is as overdone as a steak burned to charcoal, what about his substantive point regarding the banking bailout and the financial sector?

The fact that RBS was based in Edinburgh is incidental, as was the fact that most of its problems would have instead been Barclays had they won the battle to take over ABN Ambro. If the bailout hadn’t happened, to avoid a worldwide contagion there would have needed to have been a bailout from other UK or overseas investors. The alternative was a firesale of assets – i.e. people’s mortgages and businesses all over the UK being flogged off to the first bidder to try and avoid meltdown. As such, the bailout propped up a great deal more than just banking jobs, be they in Edinburgh or anywhere else for that matter.

Unaccountably, he goes on to place part of the blame for Edinburgh's supposed dependence on the public purse to the Scottish Parliament, pleading bizarrely “mea culpa along with the rest of us who argued for devolution. Naively, we thought this might benefit Scotland as a whole, but we forgot the lesson that when you follow the money it invariably resides where politicians lie.” On that front, you can include me out, Iain. Bringing St Andrew's house under proper democratic control while providing a forum for national debate and lawmaking has been an unqualified good.

Let's leave aside the fact that Edinburgh was an administrative capital long before devolution, and that Holyrood had no power over the banking crisis, either in terms of the response or the failed regulation beforehand. His argument seems to be that since most of Edinburgh's top 10 largest employers are public sector and that 'some brewing' takes place, it’s therefore public cash that keeps the private sector going. Frankly, that argument is nonsense on stilts.

As a wee aside, thanks to the brewing reference, I'm willing to lay a pound to a penny that his source for this was Wikipedia:

There's no reason to doubt the figures – only his conclusion. The public sector has some big employers in Edinburgh, which provide jobs for plenty of people who live outside and travel to work in the city. What his use of these figures ignores is the less obvious private sector activity going on in smaller entities, which collectively dwarfs the public sector. As you can see from the earlier spreadsheet, where Edinburgh is concerned, there's around 93,000 public sector jobs and 211,000 in the private sector. Notwithstanding the fact that some of those public sector jobs are national rather than local, you still need some heroic multiplier effects to argue that 93,000 sustains 211,000 rather than the other way about.

Just think on the few acres down at Westfield, near Gorgie, where you'll find Wolfson Microelectronics, which makes chips for every iPhone in the world, alongside a large distillery, a kitchen manufacturer and chemicals firm Macfarlane Smith. Go down Calder Road into Wester Hailes and you'll see Burton's biscuit factory. In the north, you'll find BAE Systems. Around Lothian Road, you'll find Standard Life (Edinburgh's 6th biggest employer), Scottish Widows (9th) and Baillie Gifford – significant parts of the financial sector that have stayed profitable, even if it doesn't suit Mr MacWhirter to acknowledge it.

There's too many other enterprises to mention, but we can go right down in size to our SMEs and all the mom and pop enterprises like the butcher, the baker, the candlestick maker, and the white vans of the self-employed parked on the streets of comfortable but unpretentious parts of town other than Barnton or the Grange. It's that which makes the Edinburgh economy go round just as it does everywhere else – with people borrowing, investing and getting on with providing goods and services to make a living, whatever life throws at them.

Generally, I find much to admire in Iain Macwhirter's writing and often find him a rare voice of sanity. Here, though, he's barking up the wrong tree entirely. Cut the service sector some slack Iain and reflect on the fact that despite the tales of gloom Edinburgh, and Scotland, continue to have a robust economy thanks to interdependent private - and public - sectors.

1 comment:

Allan said...

Good post, but one thing.

Whether they genuinely lost interest after a certain point, and wanted to hurt a competetor in the pocket, or they got a whiff of the Debt Report (which Goodwin, McKillop, Salmond et all thought was a formality, big mistake). Either way Barclays lost interest in ABN Amro.