Welcome to my Blog

I am a semi-retired former Scottish trade union policy wonk, now working on a range of projects. This includes the Director of the Jimmy Reid Foundation. All views are my own, not any of the organisations I work with. You can also follow me on Twitter. Or on Threads @davewatson1683. I hope you find this blog interesting and I would welcome your comments.

Wednesday 8 May 2024

Devolution and the quango state

This week is the 25th anniversary of the first elections to the Scottish Parliament. Commentary typically focuses on how the Parliament has performed and how its procedures can be reformed. While I agree with many of the criticisms, the Scottish Parliament remains the most crucial democratic intervention in Scotland for a generation and more. For those like me who remember the pre-devolution position, the Scottish Parliament remains an outstanding institution. And despite the fractious politics of recent years, the public agrees. In the most recent Scottish Social Attitudes Survey, 63 per cent said that having a Scottish Parliament gives ordinary people more of a say in how Scotland is governed, while a similar proportion said it gives Scotland a stronger voice in the UK.

The biggest failure of devolution has been the absence of decentralisation to communities, a vision set out by the Constitutional Convention that has yet to be delivered. The woes of local government are well understood, but another aspect of centralised control, the quango state, is largely ignored. Rather than extending the principle of devolution within Scotland, the Scottish Government has retained all the transfers from Westminster and, in addition, has taken away functions from Local Government. Three-quarters of public spending is directed by Scottish Ministers, including around £23 billion spent by quangos.

This week, the Scotsman is running a welcome series on quangos, which may help shine some much-needed light on these institutions. The early easy targets are management salaries and the usual suspects who serve on them. However, we should ask if this centralised control over many of our public services is the best form of governance. The Scotsman started by struggling to define what the quango state consists of, settling on around 120 bodies. They include Executive Agencies, Non-Departmental Public Bodies (NDPB) and public corporations like Calmac and Scottish Water. They range from small advisory boards to substantial service delivery organisations like Skills Development Scotland and Scottish Enterprise. They include NHS Scotland, but the democratisation of the NHS is a more complex and different debate. The governance models vary, but typically, a board of around 14 people appointed by ministers runs them. 

In 2007, the Scottish Government undertook to simplify the public sector landscape by reducing the number of Scottish public bodies under its control. Like previous governments, they found the 'bonfire of the quangos' difficult to deliver. Ministers often find it useful to have arms-length bodies to deny operational responsibility for poor decisions, which I have previously called the 'not me guv' school of government. The problem is that in the absence of democratic accountability, the public often says, 'It is you guv'. The difficulty is that ministers need more time to scrutinise them, and the sponsoring departments adopt a light touch. The recent Water Industry Commission scandal demonstrates that clearly.

Relationships between NDPBs and their sponsoring departments can also be challenging. A National Audit Office study of English equivalents found that the arm’s-length bodies sector remains ‘confused and incoherent’. Audit Scotland has occasionally forayed into quangos with similar conclusions. Their 2010 paper concluded, ' The make-up of boards and their role has evolved over time rather than as a result of any objective evaluation of the best model for public accountability.

Suggestions that they could be broken up and delivered locally are resisted because they allegedly benefit from economies of scale or are too specialised to spread the limited expertise around the country. Even attempts to minimise duplication by creating common bargaining structures have been opposed by the agencies and government. 

Options for reform include:

Identifying all or parts of the services that could be delivered locally while retaining a national framework.

Greater scrutiny by Parliament.

Direct elections.

In my paper, Public Service Reform for the Reid Foundation, I set out some principles that should underpin this work. I developed them in a subsequent paper, Building Stronger Communities. The starting point is subsidiarity, building integrated public services from the bottom up and sharing where appropriate. The role of central government should be to set the strategic direction based on outcomes – rather than trying to direct services from Edinburgh. However, a country the size of Scotland cannot justify duplication and difference for the sake of it. Therefore, we need public service frameworks that allow local services to focus on what matters to achieve positive outcomes.

Even where decentralisation is not viable, services should still be required to cooperate locally more effectively than currently. The somewhat loose duties placed on quangos to collaborate in community planning have no effective teeth.

Scotland is one of the most centralised states in Europe. Until we address this centralisation of power, the devolution project will remain unfinished. Reforming the quango state is complex but necessary.

Tuesday 9 April 2024

Ukraine and the 'Johnson thwarted peace' myth

I was involved in a panel discussion about defence expenditure this week. A trade union activist I greatly respect justified his argument against providing military aid to Ukraine by invoking a Putin-propagated myth. The essence of this conspiracy theory is that Boris Johnson thwarted efforts to achieve a negotiated peace in April 2022. There are few politicians that I have more contempt for than Boris Johnson, so I can understand how anyone can believe such a thing was possible. My surprise was that this myth has not only been debunked in mainstream fact-checks but also in left-wing media sources like Novara Media. The Kremlin and their useful idiots propagate it in a few media sources.

Let’s start by remembering that these events happened after the Russian invasion and the initial discovery of Russian war crimes, including the Bucha massacre. It was also after Russian State media, with the explicit support of the regime, including Dmitry Medvedev, deputy chair of the Security Council of Russia, published the genocidal statementWhat Russia Should do with Ukraine’. The author argues that Ukraine's existence is "impossible" as a nation-state, and after the war, forced labour, imprisonment, and the death penalty would be used as punishment. None of this sounds like a country seriously interested in peace.


And they weren’t even close, as objective analysts closer to the talks confirmed. While the negotiators agreed upon some broad principles, as anyone with negotiating experience knows, deciding on principles is much easier than agreeing on the details. 

These details included a Russian demand that Ukraine cap its armed forces at 85,000 troops, 342 tanks and 519 artillery pieces, which would be around a 60-70 per cent reduction of Ukraine’s military strength. Ukraine was understandably sceptical about signing away its capacity to defend itself, given that it had just been invaded by Russia weeks beforehand. And given Putin’s track record on keeping agreements, feared this would be a temporary pause to reorganise and launch another, better-prepared invasion. The Russian initial plan was disintegrating at this time, and Putin needed a breather.

The other essential requirement was not NATO membership, which wouldn’t happen, but rather that undefined Western nations would provide security guarantees but with no bases in Ukraine. It was this that Boris Johnson rightly pointed out was unrealistic. Few, if any, European countries would give such a guarantee outside the NATO military alliance. The Russians could sweep across Ukraine and sit on the Moldavian, Hungarian and Polish borders. That would require a massive offensive to dislodge the Russians who would dig in, as they have in eastern Ukraine. There is neither the capacity nor the political will to do that. Anyone with a rudimentary grasp of history will grasp that Putin is using the Hitler Czechoslovakia playbook.

In simple terms, no credible deal was on the table, so the only option was to fight on. A decision overwhelmingly supported by Ukrainians in polling after the Bucha massacre. Ukrainians understand this is not a manageable conflict in which you can exchange a bit of land for peace. Putin wants nothing less than the obliteration of Ukraine. They are the frontline against the new fascist menace, and the West should support them and prepare for the worst if they fail. There is a respectful exchange of left-wing positions on the war in the Scottish Left Review.

I fully appreciate the desire for peace and the opposition to less than productive defence spending. I just come from a different left-wing political tradition. The most important influence on my teenage political thought was a former Welsh miner who fought in Spain against fascism. He would have recognised Putin as he did Hitler and understood that appeasement is a strategy doomed to failure. 

Saturday 9 March 2024

Defence in an Independent Scotland

The Scottish Government has published the latest policy paper in its Building a New Scotland series, An Independent Scotland’s Place in the World. This paper sets out its vision for an independent Scotland's foreign, defence, and security policy. If you don’t fancy reading the whole paper, SPICe has done a good job of summarising the key points.

In the defence section defence, the key proposals include:

  • Joining NATO and keeping defence spending at 2% of Gross Domestic Product (GDP).
  • Working with neighbouring members in defence of the North Atlantic and High North region, with a likely focus on the strategically important Greenland–Iceland–UK (GIUK) Gap.
  • Provide conventional forces to NATO operations in support of Treaty objectives and participate in joint exercises. However, these would need to be in accordance with the United Nations Charter.
  • Scotland’s Joint Forces Headquarters would be based at Faslane. 
  • Working with the UK for a transitional period and a timetable for UK forces to gradually draw down their presence in Scotland.
  • Nuclear weapons should be removed from Scotland in the safest and most expeditious manner possible following independence.

The media headlines predictably focused on removing nuclear weapons and the impact this might have on joining NATO. The Scottish Government reasonably points out that “only a minority of NATO members host nuclear weapons.” I doubt the so-called British independent deterrent worries Putin much, given that it relies on US missiles and has anyway failed its last two tests. However, the timetable for removing nuclear weapons looks optimistic. NATO partners must cooperate, and there is some evidence that the US, in particular, might veto Scotland's application if we disagreed on a reasonable timetable. NATO is, after all, a nuclear alliance, and even non-nuclear armed states can carry battlefield nuclear weapons. 

While I think NATO would eventually welcome Scotland, the idea that we would be essential to protecting the northern flank is fanciful. NATO can do everything from bases in Norway and Iceland. Scotland would add to that, but it's not vital.

My problem with the paper is more with the conventional defence plans, or the lack of them, and the absence of any costings. The paper ignores the practical challenges Scotland would face when establishing a conventional army, navy and air force. These challenges include:

  • I have previously highlighted the absence of any recognition of the defence industry in the First Minister's speech on industrial policy. UK ships and other defence equipment will be built in UK sites (the paper is frankly delusional to argue otherwise), and Scotland cannot provide a similar pipeline of work. There is also the issue of access to sensitive electronic equipment, which is crucial to modern armed forces. Some people, opposed to the defence industry in principle, may not regard the loss of a defence industry as a big loss. However, it certainly will be to the 33,500 workers and their families at a time when the post-Indy Scottish economy will face many other challenges. The defence sector contributes £3.2 billion to the Scottish economy.
  • The infrastructure and support contracts that keep defence equipment running are linked to the defence sector. Ships need regular refits, aircraft need specialists to keep them running, and a substantial Ministry of Defence to pull all of this together. Scotland will also need munitions stores and specialists to maintain them.
  • Ensuring Scotland retains the skilled personnel required to run modern defence forces. At best, Scotland will inherit a random collection of transferring service personnel rather than a coherent military force. 
  • Those gaps would need to be filled by a training programme. That would be a long and complex process with new officer and technical training establishments to be established with none of the economies of scale the UK brings.
  • The UK will be unlikely to share intelligence with an independent Scotland. Given the approvals required for the most sensitive equipment and software, it will take many years to build up the necessary systems, if at all.  

None of the above are impossible to deliver, albeit with costly investment. My concern is that there is no evidence from this paper that any serious thought has been given to the detail. As others have pointed out, it reads like “some of the pro-Brexit material at the time of the referendum – trying to reassure people that nothing will really change, all will be well and frankly we’re better off without that lot anyway.”

This paper is a political gloss that has rightly not impressed those who understand the defence sector. If the Scottish Government is serious about defending an independent Scotland, it needs to get serious about planning for it.

Wednesday 7 February 2024

Defence and security in an uncertain world

Everyone is suddenly talking about defence. Britain’s Chief of the General Staff, General Sir Patrick Sanders, discussed a ‘citizen’s army’. This has sparked nostalgia for National Service in some quarters (which Sanders rejected) and a more serious debate about defence spending in an uncertain world elsewhere. The prospect of a Trump presidency adds fuel to the discussion in Europe.

This week, I participated in a research workshop for a European client, building on a briefing note I wrote for them last year. I also presented on international defence procurement policy based on a paper I wrote for Prospect. I always find these discussions fascinating, as getting the countries' perspectives directly is much more helpful.

Colleagues in Poland, Estonia, Sweden and Finland have a genuine focus on the Russian threat, not to mention Putin’s not-so-little helper in Belarus. Other countries are also focused on what is happening in the Red Sea and Gaza, with the associated military and economic impact. With Pakistan and Iran kicking off as well, the Middle East risks a broader conflict, with ten countries now caught up in the fighting. For the first time, a Turkish colleague joined us, bringing another perspective to the discussion. He was more optimistic that the various players in the Middle East could reach a deal which would get the region back from the brink. Others were more sceptical that the Israeli Government would move on freezing settlements on the West Bank, an essential part of any long-term peace deal.

I pointed out that Britain’s defence spending is inflated by the fifth of the defence budget spent on nuclear weapons. If you take nuclear out of the equation, defence spending is about 1.75% of GDP, around the middle of the European league table. This means that the armed forces are struggling to keep existing equipment running. Even the Royal Navy, seen as a gainer in recent spending rounds, must decommission ships because it doesn’t have enough sailors. The Army is in even bigger trouble. When the Tories came to power in 2010, the British Army was over 100,000-strong. It is now due to fall to 72,500. Chatter about a ‘citizen’s army’ is not going to plug that gap anytime soon, and neither is the much-vaunted technology. As the Economist’s defence editor puts it, ‘Far too often, penny-pinching and short-termism have resulted in Britain buying high-end kit and then economising on the things that make it work properly.’

I was asked what a Labour Government might do – a frankly perilous speculation these days! I am impressed with Labour’s defence team’s approach, which appears to have a good grasp of the issues, including the need for procurement reform. The problem is that Rachel Reeves seems no more likely to challenge the Treasury’s short-termism, given her spending caution. Delaying expensive projects is a well-travelled Treasury route to balance the books. While Labour is comfortably ahead in the polls on most issues, they trail the Tories on defence and security by four points (YouGov poll below), although the gap is narrowing. 

I suspect this reflects a traditional view that Labour is not strong on defence. In an uncertain world, this is something Labour cannot afford to be weak on. If European security worsens later this year, the risk is that voters may put this issue at the top of their list of concerns. James Rose has pitched a package of policy ideas to help Labour seize the agenda on defence that I largely agree with. These include replacing the weapons sent to Ukraine and reversing Tory cuts, laced with more traditional Labour policies on support for veterans and ending failed outsourcing. To this, I would add the proposals in my paper for Prospect on defence procurement, a concern reinforced by the Westminster Defence Committee. This package would also have economic spin-offs and would be welcomed by the defence trade unions.

There is an adage that it is the first responsibility of government in a democratic society to protect and safeguard the lives of its citizens. Labour’s leadership would do well to remember that.

Monday 8 January 2024

Tough political decisions

 It could be a long political year if today's election pitches are anything to go by. 

Anas Sarwar was making a pitch to Yes voters in Rutherglen. It is a smart move given that despite the SNP's woes, the dial has barely moved on support for independence. However, a call for change alone may not be enough to firm up these voters for Labour. Anas needs to think further about what a serious offer on the constitution might look like to shift these voters at the UK General Election and, equally important, for the next Holyrood election if he wants to be First Minister. Lending votes to get rid of the Tories is only a short-term strategy.

I was at the University of Glasgow today, listening to the First Minister set out what an industrial strategy might look like post-independence. The media spin was more about the increase in household income independence might bring. This reinforces the recent soundbite script from SNP MPs, which puts the cost of living crisis before constitutional change. This reflects where the voters are, even if less popular with some activists. He further reminded some of those activists that Yes supporters should not simply shout "independence ever louder" but help set out an "alternative path: one that leads to a renewed sense of possibility”.

I was less interested in the political guff than what he had to say about industrial strategy, something grossly neglected in Scotland and the UK. Other small European countries have successful industrial strategies that have helped raise living standards. However, this didn't magically happen because they are independent; it resulted from a positive strategy.

There was a predictable and essentially correct analysis of the failings of the UK Government over many years. He argues it isn't a short-term crisis but the result of long-term failure, ‘creating a poor society with pockets of rich people’. His challenge to Labour is how they would change this given Keir Starmer’s cautious policy approach to the Green New Deal.

He proposed three pillars to an industrial strategy: joining the EU, a new ministry for industrial policy, joining up action across government, and public investment. He highlighted the success of public investment worldwide to 'crowd-in' private investment, particularly in the USA and China, with an albeit more modest response from the EU. It is less clear how an independent Scotland would develop the fiscal and monetary policy to finance a similar approach. He also highlighted EU strategies on CCS and hydrogen, which Scotland is well placed to contribute.

A crucial industry for Scotland is shipbuilding, although the FM didn't mention it in his long list of successful Scottish industries. Probably because on the civil side, the problems of ferry building have not helped the sector, with ships now being built in Türkiye. There should be opportunities for support ships in the renewables sector, but turning renewable energy prospects into supply chain jobs has been challenging.

Defence spending remains a vital part of the Scottish economy, providing 33,500 jobs and contributing £3.2 billion to the Scottish economy. It also provides high-wage jobs that provide income tax revenue, as Graeme Roy highlighted in the Herald today. Each percentage point of earnings growth in Scotland delivers around £25m more revenue than would be generated by the equivalent UK tax policy. 

For Scotland, a big chunk of defence investment and employment comes from naval shipbuilding on the Clyde and at Rosyth. The FM needs to clarify if an independent Scotland would pursue a Scotland First procurement strategy that considers the social value of procurement. The UK government has drifted away from this by awarding the Fleet Solid Ships contract to an overseas consortium. The more difficult question is how defence spending in an independent Scotland will sustain our defence shipbuilding industry. Some 24 warships will likely be built in Scotland between 2015 and 2035. It is hard to see how a Scottish Navy will need more than a handful of warships. Exports will be challenging given the global move to favour home-built procurement, or at least substantial offset, which Scotland may find challenging to offer.

Few would disagree with the ambition and vision the First Minister set out to achieve an industrial strategy that normal countries follow. However, the transition to a high-growth, low-inequality country is a long-term process that will require actions on a scale that will be challenging. In fairness, the FM didn't claim it would be achieved overnight, but his industrial strategy needs more detail and has to address difficult issues like shipbuilding. He and Anas Sarwar would be more credible if they faced up to the complex political issues.

Tuesday 19 December 2023

Scottish Budget 2024-25

 There were no big surprises in the draft Scottish Budget published today. I set out the background to the Budget in a briefing for the Jimmy Reid Foundation, and it was always going to be challenging given the economic environment and the appalling UK Autumn Statement. 

There was little cash to spread very thinly. The NHS and social care budget predictably got the lion's share, although even that is well below what it needs. Within that budget section, social care did best, which is the right priority given the impact of delayed discharge on our hospitals. However, welcome though £12 per hour is for workers, it is unlikely to bring significant numbers of new staff into the sector. We need £15 per hour, and we need it quickly, along with funding for sick pay. Mental health, drug, and alcohol services are going to have a difficult year.

NHS staffing will remain a big problem in the coming year, as growth in staff numbers is likely to continue falling behind the rest of the UK. 

The Scottish Child Payment is at least being uprated but short of where many organisations felt it should be to maintain progress on tackling child poverty. As the Scottish Fiscal Commission's (SFC) report shows, Social Security payments with no equivalent in the Block Grant are the biggest additional cost to the Scottish Budget.

On income, changes to Income Tax are a welcome progressive change to the banding structure. Again, the Deputy First Minister was urged to go further on tax reform by a coalition of over 60 organisations in a letter I signed on behalf of the Reid Foundation. Tackling Scotland's key challenges requires long-term thinking rather than more sticking plasters. 

There is also a shocking lack of consistency. Progressive Income Tax changes must be contrasted with the regressive Council Tax freeze. If fully funded, the resources could be better targeted to support public services and the cost of living crisis. This chart from the recent FoA budget report is a reminder of falling real terms local government spending, particularly on non-statutory services, over the last decade.

As with the UK Budget, I am more interested in the Scottish Fiscal Commission report, which gives a longer-term perspective. Their fiscal forecast is summarised in this chart. Revenue will be up 8% by 2028/9, but capital will be down by 20%. Our crumbling infrastructure is about to crumble some more! The Scottish Government is heading towards the capital borrowing cap, strengthening the case for the same prudential borrowing powers as local government.

The SFC also highlights the drop in living standards between 2021-22 and 2023-24 as the largest reduction since Scottish records began in 1998. They are unlikely to recover to 2021 levels until 2026. 

The SFC also assumes average devolved public sector pay growth of 4.5% in 2024-25. This includes an average basic pay award of 3.0% and pay progression and churn. They also forecast a fall in Scotland’s public sector employment from 2023-24 onwards. Overall, the SFC indicated slightly higher wage growth in Scotland than in the UK, plugging the current gap. Some sectors are doing better than others this year. 

In conclusion, the report card would have to say, could do better. Some steps in the right direction with progressive income tax changes and spending priorities. However, that has to be balanced by only modest tax reform and limited support for alleviating child poverty, coupled with the absurd council tax freeze.

Monday 4 December 2023

Pharmanomics - How Big Pharma Destroys Global Health

If you read one book this year about the economics of health, Pharmanomics by Nick Dearden should be it. The Director of Global Justice unpicks the way Big Pharma does business and rips us all off. This may not be unique in a capitalist society, but in the health sector, it costs countless lives. 

The COVID pandemic started to open the eyes of governments to this particularly rapacious form of capitalism. As Nick puts it, ‘They got to dictate who lived and who died in the most serious public health emergency in living memory.’ They prolonged the pandemic and entrenched global inequality for a generation with a vaccine that was invented mainly using public money. Corporations like Pfizer, Johnson & Johnson and Moderna  – used taxpayer support to get the vaccines that bear their names ready. Then, they privatised the  know-how  behind these vital medicines and refused to share it with the many countries that could have  joined the global manufacturing effort. Even AstraZeneca, whose Oxford vaccine was almost entirely funded by the public purse, turned what should have been a 'People's Vaccine' with an open license into an exclusive license, which prioritised rich countries. A practice they had undertaken before when they closed down early research into tuberculosis and malaria in favour of drugs for diseases affecting richer countries.

This book shows, page after page, how Big Pharma has been doing this for years. The patent system that underpins their profits delivers returns that manufacturing companies can only dream about. In the 1990s, Big Pharma discovered that their most significant asset wasn't research and development but intellectual property. So they lobbied in the USA and fought court battles to extend their patents and keep their data secret. This culminated in a trade deal known as TRIPS that enforced monopoly protection everywhere - described by one journalist as ‘a brute and profoundly undemocratic expression of concentrated corporate power.’ It is now a core part of the World Trade Organisation rules.

Examples include OxyContin, the drug behind the opioid addiction epidemic that has probably killed more than 300,000 people. You can watch how they encouraged overprescribing in the Netflix miniseries Painkiller. The drug generated $35bn for the company Purdue. They are now using the same discredited tactics to market opioids in China and other countries.

We are often told that these profits are essential to develop new drugs. However, Big Pharma does very little research into new medicines. They spend between five and eleven times more on advertising than on research. The drug is created by smaller companies, often funded by the public sector, and then bought out by a big drug company for the patents. They close down competitors and make small changes to drugs to extend patents. They are also one of the most financialised industries in our heavily financialised economy – stashing cash in tax havens to buy up companies and enrich shareholders. Medicine costs are entirely unrelated to research costs; they are hard-wired into the financialisation of the industry. As a Congressional investigator put it, 'The big Pharma fairy tale is one of ground-breaking R&D that justifies astronomical prices, but the pharma reality is that you spend most of your company's money for yourself and your shareholders.'

When you read the techniques that these companies use, it could drive you to despair. However, that is not the author's intent. He wants to open our minds to the possibility of change. We created the NHS, so why not the medicines they administer? 'If our healthcare is too important to be left to the market, then that must include the research and development of the medicines that keep us well.' It would save the NHS billions in the inflated costs that drain NHS funds. The purchasing power of the NHS has resulted in some small progress in regulating costs compared to the USA. Needless to say, the drug companies are a big part of the lobby trying to privatise UK healthcare. 

Governments need to stop being embarrassed about their role in the economy. There is a long list of technologies invented in the public sector whose ownership is transferred to the private sector and then rented back to us at enormous cost. We also need to reform the patent system to be shorter and more narrowly drawn. The pandemic and the profiteering of Big Pharma should be a wake-up call for governments in the Global North as much as it has been for the Global South. We should pressure governments to change.