Report - Section 7

Service Industry

In the past service industry has received much less assistance from regional policy than manufacturing. In part this is right because many service activities, such as medical services, education, accountants, distribution, are governed simply by local demand. But there are service activities, notably major offices, which have a choice of location and every effort should be made to attract them to areas where labour is available.

Following independence the increased Government activity would largely wipe out any spare labour resources in Edinburgh, but major efforts would be needed to promote commercial and office development in Glasgow. The Scottish Development Authority should be empowered to offer assistance, comparable in scale to that available to manufacturing industry, to encourage such development in the Glasgow conurbation and the system of property rating should be revised, if not abolished, to prevent high rates being a brake on commercial development as they have been in the past.

Tourist development would obviously assume major importance for any independent Scotland and the financial resources available to the Tourist Board could be increased.

The Pace of North Sea Oil Development

On the face of it the pace of development of North Sea oil appropriate for Scotland would be very different from that now being demanded by the UK. Apart from the need to avoid piling up excessive surpluses, Scotland would wish to extend her North Sea oil revenue over a much longer period than the 30 or so years which seems likely at presently planned rates of extraction. It is also desirable to avoid the frenzied peaks of activity which seem likely in Shetland, the Moray Firth and Loch Carron on present plans. These will impose immense infrastructure demands, lead to a substantial inflow of population and leave in their wake problems of readjustment and unemployment which it may take years of regional policy to overcome. In addition the contribution of Scottish Industry to oil developments, which is so far disappointing, might be increased substantially if the whole programme is not required to go at the maximum possible speed.

From a purely Scottish point of view this suggests that a production flow of, say, 50m tons a year might be ideal. Even this would be five times Scotland's present consumption and yield and annual revenue of between £700m and £1,500m. However one cannot look at the Scottish position in isolation. If, because of action in the Middle East, there is a serious energy shortage in Europe, Scotland would undoubtedly suffer severely from the resulting slump. It would therefore be in Scotland's interests to increase her oil production well beyond what would otherwise seem desirable. If however there is no serious shortage in physical terms, merely a crisis of price, then action by Scotland is not going to affect the international price of oil, nor will it matter to the other countries what the source of their oil is.

Inflation, Income Policy and Training

The strength of the Scottish exchange rate and the low interest rates which would result from the budgetary and balance of payments position would do much to reduce inflationary pressure. A major part of the British inflation has resulted from the downward drift of the currency and the consequent rise in import prices. The absence of this, relaxations in taxation and subsidies for housing would no doubt help to reduce the pressure of wage increases. Nevertheless as Scotland moved nearer full employment serious shortages of certain types of skilled labour would occur and this would tend to produce acute inflationary pressure. Some form of incomes policy is clearly going to be a continuing feature of advanced economies and would be essential in Scotland if the economy if the economy was not to price itself out of international markets. It is important to recognise, however, that the labour shortages which give rise to the pressure could be avoided to a considerable degree if training schemes were more flexible and if a substantial increased effort was put into retraining. A full-scale examination of training is clearly an early priority.