Carnegie UK Trust
Item 2 is to take evidence from Martyn Evans of the Carnegie UK Trust on its report “More Than GDP: Measuring What Matters”.
I welcome Martyn Evans and invite him to make a short opening statement.
Martyn Evans (Carnegie UK Trust)
Thank you for the invitation to speak to the committee.
As you know, economic growth as an intermediate policy objective has served us well in the United Kingdom over the past 100 years. Gross domestic product has doubled every 25 years and transformed the lives of my family and probably yours, and of millions of people throughout Scotland.
The gains of growth have not always been evenly distributed, but there is no doubt about the general social and personal benefits. However, the policy of grow, tax and spend, which made 20th century Britain, is under increasing critical review. European thought has been at the heart of those challenging debates, earning the side swipe that Europeans are the idlers of the world, looking for an easy 21st century.
The interest of the Carnegie UK Trust is twofold. First, our trust deed, which was signed by Andrew Carnegie, is simple and remarkably modern: he requires us to address the wellbeing of the people of the United Kingdom and the Republic of Ireland as their needs change from time to time. We have been looking at that for the past 100 years.
As we move into the 21st century and towards the trust’s centenary in 2013, we want to look forward and to understand what wellbeing means in the 21st century and how we can harness the energy of civil society, Government and its people to improve wellbeing.
We established a round-table of eminent people in Scotland to follow on from the Sarkozy commission. The most striking outcome of the round table was the acclaim that it gave to the national performance framework established in 2007 by the incoming Scottish National Party Government. The framework is a rare international example of a Government trying to measure what matters and using those measurements to drive public policy, spend and investment.
Thank you for being brief in your opening statement. I am afraid that some people have not been quite as brief in recent weeks.
How do you persuade people—for example the media and others—to take the issue of wellbeing on board? We hear in the media that GDP is relatively flat at the moment in the UK, although it is slightly higher in Scotland, but GDP seems to be the totem for all. One issue is that, if politicians decide to move to different measures of, for example, wellbeing, it provides an opportunity for others, in the media or political rivals, to denounce them for trying to take people’s eye off the ball, which is GDP. Although I believe that the report is excellent and that there are good arguments in it, how practical is it to sell your message?
That is critical. My conclusion is that there is never a right time to change. When there is economic growth, the issue is of marginal interest, and when there are problems in our economy, it is a distraction, so whenever the debate is raised there are voices that say no.
The important point is that it is necessary to carry on measuring GDP—it is crucial for any Government to measure GDP—so we are not throwing the baby out with the bath water. Also, the debate about happiness can become a distraction. Wellbeing is partly about happiness, but the debate can be trivialised by being characterised in that way.
I do not have an easy answer on how we give the media and the public confidence in the idea of having a wider range of measures, but since the round table I have come round to the argument that a dashboard is required. If GDP is the only measurement—like speed in a car—that will tell you something but not everything about what you need to know, so a dashboard of measurements is required.
The key discussion is about what, apart from GDP, we should both measure—we currently measure a lot of things—and use to drive our policy. Getting people to take the issue seriously is a great problem. I have seen the matter trivialised and I have seen those who oppose the idea say that it is about the psychology of individual preferences and has nothing to do with Government.
Back in 2007, the very progressive idea of fulfilment was proposed, which is that the issue is not happiness but personal fulfilment. If one objective for the Government is to help people to achieve that, let us have a decent discussion about that. I regret that there is no magic bullet, but I am sure that you know that.
Absolutely. In some ways, it is like trying to steer the Titanic. When one measure is used and is held up as being important for so many decades by so many people around the world, it is hard to change things.
In the report, you ask for more subjective rather than objective analysis. Will you explain that? Generally speaking, I think that one tries to have as much by way of hard facts as possible in a report, because in the political and economic spheres there is a lot of argument about facts, figures and statistics. If one puts a subjective layer on top of that, it can sometimes undermine the credibility of what one is putting forward.
That is a strong criticism of the claim that we should take the subjective view that the report proposes, but I think that it is defensible on the grounds that we can ask people about and demonstrate wellbeing in terms of security, self-esteem, purpose, vitality and autonomy. Those are the kind of things that people value and that make them feel better, and we can measure how that happens. I am afraid that we get into a rather undergraduate discussion about utilitarianism and Aristotelianism, which is a bit difficult to present in public discussion, but it is not only about happiness; it is about fulfilment.
If we ask people what they mean by being fulfilled, there is a common conversation, in which people say, “I like my job and I feel fulfilled. I have a decent family circle and I feel good about that. I feel safe in my environment.” Many of those things are measurable, so we can measure what people are saying about themselves being fulfilled and, in Scottish terms, flourishing. I agree—and this is where it becomes difficult for politicians—that that can sound very soft and subjective, and could sound like we are saying, “Tell us what you would like and we will deliver it to you,” which is not in the power of politics or politicians. However, what makes us feel good about ourselves and society is important. One reason why that is becoming more and more apparent is what we call the wealth paradox, which is quite well established.
The relationship between wellbeing and income is clear, but it tails off to almost nothing at some income levels, for complex reasons. Many people feel that they have a decent enough income but do not feel that their wellbeing is increased. The evidence is that people in Great Britain and Scotland feel that their wellbeing is not increased at between £20,000 and £30,000 of income. After £30,000, people do not feel that their wellbeing is increased. In America, the figure is between $50,000 and $70,000.
The reasons for that feeling are complicated. A popular conversation among people is about being materially better off but not feeling it. People say, “Am I working harder? Yes. Am I more stressed? Yes. Do I feel safer? No.” Given that the crime rate is reducing but the fear of crime is increasing, whether those views are objective is a different question.
I hide nothing from the committee. As experienced politicians, committee members all know that public debate about the subject is extremely fraught, but the debate is moving quite fast and in a positive direction. The popular conversation about feeling materially better off but not feeling better is at the heart of the matter.
I am not sure whether having the conversation is easier post-2008—after the financial crisis. I feel that it is easier, but I am not into the public conversation yet—I am much more into the conversation among think tanks and thinkers. The committee will have a better idea than I do about how the issue plays in public.
The economy is flatlining and I imagine that the population is more insecure than it was a few months ago because of what is happening across Europe and in the wider world.
The subject is fascinating. Many of the arguments have been aired in other areas. For example, the report says that Chile has an average per capita income of $12,000 and that the equivalent figure in Denmark is $34,000, yet life expectancy in Chile is higher—although issues such as diet and lifestyle come into play.
How receptive are senior politicians to the message that you present? How likely is a consensus? If the proposals are implemented only in Scotland or the UK, they will not necessarily work particularly well, because comparisons will still be made with elsewhere. How receptive are people across Europe and the wider world to the process? I notice that resource denudation is classed as a negative, yet it is not really, because chopping down trees and employing people to log them are considered to be growth, although the environment could be damaged permanently. Will you comment on that?
We have discussed the subject in Cardiff, Belfast and Dublin and I will discuss it in London soon. The devolved nations and the Republic of Ireland are interested. The devolved nations are interested because they do not control all the instruments for controlling GDP or fiscal and monetary policies. An issue is the wider range of control that Governments can have, but that is not the only reason for the interest.
The other devolved nations look at what happens in Scotland. They are very interested in the national performance framework—Wales is to do something similar and Northern Ireland is trying to look at something similar. One characteristic of Scotland is that we hide our light under a bushel. We can say something proudly about this.
More internationally, we will do a study trip next year to find out some answers. We will go to France, because of the Sarkozy commission that looked at the issue, and to major cities in America and Canada that have also looked at it. People from the New Economics Foundation, the Institute for Public Policy Research and other bodies that have covered the subject more widely tell me that it is the meat and drink of some private conversations among politicians, but the public conversations have yet to be had. In private conversations, politicians accept the issue and its complexity.
As you said, working out what is and is not part of wellbeing is quite difficult. For example, some debts improve wellbeing. All the evidence says that a mortgage is a debt that improves wellbeing, whereas short-term debt or credit card debt does not. The issue is working out what we mean. If just indebtedness was measured, the picture might be complicated.
10:15
I return to your question about how receptive senior politicians have been. I have not spoken to a lot of senior politicians about our proposal, but the ones to whom I have spoken have been enthusiastic about it. We had Sir John Elvidge, who was a senior civil servant, at our round table and the evidence that we got was that the civil service liked our proposal because it gave certainty to a broad Government agenda and a sense of direction set by senior politicians—in this case, in Scotland. What senior politicians think, what the public think and what the press think are all interlinked. As I said, I am concerned—as anybody would be—that the debate could be trivialised. I believe that it is a modern debate to have.
The great advantage in Scotland is that we have evidence. Elsewhere, there is little evidence about how Governments use the measures, although there is lots of intellectual argument. There is also a popular concern about wellbeing versus financial and material wealth. I am not sure that that has been sorted out—in fact, we all know that it has not been sorted out. There is unease about the relationship between the two, and that is the 21st century dilemma. The 20th century dilemma was about growing our wealth and our society; the 21st century dilemma is about how we can establish a sustainable society, how an economy such as ours can flourish within Europe and how we can flourish as a people.
Thank you. I invite members to ask questions.
I am inclined to agree with all that Martyn Evans has said. There are plenty of examples in Scotland. For example, in the statistics over the years, rural Perthshire has often come out as one of the lower-waged parts of Scotland; yet, in any survey that asks how happy people are, it comes out right at the top. I can see how that would work. I am concerned about how what you propose would change the results. If we used your method, would the deprivation map of Scotland be different? Would different areas be considered the most deprived, and would some of our currently most deprived areas be considered less deprived? How would it change the map?
Remember that I want GDP plus a range of things to be taken into account, with a concentration on those things that are damaging to wellbeing that are hidden within GDP. For example, traffic jams improve GDP—that is one of the conundrums of GDP. Equality within a society is positively associated with wellbeing, although the relationship is complex. If we used measures and drivers to achieve greater equality of income and opportunity in society, which is an ambition—although it is not an ambition of many Governments, as they do not measure it as well as they could—the map would, I hope, be changed because, rather than just willing and hoping that it would be an outcome of all the other policies, it would be central. There would have to be a way of measuring it.
The challenge is often not in saying what we would like to measure but in finding a suitable way of measuring it. However, you should remember what happened with GDP—it took 30 or 40 years to get agreement on that, and a very complex process had to be gone through before we finally got that single measure agreed. If we want to improve equality—which I would say is a measure of wellbeing—we must find the complex series of things that need to be put into the equation to measure that and find how we can drive all institutions below Government to try to achieve a greater degree of equality, including income equality.
I take it that you are talking about the better targeting of resources. Would we find Government resources targeted more accurately at the areas of greatest deprivation, resulting in a bigger differential between those who receive Government resources and those who do not, or would Government close the gap by targeting some of the resources that are currently allocated to deprived areas at areas that are not currently identified as being deprived?
We have a policy of grow, tax and spend, which has served us very well. In the spend part, we have tried to redistribute the benefits of the growth, but that has been uneven. We have not found very efficient ways of tackling some of our most deprived postcode areas in Scotland and the rest of the United Kingdom. We have done our best and put a lot of resources in, but we find that we are recycling those resources. In housing, for example, we build and refurbish, and then we have to do it again in 10 or 15 years’ time. There is a cycle of spend.
I wish that I could say that it was quite simple, but anyone who has any experience of political life will know that that is completely false. However, there are issues of wellbeing that relate not only to spend, but to community resilience, how communities feel about themselves and how we might empower them.
The idea is not a radical one, but a modern one about how we start to engage with communities so that they themselves define what wellbeing is. I will give you one example. We are going to do some work next year about what we call—and some previous researchers have called—incivilities. What people in communities really care about are things that many people at high levels of public policy dismiss as being not quite good enough—things such as graffiti, dog dirt and unpleasantness in their area, and poor rubbish collection; they think, “We want something more important than that to concentrate our intellect and our public finances on.” However, if we tried to tackle some of those things, I think that wellbeing would increase. It is about allowing communities to say what their preferences are.
To come back to your question, I would hate to think that this approach would have any negative effect on resource allocation to our poorer communities. I would expect it to have a positive impact, but it is not just about spend; it is about building on the assets that communities have and recognising that they themselves can make a contribution.
You do not view it as diverting resources away from what Burns described as “honest poverty” and towards people who have money but find that it has not made them happy.
One of the best quotes that I have seen appeared in The Guardian right at the beginning of the big society thing. It said that the big society was an interesting idea about empowerment, but asked whether it might just benefit those with fat wallets and sharp elbows.
That would be my concern about any policy that seeks to empower communities and individuals: will it just empower those who already have power and allow them to consolidate and ring fence what they have? In some respects, it is the Government’s role to ensure that there is a redistributive element in society.
The conversation, in which you are engaged as much as I am, is about what the measurements are and who sets them. Part of our argument is that those measurements are set not just by Government, but by civil society and communities, and public authorities should respond to them. I would not be arguing for this approach if I thought that it would take resources away from our most deprived communities. In many ways, those communities epitomise the lack of wellbeing despite the wealth that surrounds them.
So your approach will help us to target resources better, but we will not end up closing the gap in spending between the rich and the poor, so to speak.
I certainly hope that it would help us to target resources better. It would drive the people who are responsible for services to understand what they are trying to achieve rather than just have targets set from above. Closing the gap between rich and poor is a difficult one because it depends on Government tax redistribution policy; it is for Government to decide what it would like to do and what it puts before the electorate. As you know, it is quite controversial—not in theory, but in practice—to take money from one part of society and put it towards others.
I enjoyed reading your fascinating and thought-provoking report, Mr Evans. As a former economic consultant, I am guilty of having undertaken many evaluations on the basis of GDP. However, I buy in very much to what you are saying, and I think that we need to widen the range of indicators that we use.
I will deal with two subjects. The first, which links in to the discussion that you have just had with Alex Johnstone, concerns how society—the public sector—invests. To date we have used the Treasury’s green book, which contains guidance on economic appraisal and evaluation of public sector projects, to decide between different options. Much of the focus is, understandably, on the rate of return on the public funds that are invested. Did the round table look at that document as part of its work? Given its thinking, do you have a view on how valid the green book is and whether the criteria for investment need to be refreshed?
Since I became a member of the Finance Committee, it has dealt with written submissions and other evidence from witnesses on the relative merits of projects such as the Borders railway and the Glasgow airport rail link. Clearly, GARL would have a significant economic impact on Glasgow and the western central belt. I do not deny that in any way, but the Borders rail project is important to the community that I serve, not just for economic reasons but for social reasons. Do we place enough value on the wider social benefits of such projects, or is it always a beauty contest based on the rate of return?
I regret to say that the round table did not look at the green book—it did not look at public expenditure at that level. It met only four times, and it was quite difficult to bring those prominent people together in the short time that we had. I do not doubt that there is more work to be done. However, the conversation regularly returned to the perverse incentives that exist in public expenditure and the counterintuitive rules that apply. As an economist, you will know that measurement is critical and also that we can measure things that are contradictory and still come to a figure. Often, however, money trumps measurement. Whatever we measure and however the measurement is done, people can say, “It doesn’t matter what it says; it costs too much.”
Our objective in the round table was to take up the Sarkozy commission recommendation that every jurisdiction should have a round table. We could not get any buy-in to that from the UK Government, so we decided to try it in Scotland. We wanted to see whether we could widen the conversation among a range of interested people and open a debate about GDP-plus at the macro level. Having done that, we can have a range of other debates about the Treasury rules and whether they are implemented correctly. The one that I remember is the green book rule that public assets must be disposed of at the full price. That cuts across a range of other public policies on community growth, empowerment and so forth, but it is clear why we have it, because otherwise public assets could be disposed of at less than their value to us as the public. Working that one out would be quite tricky.
Taking that example, we can imagine a situation in which a local school has to close and the community wants the building for a community centre or another local project that would contribute to wellbeing in the way that you described; however, for financial reasons and given the best-value regime, the local authority does not choose that option.
Yes. That example is regularly rehearsed with us. It is a specific example of the perverse rules, but we can understand both sides of the argument. Why should our assets be sold for less than their value? On the other hand, if the value created by the asset is built upon, what is the issue? It is important that the asset does not go outside community ownership; if it was sold to a private interest, we might be concerned about underselling our assets. You will know that we have undersold some of our major public assets over the past 30 or 40 years to great private benefit, so it seems strange that we cannot sell some of our public assets at a discount for community benefit.
I agree. In the same vein, we regularly hear that the official statistics tend to underrecord the contribution that sectors such as education and health make to the economy because of the means by which gross value added—which is a building block for GDP—is calculated. We could argue that the value of sectors such as education and health and other social investments of that kind are routinely underrecorded. Did the round table discuss that?
10:30
We did. We focused on the third sector and said that there should be another set of national accounts to consider the contribution that the third sector can make, because it is difficult to capture that with the current forms of measurement. Sometimes, people say, “We only collect certain types of data; we do not collect enough,” but that is not true; we collect an enormous amount of data, even if we do not use that data for measurement and policy creation. However, one area in which we do not collect enough data is the impact of the third sector.
The third sector is a significant part of the economy. As the Scottish Council for Voluntary Organisations readily reminds us, it employs a large number of people in Scotland and provides a large amount of income. However, we are finding it difficult to work out how to measure its economic impact and its impact on wellbeing. If we could work out how to do that for the third sector, I am sure that we could find ways of doing it for health and other sectors.
My second theme involves the sustainability agenda. The summary of the round-table recommendations and the Stiglitz recommendations both refer to the loss of the Scottish sustainable development indicator set. Why has that had such an impact? What can we do to address that?
Every report of this nature is the result of a range of compromises. I would say that the green tinge of the report was not fully agreed by all members of the round-table—they let it go, but there were some very strong green voices, and rightly so. The feeling was that the Scottish sustainable development indicator set was a measurement that was collected in order to hold the Government to account for a difficult policy objective, which is to maintain our wellbeing and economic growth while not degrading our environment. The losing of those measurements was seen to be an indication—perhaps not a substantial one—of a lessening of interest in an important aspect of our wellbeing. At the time, people asked why we were taking those measurements away, given that we are measuring all sorts of other things and that the measurements contribute to accountability.
The view of those on the round-table was that the national performance framework was a progressive policy that was ahead of its time. We got clear evidence that the civil service was behind the framework and liked it, but we did not feel that it was used as an accountability mechanism—it was too new to be viewed in that way. Instead, more traditional financial accountability measures were applied to Government spend. I do not know what your current views are, but it was interesting to us that it had not been to the forefront of parliamentary committees’ minds with regard to measurement, which means that the sustainability measurements might not have had the traction that they might otherwise have had and that, because people were not used to using them, they could be reduced or diminished.
On how practical and useful the approach is, from what you have already said, I think that you might agree that individuals already use a range of measures in their own thinking—perhaps consciously, perhaps subconsciously—about their lifestyle. For example, they do not always go for the highest salary, because other factors might be more important, such as living in a certain area, being near to their family or enjoying their job more. Is it therefore necessary for the Government to get involved in all that as well? Is there a danger that the Government might try to do too many things and take its eye off the economic ball?
I have a lot of sympathy with that view, emotionally. When I first approached this area, I asked myself whether the Government was being asked to intrude into individuals’ lives. My conclusion, eventually, was that that was not the case. We are trying to find out what matters to people collectively—everyone’s desires and wishes—and how the Government can impact on that.
It is not jobs but job security that appears to be one of the major drivers of wellbeing. People tell us that they feel better if they know that their job is secure and that they have a long-term future in their job. That insight is not particularly brilliant, but if you can find a measure for job security—one thing that the Government is trying to do is to create not just jobs, but stable jobs—that will fulfil a role of the Government, which it has taken on and does well in many areas, and refine it in terms of what people feel, thereby creating their own wellbeing. That is an attempt to answer your question.
I think that it is right to have those sceptical voices because, if we are not careful, this could degenerate into a west coast of America-style “What would make me feel happy?” situation and that is not the point of government. The Government should not intervene to make individuals feel happy, but we need to know what wellbeing and fulfilment levels are to know whether the Government can do anything. Sometimes, the Government cannot do anything and that would also be a good political discussion to have.
That is helpful. My other point was to do with recommendation 5 in your report, which is about distribution and inequalities. Can you explain? Perhaps I have not understood. You say that some things are good and you talk about the solidarity of purpose target and so on, but what do we not have in that area that we need?
I am afraid that I cannot be specific about what you do not have. We felt that the measurement and the purpose were not sufficiently focused for that matter to be a primary driver of public policy. Perhaps I can use my experience in the health service to explain: narrowing the gap between those who have the poorest health outcomes and those who have better outcomes is constantly an issue. That is bedevilled by the fact that those who are better off have better health outcomes. It is not that the lowest group has worse health outcomes, but that the better-off group has much better health outcomes. If you were not careful, one perverse outcome could be that you would start to stop people at the top of the income scales—those who are wealthier—becoming healthier and healthier. We must be careful about what we measure, or the policy that we pursue might have the objective of reducing health inequalities but, in reality, would only stop already healthy people becoming healthier.
Do we need a change of emphasis on the range of measures that we already have rather than completely new measures?
If I was speaking to another Parliament and a different Government, I would be saying that they did not even have the measures available. The great thing about this Government is that it has such measures, so the argument is about how effective their use is and whether we can improve them. You get nine out of 10 for having the measures, but we can improve them.
As for the detail about how to do that, the round-table said that it did not have the time or expertise to make suggestions but that it wanted to drive a discussion that said that this is a great place to be but that the measures could be refined to achieve the policy objectives, which are not just about GDP growth but go beyond that. They are quite sophisticated objectives, such as those on income distribution and inequality, and if we can find such measures and give them to the public agencies and other agencies, perhaps we can narrow that gap. That would be the ambition.
My point follows on from John Mason’s question and, again, it is about recommendation 5. It harks back in some ways to the old concept of a social wage. It is not just about the money in your pocket—the social support and services that people get matter, too. A good example of that might be the fact that the council tax freeze puts a couple of quid in everybody’s pocket, but the other side of the coin is that people’s wellbeing could be disrupted because of the cuts in services.
A lot of these things are great ideas in principle, but putting them into practice has proved to be a wee bit more difficult. It is one thing to identify and measure wellbeing by whatever method, but if it becomes central to Government policy making is there not a danger that policy could be determined by whether actions will boost the chosen indicators at the expense of other actions that are not included within the targets? Does not that choice of wellbeing indicators then become a political issue?
I will take your last point first. Absolutely—it is clear that if you choose a series of measures and then drive them, you are making political choices. One set of political choices is distinguished from another by the parties that would, presumably, put themselves up for election and the difference comes when a party puts a certain set of measures before the electorate and is chosen, as it will then pursue those measures. It strikes me that that is the point about political competition. I absolutely see and accept the point: these decisions are not value neutral and they absolutely would have a political and social value.
The inequality debate, again, is a matter of parties’ preferences. On measures for increasing wellbeing, the New Economics Foundation suggests that there should be a target band of income for everybody. We should assess how many people are in the target band and how many people can be moved into it. The foundation states that income increases are important for wellbeing but that above a certain level they have a diminishing return on wellbeing and that how many poorer, lower-paid people can be moved into higher income bands is critical. That is not what the Carnegie UK Trust says but what the New Economics Foundation says, because we are moving into making active choices on policy objectives. I believe that it is a completely legitimate policy objective to have a target band of income, and that a political party could choose what income band would be appropriate to drive public policy and what redistribution or tax levers should be pulled to achieve that target.
At the risk of being positive, I suppose—
Steady now.
I know.
I have never known a party to go into a Scottish election saying that its core objective is to increase the nation’s GDP. It is perhaps more sophisticated than we are suggesting. Most politicians, Governments and public agencies have a varied range of indicators for determining important outcomes. For example, local councils’ single outcome agreements have a range of indicators, health has a range of target outcomes and the national performance framework has a range of indicators.
When a nation wants to compare itself against another, GDP is regarded as the most important factor. Is not GDP more a measure for countries to use in making comparisons between and competing with one another, rather than a measure for Government agencies, which are more focused on matters at a local level?
GDP is an internationally recognised number—it is a series of numbers that end up in one number—that allows international comparisons. However, as the convener said at the beginning, it is also a clear driver of public policy. If GDP is in decline or is negative and we are in recession, those are headline figures. Economists know that GDP consists of a complex set of things that are rather strange. For example, traffic jams increase GDP, and crime increases GDP—when GDP is unpacked, it is a strange measure.
The core argument is that we have an international comparator that allows us to make comparisons between countries in terms of the important matter of growing their economies. Would we want to take that away? Absolutely not. Would we want to build, as the Sarkozy commission is saying, another series of equally robust international comparative figures? Yes, that would help and we already make such comparisons in some ways. The Organisation for Economic Co-operation and Development comparisons—unfortunately they are for the UK, rather than for Scotland—are made under a range of indicators that are absolutely fascinating. In many ways and over a range of areas, they tell a good news story about what the United Kingdom is and how we are engaged. I would like to see the indicators disaggregated for Scotland in order to know what the story is for Scotland.
If we are to have GDP-plus, we should learn from all the lessons from GDP and economists’ efforts in order to make it a robust, agreed single indicator. By doing that, we can use the comparisons rather than argue about the figures behind them. GDP is necessary, but is it sufficient? Absolutely not. International comparisons could be made between other aspects of wellbeing. Let me give an example—jobs—which is an important one. We have the broad public policy in the United Kingdom of lower job security and greater labour mobility, which will bring in foreign investment and grow our GDP. Other countries have a policy for stable jobs and investment in jobs for the long term. Those are complex political choices, but the evidence is that people value stable jobs, which increases wellbeing. The trade-off is therefore whether we want a declining economy and a few well-paid secure jobs or a growing economy. The conversation becomes about what we are willing to trade off, which is a complex political question—not what measures of wellbeing and GDP we have, but what we are willing to trade off between those various measures.
Thank you.
10:45
First, I have an observation based on what Derek Mackay said about the focus on GDP. He is right to hit on that issue. The most powerful organisations in the world are organised on the basis of the size of each country’s GDP—the G8 and G20—and some of the key decisions that affect the wider wellbeing of society and other nations are set by those so-called big hitters because of the absolute size of their GDP.
If we looked at GDP per head, there might be a different league table, and I also want to raise the issue of the international development index. If we rank countries in order of their development, the likes of Norway and New Zealand—which has a lower GDP per head even than us—are more developed than we are. That is a reflection that there are other international benchmarks, such as the international development index. Should we perhaps set more store in our place in those league tables than we do in GDP?
I think that we already set quite a lot of store in those measures. The national performance framework has international comparisons about other matters. International comparators are always useful to have as they help us drive where we want our society to be and how to approach trade-offs in issues such as taxation—how taxed we want our people to be.
Of course, how wealthy a country is determines many things—for example, how much power it has because of the money that it can spend on its military—and I do not think that that will change. However, that is not the argument: it is not to reorder who is in the G20 or whatever. Powerful economies have all sorts of ways of growing, but the argument is whether in Europe, in the 21st century, we will be a powerful, growing economy on the basis of the 20th century. The answer is probably not. We have to find other ways of defining ourselves. Part of it is the knowledge economy—the kind of jobs that we want—and part of it relates to the manufacturing base that we can have here.
There are all sorts of complications, which is why the discussion is a European one. It is not a discussion that is taking place in China or India, which are growing their GDP, internal consumption and exports at an extraordinary rate, and it is not really a discussion in America either. The discussion will grow there, but the Americans see themselves as competing in the 21st century to maintain their position of GDP, world and military power. That is why it is a European discussion and, even more so, a Scottish discussion. A small country in Europe has to find what its Government can deliver to its people. There is a lot of disparagement outside Europe about the debate. As I said at the beginning, it is seen as lazy Europeans wanting more—they had more in the 20th century, and they want more in the 21st century. That is an argument to be rebutted.
The excitement of the discussion is that there is a lot of UK and devolved interest in it. It is timely and, leaving aside party politics, I think that Scotland has something very important to say about it. It is not in any way perfect—we cannot just export the argument—but that is not the point. The point is that the Scottish Government is the only Government that we could find that has a broader set of measurements related to the discussion. I cannot say that we spent a huge amount of time looking everywhere. In fact, people told us to go to Bhutan, but we were not interested. I would love to go there, but the issue is not about happiness. We are talking about a complex industrial society in a modern world finding forms of measurement that include GDP-plus. The Scottish Government has tried to identify what that “plus” is. We think that it is great—it could be improved, but it could also be a template for other jurisdictions to look at.
Thank you.
Will you expand on recommendation 11, where you say:
“The decision, to cease monitoring and reporting … was a step backwards”?
Would you like the sustainable development indicators and Sustainable Development Commission to return?
Yes, we would like them to return. We measure an enormous amount of things, so I can understand why we may want to rationalise what we measure, but measuring a range of sustainability targets drove a conversation about how sustainable we were trying to be as an economy. Why would we not have those? We would like them to return, perhaps not in their old form, but we would like the issue to be back on the agenda.
That would be consistent with the public policy discussion about whether the way that we are driving our economy is right and whether we are destroying things for future generations for our own benefit now. However, I do not want to say that the indicators were perfect and that we want to reintroduce them. I want there to be a conversation about how we measure our sustainable impact and how we hold Government, its agencies and civil society to account for environmental degradation.
In the concluding comments of your report, there is an interesting quotation from John Stuart Mill, who
“predicted that once economic growth had delivered prosperity, a ‘stationary’ economy would emerge in which we could focus on human improvement: ‘There would be as much scope as ever for all kinds of mental culture, and moral and social progress ... for improving the art of living and much more likelihood of it being improved, when minds cease to be engrossed by the art of getting on.’”
That sounds like something about which we would certainly be enthusiastic, but how will we know when we have reached that stationary position, if we reach it? Everyone says that economic growth is clearly not sustainable in the long run and there will always be people in any given society who do not feel that they have their proper share of it, so what would happen with people who did not feel that they had a role in that stationary economy? How would such an economy secure economic competitiveness and ensure that society remained vigorous rather than becoming stagnant or sclerotic?
That is a great point. I did my masters degree on John Stuart Mill, so I remember that quotation vaguely from it. He is in the report because we wanted to have a strong Scottish thinker who questioned constant economic growth.
You asked whether we could reach a point of stability. I do not think that Mill is right about that, but he is right that GDP is an interim measure—an intermediate policy objective—and not the outcome in itself. That is the important thing. He was trying to say that we are trying to get economic growth not for its own sake but for a particular purpose. If economic growth results in things that destroy or undermine fulfilment, wellbeing or the environment, we question it.
That brings us neatly back to your first point: how do we have a public discourse about that? It is difficult, because there is a mantra that economic growth is, in itself, a good thing. That is where we are now, but is it a good thing? A range of people are questioning whether it is.
I do not think that we possibly could reach a stable point. However, John Stuart Mill is a great person to quote, because he is a great Scottish thinker.
That is a good point on which to end. Thank you, Mr Evans, for answering our questions in this fascinating evidence-taking session.
I suspend the meeting for five minutes for a natural break.
10:54
Meeting suspended.
10:57
On resuming—