Achi news desk-
The level of wealth losses in Scotland is being compared to developing countries with concerns that the nation is being “massively exploited” by foreign interests.
Official wealth export data seen by The Herald on Sunday calculates the financial difference between what Scotland produces (Gross Domestic Product) and what is earned by the nation’s people and businesses ( Gross National Income) shows that £10.126bn has been lost in 2021 alone. For each year of a 22-year period since devolution, Scotland has lost an average of £12.1bn a year in net wealth.
Since devolution, the nation has had a net wealth loss of £266.350bn with much of it coming in the form of profits and dividends to companies and shareholders overseas and elsewhere in the UK. Just over 50% of that went overseas with the rest going to the rest of the UK.
Respected think tank Common Weal, which has been tracking Scotland’s financial strength has raised concerns that the net wealth loss is greater than almost any developed country that is not a tax haven and is causing “major economic disruption “.
They say the level of profit loss from Scotland is “much too high for a country of our size and economic development and, in fact, exceeds the levels of some of the poorest countries and most exploited on the planet”.
“This should be politically, socially and economically unacceptable and its reversal should be considered a core part of strategic economic planning going forward,” said Common Weal.
They say that a country of Scotland’s financial position should be a net importer of wealth, meaning that the £10.126bn lost in 2021 would turn into a profit of £1.5bn, with expected returns of 1% .
Of the £10.126 billion – around £6.2bn went overseas while the rest went elsewhere in the UK.
“Far from improving Scotland for its citizens, the over-reliance on foreign direct investment is stripping this country of its wealth and causing its domestic industry base to wither,” they said.
“Scotland’s biggest economic problem is the lack of Scottish ownership in the Scottish economy, certainly on the medium and large scale. If we don’t reverse that, we will always be trying to raise the waterline in a vessel with a hole in the bottom. .”
One study shows that Scotland has surpassed the UK and Europe on foreign investment in 2022 for the second year running – by securing a record 126 inward investment projects in 2022 – a 3.3% increase on 122 projects 2021.
But the concern is that foreign investment requires a return – which means extracting profit from the country.
It comes as foreign governments including China and foreign companies have major financial interests in Scotland’s offshore wind farm revolution.
Ministers came under fire at the time for failing to properly replace the seven operating farms and three large schemes that were in advanced development stages which will together according to energy companies have 5GW of installed capacity – enough to power double the 2.7 m households in Scotland.
There has been concern that governments in China and the United Arab Emirates who have a key interest in the projects are presided over by human rights concerns among those benefiting from Scotland’s green revolution.
At that time in the last full financial year, combined offshore wind farms made over £230m in profit.
The “extraordinary” array of state government-controlled companies making millions from a key stake in Scotland’s collection of offshore wind farms also included France, Norway, Sweden and the Republic of Ireland.
Controlling interests are also held by private energy companies in Germany, Spain, the Netherlands and Japan.
The Scottish Government has been criticized for its failure to establish a publicly owned energy company saying it did not have the powers – while Wales has been developing a similar scheme.
Campaigners have long called for a state-owned company to own energy resources, to provide safe, reliable and low-cost retail energy to homes and to ensure supply chain and renewable energy manufacturing jobs for Scotland .
Scotland’s busiest airport is now owned by French construction company Vinci, which bought a majority stake of 50.01% for £1.27bn last week.
Common Weal which has carried out an analysis of Scotland’s wealth says that the loss is one of the highest in the world.
They say that a comparison with over 200 nations of all economic sizes on the World Bank’s GNI database shows that the loss is greater than most countries of similar size and per capita income level and that it higher than the average of the world’s poorest and most indebted countries. countries.
Scotland is in the bottom 25 countries with the biggest wealth losses in 2021.
Some of the world’s largest economies all made the biggest wealth gains in 2021.
They include the US with $302.03bn (£242.36bn), Japan with $242.99bn (£195bn) and Germany with $151.09bn (£121.24bn.
Scotland is in the top 40 countries with the highest losses as a percentage of GDP at 5.59%, but more than 30 are economies half the size of the nation or more.
It ranks with Laos at 5.7%, Fiji and Chile at 5.83%, Liberia at 6.1% and Bhutan at 6.13 and at the top of the table are the smaller economies of Timor-Leste with 47.85% and Puerto Rico with 31.42%.
The UK is in the top 55 in terms of wealth gain and loss, with a deficit of £4.78bn, which is 0.15% of GDP. Of the top performing larger economies, Kuwait had profits of $19.15bn (£15.36bb), which was 14% of GDP and Hong Kong had profits of £25.57bn (£20.5bn), which was 16.9% of GDP.
Common Weal director Amanda Burgauer said: “It’s time to challenge the mantra that foreign direct investment is always good for Scotland. What this shows is that foreign ownership of our economy makes us much poorer.”
“If you want to know why the Scottish economy is lacking, look at how on income and level of development we group with the main European countries but the extent to which we export our wealth abroad we group with countries which is developing. I think that tells you all you need to know.
“Scotland’s biggest economic problem is the lack of Scottish ownership in the Scottish economy, certainly on a medium and large scale.”
Scotland is also set to lose billions in profits each year from the ScotWind offshore wind projects which the Scottish Government is hailing as a “truly historic” opportunity for Scotland’s net zero economy in what Common Weal described as ” possibly the biggest economic failure of the last decade. “.
The biggest winner at ScotWind was Scottish Power, a subsidiary of Spanish utility company Iberdrola, which won the seabed rights to develop three new offshore wind farms with a total capacity of 7GW.
Analysis by Dr Craig Dalzell, head of policy and research at Common Weal raised concerns that the level of wealth loss as a percentage of GDP is far higher than the average of any World Bank income group, including the world’s least developed and most indebted income group . generations.
He fears that an over-reliance on foreign capital has and will lead to a “catch-up” of Scottish democracy as politicians will be under pressure to appease investors who have already shown an ability to move investments elsewhere if the demands are not are satisfied about tax cuts, erosion. workers’ rights, environmental standards or any other legislation that could breach profit extraction rates.
He said: “When it comes to Scotland at the moment, our economy is being massively exploited and massively extracted and our public services are suffering. If that money is leaving it’s not flow around our economy. If Scotland were £50,000 richer, then where would that money be, it would be in our economy and be invested in public services.
“If you look at all countries, and take the average expectation from a country of our level of development, you would expect Scotland to be a net importer of wealth.
“You would expect Scotland to have some sort of sovereign wealth fund investing outside the country and taking profits in. You would expect more Scottish companies to have outposts elsewhere in the world and take profits. inside.
“Countries as rich as Scotland generally tend to draw wealth towards themselves. Scotland is a very strange country at that level of development, in the sense that we push so much of our profit out of Scotland.
“The reason is that we have a very foreign-owned economy and we have had successive governments that see foreign investment as a major tool of economic development. Every time they try to push the economy, the Scottish Government talks about more foreign direct investment.
“We would expect to see a wealth of 1%. The Scottish Government is so focused on getting foreign companies to come in and develop Scotland but we are not investing in the domestic Scottish economy, so we are seeing this profit leave , and you can see that with energy, with the high level of foreign ownership of energy companies, those profits support their public services rather than Scotland’s.
“Many of these choices land at the door of the Scottish Government.”
Earlier this month, external affairs secretary Angus Robertson visited Washington and New York City to promote Scotland to North America as “a great place to live, work, study, visit, invest and do business”.
The engagements included meeting with technology companies investing or planning to invest in Scotland.
Dr Dalzell added: “There is no need for Angus Robertson to go to New York on Tartan Day to drum up support for more foreign direct investment. He could have been there to drum up support for Scottish companies investing in the US. ”
A spokesman for the Scottish Government said: “Despite being tied to the UK’s failed economic model, Scotland is a rich country with a GDP per head behind only London and the South East. Although foreign investment has brought jobs and prosperity, foreign companies in Scotland make up a similar proportion of our economy to those of many other countries in Europe.
“This type of high-quality investment helps create a more open and outward-looking economy, adds to domestic supply chains, improves productivity, and provides well-paying skilled jobs.
“The Scottish Government has set plans for a specific Fund for Building a New Scotland to invest up to £20 billion over the first decade of an independent Scotland, to ensure that everyone can benefit from the natural wealth of this country, and lay the foundations for a fair. , a growing green economy.”
