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1 Dec 08

Brian Ashcroft is entitled to get emotional about the crisis in the Scottish financial sector – “a tragedy” – thanks to his strong reputation as a disinterested economic commentator

by Richard Goslan

Economists have a reputation for forsaking emotion in preference for the measured analysis of the numbers – no matter how grim they might be. But when the news from the financial services sector is as unremittingly awful as it has been over the past few months, even economists find themselves offering up more than just statistics.

In Brian Ashcroft’s view, there is no overstating the damage that has been done to Scotland’s international reputation because of the meltdown of the nation’s top two banks. The professor of economics at the University of Strathclyde has watched in dismay as the Royal Bank of Scotland and HBOS have been caught up in the global financial crisis: brought to the brink of bankruptcy, partly nationalised and,in HBOS’s case, facing takeover by Lloyds TSB.

“It’s a tragedy,” he says. “It’s a tragedy for Scotland, because in the long term, our reputation for financial services has been damaged, there’s no doubt about it, and banking in particular has been damaged. Let’s hope that the banks’ new regimes ensure that we can recover from it.”

Ashcroft goes on: “I’ll be honest about this, I thought that RBS was well capitalised,but I got it badly wrong. But there again, so did many others.

“We all fell victim, in part, to our trust in the efficiency and skill of Scottish banking – which, very sadly, has been blown apart.

“We’ll see new regimes come in and after a period of consolidation, reputations will be rebuilt, but it’s going to be very hard to argue the case for prudent Scottish banking. When emerging nations have looked for banking advice, they have often looked to Scotland. Will they do so in the future?”

One of the reasons Ashcroft is able to be unsparing in his criticism is his independence in his role as a teacher at the University of Strathclyde’s Fraser of Allander Institute (FoA).

The institute was established in 1975 as a result of a donation from the Hugh Fraser Foundation, a charitable body set up by the Scottish businessman and department store owner. The institute carries out research on regional issues generally and the Scottish economy in particular, including forecasting and the analysis of short-term and medium-term movements in Scottish economic activity.

Its best known publication is its Economic Commentary on the Scottish economy, which has been published since 1975.

Publication of the commentary stopped more than a year ago, after Ashcroft’s decision to go into semi-retirement. Professor Ian Wooton, head of Strathclyde University’s economics department, described Ashcroft as “irreplaceable”, and without any natural successor in place to take on his role, the commentary’s future looked bleak. Thanks to financial support from PricewaterhouseCoopers, the report was revived in June this year and Ashcroft was lured back into the fold as economics editor, with Cliff Lockyer as managing editor. The outpouring of support from business and media at its relaunch showed how much the commentary had been missed.

“I think it’s absolutely crucial that there is an independent source of critical but constructive advice on matters economic,” says Ashcroft.

“We’ve always tried hard to ensure that whatever we say is justified by evidence and as much as we can reasonably and humanly do it, uncoloured by personal prejudice and belief.

“We’ve always had to be careful with that, but over the years I think we’ve generated a reputation for independence. And long may it continue because it’s important that we are not in such a position that we feel we need to temper our words because of the interest of some funder or supporter. It’s not just about government, it’s also about industry, or key players in the Scottish economy – we have to ensure that we can say our piece. We say it constructively and politely, but nonetheless we say it.

“You would expect that the state could come in and support this kind of activity, but there’s a great danger when that happens that you are shoe-horned into more supportive, less critical type of work. There’s always this difficult balance.”

Ashcroft knows all about balance, and potential conflicts of interest. At the time of his semi-retirement, his wife, Wendy Alexander, was taking over the reigns of the Scottish Labour Party from former first minister Jack McConnell. Her promotion coincided with the FoA’s Economic Commentary going into hibernation, which Ashcroft says was not entirely a coincidence.

“It was a factor, but a small factor,” he says. “I was aware that I would be subject to increasing criticism and I was aware that the connection might get in the way of the message, but I’m the type of person who wouldn’t have allowed that to stop me.

“It is true that there are certain politicians who will try to brand what I say as being essentially an apologia for the Labour party, but there again we have been very critical where appropriate of the government. I do try and base what I say around the evidence.”

Ashcroft opted to spend more time at home, helping to look after the couple’s young twins and returning to one of his first loves – playing rock guitar (his band, the Denvers, enjoyed some success in the early 1960s). With his wife’s political career in the ascendancy, he was happy to take a back seat. But the potential conflict of interest was unexpectedly removed, when Wendy Alexander resigned the leadership in June,following pressure over breaking party donation rules.

“When Wendy retired in June I had already agreed to return to doing the commentary, but there was a degree of serendipity in the timing,” he says.

“It is helpful to me that she is not in that position any more, but in no way did I wish her not to be in that position.”

In the meantime, Ashcroft is working to make sure that when his retirement does come around, the FoA commentary is left in capable hands.

“It’s a bit unfortunate when one person gets to retirement age that the whole thing is at risk,” he says.

“One of my main objectives in returning was to make sure we have a product which will continue past personalities – it’s like succession management up to a point.” n

A report on the most recent Fraser of Allander Institute Economic Commentary Looking into the Abyss is on Page 8. It is available to download from www.strath.ac.uk/fraser

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