Should a country of 5 million souls
which currently forms the northern part of an “imperial” nation split and go
its own way?
Not exactly, perhaps, the question on
the referendum paper – but I’ve chosen this adjective and put it in inverted commas to
give a sense of some of the ideological issues involved in the present debate
which is currently raging in my homeland….
Noone disputes that these 5 million
people form a country (it has had its own legal, religious and educational
systems for centuries) – nor that they have, in the past few decades, become
deeply alienated from the British political system which has developed since
the 1970s.
The new Scottish Parliament which was
formed in 1999 has significant devolved powers and more are coming its way. But
that has not stopped the alienation from the neo-liberal ideology of the
British system which has permeated even the Labour party since the 1990s
The question is whether Scotland
should tear free from the remaining parts of the “Union” which was formed all
of 300 years ago – namely the economic, welfare and defence parts.
The consensus of opinion in Scotland
seems to be that the last two should now also go. The presence on the river
Clyde of the British nuclear submarine base is and always has been deeply unpopular
(with ongoing public protests for the past 50 years); and the Scots never
supported the Iraq war… I will elaborate this aspect in a future contribution.
And the last post indicated how
unpopular the welfare cuts are in Scotland.
Basically that leaves the economic
arguments….
The best of the “unionist” blogs –
called Notes from North Britain - is written by the Professor of Public Law at
the University of Glasgow. His latest contribution is a powerful argument -
Fully 70% of Scottish exports are sold to the rest of
the UK. Just pause there for a moment: Scotland trades more with the rest of
the UK than with the whole of the rest of the world put together. Scotland's
trade with the rest of the UK is worth four times her trade with the EU.
In the last decade the value of Scottish trade with the
rest of the UK has increased by 62% (whereas the value of Scottish trade with
the EU has increased in the same period by a mere 1%). Given the eye-watering
scale to which the Scottish economy depends on doing business with the rest of
the UK, why would any sane person wish to erect an international frontier
between Scotland and the rest of the UK? Why turn this trade from domestic to
international, with all the added costs and disincentives that would apply?
A
"border effect" would inhibit and diminish Scottish trade
considerably. Compare, for example, the US and Canada where, despite
commonalities of language, free trade agreements and the relative openness of
the border, it remains the case that Canadian Provinces do twenty times as much
trade with each other as they do over the border in the US.
The border between Canada and the US has been estimated to
reduce trade by 40%. Migration within Canada is fully 100 times greater than
migration from the US to Canada.
Here, it has been estimated that the
"border effect" could cost each Scottish household £2000 annually. There are 360,000 jobs in Scotland created by companies in
the rest of the UK. A further 240,000 Scottish jobs depend on exports to the
rest of the UK. That's 600,000 jobs. As many as 200,000 jobs in Scotland depend
on the financial services industry. Fully 90% of Scottish companies' financial
services business is with the rest of the UK. Nine out of ten pensions sold
from Scotland are to customers in England, and eight out of ten mortgages lent
from Scotland are to borrowers in England. This economic activity requires a
single domestic market with a single currency in a single regulatory regime.
Scotland's economy is performing well in the Union.
Scotland has a higher economic output per head than Denmark and Finland, and
significantly higher than Portugal. And Scotland has maintained a consistently
higher employment rate than comparably sized countries in the EU. Indeed,
Scotland has the highest employment rate of all the nations of the UK -- and
there are more people in work in the UK now (30 million) than ever before in
our history. We have a higher employment rate even than the USA.Whereas the EU single market is still replete with trade
barriers, in the UK our domestic market sees genuinely free trade, meaning that
Scots have ten times the job opportunities they would otherwise have.
The United Kingdom is the sixth largest economy in the
world, despite being only the 22nd biggest country in the world in terms of
population. Who wouldn't want to be part of it?
………………..Trade and jobs are about economic opportunities. But
economic Union is also about sharing risks, absorbing shocks, and pooling
resources, leading to greater stability and security for us all. Take oil and
gas as an example. North Sea oil and gas is a lucrative business, but it is
also highly volatile. The oil and gas is expensive even to locate, never mind
to extract, and the price of oil can decline sharply. Tax revenues from North
Sea oil and gas fell by a whopping £4.5 billion in 2013. That is the size of
the Scottish schools budget. That kind of economic shock is much easier to
absorb in an economy of 63 million people than it is in one of only 5.3 million
people.
The UK Government supported the injection of over £45 billion into RBS
in 2008, and offered the Bank a further £275 billion of guarantees and state
support. This total was more than double the size of Scotland's economy that
year -- it was 211% of Scottish GDP including geographical share of
North Sea oil. The Union delivers for Scotland economic security, as well as
economic success. The Union is good for Scotland. Public spending in Scotland
is £1200 per head higher than the UK average. At the same time, onshore tax
receipts are, per person, lower for Scotland than the rest of the UK.
In
numerous ways, Scotland does disproportionately well out of the Union. In
2012-13, for example, Scottish universities secured more than 13% of the UK's
research council funding: some £257 million. This isn't just good for Scottish
universities: it's good for Scotland as a whole. It was estimated in 2010 that
Scottish universities contributed £6.2 billion to the Scottish economy (not
least through the 39,000 people they employ). It is not just in raw economic
terms that the Union delivers for Scotland: it delivers also in cultural
terms. The UK's national broadcaster, the BBC, receives some £300 million
annually from Scottish licence-fee payers, but makes nearly £4 billion of
programming which is free-to-air in Scotland.
One of the books I’m now
waiting to read is by an academic who was for many years the top civil servant
dealing with economic issues in the Scottish Office – Guy McCrone. Here is an excerpt from the
summary of his book Scottish Independence – weighing up the economic issues given by one reader who, like me, is striving to
be balanced.
……the economic issues
surrounding Scotland’s prospect of independence remain too fluid to call. What
I mean by this is that the book (like many other sources) presents historical
and contemporary economic data which is fine and good, but by necessity it is
then forced to speculate as to likely outcomes.
This for me is the key problem surrounding the plea by members of the voting
public who I have witnessed on various television debates and investigative
programmes surrounding the referendum, who ask for more certainty.
Neither McCrone’s book, nor in
my opinion any others are going to be able to provide that kind of certainty.
The bottom line is that McCrone helps the reader identify some of the key
economic issues in the debate, but he also highlights how complex and
interconnected the range of economic issues are surrounding an independent
Scotland compared to business as usual in the Union.
………Given a Yes vote for
Independence would have its impact felt for many generations of Scottish
residents, too fine a focus upon the question of whether independence, greater
devolution or business as usual will deliver a better or worse Scotland seems
artificial and dishonest to me.
The truth is nobody knows.
Voters can weigh up the economic issues and this book can help identify many of
their peaks, but the outcome will be determined by policies and environments
that unfold over the coming decades.
If one looks back at history
and reviews the then existing government policies and plans for the future,
most of them turned out to be wrong or were subsequently change to take account
of shifting environments and surprises.
The reality of the economic
and political landscape is that whilst one can plan specific projects, such as
whether to build more wind farms or nuclear power stations, it is a very
different proposition to try and plan the likely outcome and impact of proposed
macroeconomic policies and expect them to be right.
As McCrone’s book emphasises without certainty about the nature of a final
currency and monetary structure, then in the event of a Yes vote wining, many
of the other economic issues examined in his book are subject to considerable
uncertainty.
However, this is the
political reality and anyone wanting to get a handle on some of the key
economic issues at the centre of the Scottish referendum issue is likely to
find something of interest here. Just don’t expect certain answers.
