For Richer or for Poorer? The Costs of Scottish Independence

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Scottish independence is being costed up. Never mind the supposed Scottish reluctance to part with money, any nation would wish to know whether they were going to be substantially richer or substantially poorer, as a result of independence. For voters in Scotland though, the options are as clear as mud. Both sides of the debate have presented figures which vary so widely as to be laughable. The “No” campaign, backed by the UK government, says every Scot will be £1400 worse off. The “Yes” campaign, led by First Minister, Alex Salmond, says they will be £1000 each in pocket. Only one thing is for sure – they can’t both be right.

It is a chore to untangle the two conflicting theories over Scottish independence. What Alex Salmond actually claimed was that Scotland would be £5 billion better off in fifteen years as an independent nation. This translates to £1,000 per person. So how did he reach that figure? It is based on a rise in productivity of 0.3 percent, a 14 percent rise in oil and gas production and the accompanying revenues and a recalibrating of the difference between what Scotland puts into the UK pot in tax, and what it takes out in public spending. The Scottish Nationalists say that tax receipts are 14 percent higher in Scotland than the rest of the Union. A 3.3 percent rise in employment is also anticipated. This is an optimistic forecast, favoring Scottish independence.

By contrast, the Treasury in Westminster, through their spokesperson Danny Alexander, talk of a “UK Dividend” which represents £1,400 for the next twenty years for every man, woman and child, by staying in the United Kingdom. This would come about through higher public spending. They say that oil revenues are shrinking, not growing, and that the aging population will create a “fiscal challenge.” They also warn of exorbitant “set-up costs” for a new nation, figures which have been the cause of much academic controversy, and as a result, were dramatically reduced from 2.7 billion estimate to 1.5 billion.

The spat began when the author of the research used for the Treasury figures, Professor Patrick Dunleavy from the London School of Economics, said they had used his work in a “misleading” way. The Treasury quickly counter-claimed they had used someone else’s report, a professor Robert Young from Western Ontarion, but he too retaliated, and said they were using their own figures, not his.

Wherever the figures come from, the key difference would appear to be in the future of North Sea oil. The Treasury point out that the last two years have seen revenues falling off, even below the most pessimistic forecasts, and basically, that it is running out and a spent force. The SNP retaliate that the drops have been predicted, owing to high levels of investment in the industry, and there is enough oil left to see the industry flourish for at least another fifty or sixty years. For Scotland to have its whole share of that, as opposed to having to split the proceeds with the rest of the UK, would be of huge benefit to the economy.

Just as the Treasury had doubts cast upon its conclusions, so too has the “Yes” campaign. A Glasgow University study of Scotland’s primary export industries has revealed a high level of foreign ownership. Salmond says that Scotland is the No. 14 richest country in the world, but not all the wealth generated stays in Scotland. This study actually places Scotland in the No. 20  position, lower than Ireland and Japan. There is only one firm that owns a license to produce oil and gas that is Scottish owned, First Oil. Many banks and financial institutions are global. The whisky industry is largely dominated by the drinks giant Diageo, based in London. More than 80 percent of the salmon farmed in Scotland is owned by non-Scottish companies, nearly all of them Norwegian. If Scottish independence relies on the profits from these dominant exports, then it is based on a shaky foundation, say the doubters.

Unfortunately, with so many competing claims, and so much political game-play going on, it is not really possible to say for sure which party is likely to be correct. Predictions are notoriously fickle at the best of times. One side gives a “best-case scenario” and another, the worst. What cannot be factored in either, is how an independent Scotland would be able to do things differently, as that is an unknown quantity.

As voters prepare to go to the polls on September 18 for the referendum to decide Scotland’s future, it is deemed unlikely that these two opposing sets of figures will sway anyone’s mind. If anything they will strengthen already decided voters in their original choices. For Richer or for poorer is a huge commitment to make, yet the costs of Scottish independence cannot be pre-determined.

By Kate Henderson

Financial Times
The Spectator
BBC News