Opinion: The economics of independence have been lost in the smoke of battle

As economic issues have come to the fore in the referendum campaign, I find myself, oddly, sympathising with both sides in the debate, not for what they are saying, but for what they can’t say. You can imagine the story lines:

In an astonishing admission that has left the Yes campaign in tatters, Alex Salmond has accepted that the markets will be adversely affected in the short-term by a vote for independence.

or;

The Better Together campaign was in free fall yesterday when Alistair Darling agreed that an independent Scotland would be economically viable and could be more prosperous in the longer term.

Intuitively, I think most people recognise that both of these statements, shorn of their hyperbolic commentary, are probably accurate (note my use of “could” in the second hypothetical headline). But our adversarial politics and media make it very difficult for politicians to make their case “on balance” while acknowledging the counter-arguments.

If you distil into a single conclusion the Daily Telegraph’s headlines in their many stories on the referendum, you would conclude that Scotland is an economic basket case on the point of self-immolation! The Better Together politicians daren’t go that far because that might be seen as a wee bit insulting to the people they are trying to woo, but they understandably seize on the pronouncements of businesses operating across the UK who obviously would prefer not to have the upheaval of independence.

On the Yes side, I can’t think of any newspapers promising economic nirvana, but you do get pro-independence politicians offering a starry-eyed vision of Scotland’s future that certainly cannot be guaranteed.

In overall economic terms, the BBC website shows that Scotland’s GDP per capita, excluding the oil, is currently at 99 with the UK at 100. With the oil, which admittedly won’t last forever, the Scottish figure is 118.

So if there is a Yes vote next Friday, I would be very surprised if the Scottish or (wider UK) economy starts collapsing altogether. It will certainly be buffeted because of the uncertainty at least until the shape of the new settlement emerges. After that, there is likely to be an independence “bounce”. Things will then settle down and Scotland’s economic future will ultimately depend on the people we elect (hopefully, lots of Lib Dems) and the policies they implement.

It does look as if we would need some new banks. Recent announcements suggest that Scotland’s entire banking sector plans to register down South if the result is “Yes”. Independent countries usually require individuals and companies operating in their territory to use domestically registered banks even if they are subsidiaries of global ones. That could be a good commercial opportunity for entrepreneurs interested in re-establishing solid and responsible consumer banking in Scotland.

I think, however, that the outcome will be a “No”. This is not because Gordon Brown has waded in to offer us the best of both worlds – incidentally leaving Scottish MPs at Westminster with little else to do except help govern England. Nor is it because of the love-bombing from cohorts of Labour MPs. But people are worried about their jobs, energy and phone bills, supermarket prices and TV licences. Now that the heavy artillery of big business has been deployed, I think they will outgun the light infantry of smaller companies who have declared for independence and persuade enough wavering voters to stick with the status quo. Although I will be voting Yes for reasons set out in a previous post, I won’t be going into mourning about this. The world won’t end with a No vote either.

* Simon Horner was Lib Dem candidate for North-East Scotland (European Parliament) in 1989 and 1994 and for North Tayside (Westminster) in 1992.

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23 Comments

  • Paul In Wokingham 13th Sep '14 - 10:27am

    Very good critique of the campaigns. Like the author I too have been perplexed both by the fanciful scare tactics of the “no” campaign and the equally implausible vision of sunlit uplands from the “yes” side. I suspect the reality is that most people in Scotland would see little day-to-day difference from independence.

    The vision of disaster for Scotland that dominates today’s Telegraph and Mail front pages is a good indication of the nervousness of the powerful to change, and begs the question “who benefits most?” from continued union.

    If I lived in Scotland I would vote “yes”, as independence offers an opportunity to escape the kleptocracy that has dominated the Anglo-American sphere since about 1980. But like the author I still think that it is unlikely to happen.

    On the other hand, perhaps we are guilty of normalcy bias. Mike Smithson makes the point that the betting is not sensible: the polls all show a statistical dead heat but a £100 wager on “yes” returns £390 while the same bet on “no” returns just £25.

  • What has also been lost or even totally forgotten about is the combined Scottish and rUK economy moving forward. So by way of illustration, whilst Alistair Darling agreed that an independent Scotland could be economically viable and prosperous, what he didn’t do was to set that along side the rUK economy and the combined UK economy. It wouldn’t surprise me to find that whilst both economies remain economically viable and prosperous, they could of done better by remaining together – a case of the whole being greater than the sum of the parts.

    A clear case in point is the up coming EU re-negotiations hovering in the background; will the individual deals cut by Scotland and rUK be better than the deal that could be obtained by a united UK?

  • Roland, you’re assuming that an EU full of negotiated opt-outs, special cases and exceptions for the British is an EU that delivers the best outcome for its citizens.

    I don’t. I believe that like our union, the European Union is greater than the sum of its parts, perhaps even more so than any of the nation-state unions that exist within it. And especially as we move into a 21st Century world dominated by giants like China and the US, competing with resurgent Russia and emerging India and Brazil. Little countries must either band together or get stepped on or at least sidelined by big ones. Regardless of what South Britain and NI might prefer, I believe Scotland will be better off as a full, constructively engaged European member state than as an often overlooked component of a UK separating from Europe and striking out into irrelevance.

  • Colin there, making the mistake of presenting the case that the UK is impossible to improve and that the only hope is a Yes win on Thursday.

    He is wrong. The narrower the No win, the more potential exists for harnessing the momentum and driving a wave of reform throughout Britain. But if enough people fall into that trap of believing in the all or nothing single vote, then all the momentum and engagement that’s been built up over the course of the campaign could be lost and be truly wasted if the No vote wins out after all.

    I would also point out that party political declarations of allegiance to Green-ism have little relevance to localism, a liberal objective without a clear-cut green angle. Green politics is confused on the point of where government ought to lie, with some advocating big state greenwashed socialism, others advocating decentralised federalism on a liberal model and still others wanting a more anarchist or individualist cast to society.

  • Well, in my experience the Greens are dominated by the greenwashed socialists and have no real commitment to the civil liberties agenda or any such issues. But we shouldn’t digress into debating whether liberalism is best served by trying to repair and restore a damaged liberal party or by trying to take over and liberalise an illiberal one. I’m clearly on the side of the former, and I wish you luck though I believe your chances of success to be nil with the latter.

    On the poll data, well, all I can say is that my utterly unscientific experience of living in Scotland leads me to believe differently. Nobody who is saying ‘its a done deal, cut and dried with only the size of the majority to decide’ has any idea what they’re talking about. Social science works surprisingly well when you have a massive aggregation of data to work with. Census data and that sort of thing. But you end up drawing utterly spurious conclusions when you don’t have that kind of scale of coverage, and these 1,000 person polls simply can’t do better than give a vague hint.

  • Mick Taylor 13th Sep '14 - 7:37pm

    The Greens are not democrats. One of their founder members said quite clearly in an open meeting I attended that they would have to suspend democracy if they won an election because 5 years was too little time for all the changes they wanted to bring in. You have been warned.

  • With the Scottish conservatives being a fringe party in the Scottish context

    The Scottish Conservatives may be a fringe party due to to toxicity of the brand, but there are a lot of Scottish small-c conservative voters out there (including independents and a lot of the northern rural SNP) who are never going to vote for any kind of socialist party, especially not the mad-lefty Greens (remember that a key plank of the SNP prospectus is lower corporation tax, which I am assuming the Greens would be agin).

    If there is a yes vote, then either Scottish politics will follow the dysfunctional Irish model where all that matters is what side you were on at the time of independence, or it will reorganise itself into a functional democracy with a conservative and a socialist party (in the latter case I suspect what will happen is a bunch of the right-wing SNP will leave and, with the rump Scottish conservatives and the independents-who-are-really-Tories, form a new right-wing party to be the opposition to the now-all-socialist SNP) .

    In neither scenario is there any real role for a loony-left fringe party like the Greens.

  • @T-J (13th Sep ’14 – 2:01pm) – I made no assumptions, I only posed a question to illustrate an observation. However, you in your response do and pre-judged the outcome of future events. Additionally, the viewpoint expressed in your comment contains several contraditions. Whilst I could pull apart the various contradictions, I will put that to one side as we all know that the mere mention of Scotland can make grown-ups go dewy eye’d and loose all sense of reason.

    No what I believe Simon was alluding to was a real consideration of the economic’s which has to include consideration of the economics of our European region, namely, the British Isles, not just the isolated consideration of Scotland’s micro-economy.

    Additionally, looking ahead, it is obvious that for Scotland to be successful after the referendum, it needs the UK electorate and Westminster on side – remember a Scottish decision has a major impact on the UK, even though only the Scot’s are voting, and Westminster currently has no mandate from the UK electorate to make any settlement that is favourable to an independent Scotland and there is no court Scotland can appeal to (the House of Lords possibly?). Therefore it is noteworthy that neither side in the campaign has tried to widen the debate to garner support for their view of Scotland’s future; even though given the slogan “Better together”, you would of thought the Yes campaign would be doing exactly this to encourage wider support among those with connections on both sides of the border.

  • The Questions could be rephrased:

    Could Scotland be better off in the UK?
    Yes

    Could Scotland be better off independent?
    Yes

    Could the UK be better off including Scotland?
    Yes

    Could the UK be better off without Scotland?
    Yes

    But the more important question is:

    Is Scotland likely to be better off independent with the current proposals that the Yes campaign are arguing for?
    No

  • @Roland – you are correct. If the vote is to end the union, Mr Salmond seems to be assuming that winning a majority of 6 million Scots votes empowers him to dictate terms to the other 59 million of us, starting with the imposition of a currency union. Surely that would require a mandate from the people south of the border. I’d be interested in seeing any large scale opinion polls in the rest of the UK regarding that prospect. My own conversations with friends and colleagues suggests the answer to that one is a resounding “no”, but I’d like to see more empirical evidence.

  • Roland, you were either assuming that the EU works better with the complications of special opt-outs and workarounds just for the British / Scots, or you’re simply wrong about how to make a single market work fairly and efficiently. And actually, if you’re going to tell me my point of view is full of contradictions, you’ll have to go into some detail. I’m not just going to take your word for it and abandon my position on your say so.

    Your point about mandates to negotiate a good deal for Scotland is irrelevant – the government of the remaining UK has a mandate to negotiate a good deal for the rest of the UK, and it is impossible for the rest of the UK to shaft Scotland without seriously harming its own interests. Can the scaremongering, if you please.

    Psi, the most important question is whether Scotland, the UK or anyone is likely to be better off under the current proposals the No campaign are making and with the British state unreformed as it is. My answer to that question is a resounding no, and that leaves me stuck with only a Yes vote that makes any sense.

    JUF, Mr Salmond makes no such assumption. He would be starting from the position of wanting a currency union. Then the ball would be in the rest of the UKs court to come up with a counterproposal with regards to their starting position of wanting no currency sharing. Bearing in mind that the markets will react badly to any intransigence and that the rest of the UK cannot harm Scotland without damaging itself in the process, and assuming that neither side will actually employ five year olds to handle the negotiations, the process should be fairly effective at delivering a mutually agreeable solution.

  • T-J

    “the most important question is whether Scotland, the UK or anyone is likely to be better off under the current proposals the No campaign are making and with the British state unreformed as it is. My answer to that question is a resounding no”

    Seriously?

    The position of the Yes campaign is:
    – Sterlingization
    – Default on debt
    – Expect Oil Money will pay for everything
    – Claim international businesses will relocate to Scotland

    In the event of a Yes:
    – Sterlingization is the worst of the options (probably the best would be separate currency).
    – Default is a very risky option
    – Countries with large commodity industries often find things hard going (Norway is cited because of it’s unique achievement of succeeding in spite of its oil)
    – Multi-nationals will not relocate to Scotland, if they are really driven by headline rate they will be in Ireland and there is very little uncertainty of a new nation there.

    I certainly don’t like the status quo and I hope we will see proper federalization in the UK as a result of this but the current debate passed through the looking glass some time ago.

  • Psi, my opinion is that the worst credible outcome of a Yes vote isn’t as bad as letting the status quo continue unabated.

    The Yes campaign has its flaws. A separate currency would be best. And default must be reserved as a final sanction for if the rest of the UK is refusing to negotiate in good faith, as it would hurt both parties badly if it were actually to happen.

    But the No campaign’s talk doesn’t add up at all. Scotland, even without the oil, is wealthy enough to function as an independent state. Forget about Norway, consider Denmark. No oil there, about five million people and they somehow manage to operate without descending into abject poverty.

    The odds are still on a No vote on the 18th. But the narrower that win is, the more chance we have of seeing change. And if Yes end up pulling through on the day, it won’t be the end of the world.

  • From The Guardian —
    The remarks by the Queen came after the palace insisted last week that the monarch, who spends every summer at her Balmoral estate and whose mother was Scottish, was remaining above the fray in the referendum. This followed reports that the Queen was horrified by the prospect that her kingdom may be broken up.

    Nigel Farage, the Ukip leader, weighed in last week when he said it “might be handy” if the Queen intervened on behalf of the pro-UK side. Some campaigners for the union have pointed out that in 1977, the year of her silver jubilee, the Queen said in a speech in Westminster Hall: “I cannot forget that I was crowned Queen of the United Kingdom of Great Britain and Northern Ireland.”

  • “The Queen said in a speech in Westminster Hall: “I cannot forget that I was crowned Queen of the United Kingdom of Great Britain and Northern Ireland.”

    But when she ascended the throne, she was actually Queen “of Great Britain, Ireland, and the British Dominions beyond the Seas.” The royal titles and their associated claims have changed many times in the Queen’s long lifetime, and one more change is neither here nor there. Perhaps after a separation she could be “Queen of the United Kingdom of England and Northern Ireland and Queen of Scots.”

  • David-1
    Yes indeed. No doubt part of Cameron’s EU renegotiations will demand that she is restored as Elector of Hanover.

    She is in fact still Queen of 16 different independent countries, some of which have currencies tied to the and have a large ex-pat English population. It is all working quite well I am told and Canada, Australia and all the others of the 16 seem to be struggling along without London rule. Scotland is different of course, the Scots could not possibly manage to do what Guernsey and Jersey do because Scotland is too small.

  • @TJ if “cutting off your nose to spite your face” wasn’t a recognised form of human behaviour, we wouldn’t need an expression for it 😉

    We all see things through the prism of our own experiences. I have witnessed a couple of company de – mergers, and in both cases they started out reasonable and finished up with people who had been colleagues or even friends not speaking. In one case I saw middle aged professionals (not five year olds) physically wrestling over a server.

    So I expect negotiations over independence to be conducted as a zero game in an atmosphere of bitterness.

  • @TJ Also, there is still the small matter that 59 million people out of 65 million haven’t been able to express their wishes, not have they given a mandate to anyone to negotiate on their behalf.

    So even if the rUK side signed up for a currency union, I think that would have to be put to the voters of rUK in a referendum, and they would have every right to vote “no”.

  • @JUF
    Re currency union

    Page 7 of yesterday’s yougov poll has the evidence you were searching for.

    61% of those polled said no, when asked the question:

    If Scotland votes to become an independent country
    it would then need to negotiate independence
    arrangements with the rest of the United Kingdom
    before becoming independent in 2016. This would
    include the future of Scotland’s currency. Alex
    Salmond has said he would like an independent
    Scotland to continue to use the pound as part of a
    currency union. The Conservative, Labour and
    Liberal Democrat parties have said that the rest of
    the United Kingdom would not agree to this.

    If Scotland were to become independent, would you
    support or oppose Scotland continuing to use the
    pound as part of a currency union?

    http://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/dx68iw22ce/YG-Archive-Pol-Sunday-Times-results-1400912-main.pdf

  • TJ – Your expressed viewpoint concerning the UK re-negotiation, clearly indicates that you have no faith in Scotland’s ability to influence either the UK negotiations or the outcome of the much talked about 2017 referendum.

    Hence has it not occurred to you that if Scotland is unable to exert influence within the UK – a union it has been in for circa 300 years and where it has 59 MP’s out of a total of 650, the likelihood of Scotland having any significant influence in the EU where it currently has 6 MEPs out of a total of 751 is going to be limited.

    Personally, I would like to see Alex Salmond promote the benefits of EU membership to the UK electorate with the same passion he has shown for Scottish independence. Because if, as you as Scotland is massively pro-EU it will greatly assist in marginalising the quitters. Hence one of the thoughts behind why I asked my original question about the EU.

  • JUF, the behaviour of executives in a company demerger is one thing. I know more about the negotiations surrounding the breakup of the former Yugoslavia and Czechoslovakia, myself. In the former case, they managed to sort out the currency question in the middle of a civil war, as others have pointed out on threads here. In the second case, mature and sensible adults managed to work things out with no problems or violence at all.

    But, of course the rest of the UK is entitled to hold a currency union referendum and vote no in it. I would personally vote against such a union myself. I would prefer a settlement whereby Scotland sets up a new currency with the transitional cooperation of the Bank of England, cooperation that would extend as far as the BoE being willing to extend a similar sort of deal as the one which formed part of the Irish bailout a few years ago. Anything more seems unrealistic and unfair, but much less and Scotland needs to act to minimise its liabilities whether or not that might cause trouble down south.

    Roland, of course Scotland can’t seriously influence UK negotiations with Europe or the outcome of a 2017 referendum. That much is obvious. But it doesn’t automatically follow that Scotland would be irrelevant as a full member of the EU, the structures and processes being so different. The European Union is a confederation of equal sovereign states, whereas the UK is a unitary state designed to empower the centre at the expense of the periphery.

    It does occur to me that a lot of the English apprehension about the EU is driven by a vague concern that it will do unto us as we have done unto others. But the constitutional setup doesn’t really enable that sort of behaviour and the realities of the balance of influence prevent it.

    Scotland would end up with around 13 seats in the European Parliament, about the same as Denmark. Sure, it’s not going to dominate the assembly. But it would also have a Commissioner and have an equal presence to every other member on the European Council. The reqirement that the European Parliament and Council act together aims to ensure that the preferences of its large population powerhouses cannot indefinitely override the needs of its smaller members.

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