The UK Treasury chief who was at the heart of Project Fear during the Scottish independence referendum of 2014 is singing a different tune after the Brexit referendum. In an extraordinary article in the Financial Times (£) summarised here, Sir Nicholas McPherson sweeps away most of economic and financial problems associated with independence..
With the UK leaving the EU, there is a golden opportunity for proponents of Scottish independence to reappraise their economic prospectus. Clearly, membership of the EU will lie at the heart of it. That will enable Scotland to have access to the biggest market in the world without the uncertainties that are likely to face the rest of the UK for many years to come. It would also provide a historic opportunity for Edinburgh to develop further as a financial centre, as London-based institutions hedge their bets on the location of staff and activities. If Royal Bank of Scotland, the state-backed bank, relocates its headquarters as part of that process, that would strengthen the long-term sustainability of the Scottish financial sector.
.. the EU has a huge interest in fast-tracking membership for a country whose citizens have been members of the bloc for 43 years and have voted to remain by 62 per cent to 38 per cent.
In the longer term, there could be a case for tying the Scottish pound to the euro.
It also has a chance to set out a tax policy for the longer term. An independent Scotland committed to the EU would have an extraordinary opportunity to attract inward investment as well as highly skilled migrants. But, since it will be competing with Ireland, it needs a tax system that is equally competitive. That points to low corporate taxes and keeping marginal rates of income tax down. It may also point to a smaller, more efficient state.
The aftermath of the EU referendum contains many lessons. Perhaps the most important is that without a plan for what happens next you risk months, if not years, of uncertainty and drift. The Scottish government is in a unique position to take a more far-sighted approach. If it can develop a clear and coherent economic strategy ahead of any future referendum, it not only stands a better chance of winning it will also increase the probability that an independent Scotland inside the EU can hit the ground running.
That is from an ex-mandarin at the very top of the Whitehall establishment clearly so jaundiced by the Brexit vote that he is prepared to endorse the economic case for Scottish independence.
The political case is put by Michael Keating, editor of the blog for the Centre for Constitutional change even if the UK negotiates the most favourable terms of association with the EU.
The essential point is that, the more free trade the UK negotiates with the EU, the easier it would be for Scotland to keep itself in both the UK and European markets. A Norway-type deal, with full UK membership of the single market, would be the best of all for Scotland’s economic interests.
A recent article in the Economist suggests that this could be a way of keeping the United Kingdom together. In practice, the opposite is likely to be true. The more free access there is to both markets, the less need there is for Scotland to stay in the UK and the easier independence becomes. In fact, this was the whole point of the independence-in-Europe argument adopted by the SNP thirty years ago. The downside of the Norwegian model is well known. Norway has to accept most EU policies but has no vote in making them. By accepting economic union and rejecting political union, Norway has marginalized itself, while finding a political compromise that both pro- and anti-EU supporters have come to live with. England and Wales might end up in the same place but Scotland, unlike Norway, has expressed a preference for EU membership. If the UK were to get a Norway-style deal, Scotland would have a strong motive to go for independence, which would give it a seat in the EU councils. Indeed, the ironic outcome of this scenario is that both the remaining UK and Scotland would be subject to European rules but only Scotland would have a say in making them.