The Scottish independence debate: the complexities start to emerge

Professor John Curtice explains the complexities surrounding  the referendum questions on the Today programme. Assume two ballot papers, one on devo max, the other on independence. If you look at some opinion polls, as many as 75% -80% might vote for devo max. Let’s say fewer,  say, 51%  vote for independence. Which would win? The Nats would say the radical option of independence, their opponents, devo max. Result, chaos. The alternatives? Vote  1, 2, 3  on all three options, status quo, devo max ,  independence ( in what order?) in a single ballot paper. But AV was exactly popular when it was tested to destruction in the referendum last year, was it?

Bagehot in the Economist has done a searching interview with Alex Salmond. As a comparative expert himself he demonstrates that the economic arguments are bewilderingly complex – and that makes them essentially political.

(Salmond) argued that, if you include revenues from North Sea oil and gas, Scotland ran a current budget surplus in four of the last five years while the United Kingdom was in deficit each and every of those years. Include a geographical share of oil, goes another of his statistics, and Scotland’s population share of UK net debt in 2009-10 is 46.3%, compared to 52.9% of GDP for the whole of the UK.

The Liberal Democrat cabinet minister for Scotland in the British government, Michael Moore, last year produced tables that are every bit as stern and important-looking as Mr Salmond’s. But these show different deficit and surplus numbers for the same period. Mr Moore argues that Scotland has run deficits for years, even if North Sea revenues are counted. Indeed, he says: “If you had allocated every single penny of oil and gas revenues to Scotland over the past 30 years – a figure of £156 billion – then you would still fall £41 billion short of what both governments have actually invested in Scotland.”

Whose numbers are right? I have no idea. The bottom line, surely, is that an independent Scotland’s future solvency cannot be separated from the negotiations that would follow a referendum vote for a split.

The FT (£) gives the complexites are airing, speculating that the UK might demand “billions” in compensation for moving the nuclear submarine facilities from Faslane on the Clyde  and  the Lex column gives a firmer view that  Bagehot of the economic balance sheet.

With a fiscal deficit in 2009/10 of 17 per cent of GDP, Scotland would  attract a low credit rating. Rather than Ireland, which was the Scots’ model for  years, a better comparison might be with Slovakia. It is the same size, rated A  plus/A1, and has 10-year bond yields of 4.5 per cent against the UK’s 2 per  cent.

Most North Sea UK oil lies in Scottish waters. It is the country’s biggest  asset, but a diminishing one: oil tax revenues are projected to fall to 0.2 per  cent of UK GDP by 2022/23, from 0.7 per cent now. Even including its  geographical share of revenues, Scotland would have had a fiscal deficit of 10.6  per cent in 2010. Moreover, its banks could be an outsized burden. Who would be  lender of last resort in the next banking crisis?

However important the economic and financial  arguments the hand of history is never absent. And Alex has been waving first to Bagehot….

 We are not wanting to be upsetting or awkward. On the contrary, there will be lots of positives. Look at the relationship between Ireland and Britain, and how it has been enhanced by mutual respect. He checked himself. Scotland is not Ireland, he said carefully. Scotland was never an oppressed country.

… and on the eve of that British Irish Council meeting in Dublin, as picked up by the Scotsman, where he stoked up a nice little controversy. I’m not sure he comes out of it as well as Mick thinks – certainly not if you read the (pro-Union) Scotsman.

Mr Salmond told the Morning Show on Ireland’s national broadcaster RTE: “I am sure, as many people in Ireland will remember, that sometimes people in leadership positions in big countries find it very difficult not to bully small countries.

“Of course, what we have seen – as everybody knows – over the last week is the most extraordinary attempt to intimidate Scotland by Westminster politicians.”

Later in the interview, he made a similar remark, saying: “As again the people of Ireland will know, bullying and hectoring the Scottish people from London ain’t going to work.”

Mr Salmond’s comments were criticised by Lord Trimble, the former Ulster Unionist leader who was awarded a Nobel Prize for his role in bringing peace to Northern Ireland.

Lord Trimble said Mr Salmond had been “playing to the gallery in spades”. He went on: “It is grandstanding on stilts. It is totally divorced from the reality. My understanding is that the government have been trying to get into a conversation with Mr Salmond for the past year, but he has been declining to talk to them.”

The First Minister also angered politicians on the other side of the political divide.

Seamus Mallon, a former leader of the moderate, mainly nationalist SDLP, suggested Mr Salmond should brush up on his history, saying many Scots were members of the Black and Tans, the notorious British militia that gained a reputation for violence in Ireland after the Great War.

Mr Mallon said: “Scotland was part of the bullying that took place in Ireland. People from Scotland were the cornerstone of the plantation of Ulster. I think Alex is a very able performer, but his knowledge of history is a little weak.

“As recently as 15 years ago, you had Scottish regiments here, enforcing the writ of Britain so, I think I could recommend a good history of Ireland for him.”

After that, will Alex lay off the Irish parallels? You could hardly blame him if he did.  But he can hardly duck the economic debate.

Adds later  A more sympathetic view of Scotland’s prospects on its own, with comparisons with Ireland from the “part-English, part Scottish , largely brought up in Ireland” economics commentator of the Independent, Hamish McRae.

 Scotland would have to compete with the rest of Britain, with Ireland and to
some extent with the rest of the EU for investment funds, and for human capital.
Ireland has been extremely successful at attracting inward investment, and
England has been extremely successful at attracting talented human beings. So
Scotland would have to remain competitive on both counts; there would, for
example, be a strong case for Scotland following the Irish model and creating a
particularly attractive corporate tax regime. That would affect policy south of
the border, too.

That leads to the most intriguing question of all: how much could an
independent Scotland affect – indeed, improve – economic management in England?
Might more competition within these islands lift overall performance? That would
be a prize worth chasing.


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