Scottish independence matters less than you think


After Scotland and England united in 1707, Scots took advantage of free trade with England and access to the British empire. Scotland was transformed from a poor peripheral state to one of the world’s richest regions. Steam technology made it a global leader in building ships and locomotives. In the mid-19th century it was common to talk about North Britain.

But Scotland’s performance was less impressive in the 20th century. The manufacturers of west central Scotland failed. Nationalism revived and, in the 1970s, its adherents adopted the unsentimental slogan “it’s Scotland’s oil!” – most of the UK’s North Sea wealth was within what would be the territorial waters of an independent Scotland.

In the 1980s, the strident tones of Margaret Thatcher, then prime minister, grated on Scottish nerves. She swept to electoral victory in the UK as a whole, but eroded Conservative support in Scotland. When Labour won power in 1997, not a single Tory MP was elected north of the border. Labour quickly implemented an election pledge to establish a Scottish assembly.

In 2007, when Labour’s popularity was at a low ebb, the Scottish National party became the largest party in the Edinburgh parliament. Alex Salmond, its charismatic leader, led an SNP administration more competent than the coalitions that had preceded it. So he was re-elected in 2011 with a mandate to hold a referendum in Scotland on independence – a poll that will be held in September 2014.

The speed with which independence for Scotland moved from a vague aspiration to a live issue wrongfooted politicians on all sides. The SNP had few specific ideas of what independence would imply. Mr Salmond and the SNP are consistently more popular than their signature policy, and have struggled to win over moderate voters to it. They have attempted to make the case that nothing would really change while everything would be better. The problematic nature of this position is seen in the 667-page blueprint for independence published this week.

It seeks to reassure that an independent Scotland would have the same queen, the same relationship with the EU and the same currency. Her Majesty would no doubt be amenable to remaining Queen of Scotland. Spain and Belgium – each contending with their own separatist movements – might be unhelpful, but Scottish accession to the EU could certainly be negotiated.

Where the document does promise change, it is long on pledges and short on how they would be paid for. Its headline-grabbing proposal – the extensive provision of free childcare – is one Scotland already has the power, if not the financial resources, to implement.

The biggest outstanding question is over which currency an independent Scotland would use. Monetary union with the rest of the UK is the most sensible course – and the one the Scottish government proposes. But in the context of the troubles of the eurozone, the Treasury and Bank of England might be expected to seek extensive control of both Scottish fiscal policy and banking supervision. Yet with Scotland representing only 8.5 per cent of the monetary union, it is hard to imagine them conceding many such rights back to Scotland. While Mr Salmond insists that there is no currency plan B, Scotland would have no negotiating power without one and the rational plan B – a Scottish pound pegged to sterling – is also the likely outcome.

Scotland has income per head broadly in line with the UK average, making it the richest part of the UK outside London and the southeast. Its industrial and employment structure differs little from that of the UK. Unlike Wales and Northern Ireland, Scotland is plainly viable as an independent country.

Scottish government revenue is currently principally derived from a block grant from the UK Treasury, which supports public expenditure per capita in Scotland at a level 10-12 per cent higher than the UK. An independent Scotland would lose this subsidy, but gain most UK oil income. These revenues are uncertain, enabling both sides of the debate to find support for conflicting claims about the fiscal consequences of independence. But a more important question is whether Scottish business would perform better in an independent country.

Scotland has suffered from a drain of corporate headquarters activity. The pull of London would remain, but an independent Scotland would have better opportunities to compete. Devolution since 1999 has been associated with a revival of self-confidence that might gain strength in an independent country. Even small growth effects would have economic consequences far larger than fiscal balances.

But the centre of political gravity in Scotland is far to the left of that of the UK and that is at the centre of the concerns – widely held but little expressed – of Scottish business over independence. It is possible to imagine a future for an independent Scotland characterised by reactionary municipal socialism – and the crony capitalism that brought Ireland and Iceland close to economic collapse.

The polls suggest independence will be defeated. A narrow margin leaves the issue alive – Quebec has done well by being always on the point of leaving Canada. A heavy loss would raise questions over the future of the SNP and its leadership. Yet arguments over independence that have caused strife elsewhere – from Ireland to Kosovo – have not been about small economic benefits. That this issue dominates discussion in Scotland demonstrates that this debate is not deeply serious. For the degree of economic independence a small European country can enjoy in a global marketplace is inevitably limited. Nothing that happens in Scotland in September 2014 will change that reality.

Print Friendly, PDF & Email