You say Scottish Independence? I say economic suicide – Conservative Article
The Brexit debacle has stirred, once more, the SNP’s hopes of Scottish independence and joining the EU. With Sturgeon & Co. citing this parting of ways as a pretext for another plebiscite, #IndyRef2 will occur when she feels a ‘yes’ campaign is in a strong position.
Before I dive into perhaps a drier spiel about economics, let me make a more political point: should Scotland wish to be independent, it should absolutely be so. There should be no tethering of the Scottish future to the British yolk, unless by consent. However, should Scotland wish to make its own way, its people should absolutely know what it’s in for. In my eyes ‘shepherd Sturgeon’ is leading her ‘flock’ over an economic cliff-edge.
So, what are the arguments against her?
The first, and most glaring, is the growing deficit. The latest figures (2019/20) shows it to stand at 8.6%, a £15.1 billion pound gap between revenue and expenditure; this does not even contemplate the costs of COVID, which could see it hit at least 26%. At present, Westminster subsidises this gap. A fair deal, considering the unique geographical challenges of Scotland.
To address this deficit there is only so much one can do. Either spending needs to decrease (austerity), or revenue needs to increase (taxation), or a combination of the two. But why is that? Well, mostly because Scotland wouldn’t be allowed to join the European Union with such a high deficit, and no remedial action.
Scottish independence would be immediately followed by questions such as which hospitals to close? Which social programs to cut? Which teachers to fire?
This is even worse when one considers the sovereign debt issue. Westminster will not sign off on Edinburgh’s departure (and thus make it a legally binding referendum) unless Edinburgh receives its fair share of UK debt. This is a deal they have to sign in to avoid having Spain vetoing their accession to the EU (Catalunya).
In 2014, when #IndyRef1 was being contested, Whitehall issued a white paper with some detail as to what independence would mean. In 2014, when Scotland was in a stronger financial situation than now, this share of UK debt was calculated to be 123% of Scottish GDP.
Irrespective of Sturgeon’s repeated babbling about the “fundamental strengths of the Scottish economy”, it would now be carrying well over its bodyweight in debt, on top of an increasingly crippling deficit.
The next issue (yes, they keep coming) is the currency. The SNP’s preferred course of action would be to retain the use of sterling. This is improbable, and could only occur with the agreement of the UK government. Joining the EU may also require Scotland to have their own financial regulators, which again, makes the retention of sterling very unlikely. The reason for this is simple: it would be accepting a risk (foreign influence over monetary policy) over which it had no control.
To quote the UK government in 2014: “the proposal for the Scottish Government to exert some influence over the Bank of England … is devoid of precedent and entirely fanciful”. The cost of changing its currency would be massive. This, in conjunction with previous costs, is making the discussion seem akin to insanity.
All of the above assumes that the Scottish economy would stay as is, after an independence vote. This is unlikely. Scotland joining the EU would create a hard economic border between it and the rest of the UK. This problematic; 60% of all Scottish exports go to the rest of the UK. Exports that would be very much dampened by this border.
One last thing to mention in this debate: oil. Sturgeon’s saviour? Unlikely. Despite Scotland having a large claim over UK oil, relying on it would be a poor fiscal choice. The general volatility surrounding this sector, and recent oil prices plummeting to around $45 a barrel, shows that relying on oil alone would be nonsensical.
Independence would leave Scotland crippled with debt and deficit, with a far weaker and unstable economy. It goes without saying that a lesser quality of life would incur. Perhaps, rejoining the European Union would improve the Scottish outlook but – as Greece and Italy would testify – the austerity that the Scottish would have to first navigate, would be nothing short of crippling.
A thinly veiled power grab is what rings most apparent to me. In the name of nationalism, Sturgeon is forsaking her own nation.
Written by Senior Conservative Writer, Alexander Dennis
(Note: My many thanks to one Colston Kane, and his aid with the economics of this topic)
Point of Information
We Need Scottish Independence … Eventually – a Liberal Response
As anyone who knows me can tell you, I am a strong believer in Scottish independence. Yet, the strongest arguments against it have always been economical. Alex has elaborated on some of these major issues very well, which are worth expanding on further.
Alex covers the problem of currency relatively well, with the SNP preferring to stick to the pound sterling if independence arrives. He also argues that this is not currently feasible. I agree… For the time being.
But whether Scotland would actually be happy with a lack of financial sovereignty is another question altogether.
There are other options, though, that Alex fails to mention. If independent, there is a chance that Scotland may create a central bank. With our current recession, though, this would be catastrophic. The creation of a Scottish central bank would result in an artificial rise in interest rates, a detriment to already struggling businesses and clients.
Modern Monetary Theory could prove to be an alternative option. This idea suggests that businesses continuously spend whilst the government prints money to cover the costs. Yet, not only is this a sure way for hyperinflation, but the SNP itself would never back such a policy. Rellying on the pound sterling will be necessary, but it is not possible yet.
I also agree with Alex, an ‘oil republic’ is not economically sustainable given the recent global dive in its price. To create an independent Scotland, diversifiying its economy is absolutely necessary. For example, Scotland should use its vast expanses of empty land to invest in alternative energy – nuclear, wind, and hydroelectricity spring to mind. This has to happen before independence though.
However, as Alex says, the biggest issue at the moment is the deficit. This cuts off EU membership – Scotland’s life-line after independence. I do not think Alex should assume a hard border will exist with the UK, but Scotland will need to fight for a deal with little time to spare. Given how Brexit is going, I’m not hopeful.
I share Alex’s fear that a second referendum right now would harm, not help, Scotland. I would love an independent Scotland, but not yet. There is still a lot of work to be done first.
Written by Co-Chief Liberal Writer, Frank Allen
Brexit says: “Let the Scottish people decide” – a Labour Response
“A thinly-veiled power grab is what rings most apparent to me. In the name of nationalism, Sturgeon is forsaking her own nation.”
If Brexit has taught us anything, it’s that this mode of thinking can be incredibly strong. No matter how complex and strong the economic reasoning against a proposition, nationalism, sovereignty, control, whatever you want to call it, can lead to seriously detrimental political outcomes.
At this point, I’m very tempted to refute all of Alex’s eloquent economic arguments with a soundbite like “you’re inciting project fear”. But, once again, I don’t think that it is project fear. I think both Frank and Alex pick up on very real and serious economic consequences.
Undoubtedly, the currency is one that will be difficult to solve, particularly in the short term. The same can be said of the growing deficit in Scotland, which is likely to continue growing if the COVID situation worsens. In this vein, I agree with Frank that now is not the right time.
But we no longer live in a context in which economics, or even objective facts, matter most. What matters most is “the will of the people”. And if that’s how it has to be now, then we have to let the Scottish people decide what they’d like to do, even if we think it would be economic suicide.
Things may get worse for Scotland if they left the UK. At the same time though, things are going to get worse for the entire UK because of Brexit, something which the majority of Scots didn’t even vote for. They have been forced into an economic catch-22. So it’s almost understandable that they might want to go their own way.
If they do leave, I hope the UK government will have the decency to be as generous as they expect the EU to be during negotiations. Somehow, I think I’ll be disappointed here though.
Written by Senior Labour Writer, Jack Rolfe