ARE THE WHEELS COMING OFF THE INDEPENDENCE BANDWAGON?
If you stand outside Bute House this weekend you may hear a strange hissing noise. It is the sound of air escaping from the SNP’s over-inflated case for Scottish independence. First came the devastating Government Revenue & Expenditure in Scotland (GERS) figures showing how Scotland spent £15.1 billion more last year than it collected in tax, a GDP deficit of 8.7 per cent. Add to that the collapse in oil revenues and the looming mega-recession caused by the pandemic and suddenly the economic case for independence begins to reveal more holes than a Swiss cheese. When leading nationalist and former Holyrood minister Alex Neil advises the SNP to drop its plans for an independent Scotland to re-join the EU stating that it could: "lead to a hard border between Scotland and England, a proposition that would scupper any realistic chance of winning a second independence referendum”, then the wheels really do fall off the nationalist bandwagon.
Nevertheless, the BBC generously continues to provide Nicola Sturgeon with a daily platform, ostensibly to answer questions from the press and brief the public on the coronavirus crisis. The First Minister tells us to “Remember facts.” It is a pity the Scottish government’s grasp of the economic facts have been twisted to fit their partitionist narrative. As Mark Twain said: “Get your facts first, then you can distort them as you please.” Maybe this explains why Andrew Wilson, who chaired the SNP’s sustainable growth commission and Ian Blackford, their leader at Westminster, constantly cite Ireland and Denmark as successful small nations that an independent Scotland could emulate.
Why can’t Scotland be like Ireland or Denmark they say. Well we could, but at what cost? Ireland’s debt is currently €220 billion (£197 billion). It is amongst the highest in the world. It equates to €44,000 (£39,000) for every man, woman and child in the country. Maintaining such a huge debt against the background of the pandemic and the global economic downturn has left Ireland badly exposed, watched nervously by international financiers and bond markets, as they struggle to pay off their post-2008 banking crisis bailout and face the looming Covid recession and the Brexit fallout. Ireland has paid over €60 billion (£54 billion) in servicing their national debt in the past ten years alone and that’s just on interest and not settling the debt itself. The current historically low interest rates have enabled them to keep their head above water so far….but only just. Ireland will be faced with a massive debt for decades to come and the Irish government will have to cut public spending and raise taxes to service it.
In Denmark the national debt stands at around £96 billion. The Danes pay income tax of 41% on earnings over £6,000 and 55% on earnings above £70,000. Vat is 25% and there is no statutory minimum wage. The message seems clear. An independent Scotland modelled on Ireland or Denmark, will face eye-watering debt, large cuts in public spending and vast increases in taxation. It will make the austerity of the Cameron years resemble the good times. Under the Barnet Formula, the pooling and sharing of debt that Scotland benefits from as an integral part of the UK currently boosts government spending to the tune of £2,000 more per head than in England. That’s £6.5 billion of additional Treasury funding for Scotland spent on health, education and other public services, sustaining tens of thousands of jobs. That would disappear with independence.
Geographically Scotland is half the size of the UK, but with only a tenth of the population. Our demography, our widespread communities and vast infrastructure have always created the need for greater spending here than in other parts of the UK. The fact that the SNP have also chosen to provide free university tuition, free personal care for the elderly, free prescriptions and other benefits that do not exist south of the border, has also driven up our fiscal deficit. But these additional costs are met by taxpayers across the whole of the UK. How would we be able to sustain these current levels of public spending after independence?
To paraphrase JFK: “Geography has made us neighbours. History has made us friends. Economics has made us partners and necessity has made us allies.” For more than 300 years we have been neighbours, friends, partners and allies with England, Wales and Northern Ireland. More than 63% of our trade is with the rest of the UK, far in excess of our trade with the EU. An independent Scotland would have to create its own currency, undermining the UK single market and the free flow of goods, services and people. We would have to set up our own Central Bank at a cost of £60 billion. We could not rely on low interest finance to service our soaring debts. Without the international credibility of the Bank of England, the Scottish Treasury would have to pay a premium on its borrowing over UK rates. We would also have to borrow vast amounts of money in a foreign currency and repay the debts in that currency, a recipe for national bankruptcy.
Independence would be massively costly for the people of Scotland. It is not good enough for those who seek to partition our country simply to argue that if other wee countries can do it so can we. We are part of a successful union that has served us well for hundreds of years. We have withstood economic shocks in the past because we have always pooled and shared our resources. We will need those pooled and shared resources to overcome the economic impact of the coronavirus pandemic. But we will also need a Scottish government that focuses on rebuilding the economy, boosting business and industry, sustaining and creating jobs and making Brexit a success. What we don’t need is another low-grade nationalist government, obsessed only with dividing our nation, begrudging every pound we get from Westminster, yet forever demanding more, while trying to distort and hide the true cost of partition from the people of Scotland.