While about one third of Scots are clear they want independence and a similar number are clear they want to stick to nurse for fear of something worse, the final third has an open mind; they are looking for some kind of reassurance which option would make their lives and those of their children better. It’s not just about money but that is an understandably important factor. If you feel you belong in that third, read on.
This week, the Scottish government produced a paper putting the economic case for independence. Titled Scotland’s Economy: the case for independence, it says: “By international standards Scotland is a wealthy and productive country. There is no doubt that Scotland has the potential to be a successful independent nation.” The paper concluded that Scotland had “more than enough resources” if it had the powers of independence.
Launching the paper, First Minister Alex Salmond said: “Despite our strong economic foundations and excellent global reputation Scotland, with Westminster in control of our economy, is not reaching our potential as a nation and this report clearly lays out the ways in which UK government economic policies have not worked in Scotland’s best interests.”
Here, are the key points of the Scottish government paper:
Scotland can afford to be an independent country
The Scottish economy performs strongly on key indicators but there is room for improvement, the Scottish government says. In 2011, Scotland was positioned as the third highest region in the UK – behind London and the south east of England. Adding a geographical share of Scotland’s North Sea output increases Scottish GDP per head from 99% to about 118% of the UK average.
Scotland’s share of the UK national debt is lower as a percentage of GDP than the UK’s. UK public sector net debt at the end of 2011-12 stood at £1.1 trillion (72% of GDP). Scotland’s per capita share would have been equivalent to £92bn (62% of GDP). Scottish exports (excluding oil and gas) to destinations outside the UK in 2011 totalled £23.9bn. In the same year, a further £45.5bn of goods and services were traded with the rest of the UK.
Key strengths include the food and drink sector (18%), reflecting high demand overseas for Scottish whisky.
Scotland has enormous potential
In oil and gas, Scotland is estimated to have the largest reserves of oil in the EU, accounting for 60% of the EU total. There are estimated to be up to 24 billion barrels of oil to be extracted from the North Sea. In 2011, oil and gas production contributed £26bn to Scottish GDP.
Analysis by Prof Alex Kemp of Aberdeen University estimates Scotland’s share of UK offshore oil production at 96% and offshore gas production at 52% in 2011. This resulted in Scotland accounting for an estimated 78% of total UK hydrocarbon production in 2011.
In renewables Scotland has 25% of Europe’s offshore wind and tidal resource and 10% of Europe’s wave resource. At this time, there are more wave and tidal power devices being tested in the waters off Scotland than in any other country in the world. It already generates more than one-third of our electricity needs from renewables, including hydro power.
Turnover in our food and drink reached £5.38bn in 2011. and Scotland is now the world’s third largest salmon producer. In fact, Scotland lands 60% of the UK’s fish and has more than one quarter of the UK’s beef herd. When it comes to whisky it is reported that 40 bottles of the spirit are shipped overseas each second.
Scotland is internationally recognised as the most important UK financial services centre outside London and the south east. The tourism industry in Scotland employs almost 200,000 people. Our creative industry sector has a turnover of £4.8bn. Scottish art, film, fashion, music and literature are well recognised, as are Scotland’s design, IT and computer gaming industries.
Scotland has a strong digital and ICT sector, employing 47,000 people. In 2012 the life sciences sector provided employment for about 32,500 people in 650 companies and organisations. The related area of medical technology and pharmaceutical services has also shown growth.
Status Quo not working
The Scottish government says: “The one-size fits all policies implemented by the Westminster-based UK government are not generating the growth or delivering the social cohesion that Scotland should be enjoying.” Work carried out by the Scottish government’s Fiscal Commission Working Group concluded: “It is widely accepted that, in terms of economic growth, Scotland has underperformed relative to both the UK and other small EU countries.”
The Scottish government says the current constitution arrangements do not allow economic policies to be tailored to the challenges faced in Scotland. This puts Scotland at a disadvantage and is also evident in the divergence in performance of the economies of other regions within the UK in relation to London and the south East.
It argues that the UK is the fourth most unequal country in the developed world. As well as limiting the potential and prosperity of individuals, such inequality is bad for our economic health. Inequality is estimated to be slightly lower in Scotland, but is still too high, the report says.
How independence will strengthen economy
The paper says: “Our ambition is for an economy that is diverse and grows sustainably, with high value jobs that pay decent wages, leading to greater equality of income and wealth and a higher degree of social cohesion.” It adds: “This paper is not intended to be a policy manifesto, but it does set out the evidence that small economies perform well and that independence, within a continuing currency union, would give future Scottish governments the powers to address the imbalances and inequalities that inhibit economic growth.”
The Scottish government believes that it is in the interests of Scotland, and the rest of the UK, for an independent Scotland to share the pound within a monetary union after independence. It admits a currency union would provide some constraints on deficit levels and debt levels.
But it does not believe a currency union would “seriously inhibit the policy freedom and flexibility of an independent Scottish government”. It says it would instead ensure and promote overall financial discipline.
The lack of policy levers has constrained the ability of Scotland to perform as well as it could have over the past few decades, says the Scottish government. The paper provides a list of fiscal levers that could be used to boost growth, address inequality and stabilise the economy. These include:
- Oil and Gas Taxation
- Excise Duty
- Value Added Tax (VAT)
- Air Passenger Duty
- Capital Borrowing
- Welfare and Social Security
- Corporation Tax (base and rate)
- Public Sector Pay/Pensions
- Capital Gains Tax
- Rural and Environmental Taxation
Anyone who watched the first programme of Nick Crane’s Town series on BBC2 on May 21st will have been struck how Oban—once a remote and rather second-rate transit point for ferries to the Hebrides—has reinvented itself as a quality food, watersports and outdoor vacation destination. Instead of following any Central Belt model, it has invented its own and it works. Anyone going there now who knew Oban in the eighties marvels at the transformation. Scale that up to a national level and you have Scotland with all its potential.