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Category Archives: independence
The wages of Scottish independence – England, Wales and Northern Ireland must be heard
In the matter of Scottish independence, the British political elite and the Scottish Numpty Party (SNP) are flatly ignoring the interests of the English, Welsh and Northern Irish. This is unreasonable for two reasons: firstly, the granting of independence to Scotland has considerable political, economic and security implications for the remainder of the UK and, secondly, the conditions on which Scotland might be allowed to leave the Union are of direct interest to the rest of the UK, because if they are too generous to Scotland they will disadvantage England, Wales and Northern Ireland.
The granting of over-generous conditions to the Scots is probable with the present Coalition Government, which has done nothing to abate the appeasement of the Scots so assiduously practised by New Labour since 1997 by continuing the Barnett Formula and tossing juicy bones to Edinburgh such as increasing the number of armed forces personnel in Scotland at a time of massive reductions in Britain’s defence forces (http://www.telegraph.co.uk/news/uknews/scotland/8646134/Liam-Fox-Scottish-defence-footprint-to-increase-despite-RAF-Leuchars-closure.html). There is also the strong possibility that the present Government would attempt to placate Scots by going for devolution max or independence lite, either of which would shift major powers to Scotland such as fiscal independence and the revenues from the oil and gas in Scottish waters without the Scots taking on a share proportionate to their population of the UK’s financial obligations.
It is also true that even if the cutting adrift of Scotland was entirely equitable in terms of the division of debts and assets, the rest of the UK (and especially England) would have a serious interest in blocking the divorce. To begin with, an independent Scotland would not be able to guard its own borders or patrol the oil and gas fields in its waters because of its small population, the large territory in relation to the population and the sheer cost of doing so. The rest of the UK (in reality England because Wales and Northern Ireland receive far more from the UK Treasury tax pot than they put in) would in practice be providing Scotland’s defence, because no country could imagine that an attack on Scotland would not bring in England.
There would also be the threat of immigration from an independent Scotland to England. Scotland could operate an open door policy in the sure knowledge that immigrants entering Scotland would overwhelmingly head for England. Scotland might even act as a national people trafficker by selling entry to Scotland and/or Scottish citizenship. If both Scotland and England remain within the EU, the Westminster Government would be unable to do anything about the immigration to England via Scotland of any number of people from both within and without the EU.
Lastly, there would be the question of what would happen if an independent Scotland ran into the sort of economic trouble experienced currently by the Republic of Ireland and Greece. As sure as eggs are eggs, England would be called upon to bail her out. Even if that did not happen it is probable that an independent Scotland would not be able or willing to finance her share of the accrued financial obligations of the UK. There would be no way of guaranteeing that an independent Scotland could service even her 9 per cent share of the UK national debt (which is officially projected to be at least £1.3 trillion at
the proposed referendum date of 2015) let alone her PFI and other public service debt (http://englandcalling.wordpress.com/2011/06/02/the-wages-of-scottish-independence-public-debt/). The reality is that if Scotland had a nominal independence England would be the guarantor of last resort, underwriting Scotland’s obligations accrued both before and after independence.
The rest of the UK, and especially England, clearly have a pressing interest in the question of Scottish independence. How should that interest be given a political voice? This can be done either with a referendum on Scottish independence in which they (but not the Scots) vote on a simple question such as “Should Scotland be allowed to vote on whether they want independence” or by a referendum held in England, Wales and Northern Ireland on any conditions for independence which have been agreed between the UK and Scottish Governments and accepted by the two parliaments. It is important to understand that UK Government cannot simply decide to grant Scotland independence, because the 1707 Act of Union would have to be repealed by the Westminster Parliament and the Scottish Parliament would have to accept the conditions for independence and pass legislation preparing Scotland for independence if a YES vote was obtained. (The later Acts bringing Ireland into the Union and then adjusting the Union to include Northern Ireland rather than Ireland, would be amended by the doctrine of implied repeal. However, a new Act might be passed clarifying the new situation).
A vote on the simple question of independence should be held in England, Wales and Northern Ireland and a YES vote obtained before a Scottish referendum is held. If a NO vote resulted then Scottish independence would be off the agenda. Similarly, if the conditions are voted upon, this should be done before the vote is put to the Scots. A NO vote would mean that either Scottish independence was off the agenda or that the conditions had to be changed and put to the English, Welsh and Northern Irish electorates again. Nothing short of Westminster abolishing the Scottish parliament and government by repealing the devolution settlement as it applied to Scotland could prevent a referendum, being organised by the Scottish government and sanctioned by the Scottish parliament, but such a referendum would have no legal or constitutional status.
If Scotland declared UDI they would legally be in rebellion. That would not only lay Scotland open to catastrophic sanctions by Westminster but also put them at odds with the EU because an independent Scotland created illegally would not automatically have EU status. It would also be a very dangerous thing for the EU to offer any support on encouragement to part of an established EU member seceding from the member because there are so many parts of the EU which might do the same. In theory this might play into the hands of Eurocrats because it undermines the powerful national state, but in practice it would simply strengthen nationalism and in the most messy and chaotic manner with
micro-states popping up all over the EU. This consideration would also prevent the EU
pushing for Scotland to be made independent in the case of Scotland voting YES in a referendum which had no legal status. However, the EU might well push for greater
devolved powers short of independence for Scotland in such circumstances. That needs watching.
There is also the ticklish question of what the franchise should be for the Scottish referendum on independence. Like the rest of the UK, Scotland is far from being ethnically monolithic. The 2001 census showed 88 per cent of the population being White Scottish, 9 per cent White non-Scottish and 2 per cent black or Asian. (http://www.scotland.gov.uk/Publications/2004/02/18876/32939).
There are also different electoral qualifications for voting in Scotland and the rest of the UK, these varying between UK national elections, elections to the devolved assemblies, EU elections and local elections. Elections to the Scottish parliament include Scottish residents from other EU countries in the electorate, while elections to the Commons do not. Conversely, ex-patriot Britons are allowed to vote for Westminster MPs while they are not allowed the privilege in the election of MSPs to the Scottish parliament even if they are on Scottish electoral registers. As there are large numbers of Scots living outside
Scotland, this is no small difference.
The Scottish government Draft Referendum (Scotland) Bill Consultation Paper states “Eligibility to vote will follow the precedent of the 1997 referendum in being based on who
can vote at Scottish Parliament and Scottish local government elections. However, the draft Bill provides that those aged 16 or 17 on the electoral register on the date of the referendum will also be entitled to”. (http://www.scotland.gov.uk/Publications/2010/02/22120157/7)
That is all very well on paper, but there is no guarantee that the Commons would accept such a franchise because that would mean a large proportion of voters could be either without British citizenship or possessed of dual citizenship. It would in principle be possible to identify people from outside Scotland who would be willing to vote for independence, ship large numbers of them into the country shortly before a referendum, get them registered as resident in Scotland and effectively fix a YES vote.
There is also the strong possibility that there would judicial challenges from those excluded particularly ex-patriot Scots. In a country such as modern Britain they might well succeed, so hemmed about with laws and treaties obligations restricting what parliaments and governments may do. Most particularly Article 3 of the first Protocol to the Human Rights Act runs “The High Contracting Parties undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature.” It is all too easy to foresee the type of legal wrangles over who comes within the definition of “the people”, especially in the case of ex-patriot Scots. Would a Scot have to live outside Scotland for six months, a year, five years or what to count as not being part of the people?
If the Scottish parliament could not simply lay down who should vote in the referendum large numbers of possibilities arise. Here are a few. Should every adult living in Scotland get the vote? Should it be every adult who is qualified to vote for the Scottish Parliament? Should it be only British citizens living in Scotland? Should it be only Scots living in Scotland? Should it be Scots living throughout the UK? What about Scots living abroad? Should they be allowed to vote as ex-pat Britons are allowed to vote in Westminster elections? Should it be any adult in Scotland entitled to vote in EU elections? Should it be every adult in Scotland entitled to vote in local elections?
The above facts speak for themselves: there is considerable doubt about when and in what form a referendum on Scottish independence might be held. It is vital that the many unresolved questions are answered before any referendums are held and that the political elite in the UK does not simply railroad an independence referendum through without giving the people of England, Wales and Northern Ireland a say in that which so directly concerns them.
The wages of Scottish independence – If Parliament says NO
Whether or not Scotland would vote for independence is debatable. Polls consistently show a majority against, although there are always a substantial number of “don’t
knows”. In a referendum held only in Scotland with the YES campaign headed by the Scottish Numpty Party (SNP) leader Alex Salmond and the NO campaign led by Scottish
non-entities or people from outside of Scotland such as Cameron, it is possible that a YES result might be obtained, especially if there is a low turnout and there is no minimum turnout required for the referendum to have force. If the referendum is held before the conditions for independence are decided, as Salmond wants, the chances of a YES vote would be considerably increased because voters would be buying into the idea of independence based on the wildly irresponsible SNP fantasy of a Scotland made rich by oil revenues rather than the reality.
From his public comments David Cameron appears to accept that the results of a referendum held in Scotland would be binding because he stated in June 2011 that
if a referendum is held he will campaign as vigorously as possible for a NO. But it is not in Cameron’s gift to say that a referendum will be binding, because the Act of Union of 1707 would require repeal. Before any referendum is held Cameron would have to persuade the Westminster Parliament to pass a Bill which granted Scotland independence in the event of a YES vote, with the YES triggering a repeal of the Act of Union. As a matter of practicality it would also have to contain the conditions under which Scotland would be granted independence, because it is improbable in the extreme that the House of Commons would give an absolute promise of independence, that is, allow the Scots to vote for independence without the conditions being agreed in advance of the referendum. (If the Commons did perpetrate such an act of folly it would create untold strife between the Westminster and the SNP because it is a fair bet that Salmond would ask for impossible terms). What could happen is that there are either two referenda, one on an undefined independence with a second after conditions have been agreed between Westminster and Edinburgh, or a single referendum on an undefined independence with a vote in the Commons on conditions for independence after these have been agreed between Westminster and Edinburgh. This would be the disadvantage of the rest of the UK because the SNP would be arguing for favourable conditions with the propaganda tool of a YES vote behind them.
It is unclear where Cameron stands on the agreeing of conditions for independence, viz: “ He [Cameron] has made it clear that the referendum question would have to be straightforward rather than the multiple-choice version favoured by the SNP: Cameron wants the voters to be asked a simple question, along the following lines “Do you wish Scotland to remain part of the United Kingdom?” Last night a Westminster source with inside knowledge of the new hard – line stance being adopted by Mr Cameron commented: “Mr Salmond must be honest and straightforward with the Scottish people in his phrasing of the question for the referendum. If he isn’t we will conduct the referendum.” ‘(http://www.telegraph.co.uk/news/uknews/scotland/8565826/David-Cameron-might-take-Scottiish-independence-referendum-off-Alex-Salmond.html).
This does not indicate whether the conditions would be decided before or after the referendum, but, as mentioned previously, it is unlikely that the Commons would accept a binding commitment without knowing the conditions. Again, the Commons would have control of what happened because if Cameron wished for the Coalition to run a referendum new legislation by Westminster would be needed. If Cameron takes charge of the referendum it would provide the SNP with a recruiting sergeant for independence because they could march under their favourite banner of “the English are oppressing us”.
Bt whatever the result of a referendum, there would still be the need for legislation to dissolve the Union and it is by no means certain that the Coalition Government or any other would be able to force such a Bill through the House of Commons. There are three reasons for this. The first is the self-interest of the Labour and LibDem parties, both of which rely disproportionately on Scottish seats in their representation in the Commons. At the 2010 General election 41 out of 257 Labour seats were in Scotland, as were 11 of the Libdems total of 57.
(http://news.bbc.co.uk/1/hi/uk_politics/election_2010/scotland/8663161.stm). If the 59 Scottish seats were removed from the House of Commons, it would be very difficult for Labour ever to form a government by themselves. A coalition of Labour and the LIbDems would perhaps stand a better chance of forming a government in a rump UK, but it would not be that much better , especially in the disillusionment of LibDem voters in the aftermath of the formation of the Coalition which has seen them both break election promises, most notably their written pledge on university tuition fees, and attach their
name to many unpopular policies such as the rapid reduction of public debt and further
privatisation of the NHS. There are also sincere unionists in both the Labour and the LibDem parties who would vote against on principle.
But it is not only Labour and the LibDems who might vote against a Bill to dissolve the union. It would be in the interest of the Tory party to see an independent Scotland because it would greatly increase the likelihood a Tory Government in the rump UK. But the Tory Party is by history and inclination a unionist party. Some Tory MPs might feel strongly enough to vote against the Bill on principle. The fact that Cameron is firmly in the unionist camp would give individual Tories, especially the backbenchers, encouragement to vote independence down.
The Bill could also be rejected by the Commons if were unduly generous to Scotland, for example, it did not require Scotland to take a share proportionate to their population of UK National debt at the time of independence.
It is also a moot point whether MPs for Scottish seats would be allowed to vote on the repeal of the Act of Union. If they argue to be allowed to vote it could be argued that if the whole of the UK, as represented by the Commons, is voting on the matter, the referendum should include the whole of the UK. There is also the possibility that before the conditions for independence as agreed between the Government and the SNP (or
any other Scottish government) are accepted as binding, they should be put to a referendum in England, Wales and Northern Ireland. This would be both reasonable and emasculate any Commons objection to conditions.
There is also a potential delay of several years lying in wait in the Lords. If the Lords rejected either a Bill enacting Scottish independence or a Bill laying down conditions thought to be unacceptable, the Parliament Act would have to be used which entails both a statutory delay of one year and possibly (although this would be highly unusual) further substantial delay when the Bill returned to the Commons for re-presenting to the Lords. It is also worth remembering that when any Bill goes to the Lords initially there are plenty of opportunities delay matters.
What would happen if the Commons rejected Scottish independence after a Yes vote? It would depend to a substantial degree on the turnout and the size of the Yes majority. If the
turnout and majority were small, say 35 per cent voting and a majority of a five per cent or less, it would be uncomfortable for the Government and would provide a very strong propaganda tool for the SNP and any other party supporting independence to either raise the number in Scotland wanting independence at any price or to extract serious concessions from the Government which could be anything from the continuance of the Barnett Formula and massive funds for infrastructure projects in Scotland to arrangements leading to an independence lite or devolution max settlement. The latter course would be much more likely because the Alex Salmond has been pushing independence lite or devolution max very heavily since the SNP won a majority in the Scottish parliament in May 2011.
If a referendum resulted in a low turnout but a large majority voting for independence, it would become more difficult for the Commons to vote against independence. It would also give the SNP more bargaining power to reach independence lite or devolution max. A high turnout with a narrow majority would probably give Salmond less bargaining power because the Government and the Commons would be able to point to the large minority of the electorate voting against and claim that such a serious step as independence needed a solid majority of the people behind it.
The most problematic situation would be a high turnout with a substantial majority for independence. That would cause problems for both the Government and the SNP. The Government and the Commons would not be able to argue that the vote was not conclusive because either only a small proportion of the population had voted for independence in the case of a low turnout or that almost as many had voted NO as had voted Yes in a high turnout. The difficulty for the SNP would be that with a clear mandate the pro-independence Scots would not accept anything less than full and unambiguous independence. The other great unknowable is what the political situation at Westminster will be in 2015 or whenever a referendum is held. The Coalition Government may say that they will not go to the country until 2015, but there is no certainty about that. Even if the Bill stipulating that Parliaments must run their full term is passed, it will still have a mechanism for going early, for example, sixty per cent of the Commons voting for dissolution. The relationship between the Coalition partners is looking increasingly fractious and the News Corp phone hacking scandal bids fair to both make that worse,
strengthen Labour and conceivably force Cameron from the Premiership as more and scandalous associations between Cameron and News Corp power players and journalists comes out.
If the Parliament is dissolved before any referendum is held, that will potentially scupper any agreement which Cameron (or any successor) may have made with Salmond. Any new Government would not be bound to honour such an agreement and even if an Act is on the Statute Book which provides for a referendum and has a clause which repeals the Act of Union, a new Government would still be under no obligation to honour it – a simple Bill repealing it would be all that is needed to prevent a referendum.
To add to the Westminster confusion, Lords Reform is still on the cards. This will not be
reform but in effect the abolition of the Lords and its replacement with a new House. No one knows what the relationship will be between that House and the Commons. If it is elected in whole or part it would be difficult to deny it great powers than the Lords has. Those might be greater powers of veto, amendment of Commons legislation or delay of
Commons legislation.
An elected second chamber or one based on appointments to represent a greater range of British society than the Lords presently does would have a very different make-up from the Lords. This could mean a second chamber much less responsive to the prevailing British political elite culture and mores. Such a chamber might well be hostile to the idea of placating Scotland, as Cameron seems to be determined to do, because growing English resentment of the privileges given to the Celtic Fringe and the subordination of English interests would be likely to be expressed more strongly in a reformed second chamber, especially a an elected one under proportional; representation, than in the Lords which is overwhelmingly the creature of the mainstream political parties.
Speaking of English interests and resentment, there is the undelivered to date promise of “English votes on English laws” which Cameron made before the 2010 election. If that promise is honoured before a referendum on Scottish independence, especially if an English Grand Committee is formed, that would provide a focus and vehicle to either oppose such a referendum or influence the conditions for independence or the nature of the referendum to be held.
There is also the possibility that the SNP may cease to have a majority in the Scottish Parliament or even to be part of a Scottish Government before any referendum is held or conditions are decided. This is not that improbable because the SNP has the referendum on independence pencilled in for 2015, the very end of the present Parliament even if it runs its full term.
If the referendum has not been held by then there will be another set of elections to the Scottish parliament. The SNP could easily lose their majority because the economic realities are beginning to strike home in Scotland. The Brown Government agreed to delay cuts to Scotland’s block grant for a year and the Coalition honoured this when they formed a Government in May 2010 (http://scotlandonsunday.scotsman.com/scotland/Tories-to-delay-cuts-for.6168741.jp).
This means that it is only in this financial year (2011/12) that cuts are occurring. But because the 2010/11 cuts were delayed, the cuts this financial year includes those plus any others made since the Coalition gained office. All the Scottish government did was put off
the pain.
If a situation is reached where a referendum has been held and a YES vote achieved but the House of Commons refuses to pass the necessary legislation or a referendum is held without conditions being agreed in advance and the Westminster Government is unable to agree terms with Holyrood, what would be the position? The Westminster Parliament and Government would hold all the aces if they chose to play them because the Scottish government is dependent on Westminster raising the money to fund them. Even if Scotland declared UDI (wildly improbable) they would not be able to raise anything like the money they would need to fund everything in Scotland that is now funded by the taxpayer. To take one example, the Centre for Economic and Business Research predicted in 2009 that by 2013 67 per cent of Scottish GDP would come from public spending (http://www.timesonline.co.uk/tol/news/uk/article5489654.ece).
Anything short of UDI and Westminster could simply strangle Scotland by, for example, reducing the Treasury block grant to Scotland to the per capita level of England. That would remove around £8 billion pa from the Scottish government’s revenue. The only question at issue is whether the Westminster Government would have the will to take such action.
The wages of Scottish independence – The monarchy
The Scottish Numpty Party (SNP) has committed itself to the Queen being Scotland’s head of state should independence occur. http://www.guardian.co.uk/politics/wintour-and-watt/2011/may/25/alexsalmond-queen). As with so much of the SNP policy towards independence this presumes something which is far from self-evident, namely, that
this would be acceptable to the Queen, practical or agreeable to the remainder of the UK.
It might seem a simple thing for the Queen to be Scotland’s head of state for many of Britain’s ex-colonies and dominions, including substantial states such as Australia and
Canada, retain such a link with the old colonial power. If she can act as head of state for them why not for an independent Scotland, a much smaller and more insignificant entity? The answer is simple; all the Commonwealth countries of which she is queen are not intimately connected with Britain geographically, administratively or economically. Scotland is. In addition, if Scotland retained the pound she would have something no other Commonwealth country has, her fiscal policy substantially decided by Westminster.
To understand the potential dangers of the Queen as head of state of an independent Scotland a familiarity with the nature of the monarchy as it is today. Britain’s monarchy
evolved from an executive to a constitutional one largely through convention rather than law. For example, the monarch stopped vetoing Acts of Parliament after the advent of the Hanoverians in 1714 not because the power was removed by Parliament, but because the monarch did not use the power. In time this became a convention. The consequence is that there are few constitutional bars placed on the Crown’s powers and the Royal prerogative is essentially what it was after the Bill of Rights was passed in 1690 in the aftermath of the overthrow of James II. (An up to date description of the Royal Prerogative can be found at (http://www.parliament.uk/documents/commons/lib/research/briefings/snpc-03861.pdf). However, all of the important powers which remain bar two are exercised today by the Prime Minister. The important exceptions are (1) where the appointment of a prime minister is to be made when there is no party with a clear majority in the Commons and the monarch has to decide whether a government can be formed and if so who is best able to do so and (2) the monarch’s decision whether to grant a dissolution of Parliament is not straightforward. For example, suppose a coalition government breaks up and there is the possibility of forming a different coalition with a working majority, the monarch might decide that the denial of a dissolution and the acceptance of a different coalition might be preferable to another General Election. That could be the case where there have been two General Elections in a short period which have failed to return a House of Commons with a workable majority for a single party. If the present Coalition pushes through the promised Bill to make future Parliaments go the full five years unless a strong majority in the Commons votes for a dissolution, this objection would be much weakened. If the present arrangements for general elections in Scotland continue, namely that they be called only every four years , (http://www.legislation.gov.uk/ukpga/1998/46/part/I/crossheading/general-elections)
the difficulty will not arise. However, in the case of an independent Scotland there would be more opportunity for the monarch to be called upon to appoint a new government during the course of a parliament because the electoral system is likely to produce coalitions and often coalitions of more than two parties. At present the formation of the Scottish devolved Parliament and government does not involve the monarch. If Scotland became independent she would have to do one of three things: have a Governor-General as the Queen’s representative ; have a relationship in which the Queen performs the same duties in Scotland as she does in the UK as it is presently constituted or some entirely new relationship which reduces the monarch to nothing more than a figurehead with no prerogative power or influence, for example, no Royal warrants, no part in hung parliaments and so on. This strikes me as unlikely because it would offer an example to other Commonwealth states which persuade them to lobby top change their relationship
with the Crown.
In the case of the appointment of a Governor-General, that in itself would be a difficult political decision because the Scots would doubtless call for a Scot. The appointment of a Scot could produce a person with divided loyalties or even worse one wholeheartedly biased towards Scotland’s interests. Conversely, the failure to appoint a Scot could result in a continuous running political sore. But appointing a Scot as Governor-General would be no guarantee of compliance to Edinburgh’s wishes. The Governor-General of Australia who dismissed Gough Whitlam as Australian Prime Minister in 1975, Sir John Robert Kerr, was Australian.
Any relationship other than one which was new would produce constitutional difficulty, because the major element of the prerogative which the monarch still exercises which would be applicable to Scotland – the decision of who should form a government where there is no clear cut electoral decision – would force the monarch into politics, either
directly or through a High Commissioner. This might not matter if coalitions were a
rarity in an independent Scotland. But they would probably be the norm rather than a rarity. If Scotland retains the electoral system used for her devolved parliament, the monarch (or Governor-General) would have to make such a decision after most Scottish general elections . Coalitions being fragile, there would also be multiple opportunities for more than one such decision to be made in any parliament. If that were the case, the monarch (or Governor-General) would constantly be brought into active politics. Should the monarch (or Governor-General ) make a decision which was questionable, for example, accepting a coalition which excluded the party with the most seats, the monarch could be subject to personal political attacks. That could undermine the position of the
monarchy in the rest of the UK as well as Scotland.
Scotland could adopt a first-past-the-post electoral system, but that is most unlikely because of the vested interest all parties in Scotland have in retaining the present system,
that is, all know they will have a chance of at least some seats, something which would not be the case under first-past-the-post. But even if a first-past-the-post system was adopted there would still be occasions when a coalition was needed. This would be much
more likely in a small assembly such as the devolved parliament than in the House of Commons , which has more than five times the members of the Scottish parliament.
A small number of elected representatives means that any overall majority is going to be small whatever the electoral system. That is simply a matter of arithmetic. In a House with 646 members such as the House of Commons, a party winning 55% of the seats has 355 members which gives a majority of 64. 60% of the seats in the Scottish parliament (129 members) is 71 seats and a majority of 13. Managing a parliament for four or five years on a majority that small would be difficult. Every death or retirement of a member would take on considerable importance. The opposition would be constantly on the alert to embarrass the government with “ambush” voting and refusals to pair. This would make coalitions even where an overall majority likely within their potential for politically embarrassing the monarch.
That is not the only chance of political embarrassment or worse for the monarch. The Queen acts a conduit for the UK Government’s legislative programme through the Queen’s speech. She does not do the same for the devolved government in Edinburgh. If an independent Scotland wished the Queen to give a Queen’s speech in an independent Scottish parliament , she could easily find herself proclaiming contradictory policies in Westminster and Edinburgh, for example, Westminster might decide to raise duty on Scotch whiskey while Edinburgh opposed such a move. More dramatically, if Scotland continued to use the pound the Scottish government might, for example, argue for lower
interest rates and Westminster to raise them.
The monarch might also find herself having to speak words written for her by either government which would insult or enrage either Westminster or Edinburgh. It is easy to imagine Alex Salmond putting anti-English rhetoric into a Scottish Queen’s speech.
Embarrassment could also arise if those who were persona non grata to either Westminster and Edinburgh were entertained by the other and monarch had to meet them. Or the monarch might be called upon to undertake a public duty which was unpalatable to one of the governments, for example opening a nuclear power station in England and praising it as the best way of ensuring future energy supplies while Scotland continued with a no nuclear policy. The same problems would arise with any lesser royal, in whom they me, the speeches they might give and the places they might visit.
If an independent Scotland decided to use the Royal Prerogative powers which the Westminster Government uses, they would be much more potent in Scotland than they are at Westminster. The small size of the Scottish Parliament would lend itself much more easily to corruption and intimidation because there would be few people who would need to be corrupted or intimidated. That would, for example, make the use of existing prerogative powers which allow ministers to produce law without having to put legislation through Parliament a potentially dangerous weapon in the hands of a Scottish Prime Minister inclined to govern autocratically. In the latter days of the last Labour Government The Constitutional Reform and Governance Bill 2008-0 (http://www.legislation.gov.uk/ukpga/1998/46/part/I/crossheading/general-elections)
was passed. This did put some restrictions on the Royal Prerogative such as giving Parliament a say in the waging of war and the agreement to Treaties . But that Act only applies to the Westminster Parliament and UK Government. An independent Scottish Parliament could use the Prerogative in its form prior to that Act. They could, amongst other things, make treaties or declare war without Parliamentary approval. The Queen could end up supporting a treaty or war in one country and opposing it in another.
A particularly fraught problem is the position of the armed forces. The UK armed forces owe their loyalty to the monarch not Parliament or Government. Imagine the situation after Scottish independence if both Scotland and the UK had their separate armed forces who were yet all subject to the authority of the monarch. The opportunities for disagreement would be immense, as indeed they were before the Union when the English and Scottish crowns were united. In the 1690s Scotland developed a madcap scheme to establish a colony on the Isthmus of Panama http://www.rogermoorhouse.com/article2.html). Its promoters knew nothing about the reality of the site, which was inhospitable. It also fell within the Spanish ambit. The promoters of the scheme called on William III as King of Scotland to use English colonial power, English troops and the Royal Navy to support the colony and to generally aid them to the disadvantage of English interests. William refused because he did not wish to give Spain grounds for war or create opposition in England. It is conceivable that similar clashed of interest could arise again, for example, if an independent Scotland could not defend its territorial waters and called on the Royal Navy to do so.
That would be an awkward enough marriage of dissonant interests, but the SNP leader is hoping for an independent Scotland and the remainder of the UK to share a common defence force (http://www.telegraph.co.uk/news/uknews/scotland/8515034/Sir-Mike-Jackson-tells-Alex-Salmond-British-soldiers-have-only-one-master.html).
That would create an impossible situation whereby Scotland might wish to withhold troops and equipment from Westminster if there was disagreement about how they might
be deployed. Servicemen cannot have two political masters.
Those are some of the problems which would come with an independent Scotland with the Queen as head of state. There are others, for example, the funding of the monarchy. What would Scotland pay? Or the diplomatic service; how would UK and Scottish ambassadors in the same country, both appointed by the monarch, reconcile different views on the
same diplomatic matters? What is clear is that a return to the 1707 situation of one crown but two countries would be immensely messy and not in England’s interest. If Scotland becomes independent it should be without the Queen as head of state. The Queen (or her successor) could not veto this, because the Parliamentary settlement of 1689 with William III puts the ascension of a monarch to the throne of England in the gift of Parliament.
The wages of Scottish independence – immigration
The Scots Numpty Party (SNP) fondly imagines that an independent Scotland would continue to have free access to England. They recklessly assume Scotland’s position would be akin to that of the Republic of Ireland. However, that assumption rests on a number of dubious presumptions: (1) that an independent Scotland would be in the EU; (2) that the remainder of the UK (henceforth the UK) will remain in the EU; (3) that the EU will survive in its present form ; (4) that the UK will continue to have such generous welfare provision and (5) that the UK will play by the formal EU rules.
If either Scotland or the remainder of the UK was outside the EU, the rules relating to free movement of peoples across EU borders would not apply and the UK could restrict movement from Scotland to England at will. If Scotland was not in the EU (and the EU
might not welcome the idea of another potential Greece or Republic of Ireland or the Westminster government might veto their application to join ) but the UK remained in the EU, the Scots would be at a disadvantage in comparison with the continental EU states, because the remainder of the UK would be required to accept labour from other EU countries but not from Scotland. But what if both Scotland and the UK remained within the EU? That would mean there would be free movement between the countries. However, that presumes the EU will remain as it is. This is very uncertain. Should the Euro collapse that might cause such financial distress that the EU ceased to exist as each of the member states looked in desperation for their own salvation. That could leave an independent Scotland out on a limb, bankrupt and unable to export its unemployed.
Even if the EU did not break up, a the collapse of the Euro would could produce a lasting depression along the lines of that of the 1930s. This would reduce both the opportunities for employment within the EU and the ability of member states to meet their welfare obligations, which would dissuade people from moving to countries where the welfare benefits are highest.
As all EU law requires is that the same benefits that are offered to the citizens of an EU member are offered to any other EU members’ citizens, this produces widely varying provision in the various EU states with corresponding differences in their attraction to immigrants.
Welfare is particularly significant in the UK’s case because when everything is taken into account – unemployment pay, sick pay, working tax credits, housing benefit, council tax
benefit, free school education and (still) subsidised university education and the NHS (which is by far the most generous healthcare system in the EU – the UK has arguably the most attractive welfare package in the EU and one moreover which is very readily accessed.
If UK benefits were considerably reduced there would be far less incentive for foreigners to come. That would apply to an independent Scotland. In fact, Scotland could find itself in a situation where the welfare benefits they offered were more substantial than those of the UK and produced migration from the UK to Scotland to claim the higher benefits. As things stand with EU law, they would have to pay the higher benefits to all EU citizens who claimed them. The only way the Scots could prevent paying higher benefits would be to
reduce the provision s to their own people.
There is also the possibility that the UK could reduce their level of welfare provision even without a further great economic disaster. This is certainly the intent of the Tory Party and if they achieve a strong majority at the next general election this may well happen.
Another possibility is that the EU could re-invent itself in a number of ways. It could reduce its members to a core of stable, productive members. That would not include Scotland. A multiple layered EU with members having a different status is another with differing rules relating to free movement, the right to work and access to welfare. In reality this already exists with countries in the European Economic Area (EEA) such as Norway and Switzerland having free trade and free movement of peoples but not obligations such as welfare provision for EU state citizens (http://livinginamadhouse.wordpress.com/2011/05/01/if-we-leave-the-eu-we-mustnt-be-another-norway/). It is improbable that an independent Scotland and the UK would be in the same layer because of the great difference in size and wealth between the two.
As for free movement within the EU itself, it is noticeable how readily the Schengen Agreement was overthrown in May 2011 by subscribing states declaring they were suspending free movement because of the pressure of refugees from North Africa caused by the so-called “Arab Spring”. (http://www.guardian.co.uk/world/2011/may/12/europe-to-end-passport-free-travel). The Schengen Agreement provides for the twenty five signatories (all EU members except for the UK and the Republic of Ireland) to operate a no borders regime for the subscribing members. This covers approximately 400 million people. Not only is free movement within the EU one of the four EU “freedoms”, but the Schengen Treaty conditions and the law evolving from them are now part of the EU’s acquis communautaire (literally that which has been acquired by the community) . This means that jurisdiction over the Schengen Area and any amendment to the Treaty provisions is now subject to the legislative process of the EU (the Council of Ministers and the European Parliament) rather than a negotiating free-for-all by the political heads of
each member state. Yet the decision of EU countries large and small – Italy, France, Denmark – to act unilaterally passed without any real opposition or action. The lesson here is that when shove comes to push national interests will predominate. Other examples are the flouting of EU rules on such things as competition and state subsidies. Often no action is taken and even where it is, the larger countries such as France simply ignore any fines or judgements from the European Court of Justice with impunity. Even if Scotland and the UK remained within the EU, the UK as one of the larger EU states could impose border controls against Scotland without anything dramatic happening. The same would apply with greater force if an independent Scotland became a member of the EEA or the UK left the EU and signed up to the EEA.
Scotland could in principle join the Schengen Area, although its fragility has been clearly demonstrated this year. But that would do them little good because neither the UK nor the Republic of Ireland are members. Thus Scotland would have no shared border with the treaty members.
If the UK left the EU, an independent Scotland would be utterly in the hands of the UK, which could not only stop human traffic over the border but legally prevent any goods traffic between the UK and Scotland. The same would apply if Scotland was not in the EU and the UK was.
Why would the UK not want to have an open border with Scotland? The Westminster government might wish to prevent free Scottish immigration for a number of reasons. The most obvious would be if Scotland was used as a conduit for immigrants from outside the British Isles to enter England in large numbers. (I say England not the UK because experience shows that immigrants to the UK overwhelming head for England).
Then there would be the risk that the resident population of Scotland would want to come to England in large numbers if the Scottish economy turned turtle. That could have considerable costs for England both in terms of competition for jobs, housing, public services and benefits paid to the unemployed.
There is also the strong risk for Scotland that a future Westminster government could be faced by an electorate, especially of those in England, which was hostile to Scotland because of their decision to leave the union and wished them to be denied any suggestion of special treatment such as continued free movement across borders.
If Scotland became independent that England’s already great predominance within the UK would become even greater with over 90% of the UK’s population and much more of its wealth. That would make the UK government give more attention to English interests. This natural tendency would be enhanced by the loss of the 59 House of Commons seats which are returned by Scotland. That would make a future Labour or even a Labour/LibDem government improbable because Labour and the LibDems hold all but one of the 59 seats. The likelihood would be a Tory Government at Westminster for the quite some time after Scottish independence.
There would also be the question of nationality at the time of Scottish independence. Alex
Salmond has the quaint idea that the Scots would have both Scots and British nationality. This is a very rash assumption. British nationality might not continue once Scotland was gone. The UK might opt for a confederal system with different nationalities for England,
Wales and Northern Ireland. England might decide to go for independence herself. More broadly, a Westminster Parliament dominated by English MPs and concentrated on English interests might refuse to share a nationality with an independent Scotland. An independent Scotland which did not have free movement between herself and the UK would be in a very perilous position, because she would be a small country on the very
periphery of Europe with no border with any country other than England. Scots should reflect on that inescapable fact.
The wages of Scottish independence – Public Debt
One thing is certain about an independent Scotland: it would begin life with a massive national debt. Exactly how much is problematic because the Scottish referendum on
independence will probably not be held until 201. If there is a YES vote, it will probably be another couple of years before agreement is reached between Scotland and Westminster on the terms of independence because the Scots Numpty Party (SNP) has not proposed
that the terms on which independence is to be granted are reached before the referendum. In addition, some revenue streams, such as those from the oil and gas in English waters have never been formally agreed and calculated and public sector debts are not always clear-cut, for example, the cost of building a high-speed rail link to Scotland. All this means that that the best that can be done for the official UK National debt at the time of likely independence are official projections with unofficial estimates used for items such as oil and gas in English waters .
The official UK national debt as it stands now is:
“Public sector net debt (excluding financial interventions) was £910.1 billion (equivalent to 60.1 per cent of GDP) at the end of April 2011. This compares to £765.5 billion (53.0 per cent of GDP) as at the end of April 2010.
“The unadjusted measure of public sector net debt expressed as a percentage of gross domestic product (GDP), was 148.9 per cent at the end of April 2011 compared with 150.9 per cent at end of April 2010. Net debt was £2252.9 billion at the end of April compared with £2180.0 billion a year earlier.” (http://www.statistics.gov.uk/cci/nugget.asp?id=206)
The unadjusted measure includes the financial subventions such as those to RBS and Lloyds. Those wishing for a fuller description of the treatment of public sector debt should
go to http://www.bankofengland.co.uk/mfsd/iadb/notesIADB/debt.htm
The simplest and fairest way of apportioning the UK national debt is by allocating a share to Scotland proportionate to their share of the UK population. The estimated population of Scotland was 5,222,100 in mid-2010 http://www.scotland.gov.uk/News/Releases/2011/04/27095112).
The estimated population of the UK in mid 2009 was 61,792,000 http://www.statistics.gov.uk/cci/nugget.asp?id=6 . Hence, Scotland has approximately 8% of the UK population. Eight per cent of £910 billion is £73 billion; eight per cent of £2253 billion is £180 billion.
By 2015/16 the net debt figure will have increased substantially. Here is Bill Jamieson of the Scotsman spelling out what the net debt share would mean for Scotland :
“What of deficit and debt apportionment? Both in the immediate term and in the final settlement, the SNP has called for more borrowing powers. But how much more borrowing will be sought on top of Scotland’s share of UK debt? To give a proximate idea of what we face, let’s assume Scotland’s debt share is similar to that of her share of UK GDP – circa 10 per cent. By 2015-16, when a referendum vote may be held, UK net debt is projected at £1,359 billion (69 per cent of GDP) and the annual interest charge would have risen to £67bn. Scotland’s share would be £136bn, and £6.8bn respectively.” (http://thescotsman.scotsman.com/holyroodelections/Bill-Jamieson-The-burning-independence.6766635.jp?articlepage=2).
Of course, Scotland might have another year or two before independence, which even on the Coalition’s planned spending deficit reduction plans would add a few billions more – the projected spending deficit in 2015/16 is one per cent which would mean £15 billion plus added to the national debt each year past 2015/16
(http://www.soas.ac.uk/cdpr/publications/dv/file67880.pdf). However, the signs for a strong economic recovery are poor – stagflation looks increasingly on the cards with rising prices and falling projections of growth – and the deficit in 2015 and the years immediately following may well be considerably higher than the projections. It also assumes that no other non-financial disaster strikes. This could well happen with the Coalition’s plans to privatise more and more of public provision. The major problem with this, apart from introducing the profit motive, is that private businesses can fail.
If they are providing essential public services they cannot be allowed to fail which means the taxpayer will have to step in. At the moment there is a potential disaster just round the corner with the care home provider Southern Cross in deep financial trouble. (http://www.guardian.co.uk/society/2011/may/25/southern-cross-care-homes-in-balance). The company caters for 31,000 of the old and vulnerable. There is no way other private providers could take up the slack. That would mean the taxpayer stepping in either with preferential loans to the company, which would almost certainly be challenged under EU competition law, or taking over the business wholesale.
That is just the net public debt. What the unadjusted national debt would be in 2015 can be no better than a guestimate. If the publicly owned shares in the banks are sold that would reduce the unadjusted figure, but there is no guarantee that the money put in
when the banks were on the verge of failing will be recovered in full. Even if they are sold for enough to cover the money put in directly by the taxpayer this would only be a small part of the overall costs of the banks’ rescue: .
“The Government has pumped around £45 billion into RBS and £20 billion into Lloyds – holding stakes of 84% and 41% respectively – although the taxpayer is currently sitting on almost £20 billion in paper losses on the holdings.” (http://money.uk.msn.com/news/articles.aspx?cp-documentid=152384309)
If the shares are not sold, assuming no other financial disaster then the unadjusted debt will probably be in real terms similar to that between adjusted and unadjusted debt in 2011). However, that is a very big assumption because the UK may not be out of this financial crisis by a long chalk. UK financial institutions, especially those providing mortgages, still have a good deal of potentially toxic debt. Those struggling with
mortgages have been switched to easier terms, especially interest only repayments http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8548745/Banks-accused-of-using-mortgage-debt-leniency-to-flatter-numbers.html) . In addition, in the past six months UK banks have been going much more heavily in UK Government gilts (http://www.telegraph.co.uk/finance/economics/gilts/8550716/Banks-buy-bulk-of-39.8bn-of-new-gilts.html). This has the effect of another spate of quantitative easing. That will feed through into ever greater inflation (inflation is already high) which will eventually lead to much higher interest rates. That will drive many mortgage holders over the edge. If the UK property market collapses, that will seriously undermine the UK banking system and could well lead to other taxpayer bail-outs.
Even if things go well (well in the context of what the coalition is aiming for) the unadjusted debt would probably be in £,2500- 3,000 billion in 2016/17. That would leave Scotland with a starting national debt of £200 – 240 billion. An independent Scotland would find borrowing money would be rather expensive because of the weakness and small of the economy would make it a far riskier bet than lending to the UK, but suppose
five per cent interest was paid, that would be £10-14 billion a year to service the Scottish debt.
That would not be the full debt Scotland would have to take on. There would
also be a proportionate Scottish share of (1) UK’s PPP and PFI obligations at the time of independence, (2) the funding of UK public sector and EU pensions earned up to the advent of independence and (3) other UK debt taken on up to the time of independence.
There would also be the need to fund council debt which is not related to PPP/PFI/or local authority pensions, although that could be a mix of national Scottish funding and local authority taxation.
PPP and PFI present a problem because the cost is spread over 20-30 years and there are renegotiation clauses at various points in the contract; contracts are sold on so the reliability of the contractor can change and when shove comes to push the taxpayer is a faced with a choice between paying the contractor more or seeing the project collapse. (see http://livinginamadhouse.wordpress.com/2011/01/27/ppp-and-pfi-buy-now-pay-later/). Because of this it is impossible to give an accurate figure for the cost of a contract and the payments being spread over a long period have persuaded government statisticians not to include the full cost in the UK national debt. The complications can be seen here. (http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/d/psfnewsrelease_aug06.pdf). To give an idea of scale of allowances made by the statisticians, in 2006 they added £4.95 billion to the net debt.
Estimates of the amount to be repaid under PPP and PFI are around the £200-230 billion mark. For example, “Figures obtained by this newspaper [Daily Telegraph] through Freedom of Information requests reveal the full, mind-boggling cost of the Private Finance Initiative (PFI) upon which the last government relied to fund its public sector infrastructure projects. More than 900 schemes have been completed with a total capital value of £56 billion – yet the amount the taxpayer will have to repay currently stands at £229 billion.” (http://www.telegraph.co.uk/comment/telegraph-view/8279753/Gordon-Browns-poisoned-PFI-legacy.html24 Jan 2011). Eight per cent of £229 billion would be £18 billion.
Public sector pensions for those working for the UK also do not have to paid for immediately. Here are the National Audit figures for 2009:
“•Total payments to more than 2 million pensioners in the UK’s four largest pay-as-you-go pension schemes (also known as unfunded schemes – where current employee and employer contributions are used to pay current pensions) were £19.3 billion in 2008-09,
a real terms increase of 38 per cent since 1999-2000. This is driven by more employees retiring each year, which is a substantially more significant factor than longer lifespans.
“ •Employee contributions of £4.4 billion reduced the taxpayer’s share of costs to £14.9 billion in 2008-09. The employee element grew by 56 per cent in real terms since 1999-2000 because staff numbers and contribution rates have increased.” (http://www.nao.org.uk/publications/0910/public_service_pensions.aspx). Eight per cent of (15 billion is £1.2 billion.
The individual costs of Eurocrats’ pensions are high but not massive in in the context of national budgets: “Contributions by UK taxpayers to the pension pots of EU civil servants will jump to £350m a year by 2040, the report showed. “European taxpayers will have to stump up a total of £85bn in the next 50 years to pay for the comfortable retirements for officials.
“The total contribution from Britain in that time could be an astonishing £8.5bn. “http://www.thisismoney.co.uk/pensions/article.html?in_article_id=515300&in_page_id=6#ixzz1O27PaX00). Scotland would have a liability of around £1 billion spread over 30 years.
There is also the question of past transfers of English money to Scotland. The SNP’s claim that the oil and gas tax revenue has exceeded the money received from the UK treasury is wildly wrong. In 2009 a Scotland Office paper “Scotland and Oil” dealing with the tax
income from oil and gas fields around the UK painted a rather different picture. It concluded that:
“• If all North Sea oil revenues had been allocated to Scotland there would only have been 9 years out of the last 27 when Scotland’s finances would have been in surplus.
• Including all North Sea oil revenues the last year of surplus was in 1988-89 and since then there has been 18 years of annual deficits with Scotland’s spending being greater than the tax raised in Scotland.
• Even if all oil revenues had been allocated to Scotland the total deficit would have outweighed the total surplus by £20bn since 1980-81. “ (http://www.scotlandoffice.gov.uk/scotlandoffice/files/Scotland%20and%20Oil%20-%20Background%20paper.pdf)
So there you have it, the official view is that even if all the oil and gas revenues were allocated to Scotland they still would not pay their way. Of course, a substantial part
of the oil and gas tax revenue would not go to Scotland because of the fields in English waters. Exactly how much is debatable, but most of the remaining gas is in English waters, viz:
“The SNP claims that Scotland would receive 95 per cent of oil revenue, but its calculation is based on the total revenue from oil and gas. Its opponents say that they do not take into account the large number of gas fields in English waters.
“THE EXPERT SAYS: Prof Haszeldine says: “The vast majority of the oil is in Scottish waters. With practically all of the gas in the UK in the southern North Sea, that is in ‘English’ territory.” He says it is hard to separate the revenue from oil and gas. “(http://thescotsman.scotsman.com/politics/Can-oil-and-gas-fuel.2834598.jp)
It would not be unreasonable to add £30-40 billion to the Scottish national debt to cover the discrepancy between what Scotland has paid in to the UK Treasury and what they have taken out since 1980.
There is also the question of a disproportionate public sector employment being deliberately created in Scotland to boost the economy at the expense of England. This includes such things as the Faslane nuclear submarine base and the administration of much of England’s benefits system. Around 60% of current Scottish GDP is derived
from public expenditure and this is projected to rise to nearly 70% by 2012 (http://www.telegraph.co.uk/news/knews/scotland/4217793/Scotlands-dependence-on-state-increasing.html). I would not care to put a figure on what this has been worth to Scotland but it must be billions.
Finally, in the 273 years prior to 1980 when there was no major oil and gas tax revenue. During much of that time Scotland had favourable treatment both in terms of taxes raised in Scotland and money sent there from the UK Treasury. This imbalance was built into the Act of Union:
“Clause IX. THAT whenever the sum of One million nine hundred ninety seven thousand seven hundred and sixty three pounds eight shillings and four pence half penny, shall be enacted by the Parliament of Great Britain to be raised in that part of the United Kingdom now called England, on Land and other Things usually charged in Acts of Parliament there, for granting an Aid to the Crown by a Land Tax; that part of the United Kingdom now called Scotland, shall be charged by the same Act, with a further Sum of forty-eight thousand Pounds, free of all Charges, as the Quota of Scotland, to such Tax, and to proportionably for any greater or lesser Sum raised in England by any Tax on Land, and other Things usually charged together with the Land; and that such Quota for Scotland, in the Cases aforesaid, be raised and collected in the same Manner as the Cess now is in Scotland, but subject to such Regulations in the manner of collecting, as shall be made by
the Parliament of Great Britain.” Act of Union (http://englandcalling.wordpress.com/the-act-of-union-1707/)
The population of England was five times that of Scotland in 1707. Had Scotland paid the tax listed in Clause IX at the same rate as England they would have paid £400,000. Instead they were required to pay only £48,000, roughly a ninth of the pro rata sum.
For much of the time between 1707 and 1980 Scotland was poor (which meant less tax being collected) and from the time of welfare payments being instituted for the UK as a whole in the early years of the last century , Scotland has had a higher take up than England.
The accumulated sum (including compound interest) resulting from this favourable treatment would be colossal, far beyond what Scotland could afford,. However, it is a useful political mallet with which to thump the SNP if they start claiming all the oil and tax revenue and demanding compensation for defence equipment and installations, embassies and such forth.
All those obligations and difficulties have to be set against the small size of the Scottish economy. No official GDP measure is produced but the ONS 2009 figure for Scottish Gross Value Added (GAV), which is GDP without taxes (less subsides) on products,
was £102,552 billion (http://www.statistics.gov.uk/pdfdir/gva1210.pdf). The GDP today is in the region of £130-140 billion, with around 60% being from public spending. In 2010 total public spending in Scotland was £52 billion (that is devolved -health, education and so forth- and non-devolved expenditure such as benefits)http://www.ukpublicspending.co.uk/Scotland_country_spending.html.
It is rather difficult to see how an independent Scotland could service a national debt which could be £300 billion or more. At five per cent that would be £15 billion a year. There is also the risk that an independent Scotland might have to pay more than five per cent because they are a small economy with little private enterprise. If they join the Euro or retain the pound they will be subject to the decisions of Westminster or Brussels which may not be in Scotland’s interest. It is a less than encouraging picture.
The wages of Scottish independence – the currency problem
The most problematic decision for an independent Scotland is the currency. There are three choices: to keep using the pound, join the Euro or create their own currency. If they choose the pound or Euro they will not be truly independent because they will have to relinquish control over a large slice of Scotland’s fiscal policy. True independence
would require the creation of a new currency.
If Scotland chooses to stay with the pound, as things stand they would l be subject to the
decisions about interest rates made by the Bank of England (BoE). It is improbable that the Westminster Government would change the present regime to suit an independent Scotland, and any change, for example, returning control of monetary policy to the Government from the BoE’s Monetary Policy Committee (MPC) or the alteration of the MPC’s remit, would be made to suit the UK Government not Scotland.
The MPC’s present remit is to keep inflation under control around a 2% target:
“ The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment. Price stability is defined by the Government’s inflation target of 2%. The remit recognises the role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government’s inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.”
(http://www.bankofengland.co.uk/monetarypolicy/framework.htm)
The MPC has ignored that remit since the recession began in earnest in 2008, leaving
inflation to look after itself by first reducing Bank Rate to an all-time low of half a per cent and then keeping it there. Ostensibly this has been done because of fears of a severe shrinkage in the UK money supply. In addition, to boost the money supply the BoE has engaged in what is politely known as Quantitative Easing (QE) and impolitely known as printing (virtual) money. A cynic might say that the reason the MPC and the BoE have behaved in this fashion is to covertly do the Government’s bidding, namely, (1) preventing
a wholesale collapse of house prices through massive defaults caused by keeping Bank
Rate at a sensible, much higher, level and (2) reducing public and private debt by inflating it away. Whatever the truth, the management of the economy since 2008 illustrates an important truth: whoever controls the currency to a very great extent controls the politics of a country.
If an independent Scotland opted to keep the pound, when shove comes to push they would have to accept whatever Westminster decided, not only from the direct
management of the economy through MPC decisions and strategies such as QE, but also
the effects of the general fiscal regime decided by Westminster which would affect the value of the currency. This would include the tax regime in the UK and Westminster’s attitude towards debt, especially private debt. It is not inconceivable that credit controls such as those which existed before Thatcher removed them in the 1980s could be re-imposed, for example restrictions on bank loans and mortgages.
There are also dangers for the rest of the UK if an independent Scotland is tied to the pound. One of two arrangements would exist: either no Scots say in how the Westminster Government acts (probable) or some arrangement by which Scotland would have
a formal say in the setting of interest rates (improbable). Whichever it was you can bet the Scots Numpty Party (SNP) would complain that interest rates are set to benefit England.
That would create a danger that politicians in Westminster would give some
ground to them even if there was no reason to do so. If you doubt this reflect on the fact that David Cameron has not laid down any conditions for Scottish independence merely said that he would campaign against it. (http://englandcalling.wordpress.com/2011/05/06/scottish-independence-yes-but-only-on-these-terms/). If the Scots do vote for independence , it is not probable that negotiations between the SNP and Westminster would result in the Coalition Government giving a great deal away to the SNP in the vain hope they can cobble together a deal which allows them to pretend the UK as presently territorially constituted still exists in some form. This is an issue which needs to be aired in public as often as posssible.
More fundamentally, the division of a currency between two supposedly sovereign states would create uncertainty in the money markets because it would not be clear who was pulling the strings or what would happen if Scotland got into the sort of economic trouble
Greece is currently experiencing. The danger for the UK would be that Scotland would get into such a financial mess that the rest of the UK (in reality England as both Wales and Northern Ireland are economic basket-cases) would come under immense pressure to bail Scotland out, exactly the predicament the richer EU countries have found themselves in over the Euro turmoil. Even if Scotland did not suffer a Greek-style economic collapse;
if it turned out to be church-mouse poor http://englandcalling.wordpress.com/2011/05/06/scottish-independence-yes-but-only-on-these-terms/) rather than the oil-tax El Dorado which fills the dreams of SNP members, that would have a serious effect on the behaviour of the currency, because the money markets would look at the combined economic performance of the UK and Scotland. That would mean UK Government borrowing would cost more. It would also probably mean higher Bank Rate than would otherwise be the case or higher inflation in the BoE kept rates low despite what the economic indicators were saying.
The Euro poses the same problems as the retention of the pound writ large. Whether the Euro will survive in its present form or even at all is uncertain. But even if it does manage to overcome the present difficulties which besiege the currency, it is dubious whether the richer Euro members, especially Germany, would welcome into the Euro fold another small country with a dangerously high dependence on public spending, much of which
would vanish at independence. However, if Scotland did gain membership of the
Euro, its government would have absolutely no effect on how the currency was managed and would be much more likely, because of the number and diversity of the Euro members, to find itself trapped by interest rates and the value of a currency which was not suited to Scotland’s needs than they would have been if they kept the pound ,
a stable, important currency which has been shared between Scotland and the rest of the UK for 300 years. The present mess that Ireland, Portugal and Greece find themselves in should be warning enough of these dangers.
The other problem with being in the Euro is the likelihood of ever more invasive powers over economic decisions such as oversight of banks being given to the Eurozone members . Even as things stand, in theory at least there are severe restrictions on the amount of public debt a Eurozone member may run up. The current Euro crisis is bringing ever louder calls for much more stringent controls over what Euro members can
do and meaningful enforcement of Euro regulations. Scotland would have far less fiscal freedom if they joined the Euro than if they retained the pound.
That leaves the creation of an entirely new currency. This would give Scotland fiscal freedom, but would come with its own vast problems. Getting international credibility for a currency is difficult for a large country with vast natural resources (think of Russia after the dismemberment of the Soviet Union); it is much more difficult for a small country (Scotland has a population of around 5 million) even one with still substantial oil reserves.
An Independent Scotland would not seem an attractive economic proposition to foreigners. Around 60% of current Scottish GDP is derived from public expenditure and this is projected to rise to nearly 70% by 2012 (http://www.telegraph.co.uk/news/uknews/scotland/4217793/Scotlands-dependence-on-state-increasing.html). Much of the public expenditure is dependent on a subsidy from England (the difference in per capita Treasury funding alone means Scotland takes around £8,000 billion from England each year – (http://englandcalling.wordpress.com/2011/05/06/scottish-independence-yes-but-only-on-these-terms/) and the likely tax revenues from oil and gas in Scottish waters (some of the oil and most of the gas is in English waters) are likely over a the medium term to be considerably less than the subsidy received from England. (http://englandcalling.wordpress.com/2011/05/14/the-truth-about-uk-oil-and-gas/).
Moreover, the amount of oil extracted in the future will depend on the price and likely tax regime and the amount of oil will decline steadily even if the price remains high.
Foreigners would also be concerned at the very narrow economic base of Scotland’s economy. Of the forty odd percent of the economy which is not publicly funded, a substantial part derives from the oil and whisky industries (http://www.corporatewatch.org.uk/?lid=1827). Moreover, much of Scotland’s private enterprise, especially the oil firms and rather humiliatingly the whiskey producers, is foreign owned so that the profits emigrate .
There is also a lack of entrepreneurism in Scotland so the private sector is unlikely to swell:
“Scotland has the lowest ratio of businesses per head of population in the UK, according to figures published by the Department for Business Innovation and Skills (BIS). At the outset of 2010, Scotland had 672 private sector enterprises per 10,000 adults, while England had 922, Northern Ireland 860 and Wales 783.” (http://thescotsman.scotsman.com/6983/Scotland39s-private-sector-lags-UK.6773823.jp)
An independent Scotland would also start with a massive national debt. Here is Bill Jamieson of the Scotsman dealing with the UK national debt:
“What of deficit and debt apportionment? Both in the immediate term and in the final settlement, the SNP has called for more borrowing powers. But how much more borrowing will be sought on top of Scotland’s share of UK debt? To give a proximate idea of what we face, let’s assume Scotland’s debt share is similar to that of her share of UK GDP – circa
10 per cent. By 2015-16, when a referendum vote may be held, UK net debt is projected at £1,359 billion (69 per cent of GDP) and the annual interest charge would have risen to £67bn. Scotland’s share would be £136bn, and £6.8bn respectively.” (http://thescotsman.scotsman.com/holyroodelections/Bill-Jamieson-The-burning-independence.6766635.jp?articlepage=2)
That would not be the full debt Scotland would have to take on. There would also be a proportionate Scottish share of the funding of UK public sector pensions up to the advent of independence; either a proportionate share of the UK’s PPP and PFI obligations at the time of independence or full responsibility for all PPP and PFI contracts in Scotland plus any other debt accrued for Scottish projects, both at local and national level, and other UK debt up to the time of independence. It is dubious whether foreign investors or the money markets would see an independent Scottish currency as a safe bet with those massive starting obligations.
More generally, companies operating in Scotland now have the assurance that they are operating within a country which is controlled by a much larger and richer national entity namely England. That is particularly important for the oil industry who need safe seas to operate in. They would have no such assurance if Scotland was independent.
Finally, there is the thorny question of the Scottish banking system. It is not merely that the British taxpayer (in reality the English tax payer because the Celtic Fringe take vastly more out of the UK tax pot than they put in) has put directly “The Government has pumped around £45 billion into RBS and £20 billion into Lloyds – holding stakes of 84% and 41% respectively – although the taxpayer is currently sitting on almost £20 billion in paper losses on the holdings.” (http://money.uk.msn.com/news/articles.aspx?cp-documentid=152384309). Those are horrific figures for an economy the size of Scotland (£140 billion approx – see below) . However, that is only the tip of the taxpayer cost iceberg. Part at least of the ongoing costs of the recession and the burgeoning UK national debt is down to the reckless behaviour of financial institutions and the two Scottish banks RBS and HBOS were by far the greatest contributors to the need for taxpayer support and the ravaging of value by feeding inflation through QE.
The size of the damage done can be seen from the Jamieson quote above: if the UK national debt reaches £1.4 trillion by 2015 that will mean the national debt will have nearly trebled (excluding inflation) since 2008 when it was around £500 billion (http://www.ukpublicspending.co.uk/uk_national_debt_chart_10_G.html). Even worse, the official national debt figure does not include the costs of bailing out the banks or the full cost of PPP and PFI expenditure, debt which was kept off the official national
debt by Gordon Brown’s off-the-books Enron style accounting. The official national debt figure with all identifiable costs included (the unadjusted measure of public sector net debt ) was £2252.9 billion or 148.9 per cent as at May 2011. (http://www.economicshelp.org/blog/uk-economy/uk-national-debt/).
Exactly how Scotland would be able to sustain an independent currency against the background of the loss of English subsidy, the narrowness of the Scottish economy, the over-dependence on the public sector, the huge national debt Scotland would start with and the awful mess of their banking system is to put it mildly difficult to see. That economic background also makes the idea of Scotland using either the pound or Euro very unattractive, because not only would it drag down the credibility of the currency (especially in the pound’s case), but the likelihood of a either England or the Eurozone having to bail-out Scotland with vast amounts of money looms very large.
All those obligations and difficulties have to be set against the small size of the
Scottish economy. No official GDP measure is produced but the ONS 2009 figure for Scottish Gross Value Added (GAV), which is GDP without taxes (less subsides) on products, was £102,552 billion (http://www.statistics.gov.uk/pdfdir/gva1210.pdf).
The GDP today is in the region of £130-140 billion.
Whatever currency choice Scotland made one thing is certain: borrowing by Scotland’s government, both central and local, and any other public body in Scotland would become much more expensive. The UK can borrow at a rate which is moderate: an independent Scotland would, because of its precarious economic situation, have to borrow at considerably more than the UK rate, if things go really wrong at the extortionate rates the Greek Government is having to pay despite being part of the Euro.
The wages of Scottish independence – the loss of the military
One of the most complex aspects of disentangling Scotland from the rest of the UK should Scotland become independent is defence. It is complex because of (1) the siting of the Trident submarines and other major ships at Faslane; (2) the awarding of MOD research contracts to Scotland and (3) the fact that the armed forces which now exist in Scotland would not be suited to Scotland’s defence needs, they being designed to fit into a UK defence strategy not a Scottish one.
Back in 2002 the Scotch Numpty Party (SNP) had these rather grandiose plans:
“Colin Campbell, the party’s defence spokesman, gave details of a Scottish Defence Service (SDS) which would operate in a nuclear-free Scotland following the removal of Trident.
“Mr Campbell said current estimates showed that a defence programme would cost £600 million a year with an extra £300 million for works.
“The total defence budget of £1.8 billion would be about the same figure as the Ministry of Defence currently spends in Scotland.
“He told the delegates: “We are looking at a maximum establishment of 20,000 regular personnel in Scotland … that is 5,000 extra people being paid in Scotland and spending their money in Scotland. That’s worth about £150 million a year.”
“He reckoned there would be 7,000 more indirect jobs as a result of the SNP’s defence policy.
Apart from 20,000 full-time regular troops, Scotland would also have 20,000 regular reservists and 8,000 part-time reservists. (http://news.scotsman.com/snpconference2002/SNP-proposes-nuclearfree-Scottish-Defence.2364594.jp)
A more realistic idea of the armed forces and independent Scotland could afford can be gained from those of the Republic of Ireland RoI) which has an estimated population of around 4.5 million http://www.cso.ie/releasespublications/documents/population/current/popmig.pdf) to Scotland’s estimated five million.
The RoI has an army of approximately 8,500, a navy of 1,100 and an airforce of 1,000. (http://www.military.ie/home). Total defence expenditure for 2011/12 is EUR725 million (£632 million – (http://articles.janes.com/articles/Janes-Sentinel-Security-Assessment-Western-Europe/Armed-forces-Ireland.html). To put that in context the UK’s defence
expenditure for the same year is £ £33.8bn, or around 53 times that of the RoI. (http://www.mod.uk/DefenceInternet/DefenceNews/DefencePolicyAndBusiness/DefenceBudgetCutByEightPerCent.htm).
The RoI armed forces could offer little meaningful opposition to an invasion by any serious invader. Their armed forces can perform a domestic quasi-police function at best .
An independent Scotland would have substantial revenues from oil which the RoI
does not have, although these are very susceptible to violent fluctuations in the oil price, something which would make planning for the future especially difficult as the oil tax receipts would form a substantial part of the anticipated revenue an independent Scotland would need. The oil is also a diminishing resource. (http://englandcalling.wordpress.com/2011/05/14/the-truth-about-uk-oil-and-gas/).
In addition an independent Scotland would lose the subsidy they receive from England each year (around £8 billion at present – http://englandcalling.wordpress.com/2010/11/12/celtic-hands-deep-in-english-taxpayers%e2%80%99-pockets/)
and begin their independent life with a large national debt as their share of
the UK national debt. That share would be at least £100 billion with the UK National Debt as it is now at around £1.1 trillion (http://www.statistics.gov.uk/cci/nugget.asp?id=277)
, but by the time a referendum is held on the proposed SNP timetable in 2015 it will probably have grown to £1.5 trillion. This would make Scotland’s proportionate share (based on her proportion of the UK population) around £140 billion. In addition there would be large sums of additional debt for Scotland arising from the rescue of the Scottish banks RBS and HBOS, PFI projects and the funding of public service pensions. Scotland would also have to fund a great deal of initial extra expenditure resulting from the setting up their separate public administration.
Taking these financial constraints into account, it is most unlikely that an independent Scotland would be able to support armed forces substantially greater than those of the RoI. If that were the case, Scotland would lose out in terms of the numbers of servicemen in Scotland, the number of MOD civilian workers and the lucrative contracts (with the jobs attached) for defence which they now receive from the UK Treasury. The MOD website gives a snapshot of the material benefits which belonging to the UK currently brings to Scotland via the defence budget:
“Scotland makes a very important contribution to UK Defence. Scottish military links and heritage remain strong and all three Armed Forces continue to have a significant presence at 381 sites across the country.
“There are 5,000 Armed Forces Volunteer Reservists and 10,000 Cadets throughout Scotland, plus ten University Squadrons and Corps. The Army alone has 58 Territorial Army centres, 17 Combined Cadet Force units, four University Officer Training Corps, and 228 Cadet detachments, which are supported by 1,000 adult volunteers.
“The MOD and the Armed Forces employ 20,000 people throughout the country. Each year the MOD spends an average of £600 million in Scotland, and awards over 500 direct contracts, sustaining additional jobs in Defence manufacturing. Scottish industry produces cutting-edge, hi-tech ships and equipment to enable our forces to carry out their operations.
“About 130 Royal Navy and NATO ships visit ports in Scotland every year, bringing money to the local economy.”
“An estimated 11,000 Scottish jobs are directly dependent on Defence contracts, with thousands more jobs supported in Scotland through the presence of the MOD and its spend in local areas. Defence industry varies greatly, from specialists in chemical protective clothing to shipyards that have produced Type 45 destroyers. The new royal Navy Aircraft Carriers will be built at Clyde shipyards in Glasgow and assembled as Rosyth Dockyard in Fife.”
(http://www.mod.uk/DefenceInternet/FactSheets/DefenceInScotland.htm)
Much of that would go because of the financial constraints described above. In the case of research and manufacturing , all of it would be removed as soon as alternative arrangements could be made and existing contracts expired. Without the patronage of the UK Treasury there would be greatly reduced opportunities for Scottish defence manufacturers and Scotland would, like most countries of her size, buy the bulk of her military equipment from foreign suppliers.
The heaviest loss would be the submarine base at Faslane which is scheduled to get even more work than it presently has because during Gordon Brown’s premiership (in 2009) the decision was taken to base all the UK’s new submarines – including those on which the UK’s nuclear deterrent Trident is now entirely based – at Faslane by 2016. It is a substantial facility to say the least viz:
“In May 2009 the then Minister for the Armed Forces announced that three Trafalgar Class submarines will transfer to Clyde by 2017, joining the Vanguard Class submarines and the Royal Navy’s new Astute Class vessels.
The announcement confirmed HM Naval Base Clyde’s future as the home of the UK Submarine Service and paved the way for Faslane to become the country’s submarine centre of specialisation.” (Once the transfer of work to Faslane has happened it will contain: “Four nuclear powered Vanguard Class SSBN submarines – HMS Vanguard, HMS Victorious, HMS Vigilant and HMS Vengeance – which between them maintain a continuous at sea presence of the UK’s Independent Strategic Nuclear Deterrent.
“Eight Sandown Class Single Role Mine Hunters (SRMH)….
“HM Naval Base Clyde can be thought of as a garage for all these vessels – keeping them ready to go to sea – and the hotel for the ship’s crews. Indeed, with over 2,000 beds, the base is one of the largest hotels in Scotland!…
“In March 2010, the MOD signed a long-term partnering agreement with Babcock, consolidating the company’s relationship with the base until 2025, guaranteeing cash savings for the MOD of at least £1.5 Billion. The agreement also helped to protect the long-term future of the maritime industry, hlping to preserve capabilities and vital skills neded to carry out future work.
“The Naval Base is the largest single site employer in Scotland, currently employing around 2,500 service and civilian personnel, of whom around 1,500 work for Babcock. When Fleet staff and other Lodger Units are taken into account, the total number of
people based at HM Naval Base Clyde rises to around 6,500.” http://www.royalnavy.mod.uk/operations-and-support/establishments/naval-bases-and-air-stations/hmnb-clyde/what-is-hmnbc/
That gives some idea of the potential scale of the losses of jobs and expertise and the complications caused by contracts already completed.
Since the 2011 elections in Scotland which unexpectedly delivered the SNP a majority in the Scottish parliament, the SNP leader Alec Salmond has attempted to push an “independence lite” agenda (http://www.telegraph.co.uk/comment/columnists/alancochrane/8516142/Dont-believe-SNP-on-Diet-nationalism.html)
which includes the suggestion that Scotland would “share” defence facilities with the UK. This would be impractical because of (1) the gross imbalance in the size of the defence resources of an independent Scotland and the UK and (2) the potential for conflicting foreign policies meaning the UK would want one thing and Scotland another. (http://www.telegraph.co.uk/news/uknews/scotland/8515034/Sir-Mike-Jackson-tells-Alex-Salmond-British-soldiers-have-only-one-master.html).
In addition, in the case of the nuclear submarines and deterrent, the SNP has as a policy of the removal of these from Scotland. (http://thescotsman.scotsman.com/politics/SNP-call-to-scrap-nuclear.4666024.jp). The submarines and the deterrent could be transferred to the facility at Devonport, Plymouth.
A taste of what the re-shaping of the military in Scotland would mean can be gained from the response to the cuts proposed by the Coalition Government in Westminster:
“There are specific parts of Scotland where defence-related employment makes up a significant proportion of local employment, including Moray which is home to two RAF
bases (Kinloss and Lossiemouth) and Fife, which is home to RAF Leuchars. Cuts in the defence budget (made in Westminster) will profoundly affect localities such as these. The UK Government has confirmed that RAF Kinloss will cease to operate after 31 July 2011 and the futures of RAF Lossiemouth and RAF Leuchars are still uncertain (an announcement will be made after the Scottish elections). In response, Moray Council and local businesses and communities have launched an action plan to stimulate the local economy in response to fears about the impact of the RAF job cuts and subsequent reductions in local economy activity and spending (BBC News 18th March 2011)”. (http://www.sac.ac.uk/mainrep/pdfs/publicsectorbudgets.pdf).
But even if an independent Scotland was wealthy, it would not simply be a question of taking over the Scottish military facilities which presently exist. These exist within the context of a UK defence strategy. It is improbable that an independent Scotland
would wish to get involved in overseas escapades such as Iraq and Afghanistan.
Her military needs would be to defend Scottish territory and patrol her
territorial waters. That alone would mean that much of the military establishment in Scotland would be scrapped and new equipment and training provided., another considerable expense.
The idea that Scotland could defend its land and territorial seas against a determined and large enemy is in truth nonsensical. Scotland is a relatively large country (30,000 sq miles) with a small population (5 million) , most of which is crammed into the lowland stretch from Glasgow to Edinburgh. Compare that with England, 50,000 sq miles and
a population of 54 million. Scotland has neither the bodies on the ground or the wealth to present a serious threat to an invader.
Because of Scotland’s inevitable military weakness, the rest of the UK (in reality England) would have to come to her aid if she was invaded by an enemy who was using Scotland as a backdoor to invading England. Scotland would also shelter under the UK
nuclear deterrent and her general military and diplomatic strength. Those two things cannot be avoided. However, it would be reasonable to make it a condition of independence that Scotland paid the remainder of the UK for that protection.
The truth about UK oil and gas
The Scots Numpty Party (SNP) bases its case for the viability of Scotland’s independence on the idea that wicked England has been “stealin’ ouir oil” and that if only they had control of the tax revenues from UK oil and gas Scotland would become a Caledonian El Doraldo. Sadly for such people a 2009 a Scotland Office paper “Scotland and Oil” dealing with the tax income from oil and gas fields around the UK painted a rather different picture. It concluded that:
“• If all North Sea oil revenues had been allocated to Scotland there would only have been 9 years out of the last 27 when Scotland’s finances would have been in surplus.
• Including all North Sea oil revenues the last year of surplus was in 1988-89 and since then there has been 18 years of annual deficits with Scotland’s spending being greater than the tax raised in Scotland.
• Even if all oil revenues had been allocated to Scotland the total deficit would have outweighed the total surplus by £20bn since 1980-81. “ (see page 1 – all references below to pages without a url refer to this url – http://www.scotlandoffice.gov.uk/scotlandoffice/files/Scotland%20and%20Oil%20-%20Background%20paper.pdf)
So there you have it, the official view is that even if all the oil and gas revenues were allocated to Scotland they still would not pay their way. Of course, a substantial part
of the oil and gas tax revenue would not go to Scotland because of the fields in
English waters. Exactly how much is debatable, but most of the remaining gas
is in English waters, viz:
“The SNP claims that Scotland would receive 95 per cent of oil revenue, but its calculation is based on the total revenue from oil and gas. Its opponents say that they do not take into account the large number of gas fields in English waters.
“THE EXPERT SAYS: Prof Haszeldine says: “The vast majority of the oil is in Scottish waters. With practically all of the gas in the UK in the southern North Sea, that is in ‘English’ territory.” He says it is hard to separate the revenue from oil and gas. “(http://thescotsman.scotsman.com/politics/Can-oil-and-gas-fuel.2834598.jp)
There is also the intriguing prospect of the outer Islands, the Orkneys and Shetlands, not wanting to leave the UK or seeking independence. That would take more oil and gas
revenue out of Scottish hands.
The fact that even the total oil and gas tax revenues did not bridge the gap between what Scotland received in money from the Treasury and what she contributed to the Treasury is unsurprising. The price of oil is high now but this is an abnormal. In the period 1980-2003, the price was always below $20 a barrel apart for two years in the mid 1990s when it was a couple of dollars a barrel higher. (see page 3 “Scotland and Oil”) . The price did not rise above $50 dollars a barrel until 2007.
There has also been great volatility in the tax take in recent years:
“In July last year [2008-9] sitting with the price of oil breaking new highs at $147 a barrel and projected revenues for the current year [2008-09] at £13.2bn, finances were looking incredibly good. However, sitting today with oil prices at $70 per barrel and projected revenues for the current year [2009-10] of £6.9bn the finances would be looking substantially different and spending plans would have had to have changed.” (see page 10 “Scotland and Oil”).
At present the Scottish Parliament is in a very fortunate situation. It knows, more or less, what revenue it will have to spend for the coming financial year because its funding comes from the UK Treasury. Thus it is spared the responsibility of raising money from its electors . It is in the same position as, for example, the BBC.
If Scotland were independent it would have to raise the money to be spent by central government. That would bring a very different relationship between the politicians
and the Scottish electorate. If a very large slice of Scottish government revenue was dependent on oil and gas revenues , massively swings in the tax collected from year to year, as happened in the years 2008/9 and 2009/10 , it would make forward planning very difficult indeed. To understand just how volatile tax revenue from oil and gas has been since production began see http://www.hmrc.gov.uk/stats/corporate_tax/table11-11.pdf.
No electorate is going to be cheering if politicians are constantly having to change spending plans. The worse case scenario would be that the oil and gas revenues would be so low that a Scottish government would simply not be able to fund the ordinary business of government. That is not so far-fetched because of the great difference between revenue and expenditure when oil and gas revenue is ignored. For 2007/8 the Scotland Office estimated that without including any revenue from oil and tax, Scotland paid £45,191 billion into the UK exchequer and received £56,285 billion back, a deficit of £11, 094 billion. (http://www.scotlandoffice.gov.uk/scotlandoffice/files/Time%20Series%20Analysis%20of%20Government%20Expenditures%20and%20Revenues%20in%20Scotland.pdf).
Apart from the volatility of the oil and gas price, there is also the rapidly depleting reserves of oil and gas around the UK. Production has already fallen from just under 3 million barrels a day in 1999 to about 1,25 million barrels in 2014. ( see page 5 “Scotland and Oil”). The amount of oil and gas will continue to fall over the medium term and the quantuity oil and gas extracted will be strongly influenced by the oil and gas price. The
lower it is, the less exploitation of the smaller marginal fields. In the medium term Scotland can look forward to diminishing tax returns whatever happens.
There is a further fly in the Caledonian water. As the price of oil and gas has risen and the
political volatility of many of the major oil and gas producers has increased, increased interest has been shown in extracting gas and oil from shales. Most of the likely sites in the UK are in England or English waters. http://www.bgs.ac.uk/research/energy/shalegas.html.
If this source of hydrocarbons proves to be as abundant as its advocates claim, the demand for oil and gas from the ever more marginal fields around the UK will diminish.
There are many other economic dragons which an independent Scotland would need to slay, including dealing with their over-reliance on taxpayer funded jobs and how they would fund their share of the UK’s public financial obligations at the point of independence, but the volatility and shrinking of the UK’s oil and gas tax receipts would be arguably their greatest challenge simply because of the heavy dependence the
advocates of independence have placed upon their continuation at a high rate.
