Sunday 31 March 2013

Independence weighed in the balance

Some Scots support independence come what may and nothing would change their minds. Other Scots want the UK to continue and are just as fixed in their view. But for those people who have not already decided, the debate is really a matter of weighing up the potential advantages and disadvantages of independence. The fact that most commentary on the issues involved is completely one-sided, can hardly be helpful for people looking at the pros and cons in this way. The polarisation of the debate means that nationalists frequently attempt to argue that the UK has no benefits at all, while unionists frequently strive to portray an independent Scotland as if we would be joining the Third World. But this is to treat political opponents as if they were fools. There must be something attractive about independence, otherwise the idea would not have attracted the support of a significant number of Scots and we would not be having the debate at all. Likewise, there must be something attractive about the UK, otherwise we would have become independent long ago. The essence of the debate should be an attempt to investigate these advantages while assessing the corresponding disadvantages.

Looking at the pros and cons of independence is to look fundamentally at two issues, money and power. Economically, the main pro is North Sea oil. It was the discovery of this resource which gave wings to the independence campaign some 40 years ago. Without it few in Scotland would ever have considered independence as an option. This is is not to talk Scotland down, but rather it is to recognise that Scotland’s position without oil would be not dissimilar to that of Wales, Northern Ireland and the North of England. Those parts of the UK, which were centres of heavy industry, have still not fully recovered from the decline of those industries. The difference between a Scottish nationalist and a Welsh nationalist is that independence is an economically viable option for the former, while it is not for the latter. The difference is oil.

At the moment oil revenues are shared in Britain. They help Scotland economically, but they also help Northern Ireland, Wales and England. But if we had these revenues to ourselves, clearly we would get more. It’s like a cake divided between four at present. If Scotland had the cake to ourselves, we could scoff the lot. For people, supposedly on the left, to put forward this argument has always struck me as hypocritical, but nevertheless, having all of the revenue from oil is clearly something to be counted on the pro side of the debate about  independence.

But what of the the downside? At present Scotland gains a share of central government funding from the UK, calculated according to the Barnett formula. This enables the level of public spending per person in Scotland to be somewhat higher than in England. In the event of independence,  this funding would obviously cease. As a newly independent country, we would also have a number of disadvantages. Our borrowing costs would certainly be higher than the rest of the UK (rUK). Assuming that we kept the pound, we would be borrowing in a foreign currency, which is inherently more risky than borrowing in our own currency. Moreover, as a new country we would have to establish a track record economically before the markets could assume that we would be economically prudent. We would likewise have certain start-up costs. We would have to set up things like a tax collecting agency, a pensions agency and a passport’s agency, not to mention an army, navy and airforce. No doubt, much of this would already be in place, but just as any new business has start-up costs, so too would Scotland. There would be some loss of the economies of scale, which at present we enjoy by being a part of the UK and most likely some disruption to the UK single market, which to an extent depends on us all living in the same country.

No one knows the exact figures and anyway they are subject to the bias inherent in this debate, but it is reasonable to guess that the advantages of having all of the oil revenue versus the disadvantages already mentioned, would leave us perhaps a little bit better off than we are at present, but not by much and maybe not at all. But it must be remembered that oil revenues fluctuate greatly and anyway are in decline. Scotland will not become Norway. Its too late and besides we are not remotely like Scandinavians. The main economic advantage of independence therefore can be summed up as a much greater share of a declining resource. Even if it we were to be better off in the short term, what about 30 years from now?

The other main advantage of independence is that we would not have to share power with Westminster. We would have complete political control from Edinburgh. But let’s look at how the political situation works at present. Under devolution the Scottish parliament already controls health, law, education, local government, road, rail and air, farming, fisheries and sport. The Scotland Act 2012 gave the Scottish parliament the power to raise and lower income tax. At present around two thirds of public spending is controlled by the Scottish parliament. What this means, in practice, is that we already have two thirds of the power. What power on the other hand is retained by Westminster? The UK government controls defence,  macroeconomic policy, foreign affairs, immigration, broadcasting, social security, pensions and the constitution. What this all means is that the debate about independence is really a debate about gaining power over these issues as to all intents and purposes we are already independent with regard to those issues that are already controlled by Holyrood.  

People in Scotland are able to influence the powers that are retained by Westminster, because we have a vote in each General Election and MPs from Scotland have frequently been important members of successive governments. This would clearly cease to be the case in the event of independence. Moreover, if Scotland became independent and kept the pound, it is doubtful that we would gain much control over macroeconomic policy. The Bank of England would still control matters such as interest rates and monetary policy. To remain successfully in a currency union with rUK, Scotland would largely have to follow the same economic policies as rUK. It might even be necessary for the rUK Chancellor to oversee the Scottish budget. The foreign policies of most Western European nations are generally very similar and  follow reasonably closely the line of the larger powers. To be frank, we neither know nor care about the foreign policy of a country like Denmark and Scotland’s foreign policy would be similarly irrelevant. If an independent Scotland were to be a member of NATO, we would be further pressured to follow the American line or face the consequences of US displeasure. If an independent Scotland wanted to retain an open border with rUK, we would not be able to have our own immigration policy as immigrants to Scotland could immediately move south of the border. Scots should ask themselves if gaining control over broadcasting, losing the BBC and ITV,  would give us better television and radio. Would gaining control over defence, including setting up our own version of MI5 and MI6 really make us safer? Each of us should think seriously about whether we would rather have our pension and social security rights guaranteed by the UK treasury or by a newly formed Scottish treasury?

While there are advantages to Scottish independence, there are also disadvantages. Most importantly, we would be giving up the shared solidarity of being citizens of UK. What strikes me as strange is that we would be turning ourselves into foreigners in order to take control over matters, which are often fairly abstract like the constitution, or which work well at a UK level and which frequently are not at all big issues at the average election. Holyrood already controls the day to day issues that affect our lives, like health and education. In the event of independence, there would be a new sovereign nation called Scotland. There would be a seat at the UN and no doubt, there would be a lot of flag waving. But practically speaking, we would not have gained much extra power. Breaking up the UK would cause years of negotiation and uncertainty. It would certainly spook the markets and damage the economies both in Scotland and the other parts of the UK, but the potential gains appear marginal and scarcely worth the trouble.

People who are desperate for Scotland to be a sovereign nation will not be concerned by any of this. It’s always worth remembering that some people would argue for independence even if they were to be worse off, because their ambition that Scotland should be a nation again is central to their sense of identity. The rest of us however, need to carefully consider the pros and cons of independence. Otherwise, the deal we are being offered when weighed in the balance might be found wanting.