The annual GERS argument helps the SNP

 

I never pay much attention to GERS figures, and I think that the Pro UK arguments that follow them each year are stupid and harmful to the argument against Scottish independence.

The argument goes Scotland makes a loss therefore it requires a subsidy from the UK. Therefore, it couldn’t become an independent state because doing so would involve bankruptcy.

The argument is stupid primarily because it depends on hoping that Scotland will continue to be poorer than the UK as a whole. But if we are Pro UK, we ought to hope that both Scotland and the UK prosper and that the existing economic inequalities between regions lessen and eventually cease. The GERS argument depends on hoping that Scotland remains worse off. It is anti-UK and anti-Scotland. It fuels nationalism and fuels separatism.

If you argue that Scotland cannot become independent because it runs a deficit and depends on a subsidy from the Barnett formula (the so-called Union dividend), what do you argue if Scotland in the future runs a surplus? It is perfectly possible that a future Scottish businessman may invent the next important technology just as a past American businessman invented Amazon or Microsoft or Apple. Scotland may then become more prosperous than other parts of the UK. So, what do the GERS enthusiasts argue then? Do they join the SNP?

The truth is that Scotland does not run a deficit. The GERS figures are nominal and theoretical. If parts of the UK whether the Northeast of England, Cornwall, Scotland, Wales or Northern Ireland spend more than they raise in taxes these all become part of the UK’s deficit and ultimately the UK’s debt. Scotland no more runs a deficit than Cornwall, because Scotland is neither a federal state because the UK is not a federation, nor an independent state, because the UK is a unitary state that happens to have devolution.

Would Scotland or Cornwall run a deficit if they became independent states. This too is a theoretical question. You might argue that the GERS figures suggest that Scotland would immediately be bankrupt, but you could equally have argued that Latvia and Ukraine would immediately be bankrupt after leaving the USSR. No doubt Soviet Economists did.

But this is to ignore the behaviour of people in newly independent states and the behaviour of their governments. Every one of the states that became independent after the breakup of the Soviet Union continues to exist and continues to have a functioning economy. If they discovered upon independence that they were running an unsustainable deficit they cut spending, raised taxes or sold debt on the open markets. It might not have been a pleasant experience, but each of them managed.

The idea that out of all of the newly independent countries in the world including South Sudan, Uzbekistan and East Timor only Scotland would be unable to manage is preposterous.

Indeed, if I were concerned about Scotland running a nominal deficit and I was desperate to reduce it to one or two percent, I would argue that the only way for this to occur is for Scotland to become independent, because it looks unlikely to happen otherwise. The GERS figures are therefore an argument for independence not against it.

Why does Scotland nominally spend more than it earns? It does so because it can.

Next year the GERS figures will no doubt show that Scotland spends still more than it earns than this year? Why because there is nothing to stop it doing so.

This is the fundamental problem with devolution in the UK. It gives power and quite a lot of power, but without responsibility. If the UK economy ran a 10% deficit there would be a crisis like the one Liz Truss provoked only much worse. Markets are willing to lend to the UK at sensible rates only because they believe they will get their money back. But there is no such problem for Scotland.

Our government can have free tuition fees, it can have free prescriptions, it can have stupidity like rent controls and spend a fortune on ferries that don’t arrive precisely because it has power without responsibility.

It’s exactly the same situation as a student at university who depends on his parents to subsidise his spending. He can go out every night, he can go on holiday, he can feel independent, but he has power without responsibility because in the end Daddy will pay the rent and pay off the credit card bill.

This is why Scotland has poor governance. Voters do not have to make hard choices. They can vote for free this and free that without facing the consequences of their votes.

It is for this reason that public spending has reached the absurd level of 51% of GDP in Scotland. It is easier for us all to work for the public sector than to make products that the rest of the world wants to buy. All of this would immediately cease on day one of independence.

At that point Scotland would be able to manage a deficit of perhaps two percent and so we would have to give up employing quite so many in the public sector, we would have to give up the free this and the free that, we might have to increase taxes and we would have to deal with the negative consequences of breaking up the UK as would everyone else in the UK. But we would all have to manage.

The Pro UK argument cannot depend on GERS. It wouldn’t occur to anyone in the USA to argue that California ought not to be independent because it runs a deficit. The unity of the United States does not depend on such calculation and nor should it here.

The full stupidity of the GERS argument each year is that it treats Scotland as if it were independent in order to argue that it ought not to become independent. It is a soft nationalist argument as indeed was the whole concept of being better together. We are one nation indivisible don’t treat us as being separate if you don’t want to fuel separatism.

Scotland does run a nominal deficit, and this would have consequences if it chose to become independent, but it runs this deficit only because it is part of the UK and because it can.

The soft nationalism that gave us devolution is the root cause of our poor governance. It treats us like children who need not face the consequences of our folly. No wonder we behave like them with our flag waving and our grievances.

If Scotland and the UK as a whole, which has a level of debt that is close to unsustainable, wants more prosperity, we are all going to have to grow up. The answer is not nationalism. The answer is free markets, working hard, making goods and services that others want to buy and spending less than we earn. That way we can all profit. To suppose that we would be better off with separatism is to suppose that the USA would be better off if it is split up. No one thinks that. No one at all.

 

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