By Russell Bruce
The article in yesterday's FT was headlined ‘What does independence even mean for Scotland’.
I cannot reproduce the FT article for those who do not have an FT subscription, but the following will give you the gist of the same old ‘worry the natives strategy’ Alistair Darling and his BT buddies think will drain away our national self esteem.
The answer to the headline question is GROWTH. The Scottish economy is growing faster than the UK economy but we can do better with the full powers of Independence. Scottish GDP is growing at 1.8% against 1.3% for the UK. GDP per capita is also higher for Scotland than in the UK. We spend more on economic development than the UK.
Result: investment = growth, rising GDP, more jobs created and tax revenues increasing. Problem is the tax revenues end up in the Treasury so that we are dependent on a block grant rather than gaining the benefits of the success achieved under the limitations of devolution.
Unemployment is lower in Scotland, employment rates higher, economic activity levels higher, youth unemployment falling faster. What's to be afraid of?
Yes we will have challenges, but those can be addressed by using our current economic advantages to change the future long run speculations predicted in the IFS report. Economic forecasting does not work on 50 year time spans, but is useful in demonstrating the need for policy planning to alter the long run pattern.
Economic growth will bring population change, skills development and economic diversification to an economy that is already reasonably balanced. We are not dependent on oil but we will invest for the future both through aggressively spending on economic development and creating a Sovereign wealth fund.
Figures just released today by the Oil and Gas Analytical Bulletin show Scotland’s oil and gas exports to the UK and rest of the world reaching £30bn in 2012. Take out the value of exports to the UK and transfer that to rUK imports and sterling is undermined in world markets without an agreement on a currency union.
As Hugh MacDiarmid said:
If there is ocht in Scotland worth ha’en
There is nae distance to which it is unattached
(Unconscious Goal of History 1930)
Project fear is no more than a projection of an internal angst.
Look back at UK economic management, then look at the changes taking place in Scotland and the future certainly seems on a firmer footing with Independence.
The currency question gets little if any serious debate. Alex Salmond has never said there was a guarantee that an independent Scotland could use Sterling in a currency union. That can only be achieved by negotiation. What he has said is it makes sense and would be of mutual benefit. Scotland would gain a smoothing of changes following independence and ease the flow of trade to mutual benefit.
As George Kerevan has pointed out, the EU estimates the UK trade deficit at 4.4% of GDP - the highest of any major economy. Take out £50bn of Scotland's exports and the UK trade deficit rises to around 10% of GDP. Interest payments on UK's debt have risen by 1% (10yr bonds) in the last 12 months. Just think how rUK’s creditors will react to such an impact on a doubling of the trade deficit.
Darling gives the game away on where the real fear lies. "For a currency union to work, both sides would have to agree.. “ Therein lies the rub. Agreeing budget deficits and debt reduction is a bigger challenge for rUK to meet because the current spending gap is 60% higher for the UK than for Scotland. Scotland’s revenue expenditure gap is 5% and the UK’s 7.9% (IFS p2).
Alistair Darling’s thesis, if we can call it that, is the future cannot be changed from the direction of current UK policy. That is the point of independence. We need to do things differently. We have a position of strength and the option to plot a different course that may not be open to the UK because there are some fundamental differences that have not yet been fully explored in the debate.
I will be looking at those in a future article when I have completed a study of some interesting distinctions in Scotland’s asset base that have only been covered so far through a negative and seemingly unalterable prism.