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politics

Independence – just don’t go there!

One paper it was a dismal week for the Yes Campaign. The respected Institute for Fiscal Studies (IFS) produced a report saying that, even with North Sea oil revenues, there would be a £2 billion shortfall in public spending if the Barnett Formula were scrapped and taxes might have to rise by 14%.

The Centre for Public Policy for Regions (CPPR) said the SNP’s plans for an oil fund would be unaffordable and Scotland would have to slash defence spending to make the numbers work. The SNP’s Nicola Sturgeon was rapped over the knuckles by the UK Statistics Authority for “selective” use of statistics on Scotland’s ageing population.

An academic from Strathclyde University, Professor Robert Wright, said Scots might have to have passports to get into England after independence. And to cap it all, the Home Secretary, Theresa May, said that an independent Scotland would be more vulnerable to terrorism.

So there you have it. Scotland would be an impoverished and defenceless country infiltrated by al-Qaeda, shunned by Europe, barred from England, forced into deep cuts in public services and run by politicians who are economical with the truth. As it happened, these reports broke while I was in London speaking to civil servants and academics at the Institute for Governance (well, someone has to do it). The mood there was one of mild irritation at the whole independence debate, combined with incomprehension that even one-third of Scots voters would want to leave the UK.

The curious thing, however, was that this flurry of reports didn’t actually cause much of a media frenzy back home. Earlier this year, these would have been big stories spawning thunderous editorials and rows in television studios. But this time, the Scottish Government barely bothered even to rebut them. Looking at the usual stream of press releases from St Andrew’s House last week on everything from organ donation to the Play Strategy Action Plan for children, I could find no direct challenge to the IFS numbers. Perhaps they’ve just given up. Theresa May’s claims about Scotland becoming a target for Islamist and other forms of terrorism after independence aroused some comment, but mostly critical of the Home Secretary’s alarmism.

Now, I’m not entirely sure what all this means. Perhaps indy-fatigue is setting in and people are no longer listening to the recycled warnings emanating from Westminster. Or minds are already made up and the argument is more or less over. Whatever, there seems to be a law of diminishing returns applying to the negative stories about the economics of independence.

Also, Grangemouth cast a long shadow over Scottish politics last week, as voters sought to comprehend how a plant accounting for 2% of Scotland’s GDP nearly went under because of a row between Unite and Ineos over a union organiser. There was widespread support for the way Alex Salmond had handled the crisis, putting jobs before politics, and this rather put the statistical bickering over Barnett into perspective.

For what it’s worth, the SNP’s counter-argument to the IFS is that Scots generate more GDP per head of population than England, and consequently Scotland could be one of the wealthiest countries in Europe. The debt problem is one that England shares equally with Scotland and it is difficult to make predictions about the size of Scotland’s deficit after independence. For example, with its oil reserves, green energy potential and other assets, Scotland might have lower borrowing costs than indebted England. Also, the IFS used the least optimistic forecasts for the future value of North Sea oil.

But these don’t really answer the specific point that, crudely, Scotland stands to lose £7bn a year from the scrapping of the Barnett Formula, while gaining only £5-£6bn from getting its fair share of oil revenues. Public spending is higher in Scotland than in England, and there is no guarantee that this could continue after independence without higher taxes. Mind you, there is no guarantee of anything, and while the IFS is raising questions about how Scotland might make the transition to independence, it doesn’t deny that Scotland would be more than economically viable as a small independent nation.

And what is interesting about the IFS report – for anyone who bothers to read it – is its observation that the shortfall in taxation is largely because so much of the nation’s wealth is concentrated in the south-east of England, mainly in the property market. When I was in London, I happened to notice that the house adjacent to the Institute for Governance in central London was composed of flats. The Zoopla website informed me that the average price for these mostly two-bedroom flats was £6.75 million. Which made the point. There is a profound economic imbalance in Britain between north and south.

The SNP argues that a No vote will accelerate this trend because Scotland will cease to figure on the Westminster radar, as it did after the 1979 devolution referendum. The drift of talent and capital to London will intensify with the lack of economic opportunity here. I spoke last week with one of Britain’s leading documentary and feature film makers – a Scot – who had returned to Scotland a few years ago, only to find that she couldn’t get any commissions and had to go back down to London. The distance between Scotland and England is about to get a lot greater, despite the promises of HS2.

What both the IFS and CPPR reports fail to take fully into account is that the Barnett Formula on which they base their forecasts is already on its way out, as a result of the partial devolution of income tax under last year’s Scotland Act. There is now a broad consensus among academics, civil servants and politicians in London that the Scottish Parliament will, in the words of the 2009 Calman Commission, be made “responsible” by having to raise in tax an increasing proportion of what it spends on services. In other words, fiscal autonomy looks like an open door. But beware what you wish for – because without oil revenues, this will put immense pressure on Scottish public spending.

The other intelligence I have gleaned is that the little-known report of the McKay Commission, set up by the Coalition last year into the West Lothian Question, is very likely to resurface after the referendum. This proposes the effective exclusion of Scottish MPs from votes on nominally “English legislation” in Westminster. This may be accompanied by a further reduction in the number of Scottish MPs in Westminster. Either way, Scottish representation in Westminster is likely to be significantly reduced, whatever happens in 2014.

The landscape is shifting all the time. Scots face a very difficult choice next year: the inconvenience and cost of becoming an independent state, versus death by a thousand cuts from remaining part of the UK. Certainly, the old idea that Britain was a common project and that Westminster had a responsibility to the “regions” is evaporating. We’ll be increasingly on our own either way.

And this, too, is the lesson of the Grangemouth crisis. If it hadn’t been for the First Minister of Scotland banging heads together, we would still be writing the plant’s epitaph this week and lamenting the loss of much of Scotland’s industrial base.

Avoiding recriminations on either side, Salmond has sought to demonstrate by his own actions the necessity of Scotland having a powerful authority in Scotland, able to sort out crises. That was his rejoinder to all the reports on Scotland’s inadequacies. The SNP are hoping that actions really do speak louder than words.

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About iain2macwhirter

Writer and journalist.

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