Yours, for Scotland. Ten economic questions on independence
Not my words, but “Yours, for Scotland, Alex” was the handwritten signature to an excruciating letter written by Scotland’s first minister to Sir Fred Goodwin in 2007. The letter, here (and pictured at the bottom of the blog): encourages, and backs the Shred’s disastrous bid for RBS to takeover ABN Amro, a step not even taken by Gordon Brown. And there is a relevance to the now furious debate on independence.
Firstly, it’s an apt illustration of the economic interlinkages between England and Scotland. But it also shows that even when an SNP First Minister thinks he’s encouraging something “for Scotland” it doesn’t always work out in her interests. So there’s are a multitude of questions about any divorce in the Union, which right now is being ignored in place of referendum procedure. Some are of vital interest to any voters in a referendum. Many are of important interest to voters across the UK.
1. Will an independent Scotland aim to join the euro? The 2009 Scottish Government White paper states: “Scotland would continue to operate within the sterling system until a decision to join the Euro by the people of Scotland in a referendum when the economic conditions were right.” page 31.
Surely the argument as made in 09 is transformed now, given the treatment of small indebted nations by the Euro big boys.
2. Would the evident loss of economic sovereignty to Brussels and the ECB in Frankfurt mean an even less sovereign Scotland than exists within the UK Union? If Scotland joined the euro, it would have to negotiate acquisition of gold and Forex reserves from Bank of England to give to the ECB in Frankfurt.
3. Would Scotland become part of the prosperous northern bloc, or instead go straight into the PIIGS – the acronym used to refer to Portugal, Italy, Ireland, Greece and Spain? If it inherits in 2014 a proportionate share of the national debt, it would be a highly indebted nation with a likely structural deficit (Calman commission analysis) even after oil revenues. It depends on the post-referendum negotiation.
4. Why would Scotland aim to join a currency union to which its exports were a total of £9bn (EU) when its intra-country “exports” to the rest of the UK are four times as much: £36bn? (2003 figures, for intra-UK figures, they are experimental).
5. Will an independent Scotland stay in the “sterling zone”? So will Scotland be any better off from being tagged to a central bank that takes no notice of its economic conditions? Surely the singular lesson of the past year is that monetary union requires fiscal coordination/control. Could Scotland “print money” independently to lower its own long-term interest rates? Would the UK Treasury have to send inspectors to Holyrood in 2016, like the ECB/EU has sent teams to Dublin/ Athens/ Lisbon?
6. What proportion of the remaining North Sea Oil reserves will remain with an independent Scotland? Over 90%? Do you recognise other maritime divides other than the “median line”?
7. If you expect 90% of the oil revenues from the UK Continental shelf, what proportion of the UK’s £1.4 trillion national debt will you take on?
8. How do you expect to sustain higher public spending per capita than Wales and Northern England in Scotland, post independence? Higher taxes, the Laffer effect, becoming a tax haven, spending cuts?
9. What proportion of the Royal Bank of Scotland’s £187bn toxic asset exposures, currently residing at the UK Treasury’s Asset Protection Agency, will Scotland take on? SNP supporters blame “English” light touch regulation so did the SNP publicly critique light touch regulation?
10. Why did the SNP offer support, assisitance and “Good luck” to RBS’s disastrous bid for ABN Amro, which nearly bankrupted Britain. Could an independent Scotland have ever bailed out RBS, representing 2,500 per cent of its GDP?
Of course, Scotland could survive economically as an independent nation with an economy bigger than New Zealand. There has been much carping about Mr Salmond’s arc of prosperity speech (Iceland, Ireland etc). But it is absurd scaremongering to suggest that Scotland would suddenly go bankrupt. The question is will Scotland be better off? I think it’s fair to say that a successful euro made the purely economic case for Scottish independence much stronger. The euro’s problems and evolution has changed the game though. Scotland would have to seriously consider its role within one of two currency unions: the eurozone, or the sterling zone.
Follow Faisal Islam on Twitter: @faisalislam