Scotland, Oil and Ballots
Hello from Scotland: Edinburgh to be exact.
The Scottish capital is never dull. It is a city with cultural appeal, some great art galleries and wonderful architecture- it is not known as the “Athens of the North” for nothing.
It is also the seat of the Scottish government. This is the Scottish Parliament with devolved powers from Westminster in London. The Scottish government deals with a whole of issues, all of which are pertaining to the internal affairs of Scotland, defense and external matters remaining the preserve of any London government.
The Scottish Parliament in Edinburgh was created out of a referendum held in 1997. Of course, Scotland had had its own parliament up until its Union with England in 1707. But back in 1997 Scots voted for the idea of their own parliament once more, and then voted for their representatives to sit there, which they did for the first time in 1999.
What I should write now is that this has been a wonderful experience in local power fully integrated into the politics of the wider United Kingdom.
The fact is the opposite has happened. The Scottish National Party now runs the parliament in Edinburgh. This is a party with one aim: Scottish independence from the rest of the UK. As a result the Scottish Parliament has become a thorn in the side for successive Westminster governments. Under Nicola Sturgeon, the current Scottish Premier and leader of SNP, Scotland feels already very much “independent” of London. In fact, some claim Sturgeon acts like she is the “Queen of Scotland” – and to all intents and purposes maybe she is!
A referendum was run in 2014 to decide the issue of Scottish independence. Politicians said it would decide the issue “for a generation.” That was the theory. Again the opposite happened. Even though the vote went against the separatists- two thirds of those that cast their vote voted for the constitutional status quo – it has not appeared to weaken the hunger for the SNP for an independent Scotland. And, in the wake of the Brexit rows – Scotland voted overwhelmingly to remain – Scots are more minded now than ever, according to the latest opinion polls, to go it alone.
Now, this ongoing debate is potentially more damaging to the United Kingdom’s economy than even Brexit may be. This is not just around the issue of a land border within Britain but also, like Brexit, in terms of overall business confidence. But as with Brexit’s political argument appears to be more paramount and prominent than any business one.
Looking around Scotland today, I wonder about the impact of independence on the Scottish economy. For a start, Scotland’s budget deficit – even including revenues from the North Sea Oil– remains high. The country’s almost 8% deficit on its gross domestic product, is about four times the size of the deficit for the UK as a whole.
Tax is the reason for this. Scottish taxes come in at about £300 per head lower than the equivalent rate per person across the UK. Yet, the spending on Scotland is £1500 more per head than for others in the UK. Not a bad deal – there is no need to even mention this black hole in the nation’s finances at present as long as that deficit is subsumed into the bigger British picture. The key words here are: “at present”. But you can see how if the Scots were actually paying for this there would uproar and a knock on effect in the economy there.
Now the nationalist argument, or at least one of them, is that Scotland currently only receives a proportion of the North Sea revenues. If it was to become independent it would demand the lot. A British government waving away the lucrative North Sea Oil receipts without a fight is not a realistic one.
The other hard issue is the one I raised at the beginning of this: tax. Raising personal tax is never popular, a post- independence tax hike will depress not just all Scots but the prospects of attracting inward investment. Why set up there when you can go to other low-tax regimes in the European Union. Any new independent Scotland just can’t afford to upset business, however, both those existing within its borders or those who may be lured to set up business there. Spending cuts are always an alternative, but for a Scottish government who has heaped all the blame for such cuts very conveniently on successive Westminster government this sounds like political suicide and is an equally unattractive proposition for politicians and public alike.
Don’t get me wrong. Small countries can thrive as independent entities; look at Luxemburg or perhaps a better and closer example the Republic of Ireland. I have little doubt that Scotland could be one of those countries, punching in economic terms above their weight. It has more going for it than most countries: finance and banking, world class food and drink exports, and a whole host of renewable energy sources and sectors. It is also a country with a blessed with the natural infrastructure for a great tourist industry not least because of its fantastic global brands: think Scotch whisky, tartan, bagpipes and even the Loch Ness Monster!
Then there is the thorny issue of a newly independent Scotland retuning to the embrace of the European Union. Like Greece and Ireland before, Brussels would expect an Edinburgh government to deal with the deficit and like the Irish and the Greeks that could be a painful message for the Scots to hear.
I’m enjoying my time north of the border. However, with the drama of Brexit resolved for now, a new and perhaps even greater one is just about to start in Scotland and across the United Kingdom.
