Scottish Independence

Apologies to my international readers, this one is just about Scotland.

Some Scots want independence and their leader Salmond promises that he will deliver a land of milk and honey. I wrote a few months on some reasons I don’t think they should go their own way:  https://timeguide.wordpress.com/2013/11/24/scottish-independence-please-dont-go/

The economics really don’t look good if they choose to do so anyway. A survey just published suggests 38.6% of large businesses and a third of small one would consider moving out of Scotland if it gains independence. That doesn’t mean they actually will, but it does suggest a potential financial problem. This week we have also learnt that European Law would require the Royal Bank of Scotland to move to London if it happened, since they do most of their business in the UK and banks have to be resident in the country where it does most of its business.

Salmond has suggested making loads of cash from wind farms. If every hectare of Scotland were covered in wind turbines at maximum density, it wouldn’t even make enough energy to replace England’s coal power stations. Hardly Saudi Arabia is it, as Salmond once claimed? Oil is still there in the sea in reasonable abundance, they might win ownership of much of it, and they could extract it for some more years. But not many. Thanks to the recent goings on with Russia, shale gas is starting to look a lot more desirable. England’s recoverable reserves estimates increased by 50% this last week. We have a lot of shale gas, and it will be much cheaper than oil or Russian gas if we can get past the current fracking objections. The same goes for many other countries that might otherwise be tempted by North Sea oil. Even if we can’t use our own shale gas, US shale gas production can expand a lot and could fill much of our needs too. So there may not be much demand for Scottish oil for much longer.

Each Scot is currently subsidised by English taxpayers. The subsidies allow Scottish students free University education (while the English have to pay £9000 per year). Elderly care is free, prescriptions are free. Estimates of the subsidy vary depending on the political allegiance of the source, but a BBC figure of over £3000 per head seems reasonable. An independent Scotland would have no reason to expect to keep receiving that.

A study 15 months ago based on stats collected by the Office of National Statistics pointed out that only 12% of Scots contribute more to the state than they receive back in total benefits. A reasonable assumption is that some of those 12% work for the big banks and other large companies that will move to London, and some work for the smaller businesses that would also consider leaving. Some of those will leave, and that will mean that an even smaller proportion of Scots are net contributors to the state. They might feel pretty unhappy if the politics still means that they are then expected to pay even more taxes to make up the deficit, so more of those ‘considering leaving’ might actually do so. A vicious circle will force more and more Scots onto the train to London or overseas. Scotland would soon be full of net receivers from the state, used to a heavily subsidised standard of living and willing to vote for anyone who will keep borrowing more and more to pay for it. Those that can will leave.

It is hard to escape the conclusion that a newly independent Scotland will very soon start to see its standard of living very significantly degraded. Even after tightening its belt a few times, it is likely to see its economy slide deeper into debt. Not a good prospect at all.