Scottish independence: the bottom line

by on January 13, 2014 at 1:04 am in Current Affairs, History, Law, Political Science | Permalink

Christopher Pissarides, professor of economics at the London School of Economics, said being part of the Union gives a small economy like Scotland assurance that help will be forthcoming if something goes wrong.

“The last thing any Scot should wish is to give up the support potentially available from the UK (England?) for support from the European Union under Germany’s rules,” he said.

Here are related opinions:

Philip Rush, chief economist at Nomura investment bank, said: “Higher taxes on income would push many wealthy individuals and some companies they work for south of the Border, harming Scotland’s economy.”

Keith Wade, chief economist and strategist at Shroders, said “massive wrangling” between Holyrood and Westminster over tax and spending would be required for a currency union to work “to avoid a rerun of the euro crisis”.

“When combined with the considerable uncertainty over whether Scotland can remain in the EU, Scottish businesses would start to head south,” he said.

There is more here.

Steve Sailer January 13, 2014 at 1:40 am

Seems like Scots do pretty well for themselves in Britain, as the names of the last three prime ministers suggest: Cameron, Brown, and Blair.

prior_approval January 13, 2014 at 1:51 am

‘“The last thing any Scot should wish is to give up the support potentially available from the UK (England?) for support from the European Union under Germany’s rules,” he said.’

Sadly, the Tories look worse in Scottish eyes than ‘German rules.’ Might have something to do with the fact that Germany still has a vibrant manufacturing economy, and maybe Scots are nostalgic for the old days? And at least in Germany, the Scots have a reputation for thriftiness that is only matched by the Schwäbisch – the two sides might find more in common than one thinks in a world drowning in QE style measures.

‘Keith Wade, chief economist and strategist at Shroders, said “massive wrangling” between Holyrood and Westminster over tax and spending would be required for a currency union to work “to avoid a rerun of the euro crisis”.’

Who says an independent Scotland would care about currency union (which, technically – more or less – is what currently exists anyways) when joining the eurozone is pretty much a requirement for joining the EU, it must be noted. And the Irish experience in disentangling from the pound does provide some lessons, positive and negative.

‘“When combined with the considerable uncertainty over whether Scotland can remain in the EU, Scottish businesses would start to head south,” he said.’

This is completely true, however. The Scots are going to need a little extra push to join the EU. Though amusingly, it is just possible that the Tories will finally do something the Scots approve of, and that will involve a swap of English EU membership for Scottish, as the Tories finally realize their dream of England unbound from the Continent.

And though not a prediction, that is the sort of strange semi-compromise that just might happen, in much the same way China did/did not change its membership in the Security Council in 1971. This would avoid both the precedent of EU ‘secession’ and the precedent of EU recognition of independence ‘movements,’ while still allowing the EU to support the right of self-determination without it being applicable in any other situation (except possible Welsh independence, that is).

So Much For Subtlety January 13, 2014 at 2:38 am

Scotland has not been a manufacturing country for a long time. At least not without massive English subsidies. Nor are they remotely thrifty. When the Scottish Churches collapsed so did the values that went with them. Scots are now mainly on the dole, one way or other, drunk, on drugs or in prison. There are vast areas of urban Scotland where there is literally nothing else for men in particular.

If Scotland joined the Eurozone their problems would be worse. At least being in Britain means that they have some exchange rate flexibility. Having the economy of, say, Slovakia, with the drinking problems of Russia, the spending discipline of Greece and the politics of Italy is not a recipe for success when combined with the exchange rate of Germany.

What sort of semi-compromise is that? Europe would fight to the death of the last unemployment Greek youth rather than allow Britain to leave. If Britain could, anyone could. They cannot afford it. Britain is a paying member. There used to be what – three of them of any size? I think the Netherlands has stopped being a net contributor. Leaving Germany and Britain.

Not to mention that it would provoke other secession movements. Not something the Spanish or even French would want to see.

Alexei Sadeski January 13, 2014 at 3:07 am

Surprised to hear the Netherlands is no longer a net contributor. Denmark and Sweden are, though, I assume? Combined they may “contribute” a decent bit.

Hoover January 13, 2014 at 3:48 am

France and Italy are net contributors, paying roughly the same amount as the UK.

GC January 13, 2014 at 4:48 am

As per 2011 (last year I have the data for), net contributors were Belgium (1,3 B€), Denmark (0,8), Germany (9), France (6,4), Italy (5,9), Luxembourg (0,07), Netherlands (2,2), Austria (0,8), Finland (0,6), Sweden (1,3), UK (5,5) or 11 out of 27 (now 28) countries.

If someone has the 2012 and 2013 data, I’d like a pointer.

JWatts January 13, 2014 at 10:00 am

Hmmm, so the net contributors per capita are roughly:
Luxembourg 140 (potentially significant rounding error)

Sweden 137

Belgium 117

Netherlands 131

Finland 111

Germany 110

France 97

Italy 97

Austria 94

UK 87

Denmark 14

Roy January 13, 2014 at 5:42 am

I think an independent Scotland outside of the EU would be a really bad pilitics, especially if it was willing to join the euro.

Think about the collision of a hostile excluded Scotland and EU tax evasion problems… Honestly I would be shocked by a Scotts yes vote even though my godfather was once an SNP candidate, but if it happened the rump UK would certainly back Scottish membership and the only country I see really determined to block it would be Spain.

If Scotland wasn’t admitted not only would it be an embarassment for the Brits it would also be the first territory to leave the EU since its creation, not a good confidence measure.

barry January 13, 2014 at 6:57 am

> Scots are now mainly on the dole, one way or other, drunk, on drugs or in prison. There are vast areas of urban Scotland where there is literally nothing else for men in particular.

Gosh, it would be a shame if someone took your wild assertions and tested them by looking at the facts, wouldn’t it?

Scottish unemployment rate: 7.1%
UK unemployment rate: 7.4%

So, Scots are not “mainly on the dole” – in fact, less are on the dole in Scotland than in the rest of the UK.

Incarceration rate:

Scotland: 134 per 100,000
England: 148 per 100,000

Oops! looks like you are completely wrong that loads of Scots are in prison. In fact, the imprisonment rate of Scotland is considerable less than that of England.

And the same is true of other measures. Economically, Scotland does fine compared to the rest of the UK, beatings the average of other UK regions. It may have areas of Poverty, but so does England. It also has areas of wealth.

Like most lazy commentators on the matter, you have a prejudice that Scotland is some sort of uniform hellhole, and haven’t bothered to fact check.

Z January 13, 2014 at 9:51 am

http://www.dailymail.co.uk/news/article-2214477/Nine-Scottish-households-benefits-pay-tax.html

You can play games with employment stats and even crime stats, as every western nation has learned. What cannot be obscured is the fact the Scots have a massive welfare state that depends on money from London to remain solvent.

barry January 13, 2014 at 10:21 am

You talk high mindedly about “playing games” with numbers – I was reporting raw statistics – and then you post an article from the daily fail, which consists of unsupported and hysterical comments from a politician? And then make an evidence-free assertion that we depend on cash from London? How amusing!

I believe North Sea oil has produced more than 1 trillion in tax receipts to the UK government thus far, and according to the only actually-available analysis of tax receipt and spending across the UK – the GERS report – Scotland as a whole remains in surplus compared to the rest of the UK.

These are actual facts – all you have is evidence-free mud slinging and daily mail drivel.

Art Deco January 14, 2014 at 1:39 pm

Scots are now mainly on the dole, one way or other, drunk, on drugs or in prison. There are vast areas of urban Scotland where there is literally nothing else for men in particular.

It is always sort of amusing the popularity of social hypochondria and collective libel. Kevin Williamson at National Review has been busying himself defaming Appalachia (with the assistance of the innumerate Rod Dreher).

Tom January 16, 2014 at 2:42 pm

“Who says an independent Scotland would care about currency union (which, technically – more or less – is what currently exists anyways) when joining the eurozone is pretty much a requirement for joining the EU, it must be noted.”

“Will Scotland be forced to join the Euro?
Answer: No.

In order to be considered for membership of the Eurozone, countries need to choose to include their currency in the Exchange Rate Mechanism II and there are no plans for Scotland to do this. No country can be forced to join the Euro against its will.”

http://www.scotreferendum.com/questions/will-scotland-be-forced-to-join-the-euro/

“Four currency options were examined by the Fiscal Commission – the continued use of Sterling (pegged and flexible), the creation of a Scottish currency and membership of the Euro.

They concluded that retaining Sterling as part of a formal monetary union with rest of the UK will be the best option. The Fiscal Commission proposed a practical and workable model, including governance and institutional arrangements that would create a successful and robust framework.

The Commission’s analysis shows that it will not only be in Scotland’s interests to retain Sterling but that – post independence – this will also benefit the rest of the UK.

Under such an arrangement, monetary policy will be set according to economic conditions across the Sterling Area with ownership and governance of the Bank of England undertaken on a shareholder basis.”

http://www.scotland.gov.uk/Publications/2013/11/9348/7

GC January 13, 2014 at 4:31 am

“the considerable uncertainty over whether Scotland can remain in the EU”

What uncertainty? There is no uncertainty at all regarding a possible Scottish Eu membership. Thanks to Spain, France, probably Italy and Slovakia and just about any present Eu country with possible break away regions, Scotland would never be automatically allowed in the EU and any accession process, which per se would last years, is very unlikely to be successful until it will require an unanimous vote for accession because it would open a pandora box of independence movements.

In effect, the only uncertainty is whether Scotalnd (or Catalunya, Alto Adige, the Hungarian districts of Slovakia, Corsica, the French Baques…) would even be allowed to start the accession process itself

arne.b January 13, 2014 at 5:50 am

What if the UK at some point wants to leave the EU against the wishes of a majority of Scots? Could Scotland then not put its desire to remain in the EU above any desire to remain in the UK?

Why does there not seem to be any discussion of such a scenario? Simply because the referendums are not scheduled in the appropriate order?

GC January 13, 2014 at 6:47 am

More because, at this moment, there are actually no provisions for an EU exit in the treaties, while the accession process is well structures. In effect, assuming UK really holds the referendum and the result is for leaving the EU, is not at all clear how that would happen, on a legal and practical point of view.

The Anti-Gnostic January 13, 2014 at 10:46 am

and the result is for leaving the EU, is not at all clear how that would happen, on a legal and practical point of view.

It’s called sovereignty. If a sovereign wants to default on a treaty, it does so. If other sovereigns don’t like it, they can lob a few cannonballs its way, impose sanctions or just live with it.

The EU is like the NCAA: once its members perceive they’ll do better for themselves out of it than in it, then the EU disappears.

Peldrigal January 13, 2014 at 11:49 am

There have been provisions to leave the EU in the treaties for quite a long time.

http://en.wikipedia.org/wiki/Withdrawal_from_the_European_Union

ChrisA January 13, 2014 at 5:16 am

Although I am English in origin I would not be opposed to independence for Scotland. I think Scotland suffers quite a bit from being dependent on English money for welfare, and having England (or London) an exit place for ambitious and go-getting people. This has meant that politics in Scotland have become basically grievance politics, all about extracting rent as opposed to hard decisions about how to make improvements to the economy. The natural tendency of Scots is not at all like this, they are personally quite conservative (much more so than most English people), thrifty and entrepreneurial. Mostly this occurs in other places though rather than Scotland.

For English people there would also be some advantages, the Labour party would lose a lot of support and the UK could really do without them wrecking the economy every few decades with their mix of maudlin socialism and schoolboy economics. Of course initially Scotland would get single party rule, but that wouldn’t last long, or the Labour party would move significantly rightward.

The transition would be hard of course, but eventually I think both would be better off. In addition, maybe there would be some more realism about Britains place in the world and the UK politicians would finally lose their view that it is important that their voice be heard.

Also, too many people in England are personalizing this decision, its not as though two people are divorcing each other, or that somehow people are losing status by Scotland leaving the UK. In fact most English people rarely think of Scotland so it would make little difference to their lives.

On the subject of not being able to join the EU, surely that would be a plus? Afterall other European countries not in the EU (Switzerland, Norway) are hardly struggling. If Scotland were foolish enough to join the Euro, then they would at least have the option of entering at a favorable exchange rate.

GC January 13, 2014 at 5:26 am

There is, of course, a difference between joining the EU and joining the euro. Not joining the EU (really, being expelled from it, in practice) would be somewhat catastrophic on an economic integration point of view. On the other hand, not joining the euro would be wise.

Marian Kechlibar January 13, 2014 at 8:00 am

The existence of independent Scotland would not prevent the thrifty and business-minded Scottish individuals from going to London. As long as you have no language barrier and no Iron Curtain, this movement will happen. The only thing that would grow would be the bureaucracy.

To illustrate the situation on a similar example: as of 2014, there are probably way more Slovak students and professionals in Prague than in 1992, the last year of the Czechoslovak federation. The brain drain from SK to CZ is just enormous. The other direction (CZ to SK) is less than a trickle.

Millian January 13, 2014 at 6:10 am

Evidence from the region suggests that footloose businesses have been migrating away from large jurisdictions and towards small ones that can tailor policies to economic niches, like the Netherlands, Denmark, Luxembourg, Sweden, Switzerland, etc.

If an independent Scotland reversed this phenomenon, it would effectively be reversing 70 years of empirical evidence.

barry January 13, 2014 at 6:43 am

None of these people seem to have the first clue what they are talking about.

Why does Rush assume that an independent Scotland would be a hard left regime that would jack up taxation? What evidence is there of massive flight of individuals from high tax societies such as Norway and Sweden, in any case? This is obviously utter rubbish.

Wade seems to think the proposal is for Scotland to use the pound and have some massive say on monetary policy. I don’t think Scotland would have any say on monetary policy – exactly like now, Scotland would not be considered. Only the needs of the London housing market would be considered for monetary policy. I don’t believe it is unusual for countries to peg their currencies or even use the currencies of other countries – Ireland certainly did it for a long time after independence.

We may well ask Pissarides what fantastic support Scotland received from the UK government that appeared to have a mission to destroy its industry through most of the 80s – using Scottish oil receipts to fund the process of course. Being subject to the whims of an larger economy works both ways, no?

Simply, if we compare Scotland to Norway – a neighbouring country of about the same size and not dissimilar climate and culture – dark, wet, depressed and alcoholic, and both with the same oil reserves – we can see how deeply Scotland has been screwed by its experience in the UK. No oil fund in Scotland, no real investment of its natural wealth – the money was hijacked and used to pay for thatcherism (through the 80s oil receipts paid for 10% of the UK treasury’s tax), and then people turn around and go on about how poor Scotland is and how this means it must be in the blessed union – talk about pulling a fast one!

Emil January 13, 2014 at 7:56 am

” What evidence is there of massive flight of individuals from high tax societies such as Norway and Sweden, in any case? This is obviously utter rubbish.”

Say what? Where do you think the richest Swedes live? kamprad (ikea) in Switzwrland, the Rausings (tetra pak) in London, etc. If you go to London or Singapore you wil find an amazing amount of Swedes (and French)

barry January 13, 2014 at 8:06 am

Even if we take it as a given that the fabulously wealthy will leave high tax regimes, and that those regimes will be brought to their knees just like Sweden (errrrr?) – the fact is, the Scottish parliament has had the ability to vary income tax since 1997, and hasn’t done so, preferring to keep it at a UK level.

If it already has the power and hasn’t done so, why are we to believe that it would suddenly do so upon independence? It seems like straightforward scaremongering.

Emil January 13, 2014 at 10:39 am

Please note that you are now making a differen argument than before.

Marian Kechlibar January 13, 2014 at 8:21 am

From my anecdotal experience, there is some serious migration of Scandinavian experts to Arabic countries.

Basically, you spend 3-5 years as a software (or other) engineer in Saudi Arabia, make enough money to last you a lifetime (no taxes), then come back to Sweden to live relaxed life there. No double taxation occurs, because as long as you are abroad for 183 days or more, you are not Swedish taxpayer. (Only the US tax their citizens abroad).

barry January 13, 2014 at 9:23 am

I see. Would you say the existence of these highly paid emigrants is such a grievous and even existential problem problem for Sweden that it should re-evaluate its own independence? Perhaps Sweden should join the United Kingdom, I’m sure that will fix the massive problems this doubtless causes. After all, its not like talented Scots ever move to London currently!

Emil January 13, 2014 at 10:38 am

1) Sweden has been independent for 500 years or so

2) It has chosen (since the 1990s when it was about to disintegrate) to reduce taxes

Marian Kechlibar January 13, 2014 at 10:49 am

Overreaction level: high.
Strawman attack level: ultra-violence.

In your original comment, you commented on Scandinavian high-tax societies, flight of the high-income class and “utter rubbish”.

I added an anecdote from my life, in good faith.

Your reaction went off the rails completely. The convoluted suggestions about re-evaluation of Swedish independence reside solely in your head.

locke January 13, 2014 at 4:56 pm

ha, strange coincidence, I was just today reading about the extent of Viking trade in the middle east.

Tom T. January 13, 2014 at 7:41 am

“the support potentially available from the UK”

What’s “potential” about it?

Alan Gunn January 13, 2014 at 8:08 am

Another point worth mentioning is that the current Scottish nationalist economic plan seems to be mostly “let’s live on our North Sea oil.” This plan has shortcomings, like having to get the rest of the UK to agree to an independent Scotland’s keeping most of the oil revenues. Or the fact that North Sea oil isn’t going to last forever, and in any event is going to face increasing competition from other energy sources.

Barry January 13, 2014 at 8:38 am

A brief glance at the white paper will show that the economic plan of the SNP is considerably more in depth than just “lets live it large on oil” – economics greatly exercises nationalists and Salmond himself was an economist before becoming a politician. Scotland is a very varied economy with lots more to it than just oil.

I don’t understand why it is seems to be believed that an independent Scotland would have the SNP form the government exclusively, forever. There are several parties in Scotland and there could thus be all kinds of governments formed with quite varied policies on economic matters.

FC January 13, 2014 at 12:10 pm

Ireland, South Africa, India, Singapore, Egypt, Israel etc. were each dominated by a single party for decades after they threw off the English yoke.

A Scot January 13, 2014 at 9:52 am

The strongest arguments for Scottish independence are cultural and not economic. We are willing to accept some short-term negative impact on the economy, which will be immediately offset by the “soft” advantages of independence.

Ireland did not come out ahead economically in 1922, but hardly anyone in the Republic regrets leaving.

Marian Kechlibar January 13, 2014 at 10:52 am

What precisely will the Scots gain culturally? They won’t be switching to Gaelic anymore (and no one would prevent them even today, if they wanted to).

Ireland isn’t a good comparison, IMO. The island was basically a staunchly Catholic colony which hated the absentee Anglican landlords to high heaven. I am not aware of such recent state of subjugation, religious oppression and hatred between the Scots and the English.

FC January 13, 2014 at 12:06 pm

Maybe that’s because the ones who regret leaving the UK left the Republic long ago.

TMC January 13, 2014 at 12:48 pm

Or, more likely, beyond a few rentseekers,never were there to begin with.

FC January 13, 2014 at 1:24 pm

Rather than collate the mountain of evidence that you couldn’t be more wrong, let me Wikipedia that for you.

“In 2001, there were 674,786 people in England […] who had been born in Ireland. This is the greatest concentration of Irish-born—as distinct from persons of Irish ancestry—abroad anywhere in the world and was equivalent to 12.1% of the population of the island of Ireland (5.6 million) in 2001.”

http://en.wikipedia.org/wiki/Irish_migration_to_Great_Britain

Fred January 13, 2014 at 12:27 pm

But think of the money they could save on unnecessary defense spending. Scots greatly oppose nuclear weapons in polls, and Scotland’s deepwater port is the only place in the UK for the Britain’s nuclear subs to be based. If Scotland goes independent, the SNP says they will quickly move to get rid of nuclear weapons. The UK may have to base their nuclear subs in American or French (gasp!) deepwater ports. Interesting twist to the independence question.

http://www.theguardian.com/uk-news/2013/jul/10/mod-trident-scotland-independence
http://www.nti.org/gsn/article/uk-lawmakers-eye-basing-submarines-us-port-if-expelled-scots/

Rachmananon January 13, 2014 at 11:50 pm

The separatists are nationalist fools, but I gotta be grateful for their spokesperson’s saying that ‘the separatists’ campaign will have a “ruthless focus” on policies such as cutting air…” Particularly since I am assuming that this has something to do with bagpipes.

Art Deco January 14, 2014 at 1:35 pm

I cannot help but think that Scottish sovereignty would be an answer to a nonsense question. The true threat to self-government arises not from Westminster, but from Brussels. A sensible course of action would be for Britain to tear up every treaty they have signed since 1971. A customs union, a frontline immigration and customs police, and a military alliance will do just fine for that share of Europe outside the Russian sphere of influence; the rest can go.

As for Britain, an end to mass immigration and comprehensive decentralization can act to return discretion to communities on the ground. You can allocate to the central government the military, the diplomatic corps, the central bank and mint, the financial supervisory apparat, miscellaneous regulatory bureaux, a specialty police force, and the social security system. You can let local and regional authorities run the rest, and give the Home Counties and the Midlands at least as much autonomy as Scotland and Wales have.

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