Wednesday, 10 September 2014

Will Scotland Really Want to Bear the Cost of Independence?

Personally I have no idea at all if the complex economics of the situation mean that Scotland will be better off as part of the UK, or as an independent nation. To me it seems that it largely depends on the outcome of the negotiations that would follow a Yes result. Yet, this seems to be a crucial point that has largely been missed in this referendum campaign.

The Scottish referendum is not technically a referendum with a Yes result that automatically confers independence on Scotland. It is actually simply a referendum which, with a Yes result, would give the Scottish Parliament the authority to open negotiations for independence.

Sitting down at the negotiating table, Alex Salmond will quite obviously be attempting to negotiate the best deal he can for Scotland. He will want to minimise the debt burden that the Scottish government want to take on, he will want a special deal to use the British Pound and he will want to pay as little as possible towards the relocation of UK assets to England/Scotland as required.

The Anglo/Welsh/Northern Irish Government conversely will be looking to get the best deal for the remaining nations of the old United Kingdom.

Perhaps negotiations will be concluded quickly and easily and a deal will be done.

But perhaps not. Perhaps instead there will be a stand-off with the Scottish demanding a low debt and low exit price and the EWNI (England, Wales, NI) Government demanding a considerably higher one. It seems very likely that this will happen.

What happens then?

I would imagine the Scots cry foul and launch a campaign to get the support of majority of Scottish to the idea that the nasty EWNI Government are trying to rip them off.

Simultaneously the EWNI will launch a campaign to convince it’s own nationals and the Scottish that the Scots, after hundreds or years of subsidy, are trying to renege on their responsibilities. There is a general idea around that the Scots are very stingy with cash – so it will play to existing prejudices and easily garner huge support.

If things get really out of hand we could have social unrest and even the rise of Terrorism – a new ISA (Independent Scottish Army).

But perhaps it will not come to this:

It seems strange, and a very poor negotiating stance, that Alex Salmond recently threatened not to pay Scotland’s share of the national debt when independent.

Surely this threat just means that a Scottish Government will not be given independence without having paid off it’s debt first? And how will this fledgling nation borrow the huge sums of cash involved? Who will lend to this self confessed debt reneging government with their strange new Scottish currency?

Perhaps the markets will, but at very much higher rates than are currently being ‘enjoyed’ on the UK national debt.

So how will the prospect of Scottish Independence then look economically if a huge proportion of it’s tax take is going to go on debt interest repayments and restructuring costs and they have lost the UK Barnett Formula subsidy from the UK that they currently do enjoy?

Will the gusto and bluster of the Independence supporters stutter to a halt as the realisation dawns that the future looks horribly bleak. A high tax, low spend, low inward investment economy with the majority of it’s public sector jobs gone south – literally.

Perhaps the Scottish people will demand another referendum before the Scottish government takes them to independence because suddenly the deal doesn’t look so great and the future isn’t bright. It’s cold, wet, miserable, lonely and poor.

It’s interesting that Cameron’s promised ‘if I am the boss’ EU referendum in 2017 is to be proceeded by a negotiation so we know exactly what the EU deal (if there is one on offer) is. Seems like quite a good idea really doesn’t it.

Of course leaving the EU will be much easier for us than for Scotland to leave the UK – the EU doesn’t raise our taxes or control our currency.

All in all, it’s less Braveheart. More broken hearts. Scottish ones.


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