Ocean Kinetics - The Engineering Experts

Letters / Time for independence is not now

SNP Shetland convener Tom Wills (Hope over fear; SN, 20 January 2020) makes his case for independence and a second referendum. He claims the recent general election results provide a mandate.

First, the SNP lost the 2014 independence referendum by 55 per cent to 45 per cent.

Using Mr Wills’ own figures, the SNP received 45 per cent of the general election vote, exactly the same proportion as voted for independence in 2014. Apart from winning fewer seats this time than in 2015, not much appears to have changed, electorally. The 55 per cent who voted to remain in the UK are still, it seems, 55 per cent.

Obviously, there is no “mandate”.

Denouncing Westminster, he says: “While the UK has continued to run up debt, Scotland has lived within its budget …”

This is only true because Scotland is part of the UK. The situation will change, dramatically, with independence.

The Scottish Government receives a block grant from Westminster to cover its spending and isn’t allowed to borrow to supplement it. Therefore, we automatically “live within our budget”.

All borrowing is carried out by the UK government and contributes towards running the whole country, including the devolved governments’ grants.

At present, we are heavily subsidised since Scottish funding is independent of Scottish tax returns and increases automatically with UK government spending (Barnett Formula).

The more the UK spends, the more money Scotland receives and as we return less tax to the Exchequer than we receive in funding, the shortfall, our “notional budget deficit”, is funded by Westminster.

Scottish Government figures put our current deficit at £12.6 billion (including North Sea oil), equating to a £2,340 per annum subsidy for every man, woman and child in Scotland.

It follows that Mr Wills’ criticism of UK national debt is unfounded. We have received and spent our share of it.

Nicola Sturgeon’s own Sustainable Growth Commission (SGC) acknowledges this, stating that an independent Scotland should pay the interest on our share of UK debt for the duration of its life, plus other fees for shared services, leading to an estimated Annual Solidarity Payment” of £5 billion per annum.

This payment calculation is convoluted and negotiable – there are ‘swings and roundabouts’ – so, for simplicity, assume the most favourable case i.e. no additional costs e.g. new currency/central bank, debt interest, capital investment or spending to stimulate the economy, etc.

Assumption: Initial independence budget deficit, £12.6 billion per annum, seven per cent of GDP.

The SNP intend to re-join the EU, whose joining conditions limit borrowing to 3 per cent of GDP (£5 billion per annum), meaning we would face £7.6 billion per annum of spending cuts/tax hikes, on an annual budget of £75 billion i.e. swingeing austerity!

Strathclyde University’s erudite Fraser of Allander Institute refer to this problem in their article entitled A referendum in 2020? noting: “Scotland would face a major challenge in meeting the EU target of a fiscal deficit no greater than 3 per cent of GDP.”

Joining the European Economic Area (EEA) instead of the EU won’t help. The SGC assert that current levels of budget deficit would be unsustainable, in any case, and recommend a 10-year programme to reduce it below 3 per cent GDP.

It follows that independence in our present economic circumstances would mean many years of austerity.

There may come a time for independence, once we know the truth about the effects of Brexit and our economy is no longer heavily subsidised by the UK. However, that time is not now.

John Tulloch