If Scotland votes to become independent, it will be the richest country ever to do so. The economics of the independence debate start with this clear and simple fact.

Such an undertaking would be a substantial challenge, there is no doubt. And the Scots remain a canny bunch, unlikely to choose such a move unless the case is made substantially and well. But the positive argument rests on a simple enough proposition: if Ireland, Finland, New Zealand, Norway and Denmark can all be highly successful economies with a similar population, why can’t Scotland?

Small countries dominate the top of the rankings of the International Monetary Fund’s (IMF) league table of economic performance measured by GDP per capita; so Scotland could surely make the policy choices to emulate them? If it chooses policies that will help the economy achieve its potential, then it will succeed, over time. Rome wasn’t built in a day, but it was worth building.

Of course, if Scotland makes bad choices the country won’t achieve its potential. The question is whether it’s more likely to get the policy mix right on its own than as part of the UK, with a government it doesn’t support. Policies it would make as an independent country include a pro-migration stance agreed across all the parties in Scotland, in contrast to the approach of the UK Home Office. The economic imperative for this in Scotland is clear, as is political consent.

This argument is by no means a slam dunk for proponents of independence. Some countries do get it wrong. The Paris-based Irish author, Michael O’Sullivan, looked at this in his 2019 book The Levelling; he pointed out that in 1924 Argentina was three times wealthier than Japan but today is half as rich. Simply put, countries can fail to deliver on their own best interests. The evidence of this is at the heart of the negative economic case for Scottish independence, which has probably never been stronger because of the UK’s economic performance.

The UK once had the richest economy in the world. Today on the IMF league table it sits 28th. This long, relative decline in performance has been accelerated by Brexit, which is the catalyst for Scotland’s choice now.

It’s not just the fact of Brexit, but the manner of it. A choice that Scotland opposed in substantial numbers has been imposed with literally no plan of how to go about it. No prospectus was laid out in advance of the vote about what it would mean, nor what the transition would be like. When an agreement was eventually struck on the detail by the UK government it was for a deal that it now describes as “self-harm”.

The economic truth, which is now universally accepted, is that the UK is one of the most unequal economies in the industrialised world. The gap between the richest and the poorest local areas is – by some distance – the largest of any European country. This is why the UK now has a whole government department for “Levelling Up”.

It’s one of the great ironies of the Scottish debate over the last half-century that the very need for “levelling up” is the basis of the main economic argument for the Union. The UK economy does most of its flying on the one engine of London and the South East. The other UK nations and regions underperform economically but “benefit” from fiscal transfers from the south in higher public spending. This notional “deficit” is higher than the UK average in most places, including Scotland. So, the argument goes, Scotland would miss this funding if it voted for independence. An unsustainable deficit would in most countries be an urgent reason for reform – in the UK it is the central argument for the status quo. We’re a nation of ironies, but not all of them are funny.

In fact, the Scots raise enough in taxation in non-Covid times to pay for all the policy responsibilities of the Scottish government (health, transport, education etc) plus state pensions and social security. The deficit is therefore made in the notional allocation of UK programme costs to Scotland in defence, debt interest and the many other reserved areas. Many of these Scotland would have to fund; some they may choose not to.

One obvious departure would be the choice not to fund the replacement of Trident. Andrew Marr argued in New Statesman recently that Russia’s actions in Ukraine weakened the case for Scottish independence and strengthened the case for Trident’s replacement. At the twentieth read, I’m still struggling to understand his point. But he did get one thing right: an independent Scotland will not be a long-term host to the next generation of nuclear weapons but will seek to be an active and supportive member of NATO. Just what our “independent deterrent” is currently deterring in Ukraine is not clear to me, but that is for a different essay.

Regardless, what is certainly true is that Scotland will require to make its public finances sustainable in an orderly fashion. All countries must. What would make no sense is a self-defeating austerity programme, such as that which most economists now agree was a damaging mistake by the Conservative government in the years following the global financial crisis of 2007-8.

The priority right now is investing for recovery and the net-zero transition. But if Scotland is to borrow on the debt markets sustainably and cost-effectively, it will need a credible plan. This is a large part of the reason why the SNP’s currency policy is to retain GBP sterling for a transition period of some years before launching a Scottish pound. Ireland did this and it makes sense for many reasons, not least in removing currency risk from the cost of borrowing while credibility is established by the Scottish government’s financial policies and institutions.

A central bank will be created early, however, as lender of last resort and regulator. An anchor institution for the new country as it begins its transition back to the European Union, it will need to be led by the best talent that can be found. In due course Scotland will naturally have its own currency, but only when it is practicable, and the time is right to ensure its best interests. That timing will depend on key tests published by the Scottish government for markets, companies and individuals to understand with certainty.

There are always trade-offs of course. Currency stability and de-risking is traded off against monetary policy sovereignty for a transition period. This is sensible. The other trade-off Scots will need to weigh up is what the transition back to the European Union will mean for trade. It’s clear that Scotland’s economy would benefit from diversifying its trade and growing in markets outside the UK just as Ireland has done. When Ireland joined the EEC in 1973 its trade was vastly dominated by the UK; today Britain is a fraction over 11 per cent of Ireland’s exports and its economy is all the healthier for it.

But it stands to reason that if Brexit is problematic for Britain’s trade, then Scotland returning to the EU will create challenges. The difference of course is that if Brexit is a choice to exit the benefits of the single market, independence would be a choice to return to them. Transitional challenges will therefore be about benefits sought rather than departed from in Brexit.

The Scottish electorate has not yet heard an updated case for independence from the Scottish government, which won the Scottish Parliament election on a manifesto commitment to give people a vote on the issue. Its focus has been entirely and rightly on covid. But work is now under way to remedy that. It will be the antithesis of, and an antidote to, Brexit’s self-inflicted problems. Where Brexit had no plan, the Scottish government is working on a prospectus to make clear why the choice should be made and what the transition would look like. Much of the thinking to underpin this work has already been agreed.

The Scots have the choice of independence and a return to the European Union. Not choosing that would be economically high-risk. The process will not be simple; it will be hard work and take effort; but, like most acts of self-improvement, it will also be satisfying and meaningful. Of course it will be challenging, but it will be worth it.

Andrew Wilson is founding partner of Charlotte Street Partners and chaired the SNP’s Sustainable Growth Commission

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  • Avatar
    Dr Tim Rideout
    6 May 2022 4:37 PM

    The SNP plan as adopted by Conference in April 2019 is to have our own currency ASAP after Independence Day and the notorious ‘6 Tests’ were made advisory only. What Wilson describes is his and the SNP Leadership position as they have never accepted what Conference decided. There is absolutely no point in the Scottish Government borrowing on International markets in foreign currencies such as sterling. That is because ScotGov spends in S£ and there it needs to borrow in S£, and that means from us in a domestic Scottish market. If the Scottish Government borrowed e.g. US$ then they would deposit these at the Scottish Reserve Bank who would create and issue the equivalent in new S£ and credit that to the Finance Ministry who could then spend it. The dollars have just become part of the Foreign Reserves and will simply sit in the SRB unused until the time comes to repay the loan. In the meantime ScotGov is paying interest on these unused dollars for the privilege. That seems kind of stupid. So much better to run a deficit (which creates S£) and then mop those up by having us buy bonds. All the interest then also stays here and benefits us. If foreigners want to lend to ScotGov then they exchange their money into S£ (which supports the exchange rate) and use those to buy the bond.

  • Any economic argument for independence which starts “if (insert favourite successful small nation(s) here) can do it, so can we” instantly loses all credibility. And if the economic case for independence is even remotely built on such misleading, superficial and crowd-pleasing assumptions rather than a full, rigorous and objective analysis of an independent Scotland’s competitive advantages, opportunities, weaknesses and risks, then articles like this are both morally and professionally dishonest.

    • Avatar
      Wallace McCallum
      8 May 2022 6:20 AM

      And yet, not some, but all the small nations around us outperform Scotland and the U.K. for that matter on per capita economics… never mind most positive life metrics… by some way in most cases. Can you add that straight onto your opportunity column and weight it accordingly… versus staying in a relationship with a track record of lagging dependency now trending downwards… sometimes you need to just shit or get off the pot… you’re not going to have all the answers, they are unanswerable in many cases. What do we actually know… the U.K. nation didn’t implode with brexit… despite the negatives we all just adapt and live our lives…

    • Avatar
      Alex Gallagher
      8 May 2022 9:06 AM

      Absolutely Rab. Andrew Wilson has been publishing this article reheated for about five years now. It echos the failed Sustainable Growth Commission report and has never been persuasive. And as we see from Tim Rideout’s comment above, the SNP has two unrealistic stances on currency and therefore the economy. The most interesting thing is the article keeps getting published in respectable journals and blogs.

    • I disagree with your first point – there is value in pointing out that there are historical precedents that independence for a small nation is possible and can be beneficial. I don’t agree with your assertion that any remaining argument loses credibility.

      However I do agree with your second point that the article doesn’t go into enough detail about how an independent Scotland would fare given it’s unique strengths and weaknesses – and what policies it should focus on in order to make independence a success

    • Using rhetorical sleight of hand to reassure people who don’t understand the consequences of what you propose that “it’ll be all right on the night” is morally reprehensible. You know exactly what you’re doing, and that the vast majority of us won’t be as insulated as the small nationalist elite you belong to. I hope you have enough of a conscience to have some sleepless nights over this behaviour.

  • Avatar
    Bruce Moglia
    8 May 2022 10:30 AM

    Apart from taxation on working Scots that goes south of the border, an independent Scotland would also receive all duty on sales of petrol, diesel and aircraft fuel, and tobacco that is sold in Scotland. We would also receive all duties on alchohol based drinks made or sold in Scotland as the largest gin manufacturer in the world, and the billions of pounds worth of duty on Scotch Whisky that all bypasses Scotland and goes straight to the Treasury in London. We would also be recipients of all VAT raised in Scotland and taxation on all the English Based Supermarkets and shops in Scotland who currently pay everything direct to London, and that includes Aldi and Lidl. Then we have our Exclusive Economic Zone (EEZ) of oil & Gas in prodigious quantities that has raised hundreds of billions that Scotland didn’t see a penny of, and our Atlantic Margins where the North Sea has been described as but a puddle of oil compared to the oceans of oil it contains. Those already contain the massive Claire Field, the largest offshore oilfield in northwest Europe, and the giant Foinavon and Schiehallion fields that require tankers to take their production to market, and we hear nothing about them as the English Government describe them as Unknown Territory to avoid their recognition as Scottish fields. Scotland is wealthy beyond the dreams of avarice, and the above reference to misleading, superficial and crowd pleasing assumptions are but figments of a deranged Unionist mind.

    • Avatar
      Alex Gallagher
      8 May 2022 1:02 PM

      So Bruce

      What does that mean with £ sgns attached? How much in and how much out?
      Even Andrew Wilson says we would have to cut £billions. He just doesn’t say where. Can you?

      • Avatar
        Radio Jammor
        9 May 2022 6:51 AM

        Andrew Wilson did not say that. That is you misrepresenting what he actually stated.

        But as usual, the Unionist arguments forget process and democracy. Fiddly things that they tend to be for the UK and its proponents.

        There will be a vote first. This will be the opportunity for the pro-independence parties to put forward their manifestos for an independent Scotland. As usual, Unionists will pour scorn without much basis and fail to make a positive case for staying in the union, concentrating instead on another Project Fear.

        If at this point we assume a Yes vote for independence, what would happen next is that the UK will be forced to concede that Scots have voted for independence. The UK refusing to accept a country voting for independence from the UK has never happened – and many countries have done just that. The UK must at least appear to respect democracy or the game is completely up.

        Then there will be negotiations over the details of Scotland withdrawing from the UK. A withdrawal agreement will then come out of it and then – and only then – will we have the complete picture of the finances of an Indy Scotland.

        If that process sounds familiar, it is because it is broadly what happened with Brexit. But that is where the comparison ends.

        Naturally, until then, or until most Scots understand the false premise behind it, Unionists will continue to demand a level of financial detail from the plan to leave the UK, which does not and cannot exist yet. The con being that because the answer is never provided, Unionists want you to assume that this is because the truth is being hidden. The truth is that the question of detailed finances is itself a lie at this stage. The simple fact of the matter is that until there is a withdrawal agreement, such detail cannot be provided. And you won’t get a withdrawal agreement without a Yes vote. Some Unionists are aware of this deceit behind their tactics. Others just argue in plain ignorance, trusting the wrong people to be honest and up-front about the matter.

        The fact that so many Unionists have been demanding something that cannot yet exist will come back and bite them, as it dawns on the the less politically inclined as we approach the referendum, what devious – or is it ill-informed – arguments the Unionists have been making, in order to try and scare people away from making their lives better, by unshackling Scotland from a UK that has been frittering away taxes on oil and gas whilst taxing the poor more and the rich and their businesses proportionately at least, if not in actual terms, far less.

        The simple fact of the matter is that Scotland will indeed be a rich and resource rich country that with independence can radically alter its economy to better suit its citizens. Far too many of have been left in poverty and with a growing cost of living crisis, under the auspices of the UK. It’s time to change all that. And the only way for that change to happen is with independence.

    • Avatar
      Bruce Dunn
      8 May 2022 11:19 PM

      All of those items are calculated into the Scottish Government’s G.E.R.S. every year.
      Also, are the Net Zero targets just lies? Half your paragraph talks up Fossil Fuels.

    • Avatar
      Alison Lindsay
      11 May 2022 1:21 PM

      I agree with you regarding Scotlands natural wealth. My simple question though is – if our people want independence and membership of the EU (as clearly indicated in recent Polls and Votes) would joining the EU and adopting the Euro not be the combined solution to the Scottish wish for our independence and the necessary monetary adjustment from giving up the U.K. Sterling currency? Personally, my monetary resources are in my bank and I am not fussy about what sort of paper money or coins I use to spend especially as I use little actual cash nowadays as I mostly use my bank card as ‘money’. The little money I actually carry I call ‘ my pocket money’. Now, mine is not a knowledgeable economic question, simply the question of an ordinary daily user of money who wants my Nation to Be Governed by our culturally canny Scottish folk.

      • Avatar
        Alex Gallagher
        12 May 2022 10:19 AM

        Joining the EU would take years or decades. In the meantime all the economic problems that Andrew is avoiding listing would hit hard. Search Copenhagen Concealment for full explanation.

        £15bn deficit from day one. New currency or use the £. – both problematic. No state bank as lender of last resort. Borrowing expensive. Capital flight. Skills flight. Hard border at Gretna causing trade difficulties (see NI protocol).

        There would be a generation (a real generation) of decline. We might take 60 years to recover (like Ireland). We might never fully recover economically. Search: These Islands Growth Commisssion Response for fuller fact based analysis

        • Like Ireland? Were we doing well as part of the UK. When was that? Was it when you were exporting all our food and caused a famine?

  • Avatar
    Rodger Lyall
    8 May 2022 1:32 PM

    Over the past few years, I have made suggestions to the Scottish Government surrounding a better approach to economic planning which I have been told have been welcomed. I have even offered to help, as a volunteer (I am a retired Coopers and Lybrand management consultant). I was thanked and told that my comments had been valued and were noted. Since then, I have heard nothing which means I can only construe that there has been no change. I have voted SNP in the past and on the basis that they are the best of a ‘bad lot’ but I fear for our future in the absence of any intelligent strategy as far as I can see.

  • Avatar
    Colini McKenna
    8 May 2022 6:04 PM

    Alex Gallagher, by citing ‘even Andrew Wilson’ you seem to believe, even after the discredited Commission document he had a leading role in creating, that he is the go-to guru.
    All your eggs in one economist’s basket is surely a blinkered approach.
    I would much prefer to read the thinking and explore the economic modelling from a range of non-party affiliated economists than to constantly read the reheated thoughts of Ms Sturgeon’s pet bone caster.

    • Avatar
      Alex Gallagher
      9 May 2022 11:45 AM

      Agree the Sustainable Growth Commission is discredited. But it’s recommendations are still official SNP policy. And it’s not about all eggs in one economists approach. It’s that, if you want “independence”, you need to have a single believable coherent economic strategy based on facts and evidence. For instance, as I said above, the SNP appears to have two currency policies 1. keep the UK£ for a time to get stability and then establish a Scottish currency. Or 2. go to a new currency immediately and take the MMT approach that a country can print limitless amounts of money to meet any circumstance. Neither is sensible. But the big problem is, given that they have no agreed currency policy, they can
      have no coherent overall economic policy.

  • Avatar
    David McCandless
    9 May 2022 12:25 AM

    I think the point about Trident is slightly disingenuous. The amount allocated to Scotland is around £0.1bn so removing it wont do much for the notional deficit.

    Also portraying the deficit as ‘debt interest and defence’ – well – whether or not an independent Scotland can just walk away from paying a fair share of debt interest seems questionable. It certainly wouldnt be popular in England. And the SNP’s own (2014) estimate of defence costs was around £3bn (for a largely coastal force) – and Scotland will need to pay for defence.

    So the notional deficit – imo – still needs a lot more discussion. Its quite large and not going anywhere.

  • Avatar
    George S Gordon
    9 May 2022 8:56 PM

    The debt represents the savings of mainly UK pension funds who puchase Treasury-issued gilts. The gilts and the interest are 100% guaranteed by the UK Treasury to the gilt holders. Does anyone believe transferring part of those savings to a newly independent country would be acceptable to the gilt holders? It would technically be seen as a UK debt default.

    To put it another way, the ‘debt’ equates to the gilts held by those savers. The original issuers of the gilts cannot just order the savers to allow them somehow to be replaced by new Scottish gilts. Nor can the UK force the new Scottish government to issue gilts and pay the proceeds over to the UK Treasury. Can anyone show me a comparable example where that happened?

    You will recall that the UK promised it would stand by its debt if Scotland had become independent after 2014. That’s because they understand the above.

  • […] institutions? How do you enthuse people if your case, which Andrew Wilson has recently repeated, rests on keeping economic power with the City of London, opening Scotland up to a privatisation […]


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