ANDREW Wilson’s Growth Commission is finally with us. After reading it I feel as though I’ve just woken up from a bad dream in which I’m struggling to find answers to problems that in reality don’t exist.
The ‘Growth Commission’ is a misnomer. Really it should have been called the ‘Recession Commission’. To be fair, it admits that independence would not exactly be a picnic, and that we’d need to take radical and uncomfortable measures to deal with all the undoubted problems that would arise from leaving the UK single market.
From a Scottish business point of view it just begs the question ‘what’s the point’? What on earth is the point of abandoning a perfectly good – indeed highly advantageous – set of fiscal and monetary arrangements for a prospectus that tries its best to find some sensible alternatives but, to be frank, reads like the start of a twenty-year nightmare.
At least the authors are – partly – honest about the challenges. We all now know that Scotland outside the UK faces a very large fiscal deficit. Even nationalists are reluctantly admitting that North Sea Oil won’t balance the books. Put simply we spend a hell of a lot more than we earn in taxes. That means, if we left the UK, taxes and borrowing would have to go up and spending come down. A lot. All of this, by the way, would impact on business and employment to the tune of tens, possibly hundreds of thousands of jobs as costs went up and the government taps were turned down to a trickle.
Wilson’s modest answer is that spending would grow less fast than the economy. But if this – and the other plans put forward in the report – are good ideas, why not just do them now? The Scottish Parliament already has most of the powers that impact on growth. If they’re not a good idea, why are we talking about them?
Almost worse is the monetary nightmare offered up by Wilson and his fellow authors. It’s the worst of both worlds – the limbo of sterlingisation followed by a new currency. A separate Scottish currency is probably logical if we left the UK. But it would be untried in international markets. There would be a premium on our borrowing. Made worse by the fiscal situation. Leading to higher interest rates. And more expensive mortgages for home owners. Our financial institutions would have to move down south – where most of their customers are after all – so the Bank of England would continue to guarantee them and oversee them. Anybody trading across the border would have to hedge against currency risk and pay extra every timethey bought or sold a widget in England. All this after an uncomfortable limbo using Sterling without the blessing of the Bank.
The ‘Growth Commission’ offers a panacea to take all the pain away: migration. If we can attract enough new workers from abroad it will grow our economy and revenues enough to plug the gap. But this has been tried before. Scotland has been in the EU single market for years with free movement from Eastern Europe up for grabs. But even when the UK was the only place they could move to, not enough Poles and Lithuanians came here to Scotland to make the difference. Migrants come to where there is growth and jobs, they don’t create it on their own. Now I’m the first to accept that Scots businesses needs skilled workers. But this is best achieved in a UK context. A radically different immigration policy here will just put up more barriers to trade.
All of this points to the elephant in the room, of course: Brexit. Leaving the EU is uncomfortable for many Scottish businessmen. I voted ‘Remain’ myself. But as far as the Union goes – our Union, between Scotland and England, Brexit is a game changer – but not in the way the nationalists think. It makes it all the more vital – essential even – that we retain and maintain the UK single market. We simply cannot afford to raise barriers to trade with our largest trading partner. Inside the EU, considering independence was an indulgence. Outside, it’s an irresponsible folly.
Struan Stevenson is Chief Executive of SBUK a campaign group promoting the business benefits of Scotland’s place in the UK