HAVING BEEN GIVEN the opportunity to write a defence for the Union, for me there was only one topic to look at – the one area that affects everything from the welfare provision for the most vulnerable in society to the education system through to our health service and that one area is the economy. Without a stable economy, the funds are not there to provide the best we can for our people and our society.
We have all heard nationalists use the derogatory phrase “too wee, too poor, too stupid” to demean opposition to separation, but remember it was the SNP’s John Swinney who coined the phrase in 2001. Non-separatists don’t believe Scotland is too poor to be independent; only nationalists use the insulting phrase.
No-one says Scotland could not survive on its own outside the UK, but Scots need to be aware that, without the support of the UK, their standard of living would fall. Currently, the extra money we receive from HM Treasury supports 14 per cent of Scotland’s public services every year. In cash terms, that is £10 billion. The question is, which taxes would have to rise, and by how much – acting as a deterrent to enterprise and business – and which services would have to be cut, and by how much?
What non-separatists know is that Scotland is capable of being a separate country but believe that Scotland is better as part of the United Kingdom. This Covid-19 pandemic has made this very clear indeed.
Scotland would have survived this pandemic like every country in the world but at what cost? Would we have been able to provide what Rishi Sunak and the UK government has – the furloughing scheme, the help to self-employed, the investment in restarting the economy? 736,500 posts have been supported by the furlough scheme in Scotland. The cost of this at Scotland level is not yet available. The cost however of the self-employment income support scheme which has helped 155,000 individuals in Scotland is £449 million to 30 June 2020. Outwith the Union how would the last few months have looked? Would we have had to return to our jobs regardless of the health risks? Would businesses have closed, making many thousands of people unemployed? What would that have done to the mental health of the Scottish people?
Where has this money come from? It has been borrowed by the UK government via the issuing of gilts. Are we saying that the UK as a whole is too poor to function? Absolutely not. All countries borrow but an important question is what determines the cost of this borrowing?
The calculation of this is no different to Mr Smith going to his bank and asking to take out a loan.
Does Mr Smith have a good credit history?
Has he defaulted on any loans in the past?
Does he have any other debts?
Does he have an appropriate income to repay the debt?
All of these lead to the question, can Mr Smith repay the debt when it is due?
In this case, the UK has a good credit worthiness rating. As at Dec 2019, Standard & Poor’s credit rating for the UK was AA, a high grade. A 2-year UK gilt pays out at 0.5 per cent as it is considered a very safe investment. Compare this with Turkey where it pays out 11.325 per cent for the same period. Why the difference? It comes down to the confidence the investor has that he will receive his money back. A risky investment requires a higher yield. Turkey pays the price of not being a safe investment in comparison to the UK.
What has this to do with Scotland, you may ask. This is the question that non-separatists are often faced with. Independence should not be decided upon solely by your heart but also your head which is one of the reasons Scots voted against independence in 2014. There was no detail given on the economics of how an independent Scotland would look.
What currency would we use? Would we have our own Central Bank and if so where would the funds in that bank come from? How much would it cost to borrow?
We already spend more than we raise so how would we repay the debt?
We would start life as an independent Scotland with debts incurred as part of the United Kingdom, even higher now than before Covid. Scotland has received an additional £6.5 billion of funding to assist the administration in Holyrood with the Covid recovery and that sum is climbing daily. The UK government will have borrowed that money to assist the economy. Do nationalists really believe they can walk away fromthat debt? What investor looking on would ever lend money to an IndyScotland with that track record? And what return would investors want lending to a country that has these huge levels of debt and a deficit of 7 per cent?
These are the practical issues that any nationalist politician has to answer before any referendum. They didn’t in 2014 and yes, there will be the usual suspects who will vote for independence regardless of practicalities but there are also the people who just want to get on with their lives and have a good quality of life. Unless you have an economic argument that will convince them their jobs, their savings, their pensions and their lifestyle will be safe, they will not vote for independence.
Why take a leap of faith when the person asking you to do so can’t tell you how you will land?
Photo: Empty Princes Street, Edinburgh during quarantine of Covid-19 by AK Media from Adobe Stockâ€‹