Independence supporters need to embrace GERS
Cover image is from Steven Camley and appeared in the Herald. You can see more of his images and purchase them here.
A quick glance at twitter shows that many Unionists are taking great pleasure at the state of the Scottish Economy. They are gloating that by voting No they have saved Scotland from self destruction. Today, Conservative leader Ruth Davidson will even go as far as to thank those 2 million No voters who have prevented the country from being sucked into the fiscal black hole.
And on the face of it the figures are pretty damning. The Scottish budget deficit including a geographic share of oil was £14.9bn, or just under 10 percent of GDP. This gives Scotland the highest budget deficit (as a percentage of GDP) of any OECD country. In comparison, the UK deficit is 4.9 percent of GDP.
Many Nationalists are happy to decry the figures stating that they are only estimated and no conclusions can be drawn from them as to the financial state of an Independent Scotland. There may be an element of truth to this but it is not the right way to go about persuading people to vote Yes in a second referendum. There is already a perception held by many Unionists that Independence voters are economically illiterate and burying our heads in the sand at bad news isn’t going to change that. We can’t continue to do as many Unionists also do, hail the figures when they back up our argument and ignore them when they don’t. This type of data is what people will be using to make a decision if a snap second referendum is called in the aftermath of the Brexit vote.
The first thing to note is that it is not all bad news. The rise in the onshore economy almost covered the losses made by the decline in oil revenues. The economy is growing, our employment rate is higher than the UK as a whole. Our output per head and our growth of productivity has outstripped the UK. Our exports are doing well. Spending on capital projects and economic growth is over £400 per head higher than the UK, meaning that some of the large deficit could be viewed as an investment that will reap future dividends.
That said, the size of the deficit is a worry that we should not shy away from. Our political opponents and the general public certainly will not.
Some Unionists are from the Too Wee, Too Poor, Too Stupid camp. They seem to take pleasure in the fact that we are running a massive deficit as it proves Scotland would be a basket case if Independent. Others talk of the broad shoulders of the Union, they point out that the UK has a diverse economy so constituent parts can lean on each other when they need to. At the moment the Scottish economy is not doing as well so the UK economy can step up and shoulder some of the burden.
However, if the Scottish economy is struggling it is doing so while it is largely controlled from London. If Scotland had not been in the Union it would have run a surplus for most of the last 34 years. It is reasonable to presume that we would be a country with a large oil fund, which would be more useful than any broad shoulder when dealing with a downturn. Instead we have a large overspend and a share of UK debt. You can see this clearly in the following article by Professor Brian Ashcroft (who is not a nationalist). I don’t see how Scotland can be benefiting from the broad shoulders of the Union when by being in the Union we are much worse off than we would have been otherwise. There is an argument that we would be better remaining in the Union going forward due to our current position but that is like advising a kidnap victim to remain in their dungeon, escaping would be a fanciful idea due to the years of incarceration rendering them incapable of looking after themselves. At least the dungeon is shelter and provides regular meals.
But the past is in the past and we need to admit that at the moment things are not looking great. Many of the problems we have could be alleviated by a revival in the oil price but even that would be covering up the two main long-term issues; the structure of our economy and our ageing population. It is here we need to focus in order to convince people that they would be better off in the long term outside of the UK.
With regards to the first problem our economy needs to diversify. This could happen in the confines of the UK but there is little evidence that it will. The UK economy is imbalanced towards London at the detriment of the rest. The Scotland Bill will see Scotland gain control of income tax but that is only a small part of the powers we need to create the economic conditions for change. Most of the main economic levers needed to grow and shape our economy are still reserved.
We also have a demographic timebomb in Scotland where we have far too few working age people in proportion to those who have retired. This is a problem that we need to fix with focused immigration but the UK government has made it harder than ever for skilled people to come and work here. It is a clear case of immigration policies being tailored to the South at the detriment of Scotland, particularly harsh is the ban on the Student Work Visa that is depriving Scotland of highly educated productive people who could help close the deficit.
The question we need to ask is, given that the problems occurred while most economic levers are controlled in London, are we going to resolve these issues more easily from outside or inside the UK?
To conclude, those arguing for Independence should embrace, not run away from, the financial situation as those we need to convince will be aware of it. We can’t just wish it away. What we need to do is highlight that the figures illuminate Scotland’s condition within the Union and not what it would be like if we had full control over our affairs. Unlike many Unionists, who seem to be content with a future Scotland perpetually subsidised by the rest of the UK. We need to prepare and sell a robust economic case for dealing with the key issues we face. We lost the last referendum because we failed to do this.
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