Reflections on Scotland's Decision

Should Scotland be an independent country? Many Scots voters know the answer more or less by instinct. Plenty are convinced that independence is right and good for Scotland, and that staying within the UK is not. Plenty of others believe the opposite.

But there are more still who don’t have such conviction either way and are puzzling their way through what voting Yes or No might mean for them and their families.

They don’t lack for information. The UK Government and the Scottish Government have each published well over a thousand pages of what they see as the problems and advantages of the status quo versus independence. The Yes and No campaigns have also put out swathes of information.

How much of this has reached ordinary voters is less clear. That’s partly because few have the inclination to wade through long documents. And it’s certainly because people hear each side saying contradictory things, and end up trusting neither.

This week we published an e-book which stands back from the partisan fray and looks to help voters make an informed judgement come September 18th. Called Scotland’s Decision, it poses sixteen questions which have been central to the referendum debate, and presents an impartial take on each, drawing on the research of leading academics working for the Future of the UK and Scotland programme.  Over the next few days we will publish brief introduction for the various sections of the book, starting with the economy. 

The aim isn’t to provide definitive answers and certainly not to tell anyone how to vote, but rather to enable readers to judge better the competing claims each side makes.

So what does the book tell us?

It won’t surprise that both sides often exaggerate their claims, trying to win tactical advantage by contradicting the other.

But the contradictions have other causes too. On many matters, especially concerning international affairs, the UK Government takes the approach of a big, powerful country used to a leading role on the world stage. The Scottish Government looks to the example of small states which tend to work through cooperation and persuasion.

So the two sides often end up talking past each other when apparently talking about the same thing. Here, the choice for voters is about the kind of international role they would like their country to have.

Other contradictions are more technical. In the economic sphere it matters hugely what assumptions you start your analysis with. Very different figures emerge if you take different projections of oil revenues, or labour productivity, or immigration.

That’s why, on the same day back in May, the UK Government could tell us we’d be £1,400 worse off if independent while the Scottish Government said we’d be £1,000 better off. Each used assumptions favourable to its own case to produce the answers they wanted. There is probably only one certainty here: the forecasts of both sides are almost certainly wrong.

So what can we know about the economics of independence? It is clear that future public finances will be challenging (whether or not Scotland leaves the UK). Scotland has longer term challenges which are tougher than for the rest of the UK: falling North Sea oil revenues and a faster-ageing population. And in the shorter term an independent Scotland’s tax revenues would likely be smaller than public spending, meaning spending cuts, tax rises or more borrowing to balance the books.

But being independent would bring more freedom to pursue different and perhaps better economic policies and generate higher growth. The choice for voters is whether they think the current or future Scottish governments would use the powers of independence in ways which would boost growth enough to deal with the short and long term challenges facing the Scottish economy. This is a question about vision and leadership as much as it is about economic data.

At the heart of that question is the currency, perhaps the most important economic question as we approach the referendum. It determines the menu of available economic policy options, the interest rates at which people borrow money, and the capacity of the economy to deal with crises.

Along with many other economists, our experts writing in Scotland’s Decision are sceptical that the kind of formal sterling currency union the Scottish Government has proposed (and the UK Government has rejected) would be stable. For them a new Scottish currency may be the best option for an independent Scotland.

The currency question opens up a final key issue Scottish voters need to think about. The Scottish Government has said it wants to have a formal currency union, the UK Government has said it can’t. Is that the end of the story or the opening salvo of a negotiation process if Scotland votes Yes?

The answer to that question, and the countless others the UK and Scottish governments would need to resolve in the event of a Yes vote is unknowable now.

But if there is a Yes vote we can be sure of two things. Each side would negotiate hard in its own interests. But also, to prevent the uncertainties that would follow a Yes vote undermining confidence in the economy and in the international community, there would be enormous pressure on both governments to reach agreement on the key issues as quickly and cleanly as possible.

Blog summaries:

The book is available for download here: http://www.futureukandscotland.ac.uk/papers/scotlands-decision-16-questi...

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Charlie Jeffery's picture
post by Charlie Jeffery
University of Edinburgh
5th August 2014
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