The set-up costs of an independent Scotland

What set-up costs would an independent Scotland face? The debate continues.

The work of LSE'S Professor Patrick Dunleavy was cited in a HM Treasury report on the set-up costs of an independent Scotland. In a blog for LSE British Politics and Policy, Professor Dunleavy challenged the use of his work, focused on the cost of setting up or substantially revamping a Whitehall department, saying:

I think that UK ministers and the Treasury potentially have a point in arguing that the Scottish Government has not been very forthcoming, they might even say evasive, about clarifying some of the costs entailed in independence. But there is no point in putting into public circulation misinformation to try to counteract that. My objection is that the Treasury woefully misapplied our research estimates and that this did not need to have happened.

In response to the report, Professor Dunleavy, with the LSE British Politics and Policy and Democratic Audit, published an ebook on the topic, titled, Transitioning to a new Scottish state Immediate set-up costs, how the handover will work, and the long-run viability of Scottish governmenta publication which coincided with an op-ed in the Sunday Post.

In it, Professor Dunleavy outlines his main conclusions, describing the timetable for the set-up of an independent Scotland as 'demanding but feasible', suggesting one-time set-up costs of around £200 million. These costs are likely to be influenced by the success of the Scottish Government's planning as well as the willingness of Westminster to negotiate:

The two absolutely critical influences on Scotland’s likely overall transition costs are the realism of Scottish government planning for independence, which generally seems high. It does assume, however, that a moderate and rationalist approach will be taken by the Government in Westminster.

The report generated headlines, with coverage from STVFinancial TimesThe ScotsmanBBC, and The Telegraph.

The debate over set-up costs continues, with a response on the LSE British Politics and Policy blog from Professor Iain McLean. In a review of the figures, Professor McLean argues that there is less of a difference between the figures published by the HM Treasury and by Professor Dunleavy than there appears at first glance.

Reviewing their reports and other sources leads me to think that Patrick’s estimate and HM Treasury’s of the one-off costs of independence are actually roughly the same. Not £200 million; not £2.7 billion; but somewhere between £1.5 billion and £2 billion.

The more significant costs, according to Professor McLean are likely to be in benefits and taxation:

The two huge set-up costs lie in tax collection and benefits distribution. One may fairly say that these (especially the latter) are things that the UK does not do very well, and that an independent Scotland could do better. The point is that on independence day and for quite some time afterwards they will still be done by HM Revenue & Customs (HMRC) and the Department of Work and Pensions (DWP) respectively. Scotland would not be able to make any changes in tax rates, tax bases, benefit rates, or benefit entitlements until it had transferred all tax collection to Revenue Scotland and set up its own version of DWP.

Professor Dunleavy responds to the critique, analysing the numbers put forth in reports by ICAS. He notes the uncertainty in the debate, uncertainty that could be resolved by the two governments to allow for a more fruitful debate and decision-making process.

Why should the far more important issues around possible independence be left for Scottish voters to conjecture about like this, when detailed answers could easily be made available either by Whitehall or by academics commissioned to inform the debate?

Both Professor McLean and Professor Dunleavy will be participating in an event on July 1st at the LSE, ‘Scotland and England: what future for the union?‘ to discuss this issue and others further.

 

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Coree Brown Swan's picture
University of Edinburgh
27th June 2014
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