Scottish independence: Who’ll pay the price?

Scotland has five of the top 200 universities in the world and 25% of Europe’s offshore wind and tidal energy potential.

David Cameron's coalition lacks a specific Scottish mandate for its actions [GALLO/GETTY]

Scottish nationalists are calling for a boycott of The Economist.  

Words such as “contemptible”, “sneering” and “offensive” are being used to describe the front page of its latest edition, which shows a map of Scotland renamed “Skintland”.

According to the magazine, the nation consists of places such as “Glasgone”, “Edinborrow” and the “Highinterestlands”. 

It is followed by a leading article, concluding that Scottish independence from the UK would come at a high price and could leave Scotland as “one of Europe’s vulnerable, marginal economies”. 

Cameron in plea to Scots to remain in UK

Unsurprisingly, Scotland’s first minister Alex Salmond blew his top. The Scottish National Party leader said the front cover displays a sort of “Bullingdon Club humour” of “sneering condescensions”.  

This is a reference to an elite Oxford University student society, which includes Prime Minister David Cameron and Chancellor George Osborne among its former members. 

‘Subsidy junkies’

Salmond told a local radio station: “This is how they really regard Scotland. This is Unionism boiled down to its essence and stuck on a front page for every community in Scotland to see their sneering condescensions. 

“They shall rue the day they thought they’d have a joke at Scotland’s expense.” 

The Economist’s front page has offended Scots of all political shades, whether they support independence or not.

Labour MSP Patricia Ferguson told Al Jazeera: “Most people will recognise that this front page does not represent the facts, is way over-the-top and will not endear itself to readers in Scotland.”

The caricature of Scots as “subsidy junkies” is also inaccurate. In fact, more public money is spent in the English capital, London, than any other city in the UK.

A recent report from the House of Commons Library showed that, in 2010/11, public expenditure per head in London was £10,198, compared with £10,165 in Scotland.

What of the substantive arguments? The real question is whether a “Yes” vote in the referendum planned for 2014 would make Scots better or worse off.

As the magazine points out, opinion polls suggest that the economy will dominate the debate on Scotland’s constitutional future. Most Scots are likely to vote with their pockets. Almost two thirds would back independence if they thought it would make them just £500 a year better off.

Labour is saying privately that the fuss over the magazine’s front cover is distracting attention from the hard numbers in its analysis, which cannot be dismissed so easily. Much of the argument focuses on North Sea Oil. Since the first rigs began pumping in the 1970s, the industry has paid more than £240 billion in tax.

Oil industry

Andrew Marr, is a former political editor of The Scotsman. In his documentary on the history of modern Britain, he said: “Without oil, the great squeeze and shake out of the economy might very well have broken the back of the government. So what was achieved by all the roustabouts, engineers, divers, pilots and the financiers was epic and central.  

“And yet, barely a word about it appears in Margaret Thatcher’s memoirs or those of most other ministers. It’s as if an attempt was made to airbrush this industry out of Britain’s national story. Which would be shameful.” 

Britain is a bigger producer than Kuwait or Nigeria and up to 24 million barrels of oil reportedly remain in the North Sea. But 90 per cent of these reserves lie in Scottish territorial waters. If Scotland goes its own way, it will take nearly all of the oil and the tax receipts with them.

However, prices can go down as well as up. The past three decades have seen wild variations in the amount of money generated by the offshore industry.

The figures range from lows of just more than £1 billion in the early 1990s to nearly £13 billion in 2008-09. Economists argue that, with a smaller and less diversified economy, an independent Scotland would be more exposed than the UK as a whole to price volatility.

Scotland to launch independence referendum

If production falls, then, instead of joining Europe’s prosperous northern bloc, Scotland could go straight into the PIIGS – the acronym used to describe Portugal, Italy, Ireland, Greece and Spain. 

Brian Ashcroft, emeritus professor of economics at Strathclyde University, told Al Jazeera: “If the oil prices stay high, production is stable or rises, and oil prices are not too volatile, an independent Scotland should be in a reasonable position. If prices fall, stay low, production drops and prices are volatile then the fiscal position will be scary and Scotland would be better off in UK.”

Ashcroft added that this was not the end of the argument. Independence might provide the Scottish Government with more levers to create new jobs in other industries.

“We have not mentioned the possibility that Scotland might be able to put in place a growth policy via higher investment and a favourable tax regime than it offers as present, then again, it might not.”

High rate of employment

Scotland’s economy is not just reliant on oil. It has five of the top 200 universities in the world, a skilled English-speaking workforce and 25 per cent of Europe’s offshore wind and tidal energy potential. 

In a statement issued to Al Jazeera, deputy first minister Nicola Sturgeon said: “Whilst The Economist blundered into the economic debate on Scottish independence, it is clear that Scotland has a strong economy – despite the global recession – and that we have huge potential for further growth and development.”

“While Scotland has a higher rate of employment and lower economic inactivity than the UK as a whole, we need to do more to reduce unemployment and tackle poverty.”

The implicit comparison she is making is with the UK government. At Westminster, David Cameron’s administration is pushing through the biggest cuts in public spending since World War II.  

The Ernst & Young Scottish Item Club’s report predicts a squeeze on public sector employment that will continue until 2015. By then, Scotland will likely employ 80,000 fewer people in the public sector compared with its peak in 2008. 

UK ministers argue that their austerity drive is necessary to cut the deficit and reassure the markets that Britain is serious about reducing its high levels of debt.

Depending on your political perspective, this may or may not be true, but it is particularly controversial north of the border – because David Cameron’s coalition lacks a specific Scottish mandate for its actions. The Conservatives and Liberal Democrats are a small minority, with just 12 MPs between them out of 59 representing Scotland.

The question of whether key economic decisions should be taken in London or Edinburgh is therefore also a clash between the fiscal conservatism of the current UK government and the Keynesian consensus of social democratic Scotland.

Perhaps, this left-wing agenda is what The Economist really objects to.

Follow Andrew McFadyen on Twitter: @apmcfadyen

Source: Al Jazeera