Jim O’Neill achieves what many have seemingly been unable to do this week – looking at the economic assessment released by the Scottish Government and acknowledging the reality of what it says.
Spoiler alert for Me Bungo Pony. This is an SNPBad post.
The Government Expenditure and Revenue Scotland document for the year to April 2019 shows yet another whopping deficit of £12.6bn. Admittedly this is slightly lower than the previous year but is still a mind-blowing amount. This is 7% of Scotland’s GDP, substantially more than the UK deficit of 1.1% of GDP, and is a clear picture of the state of Scotland’s dire economic position if we ever were to become independent.
It would require swingeing cuts in government spending, a picture already confirmed by the SNP’s own Growth Commission which predicted another 30 years of austerity for an independent Scotland. But even today government is accused of underfunding Police Scotland, who require to cut 750 officers just to make ends meet, and the NHS Scotland which is substantially short of nurses and GPs.
The only way to square that circle is to borrow more, but the government would have few ways of funding that borrowing. Without a central bank, but insisting on a new currency, the government would have no way to fund the protection of the Groat (or whatever else a new currency may be called), nor to devalue it, nor to fund quantitative easing, nor to print money for its magic money tree. Similarly, it would have no way of servicing Scotland’s portion of the UK national debt, which is spiralling out of control due to PM Johnson’s spending pledges.
So it would have to rely on taxation. But just soaking the rich will not come near to solving this problem. Scotland is already the highest taxed part of the UK but with little extra in social benefits to show for it, unlike the Nordic countries. And anyway, while past tax takes have been positive and rightly begin to throw the burden back on to those who can afford it (the needs of the many – where have I heard that before) the Scottish Parliament’s own information team, SPICe, are predicting a lower tax take in the current year due to the downturn in the Scots economy.
So where does that leave us? It is clear that the best performing parts of the UK are supporting the higher needs of Scotland, a basic premis of the Barnett Formula, created by Labour’s former Chief Secretary to the Treasury. Take away the union and that support disappears. Scotland would be on its own with little or no means to fund a spiralling deficit. Remember that this deficit just adds to the substantial debts of previous years, and we have not taken on board all the benefit responsibilities made available to us. The SNP government has asked the evil Westminster parliament to keep them for a few years yet!
This will undoubtedly be a central plank of any independence referendum campaign. The SNP tell us that if they had control of the central levers of the economy, they would do much better. Unfortunately I have yet to see a single proposal from Mr Mackay’s team as to what they would do with such levers and how that would improve the finances of our country. Again, this must be explored in any referendum campaign. Vague promises will not hack it. It is time for detail.
And further, if Brexit happens on Halloween, all these attempts will take place as a supplicant country seeking the enfolding arms of the EU and the European Central Bank with decisions on how to manage our deficit taken out of our hands, just as in Greece, Spain and Portugal. The ECB is not known for its gentle dealings with deficit ridden supplicants. All that is, of course, for another day, but the SNP must come clean on the impacts of the deficit and their plans to lower it, and they must be honest with the Scottish people about the economic impacts of independence. Braveheart and the Outlaw King will no longer work with an increasingly sophisticated electorate. My hope is that any referendum rejects independence by an even wider result than 10 points, a result that will really end the speculation for a generation, or even a lifetime!