02 Sep 2016
September 2, 2016

Capital thinking


This is a wee addendum to the adjacent ‘Oil and Reason’ piece (here at Article 5). It’s just to flag a single point which should impact more on the independence dialogue, but instead seems to be generally missed. We’ll send out a little more detail, including references, with our newsletter but for now it’s the broad principle we’d like to flag to you.

Scotland’s deficit is half those of Wales and Northern Ireland, and smaller than most English regions. Indeed, the only parts of England which are net contributors, where expenditure is subtracted from tax to leave a positive balance rather than a deficit, are London and the South East.

London and the South East obviously have several advantages, including a large population to drive the primarily service-based economy. But of course they also benefit from being at the centre of, or in the immediate environs of, a sovereign state’s capital. There is therefore at least an element of circular argument within the Scottish unionists’ reasoning because if Scotland were independent then our capital and central belt would have the benefits which accrue to those of any sovereign state; this would naturally have a positive effect on the ‘deficit’.

This is just one small illustration of how the presentation of GERS figures is miscast in the media and it’s important that the independence movement rebuts this trend as time passes. The ‘capital city’ phenomenon would not account for the whole of Scotland’s deficit, of course. But as our grannies used to say, “mony a mickle maks a muckle”. It’s a question of chipping away at the received but manifestly incorrect notion that an independent Scotland would have an unsustainable deficit.

There are many other reasons why the true deficit of an independent Scotland would be much smaller than the GERS figure. For example, deficits are higher across the world at present because of the 2008 crash, and are now declining. Scotland’s oil price is at an unusual low and will recover somewhat in the coming years. Greater inward investment would accrue to an independent Scotland. Norming Scottish Defence expenditure to other small and successful EU states would alone save at least £1B. Commonweal think tank and The National newspaper have also made some important points here about how an independent Scotland’s debt might be negotiated and calculated.

In the end, of course, it will be necessary for the Scottish government to say how it would, with independence, manage the deficit down. But this is no different from any other small and successful European state.

A key point in the coming months and possibly years before indyref2 will be to find the right language to convince ‘uncertains’ who voted ‘No’ through fear last time that this time independence is far less risky than Brexit.  Correcting the misleading GERS narrative over Scotland’s deficit will be an important part of that.






2 Responses to Capital thinking
  1. Good, valid points Eric. I was aware like many Scots since 2014, that most regions of the UK, apart from London & the South East, would look similar or worse than Scotland in terms of their fiscal deficit but it suits the unionist narrative to present GERS as Scotland 0 – UK 1. In other words – losing, as opposed to being third wealthiest region of the UK.

    Presumably, they would argue that it’s not relevant to the overall argument and just reinforces the case for being ‘better together’.
    But given the massive disparity on infrastructure spend in London compared to the rest of the UK, does it not raise again, the argument that London sucks as much money out of the regions as it disperses?

    By controlling the inward and outward flows of capital, it also determines the structure and pattern of fiscal balance regionally as well as nationally.

    • Yes, well put Donald. I think that’s quite right. It’s quite interesting, politically at least, that the new PM has in effect cancelled Osborne’s emphasis on the Northern Powerhouse in favour of a conventional, Tory, Home Counties emphasis. HS2 itself was supposed to be all about the redistribution of economic growth, although less is being said about that now. I think Osborne, with a norther(ish) seat was familiar with the arguments you put and wanted to redress them to some degree to Manchester’s benefit. The same disparity seems likely to apply to Scotland as much as any other part of the UK outside the SE.

      I’m also struck by the difference between arguing that England is much wealthier than Scotland and arguing that London/SE is wealthier. The former isn’t true for most of England, and the latter seems to be so much more about accepting the narrative of being pulled along behind the city of London. There’s a terrible imbalance in play now, with both Tories and Labour playing to an exclusively English audience, having discounted Scotland as a source of MPs, and that English voice being very much dominated by London/SE. Policy is trickling to Scotland as an afterthought. There’s no scope for this to change for a generation and that seems to me too long a period to accept a situation where Scotland has little or no control over its own destiny.


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