We are now barely two weeks away from Scotland’s referendum on independence. According to the latest polling, the No camp’s lead is disappearing fast. A Yes victory is becoming a realistic possibility.
Yet the main argument in favour of independence that the Scottish population is threatening to accept is fundamentally flawed. It promises that state intervention can be maintained in an independent Scotland, and even increased through extra borrowing.
What the Scottish Left likes to think
Many Scots believe that following the great depression of the 1930s, the only thing that held the UK together was the social welfare system implemented by Clement Attlee’s Labour government following its historic win in 1945. The narrative runs that it is their nation that upholds this welfare state as England turned more towards a laissez-faire economic system in the 1980s. Even Sir Tom Devine, Scotland’s highest-profile historian, has recently come out in favour of independence because, “It is the Scots who have succeeded most in preserving the British idea of fairness and compassion in terms of state support and intervention.” Spoken like a true scion of Clement Attlee.
But how would Scotland survive after independence if the government is promising to continue offering Scots the same level of NHS spending, free prescriptions, free university and state pensions; not to mention a new proposal for free childcare? Where will the money come from to subsidise such high levels of spending?
A dose of reality
One of Scotland’s foremost economists, Gavin McCrone, has recently written a book about the economics of Scottish independence that tackles this subject head on. In Scottish Independence: Weighing Up the Economics, McCrone contends that with its ageing population and its demands on state pensions, which now take up half of all welfare expenditures, an independent Scotland would need a change of course to afford the social welfare it now enjoys.
McCrone does not believe the Scottish economy would be able to handle these high levels of public expenditure. Scotland, after all, would be in debt following independence negotiations and it would be madness to rely on the volatile commodity of oil to bail Scotland out now or in the future. Despite what the SNP says, oil will not allow an independent Scotland to thrive. It is a short-term elixir that, according to McCrone, does not by itself have the ability to solve the debts already incurred by the Scots as partners in the UK. And substantial numbers on unemployment benefits, especially around depressed former industrial areas in the west of the country, will only serve to stifle growth.
The answer for an independent Scotland to transition from a prosperous nation to a prosperous state following September 18 would be for its economy to become more dynamic. To date, one of the strongest arguments in favour of Scottish independence has been the emotional one and it would be incumbent upon the leaders of an independent Scotland to tap into this enthusiasm in order to drive productivity. This would, most certainly, help an independent Scotland succeed.
The government would also need to offer incentives to businesses in the form of substantial tax breaks to get them to either remain in Scotland or relocate there. And certainly it is SNP policy to cut corporation tax for this purpose, so this is admittedly a good starting point. If new businesses arrived, this would create more jobs for the unemployed and encourage more people to immigrate to Scotland, thereby helping to form a much larger tax base for the government over time.
Once this tax base has been established, perhaps the Scottish government would be able to implement new social welfare policies for its people. But the Yes campaign promising additional excessive levels of spending if it’s successful is absolute insanity and will lead to Scottish independence being a failed experiment with the Scots as victims.
As it stands, an independent Scotland will be hard-pressed to pay for its current high levels of public spending, which already exceed that of England (at least according to the No camp) thanks to the system for distributing money to the other UK nations under the Barnett formula.
Smith holds the key
There’s no doubt that Scotland could be successful as an independent country, but the idea that there will be tons of money lying around to subsidise all of the social-democratic programmes promised by the SNP is pure fantasy. The Scots would be wise to turn to the thinking of one of their greatest minds, Adam Smith, and his magnum opus The Wealth of Nations when trying to build their new state.
If Scotland wants to survive and not come back begging the United Kingdom for a second chance at union, socialist ideology is not the answer. Hard work, enthusiasm and how the Scots embrace the free market will determine whether an independent Scotland succeeds or fails.
There must be a realisation that with statehood come sacrifices in terms of public expenditure. If the Scots are unwilling to budge on their public spending they must be open to creating as innovative and dynamic an economy as possible to feed this need for social welfare.
But if the economy takes a while to adjust as issues such as the currency used and EU membership are worked out, will Scotland spend itself into a level of debt from which it will never recover? That would lead to a flight of both capital and Scotland’s brightest minds, which are needed now more than ever as the nation stands on the brink of history.