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Cost to each Scottish household

Chapter summary

  • The economic arguments against separation are overwhelming.
  • The “White Paper” Scotland’s Future is merely a wish-list based on over-optimistic assumptions that rely on factors outwith the control of this or any Scottish administration.
  • How does a country that has a lower gross value-added than the UK average, which receives a public- spending allocation well above the UK average, make ends meet?
  • A separated Scotland cannot survive without heavily cutting public spending or greatly raising taxation, or both.
  • After separation there are likely to be many fewer public employees than now, and they will be paid less. Welfare payments, and the numbers receiving them, will fall. Payment of state pensions can no longer be guaranteed at anything like UK levels. Health, education and every kind of public service will face deep cuts. Every household will be worse off by several thousand pounds a year.

Every household will be worse off by at least £3400-5500 a year

The economic arguments against separation are overwhelming. Those in favour argue about the benefit of oil, the security of the so-called Scandinavian model and not being run by Westminster. What they have not articulated is how these vague statements feed through to real, credible policy choices. The “white paper” on Scotland’s Future is merely a wish list, based on extremely optimistic assumptions that rely on factors outwith the control of the Scottish government.

The “white paper” is not a credible plan of action. Should Scotland leave the UK, the electorate will very quickly see the impact on their families through forced spending cuts or tax rises to balance the budget. This will affect those receiving social protection as well as the better-off. This is an unstable position indeed.

Scottish government data show that with or without oil Scotland’s fiscal position is one of the weakest in Europe. Scotland’s GDP is highly cyclical, for it is heavily dependent on oil and financial services. Scotland’s banking sector would be unsustainable at anything like its present scale should Scotland leave the UK. None of the currency options offer either the security or the unhindered exchange rate stability of Sterling that allows trade to flow unhindered. Indeed, with 70% of all Scottish trade flowing to the rest of the UK, only full partnership with Sterling is a credible option. “Independence”, then, is largely an illusion, with the Scottish Government caught between UK monetary and fiscal policy and EU directives, with very little say.

Though these arguments are complex, they impact almost every area of society. The table below highlights the key numbers looking at the UK, Scotland and the Scotland/UK ratio. In a nutshell, while Scotland is a prosperous country as part of the UK, the fundamental question remains: even with the most favourable oil settlement, how does a country which has a lower GVA than the UK average, which

receives a favourable public spending allocation well above the UK average, make ends meet? A separated Scotland cannot survive without heavily cutting public spending or greatly raising taxation, or probably both.

In consequence, after separation there are likely to be many fewer public employees over time than now, and they will be paid less. This is because it will be essential to cut the fiscal deficit. Welfare payments, and the numbers receiving them, will fall. Payment of state pensions can no longer be guaranteed at anything like UK levels. Health, education and every kind of public service will face deep cuts. Every household will be worse off by £3400-5500 a year, plus £500-1000 a year more for every £100,000 borrowed on mortgage.

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on September 16 | by

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