I confess, without a scintilla of embarrassment, that I have not read the Sustainable Growth Commission‘s (SGC) full 353-page report from cover to cover. I have skimmed through the thing a few times, lighting on bits which hint that they might prevent my attention from flagging completely. I have more thoroughly perused the less daunting 55-page summary. And I did devote some time and effort to more in-depth study of Section C – the stuff about currency and monetary policy that seems to be getting some people all worked up. Although I’m still not sure why. I am, I think, sufficiently aware of the report’s main proposals.
Other than for the purposes of discussion, there’s not really a lot of point in me poring over this tome. It wasn’t written for me. It was written for people who crave the scant comfort of a superficial order imposed on economic chaos; or those seeking diversion in the near-infinite potential for dispute; or those aware that they are sure to find opportunities to relieve the straining bladder of their pent-up outrage.
It was written for people who need to be convinced that Scotland is economically viable. That’s not me. I want independence for reasons which are almost certainly incomprehensible to those who suppose I might be persuaded by an economic argument.
With all due respect to Andrew Wilson, I don’t need him to tell me Scotland can pay its way. I know that already. I know that, not by studying statistics and graphs and tables of economic data and performing complex cost/benefit analyses which, for all their mathematical impressiveness, are really no more than an elaborate way of getting from a preconceived idea to a foregone conclusion, but by a simple process of observation. I am sure that Scotland is able to pay its own way because I look at what is actually happening in the real world outside all those fancy economic models. I look! And I see that Scotland is already paying its own way.
Everything we have in Scotland is supported by the Scottish economy. All the infrastructure and all the public services and all the pensions and all the benefits and all the rest, we pay for it. Who else is there?
The ‘Too wee! Too poor! Too stupid!’ narrative which is the constant underlying refrain of the anti-independence campaign rests entirely on the notion of a net fiscal transfer to Scotland from the rest of the UK (rUK). But you don’t need to be a highly trained economist to see that this is impossible. The UK economy is in deficit. You can’t have a net fiscal transfer from a deficit. You can’t get something out of nothing. There is no magic money tree.
The only thing that can be transferred from a deficit budget is a part of that deficit – together with the debt and debt servicing costs needed to sustain the deficit. We know for an absolute fact that rUK doesn’t ‘give’ Scotland money, because it is an uncontested fact that rUK doesn’t have any money to give. What is portrayed as a ‘subsidy’ is actually money that is, effectively, borrowed on Scotland’s behalf by the British government, in arrangement over which we have no control and for purposes of which we largely disapprove. The costs of servicing this debt are then charged to Scotland’s taxpayers in precisely the same way that taxpayers throughout the UK pay for servicing the UK debt as a whole.
In a worst-case post-independence scenario, Scotland would continue to run a deficit budget; continue to borrow to the same extent in order to sustain that deficit; and continue to charge taxpayers in the same way to service that debt. In short, nothing changes! Nothing changes with independence, other than our capacity to effect change.
I didn’t need this explained to me in a 353-page report. It is majestically obvious.
Nor was I shocked, horrified and/or angry to be informed that the starting point for Scotland’s economy immediately after the Union is dissolved will be what, for want of a better term, we may as well call ‘Tory austerity’. How could it be anything else? That’s where we are. We have to start from where we are. Other than in the demented fantasies of the terminally deluded, there is no option to start from where we want to be; or somewhere closer to where we want to be.
We start as a nation with its sovereignty fully restored from wherever the Union has taken us. Which is precisely why it is essential that we restore the ability to fully exercise our sovereignty as a matter of urgency. Because the Union is taking Scotland at a rapid and accelerating rate to a place from which recovery will be more and more difficult.
That recovery is a process, not an event. Independence is about reinstating the people of Scotland as the ultimate arbiters of how we go about repairing the damage done to our nation by the Union. Understanding the nature of the problems that the Union has bequeathed us is vital if we are to decide how best to rectify those problems. And accepting that ‘Tory austerity’ is the inescapable starting point is crucial to that understanding.
The SGC report is a tool for exploring possible ways in which the recovery process might work. It is one of several such tools. Every one of them should carry a disclaimer stating that all their calculations and conclusions are subject to revision in the light of how things actually turn out in the real world. The way things go in the real world will be decided by the people of Scotland. I see no harm at all in having such tools to inform our debates and deliberations. But I am well aware that you can’t answer a constitutional question with a calculator.
In part, at least, the SGC report is intended to offer reassurance to those who still harbour doubts fostered by decades of British propaganda. I have never entertained such doubts. I have always had total confidence in Scotland’s people.
Thanks all the same, Andrew, but I have never needed an economist to tell me that Scotland is ‘Clever enough! Big enough! Wealthy enough!’.
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Peter A Bell 
Thank you Peter for really stating the bleeding obvious. We are where we are and cannot start from anywhere else. All other viewpoints are delusional.
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Sorry Peter but your logic that the fiscal transfer to Scotland is merely ‘money borrowed for scotland’ is flawed. For it to be true every penny of UK government spending would have to be sourced from lenders. This isn’t the case.
For 2018, with total spending by the uk at about £830 billion, running a deficit of £50 billion, 6% of public spending was funded by borrowing.
Consequently, 94% of the fiscal transfer is a straight cash exchange from other parts of the uk to Scotland.
Upon independence the current Scottish deficit would be 100% funded through borrowing.
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So, nobody in Scotland pays tax.
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Everybody does one way or another.
Just not enough to cover Scotland’s outgoings – hence the fiscal transfer to make up the shortfall.
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But the fiscal transfer isn’t a grant or a gift. It is borrowing for which taxpayers in Scotland pay exactly the same as taxpayers anywhere else in the UK. We are already paying 100% of our assigned share if the UK’s deficit. So, if our actual post-indendence deficit is no more than that assigned share if the UK’s deficit – which it cannot be on day one – then we know for a fact that we can afford it because we’re already affording it
There is no magic money tree.
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No. Only a small part of it is borrowed money. Most is from tax revenue from other parts of the uk – parts that spend less than they raise.
Scotland can’t afford what it spends right now because otherwise there wouldn’t be a shortfall that necessitates the fiscal transfer.
An independent Scotland would have to make up the difference of 94% of the transfer either by reducing spending, raising taxes, or both. The other 6% is already borrowed.
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So the unproven shortfall is proved by the unproven fiscal transfer. There must be a shortfall because there’s a fiscal transfer. And there must be a fiscal transfer because there’s a shortfall.
You’re really helping to make my point about economic arguments.
And, just as a passing thought, if what you claim were true, don’t you think the British government would be keen to prove the shortfall/fiscal transfer beyond doubt by producing accurate accounts for Scotland? Anyone with an open,inquiring mind would be asking why they stopped doing so around a hundred years ago.
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But some people do need to be informed, Peter. It’s not all about you 😉.
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Pardon me for giving my personal view on my own blog. How very dare I!
Then we get to the issue of whether anybody is actually being “informed” by the SGC report. What did you know after reading it that you didn’t know before?
There is a difference between being fed stuff and being informed.
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“… no more than an elaborate way of getting from a preconceived idea to a foregone conclusion …”
I do love that phrase, but :
“Everything we have in Scotland is supported by the Scottish economy. All the infrastructure and all the public services and all the pensions and all the benefits and all the rest, we pay for it. Who else is there?”
Well according to derek Green above, the rUK subsidises Scotland. A fact or simply a preconceived idea? How can we tell, or more to the point, how great is the suggested transfer? For all I know it might conceivably be negative, i.e. Scotland subsidising the rUK? Now that would knock your socks off 😉
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The short version of Common Weal’s response is here btw :
http://www.allofusfirst.org/tasks/render/file/?fileID=1DE7B453-D6DD-3D21-F2D1ED25EB03474F
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As I strongly suspect you are aware, Peter, the “magic money tree” is London and the South-East, the only parts of the UK which are in tax surplus. Decouple any part of the UK from those areas at the inhabitants’ peril.
For example, in 2014/15 the Stamp Duty raised in just two Boroughs, Kensington & Chelsea and Westminster, exceeded the Stamp Duty raised in all of Scotland, Wales and Northern Ireland taken together. That’s not even the whole of London. It’s 13 square miles of it (London is 607 square miles in size). An unsatisfactory position you may say, and maybe you would be right. But you wilfully disregard the reality of it, even as a starting point.
Have a look at Office for National Statistics Data on Country and Regional Public Sector Finances.
Despite your awareness you present an apparently wilfully uninformed and dogmatic position, bordering on the economically illiterate (e.g. the false claim that “We are already paying 100% of our assigned share if the UK’s deficit”). I believe that you know the reality perfectly well, and have to steer the debate away from it in an effort to advocate your own position.
There are perfectly good reasons for desiring Scottish independence. Wilful disregard of economic reality undermines your argument and your own credibility as an intelligent commentator who is no doubt capable of taking in new information and responding to it, but who (in this case) chooses not to.
So, you know, J’accuse.
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Can you pull out any reliable figures for all taxation etc. vs. government expenditure for different parts of the UK? How much of the income you attribute to e.g. London is due simply to the location of registered head offices, as opposed to actual locations where work is done and salaries paid? Clearly Scottish independence would alter some at least of this apparent London-centric income distribution.
I agree that any discussion needs to be based on sound figures and information, the question is really whether such reliable information is available, along with how far any changes likely follow from Indy can be foreseen with confidence.
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I take your point, and would refer you initially to the Office for National Statistics website.
I don’t know whether any studies have been done on the point you raise, but if you can locate any I would like to see what they say.
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You have a faith position. I am not a believer.
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Likewise, though.
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Good blog Peter – other than the bit about how the Scottish deficit is funded.
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Good reply, James – but for the fact that there is no “Scottish deficit”.
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As a mere engineer rather than a lauded economist I hesitate to dabble in such things, but here goes. Please feel free to point out my errors.
Back in the 1960s and 70s there was constant reference in financial news to the UK Balance of Payments (BoP). Now, with the UK BoP heavily negative, and UK debt huge, BoP is, curiously, rarely mentioned. But Scotland has a consistently positive BoP, the only country in the UK to do so.
Leaving aside for a moment the fact/opinion that a country with control of its currency can “just print money”, it is my understanding that a country’s available money is made up of borrowings plus surplus on international trade. It follows that an independent Scotland, provided it maintains a positive BoP, would have a reducing debt and would eventually reach a situation of having little or no borrowing requirement, other than to deliberately accelerate spending on capital projects.
If the above reasoning is correct it is difficult to see any reason why Scotland requires a fiscal transfer from rUK.
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Why Where you so Disresctful of Craig as he Spoke.. ??
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I have no idea what this means.
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