The economics of an independent Scotland: bleak options

Tallying the repercussions of Brexit, one that stands to be a continuing challenge for Scotland is independence. Now that the UK’s circumstances have changed in a way the majority of Scots did not support, it is suggested that a second referendum should be held.

Now that America has mastered fracking, there is less demand for Scotland, causing prices to crash– revenues are 99% lower, at £60 million…

The Union has already saved Scotland once…

The Let’s look back to the first one – 55% of Scots voted to stay part of the union, which turned out to be a good call. The SNP’s economic plan for independence rested on the North Sea oil sector, providing an estimated £7.9 billion a year in revenues. However, now that America has mastered fracking, there is less demand for Scotland, causing prices to crash– revenues are 99% lower, at £60 million. The overall UK economy wasn’t hit as much because the stimulus from cheaper fuel pretty much balances out the lower receipts. Had Scotland voted for independence, it would’ve already gone bankrupt.

How could Scotland support its spending?

As if this wasn’t great enough a warning sign, the Scottish government also spends £127 for every £100 it raises in tax; a ratio unequalled anywhere else in the developed world. Scotland is only able to finance this type of spending through the extra money sent by England. Independence would massively reduce, or even cut entirely, this money stream.

The options aren’t pretty – state spending down by 15%, taxes up by 19%, or some combination of the two…

Similarly worrying, Scotland runs a deficit at 10.1%, twice as high as the next worst country (Japan at 5.2%), and independent countries need some degree of financial responsibility. In order to join the EU – Nicola Sturgeon’s preferred option – it would need to lowers its deficit to below 3%. The options aren’t pretty – state spending down by 15%, taxes up by 19%, or some combination of the two.

These options are feasible, but their tracks would pave the way for significant damage. There are many cuts that could be made in the Scottish government, but this would not be the only thing facing the axe – much as Sturgeon pretends, free university and free personal care for the elderly may have to go.

The recent election saw SNP support plummet, losing 21 of their 56 seats…

Reality check for the SNP

It is possible for Scotland to have a go at independence if there is the demand for it, but the SNP must stop pretending that the basic economic reality would not call for the most ambitious peacetime austerity programme ever. However, the recent election saw SNP support plummet, losing 21 of their 56 seats, with voters suggesting that the obsession with independence was somewhat of a political turn off.

Indeed, Scottish voters have largely indicated a preference for the better option; to stay together. Not only has the union protected Scotland from the oil slump, it has also enabled higher-than-ever employment and lower-than-ever pensioner poverty. In these uncertain times, the economics suggest keeping the union together would be better for everyone.