Scotland has spoken. The answer is No to Independence. There is clear blue water between the two camps.
If you had asked me a week ago I would have said this was the best possible result, putting to bed the Independence question for a generation and letting economic sense prevail.
The concept of a wealthy independent Scotland is preposterous, and I am certain economic disaster would have follwed a Yes vote. But I am left with the nagging feeling that this is not the point. The key issue is democracy – the fact that Scotland has been ruled by Westminster with a succession of Tory governments that are unrepresentative of the wishes and mores of the Scottish people.
In the democratic process of a referendum Scotland has decided that it places the value of economic certainty over the right of self determination. I find myself disappointed by that outcome. The idealist in me wanted the right to directly elect decision makers and to hold them to account to be the first and final determinant of the decision.
It wasn’t. A cynical rationality has prevailed and we are all a little diminished by it. How inspiring, how energising it would have been if the decision had gone the other way, despite the huge transition costs and inefficiency it would create. How glorious if the Scots had thumbed their noses at prosperity and all the things capitalism tells us we should want and put their freedom first.
They could have borne a torch for the world, but the lure of filthy lucre won.
So what is the truth behind the economic doom mongering? I won’t bore you with all of the things that will bend and break, here is a selection.
Lets start with the basics – utility bills would go up in Scotland over a 3 year period. Most utilities are regulated, and their prices include a Return On Capital Employed element – basically a contribution to the cost of equipment and assets. In a large landmass with relatively few people there is more capital per person used in Scotland for energy and telecoms than the more densely populated parts of the UK.
Therefore within the timeframes that regulated prices can move, there would be a reduction in the rest of the UK, where capital use is more efficient, and an offsetting increase in Scotland. The newly formed Scottish regulators could compensate by reducing the ROCE allowed in their country, which would lead in one of two directions – the lawyers making money in the European Courts, or the companies involved under investing in Scotland because the returns are lower. Either way the Scots would lose.
Take that a step further – every business that today applies geographically uniform prices, whether regulated or not, would have the opportunity to price discriminate and with the geographic dispersion in Scotland it is rarely cheaper to do business there.
Now the oil red herring – the jury is out on just how much oil there is and how long it will last. Irrespective of that there is political truth that will change the energy production patterns across all of Europe. Russian adventurism in Ukraine and the role the Saudi and Qatari people have in funding ISIS / Al Qaida type terrorism means we have to reduce our energy dependence on them.
Basically Europe as a whole, and the UK as part of it, will have to frack. The environmental cost may be huge, but it will be lower than the political and security costs. It will also close some of the cost productivity gap we currently face compared to the USA. The change in energy mix and the development of more sources will reduce the value of North Sea oil, relative to the projections currently being made.
Given the overall political leaning of the Scottish parliament I would guess they would be less likely to frack than the largely Tory Westminster crew.
There is also the corporate question. The financial markets were jittery on Independence. Risk raises interest rates required on borrowing. it does not matter if the risk is real or only perceived, that’s just the way the money markets work. Higher borrowing costs would feed into higher experienced prices for us all. Companies relocating south of the border to minimise the impact would take jobs with them.
And the currency canard? Salmond made a crass statement early on that whether Scotland kept the pound was down to the sovereign will of the Scottish people. It couldn’t possibly be so – everyone who would be impacted by the increase in risk to the shared currency has a say in it. That means the currency question was actually at the whim of the Westminster crew, and their position is well documented. In any event, why would a fiscally independent Scotland tie itself to the monetary policy of a monetarily austere Bank of England. That kind of independence starts looking like DevoMax…
The final piece in this cursory look is self evident, and so I won’t dwell on it, but there is a bureaucratic economy of scale, we don’t need more BBC, government department and Qango management layers which would largely reprise policy developed in the rest of the UK.
All of that is relatively straightforward, but it cheapens the argument. I feel sullied that we have bought the Scots with real and inevitable consequences of lower prosperity, and they have sold their freedom cheaply. It is not quite slavery, but it tastes like bonded labour.