© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
February 2, 2014 7:47 pm
After 307 years as part of Great Britain, Scotland will soon decide whether it is time to once again go it alone. Opinion polls suggest that nationalists still fall short of the numbers needed to unpick the 1707 parliamentary union with England that lies at the heart of the UK. But nationalist and pro-union campaigners alike agree that with eight months of febrile campaigning to go, the result of September’s historic referendum is far from assured.
So what would an independent Scotland look like? And what would be the impact on the remaining UK, or “rump UK” as some observers call it, of the departure of 8.3 per cent of its population and about 9.2 per cent of its gross domestic product?
Among the blizzard of contention and spin that surrounds the independence debate, some points of broad consensus are clear. Nationalists argue that being part of the UK has held Scotland back, while their opponents contend that the union has been central to its economic success. But the leading players on both sides accept that Scotland has all the ingredients to be a viable nation state.
If its geographic share of UK oil and gas output is taken into account, Scotland’s GDP per head is bigger than that of France. Even excluding the North Sea’s hydrocarbon bounty, per capita GDP is higher than that of Italy. Oil, whisky and a broad range of manufactured goods mean an independent Scotland would be one of the world’s top 35 exporters.
An independent Scotland could also expect to start with healthier state finances than the rest of the UK. Although Scotland enjoys public spending well above the UK average – a source of resentment among some in England, Wales and Northern Ireland – the cost to the Treasury is more than outweighed by oil and gas revenues from Scottish waters.
One of the favourite citations touted by the nationalist Yes Scotland campaign is a quote from a 2007 Daily Telegraph article by David Cameron, now UK prime minister, that argued there was no point in trying to keep Scotland inside the union “through fear of the economic consequences” of leaving.
“Supporters of independence will always be able to cite examples of small, independent and thriving economies across Europe such as Finland, Switzerland and Norway,” Mr Cameron wrote. “It would be wrong to suggest that Scotland could not be another such successful, independent country.”
Yet as Mr Cameron these days takes pains to point out, an acknowledgment that Scotland could succeed alone does not mean it would be better off than within the UK. Over the past year, Mr Cameron’s government has published a series of papers arguing that Scotland benefits from free access to the UK’s market of more than 60m people and from the security of being part of a large and powerful state.
Scotland’s fiscal health will also be challenged by the relatively rapid ageing of its population and the long-term decline of oil output from depleted North Sea reserves.
In a research paper this week, James Knightley, senior economist at ING, said the high transition costs of separation and uncertainties over currency and the terms of EU membership meant that the material benefits of independence were “far from clear”.
Yet Mr Knightley also noted that greater sway over its own economy could be a real advantage for Scotland. Nationalist leaders argue that local control of such “economic levers” as tax reform, immigration policy and welfare will open the way to a fairer and wealthier society. September’s referendum will hinge in large part on whether Scotland’s voters agree.
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.