Scotland should be wary of going it alone

Scotland should be wary of going it alone

Scotland shares a complex web of economic links with the rest of the UK.  If Scotland happens to vote for independence in next year’s referendum there will be huge economic and social consequences as these links gradually come apart.  One of consequence would be Scotland would need a new currency, a debate in the lords earlier this week showed that the rest of the UK would not be willing to share a currency with an independent Scotland.  The key reason for that is it would give the new nation some control of monetary policy, Lords said it would be unacceptable to have members on the Bank Of England’s monetary policy committee who represent the interests of a foreign country.  This is quite right as an independent Scotland could end up going in a very different direction to the rest of the UK leaving them with very different interests to us, so it would be an act of lunacy to allow an independent Scotland to have any influence of the rest of the UK’s monetary policy.  Currency will be a big question for an independent Scotland, and if they join the EU as they intend to they will in all likelihood end up joining the euro and does anyone in Scotland really want that?

Another big problem for a newly independent Scotland is their share of the national debt, anyone who thinks the new nation would be free from its share of the national debt is living in a fantasy world.  This debt will be around £93 billion, which totals up to 63% of Scotland’s GDP, Scotland would also have to take on its share of future liabilities such as public sector pensions which would push Scottish national debt to around £185 billion which amounts to 123% of Scotland GDP.  Another point to make on an independent Scotland’s Debt is that they will have no record of servicing their debts so it is unlikely they will be able to borrow at a low interest rate.  Scotland’s new economy is also going to be hugely reliant on oil, and the price of oil is famously volatile so it is unlikely to provide Scotland with a stable income.  Scotland would also be expected to lose a quarter of a million jobs in the defence sector.

However, the SNP deny these claims and say that if Scotland voted to stay in the UK it would be responsible for over two trillion pounds worth of debt, which is 145% of Scottish GDP.  They also went on to say that talk about job losses in defence are ridicules.  The part about the defence jobs may be true, but once when it comes to Scotland and debt the SNP are once again twisting the facts.  It is true that Scotland is responsible for over two trillion pounds worth of debt and that is 145% of the Scottish economy.  However, they share the burden of this debt with the rest of the UK and it amounts to only 85% of the UK’s GDP which is significantly smaller than 145%.  So once again, the SNP are playing fast and loose with the facts.  A final point to make is that Scotland’s spending is heavily subsidised by the rest of the UK plus it is likely it will borrow money at a much higher interest rate than it currently does and its economy is largely reliant on the public sector.  So it is not unthinkable that it will run large deficits if it goes independent and this would further increase its debt burden.