The Scottish National Party is pressing for another referendum on independence from the rest of the United Kingdom. While the Prime Minister has apparently set his face against such a referendum for the time being, we cannot rule out another Johnsonian U-turn if the SNP makes major gains in May’s elections to the Scottish Parliament and there are continuing opinion poll majorities in favour of independence.
It is difficult for we English economists to see the case for breaking up a union which benefits both parties and has endured for more than three centuries.
Recent research by the London School of Economics has shown the heavy reliance Scotland has on the rest of the UK, which takes 61% of Scotland’s exports and provides 67% of imports. Becoming independent would create a trade border with the rest of the UK, particularly if an independent Scotland were successful in its plan to (re)join the European Union.
There is an extensive literature on trade barriers and the LSE estimate is that, were Scotland independent, there would be trade costs of at least 15% for Scotland, leading to a drop of around 6.5% per capita in Scotland, even in an optimistic scenario. The common currency and single Central Bank are fundamentals which reduce transaction costs within the Union. As responsibility for the economy lies with the UK Treasury there is a pooling of national debt so that interest costs are the lowest possible: an independent Scotland would face greater difficulty in borrowing.
And, given the current levels of public spending and taxation, Scotland would face a very substantial fiscal deficit. In 2019/2020 public spending per person in Scotland was £11,566, some 17% above the UK average. By contrast in England, public spending was £9,604, 3% below the U.K average. The UK Treasury picks up the bill for the balance.
The outlines of this economic balance sheet have been known for a long time. But as far as the SNP is concerned, making these points has little or no impact. It’s all rather too reminiscent of ‘Project Fear’, which failed to convince Brexiteers at the time of the EU referendum. If you are a convinced Scottish nationalist you’re not in it for the economics.
But one worrying issue at the moment is the growing number of people in England who shrug their shoulders and say, in effect, if the Scots want to go, let them. We’d be better off without them.
This is short-sighted. There would be reciprocal losses to the rest of the UK if trade were disrupted. There would be considerable Exchequer costs (and danger to national security) if we had to relocate our nuclear deterrent and other military installations – or else pay independent Scotland sizeable sums in perpetuity to keep them in their current locations. And the inevitable reorganisation and disruption to both the public and private sectors, piled on the problems of the trade agreement with the EU, is something we could all do without as we try to get the economy working again after Covid – a task which is already going to take us several years.
Perhaps more fundamentally, since 1707 we have shared history which is often forgotten or disregarded by the English in particular. This shared history is not only economic and political (we have had seven Scottish prime ministers) but also intellectual and cultural. The writings of anglophile Scots such as David Hume and Adam Smith have contributed a great deal to England, Wales and Northern Ireland – and the world.
We have common institutions besides our Parliament and Bank of England: the Armed Forces, the Bank of England, the NHS – even the much-criticised BBC, whose first Director-General was the dour Scottish presbyterian Lord Reith.
We tend to take all this for granted. It is our common history which led to our national institutions. Developments such as the railways, the welfare state, and newspapers, have extended our knowledge and the advantages of the Union.
And remember there are over 750,000 Scots living in England – more than in any city in Scotland. As it stands, of course, their views would be ignored in any new referendum as they were in 2014 – although those over 16 in the 500,000 non-UK born Scottish population would get a vote.
Our politicians in the rest of the UK are simply not doing enough to argue the case against splitting up the UK.
Some argue that the answer is to appeal to Scottish voters by further devolution, perhaps even going to the extent of recasting the UK as a federal entity. However, experience elsewhere suggests that this will never appease hardcore nationalists, and is likely simply to kick the can down the road again.
We need all the unionist parties in the UK to be making the case for the continuing integrity of the UK – and they should make it in England, Wales and Northern Ireland as much as in Scotland.
