Introduction
I’m often queried why, if I generally identify as a nationalist, why I oppose many of the civic nationalist parties contesting elections in the UK’s devolved regions.
Is it really a case of “nationalism for me but not for thee”?
No.
Because quite simply, the SNP run a very different regime to most nations in the developed world.
Indeed if we listened to the media and awarded credit on the basis of the amount of media time given to the SNP and Scotland’s first minister, Nicola Sturgeon, then one may conclude the SNP had been part of some fantastic socio-economic success story north of the border and indeed, the social media profile of the Scottish National Party’s activists does indeed give the impression that there has been a surge of popular support for the SNP and Scottish Independence who have delivered some sort of economic miracle for Scotland.
The problem is…. neither of these impressions have any basis in reality (I examine the statistics in this very piece) and I do believe that the time has come for Scotland to either admit its position and commit to some hard reforms or else go it’s own way (and make no mistake the people of Scotland will suffer like never before if they do leave the union for reasons which I shall outline in this article).
This sounds like a startling (if not outright offensive) set of assertions. However, before emotions get the better of us allow me to actually go over the relevant numbers and facts.
In this piece we’re going to examine the Scottish National Party and it’s claims using my usual hard facts, figures and statistics and attempt to shed some light on what the truth is about Scotland’s state-of-play and of course, it’s role within the union of Great Britain.
The Scottish Economy
1. Economic Productivity & Performance
Firstly, let’s look at one of the core tenets of Scottish Nationalism – the idea that Scotland is somehow being “ripped off” or “done over” in terms of what it gives to the union vs. what it gets back.
Moreover, we can examine the veracity of this view by looking at actual data pertaining to the economic performance of Scotland as an isolated entity versus England, Wales, Northern Ireland and of course the United Kingdom as a whole.
Naturally, due to the recent COVID crisis, numbers for the past 2 years are not really reflective of normal course of affairs. To this end, we’re going to examine data collected up to the beginning of 2020 to ensure we get an accurate picture of “normal course of affairs”.
Firstly, this table which I have sourced and quoted directly from the GERS Report by Gov.Scot [1] states Scotland was running a fiscal deficit (including its geographical share of North Sea based economic activity) of about £12billion per annum (or about 7% of its isolated GDP) for 2019.
Looking at the raw numbers, then for comparative purposes, we can also see that the overall UK-wide fiscal deficit was about £23.5billion (or 1.1%) and that the Scottish fiscal deficit of £12.6 billion accounted for just over 50% of this figure.
In plain English, this means that borrowing made by the government of the UK on behalf of Scotland equates to a little over 50% of what was left of the total UK fiscal deficit after austerity and subsequently, it’s likely that much of the resulting and ongoing UK national debt results from spending which has been directed north of the border.
Now something else we should bear in mind is that all this spending is not a result of higher populations or higher population densities. After all, if it was then it could possibly be justified.
Indeed, UK population data shows that Scotland’s population density is just 65 people per km/2 [2] versus 430 people per km/2 for England [3].
So it is not raw population numbers causing the Scottish overspend.
As a matter of fact, UK Parliamentary Research Briefings provide a very interesting detailed breakdown of public spending on a per capita (I.e. per-person) basis for each devolved area of the UK [4] to compensate for the disparity in population densities.
The recently released SN04033 briefing for December 2020 (available from the UK parliament website) states the following data on public spending per person across various regions of the UK and the UK as a whole.
So as we can see, public spending per head for Scotland is 17% above the national average (standing at £11,247 per head versus £9,584 per head for the UK as a whole).
This accurately demonstrates that government spending per-person is far more substantial in Scotland and this is precisely why they are running such a grievous deficit at the expense of the rest of the UK.
Of course their lackluster productivity is also a factor here.
Scotch nationalists often try to refute my figures by presenting me raw GDP per capita figures. However, the problem with these is that ultimately the only reason why Scottish raw GDP (and in turn GDP per capita) appears to holds-up is because government spending constitutes such a large percentage of it.
If we break down GDP per capita across each region of the UK and add it into our table above then this becomes apparent and we can run a very interesting comparison which shows how exactly the Scottish Economy (along with all the other devolved administrations) are being propped up by higher-than-average government spending.
In Scotland, government spending accounts for 43% of the raw GDP statistics for Scotland
So in short, the government is almost as big a part of the Scottish economy as the private sector is and this is the only reason why the Scottish economy seems to hold its own.
Hardly anything to brag about from the perspective of Scottish Nationalists..
I would suggest that this could be one of the primary reasons why the Scottish economy has seen such lacklustre economic performance (E.g. government intervention is effectively suffocating the private sector north of the border and of course the figures are not showing genuine productivity gains due to being driven by government spending rather than genuine economic activity).
Indeed one of the main reasons that Scotland are largely getting away with running a sub-par economic model is that, as our figures demonstrate, they are ultimately being subsidised by taxes and borrowing from the rest of the UK writ-large..
The fact that public spending is nearly 10% higher than in England betrays this and of course we have to remember where this money is coming from.
In fact as uncovered by the notoriously right-wing austerity-backing newspaper The Guardian a year ago (though to be fair they also reference their sources from GERS) [5], Scotland are continuing to run a deficit equivalent to 7% of their GDP during a time when the UK as a whole has largely eliminated the deficit as a percentage of GDP.
This shows how much of a fiscal drag Scottish policy (which is largely driven by the SNP and of course the Barnett Formula arrangement) is on the rest of the UK.
2. The Consequences Of This
EU Membership
The most obvious example of this arises as a result of the SNP’s attitude towards the EU.
They are of course dead-set upon rejoining the EU and are crying like babies about being “dragged out against their will” or whatever rubbish like that.
It’s also rather strange that a nationalist movement focused on independence would want to join the EU. After all, the whole point of the EU is that there are no independent nation states as nations must necessarily relinquish control of many parts of government policy (and indeed monetary policy in the Eurozone).
That small matter aside, EU law against excessive deficits brought-in to try to prevent a return of the Eurozone crisis means that they will be legally barred from joining the EU for as long as they run a deficit above 3% of GDP according to the official European Union Excessive Deficit Protocol. [6]
In fact the top-line Scottish deficit figure as a % of GDP is actually not all that far away from the fiscal deficits displayed by Greece at the height of the Eurozone crisis (and lets not forget the irresponsible left-wing governments which Greece elected during this period which ultimately drove the borrow-and-spend model to its ultimate conclusion) which was ultimately part of the whole reason why the EU decided to adopt excessive deficit protocols to keep irresponsible member states in line.
So frankly, if the SNP really think that the EU will allow another Greek tragedy to unfold by allowing the irresponsible and dangerous SNP to bring a newly independent Scotland which is running ginormous fiscal deficits into the EU then I’d suggest that not even the European Commission are that stupid (and of course, lets not forget that a qualified majority of EU member states would ultimately have to vote to allow them in as well under the recently initiated Qualified Majority Voting regime).
This pretty much means that Scotland can forget joining the EU for as long as Scotland runs a high-borrowing high-spending economic model without addressing stagnant productivity and lacklustre growth.
Therefore it is likely that to actually meet the EU’s criteria for membership, EU negotiators would demand that Scotland cuts government spending in half as a percentage of GDP and works harder to raise funding (for example, by selling-off whatever national assets the SNP are left with) and squeeze more productivity out of GDP figures.
This would almost certainly mean widespread revolt against the SNP if this ever came to fruition because austerity-package reforms of this size would have a huge impact upon the people of Scotland (the austerity package would need to be a similar scale to Greek and Italian austerity packages in order to meet EU fiscal criteria) and of course the SNP’s vote-base themselves who are largely committed to the frankly dangerous big-government borrow-and-spend model.
National Debt
Lets not forget as well, that Scotland would ultimately take with it a share of the UK’s total national debt as part of the exit deal.
This is currently estimated by various sources to be around £25billion (which would equate to 12% of their nominal GDP) from the get-go.
With a deficit that is also running at about 7% of GDP then it would take just over a decade for a serious debt crisis to unfold (borrowing 7% over 12 years means accumulating a debt-to-GDP ratio of over 100% of GDP projecting forward and adding in the current figures).
Let us not also not forget how this aggravates the point I made previously about their plans for EU membership.
Bottom line: No good can come of this. We should remember how Greece borrowed it’s way into having debt-to-GDP ratios which ruined the nation and of course we should all remember the bailout and austerity program it was forced into by the EU as a result. An independent Scotland would face the same issues presuming it does indeed lack the stomach for the hard reforms which I suggest would be necessary for its survival as an independent nation.
Currency
For those that would decry the Greek comparison due to the mechanics of Greece also being in the Eurozone and having its debt denominated in a currency which it does not control, then we should bear in mind that the SNP ultimately plans to keep the pound.
Indeed the issue of a post-independence currency poses enormous problems whatever the outcome.
We should bear in mind that all current projections regarding debt and borrowing presume Scotland would be able to continue using the Pound as its currency post-independence and therefore the debt would remain effectively static.
In actual fact, the UK government has ruled this out and, even if the did manage to keep the pound, there are many substantial problems with this.
For instance, if the Scots were able to keep the pound, then they would effectively outsource their monetary policy to the Bank of England and Westminster (which to me, seems to defeat the point of independence but hey ho) and it would also be ruinous to a newly-independent Scotland due to the fact that the pound as it currently stands (even after the post-Brexit devaluation) is too strong for the Scottish economy and would certainly be far too strong for an independent Scotland as it would make the products of Scottish industry and services and Scottish investments far too expensive to bother with relative to those of international competitors (and especially England and Europe)..
Also, I should hardly have to labour the point about comparisons with Greece here in terms of having debt denominated in a foreign currency which is beyond the control of the government in question.
For example, a core problem with this is that there is absolutely zero chance of supportive monetary policy if Scotland keeps the pound and also slides into recession post-independence as a result of factors I have named here or any other. That is to say, because the pound will still be controlled by the Bank of England, there would be zero chance of any independent monetary support measures such as devaluation or quantitative easing or similar (at least as long as the rest of the UK is doing well).
Alternatively, if the Scottish government simply “copies” the pound to create a new currency and does not maintain any sort of hard connection to the value of the British pound then it’s hard to see how this is “keeping the pound” other than in name.
It sounds rather like Zimbabwean Dollars to me in fact and realistically I think the market would treat the fledgling currency in a similar fashion because the fact of Scotland’s stagnant economic performance would not justify any sort of equivalent valuation to the bona-fide British pound or even the Euro.
The markets would undoubtedly sense this and the first move of the professional speculators and investors upon issuance would likely create a huge market-driven corrective devaluation which, although it may help Scotland’s economy in the long term by making its exports more competitive, would provide a substantial shock to the system in the short term and would drive up CPI inflation to potentially disastrous levels which could cause a serious cost of living crisis.
A final point here with respect to their currency plans, is that ultimately, the SNP are promising to join the EU.
We must remember that the only reason the UK was never sucked into the Eurozone, is because we secured an opt-out from it which was secured by Margaret Thatcher.
This means that (the small point about their finances making them ineligible for EU membership aside), even if they managed to join the EU, that they would not be allowed to keep the pound because Euro membership is now effectively compulsory across the EU. As such, the policy point about keeping the pound is a lie so long as the SNP insist on EU membership.
In either case the issue of currency for post-independence Scotland is a huge barrier to a prosperous independent Scotland and it cannot be easily overcome without serious economic damage (or, at the least, very serious u-turns from the SNP).
3. Where I Consider This Should Go Next
I take a “reform or go away” view here.
In short the Scottish problem has to be solved because of course the SNP and their policies and the consumption habits of Scotland writ large are undermining the rest of the United Kingdom in the process.
I believe this means that, sooner or later, they have to be forced to take on board some far-reaching (and likely painful) economic reforms designed to reduce the role of government spending as a crutch for the Scottish economy and it’s GDP figures and to boost genuine business, investment and work driven productivity.
And of course this leads me to the ultimate conclusion – that Scotland must reform itself if it plans to remain in the union.