A year before the vote, nationalists say independence will bring new oil wealth while unionists caution against cost of going solo
Glasgow's west end is blessed with bohemian sophistication, good transport links and large Georgian homes. Should Scotland vote yes in an independence referendum next year, it will be one of the new nation's most desirable destinations. But it also has its share of boarded-up shops, especially away from the buzz of Byres Road and its trendy bars and restaurants. And it is the solution to that problem, not the lure of a middle-class enclave, that will be a key factor in the 2014 poll.
According to the Scottish independence movement, high streets scarred by empty shops are reason enough to break away from Westminster's political dominance. Business for Scotland, which campaigns for a permanent break with England, Wales and Northern Ireland, said in a report last week that reforms to the planning system and business rates – a levy imposed on retail properties – could revive Scottish high streets.
On business rates, a newly unchained Scottish parliament could institute an immediate revaluation of properties, bringing with it a higher threshold before rates are payable and allowing some businesses to escape payment altogether. The levy could also apply to a business with several stores rather than an individual shop, which would "encourage small independent chains".
Elsewhere in Scotland last week, supporters of the status quo fought back. At Glasgow's Scottish Exhibition and Conference Centre, built on reclaimed docks just a stone's throw from the west end, Liberal Democrats offered a good deal of tax autonomy within the union. LibDem leader Nick Clegg told his conference that voting no did not mean "no change" for Scotland. He cited a proposal from the home rule commission, headed by former party leader Sir Menzies Campbell, for a federal arrangement that included proposals for Holyrood to collect almost all income tax, capital gains tax and inheritance tax. Air passenger duty was also on the list of devolved taxes, though not VAT, alcohol or excise duties.
Further devolution, often referred to as DevoMax, may be the outcome should the yes vote fall short of 50%, but it has been sidelined as an argument while the SNP leader Alex Salmond works hard to secure an all-or-nothing vote for independence. Salmond has always put the business and economic case for independence at the centre of his argument, knowing that many floating voters are concerned that border controls could threaten their jobs.
Businesses have proved reluctant to comment on the debate. Most believe there is little to gain from taking sides and have left the discussion to their trade bodies and people like Sir George Mathewson, former chairman of Royal Bank of Scotland, who have long since retired. Businesses that have taken their grievances to Salmond have complained about the uncertainty until the vote and the likelihood of a wrestling match between London and Edinburgh over North Sea oil if Scotland votes yes, as well as the wrangling over the division of public debts for years afterwards.
Both the energy firm SSE and engineering business Weir Group are seeking assurances from Salmond that their regulatory and tax costs will not rise. Last year, the chief executive of Weir, Keith Cochrane, said: "If there is to be change in these areas, business logic would suggest that this must be because it will provide benefits that the status quo cannot. That means providing the facts and figures to support change and allowing companies to plan in advance."
Anecdotally, many senior executives in Edinburgh's finance sector are known to despair about the pro-independence lobby. Inside the banks and insurance companies behind Princes Street, there is a belief that erecting a border between them and London will increase their costs and lower their standing.
The EU would want a new member to have its own independent financial regulator. Should Scotland keep the pound, as Salmond intends, there is a question mark over the relationship with the Bank of England as lender of last resort. The UK response to the banking crisis has been to put the central bank in charge of money and financial regulation, which means the BoE will want a say over Scottish financial regulation if it is still lender of last resort to Scottish banks.
In a way, Scotland will experience the dilemmas faced by Ireland, Portugal and Greece when their finance ministers troop into the European Central Bank in Frankfurt. Frankfurt, in tandem with the EU commission chiefs in Brussels, has made it clear that only close political, fiscal and banking union can make a monetary union work. All the eurozone countries are facing an erosion of sovereignty in order to rescue a monetary union battered by the banking crisis.
Yet the Scottish pro-independence lobby believes it can have monetary union without any interference from the body that will pick up the tab in the event of disaster. Gavin McCrone, in his book Scottish Independence, says Scotland could never have coped with the collapse of the Royal Bank of Scotland. "It would not have been able to cope with the losses incurred by its banks, whatever the arrangements had been put in place, and, even if the banks and Scottish authorities had had the foresight to ensure that operations outside Scotland were conducted by subsidiaries regulated in those countries, they would have faced the same problems as Ireland."
A white paper in November is expected to reconcile many of these questions. Meanwhile, a Scottish government spokesman has made it clear that maintaining the Bank of England as the central bank was "part and parcel" of SNP plans to keep the pound.He said there would be sufficient revenues from other areas of the economy to sustain the government's current spending and the country's GDP.
He said: "An independent Scotland would establish a credible fiscal framework to ensure Scotland's public finances were put on a sustainable footing. Estimates are that North Sea oil and gas contributed £11bn in revenues last year, with £1.5tn of oil and gas left to be extracted, putting Scotland in a stronger financial position than the rest of the UK."
Phil Anderton, a former boss of the Scottish Rugby Union and Heart of Midlothian football club, points out that oil revenues are volatile and have slumped to £1bn in some years. "The SNP is selective about when money has flowed into the exchequer. Oil is volatile and there are many instances when it has failed to generate much income," he said. He is the only businessman so far to join the board of bettertogether, the pro-union campaign run by former chancellor Alaistair Darling. He said: "The oil industry makes up 2% of the UK's GDP, but 20% of Scottish GDP, so we would be putting many of our eggs in one basket."
Oil is a key selling point for the yes campaign. According to McCrone, a former economic adviser to several Scottish ministers and a lecturer in economics at Glasgow and Edinburgh universities, a successful grab of the entire industry and seabed would propel Scotland to the top of the European wealth table behind Luxembourg, Norway, Switzerland and Monaco. But this figure includes the large number of foreign firms operating in Aberdeen, most of which send their profits to overseas investors. It also presumes that the UK will happily relinquish drilling rights north of Berwick-on-Tweed.
Even with a less generous oil settlement, McCrone argues that Scotland's economy has shown it can maintain living standards, which have improved per head in recent decades compared with the UK. "The gap in output per head has narrowed so that in Scotland it is now almost equal to the UK average, showing that Scotland's position has improved when compared to the UK as a whole."
Businessman Ivan McKee, who joined the yes campaign after years of ambivalence, believes Scotland contributes more to the UK than it takes out. "The opportunity to be like Norway is tremendous. We have the natural resources and the sound finances. Independence is not about pulling up the drawbridge. It is about self determination. The world is becoming more integrated from a business perspective and being independent does not detract from that," he said
Still, Scotland has many problems that could place a great strain on its public finances. It currently receives 7% more in welfare expenditure from the Treasury than the UK average, to cope with the costs of providing for a more unhealthy and scattered population. A low birth rate and low immigration have meant there will be fewer young people in 2020 and 2030 to pay taxes and fund elderly care. That's not to say the boarded-up shops in Glasgow's west end won't find new customers but it begs the question of where higher incomes will come from and why, when other small nations are sacrificing independence for economic security inside the eurozone, Scotland believes it can travel in the opposite direction.
Scottish independenceScottish politicsScotlandAlex SalmondNick CleggSir Menzies CampbellPhillip Inmantheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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