The Lemon Fool

Very far indeed. With an economy the size of Scotland's and the lack of natural resources except for a dwindling supply of now well nigh worthless oil we would be a northern Argentina. But I do not want to get into a political argument here. Nicola must get down on her prayer mat every night. Salmond is too arrogant to do that.

Dod

Snorvey wrote:Suppose we voted yes in 2014. Suppose that, after 6 years, Scotland has extracted itself from the UK. Suppose that Scotland has applied, but not yet joined the EU.

Some counterfactuals here. You'd've had to adjust to being without the Barnett Formula, but that's historic, not a shock as with covid. As for EU membership, I think there's no possible doubt that Edinburgh and Brussels would've reached a deal to admit you formally when the UK transition period ends, or at the very least to extend Scotland's transition period.

Budget deficit? I really couldn't say. We've all been running one when we should've known better. Scotland may have been indulging a little bit more than it would have done without the Westminster ties, precisely because it can. But that's pure finger-in-the-air speculation: the only certainty is you'd've been keenly observing EU post-2009 budget rules in preparation for independent entry.

The most interesting counterfactual though, is how UK sentiment would've been affected. Such a shock to the government and media, radiating out through the population would surely have affected sentiment everywhere. How big a difference would that have made to public appetites to stick it to "The Establishment" in 2016?

Observing the daily COVID reports from here in Scotland is like getting a daily war report from both a field marshal (BJ) and a general (NS) for the SAME war. This has shown to me how utterly futile and irrelevant a Scottish Government is.

I am Scottish through and through and love my country but I strongly feel that devolution should be rescinded and that awful building raised to the ground.

Devolution is a layer of bureaucracy that the UK just does not need.

Snorvey wrote:I'm just wondering, given the low oil price, the deficit as reported in the annual GERS report, the lack of a central bank etc, how far up the creek we would be?

I suspect we would not be able to afford a creek

--kiloran

scotview wrote:...that awful building raised to the ground.

Not meant as a cheap shot, but that made me chuckle.

Raze is the word here, from the same etymology as razor. To cut or make shorter.

Raise has the etymology of to rear (or bring up) ie to grow and make bigger. I had never considered the existence of the homophones with almost opposite meanings before.

Snorvey wrote:Me neither, but I can't help thinking about how we've dodged a bullet, but I'm unsure how the economics of it all would have played out, given the conditions I set out in the original question.

In 2014, the deficit was being funded by the high oil price and the SNP even talked about setting up an oil wealth fund in the style of Norway. But without the EU and our own central bank, what would happen? Another Darien type deal struck with the English?

Dod's right in saying that you would probably have become a Northern-European version of Argentina (albeit not as bad). As for a Darien-style deal, no chance IMHO - it would be political suicide for a UK government to bail out Scotland.

Scotland would have experienced two major economic shocks: the collapse in the oil price since the independence vote and the loss of the Barnett Formula money. Scotland would also have lost a lot of public sector jobs with the closure of all UK government departments and agencies in Scotland. There would have been no appetite in the rest of the UK for keeping these jobs in Scotland (I suspect that a lot of these departments would have been moved to Northern Ireland).

Consequently Scotland's budget deficit would have increased by a substantial amount. In 2018-19 Scotland's budget deficit was 7.7% of GDP compared to 1.1% for the UK (see the article linked below). I wouldn't be surprised to have seen it hit 15% in this scenario before the coronavirus.

Then there's the issue as to what currency Scotland would have been using. If Scotland kept sterling, its ability to borrow would be constrained because it didn't control the currency. Just like many Eurozone countries and those countries who use the US dollar in preference to having a domestic currency. Scotland would now have to borrow at much higher interest rates than the UK.

If Scotland had issued its own currency, it would already have fallen substantially relative to most other currencies. Borrowing now would push interest rates up substantially; printing money would cause the currency to fall further. When the coronavirus hit I'd have expected to see a full blown currency crisis in Scotland.

This week's issue of The Economist has an article about how the coronavirus has severely weakened the case for Scottish independence.

https://www.economist.com/britain/2020/04/30/coronavirus-has-made-scottish-independence-even-less-likely

As for Scotland joining the EU after the UK's transition period ends, not very likely. Spain would probably veto this because of Catalonia, likewise Italy because of the Northern provinces and Scotland wouldn't have been able to meet the EU's criteria for entry.

I suspect that there would have been a lot of support for the UK sticking it to Scotland in the independence negotiations, much like how the SNP has urged the EU to screw the UK during the Brexit negotiations. IMHO the UK would not have voted to leave the EU in 2016 if Scotland had left the UK. Several reasons for this; the economic damage to Scotland would have caused many people who voted to leave to vote to stay in this scenario (Scotland would show a clear example of economic damage resulting from leaving an economic and political union).

Also removing Scottish MPs from the UK Parliament would have made a Conservative majority much more likely and David Cameron would probably not have needed to promise a Brexit referendum in the 2015 election manifesto. In this scenario the UK could well have vetoed Scottish entry to the EU.

And another thing. I think the NHS is probably the biggest single employer in Scotland; it certainly is in a place like Dundee for all it has benefited apparently from the new V & A.

I tried at one point to think of big successful public companies based in Scotland.There are not very many. Weir Group, Aggreko, Wood Group, A G Barr and quite probably others.

In the financial sector there are few left. Standard Life Aberdeen. RBS has been wrecked and Bank of Scotland owned by Lloyds. A number of investment trusts such as Alliance, Edinburgh, Personal Assets and others mostly managed by SLA or Baillie Gifford, the latter being a privately owned partnership.

Obviously we have a decent tourist industry where Edinburgh has singlehandedly put Scotland on the map at the risk of becoming a theme park itself.

But as a solid tax base?

Dod

Dod101 wrote:And another thing. I think the NHS is probably the biggest single employer in Scotland; it certainly is in a place like Dundee for all it has benefited apparently from the new V & A.

I tried at one point to think of big successful public companies based in Scotland.There are not very many. Weir Group, Aggreko, Wood Group, A G Barr and quite probably others.

In the financial sector there are few left. Standard Life Aberdeen. RBS has been wrecked and Bank of Scotland owned by Lloyds. A number of investment trusts such as Alliance, Edinburgh, Personal Assets and others mostly managed by SLA or Baillie Gifford, the latter being a privately owned partnership.

Obviously we have a decent tourist industry where Edinburgh has singlehandedly put Scotland on the map at the risk of becoming a theme park itself.

But as a solid tax base?

Dod

You've missed out the very biggest Scottish company (turnover wise): SSE

https://www.insider.co.uk/special-repor ... x-13834015

Aside from the list of 'Scottish companies' in the link there are also plenty of other large companies that contribute significantly to the Scottish Economy but may be headquartered elsewhere (e.g. Diageo, Ineos, Marine Harvest). However there is no doubt that the economic ecosystem is far less diverse than England, and hence the UK as a whole.

BH

Believe it or not I was about to add SSE, and Devro who are a sausage skin maker. Quite big business apparently. There will be others no doubt.
Of course we would need inward investment by the sort of companies you mention, as well as our own domestic exporters. But I simply do not think that an independent Scotland would have a big enough tax base to get anywhere. This can be seen as being negative; just look at Singapore, but we sadly do not have either the work ethic nor the ability I think to knuckle down for the wider good.

At any rate to revert to Snorvey's point, an independent Scotland would have been truly stuffed by Covid-19.

Dod

Every day I shudder at the wasted and duplicated resources being used to do the same stuff by 2/3/4 different administrations in the UK.

In all discussions about independence there seems to be a presumption that it's either independence or more devolution. I also would support less devolution. I think I'd go the whole hog and unify law, education etc.

Dod101 wrote:Believe it or not I was about to add SSE, and Devro who are a sausage skin maker. Quite big business apparently. There will be others no doubt.
Of course we would need inward investment by the sort of companies you mention, as well as our own domestic exporters. But I simply do not think that an independent Scotland would have a big enough tax base to get anywhere. This can be seen as being negative; just look at Singapore, but we sadly do not have either the work ethic nor the ability I think to knuckle down for the wider good.

At any rate to revert to Snorvey's point, an independent Scotland would have been truly stuffed by Covid-19.

Dod

You mean, like, say, little Greece ? Who have done rather well at managing their way through CV19. Or like say large USA who are having a bad go at it.

Sometimes it's not the size of the dog in the fight, its the size of the fight in the dog.

regards, dspp

dspp wrote:

Dod101 wrote:Believe it or not I was about to add SSE, and Devro who are a sausage skin maker. Quite big business apparently. There will be others no doubt.
Of course we would need inward investment by the sort of companies you mention, as well as our own domestic exporters. But I simply do not think that an independent Scotland would have a big enough tax base to get anywhere. This can be seen as being negative; just look at Singapore, but we sadly do not have either the work ethic nor the ability I think to knuckle down for the wider good.

At any rate to revert to Snorvey's point, an independent Scotland would have been truly stuffed by Covid-19.

Dod

You mean, like, say, little Greece ? Who have done rather well at managing their way through CV19. Or like say large USA who are having a bad go at it.

Sometimes it's not the size of the dog in the fight, its the size of the fight in the dog.

regards, dspp

Well, as this is "The Economy" board, I suspect he was referring to the economy, not the health response, and speculating what would be the case for an independent Scotland.

In February the 10 year Govt. Bond Yield in Greece was sub 1%. It is now above 2%.

For the US the 10 year yield is lower over that time frame, as it is in the UK.

dspp wrote:Sometimes it's not the size of the dog in the fight, its the size of the fight in the dog.

Good sound bite but completely irrelevant to the discussion.

Dod

doug2500 wrote:Every day I shudder at the wasted and duplicated resources being used to do the same stuff by 2/3/4 different administrations in the UK.

In all discussions about independence there seems to be a presumption that it's either independence or more devolution. I also would support less devolution. I think I'd go the whole hog and unify law, education etc.

The current balls-up by parts of the NHS makes me think that extreme devolution in state organisations might be a good thing. Centralised non-procurement is a good example of what I mean. A good storeman on each site could do a far better job.

TJH

doug2500 wrote:Every day I shudder at the wasted and duplicated resources being used to do the same stuff by 2/3/4 different administrations in the UK.

In all discussions about independence there seems to be a presumption that it's either independence or more devolution. I also would support less devolution. I think I'd go the whole hog and unify law, education etc.

I agree with reducing devolution and combining some services, particularly rarely used ones. Having worked with some parts of the Scottish government I've seen duplication simply for the sake of duplication, as one policy civil servant said "the minister doesn't want it to look like we might have to rely on England for that", thus money and resources are spent maintaining a contingency capability that may rarely be used, when there is already a large English team in existence which Scotland used to be part of sharing all training costs.

God knows how much that sort of thing goes on in all the different policy areas.

BH

tjh290633 wrote:

doug2500 wrote:Every day I shudder at the wasted and duplicated resources being used to do the same stuff by 2/3/4 different administrations in the UK.

In all discussions about independence there seems to be a presumption that it's either independence or more devolution. I also would support less devolution. I think I'd go the whole hog and unify law, education etc.

The current balls-up by parts of the NHS makes me think that extreme devolution in state organisations might be a good thing. Centralised non-procurement is a good example of what I mean. A good storeman on each site could do a far better job.

TJH

It will be interesting when this is all over to see how much of the PPE problem was poor procurement and how much was down to logistics problems.

BH

SalvorHardin wrote:

Snorvey wrote:Me neither, but I can't help thinking about how we've dodged a bullet, but I'm unsure how the economics of it all would have played out, given the conditions I set out in the original question.

In 2014, the deficit was being funded by the high oil price and the SNP even talked about setting up an oil wealth fund in the style of Norway. But without the EU and our own central bank, what would happen? Another Darien type deal struck with the English?

Dod's right in saying that you would probably have become a Northern-European version of Argentina (albeit not as bad). As for a Darien-style deal, no chance IMHO - it would be political suicide for a UK government to bail out Scotland.

Scotland would have experienced two major economic shocks: the collapse in the oil price since the independence vote and the loss of the Barnett Formula money. Scotland would also have lost a lot of public sector jobs with the closure of all UK government departments and agencies in Scotland. There would have been no appetite in the rest of the UK for keeping these jobs in Scotland (I suspect that a lot of these departments would have been moved to Northern Ireland).

Consequently Scotland's budget deficit would have increased by a substantial amount. In 2018-19 Scotland's budget deficit was 7.7% of GDP compared to 1.1% for the UK (see the article linked below). I wouldn't be surprised to have seen it hit 15% in this scenario before the coronavirus.

Then there's the issue as to what currency Scotland would have been using. If Scotland kept sterling, its ability to borrow would be constrained because it didn't control the currency. Just like many Eurozone countries and those countries who use the US dollar in preference to having a domestic currency. Scotland would now have to borrow at much higher interest rates than the UK.

If Scotland had issued its own currency, it would already have fallen substantially relative to most other currencies. Borrowing now would push interest rates up substantially; printing money would cause the currency to fall further. When the coronavirus hit I'd have expected to see a full blown currency crisis in Scotland.

This week's issue of The Economist has an article about how the coronavirus has severely weakened the case for Scottish independence.

https://www.economist.com/britain/2020/04/30/coronavirus-has-made-scottish-independence-even-less-likely

As for Scotland joining the EU after the UK's transition period ends, not very likely. Spain would probably veto this because of Catalonia, likewise Italy because of the Northern provinces and Scotland wouldn't have been able to meet the EU's criteria for entry.

I suspect that there would have been a lot of support for the UK sticking it to Scotland in the independence negotiations, much like how the SNP has urged the EU to screw the UK during the Brexit negotiations. IMHO the UK would not have voted to leave the EU in 2016 if Scotland had left the UK. Several reasons for this; the economic damage to Scotland would have caused many people who voted to leave to vote to stay in this scenario (Scotland would show a clear example of economic damage resulting from leaving an economic and political union).

Also removing Scottish MPs from the UK Parliament would have made a Conservative majority much more likely and David Cameron would probably not have needed to promise a Brexit referendum in the 2015 election manifesto. In this scenario the UK could well have vetoed Scottish entry to the EU.

Mostly agree with you, a further problem would have been the setup cost of an iScotland, interacting with the currency issue too. Salmond hunted for the lowest estimate and gleefully told us that a new state might be created for £200 million. This was a ridiculously pie-in-the-sky estimate that bore no resemblance to reality at all, as the cost of the Farm payments IT system a few years later, a project that swallowed £180million+ just for a system to pay a few tens of thou farmers their subsidies, went way over budget and was riddled with problems and years late (i.e. a typical gov IT project). More recently setting up a Scottish benefits system has spiralled to £650 million and that doesn't even cover every benefit!
We are literally talking many billions to duplicate all the necessary services of government infrastructure and expand the existing ones.

Also when Covid-19 struck we'd have been right in the middle of what would undoubtably would have been a monumental cluster**** of civil service managed infrastructure setup projects running over budget, over time and underperforming. Imagine suddenly having to deal with furloughed workers, new self-employed payments, rebates etc on a system not even completed and likely full of bugs.

The only thing I'd disagree on is civil service job losses, the likelihood is that many, perhaps most, of the UK civil service jobs would be replaced by Scottish civil service jobs, ultimately. Although realistically I could see an iScotland going cap in hand to have rUK provide many services for years beyond independence, while we try to set up our own systems.

BH

BH

doug2500 wrote:Every day I shudder at the wasted and duplicated resources being used to do the same stuff by 2/3/4 different administrations in the UK.

In all discussions about independence there seems to be a presumption that it's either independence or more devolution. I also would support less devolution. I think I'd go the whole hog and unify law, education etc.

Go for the last two and I would volte face and want to leave the UK!

Why on earth would we want English law or English education, whilst the school exam system here is far from perfect it is, imho, better than A levels; the AH is a decent qualification and there is even a glimmer that Oxford/Cambridge are now starting to value it above A Levels.

The other factor that has not been mentioned here is that as the Iscotland economy tanked, many of the educated and competent Scots would just leave and come to live south of the border. That then magnifies the problems in Iscotland as much of the productive part of the population isn't there any more!

scrumpyjack wrote:The other factor that has not been mentioned here is that as the Iscotland economy tanked, many of the educated and competent Scots would just leave and come to live south of the border. That then magnifies the problems in Iscotland as much of the productive part of the population isn't there any more!

Apart possibly in fund management that to a large extent has already happened. In fact of course it has always happened and Nicola is helping it along by taxing higher earners more in Scotland than in England.

And to pick up on Charlottesquare's comment about education if Scottish education is better than in England, I am sorry for the English!

Dod