Scottish Tories’ independence report shows childlike understanding of economics

| 24/03/2016 | 8 Comments

Business for Scotland comments on the Scottish Conservatives’ report on the cost of independence which we believe shows a “childlike” and “amateur” understanding of economics”.

“This report smacks of desperation. It’s almost as if the Conservative Party in Scotland is desperate to draw attention away from the double disasters of George Osborne’s unraveling amateur budget, and the No Campaign’s disintegrating project fear claims.  This is an amateur blogger report that demonstrates a kindergarten level understanding of economics and contains assumptions and calculations that fall apart with the slightest inspection”.

“Scotland’s illustrative deficit referred to in the report, and many of the expense lines in the GERS figures, relate to the additional cost to Scotland of UK membership and would reduce significantly and possibly even disappear completely with independence.

  • For example, defence spending in 2014/15 was £3bn and that is the cost to Scotland for the UK’s power projection agenda, including nuclear warheads Scotland wouldn’t have and the cost of action in the Middle East that Scotland wouldn’t support. A Scottish Defence Force modelled on Denmark’s would save about £1.2bn a year.
  • Civil service costs (salaries, rent and rates are lower in Scotland than London) would fall, likewise there would be lower costs for tax collection, border protection, security services and even not having to pay for Westminster and the House of Commons could save between £600m and £800m per year.
  • Highly conservative calculations on low pay in Scotland show that full-time workers receive welfare payments that amount to between £800m and £850m a year in Scotland. The extra Income Tax and National Insurance contributions from implementing the Living Wage would also generate between £220m and £250m of additional revenue. This means that implementing a Real Living Wage would benefit the Scottish budget to the tune of £1bn extra a year.
  • Finally, the Scottish Government offered to take a population share of the UK’s debt mountain if there was an agreement on currency. Legally, a newly independent Scotland would not be responsible for that debt and the Treasury actually confirmed that fact in 2014. Without a currency union, an independent Scotland would therefore not have the debt interest payments in its expenditure, which in the 2014/15 GERS amounts to £2.76bn.

“So the savings from independence amount to a nearly £3bn change to the deficit, if a deal had been done on currency and up to £5.5bn if it hadn’t.

“This would radically improve the deficit to GDP ratio and makes a mockery of the findings in the amateur blogger report commissioned by the Conservatives.

“Had Scotland been independent for the years leading up to 2014/15 the figures would have had an entirely different starting point and, like Norway, we would now possibly be able to dip into a sovereign oil fund to smooth over the impact of oil price volatility and invest in future growth and prosperity, instead of reeling from the impact of the failed Tory austerity which is slowing our economic growth.

“Of course the Conservative party’s report could have drawn a comparison between Scotland as part of the UK and Norway in its main deficit graph but despite listing 27 countries as different to Scotland, such as Germany and Malta, they deliberately missed out Norway.  

“This is simply a Conservative smoke and mirrors tactic to distract journalists from the party’s woeful economic record and consistently broken promises.”

Better Together’s broken promises open the door to independence http://www.businessforscotland.co.uk/better-togethers-broken-promises-open-the-door-to-independence/

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Category: Economics of Independence, GERS, Oil and Gas, Scotland's Economy

About the Author ()

Michelle is a former national newspaper journalist who co-founded an award-winning IT business before launching Tartan Cat Communications. A social media and crowd-funding expert she sits on the Board of Business for Scotland and is the leader of the Glasgow Business for Scotland Group.

Comments (8)

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  1. Stewart says:

    I note the author of the report has zero economic qualifications – and it shows.

  2. Madeleine Goddard says:

    Before you get too excited about the potential savings in defence spending you might wish to note that Denmark still has conscription, which seriously reduces costs. Is an independent Scotland proposing this too? The UK is spending very little in the Middle East now, having largely withdrawn from operations there, so I doubt if there is a huge saving to be achieved in that direction either. What you seem to be suggesting is that Scotland should cut defence and get a free ride from England, in the belief that they and NATO will offer protection in any event. Is that really ethical?

    • Robin Stevenson says:

      The 4 month conscription, known in Denmark as Hærens Basis Uddannelse or HBU, meaning simply Army Basic Training, is not supposed to produce battle-ready soldiers. It is supposed to draw a lot of young men into the military,[18-27 yr olds] give them a taste for the life of the soldier, and then give them the opportunity to perhaps go into whatever chosen service.
      Conscientious objectors can choose to instead serve six months in a non-military position, for example in Beredskabsstyrelsen (dealing with non-military disasters like fires, flood, pollution, etc.) or foreign aid work in a third world country.
      Denmark’s defence budget for 2016/17 is [expected] 1.2% of GNP.

      While Scotland may not be expected to follow Denmark’s defence example in its entirety, I think it’s worth drawing your attention to an average defence spend of 1.2% pa GNP as opposed to what the UK spends now 2% +, also pays far more on defence than what it receives for the UK Gov.

      A defence spokesman has said ” We know that operations in Libya cost up to £1.5 billion. I think we can expect similar mission creep in Syria, which will inevitably raise the costs involved.”

      As stated above Scotland pays far more towards UK defence that what they get back, a ‘free ride’ from England is a myth, perpetuated by the MSM to the gullible and the hard of thinking. NATO has 28 member states, with only 3 of these states [US, France and the UK] with nuclear capability, the other 25 do not. Perfectly sensible, when you consider that the UK’s ‘stick-on hairy chest’ is supplied by the US in the first place

    • Gordon MacIntyre-Kemp says:

      The lower cost of the Danish armed forces is not mainly due to limited conscription as you claim but the more ethical foreign policy and lack of nuclear weapons.

  3. Norrie Hunter says:

    I just don’t know why Scotland can’t be compared with Norway instead of England. We need a broadcaster who can highlight the similarities in wealth and the differences in societies. Great analysis which should be held high for all to read.

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