When the Scottish referendum was announced in March last year, it would seem that it was considered by Westminster as nothing more than a token gesture. In the eighteen months that have since passed, the issue has been somewhat sidelined and little thought has been given to the possibility of a ‘yes’ vote actually prevailing. It is no wonder then, that the last few days have consumed politicians, businesses and investors with sheer panic over the many unresolved issues and questions that surround Scottish independence. Whilst a solo Scotland has prompted fairly trivial concerns, such as, what happens to the beloved Union Jack flag and who will England proudly support at Wimbledon next year should they no longer lay claim to Murray, these merely scratch the surface when it comes to the issues that potentially lay ahead. The extent to which the independence hype has penetrated society is evident in the fact that the news of a new royal baby last week prompted speculation of its convenient timing being used as pro-union propaganda. Even Vivienne Westwood has got in on the action, utilising her recent catwalk quite literally as a political platform for the ‘yes’ vote. Whether you’re for, against, or currently sitting on the fence (or can we say Hadrian’s wall… well, just about!) when it comes to the referendum, it has to be said that the next few days are going to be an interesting time to be a Brit. With a potentially historic outcome in the pipeline we look to uncover and explain exactly what an independent Scotland would mean for us all.
Perhaps the most daunting aspect of the looming referendum is the fact that every step towards independence is quite literally a step into the unknown. This apprehension has formed the crux of the ‘no’ campaign and evidence of this is quite clearly showcased by the savings group, Standard Life who have outlined that it knows little more about what independence would mean for jobs, currency, regulation and taxation than it did in its annual report six months ago. As a result of this escalating fear of the unknown, the last few days has seen an influx of savers pulling their money out of Scottish banks. Worryingly, if the warnings outlined by the ‘no’ campaign come to fruition this example of economic disruption barely touches the surface of the economic problems that Scottish independence could yield.
Yesterday we saw Cameron, Clegg and Miliband issue their pledge to Scotland as part of their final bid to save the Union. This included a somewhat vague promise of more power to the Scots along with placing the final decisions of the NHS in the hands of the Scottish parliament. Unsurprisingly, this has been met with vocal opposition from all ends of the spectrum. Independence supporters have dubbed these as empty promises arguing that with Westminster still dictating the Scottish budget their ability to influence change within their healthcare system remains significantly hampered. Alongside this, the promise to increase the average spending allowance per person Scotland by £1400 has riled those south of the border. Tory MP Peter Bone has voiced his distaste for this unfair package, which will benefit the Scots at the expense of taxpayers in England and Wales. Whilst critics consider the coalition to be throwing powers and promises into the mix merely to save Cameron and Clegg from the embarrassment of being labeled as the leaders who lost Scotland, the long list of issues and complications that splitting the union brings begs to differ with the belief that Westminster’s ‘no’ campaign lacks depth.
Economically, an independent Scotland raises a plethora of difficulties both for Scotland itself as well as for England and Wales. Firstly, the still unresolved issue of currency. Much to Alex Salmond’s protest the Bank of England is holding true to its original promise of prohibiting the pound. Whilst Salmond and other ‘yes’ supporters have been alleviating concerns by speculating that if independence actually materialises Osborne and the bank of England will forgo this prohibition, the other, more realistic outcome; the creation of a new Scottish currency opens up a new can of worms. Across the border business transactions will be severely complicated by the variation in exchange rates and many businesses may be forced to move their headquarters south of the border or open up Scottish subsidiaries, incurring hefty expenditures. Similarly, the costs for banks in adopting a new currency are likely to prompt a rise in interest rates north of the border, which will consequently force up mortgage costs. With this comes a knock on effect for Scottish housing prices as outlined by estate agency eMoov who predicts a 20% fall for the future. It seems that even the individual consumer cannot escape the economic aftermath of Scottish independence as John Lewis have explicitly warned customers that prices could be higher in stores in a separate Scotland than those found in England.
The potential shortcomings do not stop there. As a newly created nation, an independent Scotland could initially suffer from teething problems in identifying its position within the global landscape. Whilst Scotland are in relative wealth when it comes to natural resources, the longevity of this business is certainly a topic of contention and as a newly independent country, Scotland would need to identify and forge new trading relations with no previous track record, no easy feat. Nevertheless, Salmond and the ‘yes’ campaign have provided impressive figures to suggest economic stability for a solo Scotland. With only 1% of Europe’s population, Scotland boasts 20% of European fish stocks, ¼ of its renewable energy potential and around 60% of its conventional oil reserves. These statistics have formed the basis of Salmonds response to economic warnings put forward by ‘no’ campaigners, which he considers to be little more than last minute scaremongering. The independence plan is to utilise the resource-rich country to create a sovereign wealth fund in order to produce a high growth, low taxation future for Scotland. This estimation is however, arguably unrealistic with the Institute for Fiscal Studies outlining that an independent Scotland would face a larger deficit than the UK, leaving it with a £6billion hole in public spending, which could only be rectified through tax increases. Whether or not Salmond can produce the utopian image of Scotland that he has painted, the fact that share prices for Scotland based companies have taken a large tumble speaks for itself. Stock markets are not open to uncertainty and if independence ensues the Scottish economy is set for a turbulent future.
However, journalist James Ashton argues that the economic risks of independence are higher south of the border than north. This argument is seemingly founded, as according to Goldman Sachs predictions, Scottish independence would mean a pitfall for the English currency. This is evidenced by the fact that North East England and Cumbria would be subject to business difficulties should an independent Scotland achieve its projections of reduced tax. With Scotland offering a 3% corporate tax reduction, along with reducing air passenger duty by 50%, their competitive advantage would be substantially enhanced, potentially to the detriment of business within Northern England and particularly Newcastle airport. On top of this, should independence prevail, the UK’s nuclear deterrent would be crippled (a grave concern with the current unstable political global climate) and England will incur the costly experience both in time and money of relocating the UK’s Trident.
With one day to go before Scotland decides its (and England and Wales’) fate it will be interesting to see what other issues comes to surface and with it which celebrities jump on the political bandwagon! Whilst talk surrounding the referendum is currently consumed by panic of the sheer support that the yes vote has conjured up, I believe that when push comes to shove those in the position to sway the vote will place unity and strength in numbers over patriotism and independence and will stick to the devil they know, rather than the devil they don’t.
Feature image: Ian Rutherford
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