There is a slightly later and extended version of this post, which may also be a little clearer, at the New Statesman here.
It is difficult to think clearly when you watch the utter hypocrisy of our Prime Minister, lecturing the SNP about politics not being a game, moments before she needlessly rejects a Lords amendment to secure the rights of EU citizens in the UK. Everyone knows those rights will be guaranteed during the negotiations, so it would be so easy to seize the moral high ground by doing that now. But I’m not sure our Prime Minister, and her MPs, would recognise the moral high ground if it was staring them in the face.
It is difficult to think clearly when you watch the utter hypocrisy of our Prime Minister, lecturing the SNP about politics not being a game, moments before she needlessly rejects a Lords amendment to secure the rights of EU citizens in the UK. Everyone knows those rights will be guaranteed during the negotiations, so it would be so easy to seize the moral high ground by doing that now. But I’m not sure our Prime Minister, and her MPs, would recognise the moral high ground if it was staring them in the face.
Nicola Sturgeon had
no choice but to announce a second Scottish referendum. Brexit is a
huge economic and political change, and she would be
neglecting her duty to the citizens of Scotland not to explore ways
she could avoid a hard Brexit fate for her people. She was given no
choice by the decision to leave the Single Market, made not by UK
voters but by the Prime Minister.
Yet it is also
difficult to forgive the SNP for inventing the term Project Fear,
which became the vehicle
by which the Leave campaign was able to pretend that Brexit would not
be the economic disaster it almost certainly will be. It is difficult
to forgive them for trying to pretend
that the short term costs for the Scottish people of leaving the UK
would not be severe. I thought then that it was a huge risk to bear
those short term costs when the long term benefits outlined by the
SNP appeared
to be little more than wishful thinking.
But Brexit changes
everything. The economic cost to the UK of leaving the EU could be as
high as a reduction of 10% in average incomes by 2030. If Scotland,
by becoming independent, can avoid that fate then you have a clear
long term economic gain right there. But it is more than that. If,
Scotland can remain in the Single Market it could be the destination
of the foreign investment that once came to the UK as a gateway into
the EU. By accepting free movement, it could benefit from the
immigration that has so benefited the UK public finances over the
last decade. No, that is not what you read in the papers or see on
the TV, but I’m talking about the real world, not the
political fantasy that seems so dominant today.
There is an
additional issue regarding the short term costs of independence. With
little oil at a low price there is no doubt that the rUK is currently
subsidising Scotland by a significant amount. Under Cameron it was
reasonable to suppose that this subsidy would continue for some time,
if only to prevent another referendum. I do not think we can make the
same assumption about Theresa Brexit May. The prospects for the UK
public finances under Brexit are dire, yet after the Budget there
seems no way that the Conservatives will put up taxes to pay for the
extra resources the NHS and other public services so desperately
need. As the situation gets steadily worse, nothing - absolutely
nothing - will be safe from continuing austerity. To be brutally
honest, if the SNP loses another referendum, even the formidable Ruth
Davidson will not be able to prevent Scotland being plundered by this
government.
There are a huge
number of issues that still need to be clarified regarding this
second referendum. Will the SNP still go for, or at least appear to
go for, staying in a monetary union with the rUK and keeping sterling
just because it is the more popular option, even though having their
own currency is much more sensible in economic and political terms? Will they be honest about the short term costs? Will the EU give them
the chance of staying in the Single Market or EU, or will they insist
they join the queue? But the bottom line is that the case for
Scottish independence is now much stronger than it was in 2014. Then
a brighter future outside the UK was patriotic wishful thinking.
Now, if they can stay in the Single Market, it is almost a certainty.
Thank you for this. You're the first prominent figure to ask "what happens to Barnett if Scotland has dropped the independence threat?"
ReplyDelete(Barnett as shorthand for the funding setup, not to make that precise formula a goal in itself.)
What?!?! Either we get a good deal or we get a bad deal. If we get a good deal nothing changes (apart from the price of oil). If we get a bad deal they will have trade barriers with THE REST OF THE UK ! (63% of exports vs 16% to the EU). Without a currency. Without the guarantee that Spain would let them in the EU (more likely that banks leave Edimburgh that choose Edinburgh instead of Dublin). Without the support of the majority for a referendum. How is this better? Good luck to them !
ReplyDeleteWhy on earth would the northern part of Great Britain, an island itself on the very periphery of Europe, be considered a magnet for FDI, immigration and all the purported advantages of the single market? To me this is fantasy writ large and one that, in the event of a second referendum, will not be embraced by Scots, who are far too intelligent to accept that sort of view.
ReplyDeleteMost Scots know full well that they would find it very difficult to survive outside the UK and will vote accordingly. Also you have said, quite rightly, that there is no certainty that they could join the EU so why would they vote for independence until this is clarified, which it may not be for a fair number of years.
Too many assumptions; too many uncertainties; too much reliance on the gullibility of the Scots. I can't see it.
Whether Scotland could join the EU is indeed uncertain. Membership of the single market, though, is all that is really needed for Scotland to enjoy the benefits Wren Lewis refers to. Membership of the single market is probably much less problematic. If Scotland is allowed into single market but not (or not immediately) EU it and other EU states can enjoy the trade benefits and Spanish government can still point to a penalty for secession.
Delete"Most Scots know full well that they would find it very difficult to survive outside the UK"
DeleteUnlike practically every country which was once in the Empire? What makes the Scots so unique? Only a habit of subservience to Westminster, which we must shrug of as the mask of slavery which it is.
Scotlands Economy is broadly of the same magnitude as that of Ireland, Norway or New Zealand. Why do we need the UK to survive? Answer: we don't.
This post couldn't be worse. Scotland is getting a fiscal transfer of £9 billion a year. That's why the SNP rejected Full Fiscal Autonomy.
ReplyDeleteBy suggesting independence would be a good thing to save Scots from Brexit, you will encourage them to vote Yes to losing £1 675 each per year. Even the most blood-curdling predictions about harm from Brexit didn't say we would immediately be worse off by £1500 per head. And remember this is definite -- even if there was no harm to Scots trade with rUK, the fiscal transfer will immediately be gone.
The loss of the fiscal transfer means Scots will immediately be 6% poorer, not by 2030!
Now factor in that Scot trade with rUK is a share of GDP several times larger than trade with the EU is for the UK's GDP. So -- the harm to the UK's economy from impeding EU trade is several times smaller than the harm to Scotland's economy from impeding trade with the rUK. Leaving the UK means leaving the UK's single market.
And oil is such a huge part of the UK's balance of payments that Scottish independence could cause a "sudden stop", Eurozone style, with devastation for both rUK and Scotland!
Are you trying to raise the stakes in this way? "Agree with me to reverse Brexit or the UK will break up?" How grossly irresponsible can you get?
Sorry. I'm lost. Are revenues from oil considerable or not? I struggle to see how they can be at once so big that without them rUK would be devastated and sufficiently small that Scotland's seizure of almost all of them could not compensate it for the loss of the transfers that presently flow north. If the oilrevenues are too small to compensate Scotland for the loss of transfers then the repatriation of those transfers will surely more than compensate rUK for the loss of oil revenues. The only way that Scottish independence could reduce incomes in both Scotland and rUK is if it impedes trade between these countries. Or am I missing something?
DeleteIn any case, Wren Lewis deals with the transfers issue. They are, in short, in a UK led by an ideologically austerian government, in an environment of drastically worsening public finances, exceedingly unlikely to continue whether Scotland remains in the UK or not. To lose them immediately will be painful for Scotland in the short term for sure, but this is likely to be more than compensated for in the longer term for reasons that SWL explains.
I think you will find that "Project Fear" was the in-house term used for their successful strategy by the Better Together campaign, and not a phrase coined by the SNP.
ReplyDeleteGiven Ms Davidson's flip-flop on Brexit, from it being a disaster to acceptance as a legitimate UK policy to which Scotland should quietly submit, she is much more likely to be holding the swag bag open for Theresa May than standing up for Scotland.
I'm from Romania and I think the Brexit is a huge strategic mistake. Beside all the economics, by exiting the EU project, UK practically put all the Europe in France and Germany's hands. We are hundred of millions of peoples in the Central and Eastern Europe expecting the raise of our living standards by western investments. Who will make those investments: the German, French, Dutch and other western companies. This is the cake for many years to come and will be eaten by those who understand that. I don't think the French or Dutch politicians can be so stupid to give up in this moment and follow the Brits. Putin and Trump will not rule forever, and in the final the EU will absorb all the Balkans states and maybe the remains of Ukraine. Germany alone is perfectly capable to handle the EU project even without UK and France ( with huge benefits), and be assured that we (the Eastern Europeans peoples, not the politicians) will stay in the EU almost forever or until the end. Also, Theresa May and the Brexiteers did not appear to understand that the slightest hint from Bruxelles that Scotland and NI can stay in the EU on UK place or rejoin on fast lane, will trigger the dissolution of the UK(sooner or later). Cameron was immensely stupid, but will be Theresa May who will be remembered as the one who made the Great Brittan the Little Brittan. I feel sorry for your Queen.
ReplyDeleteAfter years of bitter Brexit negotiations have shredded any remaining sympathy on the Continent for the English, won't the EU be very susceptible to letting Scotland avoid any queues for the single market/EU?
ReplyDeleteDear Simon,
ReplyDeleteThe trouble with the long term is you have to get there first. I think you omitted the fact that May actively goaded Scots and Sturgeon. May's speech last week was calculated to inflame as has her whole policy been over Brexit. Its winner takes all, the 48 % are being humiliated and scorned. The final insult to Scotland was a Prime Minister who appointed Johnson as For Sec criticise anyone else for playing games.
All that said, unpicking a 300 year old legal union, a tightly integrated economy and a common currency is in all practical terms impossible without huge disruption. As Greece has found to its cost, its a one way street.
I don't doubt that Scotland will now vote for independence but with 45 % opposed, a large easy escape South to a hostile neighbour who will seek hard terms, the short term turmoil will upend society and do serious economic damage. if you believe in 'the people' , then we will rally together and overcome. I do not, while the flames of patriotism will keep you warm for a year they flicker and die. At the point, the national game becomes hunt the enemy within and without to blame.
All of this true for the UK, listen the hysterical UKIP Rees-Mogg Trumpist wing in parliament and press; nothing will deter them, failure will be someone else fault. (The other currently remoaners and EU). I always predicted the harshest of hard BREXITS, its the prisoners dilemma writ large.
To think Scotland will avoid the same fate is wishful thinking and has to me hints of romanisation. BREXIT, INDY2 and Trump are profoundly depressing and I feel numb as I watch enlightenment thinking, rational discourse and solidarity shredded by hatred of the other.
Good,clear and concise article.
ReplyDeleteProject Fear was coined by insiders in Better Together, not by the SNP.
Minor correction: it was Rob Shorthouse of Better Together who coined the term "Project Fear", not the SNP:
ReplyDeletehttp://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
https://www.theguardian.com/commentisfree/2016/mar/11/project-fear-started-as-a-silly-private-joke-now-it-wont-go-away
I can appreciate the short summary - and the thinking behind it.
ReplyDeleteHowever, a point of factual correction. The SNP did not invent the term "Project Fear". It was coined by Rob Shorthouse, director of communications for Better Together - and informally leaked by a staffer in June 2013 or thereabouts. It's perfectly true that pro-independence campaigners and the SNP took this as campaign gold, and ran with it - but they did not invent it.
Links:
http://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
http://www.heraldscotland.com/news/13110663.One_year_on__will_Better_Together_change_their_tactics_/
See also Joe Pike's book which covered the behind the scenes of Better Together. A gossipy, lively read.
www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
ReplyDelete" A FORMER director at Better Together has admitted revealing the Unionist campaign's infamous nickname for itself was "Project Fear".
Rob Shorthouse, who was Better Together's director of communications for more than two years, confirmed he introduced the phrase to the wider world by joking about it at a Tory conference.
When the Sunday Herald subsequently reported the name, it went viral on social media.
The Yes campaign latched on to it, saying it perfectly encapsulated Better Together's attitude to the referendum and its constant stream of negative stories about independence."
A small point Steve - it is generally accepted that the No side in the Scottish referendum invented the term "Project Fear".
ReplyDeleteFrom a Scottish perspective, both sides and especially the media seemed to be deploying Project Fear arguments on both sides of the EU debate.
They tried xenophobia in the independence referendum, with statements like "members of our family in England would become foreigners".
Unfortunately, the xenophobia part of Project Fear had more weight in the EU referendum.
Thanks for this; I'd be interested to read more observations and also links to peer reviewed articles on economics of Scots indy - I didn't see so many first time round (2013/14) but what I did see appear to chime with what you say about the short term costs being more concerning than the Yes campaign revealed; that being said, no one was saying that Scotland would see Greek style austerity and economic crises; rather they were saying loans might be dependent on public sector decisions/cost cutting (at least, that's what I seem to recall).
ReplyDeleteI'd be particularly interested in knowing more about what GERS can and cannot tell us because I think the economic arguments have been too simplistic because they've used them as the ground for further analysis, with relatively little on start up costs of an independent state and investment decision potential.
On a couple of pedantic points, although I agree the 'project fear' label was probably damaging (too much happy clapping from the Yes side as a counterpoint), I believe it was a label the Better Together campaign gave themselves and this was leaked and latched onto by the yes side.
The other bigger point is that using the word 'queue' for the EU is probably misleading for anyone not very knowledgeable on EU accession.
Thanks for the post.
Given the relative importance of UK versus EU trade for Scotland, it is not clear to me that this is true. Scotland trades about three times as much with the rest of the UK than it does with the EU. So from a trade perspective (of the type captured in a gravity model), the cost of trade barriers with the UK would probably be greater than with the EU. Similarly, to the extent to which Scotland attracts FDI as a base for entering the UK market as opposed to EU market (I know less about this), Scotland's attractiveness as a base for FDI might not necessarily go in the direction posited (although I think there is more chance of this).
ReplyDeleteI think it is fairer to say that trade and FDI are now much bigger issues for the "economics of independence" than they were last time round when the 'plan' was for Scotland and the UK to remain in the single market (and fiscal transfers and currency were the big issues). I think some serious empirical research is needed to get to the bottom of how this would likely play out, because it could go either way (making independence harder, because of the hard trade barrier with the biggest trade partner; or easier, because of the the ability to retain better access to a potentially bigger trade partner, if you can reorient trade in the long term).
I feel slightly better after reading this compared with yesterday. There are a number of factors now favouring independence as you note, but there are others against it:
ReplyDelete- Financial services make up a large part of Scottish GDP. How will these be affected in the even of independence, especially if a new currency is adopted?
- I believe Scotland would benefit from a very large increase in immigration due to the low population density. Will Scots accommodate this? I note that Scots are less opposed to immigration than the English, but are still majority opposed.
- Will Scots remain as pro-European? There is a substantial number of people who voted Yes/Leave, including prominent MSP Alex Neil. Will an effort by these individuals to change minds against the EU be successful?
- If eurosceptic politicians in other countries gain power this year, will they try to scupper Scotland's aim to join the EU?
Your comments on inward investment and migration are very persuasive. And the idea of turbo-charged austerity requiring a punitive May to smash current funding arrangements to bits seems all too likely.
ReplyDeleteAdditionally, Hammond's threat of a setting the UK up as a tax haven obviously didn't sit well with maintaining a welfare state for a population of 70 million. But it could work with a well-funded welfare state and a population of 5 or 6 million. I can imagine companies fleeing from rUK to Scotland. This seems like a sensible way of optimising domestic and single market access. I can't imagine many fleeing from rEU to the UK: what for - better access to Empire 2.0?
JP
Agree with the premise of the article. Also agree with the bleak long term analysis for the UK. Not sure about the conclusion, though.
ReplyDeleteIt would help, but single market membership is far from a guarantee that an independent Scotland would face a brighter long term future.
Its benefits will be moot if the currency issue isn't adequately addressed. Keeping the pound seems like a non-starter.
Scotland is a deficit state. Brexiteer-run England, like Germany, would find transfers politically unacceptable. You'd end up with a British Eurozone, or Poundzone.
But joining the Eurozone strikes me as even more dangerous. As Mark Blyth notes, that puts the Scottish welfare state at the mercy of Wolfgang Schäuble. It's a recipe for eternal austerity.
Greece and Italy are members of the single market. The alternative would be worse but single market membership isn't enough to paper over large cracks, for which I see great potential.
Scotland must pursue its own currency. But as you say, the SNP put little thought into it the first time around. The Brexiteers will do everything they can to make their life harder.
Yes, there is an economic case. Sadly, I can't see how the poliical or media landscapes are conducive to a beneficial outcome. If there's a serious economic plan, however, it might be worth it.
As we say in Scotland; havers. Unchecked EU migration has done the UK no good at all, and if the embarrassingly lame UCL study doesn't make that clear the Oxford Migration Observatory studies do. What we've done with Labour's idiotic system of in-work benefits - which the Conservatives are desperately trying to reverse out of - is reinvent the production subsidies of the 1970's in another form, and at ten times the cost. Who would really argue for £120bn to be spent on creating jobs which aren't viable in the UK? Because that's what we do. Fruit should either not be grown in Kent, or it should be picked by seasonal workers on permits. Cups of coffee inside the M25 should cost £10. Sandwiches should be trucked in, having been made in Greece. Instead we tax productive enterprises and borrow money to draw in Europe's unemployed (and not one in ten earn more than £21,000) and pay them welfare far in excess of their earned income.
ReplyDeleteAs to Scotland, we've a collapsing education system with lamentable Pisa scores achieved by excluding a massive slice of those most likely to do badly. If Scotland is in the EU the idea that England would see a reason to facilitate any border arrangement at Berwick, short of an EU-wide deal, is laughable. Why would they? The imposition of the common external tariff will be required, given England's economic powerhouse status (certainly compared to Northern Ireland), so Scotland - exporting four times to England what it exports to the EU - would be wrecked. England would have two hostages in the Irish Republic and Scotland, and every reason to insist that in the absence of a deal which facilitates trade across the entire EU they'll happily just "soldier on" with horrific problems within the British Isles.
You say that UK incomes might be 10% lower than otherwise expected by 2030, repeating the claims based on the dodgy Treasury dossier, and all predicated not on the fact of leaving the EU but on choosing protectionism and inefficiency when we can. Why would we? Why would a country trading around the world nurture inefficiency? Isn't that an EU trick, used to defend French farmers? Saying that "if loss x is assumed to be real avoiding it is good" is like saying "if object y is a circle it isn't a square". Of course. Unt?
It must be great to say that of EU citizens resident in the UK, "Everyone knows those rights will be guaranteed during the negotiations.." Will Brits have access to health cover if they live in Spain? If co-payment is brought in for Spaniards what will the situation be for Brits? To be able to avoid all measure and caution must be rather wonderful. A professorial chair really offers advantages over the bridge of the ship of state.
Speaking as a Scot with all my money in international investment trusts, no kids and no property in Scotland I strongly favour an independent Scotland in the EU. I'll pick up the EU passport, mooch around the Canaries and never return to what will - for the first time - genuinely be the Athens of the North.
You are, Craig, entirely correct, of course, that England, being Scotland's nearest neighbour, is naturally the destination of far more Scottish exports than are our more remote trading partners. I strongly urge you to draw attention to this rather elementary point over and over again until everyone understands it.
DeleteThere is no concrete data to suggest that what you say is in fact true. There are no impartially-arrived at figures to differentiate between Scottish exports to England and Scottish exports which are going to Europe via English ports. The GERS figures are not a reliable indicator to the state of the Scottish economy. I strongly urge you to draw attention to this rather elementary point over and over again until everyone understands it.
DeletePatrick. One of the world's largest economies, facing transport issues whatever it does, is not comparable to a small economy doing nearly 80% of its trade across a land border.
DeleteYiraff Yerheid. One of us is. John Swinney accepts the GERS figures. You probably should. Or don't. Become [politically] independent. In many ways I'd just like to see the expression on the faces of the "Yes" mob (and I do mean "mob").
Actually, isn't the size of the Scottish economy relative to that of rUK quite similar to that of the UK economy relative to that of the EU? Of course, exporting always involves 'transport issues'. Indeed, that's kind of what 'export' means. Still, distance makes a difference as much for the UK as it does for Scotland, doesn't it?
DeleteTwo things:
ReplyDeleteFirstly, "Project Fear" was Better Together's own internal name for their campaign. It wasn't invented by the SNP.
Secondly, there is no queue for joining the EU. If a country meets the criteria and is accepted, it can join, even if other countries have been waiting longer.
Other than that, good article!
Project Fear was coined by Better Together, as reported in the Herald. The Yes side were quite happy to use that term as it was so apt!
ReplyDeleteThe SNP did not invent the term 'Project Fear'. The Better Together team during the 2014 Scottish independence referendum campaign called themselves that privately and it leaked out. It was not the invention of the SNP.
ReplyDeleteInteresting piece.
ReplyDeleteTo be strictly accurate, it was someone on the Bettertogether team who invented the term Project Fear (to semi jokingly describe how they planned to campaign), though of course the Yes side seized upon it with gusto.
"Project Fear" started as a bit of an in-house joke in the Better Together campaign, the SNP didn't invent it:
ReplyDeletehttps://www.theguardian.com/commentisfree/2016/mar/11/project-fear-started-as-a-silly-private-joke-now-it-wont-go-away
Very interesting take on the issue, and I agree that the new campaign needs a complete overhaul. I was wholly unconvinced by the SNP's pie in the sky thinking last time around; I voted yes for a different reason. However, as part of my degree studies in the 90s I had actually written a paper on the economic case for Scottish independence and I do generally believe that with sensibly exercised, sovereign control over the levers of economic policy a country like Scotland can be viable as an independent nation.
ReplyDeleteInterestingly, too, the SNP campaign on the economy wasn't that much different from what Kohl did in 1990. The SPD lost that election because they told the people in both parts of Germany that reunification would come at a cost and life would be much harder for the near future. No-one wanted to hear that. Kohl promised them basically manna from heaven and won. Of course, every single thing the SPD had said would happen, did happen and then some. Some parts of the East still haven't recovered. If you asked the people though if the pain was worth it, most would say that it was, even a lot of those in the regions worst affected.
Obviously, Scotland should be more closely compared to the many small European nations who came into existence after the Berlin Wall fell, but I'm not too clued up on their campaigns and the economic outcomes. Might have to look into that.
I do hope this time round we'll go with the Scottish Pound (or "Merk" as some have suggested) and an acknowledgment that independence will require sacrifices, but that it will, in the end, be worth it. Especially when compared with the eventual outcome of Brexit. Most if not all potential benefits will, I expect, accrue as usual to the South East, but the pain will be born here in Scotland, in the North, in NI and Wales in triple measures, politically, socially and economically.
Simon, why haven't you made any mention of the huge deficit Scotland would face were it to leave the UK? We Scots have already voted on this subject, in 2014 and the answer was clear. Sturgeon behaves like a primary school kid, unhappy that others won't play the game in the way she demands. What happens if the SNP lose this vote? IndyRef3? Do they keep going until the electorate gives them the 'right' answer? Arrogance and high-handedness in the extreme. Note also, that you refer to we Scots as Sturgeon's 'people'. No, never. The SNP lost their majority at the last Holyrood election and they have nobody's interests in mind except their own narrow ones.
ReplyDeleteI am confused as to how you feel Simon made no reference to Scotland's deficit. He said, 'With little oil at a low price there is no doubt that the rUK is currently subsidising Scotland by a significant amount. Under Cameron it was reasonable to suppose that this subsidy would continue for some time, if only to prevent another referendum. I do not think we can make the same assumption about Theresa Brexit May.'
DeleteSimon, just under two-thirds of Scotland's trade takes place with the rUK. Only 18% is with the rest of the EU. If Scotland were to join the EU, it would have to abide by the same terms of trade with the UK as the rest of the EU do, which we have strong reason to believe won't be very good. Or put another way: Scotland has a choice between a single market with one of two partners, where the rUK is three-and-a-half times larger a partner than the EU. It doesn't seem to me very plausible an independent Scotland would want to join the EU if it meant foregoing a bilateral deal with the rUK. Aren't they much more likely to go for, at most, EFTA status, or even something more moderated than that?
ReplyDeleteThere is the problem of the EU customs union. Norway is an EFTA but not EU member for example, and does not participate in the customs union. If Scotland stays in the EU, it must remain part of the customs union, and enforce customs checks on the outside of it. This means border controls with the UK, if the UK leaves the EU and doesn't stay inside the EU customs union. That would be the case whether or not Scotland is in EFTA, like Norway. To avoid this, the UK would have to commit itself to always have the same tariffs as the EU common external tariff. The same goes for the Irish border. http://www.irisheconomy.ie/index.php/2017/02/16/brexit-customs-unions-and-borders/
DeleteI agree that Brexit makes the economics of Scottish independence more attractive, but I don't think it goes much beyond avoiding the 10% shock to real incomes by staying in the Single Market. The mechanisms that you have suggested won't provide Scotland with much higher real GDP and may be offset by regulatory drift with the UK.
ReplyDeleteIf Scotland were to remain in the Single Market and the UK were to be outside it (as seems likely given recent commentary), why would you assume that Scotland would be the gateway destination of FDI? For example, Ireland will also have Single Market membership and this will not be interrupted for several years, as Scotland's membership would be during the EU accession phases.
During that time, Scotland would not have Single Market access, so gateway-driven FDI would go elsewhere. Depending on what specifically makes the UK attractive as a gateway to the EU; the advantages of the English language, relatively low regulation, and a financial hub are all located in other areas across the EU that are already Single Market members. Firms would not invest in Scotland years in advance of a possible Single Market membership, so FDI would only go to Scotland for gateway purposes after membership. By this point, the mantle of a gateway into the EU may have been adopted by another state.
On free movement, Scotland already enjoys the benefits of free movement of labour within the EU. What further economic benefits can it obtain from re-entering a situation it already enjoys? The only gains to Scotland come if economic activity from the rUK is displaced towards Scotland due to Single Market membership. This won't happen if Scotland cannot immediately take on the UK's role as the gateway to Europe for FDI.
If Scotland has Single Market membership, then there would be regulatory drift with the UK which is likely to impose its own costs. So, whilst Scotland would avoid the 10% reduction in real incomes following Brexit, independence would not make Scots much better off than that.
Should The Scots vote for independence, and thereby manage to stay in the Single Market, is there not a very good case that significant numbers of financial institutions would then de-camp from London to Edinburgh, resulting in quite a gain in revenues for the Scottish exchequer?
ReplyDeleteOne correction.
ReplyDeleteIt was the No campaign themselves that coined the phrase 'Project Fear'.
Whilst I see and agree with the main thrust of your article, I would like to address a few niggles.
ReplyDelete1. The SNP did not create the term, "Project Fear". The term was first used by The Daily Herald, but inferred that the Better Together team coined the term for their anti-Independence Campaign.
Independence supporters were merely referring to the factual name applied, so I don't see why they are to "blame" for it.
2. Whilst referring to the notional Scottish deficit within GERS, you refer to it being "current", without providing any context. The "current" may imply that this was not always the case but this subtlety could be overlooked fairly easily. I appreciate that the article was concise, but hardly any commentator offers any kind of historical context, recent or otherwise, to demonstrate how Scotland has been plundered already.
3. Given the outcome of the 2014 referendum, and whilst you are right to point out that there are answers required in order for Scots to make a decision, I find it strange that you would suggest that the Scottish Government might retain the currency/monetary union proposals from 2014. This seems so unlikely, I don't see it as being a reasonable question to ask. It just seems that you want to bring it up.
4. Why ask whether the Scottish Government will be "honest" about the short term costs? What makes you think they have lied?
5. There is no "queue" to join the EU. Applicants/applications do not wait in line. An application from and independent Scotland is likely to be fast-tracked, as being made by a state that was already in the EU (albeit as part of another State).
2. The Scottiosh deficit GAP (the amount that the Scot deficit is higher than the UK's deficit) has existed almost the whole time since the 80s oil boom ended. A boom which won't come back, because the remaining oil gets less and less profitable to extract, even when prices are high. The profits are what is taxed. This means an independent Scotland's fiscal position would be worse outside the UK in almost any year. So services must be cut, or taxes greatly increased to pay for them. Not what Yessres typically expect.
Delete3. Why wouldn't they retain them? (Answer: with the UK out of the EU, Scotland may be forced to join the euro as a condition of membership)
4. Because they have unrealistically low estimates for the cost of setting up an independent state, for one thing. Because they used misleading figures re the oil revenue in the White Paper. Both Salmond and Sturgeon have repeatedly said "oil is just a bonus", suggesting independence would improve Scotland's fiscal position. It would immediately worsen it, which is a short term cost. See above. That was a lie; Salmond also tweeted before the indyref that oil analysis showed a boom was on the way; the opposite happened. Not a lie, but not honest.
5. They wait in line until the 27 member states ratify their accession. There is no way to fast-track that, unless you think the ECJ would deem Scotland to inherit its membership from having been part of the UK's membership. You cannot tell whether this is "likely".
2. The Scottish government are required by law to balance their books.
Delete3. Scotland would not be able to join the Euro without meeting the EU requirements for doing so. Sweden for example, has been putting it off for years.
4. The newest SNP figures for the Scottish economy do not include oil revenues. Oil is a bonus. But Oil, in independence would not be taxed under the same regime as it is now, and could bring in significantly larger incomes.
5. As you were informed above THERE IS NO "QUEUE TO JOIN THE EU" - Reddit?
These points are in response to Anonymous's post; Yiraff Yerheid has made some points I would have made.
Delete2. There is an argument that the UK exchequer could be getting much more from oil & gas:
http://www.thenational.scot/politics/15178243.Gordon_MacIntyre_Kemp__Why_is_Norway_still_getting_much_more_tax_from_oil_/#articleContinue
http://www.businessforscotland.com/norway-still-getting-much-tax-oil/ I don't know enough about oil and gas extraction to know if there are flaws in this argument.
4. I would prefer to think of oil as a small financial bonus, set up a Norway-style oil fund, and be prepared for short term pain. Oil is anything but a bonus for the climate, and we need to wean ourselves off it.
5. It seems conceivable that an independent Scotland could join the EU before Turkey, which would have been waiting longer. I doubt the ECJ would deem Scotland to inherit its membership from the UK, but there are factors that could help Scotland join the EEA/EFTA and perhaps the EU: (i) Compliance with the acquis; (ii) a degree of political warmth towards Scotland from European politicians. From the EU point of view, complicating factors would be the Scotland/rUK border, and not wishing to influence the internal politics of a member state.
Seriously? Is this suppose to be a rational analysis of the benefits of Scotland going independent from a supposed left winger? It is sad that those condemning brexit and president Trump can some how be seduced by the 'self-determination' nationalism going on in Scotland. The irony of it. And an Oxford don too. The dislike of May and her government should not be allowed to hide the fact that all western nationalism is dangerous. The Scottish nationalists see their version of nationalism as superior to any other nationalist movements. The most Aryan of all nationalism. You even have the Scottish Socialists arguing for national socialism. As a left-winger i find this scary..
ReplyDeleteQuote - "Scottish nationalists see their version of nationalism as superior to any other nationalist movements. The most Aryan of all nationalism."
DeleteBritnats just do not do irony.
Surely the EU have made clear Scotland will NOT get automatic membership ? Will the EU been filling the spending gap currently filled by WM ? http://www.independent.co.uk/news/uk/politics/scottish-eu-independence-referendum-scotland-join-queue-membership-apply-a7627201.html
ReplyDeleteDo we really ever need to raise taxes to pay for things when we have our own currency? Isn't taxes about redistribution?
ReplyDeleteThe phrase 'Project Fear' was coined by Better Together
ReplyDeletehttp://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
The SNP didn't invent the term Project Fear!!! It's what Better Together called themselves! Jeezo!
ReplyDelete"A FORMER director at Better Together has admitted revealing the Unionist campaign's infamous nickname for itself was "Project Fear".
ReplyDeleteRob Shorthouse, who was Better Together's director of communications for more than two years, confirmed he introduced the phrase to the wider world by joking about it at a Tory conference."
http://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
Hello, thanks for the blog, Project Fear was the working name used by Better Together on the no side of the Scottish referendum and was coined by Rob Shorthouse who was their communication director, and was not made up by the yes campaign. I always thought that was a bit sinister of them.
ReplyDeleteDo you think it's possible Scotland could realistically manage its way into a position of being both in the eea and a free trade deal with the rUK using sterling? Is there enough in this for rUK for them to go for it if Scotland says yes this time?
ReplyDeleteNice piece of analysis, Prof.
ReplyDeleteNot the sort of thing we're used to from down south, to be honest.
I hope you don't mind if I quibble with two points though.
First, it was that Labour/Tory glee club, Better Together, who coined the Term Project Fear about themselves. (Yes, really. From the people who later brought us EVEL. Is there no beginning to their talents!)
You are quite right that both Remain and Leave thought they'd learned the lesson of 2014, and went lazily to their Project Fear of choice: Economic Armageddon v. Fear of Johnny Foreigner, with the results we're all forced to live with now. (I remember well Nicola Sturgeon warning against overplaying the former, having seen it lose tremendous ground during the independence referendum. Of course, her sensible advice was simply ignored. A recurring theme, I fear.)
The second point is the thought that even the formidable Scottish Tory Ruth Davidson "will not be able to prevent Scotland being plundered" by this Westminster Tory government. That really did make me chuckle, Prof! Since the Brexit vote she has a newfound interest in making Brexit a success, and respecting the democratic will of the people. Not the Scottish people, of course, since they voted overwhelmingly to Remain in the EU. But the will of some people, somewhere, regardless.
If we don't become independent in Europe, Ruthie won't be trying to prevent Scotland being plundered, she'll be standing right beside the Pirate Queen directing her nefarious operations.
Jim Fraser
This seems quite unbalanced.
ReplyDeleteThere are a great many factors that made Britain an attractive gateway to the EU, very few of which apply to Scotland, and almost none of which would apply to an 'independent' Scotland.
And are you seriously suggesting that, after Brexit, and after London, a semi-bankrupt Scotland would be #2 on someone's list of go-to places to invest? If that were really the case why have we seen not the slightest evidence of it happening before Brexit?
I note also that over the past couple of weeks you seem to have altered your estimate of the economic harm that we are to suffer consequent upon Brexit from 'a loss of 10% of GDP each year (sic)", to an apparent maximum of "a reduction in average (sic) incomes of 10% by 2030".
What exactly has happened between then and now to account for this huge improvement in our economic prospects?
The term project fear was actually invented by the No campaign. If you wish confirmation please get a hold of the book Project Fear by Joe Pike, who with his late husband, was employed by Better Together. It's a very interesting insight to the No campaign.
ReplyDeleteThis article fails to realise that if Scotland keeps the pound instead of having its own currency, it will automatically be put into economic deflation just as Greece is today, where its currency is tied to that of Germany. Currently this is avoided by the transfer of money from rUK as outlined, but once that stops, Scotland's economic future looks much more like Greece than it does Englands.
ReplyDeleteThanks for an interesting and worthwhile read, but can we clear up a persistent myth?
ReplyDeleteYou refer to there being a queue to joining the EU, however this queue only exists in the negative bile of the Unionists. The EU is not a Fish & Chip shop - there is no queue. All that's required is that aspiring joiners meet the necessary criteria. As an existing member of the EU within the UK framework Scotland already meets the necessary criteria and will have a much smoother path to EU membership. If there was a queue, there would still be a long tailback behind Turkey. They applied to join in 1987 and still haven't met the criteria. In the meantime Slovenia, Croatia, the Czech Republic, Slovakia, Lithuania, Latvia, Estonia, Poland and Hungary have all joined the EU.
You say there is "no queue" and also that there will be a "smoother path". The path is the queue. The existing members will all need to ratify Scotland's accession, and they could impose an obligation to join the euro. In which case Scotland would have to meet the convergence criteria after rejoining the EU. That would inflict horrifying austerity
DeleteThere are two single markets to be considered for Scotland: the EU and the UK. Given that Scotland exports over 4 times as much to rUK as to rEU, it would not be in Scottish interests to stay in the EU single market if barriers go up with the UK. The most advantageous position for Scotland is for the UK as a whole to stay (in some form) in the EU single market. Independence is a distraction.
ReplyDeleteYou are correct. And if Brexit cannot be stopped, Scotland would be better off with the lesser evil of remaining in the UK (but outside the EU). The disruption to trade from leaving the EU or UK might provoke a recession (or not) or do harm over the long term (or not).
DeleteThe immediate problem is what would happen if Scotland became independent, losing the 6% of GDP which is the enxt fiscal transfer from rUK. 6% is about the same as the Great Recession; public spending would have to be greatly cut, or taxes increased, to keep public services at the same standard as they are in the UK. Without the share of Yes voters who believe that iScotland would have better public spending (perhaps with lower tax rates), the SNP would be unable to get a majority for indy. Those voters will get the shock of their lives if indy happens. Now consider many believe "oil is just a bonus" because they were told so, too.
I can’t disagree with your analysis here, but I would add that you’re much too harsh on the SNP and the Yes campaign for popularising the term ‘Project Fear’.
ReplyDeleteIn the Indyref context the term related not just to the content of the argument (which was often dubious enough), but also to the way that it was hyped, exaggerated and trumpeted by an always reliable and laughably unquestioning establishment media. The campaign against Independence was also very much wider than purely economic.
From pensions to organ transplants, from NATO membership to Panda confiscation, from border control to Eastenders black-out, from terror threats to Trump and Putin croneyism smears, no warning was too dire (or too easily refutable) not to be flung at the Yes campaign. And of course there were the relentless warnings that Scotland would be flung out of the EU.
The fact that many of the threatened consequences of a Yes vote have come to pass anyway (removal of renewable subsidies, HMRC, oil, steel, defence and banking job losses, seemingly endless Tory government, to name just a few) only goes to show how right they were to use the term – and why they will be right again if Better Together MkII use the same tactics.
That BT2 will do so is almost certain as they’ve already off an running. The ‘out of the EU’ one hasn’t gone away (even though the Spanish ruling party have again recently stated that they will have no objections at all), but now has been augmented by ‘even if Scotland do manage to stay, they WILL have to adopt the Euro’. This little wheeze, a particular favourite of the Today Programme, ignores the plain fact that a condition of Euro membership is for a country to have successfully stayed in the ERM for a period of two years – something that an independent Scotland could not do even if it wanted to (which of course, it does not).
They’ve also started to ramp up the whining about cybernat abuse – which was almost always unsupported in 2014 and appears to be again now (Kezia Dugdale announcing yesterday that her timeline was full of it – but has provided no evidence whatsoever or explained why nothing at all abusive appears on Twitter).
Project Fear is a very apt term for this nonsense.
Surely this article is trying to rewrite history. 'Project Fear' was invented (and even named) by the No campaign in the 2014 referendum.
ReplyDeleteGood article. Just one niggle. The SNP did not invent the term Project Fear.
ReplyDeleteThis was an ironic self title by a member of Better Together, at a time when they were claiming they would win by 30 points+.
You do realize that the term 'Project Fear' was coined by the 2014 Scottish Referendum No campaign about themselves?
ReplyDeleteDear Prof Wren-Lewis,
ReplyDeleteI would be interested to hear your opinion on the best currency arrangement for an independent Scotland. Should it keep the Pound, establish its own central bank, return to the Scottish Free Banking Tradition (http://people.terry.uga.edu/selgin/ECON8620/documents/ExperienceofFreeBanking-Ch.9.pdf) or join the Euro Area (which is likely to have downsized to a more reasonable size before a possible Scottish independence: http://belowpotential.com/?p=188) ?
Nice blog, I think the term 'project fear' probably came from the independence movement generally, not the SNP specifically.
ReplyDeleteAlthough it was used remorselessly by Team Brexit to discredit the remain side, Team Brexit actually ran its own project fear, based on immigration and notional ideas like the EU imposing arbitrary law with negative consequences for jobs etc...
That the remain said did not exploit this and dismiss these types of arguments with 'project fear' type responses was just poor campaigning.
Hi, the term Project Fear wasn't coined by the SNP or anyone on the Yes side, it was leaked as being a name that the No campaign, Better Together, used internally.
ReplyDeleteHow much worse does the case get if Scotland were obliged to adopt the Euro? Assuming (riskily) that the structure of Euro control is not significantly changed any time soon.
ReplyDeleteFar worse, because Scotland would immediately be borrowing with a deficit of 9% of GDP as John Swinney admitted (but tried to pretend it would be his own voluntary stimulus). That exceeds the Eurozone fiscal rules, and Scotland would be forced into Greek-style austerity. When Yes voters think they will be voting for a speedier recovery from the Great Recession!
DeleteHello there,
ReplyDeleteJust a quick line to let you know it was not the SNP who renamed 'Better Together' - It was themselves:
http://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
If I could make one small correction. The term project fear was created by Rob Shorthouse, communications director of the Better Together campaign as a satirical description of their own campaign.
ReplyDeleteIt's the thick of it writ large!
With all due respect, Professor, the term Project Fear was coined by a director of the Better Together campaign. Link below refers:
ReplyDeletehttp://www.heraldscotland.com/news/13194407.I_admit_it__the_man_who_coined_Project_Fear_label/
The term "Project Fear" originated within the No campaign's Glasgow office. Osborne's "emergency budget" in the event of a Leave vote was dubbed a "punishment budget" and That, I think, was when "Project Fear"
ReplyDeletebegan to be used in the EU referendum context.
Thanks for a very interesting article. In fact I think the idea of a new currency is gaining ground.
ReplyDeleteOne issue: the SNP did not coin the phrase "Project Fear," as you say. It is very well documented that this phrase was coined by Better Together activists when informally discussing their tactics, an item of water cooler chat that was subsequently reported in the press, before being taken up more widely.
So it is not really fair to hold the SNP responsible for this one particular thing. The other charges stand.
"there is no doubt that the rUK is currently subsidising Scotland by a significant amount"
ReplyDeleteThere is actually quite a lot of doubt. See Richard Murphy at:
http://www.taxresearch.org.uk/Blog/2017/03/14/why-economic-data-provided-by-london-will-not-help-the-scottish-independence-debate/