Are you Green or are you a Nat? It’s not at all clear if you can have it both ways any more. Indeed, even if you’re a climate change denying, windfarm hating petrol head, the numbers surrounding independence do look a bit shaky. And hat-tip to Tom Gordon’s excellent take down of Salmond’s clever ‘relative surplus’ language, given it loosened up my own thoughts on the matter.
The Scottish Government’s GERS report is the go-to source for reliable information about Scotland’s finances. The number of Nats who cite it in their arguments is evidence enough that it’s legitimate. For Greens who want Scotland to go it alone however, it doesn’t make for happy reading. Principles and aspirations will clash crudely over the question of oil.
Let’s start with a basic fact – if we burn existing oil reserves over the next few decades the effects on climate change would be catastrophic. We should stop drilling, well, now. The world should ideally come together, allocate existing oil reserves appropriately and get cracking with creating green energy on a global basis. Optimistic? Yes, if past global warming summits are anything to go by, but that doesn’t mean it shouldn’t remain as Plan A. We’re burying tomorrow’s future to avoid facing up to today’s inconvenient truth, and Scotland looks set to be at the forefront of that unpardonable folly if the SNP gets its way.
The basis of Scottish independence rests heavily on profiting from the black stuff under the North Sea over the next few decades so let’s look at the figures (taken from GERS):
Scotland’s Income – £53.1bn
Scotland’s Current Spending – £63.8bn
Defence savings (after independence) – ~£2bn
Revised Spending – £61.8bn
Annual Deficit in an independent Scotland – £8.7bn
Scotland’s geographical share of oil revenues is £7.9bn which, if removed from the equation, would push our annual deficit out to £16.6bn in a single year. Probably higher through jobs lost, reduced investment etc being taken into consideration.
Our current share of the UK’s debt is estimated to be about £81bn, and keeping in mind that the UK Government has ~£60bn locked into RBS and Lloyds (the latter largely due to HBOS’ failings), an independent Scotland’s finances would be starting off in dangerously deep red territory.
‘That’s the way of the world’ many will say but, well, is it really? Proponents of independence talk about other countries who are able to make it on their own with similar population sizes to Scotland, so let’s look at some of them and what their levels of debt are:
UK – $1,592bn (~63% of GDP) (GDP ~$2,522bn) (excludes RBS/Lloyds intervention)
Scotland – $131bn (~61% of GDP) (GDP ~$215bn)
UK deficit – $201bn
Ireland – $228bn (~103% of GDP) (GDP ~ $221bn) (Deficit -$17bn)
Belgium – $484bn (~94% of GDP) (GDP ~ $515bn) (Deficit -$20bn)
Sweden – $191bn (~35% of GDP) (GDP ~ $545bn) (Deficit -$6.5bn)
Norway – $267bn (~55% of GDP) (GDP ~ $485bn) (Surplus $39.5bn)
Denmark – $141bn (~42% of GDP) (GDP ~ $332bn) (Deficit -$8bn)
Portugal – $264bn (~111% of GDP) (GDP ~ $237bn) (Deficit -$6bn)
Finland – $125bn (~48% of GDP) (GDP ~ $263bn) (Deficit -$5bn)
Czech Rep – $89bn (~41% of GDP) (GDP ~ $215bn) (Deficit -$8bn)
Slovakia – $42bn (44% of GDP) (GDP ~ $96bn) (Deficit -$2bn)
Slovenia – $20bn (40% of GDP) (GDP ~ $50bn) (Deficit -$0bn)
Latvia – $12bn (43% of GDP) (GDP ~ $28bn) (Deficit -$0.5bn)
Estonia – $1.6bn (7% of GDP) (GDP ~ $22bn) (Deficit -$0bn)
(NB: I’m no economist, and finding a single, reliable source of the above information proved incredibly difficult. If there’s errors in the above, so be it, but the numbers are intended to be indicative and to form my own view of Scotland’s position in the world post-independence)
There seems to be two sets of European countries out there of similar size to Scotland – the southern states with small debt levels and small GDPs, and the Northern/Scandinavian states with higher debt levels but higher GDPs with which they can service these debts. Yes Scotland is looking to start a new country with high debt levels and a relatively low GDP. That would be a challenge and deserves considedrable scrutiny between now and 2014. I’m not saying it’s not insurmountable, but it puts Scotland in a more difficult place than most of our similar-sized European neighbours.
We have similar debt to Finland but they have a higher GDP (by $50bn) and smaller deficits. We have the same GDP as the Czech Republic but they have debt only two thirds the size of ours.
You could only say we are doing better than Ireland, Belgium and Portugal in the above list, three countries that don’t exactly have their economic problems to seek.
Further to this, and most worrying of all, is that Scotland would have to burn its green credentials just to go backwards slowly, rather than going backwards quickly. An annual deficit of about £9bn (assuming we do keep drilling) on top of a current debt of £81bn does not bode well for Scotland’s economic health.
I had always thought that polls would only show movement from No to Don’t Know or Don’t Know to Yes, but having finally looked through the figures, I can feel the resolve for my own would-be Yes vote draining away.
Now, the big argument the other way is that it is the UK that has driven us to this parlous state, an argument that I have a lot of sympathy with and a point that makes me disappointed and not a little bit angry with recent Westminster Governments. Scotland could chart a different path for itself more successfully than it could as a part of the United Kingdom, but Yes Scotland cannot pretend that it’s a clean slate. We would be starting from further back than any of us would have liked.
So, the ball is certainly in the SNP’s court to explain how a new country could swallow these figures and move on into financial health, and hot air around relative surpluses or green energy revolutions is not going to cut it. How would Scotland cut its debt levels and what is the business plan to get through the first 5, 10 and 20 years? Nothing short of that will suffice I’m afraid.
I have always believed that Scotland stands a better chance of making independence a success from a position of strength rather than weakness. These figures do nothing to change that view, quite the opposite in fact.
Too wee? Not necessarily.
Too poor? Right now…..? Yes.