Scottish Separation

Debate between Graeme Morrice and Mike Weir

Tuesday 10th July 2012 Westminster Hall

[Graeme Morrice]

I am grateful to my hon. Friend for his intervention. As I continue with my contribution, I will come to that point and develop an argument accordingly.

According to reports yesterday, it now looks like the Greens could soon follow Margo Macdonald’s lead, potentially leaving the SNP in the ludicrous position of being the only party supporting a multi-question referendum on the issue that it has spent its entire existence campaigning for.

[Mr Mike Weir (Angus) (SNP)]

The hon. Gentleman is talking nonsense. The SNP position is and always has been that it is in favour of independence. As the First Minister has made clear, if there were a demand from civic Scotland for a second question, it would be considered. To go on about this is nonsensical. Perhaps the hon. Gentleman would like to get to the meat of this debate.

[Graeme Morrice]

I note the hon. Gentleman’s intervention. I am surprised that, although for its entire existence the raison d’être of the Scottish National party has been independence, it wants to get sidelined on the issue of devo-max or devo-plus, without the questions being defined.

[Graeme Morrice]

I could not agree more. I will certainly develop that theme as I progress in my contribution.

Sadly, the other predictable aspect of the campaign so far is the level of vitriol already displayed by the so-called cyber-nats—small-minded people who seem to glory in spewing forth hatred about their opponents on every available website and online forum. The contributions of these people, who often hide behind online anonymity, only serves to harm the debate on Scotland’s future, not to mention our nation’s reputation as a welcoming and tolerant place. Although I am willing to accept that some of these extreme nationalists have nothing officially to do with the SNP or the yes campaign, it would be refreshing if more senior SNP figures condemned and disowned their extremist bile. Any interventions?

[Mr Weir]

Yes, some horrible things are said on Twitter, but there are also, if people want to use such terms, cyber-Brits, who make equally vicious attacks on nationalists. It is terrible that the hon. Gentleman is being so one-sided. This is supposed to be a debate about the economic arguments, but we have heard nothing about that, which is typical of the no campaign so far.

[Graeme Morrice]

I am coming on to the meat of the debate. The hon. Gentleman doth protest too much.

I shall now move on to the meat of this morning’s debate—the economic consequences of Scottish separation. Some Scots regard the potential economic consequences of breaking away from the UK as neither here nor there. So important to them is the dogma of Scotland going its own way that even if every shred of available evidence demonstrated beyond any doubt whatever that Scotland would be worse off outside the UK, they would still not hesitate to break up Britain. To most Scots, that stance—call it the “Braveheart” factor, or whatever—is simply not credible. Although the debate is and should be about more than economics, there is little doubt that at its crux are the economic consequences of separation. The vast majority of our fellow citizens are interested in what will improve their lives and those of their families and the communities in which they live.

It is hard to deny that, in these turbulent economic times, the size, strength and stability of the UK economy gives Scotland’s businesses a huge advantage over their competitors on the continent and elsewhere. Scotland’s biggest market is the rest of the UK and it has undoubtedly benefited from being an integral part of the world’s oldest and most successful single market. I believe that most people in Scotland already recognise and embrace this. A survey conducted by the Scottish social attitudes survey at the end of last year showed that fewer than one in three Scots back separation, which was roughly the same figure as in 2005. Hon. Members will also have noted the results of the latest opinion poll on separation, conducted by TNS BMRB after both campaign launches, which puts those opposed to separation on 50% and those in favour on just 30%. The latter figure is the lowest received in favour of separation in five years of surveys by the Edinburgh-based pollster and means that in just six months a deficit of nine points for those backing separation has more than doubled. Judging by these figures, even the most ardent nationalist would struggle to argue that the yes campaign had got off to a good start.

Putting opinion polls aside and accepting the premise that, to coin the well-known phrase from American politics, “it’s the economy, stupid” that will determine the outcome of the referendum, let us turn to the available evidence on the key economic questions. Some of the most interesting expert contributions to the debate so far have come from Professor John Kay, a former economic adviser to Alex Salmond. Writing for The Scotsman shortly after the Scottish Parliament elections in May last year, Professor Kay said:

“Independence, if achieved, would bring complications—both political and economic. The reality is that Scotland would gain little by full independence. In the modern world, economic sovereignty for small nations is inescapably limited, and political sovereignty is largely symbolic.”

More recently, while speaking at The Scotsman’s “Economics of Independence” conference, Professor Kay spoke of his belief that Scotland faces five years of economic uncertainty if it opts to separate from the UK.

The potential economic damage ensuing from a long period of transition to a separate Scotland was highlighted at the same conference by oil expert Professor Alex Kemp of Aberdeen university. Professor Kemp said that the complex process of transferring responsibilities from UK Departments to a separatist Scottish Government would involve

“negotiations extending over a considerable time”.

Such fears about the potential impact of a vote for separation, and the instability and uncertainty inflicted on Scotland’s economy, have been voiced by many other academic and business leaders over the past few months. Even one of the SNP’s highest-profile supporters and financial backers, the highly successful businessman Sir Tom Farmer, does not support its separation plans. He stated in a recent BBC interview:

“I’ve never seen or heard anything yet that’s convinced me independence is the right way forward for Scotland. It’s not just about money, but, if it ended up that the country was going to be in dire poverty because of independence, I don’t think anybody wants that.”

For my part, I have drawn on the best available evidence for the likeliest economic impact on Scotland of separating from the UK. I want to focus on three aspects of the economic debate: oil and gas revenues; the share of the UK’s public debt that Scotland would assume if it were to separate from the UK; and a separate currency in Scotland.

Those three vital economic and financial questions were among several highlighted in the excellent Select Committee on Scottish Affairs report on “The Referendum on Separation for Scotland: Unanswered Questions”, published in February this year. I take the opportunity to pay tribute to the Committee’s excellent work. Under the skilled chairmanship of my hon. Friend the Member for Glasgow South West (Mr Davidson), it has embarked on a forensic investigation of the many unanswered questions that hang over the separation debate. My hon. Friend and his colleagues—I see one present today—deserve the thanks of all Members of this House for the detailed and meticulous way in which they are examining so many important points worthy of further detailed consideration, not least the economic matters on which I will now focus.

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[Graeme Morrice]

I entirely agree with what my hon. Friend says, and it is a further argument.

[Mr Weir]

Why is Scotland, of all countries, incapable of having a regime to support renewable energy? Countries such as Norway, Lithuania and Ireland can all do it. Also, if we are talking about the cost of energy, why does a generator in the north of Scotland have to pay £21.96 to feed into the grid, while a generator in London receives a payment of £13.35? The existing system is hardly fair.

[Graeme Morrice]

I certainly agree that Scotland is capable of sustaining a renewable energy industry, but we will do better together within the United Kingdom.

I now want to move on to the share of the UK public debt burden that should be assumed by a separate Scotland. That a breakaway Scotland would have to shoulder some of the UK’s public debt is beyond question. What is certainly open to debate, however, is how the debt to be assumed should be calculated and what factors would contribute to those calculations, including the share of the debt accrued through the bank bail-out. Members are aware of a number of recent studies to have explored this critical question.

February’s National Institute of Economic and Social Research report on the economy of a separate Scotland explored the difference between apportioning debt per capita or pro rata, concluding that there is only marginal difference between the two. The report stated:

“With a pro rata transfer of existing UK public debt, Scotland would enter independence heavily indebted with no insurance from fiscal risk sharing or fiscal transfer mechanism with the rest of the UK.”

The Institute of Economic Affairs report published just last month suggested that a separate Scotland could be saddled with an eye-watering £110 billion national debt. The report highlighted that, with the UK’s debt having recently topped £1 trillion and the expectation that it will rise even further by 2015, Scotland’s share could be even greater than £110 billion. The report’s author, Dr Richard Wellings, suggested that that high debt, which would be comparable to Portugal’s at present, coupled with decreasing oil revenues, as already referenced, would almost certainly require urgent cuts to public spending. Even calculating the public debt on the basis of population size, a proposal described as reasonable by a spokesperson for the First Minister, the report made Scotland’s share of the debt around £93 billion—still a significant burden for a small nation—and around three times greater that the Scottish Government’s current budget.

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[Graeme Morrice]

None of them. That is clearly a problem, and a step backwards.

[Mr Weir]

My understanding is that when Gordon Brown—perhaps I should still call him the right hon. Member for Kirkcaldy and Cowdenbeath—was Chancellor, his greatest boast was that he had made the Bank of England independent. How does Scotland have any influence on it at the moment?

[Graeme Morrice]

In terms of setting interest rates and so on. The Chancellor still has a role in that regard —a role that a separate Scottish Government in an independent Scotland would not have. There would be no accountability, no influence and no say in that, and the UK Government have confirmed that officially.

Whichever way one looks at the matter, the SNP’s policy of retaining the pound sterling as a separate currency for Scotland is a proposal engulfed by uncertainty. At the same time, the SNP insists that a separate Scotland would be entitled to automatic membership of the European Union—a position that is in serious doubt, as highlighted by last year’s well documented Library standard note on “Scotland, independence and the EU”, which states:

“There is no precedent for a devolved part of an EU member state becoming independent and having to determine its membership of the EU as a separate entity, and the question has given rise to widely different views.”