Scottish Separation

Lindsay Roy Excerpts

Tuesday 10th July 2012 Westminster Hall

[Graeme Morrice (Livingston) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I am delighted that I have been able to secure this Westminster Hall debate on a vital issue to the future of Scotland and its people, in view of the pending referendum.

Before I move to the substantive part of my contribution, I should like to say a few words about the referendum campaign so far. I congratulate those responsible on the recent launch of the cross-party Better Together campaign, which will lead the debate on the positive economic and social case for Scotland’s remaining an integral part of the United Kingdom. In stark contrast to the vacuous and celebrity-driven launch a few weeks earlier of the campaign by those who advocate separation, the Better Together launch, ably fronted by my right hon. Friend the Member for Edinburgh South West (Mr Darling), drew on the experiences of real Scots the length and breadth of the country who spoke passionately about why they believe we are stronger within the UK. This grounded campaign is based on hard facts and figures, exploring the many positive benefits of being part of the UK and exposing the deficiencies in the separatist plan to end this highly successful political, social and economic union.

On the other side of the debate, the Scottish National party and the Trotskyist fringe parties had, somewhat predictably, fallen out among themselves even before Alan Cumming had had time to board the plane to return to his New York home. The splits quickly became even wider when the recently appointed head of the so-called yes campaign ruled out a second referendum question on devo-max, an option Alex Salmond and the SNP are desperately clinging to as they face up to the fact that they cannot win the first question. Even the well-respected senior Scottish nationalist, Margo Macdonald, called at the weekend for a single, simple question on separation and criticised the yes campaign for refusing to spell out the details of what independence would mean.

[Lindsay Roy (Glenrothes) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Livingston (Graeme Morrice) on securing this vital debate. Can he explain why he believes that a referendum should be based around a single question? What are the problems with multi-option referendums?

[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.

--- Later in debate ---

[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.

[Lindsay Roy]

Of the many unanswered questions, which one gives my hon. Friend the greatest cause for concern?

[Graeme Morrice]

That question begs the question: many questions give me concern—not least, defence.

I now move on to North sea oil, which has long been regarded by the supporters of separation as the jewel in the crown of a Scotland outwith the UK. The Library standard note on “Scotland’s economy: current situation and issues related to independence”, published in April this year, highlights three key issues when considering this critical question—the division of the UK continental shelf and, therefore, of the oil reserves; future production levels; and the price of oil.

The argument has always been that a separate Scotland should be due the lion’s share of the North sea’s oil, and that the tax revenue from the fields would therefore accrue to Scotland. The suggestion that a separate Scotland would be due most of the North sea’s oilfields, however, is very much open to debate, and most experts agree that nothing concrete could be concluded before the negotiations on separation. Furthermore, the boundary issue aside, the reality is that oil and gas can simply no longer be relied upon in the way that the SNP has always suggested, because of the production and price questions.

Fossil fuels are a declining resource, and the trend of reduced production is now clear. Oil and gas production is falling rapidly; in 2011 it was down by 19% on the previous year, and recent Department of Energy and Climate Change figures show that oil production fell by 13% in the first quarter of this year and gas production by 14%. Future projections suggest that many North sea fields will have ceased production by the 2020s, while the cost of extraction is increasing year on year.

Oil also has a history of price volatility. The Library note shows that it has varied in recent years from a low of nearly $9 a barrel in November 1998 to a peak of almost $150 a barrel in July 2008. The price of oil is closely linked to production, with a low oil price making it less economical to invest in hydrocarbon extraction. In terms of tax revenues from oil, the 2008 Kemp and Stephen paper referenced in the Library note stated:

“It should be stressed that the projections of tax revenues are subject to much uncertainty. Thus oil prices have been very volatile and this should remain the case over the next few years.”

Oil and gas of course remain an important part of the Scottish and UK economies, and will do so for many years, but to bet Scotland’s economic future on the sector is naive at best and foolhardy at worst. Those latest figures highlight the importance of a balanced economy that is not over-reliant on one industry. They also demonstrate one of the many benefits of Scotland being part of the UK economy: we are able to work together in partnership to share the risks and rewards involved in harnessing our energy resources.