Opinionomics | 29 March 2012

Must read analysis and comment. Featuring Tim Worstall, Ezra Klein, and – yes – pasties.

1. Britain struggles to kick its addiction to consumption (Telegraph)

Jeremy Warner seems confused, arguing that reducing Britain's addiction to consumption is much needed, but that doing so is directly and substantially harming growth. He is unclear whether we should be applauding Osborne for making his decisions with an eye on the long-term, or condemning him for not putting off the "rebalancing" until the more important matter of the ongoing depression is sorted.

2. Not a tax on pasties, but a right-wing tax on heat* (LabourList)

*Not really. Conor Pope argues – perhaps tongue-in-cheek – that liberal atomic motion within cheap savoury snacks will lead directly to the eventual disintegration of the traditional nuclear family

3. Papers I need to read: Do tax cuts really help growth? (Washington Post WonkBlog)

Ezra Klein links to a paper that fairly demolishes George Osborne's argument that tax cuts lead to growth.

4. Spiked on rare earths (Tim Worstall)

Worstall applies his day-job expertise to look at the global market for rare earth metals – not as rare as their nam implies.

5. Scotland’s economy running on empty after Osborne’s Great Stagnation Budget (Left Foot Forward)

Willie Bain MP presents a (partisan, obviously, but) well-researched account of the budget's impact on Scotland

Pasties are left to cool in a shameless tax avoidance scheme. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.