Economy 17 April 2012 From Skintland to a United States of Britain The hysterical debate around Scottish independence is harming independents Print HTML The Economist this week caused a bit of a stooshie north of the border by wading into the murky waters of the independence debate with a front cover that labelled an independent Scotland as "Skintland". Whether the SNP’s irate response to the article was individual petulance or co-ordinated political manoeuvring, we’ll probably never know. What the Economist does spell out is that the hyperboles of neither side are true. Scotland has excellent resources and would not be an "impoverished backwater". Equally, there are not boardrooms full of investors waiting eagerly on the edge of their seats for Alex Salmond to usher them into his socio-democratic paradise. If the economics are just about even, then, why all the fuss? Because secessionist movements are not economic. A recent book by two MIT Economists concludes that the optimal size of a country is a trade-off between the benefits of being big (not enough of the current debate has focused on this) and the costs of heterogeneity. Voters want a government who represents their cultural and social beliefs. It is clear that a large number of Scots have felt disenfranchised by sneering, plummy Westminsterites for generations; but this narrow view disregards those many Scots who are proud to be both Scottish and British and who want to stay a part of the Union for the same non-economic national pride that the Nationalists claim a monopoly on. The debate – an ideological one hidden behind the false pretence of economics – is reminiscent of the USA’s recent primaries, where king-making independent voters are forced to listen to months of diatribe before getting down to the (hopefully) more rational Presidential election. And just like in America, voters who would prefer a pragmatic, economic solution for the UK are instead being offered two increasingly polarised options. But there is an alternative. Of the SNP's "seven key strengths" plan – released hastily in response to Skintlandgate – all seven would be attainable under devo plus/max, yet there is no mention of these options in the Economist article. Most independents (a poor choice of word in this case) would probably welcome further fiscal powers for Scotland within the Union, preserving the benefits of size and free movement of goods and labour whilst allowing the Scottish Government to provide a more tailored basket of public goods. Indeed, fiscal decentralisation in Scotland offers a rare opportunity to make many better off without making others worse off. But the rub with this can be found in another Economist article two weeks previous: Scotland, given the power to lower corporation tax. . . will suck investment and jobs from below the border. There is evidence that this "beggar-thy-neighbour" approach is already happening, with companies such as Amazon awarding large contracts to Scotland over north England thanks to the good (generously funded) work of Scottish regional development agencies (RDAs), which were abolished in England to its detriment. Provided UK growth policy continues to focus on the South East – the SNP’s main, justifiable argument – devo plus/max will breed resentment and inequality in the rest of the UK’s peripheries. For this reason, a fiscally decentralised four-state solution would also be unfeasible. What is required is a bottom-up model for the UK: Further fiscal decentralisation of the four nations alongside the regions of England; elected regional assemblies with tax-and-spend powers and well-funded RDAs; all backed up with the monetary largesse of the British State and the safety net of central transfers to underperforming regions. In short, a federation. This would allow Britain to rebalance via a productivity-driven, regional-growth model whilst maintaining an historic 300 year old Union and – although no-one seems to mention it – avoiding a costly, messy secession. It is fitting, then, that as the polarised rhetoric on both sides of the independence debate begins to emulate American politics, the best solution for our constitutional future might lie in a United States of Britain. › Simple taxes are progressive taxes The Economist "skintland" cover, which was in no way deliberately provocative Dom Boyle is a British economist. Subscribe More Related articles What's to be done about racial inequality? Ignore the spin - social housing is still under threat from the Conservatives Who benefits, and who loses out, from David Cameron’s housing plan?