What would an independent Scotland look like?

I want to imagine that independence could be a success - but grubby, difficult questions about money, jobs and services are not going away.

I want to imagine a world where Scottish Independence is not the disaster some think it will be. I want to imagine a world where it is a success.

Imagine that Scotland enters a phase of unprecedented economic growth, spurred on by the oil revenues that have been diverted from it for all these years. Coupled with the lowest corporation taxes in Europe, the Scottish economy is thrumming along with luxurious healthcare, free education up to and beyond graduate level, a supportive welfare state and pensions that are the envy of the world. Tax revenues from oil and corporation tax help the budget deficit stay in check. Even though there is a heavy dependency on the oil price, the markets give Scotland the benefit of the doubt – the sovereign credit rating of Scottish government debt is higher than the UK and their government bond yields trade well below that of the UK gilt market.

Meanwhile, in England and the rest of the United Kingdom, the government badly miscalculated the benefits Scotland brought to the Union. Bereft of trade and oil revenues the provision of local and national services has gone into a rapid generational decline. Taxes are high for individuals and businesses in a vain attempt to balance the budget, which is continuing to rise to record levels, while the cuts to government spending only serve to exaggerate the decline.

People and businesses have been voting with their feet for some time now. Migration from the once prosperous South of England is increasing at an alarming rate; both businesses and the most talented people are leaving in their droves, sending English property prices, which peaked just before the referendum in 2014 into a long-term secular decline. Meanwhile, Scottish property prices continue to make new highs each month. This is causing problems not least of which is the increase in inequality of wealth distribution in Scotland as house building can’t keep pace with the growing population.

The Scottish government is struggling to control the effects of house price appreciation because it has retained the pound and tied itself to UK interest rates. Much as Hong Kong experienced when tied to the US dollar and it had US interest rates and Chinese growth rates, Scotland now has a high growth rate and generationally low interest rates. Inflation differentials are rising between Scotland and the UK; inflationary Scotland habitually has a cost of living much higher than the deflationary UK. Broad money supply is growing at an uncontrollable rate. There are concerns over Scotland’s financial institutions. There are dark mutterings about the “Darian Scheme” – the financial disaster that drove Scotland into the arms of the English in 1707.

At the same time South of England immigration is having a profound impact on the political landscape; the history of Scottish voting patterns since the Second World War shows that Scotland hasn’t always been a centre-left country as some assume. There was a time when it was split 50/50 between Labour and the Conservatives (see graph). The latent conservatism of Scotland has now been unleashed mainly because it is dissociated from English conservatism but also because the new immigrants have a tendency not to vote for Labour or Scottish Nationalists. Scotland has become Conservative while the UK, because of its problems, now habitually votes Labour, a reversal of the pre-referendum status quo.

Scotland had been exporting some 30,000 people annually until the late 1980s. However, this tailed off and as the referendum approached Scotland had already become a net importer of people. Official estimates of population growth had already expected the Scottish population to rise above 6m in the years following the referendum. But global recognition that “Scotland has done something right” has led to an influx of Scottish talent that left the country in the thirty years prior to the referendum. First and second generation Scots have returned and converted their nationality from Australian, Canadian, New Zealand and US back into Scottish passport holders, further pressurising housing shortages and claims on the state. Scotland population swells from 5.3m in to nearly 8m in just fifteen years...

It’s quite good fun to do this; to go into a world of utopian Scotland and a dystopian UK, and one could go on for some considerable time. We haven’t even imagined a Scottish financial system (would it cheapen the argument to be the first to call for the Scottish stock market index to be called the SNP500 or their government bonds Scottish Guilts?) But what does emerge is that if you think independence can be seen merely as an exercise in democratic extension, that it isn’t about grubby things like money and jobs and services, then you should think again. A fully independent Scotland will have profound effects on the very nature of Scotland for generations to come, not all of which were obvious at first sight or, ultimately, a price worth paying.

The headquarters of the Yes campaign in Glasgow. Photograph: Getty Images.

Head of Fixed Income and Macro, Old Mutual Global Investors

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.