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.