Getty
Show Hide image

Brexit makes Scottish independence much more economically attractive

In 2014, a brighter future outside the rUK was patriotic wishful thinking. Now it is almost a certainty.

It is difficult to think clearly when you watch the utter hypocrisy of our Prime Minister, lecturing the Scottish National Party about politics not being a game, moments before she needlessly rejects a Lords amendment to secure the rights of EU citizens in the UK. Everyone knows those rights will be guaranteed during the negotiations, so it would be so easy to seize the moral high ground by doing that now. But I’m not sure our Prime Minister, and her MPs, would recognise the moral high ground if it was staring them in the face.

But thinking as clearly as I can, and it is very early days, it strikes me that there is a crucial difference between any new Scottish referendum and the one held in 2014. In 2014, there was clear short-term economic pain, with no specific reason to believe things would improve in the longer term. This time there is still that short-term pain, which could be even greater than in 2014, but this time there is a very bright light at the end of the tunnel.

Scotland's First Minister Nicola Sturgeon had no choice but to announce a second Scottish referendum. Brexit is a huge economic and political change since 2014, and she would be neglecting her duty to the citizens of Scotland not to explore ways she could avoid a hard Brexit fate for her people. She was given no choice by the decision to leave the single market, made not be UK voters but by the Prime Minister.

Yet it is also difficult to forgive the SNP for inventing the term Project Fear, which became the vehicle by which the Leave campaign was able to pretend that Brexit would not be the economic disaster it almost certainly will be. It is difficult to forgive them for trying to pretend that the short term costs for the Scottish people of leaving the UK would not be severe. I thought then that it was a huge risk to bear those short term costs when the long term benefits outlined by the SNP appeared to be little more than wishful thinking.

But Brexit changes everything. The economic cost to the UK of leaving the EU could be as high as a reduction of 10 per cent in average incomes by 2030. If Scotland, by becoming independent, can avoid that long-term fate then you have the prospect of eventual economic gain right there. But it is more than that. If Scotland can remain in the single market it could be the destination of the foreign investment that once came to the UK as a gateway into the EU. By accepting free movement, it could benefit from the immigration that has improved the UK public finances over the last decade. No, that is not what you read in the papers or see on the TV, but I’m talking about the real world here, not the political fantasy that seems so dominant today.

There is an additional issue regarding the short term costs of independence. With little oil at a low price there is no doubt that the rest of the UK (rUK) is currently subsidising Scotland by a significant amount. Under David Cameron it was reasonable to suppose that this subsidy would continue for some time, if only to prevent another referendum. I do not think we can make the same assumption about Theresa Brexit May. The prospects for the UK public finances under Brexit are dire, yet after the Budget there seems no way that the Conservatives will put up taxes to pay for the extra resources the NHS and other public services so desperately need. As the situation gets steadily worse, nothing - absolutely nothing - will be safe from continuing austerity. To be brutally honest, if the SNP loses another referendum, even the formidable Ruth Davidson will not be able to prevent Scotland being plundered by this government.

Set against that, however, is the fact that Scotland currently does a lot more trade with rUK than with the EU. If Scotland became part of the single market, and that resulted in trade barriers being created between Scotland and rUK, the immediate impact on Scotland's trade would be negative. That would be another short-term cost. But in the longer term, Scotland would be better off with this arrangement. To see why, imagine two parts of this island, one which has easy access to the huge market which is the EU and one which did not. It is obvious which part would be expected to grow more rapidly.

There are a huge number of issues that still need to be clarified regarding this second referendum. Will the SNP still go for, or at least appear to go for, staying in a monetary union with the rUK and keeping sterling just because it is the more popular option, even though having their own currency is a much more sensible in economic and political terms. Will they be honest about the short term costs? Will the EU give them the chance of staying in the single market or EU, or will they insist they join the queue? What will the UK/EU deal be, and how would that impact on Scotland if it joined the single market.

But the bottom line is that the case for Scottish independence is now much stronger than it was in 2014 in the following sense. In both cases there will be severe short term costs. But in 2014 a brighter long term future outside the rUK was patriotic wishful thinking. Now, if they can stay in the single market, it is almost a certainty.

Simon Wren-Lewis is an economist at the Blavatnik School of Government and Merton College, University of Oxford. This is a slightly revised version of a blog post on Mainly Macro

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
Show Hide image

Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

0800 7318496