I have spent time this week trying to establish the economic impact of Scotland’s referendum. I have also listened to a lot of Scottish businessfolk doing a lot of reiterating that they are “open for business”. And I have been entertained by this David Cameron Taylor Swift parody.
Anyway, in that very traditional English spirit of writing to someone in charge to complain, I’ve decided to write a letter.
Dear England, Wales, Northern Ireland and the City of London (and the overseas territories)
Today, Scotland is having a vote on whether or not it wants to stay in the Union.
And if we’re honest, it’s holding the rest of you to economic ransom. Their vote will have an impact on your lives and your country and your pound without any consideration for you or your families or your businesses.
This is not fair.
In order to re-establish the balance, I want to suggest a concurrent referendum to ask the question “Do you even want Scotland to stay anyway?”
Let’s bear in mind that the general position of the Scottish Nationalists is that Scotland and the rest of the UK are caught up in a Lady Gaga-style Bad Romance*.
*Note to the email subscribers – that’s a link to a hilarious video parody on youtube. Watch it on the blog, or on youtube.
But Bad Romances go both ways…
According to everyone (even the Nationalists themselves – although they downplay it some), leaving the Union will leave Scotland in a really sh*tty economic place:
- The Scots will have no currency, because Westminster have made it clear that they can’t just use the pound. And they’ll have to apply for membership into the Eurozone – which will take some time. So in the interim, there is currency awkwardness.
- RBS and Lloyds have said that they will move themselves to London.
- Edinburgh is the second largest Financial Centre in the UK – but financial centres don’t tend to last in places where there is currency awkwardness. I suspect that the financial world will follow RBS and Lloyds to London – where there is the pound sterling and general security.
- British businesses in Scotland have said that they’ll be raising prices – so there’ll be a swing of inflation on that non-existent-as-yet Scottish currency.
- Over the next 20 years, Scotland’s working population is set to shrink (while the rest of the UK’s is set to grow). According to the Economist, in 2012 there were 3.2 working people for every Scottish pensioner. By 2037, that ratio is due to fall to 2.6.
- Scotland’s pensioners mean a greater healthcare burden – but NHS Scotland faces a £400 million funding gap (according to the BBC). So with a new government transition, Scotland can expect to see large reductions in its healthcare offering – costing jobs and lives and so on.
- But worry not – Alex Salmond intends to use Scottish oil to build a Sovereign Wealth Fund like Norway’s in order to keep everyone happy!
- Only, oil prices are falling, the Scottish/British oil industry is plagued by unplanned shutdowns, and the theory is that the Northern Sea is quite depleted. Tax revenues from oil are independently forecast to drop down to £3.4 billion per year by 2017/18, from a hey-day high of £12.4 billion in 2008/9.
- Oh, and did we mention the cleanup costs of those depleted oil fields? Yes – Scotland will have to pay for those. £10 billion to decommission all that undersea piping – in addition to the pledge of paying half of the operating costs of the Oil Industry annually.
- So Scotland will also have to rely on its other exports of whiskey and salmon… But you know, in 2012, Scotland’s exports were £4,800 per head – compared to £7,800 per head for the UK as a whole. Meaning that a Scottish exit will leave the remaining UK residents with higher exports per head than before.
From where I sit, this all sounds like a pretty solid argument in favour of the rest of the UK kicking Scotland out. Because:
- The move of RBS, Lloyds and Edinburgh’s financial services to London will get you more jobs and more prominence (if not more tax revenue).
- British businesses with Scottish interests will earn more money with their raised prices.
- The UK will get to avoid having to support the future pensioners of Scotland (or, at least, they’ll get to negotiate passing some of that cost on to Scotland’s new government) – giving it a partial reprieve from its pension-funding crisis.
- The UK will also get to avoid those funding shortfalls for the Scottish NHS – you can leave those happily in the hands of the Scots, and get on with other things.
- Scotland would also take over a portion of the National Debt.
- Perhaps you’ll lose access to some oil revenues that were disappearing anyway – but then you’d also get to avoid all those clean-up costs. Bonus.
- The UK economy will not have to support those unproductive Scots (studies have shown them to be 11% less productive than the rest of the UK).
- And you won’t have to continue to listen to Alex Salmond.
- Oh yes – sure, the pound will probably weaken without that oil revenue. But that oil revenue was sort of disappearing anyway. And a little weakness in the pound might make other British industry more competitive.
So why not compel them to become independent? Instead of being thrown into disarray every decade or so when the Scottish Nationalist Party feels like the time is right for another referendum?
Also – wouldn’t it be interesting to watch a territory get foisted into freedom…
Just a thought.
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.