And so there we have it. After waiting almost a decade for a coherent plan for independence with which we could answer questions we have been presented with something that’s been typed up for you.
Let’s just whizz through it. First, we’re back with the idea that you can have a central bank with no monetary powers. It seems to only have two functions – to raise capital from commercial banks to enable future bailouts (lender of last resort) and to provide data to government.
Since it seems very unlikely that the UK will tell commercial banks they can reduce the deposits they must keep with the Bank of England, Scotland’s entire monetary wellbeing is almost completely dependent on a significant surcharge on commercial banks operating in Scotland. Let’s see how that goes down.
And this glosses over sooooo much. That means the commercial banks have a lender of last resort (if they go along with effectively being their own lender of last resort) – but who is the Scottish Government’s lender of last resort?
I’m worn out pointing out that almost no western European country survived Covid without Quantitative Easing or a bailout from the IMF. What would have happened during the recent Sterling crash? There is just no serious information in this section, but lots of words. Scotland the country has no lender of last resort under SNP plans, only its banks.
And we’re back stuck with the Growth Commission’s six economic tests nonsense. It claims it would be up to the Scottish Parliament to decide when a currency was introduced but up to the ‘central bank’ to decide when the economic tests were met.
If the monetary stuff is largely about using a lot of words to disguise the lack of a workable plan, the fiscal section is that on steroids. There are to be fiscal rules, but you don’t know what they are. There will be caps on deficit, but you learn neither what the cap is nor the projected deficit.
As best as I can make out the SNP now seems to hint that it won’t borrow to cover the deficit but set deficit rules. The pain (it says) will be lessened by North Sea Oil revenues (back to the future stuff that), so mark that down as the first time oil revenues have been spent.
Are we maintaining services at current levels and borrowing to fill the deficit, or are we cutting services to match tax receipts, or are we increasing taxes to close the deficit?
So where is the ‘deficit discipline’ coming from? Are we maintaining services at current levels and borrowing to fill the deficit, or are we cutting services to match tax receipts, or are we increasing taxes to close the deficit, or some combination of them all – or what?
When the Growth Commission was launched it spelled out the fiscal tests. Unfortunately that meant that anyone with a calculator could work out that this mean harsh austerity, worse than anything George Osborne imposed. To solve this problem the Scottish Government seems simply to have taken out all the numbers. Amazing.
Then we get the investment programme. This is going to create an ‘oil fund’ of £20 billion (that’ll be the oil money spent again). But then the capital investment over the first decade is going to be funded by oil (that’s it spent three times). In reality there is no oil fund, it is revenue spending. In fact it later admits that oil revenue is only £1.5 billion a year so it will borrow the rest.
Which means that as best I can tell from what information is in this, Scotland is going to get through the first ten years of independence by borrowing only £5 billion. That doesn’t include borrowing to fund deficits, but we’re not told anything about that in the fiscal section.
Where this degenerates from obfuscation to comedy is when its investment programme is mentioned. This is going to be an investment programme of £20 billion and its list of what its going to do with that money is stupendous. I mean really enormous. As in many, many, many times bigger than the money they are going to spend on it.
Where is the rest of the investment coming from? It doesn’t say ‘privatise everything’ – but then it doesn’t say ‘austerity’ either and we seem to be getting that.
So we’re getting about one per cent of GDP invested per year over the first decade. This is pitiful – climate change alone requires about three per cent of GDP to be invested. That is one half of the entire economic transformation agenda.
The other half is… rejoin the European Union. In fact this report as a whole is more an advert for the EU than it is for Scottish independence. Rejoining the EU is going to boost Scotland’s economy so, so much that everything will be fine – or that seems to be the message we’re taking from this.
But when? And how? There will be no Scottish currency for probably a decade under this proposal. To join the EU you have to meet monetary and fiscal conditions and Scotland can’t meet the monetary conditions until it’s had its own currency for about three years. As to the fiscal consequences of joining the EU we hear nothing – and those would be brutal.
It doesn’t say ‘privatise everything’ – but then it doesn’t say ‘austerity’ either and we seem to be getting that
This is the story so far then; we’ll grow our economy through fiscal discipline, tiny, tiny amounts of investment and joining the EU which will let us start a currency and then once we start the currency we can join the EU, but we won’t give you numbers for any of this. Confusing?
I’ve totally stripped away the endless recycled material about Scotland’s economic potential since it is just about identical to the text in the last half dozen poorly-received economic papers. Which basically leaves only trade and borders.
Trade is going to be great because we’ll join the EU. Except almost everything we export to the EU will have to go through England because they haven’t addressed export capacity. So our trade with the EU may be non-compliant for getting into England (assuming diverging regulations) and if it is compliant to get into England it may not be compliant to go to Europe. Are you following this?
But because we’ve joined the EU (twice, once in our imaginations, the second time basically also in our imaginations) there will be a border with England that isn’t hard because having used the phrase ‘hard border’ so much she’s worn out with it the First Minister has just decided the phrase is no longer useful. Sorted.
Actually that’s not how they’re going to sort the border. They’re going to do it by agreeing with the UK to run the border jointly. That won’t really change much, first because it doesn’t change the customs checks, and second because the UK will probably refuse to agree to it for the purposes of campaigning (if potentially not in reality).
What has happened here is that the Scottish Government has republished the Growth Commission but has taken out all the numbers that proved the Growth Commission was a manifesto for austerity. It combines this with the same old text that goes in every economic policy paper the government puts out.
It then takes all the criticisms of the Growth Commission and makes them go away by assuming that you don’t know what monetary policy means, or will fall for their ‘its a central bank, honestly’ line. It has Scotland rejoining the EU through the power of wishing for it very hard, doesn’t really have any solution for the border and proposes that Scotland basically stops investing in itself for a decade.
You can pick your reason for getting off this mad, mad bus. It could be because you think a government should have some form of lender of last resort to save it in a crisis. It could be because you’re not keen on austerity. It could even be that you’re not keen on not being told how much austerity is proposed.
It might might be because you realise they have no economic plan for Scotland. It could be because you believe climate change is real and that we need to invest more than one per cent of GDP in it over the next decade. It might be because they’ve failed to come up with any answers for trade or borders.
Or it could be because the whole thing is utter pish. Pick your reason, but for god sake get off this mad, mad bus.