Brexit makes the economics of Scottish independence much more attractive

Simon Wren-Lewis, Professor of Economic Policy at the Blavatnik School of Government, Oxford University, 14 Mar:

The economic cost to the UK of leaving the EU could be as high as a reduction of 10% in average incomes by 2030. If Scotland, by becoming independent, can avoid that fate then you have a clear long term 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 so benefited 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, not the political fantasy that seems so dominant today.

… the bottom line is that the case for Scottish independence is now much stronger than it was in 2014. Then a brighter future outside the UK was patriotic wishful thinking. Now, if they can stay in the Single Market, it is almost a certainty.

Strange Times And Constitutional Politics: Lessons from the breakup of Czechoslovakia

A thoroughly fascinating and enlightening Medium post from January 26, 2015 by Gordon Guthrie, former SNP parliamentary candidate, and author of Winning The Second Independence Referendum—a manifesto for Scotland and the EU after Brexit:

I thought it might be appropriate to publish a long analytical document that I circulated amongst some SNP chums way back in 2007.

It was written in the dog days of the Scottish General Election when it was clear we might be in Government — which would bring the whole question of an IndyRef came into play.

It looks at the breakup of the Czechoslovak Federation. The Velvet Divorce was very interesting for a number of reasons:

  • it was velvet, no violence, no ethnic cleansing
  • Czechoslovakia broke up despite the fact that 85% of the population favoured the continuation of the Federation
  • the split was driven by the Czechs and not the Slovaks — the nominal ‘oppressed’ minority
  • the Czechoslovak Federation, like the United Kingdom, was an instrumental union — a union for a purpose

This memorandum was written to explain the circumstances of the Velvet Divorce and to draw out some lessons for the conduct and positioning of the Independence Campaign.

Friday roundup

New poll puts support for Scottish independence at 50%

A new Ipsos MORI telephone poll for ITV has support for independence at 50%1, 2% higher than the last Ipsos poll in September 2016. It’s the first since July to put independence ahead.

Of those who gave a voting intention (954 of the 1,029 surveyed), 54% of men were for Yes; 46% for No. Among women, 56% were for No; 44% for Yes.

In terms of age, those 16-24 were 59% Yes, 25-34 were 64% Yes, 35-54 were 51% No, and 55+ were 60% No.

One thing that struck us was that 38% “…completely support[ed] Scotland staying part of the UK”, whereas only 28% completely supported independence2. The former is a higher number than we had imagined it to be.

The fieldwork was carried out between 24 February and 6 March. For what it’s worth, the Scottish Conservative party conference took place on 3 and 4 March, so at least some responses were made during and/or after that.

The poll additionally asked respondents about Brexit and local elections.

As ever, we recommend James Kelly’s analysis over at Scot Goes Pop.

Budget 2017: a boring budget?

Fraser of Allander Institute, 8 March:

The announcements in Budget 2017 amount to a half percentage point increase in the Scottish Government’s 2017/18 resource allocation and a 0.7 percentage point increase in its capital allocation.

The announcements at Autumn Statement 2016 implies that the Scottish Government’s resource budget from Westminster would fall by around £800m in real terms (i.e. adjusted for inflation) between 2016/17 and 2019/20. In this context, and additional £260m in cash is not an insignificant boost, but spread over three years it does not alter the conclusion that the Scottish Government will face challenging real terms funding reductions over the course of this parliament.

The Chancellor also announced a review of North Sea tax rules, with the aim of encouraging further investment in the industry, and spreading the costs of decommissioning between government and industry. Oil revenues are forecast to ‘peak’ at £1 billion in 2019/20, confirming that the sector’s days as a large tax generating source for the Exchequer are over.

Also: growth projections for Q1 2017 and estimated growth rate for 2016.

Economic growth: Scotland vs small EU countries vs UK

The chart below compares the annual GDP growth rates1 of Scotland, small EU countries (Austria, Denmark, Finland, Ireland, Portugal, and Sweden2), and the UK, from 2003 until Q3 2016.

Source: Scottish Government ‘Scotland Performs’ economic growth data, published January 2017. From the technical note accompanying the stats, it looks like the figures for Scotland don’t include North Sea oil and gas extraction activity, but the UK figures do3.

Between the four quarters ending in Q3 2015 and the four quarters ending in Q3 2016, the Small EU growth rate was 3.5%, while the UK grew 1.9%, and Scotland 0.7%. If you take an average of the sum total of all quarters of growth or contraction during the period in the chart (2003 Q1 to 2016 Q3), the result is 1.6% for both the UK and EU, and 1.3% for Scotland. The average gap with Small EU was -0.3%; with the UK it was -0.4%.

The accompanying technical note gives an average annual GDP growth rate for the 30-year period to 2006. The Small EU average over that period was 2.8%, the UK 2.6%, and Scotland 2.1%.

Data for Q4 2016 will be published next month.

(The Economist and Fraser of Allander Institute have published articles within the past couple of months analysing recent growth trends in Scotland.)

Scottish independence: SNP’s economic case ‘should not include oil’

BBC, 6 March:

The economic case for independence should not include North Sea oil revenues, the chairman of the SNP’s growth commission has said.

The commission, headed by former MSP Andrew Wilson, was set up by the SNP to help shape its future economic policy.

“… I can say with some certainty in terms of our own work that we’ll assume for the purposes of our projections that oil is producing zero revenues and therefore treat any revenues that we get from oil as a proper windfall to be used on intergenerational projects rather than spent on spending today.”

First solid bit of information to come out of the growth commission. Delivery of report said to be “in the coming weeks”. We await it with eagerness.


How wages fell in the UK while the economy grew

FT2 March (article limit):

Between 2007 and 2015, the UK was the only big advanced economy in which wages contracted while the economy expanded. In most other countries, including France and Germany, both the economy and wages have grown.

There are various reasons for the exceptional case of the UK, not least a shift towards lower-paid jobs, low productivity levels and growth, a strong rise in employment and higher inflation.

Only the US and Canada have greater flexibility in labour market regulation than the UK, according to the OECD. Thanks to a more flexible job market, people were able to find jobs quicker than in other countries. Employment expanded by 2.4 per cent in the six years to 2013, while in France there was no job expansion and the EU as a whole experienced job losses.

Check out the scatter chart that accompanies the article.