The finances of an Independent Scotland.

davomcdave

HAMISH_MCTAVISH wrote: »

Well, yes.

It would seem the sensible thing to forecast for oil prices of around $50 and be in a position to cut less if oil prices rise...

Back to the point in the OP however - and as nobody else has really taken up the challenge....

There do seem to be some options for closing that £9bn gap.

1. Spend less on defence in the short term - I'd personally hate to do so but there's zero prospect of the rUK leaving it's Northern shoreline undefended against potentially hostile aggressors.

You could quite easily spend a billion per year instead of 3 billion by maintaining a small standing army, a couple of fisheries patrol vessels, a limited airlift/helicopter capacity and a handful of fighter aircraft. The really expensive bits - subs, a fighting navy, and an advanced air force could be deferred. NATO would get miffed for a while - but an intention to improve would probably be enough.

Possible savings - £1.5 to 2bn per year for the first decade or so.

2. Share of Uk national debt - Scotland could of course walk away from it. But make borrowing to close the rest of the gap unlikely for a number of years.... Not ideal.

Would save around 3 billion per year though.

3. Energy transit tax. 45% of the UK's gas supply transits through Scotland. Press a button to shut down those pipelines and the rUK gets very cold, and very dark, very quickly, and it would take a decade or more and tens of billions in investment to rebuild the capacity elsewhere. Now shutting those down may not strictly be legal - but that's never stopped Putin - as the Ukrainians found out several winters in a row.;)

Hw much is energy security worth to rUK?

A lot...

4. Trident basing rights. How much is keeping an independent nuclear deterrent worth to rUK?

Well it's not quite priceless... But it's close. Somewhere around £3-£5bn per year for up to a decade I'd guess. As there just aren't any other even remotely feasible options.

Anyway.... I doubt we'd end up actually doing all (or even many) of the above - but an iScotland does not have quite as weak a negotiating hand as many on here assume - it would be in both parties best interests to come to a fair and amicable deal.

That deal would certainly require Scotland to live more within it's means than it does today - but it's frankly nonsensical to suggest Scotland doesn't have the ability to negotiate away some of that £9bn gap before having to start cutting spending or raising taxes.

Leasing nuclear bases to the Royal Navy is a good option for an independent Scotland to raise from cash post-Scexit but it would be a pretty brave Scotland that slashed its military spending and then walked away from its debts and turned the gas pipes off! If you're going to do the latter two then a larger not a smaller army might be advisable:rotfl:

More seriously there are presumably plenty of assets physically in Scotland that the UK would be interested in leasing from weather stations to water supply.

The fact remains that an independent Scotland would be starting with some pretty horrible looking finances and even borrowing that £6bn might well be a stretch considering that Scotland doesn't have much of a credit record to speak of especially given that the Government would either be trying to borrow in a currency with no track record (Scottish Quid or whatever) or a foreign currency that it can't print in order to repay debts in extremis (British Quid or Euro).

HAMISH_MCTAVISH

davomcdave wrote: »

Leasing nuclear bases to the Royal Navy is a good option for an independent Scotland to raise from cash post-Scexit but it would be a pretty brave Scotland that slashed its military spending and then walked away from its debts and turned the gas pipes off! If you're going to do the latter two then a larger not a smaller army might be advisable:rotfl:

Perhaps we should do a cost/benefit analysis of each and decide...

Or just flip a coin....:rotfl:

More seriously there are presumably plenty of assets physically in Scotland that the UK would be interested in leasing from weather stations to water supply.

Indeed there are...

If such a situation ever arose it would simply be cheaper and less disruptive for rUK to buy access to existing Scottish assets than to try and re-create them elsewhere. And that's everything from military bases to nuclear facilities and energy supply infrastructure, etc.

The gap of £9bn - while an interesting starting point for discussion purposes - won't be an accurate final position.

Of course that also means that those in Scotland who dream of removing Trident, for example, are likely to be disappointed at least for a few decades.

As only through a fairly mercenary programme of fully exploiting the potential income from existing assets is an iScotland likely to materially close the fiscal black hole.

The fact remains that an independent Scotland would be starting with some pretty horrible looking finances .

Yes.

But as many have pointed out - there are plenty of similarly sized countries and economies that manage to be successfully independent.

They have to spend less and tax more - so that's just what they do.

Now for me personally that outcome is not ideal, I'd rather stay in both the UK and the EU and for us all to be better off, but if forced to choose between the UK and the EU I'll choose Indy to retain EU membership.

Others will choose differently - but either way democracy will decide.

mrginge

davomcdave wrote: »

More seriously there are presumably plenty of assets physically in Scotland that the UK would be interested in leasing from weather stations to water supply.

This is a good point.

Are there any assets physically in England that Scotland would be interested in leasing or is this just a one way street?

I mean we should really try take a balanced view. Especially if the approach is going to be 'we'll turn the power off unless you give us a load of cash'

HAMISH_MCTAVISH

mrginge wrote: »

Are there any assets physically in England that Scotland would be interested in leasing or is this just a one way street?

It's pretty much a one way street.

Scotland exports large amounts of electricity, gas, and water to England.

Scotland has the UK's only nuclear deterrence submarine base - and some vital defence radar facilities and military testing ranges - none of which could be cheaply or easily relocated.

I mean, yes, it would be an inconvenience for us to have to start our own driver licensing agency, call centres, or tax collection office straight away - and I'm sure we'd prefer a transitional services agreement....

But that's not really on the same scale as shutting down England's lights, heat and nuclear deterrent on the leverage stakes.;)

mrginge

HAMISH_MCTAVISH wrote: »

It's pretty much a one way street.

Scotland exports large amounts of electricity, gas, and water to England.

Scotland has the UK's only nuclear deterrence submarine base - and some vital defence radar facilities and military testing ranges - none of which could be cheaply or easily relocated.

I mean, yes, it would be an inconvenience for us to have to start our own driver licensing agency, call centres, or tax collection office straight away - and I'm sure we'd prefer a transitional services agreement....

But that's not really on the same scale as shutting down England's lights, heat and nuclear deterrent on the leverage stakes.;)

Well it seems that Scotland holds all the cards doesn't it.

HAMISH_MCTAVISH wrote: »

Currency

This is fairly straight forward as there are limited options.

1) Keep using the £ sterling within a formal currency union under a negotiated deal with rUK. BOE would remain as lender of last resort and regulator for Scottish monetary policy. Politically difficult - but probably not impossible - if for example a quid pro quo conversation were had around Trident basing rights.

Oh.

A_Medium_Size_Jock

mrginge wrote: »

Oh.

Heh heh heh.

Hamish is I suspect when not on these forums a writer of comedy for a major media network.
This explains the current paucity of comedy on British TV and radio.

But that's not really on the same scale as shutting down England's lights, heat and nuclear deterrent on the leverage stakes.

Uh-huh.
So Scotland is wealthy enough and with a solid enough budget that it would not really desperately need the income provided from those then?
When the French and Dutch would I'm sure welcome increasing their exports to us.

And moving from Faslane to say Portsmouth would be such a huge task for rUK eh?
As opposed to the supposedly cost-free "inconvenience for us to have to start our own driver licensing agency, call centres, or tax collection office straight away".

That is so ridiculous it's funny, Hamish.
You should use it in a script.

cogito

HAMISH_MCTAVISH wrote: »

Now for me personally that outcome is not ideal, I'd rather stay in both the UK and the EU and for us all to be better off, but if forced to choose between the UK and the EU I'll choose Indy to retain EU membership.

Others will choose differently - but either way democracy will decide.

Just explain to me how that will happen.

The UK leaves the EU - Scotland is also out

Scotland leaves the UK - Scotland is still out of the EU.

I fail to understand how seemingly intelligent people can bring themselves to believe that choosing Indy will enable Scotland to remain in the EU. It won't.

mrginge

A_Medium_Size_Jock wrote: »

So Scotland is wealthy enough and with a solid enough budget that it would not really desperately need the income provided from those then?
When the French and Dutch would I'm sure welcome increasing their exports to us.

One important point that seems to have been missed in this is that we're not starting from a position of parity.

Quite rightly we're looking at the -9bn from scotlands side, but conveniently ignoring the +9bn on the other.

So when first minister hamish starts making threats about cutting off the power, the equally childish response will of course be that we'll take our extra 9bn and spend it elsewhere.

Perhaps in such a scenario the rUK will be a bit better off, perhaps a bit worse. But there is no doubt that it will be Scottish taxpayers who get the biggest shafting.

Shakethedisease

A_Medium_Size_Jock wrote: »

Heh heh heh.

Hamish is I suspect when not on these forums a writer of comedy for a major media network.
This explains the current paucity of comedy on British TV and radio.

Uh-huh.
So Scotland is wealthy enough and with a solid enough budget that it would not really desperately need the income provided from those then?
When the French and Dutch would I'm sure welcome increasing their exports to us.

And moving from Faslane to say Portsmouth would be such a huge task for rUK eh?

You can't really move it to Portsmouth. Here's the options neatly summarised. However, moving it is likely to be a just as much of a political hard sell to whichever area is chosen to move it to, if at all.

But Ron Smith says there would be considerable pressure within an independent Scotland to do a deal and create a type of Sevastopol military enclave as Ukraine did, before Russia took over the Crimea. The UK would be under pressure to do a deal too because even if it was feasible to replace the Clyde naval bases - "and it's not clear that it is" - it would be incredibly expensive and time consuming, he says.

http://www.bbc.co.uk/news/magazine-28009977

As opposed to the supposedly cost-free "inconvenience for us to have to start our own driver licensing agency, call centres, or tax collection office straight away".

Revenue Scotland is already up and running. It would need greatly expanded obviously, but the basic infrastructure is there already. https://www.revenue.scot/

Shakethedisease

mrginge wrote: »

One important point that seems to have been missed in this is that we're not starting from a position of parity.

Quite rightly we're looking at the -9bn from scotlands side, but conveniently ignoring the +9bn on the other.

So when first minister hamish starts making threats about cutting off the power, the equally childish response will of course be that we'll take our extra 9bn and spend it elsewhere.

Perhaps in such a scenario the rUK will be a bit better off, perhaps a bit worse. But there is no doubt that it will be Scottish taxpayers who get the biggest shafting.

I think the most important point that is missed is the effect of Brexit. We frequently talk about Scotland's finances in the context of a status quo UK still within the EU. That will no longer be the case in two years time. What effect would a hard Brexit have on GERS figures ?

As for threats, we are already hearing about 'question marks' over an iScotland's trade with the rUK. Even Mandelson was at it this morning on Marr. The ridiculous notion and implication being that this great free trading rUK will stop trade with an iScotland.
This 'but Scotland's trade to rUK is worth 4 times what it trades to the EU' line is repeated, complete with the above unsaid implication and will be repeated 1000's of times should another independence referendum ( now looking inevitable ) happen.

http://www.heraldscotland.com/news/15047739.Scotland_s_exports_to_UK_worth_four_times_as_much_as_those_to_EU/

https://stv.tv/news/politics/1378984-brexit-scotland-s-exports-to-uk-worth-four-times-more-than-eu/

http://www.telegraph.co.uk/news/2017/01/25/snp-urged-drop-indyref2-threat-figures-confirm-scotlands-trade/

http://www.telegraph.co.uk/news/2016/06/29/gordon-brown-tells-scots-uks-single-market-worth-far-more-than-e/

This line is everywhere. No one is disputing it's factual accuracy. But the implications and vague threats behind repeating it so often to Scots are very clear.