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Mike Keogh

Scottish Independence - it is all about the economy

Michael Keogh (Associate Director, Research) discusses the rationale for an independent Scotland.

Alistair Darling, staunch Pro-Unionist and Labour MP was always going to criticise Alex Salmond’s vision for an independent Scotland, on economic grounds and given the concentration of Labour voters north of the border. Looking at the most recent polls, the “Yes” vote has been relatively stable and behind the “No” vote, but the tide would turn sufficiently should the approximated one-fifth of voters who remain "unsure" be influenced by the SNP vision for Scotland. Some policies announced by the SNP, namely promises attached for free childcare, the basic rate of tax and the bedroom tax are clearly aimed at the "don’t know" voters, and it is this that unsettles Darling and the UK government.

It is human nature that after such a deep recession, voters disenchanted with the economic and political system would desire something new. However, with the UK economy now showing strong signs of a recovery and malaise ever evident in Europe (in part due to economic ills associated with not having a monetary and fiscal union), there is also a rational fear factor that will bind the UK together. Most commentators remain convinced that the UK is far stronger as a unified force. This is also in the best interest of Scotland, economically, socially, and politically. The key determinants of the referendum will not be the detail of the bloated 667-page SNP Blueprint for Scotland document, but whether the Scottish believe and have faith that an independent Scotland can:

-  be economically stronger (despite an aging population and depleting oil/gas reserves);

- be fiscally responsible (keeping the sterling and opposing the Institute of Fiscal Studies by declaring that it will not need to raise taxes and cut government spending to balance the books, and to be able to borrow from international markets competitively); remain a member of the EU (enjoying the trade and political benefits that it brings).

There are obvious reasons for Scotland wanting to keep the sterling, given the extent of trade ties with the rest of the UK. However, what raises a debate is, as noted in the FT earlier this week, “why the rest of the UK (58 million people) would want to create a single currency area simply to accommodate a population of five million Scottish citizens?” A mini-version of the Eurozone is not exactly a blueprint for an economic policy. And I believe it is the economic uncertainty that will override all nationalist sentiment.