Regional GDP and HS2

Regional GDP and high-speed rail.
Regional GDP and high-speed rail, based on a map from this article.
As far as I know, the calculations showing that London will benefit from HS2 and Scotland will lose out are based on the idea that improved infrastructure will lead to more business in the places that are now better connected, and as a consequence one will see a drop in business in those places that are now suffering from connectivity that is worse in relative terms.

In other words, if you want to make areas north of London more competitive compared to the UK capital, you improve infrastructure elsewhere, you don’t simply link them up to London (because this will help the capital, too, which means the relative advantage of placing your business in London won’t be reduced).

From a Scottish point of view, better infrastructure would be wonderful, but it’s really not a high-speed railway to London that will make the difference.

If we look at a map of regional GDP, it’s clear that it’s the Highlands that need help, so direct trains from Inverness to the central belt and perhaps also to Aberdeen would do wonders. In fact, a Scottish high-speed railway (SHS on the map) connecting all of Scotland’s cities would probably transform the Scottish economy. (Proper high-speed trains might not actually be necessary — the physical distance from Glasgow to Inverness isn’t that great, so a relatively straight track and trains driving 100mph would be a huge improvement to the status quo.)

Once SHS was in place, the poorest regions in the north of England could then potentially be connected to it (SHS-E on the map), which would create a lot of growth there, and importantly not just London-driven growth, which would help to stabilise the English economy.

However, Westminster aren’t likely to ever invest in SHS — their tendency to see everything from a London point of view is just too strong, and it’s too expensive to finance through the ordinary block grant. A project like this is something that can realistically only be realised in an independent Scotland.

Denmark recently slapped an extra tax on North Sea oil extraction in order to pay for improvements to the railways. Perhaps something similar could be done here after independence.

Warning taxes could go up 21% after No vote

Tax Form
Tax Form, a photo by 401(K) 2013.
The Herald has today published an article about the new IFS report:

The IFS also makes clear a ­breakaway Scotland would probably need to undertake some fiscal tightening.

“But to give a sense of possible scale,” the report says, “previous IFS research has found £2 billion of tax rises or spending cuts would be needed during 2016/17 and 2017/18 to match the UK Government’s plans. If a Scottish government also wanted to offset the decline in oil revenues by 2017/18 as forecast by the Office for Budget Responsibility, another £3.4bn would be needed.” This would mean an independent Scotland would begin life needing to find £5.9bn.

The report continues: “We estimate a one percentage point increase in all rates of income tax, or in the main rate of VAT, would raise around £430 million in Scotland,” and adds: “Making a substantial contribution to a possible fiscal tightening would require significant tax increases.”

Mr Adam calculated filling the fiscal gap by tax hikes alone would mean a rise of 13.7%.

Andy Lythgoe has used GERS figures to repeat Mr Adam’s calculations and done the same for the UK. The results are very interesting:

Scotland Revenue incl. North Sea £56,871m
Scotland Total Public Sector Expenditure £64,457m
Fiscal Deficit -£7,586m
Fiscal Deficit as % of Revenue 13.34%
UK Revenue £572,636m
UK Total Public Sector Expenditure £693,599m
UK Fiscal Deficit -£120,963m
Fiscal Deficit as % of Revenue 21.12%

An independent Scotland will thus only need to put up taxes by 14% in the same sense as the UK will need to put taxes by 21%.

In other words, an independent Scotland will be able to lower taxes by about 7% compared to the taxes we will incur if we remain in the UK.

What the new nuclear power station says about future oil prices

Nuclear Wetlands
Nuclear Wetlands, a photo by James Marvin Phelps on Flickr.
The unionist parties like to emphasise the uncertainty about future oil prices (e.g., “The tax we get from the North Sea is so volatile that the difference between the highest and lowest years is the equivalent of Scotland’s NHS budget”).

However, talking about Westminster’s decision to give the go-ahead for the UK’s first new nuclear station in a generation, and to guarantee the investors an electricity price that is almost twice the current wholesale cost of electricity, Energy Secretary Ed Davey said:

‘People won’t be paying this for ten years’ time and in ten years’ time we’ll be in a very different world – we’ll have had to replace all those nuclear power stations and coal power stations and we’re likely to see carbon prices going up and so on,’ he told BBC1’s Breakfast.

In other words, he’s implying that future energy prices will be much higher than they are at the moment, which is bad news for consumers everywhere, but excellent news for an independent Scotland. If Ed Davey expects energy prices to double over the next ten years, it means he must be expecting North Sea oil prices to rise by a similar amount, too.

Given the amounts of energy produced in Scotland, sky-high energy prices is an advantage for an independent Scotland, but this is not the case for the UK as a whole. Only in an independent Scotland can we use the increased revenue from rising oil and gas prices to make energy more affordable for the people living here.

Scots and the Scottish Cringe

I’ve been away to Denmark for a few days, and I took the opportunity to read Bill Kay’s Scots: The Mither Tongue.

For people like myself who didn’t grow up in Scotland, the Scottish Cringe is often somewhat of a mystery, but as an independence campaigner I often also feel the whole campaign is a fight to overcome that sentiment.

I therefore felt it interesting to see how the linguistic persecution of Scots (and of Gaelic, of course, but people are probably more aware of that) has formed the basis for the creation and preservation of the cringe:

The effects of centuries of stigmatisation and cultural colonisation cannot, of course, be overcome instantly with a new political attitude. The Catalans are a few decades into the recovery of their language but they concede that it will take several generations of confidence building before what they call the ‘slave mentality’ of their people can be removed. In public perceptions of Scots, we face similar problems and have not even seriously begun the process of recovery. Our equivalent of the slave mentality is the Scottish cringe.

If the people of Scotland started taking pride in both the languages of Scotland again — Gaelic and Scots — it would become so much more difficult to perpetuate the belief that we’re uniquely too wee, too stupid and too poor to be independent. The unionists have a much easier time when the world is also linguistically seen through the prism of London.

What will happen to the Scottish political parties after independence?

Everyone leads a party
Everyone leads a party, a photo by WordShore on Flickr.
The Scottish political scene is rather odd when compared to the political spectrum one tends to find in independent democratic countries.

Firstly, independence rather than any other political question is the biggest political shibboleth, separating the SNP, the Greens and the SSP from Labour, the Tories and the LibDems.

Secondly, the fact that the Scottish Parliament has almost no tax-raising powers means that the parties don’t divide into higher-tax-and-higher-spending parties on the left and lower-tax-and-lower-spending parties on the right. I guess the Tories are trying at times, but their message clearly doesn’t appeal because they can’t promise to lower any taxes.

After independence, independence will cease to be a dividing line — I’d be very surprised if any mainstream party advocated reunification with the rUK after independence.

Furthermore, in an independent Scotland it will again be possible for a party to get votes by promising to lower taxes — all Scandinavian countries have powerful centre-right parties, so even in a Scotland committed to the Common Weal project there will be people wanting to reduce the size of the state.

The consequence of all this is that the Scottish political landscape will most likely undergo a period of rapid change after independence.

The exact changes cannot be predicted. It’s likely the SNP and Labour will continue to be the two largest parties, but it’s impossible to say whether Labour will continue to be more right-wing than the SNP, or whether they’ll quickly become a left-wing party again once the ties to London have been cut. Also, although I’m certain there will be a centre-right party, I’m not sure whether it will be a descendant of the Conservatives, Labour or the SNP.

This doesn’t mean that Holyrood will suddenly look like Westminster. For instance, the centre-right party in an independent Scotland is likely to be a decent mildly Conservative/Liberal party more like the ones found in continental Europe rather than being dominated by lunatic Thatcherites, and left-wing parties will probably be in power more frequently than has been the case in the UK till now.

I’m definitely looking forward to Scotland becoming a normal country in this respect, too.