Category Archives: economics

Scotland will get £172m to buy embassies

British Embassy
Originally uploaded by The Shifted Librarian

I just noticed that in 2010, the Foreign and Commonwealth Office‘s global estate (i.e., embassies, consulates, etc.) was worth £2,042,480,000.

That’s a lot of real estate!

Scotland makes up about 8.4% of the UK’s population, and this is normally the basis for splitting up countries.

This means that Scotland will be entitled to global estate worth £171,568,320 after a Yes to independence.

This amount is of course subject to negotiation, and Scotland will probably be given a mix of buildings and money, rather than just a lump sum.

However, it does demonstrate that any fears that Scotland might not be able to afford embassies are completely unfounded.

The jobs created by independence

Independence sceptics are often worrying endlessly about the jobs that might disappear as a result of Scottish Independence.

However, many jobs will be created as a result of independence. Here are a few areas that spring to mind, but I’m sure there will be many more.

  • A lot of countries will open embassies in Edinburgh — we can’t be sure of the number, but there are about 60 embassies in Dublin, and about 75 in Copenhagen, so one would expect a similar number. Some of these will be small, but others will be huge, and there will be lots of local jobs needed to set them up and keep them running, on top of the money created by embassy employees finding places to live and spending money in local shops and restaurants. Of course Scotland will need to finance a similar number of embassies abroad, but we’re already paying about 10% of what the UK are spending on representations abroad, so I reckon there’ll be a net gain.
  • There will be ministries created for the previously devolved areas. Using Denmark as a basis (it’s probably a better guide than using 10% of the UK), there might for instance be about 850 employees in the Scottish Foreign Office in Edinburgh and about 150 in the Scottish Ministry of Defence.
  • Even if the SNP at the moment claim it won’t be needed, I think it’s likely there will be a Central Bank of Scotland, even if it’s just to administer a currency board. Using Denmark as a guide again, there might be more than 500 people working there.
  • There are other government offices of various kinds. For instance, the DVLA in Swansea almost 7000 employees — a Scottish DVLA would therefore probably have at least 700 employees. On the other hand, there are UK government offices in Scotland — for instance, the HMRC accounts office in Cumbernauld AFAIK covers an area larger than Scotland — so it’s somewhat complicated to work out exactly the net number of jobs created in Scotland.
  • Some companies would need to create separate Scottish subsidiaries. For instance, mobile phone companies would presumably need completely separate organisations in Scotland. I’ve no idea how many companies we’re talking about here, or how large their Scottish operations are, but we must be talking about thousands of jobs moving to Scotland. Of course there will also be companies based here that will need to create English subsidiaries in the same way, but I have a feeling the net effect will still be very positive for Scotland.

Of course there won’t be a perfect match between the jobs that will disappear and those that will be created — you can’t retrain a nuclear weapons worker to become a Foreign Office employee overnight — but I think on the whole it seems likely that independence will be very good for Scottish employment figures.

A Scottish currency board

Several articles, such as this one in the Scotsman, have covered the Chancellor of the Exchequer’s announcement that Scotland after independence won’t be able to use the pound:

The Treasury confirmed that, while it could not block Scotland from using the currency, it could be reduced to a situation where it had no say in fiscal policy, was prevented from printing its own money and was locked out of any valuation decisions.

Treasury officials confirmed this would mean Scottish banks, which are licensed by the Bank of England to print their own notes, would be barred from doing so in the event of independence.

Royal Bank of Scotland, Clydesdale Bank and Lloyds-owned Bank of Scotland are able to print bank notes with the faces of famous Scots, in a long tradition that has been symbolic of Scottish identity.

Whereas there’s nothing Scotland can do about being locked out from England’s fiscal policy – but to be honest, it currently tends to cater for the needs of the City of London anyway – an independent country can certainly make its own decisions about printing bank notes.

I would recommend creating a Scottish pound after independence, locking it to the English pound using a currency board. This basically means that the Central Bank of Scotland would store English pounds in its vaults and print Scottish pound notes and mint Scottish coins in the same amounts.

The advantage – apart from having distinctive Scottish money – would be that it would be easy to break the peg and link the Scottish pound to the euro instead if that was decided to be desirable. If English money was used directly, that would be much harder.

Lots of countries use currency boards, and they work really well, so it’s a no-brainer to use one at first, at least until Scotland has been seen to have a strong economy, after which it might even be desirable to let the Scottish pound float freely.

Banks in an independent Scotland

Wallace Monument
Originally uploaded by john1710

Lots of unionists seem to see in the problems of Bank of Scotland (HBOS) and Royal Bank of Scotland (RBS) the ultimate proof that Scotland is too small to be independent.

Not all unionists are convinced, however.

Apart from Fraser’s points, it’s worth remembering that independence would have consequences in many unexpected ways, and the size of banks is likely to be one of them.

If Scotland had been independent for the past hundred years, it’s unlikely that BoS and RBS would have grown so big. Other small countries don’t tend to have any banks that large. (Apart from Iceland, that is.)

It might also be that independent Scottish competition authorities would feel obliged to split up the banks as they’re too dominant here.

But even if Scotland was home to the headquarters of massive financial institutions, they probably would have separate structures in Scotland and England, and Scotland would only have to save the Scottish bit.

The City’s own currency

City of London
Originally uploaded by gm8ty

There’s an interesting article in The Scotsman today by George Kerevan.

He argues that the Bank of England, and therefore the British pound, tends to focus far too much on the needs of the City of London, rather than looking at the whole country and trying to balance the needs of all the regions.

I think he’s absolutely right, but while his recommendation is for the Bank of England to change, I’d prefer Scotland (and the rest of the UK) to join the Euro, given that the ECB does look at all parts of the Eurozone when making decisions. In other words, Scotland would not suffer a loss of influence at all by replacing the pound with the euro, just the opposite.

London and the communist country

Originally uploaded by viralbus

Fraser Nelson (conservative journalist and blogger) has a very interesting wee article in The Business.

He points out that outwith the greater London area, most people are either on benefits or working for the state, creating a situation almost like a communist country. Effectively, London is subsidising the rest of the country, rather than helping the rest of the country to grow faster. And this situation has been getting much worse under Labour.

Quite scary, and I definitely think this is another good reason to support Scottish independence!