Category Archives: featured

Should Denmark join the UK?

Christiansborg Christiansborg  With the 'tower of power'. Christiansborg is where the danish parliment ('Folketinget') resides.
Christiansborg Christiansborg With the ‘tower of power’. Christiansborg is where the danish parliment (‘Folketinget’) resides., a photo by boegh on Flickr.
British unionists love to praise the Union in such a way that you’d think every small country in the vicinity would want to (re-)join the UK. I presume the arguments would be similar for Ireland, Iceland, Norway, Sweden and the Netherlands, but given that I spent the first 30 years of my life in Denmark, I’ll examine whether this country ought to join the UK.

I’m assuming Denmark would get a devolution deal similar to Scotland’s, so that the Danish Folketing would still be in charge of quite a lot of policy areas.

From the UK’s point of view, the deal is a no-brainer because the UK would suddenly become an import player in the Arctic region (Denmark includes Greenland), which would reinforce the UK’s position as a world player and make it less likely the permanent seat on the UN Security Council would get lost. The practical implications would be minor:

  1. The House of Commons would get an addition of Danish members. Given that Denmark is tiny bit bigger than Scotland, we might be talking about adding 63 Danish members to the existing 650 MPs. The Danish members would probably support both sides equally, so it shouldn’t disturb matters too much.
  2. The House of Lords would need some Danish lords, too, but there wouldn’t be any need for a specific number.
  3. Revenues from the Danish North Sea oil rigs would go straight to Westminster.
  4. Danes would be paying a lot of taxes straight to Westminster. In return, a block grant would be sent back to Copenhagen.

From Denmark’s point of view, things are more complicated. The positives include that the British army would have to defend Denmark (but then they already have that obligation, given that both countries are part of NATO), and that the UK would be bailing out any bankrupt Danish banks (but in return Denmark wouldn’t be able to limit the size of the Danish banks, and it’s likely that the biggest ones would shift a large part of their operations to London).

Here are some things that wouldn’t change:

  1. Education: Education would be fully devolved, so Denmark could still let kids start school at the age of 7, maintain Danish as the language of instruction, and keep its own exams. The downside of this is that Danes wouldn’t automatically get better at English, nor would they start sitting internationally well-known exams.
  2. Health: The Danish NHS would be maintained without change. However, funding would come out of Westminster’s block grant for Denmark.
  3. Police: There would still be a Danish police force. But PET and FE would be replaced by MI5 and MI6, and the UK Border Agency would take over the task of guarding the Danish border.
  4. Agriculture and fisheries: Denmark would still have powers in these areas, but the UK would represent Denmark at the EU’s decision-making meetings.

But here are a few things that would:

  1. Oil: The revenues from this would go straight to London, rather than strengthening the Danish economy. The way Denmark has just decided to raid the oil companies to pay for a £3.2bn improvement of the railways would become impossible.
  2. Foreign policy would be run from London. Denmark would have to pull out of the Nordic Council and the special cooperation across the Danish-German border. Denmark would have to introduce passport controls at the borders with Germany and Sweden.
  3. Economic and monetary affairs would be run from London. From time to time, the Bank of England’s Monetary Policy Committee might include a Dane or two, but there wouldn’t be a fixed quota.
  4. The Danish monarchy would be replaced by the British one, and Denmark would lose the right to choose its own form of government.
  5. There would presumably still be commercial TV channels covering Denmark, but the public-service TV channels would be merged with the BBC. They would still broadcast some Danish programmes at times, but the majority of the programming would be standard BBC stuff.
  6. The Danish army and navy would become parts of their British counterparts.
  7. Denmark would have to introduce normal UK taxation. Amongst other things, this would mean a reduction in personal taxation, VAT and car taxes, but it would also mean a loss of interest payment deductions and the commuting deduction. In total, this would probably mean that Denmark would have significantly less money to pay for parts of the welfare state, such as subsidised nurseries.
  8. Social benefits would be paid from London. Denmark would have to introduce the bedroom tax, and unemployment benefit would be the standard British jobseeker’s allowance (something like £71 per week).

I find it very unlikely that a proposal for Denmark to join the UK would get even 1% support in a referendum. There are just almost no real benefits, and thousands of negative consequences.

Three hundred years ago, things might have looked different, but these days a small country can be part of the EU and NATO, and then there are just very few reasons for it to join a big one.

Will Scotland be richer than Norway after independence?

Scottish Thistle Coin 1602 by Tropic~7
Scottish Thistle Coin 1602, a photo by Tropic~7 on Flickr.

There was an extremely interesting blog posting on Wings over Scotland about the size of Scotland’s exports.

This made me think about the consequences for the finances of an independent Scotland.

First of all, the figure provided by WoS is $20,886 per capita, but that’s excluding oil. According to STV, Scotland’s oil and gas exports are worth about £7.6bn, which is about half the amount produced. If we assume that half of this is actually exported to England, we get a rough figure of £11.4bn, which is $18bn. Per capita this is $3400, so a very rough estimate of an independent Scotland’s exports including oil would be slightly more than $24,000 per person, which would make us number six in the World rankings, between Norway and Ireland.

There also tends to be some kind of correlation between exports and GDP. Looking for similar countries in this table, one finds Denmark and Sweden around 50%, Norway at around 40% and the UK at 30%. In other words, it would be really strange if Scotland’s GDP was very low, and one would probably expect a GDP figure per capita between $50,000 and $60,000, which would definitely place Scotland in the World’s top-10, way ahead of the UK (which has a GDP per capita of slightly less than $40,000).

My calculations are very rough, so it’s hard to say exactly how rich an independent Scotland would be, but it looks likely it would be much richer than the UK, and potentially even richer than Norway.

My only remaining question is why previous calculations of how much better off Scotland would be after independence have been so cautious. It seems to me that we’re likely to be talking about every single person in Scotland being better off to the tune of about £10,000 per year (between $10,000 and $20,000). Where has Westminster been hiding all that wealth?

The Swiss capital of the European country

The political class in Westminster tend to look at the UK from a London perspective, and to listen especially to the needs of the City of London (i.e., the big financial institutions). Most of the British media exist in the same bubble, which is why so many topics are being discussed as if everybody in the country was making a very comfortable living working in a multinational bank in London.

This became abundantly clear again yesterday, when a majority in Westminster voted to force the UK government to demand an EU budget cut, which is surely another small step towards the Brexit. In other news yesterday, it was noted that the regional divide is growing within England, and Scotland was fully preoccupied with the question of Scottish membership of the EU.

The problem is that London is to a large extent a global Switzerland, and as such EU membership isn’t necessarily such a good idea — a Swiss solution vis-à-vis the EU and lots of bilateral free-trade agreements would probably suit London best.

On the other hand, the rest of the UK is probably not that different from most of Europe, and although we can save Scotland through Scottish independence, I do fear for the prospects of the north of England if London takes the (r)UK out of the EU.

I often think that independence for Greater London would solve even more problems than Scottish independence, but alas it’s not on offer.

The current state of affairs is a bit like if the Switzerland and France had formed a union at some point and had moved the capital, the company headquarters, the politicians and the media companies to Zürich, with the result that both parts of the union were being run based on what was best for Zürich. I doubt most of France would have flourished in such a scenario.

Will Scotland have to join the euro?

Scottish euro coin
Originally uploaded by viralbus

The unionists seem to be in a tizzy about the prospect that Scotland will be forced to join the euro, so let’s have a rational look at the most likely scenarios.

To start with, it’s entirely possible (perhaps even likely) that Scotland will be allowed to inherit the UK’s opt-out. In that case, Scotland will have a formal right to remain outwith the euro indefinitely.

However, what happens if Scotland has to let go of the opt-out as part of the renegotiation of the membership terms? It’s not like Scotland would have to introduce the euro at once. Before any member state can introduce the euro, the convergence criteria have to be fulfilled:

  1. Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing member states of the EU.
  2. Government finance:
    1. Annual government deficit: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.
    2. Government debt:The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.
  3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.
  4. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

Currently the UK doesn’t pass any of the tests apart from the last one, and as far as I can tell, the same would apply to Scotland at the moment. Therefore, Scotland wouldn’t be allowed to join the euro at first, even if the people of Scotland so desired.

It is of course possible (and probably also desirable) that Scotland will fulfil (1) and (2) in the longer term, but criterion (3) requires a deliberate step that Scotland can decide not to take.

This is how the Swedes have managed not to join the euro — they’re technically obliged to join the euro, but they have chosen not to join ERM II, which means that they cannot join. Scotland can do the same, even if it’s against the spirit of the treaties.

Finally, by the time the Scottish economy qualifies to join the euro, the European Union and the euro might have changed beyond recognition, and it is entirely possible that there will be a strong desire to join the euro by then.

It’s definitely not anything to worry about at this stage.

Population growth in independent countries and Scotland

Two weeks ago, the Better Nation blog published an article by Jeff Breslin which contained the following passage:

Perhaps the saddest aspect of Ireland’s current difficulties is the number of bright young things leaving the country for better prospects abroad. One could argue that this isn’t a road that Scotland would want to go down through independence and, yet, that is precisely what is happening now. (I know this from experience as I moved to London strictly because Scotland couldn’t provide the PhD that my partner wished to study. Wales, incidentally, could).

The Irish population in 1961 was 2.8m. The population today is 4.5m.

The Norwegian population in 1961 was 3.6m. The population today is 5.0m.

The Icelandic population in 1961 was 179,000. The population today is 318,000.

The Scottish population in 1961 was 5.2m. The population today is 5.2m.

There is clearly only one stagnant, problem child in the above list and that is because there is an historic, corrosive brain drain taking place in Scotland that is damaging growth from both a population and an economic viewpoint. It is little wonder that ‘London-based parties’, to use an unfortunate phrase, are championing the continuation of the UK when it is London that is the prime beneficiary of this very brain drain.

Kids wanting to get away from it all in Sweden move to Stockholm, kids wanting to get away from it all in Norway move to Oslo and kids wanting to get away from it all in Iceland move to Reykjavik but too many kids wanting to get away from it all in Scotland move to London, and we are haemhorrhaging talent and creativity as a direct result.

I decided to have a closer look at this. Using figures from Wikipedia (look for the articles called Demographics of …), I’ve made two graphs.

The first one (top right) shows the populations of Scotland, Ireland, Denmark and Norway from 1900 to 2010. In 1900, Scotland was by far the most populous country of the four, with almost as big a population as Norway and Denmark combined. Scotland and Ireland had almost stagnant populations for the following decades, while Norway and Denmark grew rapidly. A while after Ireland became independent, the Irish population suddenly exploded, and it has now almost caught up with Denmark. Scotland seems to have experienced modest growth after the introduction of the Scottish Parliament in 1999.

The other graph (on the left) adds Sweden and England, but instead of using absolute numbers, the graphs are relative to the populations in 1900.

The second graph clearly shows a difference between non-independent Scotland and pre-independence Ireland on one hand, and the independent countries (or the dominant part of the union, in the case of England) on the other.

If Scotland had experienced the same relative population growth as Denmark since the year 1900, the population in 2010 would have been around 10.1m instead of 5.2m. Would this have happened if Scotland had regained her independence under Queen Victoria, or are there other reasons why Scotland would never have been as fertile as Denmark?

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.

Scotland and Scandinavia superimposed

On a normal map it’s difficult to see how far north Scotland is compared to Scandinavia.

To illustrate it better, I generated two Google maps of the same latitudes, just 15 degrees apart, and then superimposed them in the Gimp.

You can see the result on the right (click on it for a larger version). It’s clear that all the cities of Scotland are on the same latitude as Denmark and southern Sweden, whereas only the far north of Scotland is as far north as southern Norway.

Aberdeen is on a similar latitude as Aalborg or Varberg, Dundee is like Viborg, Glasgow is like Horsens, and the southernmost bit of Scotland is almost exactly as far south as Gedser in Denmark.