Scottish independence: Nicola Sturgeon’s embrace of Liz Truss-style fantasy economics will lead to trouble – John McLaren

It doesn’t have to be like this, it can be like Nicola Sturgeon claims she wants an “adult and honest” debate instead.

On the economic arguments, on the downside, there are risks of breaking up a close economic union and a political union that includes a significant advantage in how public spending is distributed across the UK. On the upside, there are potential positive effects of introducing a more pro-growth migration policy and energy-related benefits, both renewable and coal-based.

Given the horlicks the current UK government has made of economic policy, there is also potential to show that a Scottish government would be a better choice to manage the economy in a more stable and prosperous way. So the incentive is there for the Scottish Government to eschew Brexit-like fantasy arguments and accept economic orthodoxy, what the ‘experts’ have to say, and go on the cutting edge. But not with what was published earlier this week.

A core fantasy is that Scotland will not necessarily need to adjust its fiscal position after independence. It is coming, as the SNP’s Growth Commission acknowledged in 2018. The latest Independence Finance paper cited naïve work by the Institute for Fiscal Studies (IFS) as a partial smokescreen to avoid addressing how to close the gap between government revenue and spending in Scotland.

Sure enough, within hours, the IFS responded that its position was that “it is very likely that an independent Scotland would have to make bigger cuts in public spending or bigger tax increases in the first decade after independence than the rest of the UK”. This highlights one of the problems with the SNP’s current approach, the extreme wariness shown about doing anything other than what it will inherit. The funding shortfall needs to be recognized and options to close it need to be explored.

In terms of spending, some areas, such as defence, could clearly be cut from equivalent levels in the UK, while the benefits system as a whole could be overhauled. On taxes, there are huge opportunities to introduce more economically efficient, greener and more progressive taxes on property, roads and much more. They should try to look to IFS again, but this time again Mirrlee’s Review of the Tax System which has been studiously ignored by successive British governments. Yet the latest publication has even less to say about tax and spending changes than the Growth Commission’s 2018 report or the 2013 White Paper.

Most people probably accept that some things must, and some things should, change as a result of independence. Skepticism about the likely outcome is likely to increase when not presented with a version of what those changes might be. Not a definitive list perhaps but at least a reasonable representation of what might be involved. To avoid such contours is not to equate with the Scottish people.

Nicola Sturgeon’s economic plans for an independent Scotland must be grounded in reality (Image: David Cheskin/pool/Getty Images)

Then there are the markets. The lesson of the economic mess of the past few weeks is that unrealistic fiscal plans, based on ideological dogma, will result in a hammering from the markets. Any Scottish Government approaching Independence Day would have to present realistic sums, accepted as such by respected independent bodies, or face a swift retreat once their plans are thumbed down.

This should be a lesson well learned. You can delude yourself that publishing countless white papers means the groundwork has been done. But when each of these papers provides some real clarity then, when it comes time for others to judge, you may find yourself, like Liz Truss for the past week, having to accept what you had previously denied.

The same applies to currency, trade, borders and membership of the European Union. A careful look at the facts and at what is in Scotland’s interests, rather than what looks good from an anti-Westminster perspective, is really needed.

The apparent bias shown against Britain and in favor of the EU model, or the model of small European countries, is only a veneer. It distracts from the vision of “being quite similar to the UK, but within the EU” that is actually being proposed. A proper assessment is required, one that considers what Scotland’s model should be, based on its circumstances, perceived values ​​and social and economic priorities.

Politically, there seem to be clear advantages to putting forward a bold economic vision and stating that it would be steered towards even if some unwanted compromises were required, such as higher taxes than originally intended. A simple example would be a commitment to comprehensive free childcare, alongside high-quality early years investment and a commitment to resilience – ie. well managed – public services. This would enable a valid claim to improve future economic activity, productivity and equality.

But no such vision exists. Instead, the approach appears to rely on a mix of the unwavering support of die-hard Yes voters and the hope that anti-Westminster sentiment will trump any financial reservations of those still stinging. Meanwhile, the economic fallout from such a timid approach, as with Brexit, will be addressed after the referendum.

That would be a divisive and bad path to independence. An alternative vision needs to be explained but, unlike Brexit, it needs to be grounded in reality.

John McLaren is a political economist who has worked at the Treasury, the Scottish Office and for a variety of economic think tanks

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