Daily question: Would Scots be better or worse off under independence?

As the people of Scotland weigh up how to vote in the independence referendum, they are asking questions on a range of topics.

In this series, we are looking at those major questions and by using statistics, analysis and expert views shining a light on some of the possible answers.

Here, we look at whether people in Scotland might be better or worse off under independence.

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BBC news website user, Gavin Kinnear, says: "I know we would be socially better off," but he goes on to ask: "But would we be financially as a country better off?" David Furbur asks: "Will England, Wales and Northern Ireland be better off if Scotland leaves the Union?" and John Mcknight asks: "Would England be worse off if Scotland was independent?"

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For better or worse?
New technology

This is a big question - arguably, THE big question. The polls tell us the answer makes a big difference to the way people intend to vote. So there are big claims made by the two main campaigns in trying to answer it.

Once again, the key figure we're using here is growth measured Gross Domestic Product (GDP) per head. That fell with the recent downturn years, but over the longer term, it's on the rise. Why? Mainly because, in most years, new ways of working, new technology and education make people and machinery more productive, we tend to consume more each year, and to use more resources.

Measuring GDP per head, there was a downward blip with the 2008 financial crash.

And how has Scotland done compared with the rest of UK as a whole? In the past 25 years, growth per head has been at least as good as the UK. The two decades before that saw much lower growth, as old industries declined.

Gross Domestic Product Measures (£ per capita)

Year Gross Value Added (GVA) at basic prices

SOURCE: Scottish government (NOTE: This way of counting strips out inflation)

1998

12,536

1999

12,936

2000

13,423

2001

14,188

2002

14,815

2003

15,602

2004

16,489

2005

17,431

2006

18,401

2007

19,439

2008

20,431

2009

19,732

2010

20,535

2011

20,771

2012

20,729

2013

21,298

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What controls are there to make things better?
Success and key

Government can influence growth, by using taxation - more of that tends to reduce growth. It can use its own spending power - more of that can boost growth, though to do that, it's important that it's spent in the right places. Spending on skills training or transport is often a help to growth.

Government can also regulate the economy. It sets the rules for employment, including the law on hiring and firing. It adds costs to business such as health and safety, environment safeguards, pension requirements or minimum wage levels. And it sets the market rules for banking, energy and telecom utilities.

The big driver of growth is not government, but businesses. They invest in new factories, offices and equipment, and they hire people. But that's if they're confident that sales and markets are growing. So a big challenge for any government is to help businesses feel secure about their future. Which would do that better: at Holyrood, or Westminster?

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What are the "Yes" camp saying?

Independence: Scottish government view

Each person in Scotland

£1,000

a year better off out of UK

  • Onshore tax receipts will be up £5bn by 2030

  • 14% increase in oil and gas production between 2013-18

  • Tax receipts currently 14% higher in Scotland than UK

Getty Images

In an independent Scotland, the government at Holyrood would have these "levers of power" - taxation, spending and regulation. The Scottish government White Paper sets out ways it wants to use these.

One could be to cut the main tax on profits - corporation tax - below the levels in the rest of the UK. This could make Scotland a more attractive place to do business.

Alex Salmond says people in Scotland would be better off by £1,000 a year

Finance Secretary John Swinney has also said he wants to borrow billions of pounds more in the early years of independence than George Osborne, the Chancellor, has set out in Whitehall's plans.

The Scottish minister wants to simplify tax, and he'll consider ways to improve relations between employers and employees.

The Scottish government's calculation is that "each Scot would be £1,000 better off" after 15 years. That would require a boost to productivity, more immigration and bringing more women into the workplace encouraged by a more generous childcare system.

Some others arguing for independence want to see more radical change, often focused on better social outcomes rather than growth - such as fairer distribution of income and a more generous welfare system.

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How do the "No" camp respond?

Independence: Treasury view

Each person in Scotland

£1,400

a year better off in UK

  • 13% more tax needed to maintain independent Scotland public services, or...

  • 11% cut in public services needed to keep current tax levels

  • £1.5bn-£2.7bn estimated cost of restructuring Scotland's institutions

Getty Images

Those who don't want an international boundary at the Cheviots stress the added cost and inconvenience for businesses trading across the border, and they warn this could hinder growth.

In particular, they warn of uncertainty over the future currency, over public finances and borrowing costs, over access to European markets, saying this could lead to less business confidence and willingness to commit and invest in Scotland. Even with the same currency, they say borders inhibit trade.

Trying to be positive, the same argument is also presented as the benefit of being within a large UK market, providing scale for growth.

There's not much made of the future prospects for UK growth. That's a UK government priority, but it's also uncertain. On past performance, it is assumed to be just above 2% per year over the long term.

On the day in May when the Scottish government set out its claim of a £1,000 independence dividend, the UK Treasury published a document with the claim that there's a £1,400 "union dividend". This is about public finances rather than economic growth. Most of it is explained by higher spending per head in Scotland, as well as costs absorbed by the UK, and claims that SNP tax-cutting policies and likely higher borrowing costs would leave a larger deficit.

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So, back to the question, could an independent Scotland be better off or not?
Tax/profit sign

If anyone tells you they know whether an independent Scotland will be better off or not, be very, very sceptical. No-one knows.

The best you can do is figure what factors could make Scots better or worse off, and then make your own judgement on how these are likely to come into play.

And what factors are they? As the Scottish government points out, you can boost growth with higher output per worker or productivity, by raising employment levels and attracting more immigrants. And you can make better use of your natural resources.

But don't be so sure those are achievable. Britain's productivity has behaved very oddly in recent years, and no-one knows why. While Holyrood wants to boost productivity, almost all the levers it wants to pull are already being pulled in Whitehall.

Anyone with experience of government will tell you that the pulling of levers doesn't always get the results you expect. Governments have influence, but often less than they (or we?) would like to think.

Policies can also send contradictory signals; cutting tax to boost business growth may not mix well with moves to boost minimum wages, or making it more difficult for employers to make redundancies.

Where they DO have an effect, these levers may or may not be more successfully pulled at Holyrood. It may be, for instance, that businesses in Scotland would respond to a focused targeting of tax incentives to invest in a strongly-growing sector.

On the other side, it may be that businesses will thrive best with the smoothest possible access into the English market, where regulation and taxation are identical. Or it's argued the UK's network of embassies makes a vital difference for opening doors to more exports.

On corporation tax, it's worth noting that European partners may want to limit the scope for Scottish tax cuts, as part of a deal on making Scotland a new EU member. They don't like Ireland's low tax rate, and won't want to see it elsewhere.

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Scotland in numbers
Scotland's population and age breakdown: Scotland accounted for 8.3% of the UK population (5.3 million) in 2012
  • What is Scotland's population?
  • What is Scotland's share of the national debt?
  • How does pay in Scotland compare with England, Wales and NI?
  • Key stats: Scotland in numbers
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Cutting tax rates can also cut your tax revenues. It doesn't always. It could be foreign businesses are attracted to Scotland by low rates, and in total, they pay more. But that's not guaranteed. And until it's happened, there's a gap in the budget.

Also, don't forget that the rest of the UK, of Europe and of the world wants to boost productivity and expand workforces. There's competition for skilled migrant workers, for instance, and also for investment by multi-national companies.

Every country is pursuing growth. Scotland and the UK will surely see the economy growing in years to come. But it's not clear why a growth strategy created in Holyrood would be uniquely or even relatively successful, any more than it's clear that Whitehall has all the best answers.

One more statistical health warning: if GDP is rising, it doesn't mean everyone's getting better off. It may be because more people are entering the workforce, for instance through immigrant workers.

Also if GDP per head is rising, that won't be shared equally. Some people may be getting better off, or worse off, at a faster rate than others.

There's also the complaint that the focus on economic growth is at the expense of other priorities, such as the environment, fairness or a healthy society.

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