Scottish independence: Rivals both say Scots 'better off with us'

 

The UK and Scottish governments are debating whether Scots would be better off under independence

Competing claims about the costs and benefits of Scottish independence have been set out to voters.

The Scottish government said everyone in Scotland would be £1,000 better off a year, in the event of a "Yes" vote in September's independence referendum.

But UK ministers said in their analysis people would benefit from staying in the UK by £1,400 per person, per year.

Each side of the debate also sought to discredit the figures put forward by their opponents.

Scottish First Minister Alex Salmond said the Treasury's calculations had been "blown to smithereens", while Chief Secretary to the Treasury Danny Alexander accused SNP ministers of offering voters a "bogus bonus".

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

A new Scottish government paper said an independent Scotland would begin life with its public finances in a "strong" position, and could see its economy £5bn per year better off by 2029-30.

Mr Salmond said Scotland was one of the world's wealthiest countries, but needed the powers of independence to realise its full potential.

He told the BBC: "We put forward the benefit over a period of 15 years. We calculate that as each individual in Scotland being £1,000 better off - that's a £5bn bonus, or a family £2,000 better off a year."

The Scottish government paper said:

  • Scotland's finances in 2016-17 will be similar to, or stronger than, both the UK and the G7 industrialised countries as a whole.
  • Scotland's public finances show debt on a downward trajectory, enabling future Scottish governments to start an oil savings fund.
  • Scotland's estimated debt to GDP ratio in 2016-17 is forecast to be lower than the UK's under any potential outcome of negotiation with the UK over public sector assets and liabilities.
  • Scotland's fiscal position between 2008-09 and 2012-13 is estimated to have been worth £8.3bn, equivalent to £1,600 per person.
  • An independent Scotland could see tax income increase by £2,4bn a year by 2029-30, under a predicted 0.3% productivity increase.
  • A 3.3% increase in Scotland's employment rate would move it up to the level of the top five performing countries in the OECD and could increase revenues by £1.3bn a year, by 2029-30.

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

The first minister said his government's calculations were "based on reason and logic", as he hit out at UK government claims it could cost up to £2.7bn for an independent Scotland to set up the public bodies it needed, which made use of London School of Economics research.

LSE academic Patrick Dunleavy later posted on his Twitter account: "UK Treasury press release on Scotland costs of government badly misrepresents LSE research."

Mr Salmond added: "Danny Alexander's calculations have been blown to smithereens, because the Treasury relied on the work of the LSE professor, Professor Dunleavy, who this morning has accused them of grossly misrepresenting his work."

But Mr Alexander branded the Scottish government's £5bn figure a "bogus bonus", adding: "They're desperately trying to distract attention from that fundamental question, that there simply wouldn't be the same level of resources available for public services if Scotland were independent."

The Treasury published its own paper outlining what the UK government sees as challenges to an independent Scotland, including an ageing population, declining oil revenues and the potential for higher interest rates.

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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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Mr Alexander said: "Today we have shown that, by staying together, Scotland's future will be safer, with stronger finances and a more progressive society.

"Because as a United Kingdom we can pool resources and share risks. It means a UK dividend of £1,400 a year for every man, woman and child in Scotland.

"That dividend is our share of a more prosperous future. It is the money that will pay for better public services and a fairer society."

The Treasury analysis said:

  • Scotland, as part of the UK, was projected to be able to have lower tax or higher spending than under independence. This "UK Dividend" is estimated to be worth £1,400 per person in Scotland in each year from 2016-17 onwards.
  • Under independence, the loss of the UK Dividend would mean £1,400 per year for each Scottish person in higher taxes and lower public spending.
  • The "direct costs" of independence would include higher interest rates for an independent Scottish state to borrow, the net costs of setting up new institutions, and the net costs of funding the Scottish government's White Paper policies (including the potential economic benefits).
  • If the UK debt was split according to population at the end of 2015-16, an independent Scotland would take on debt of about 74% of its GDP, which could reach "unsustainable levels without policy action".
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Treasury graph
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Scottish tax receipts
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ANALYSIS - BBC Scotland political editor Brian Taylor

What is the £1,400 Union dividend?

Well, the UK Treasury says it's per person and would come into play at the onset of independence. It takes into account higher public spending borne by Scotland alone; lower oil revenues than Scottish government forecasts; a disproportionately ageing population; set-up costs of independence and the net effect of policies in the White Paper, such as a reduction in corporation tax. To counter that, Scotland would benefit from having a geographical share of North Sea oil, rather than having it shared across the UK as a whole.

So, what is the breakdown per head? The first six figures show costs to be added to Scotland's account (hence the plus). The seventh, about oil share, is a cost to be removed from Scotland's account (hence the negative).

  1. Lower UK borrowing +£47
  2. Set-up costs and net effects of Work and Pensions policies avoided +£261
  3. Costs of ageing absorbed across UK +£163
  4. Long term oil decline absorbed across UK +£130
  5. Lower Scottish onshore tax revenues absorbed +£207
  6. Higher public spending in Scotland +£981
  7. Oil revenues shared across UK, rather than geographically -£389

Total added costs: £1,789

Total gain: £389

Net downside: £1,400

And that, according to the UK Treasury, is how you get to the Union Dividend - worse off by £1,400 under independence, or taken the other way, £1,400 better off sticking with the Union.

Read more analysis from Brian Taylor on the two competing economic visions

 

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  • Comment number 1009.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    -3

    Comment number 1008.

    The main argument/grevance for independance is that the Scots do not feel represented adequatly at Westminster 52 MP's out of 400 (12% representation). If they join the EU they will have 7 MEP's in 776 about 1% rep. If it happens then the UK will also be weekened and a federal Europe will be one step closer for us all. Do not change the UK change the politics in Westminster. Scotland please stay

  • rate this
    +2

    Comment number 1007.

    the money spent over the last 15 years alone in london and the south east from the Chunnel ,millennium celebrations, Terminal 5, Olympics, Opera houses and Cutty Sark farce and Boris is demanding more, better together i doubt that Danny, better start looking for a new job none of you lot will be welcome in a new Scotland and its politics

  • rate this
    0

    Comment number 1006.

    Salmond wants Scottish independence for his own legacy the numbers don't stack up. I can't believe anybody in Scotland wants this

  • rate this
    +3

    Comment number 1005.

    As an Englishman Living in Scotland for the past 15 years this is a debate close to my heart. I am British and always will be but the Scottish see themselves as Scottish not British the vote is for if they WANT independence not if they can afford it!. alot of them do!, a fact overlooked by the "london south" I hope its a No vote but if it isnt then so be it!.

 

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