Thanks to the threat of independence, Scots have – in the words of Harold Macmillan – ‘never had it so good’. Scotland’s current position within the United Kingdom, in which it can hand out many social benefits to its citizens without actually paying for them strongly encourages fiscal profligacy. And why not? Who would argue against greater NHS spending, free prescriptions, or free higher education when the cost will be shared with our English neighbours?
The effective scrapping of the Universal Credit two-child limit in Scotland is the latest example that shows how the current situation benefits the country. Just last week, the Scottish Fiscal Commission published estimates of the cost for mitigating the Universal Credit two-child limit in the country – a divergence from Westminster policy which is projected to cost Holyrood between £150 and £198 million per year. When enacted in 2026, this will further widen the gap between financial entitlements in Scotland versus England, with Scots already benefitting from unique forms of support such as the Scottish child payment and the pension-age winter heating payment.
Paying Scotland off to stick around is nonsensical
This comparative generosity, from a nation not renowned for it, is possible largely due to the favourable initial terms of the block grant given to Scotland by Westminster and the continued use of the Barnett Formula, which determines the allocation of fiscal resources between the Scottish and British government.
Last year was the third year in a row in which emergency budget revisions were necessary in Scotland. Despite the greater per capita funding available to the Scottish government, Audit Scotland have warned them that they are at risk of having to enact further emergency budget revisions in the future. This is thanks to Holyrood’s failure to account for rising costs in several areas, notably additional social security spending and increased employer National Insurance contributions (they will be compensated for this latter loss by HM Treasury, but probably not fully). With its larger than average government payroll, Scottish finances are also particularly vulnerable to being derailed by public sector pay deals. Finance Secretary Shona Robinson MSP has promised to put an end to these bad fiscal habits, but there are good reasons to expect more of the same.
The looming threat of independence and the resulting desire in Westminster to keep Holyrood sweet, as well as the massive overrepresentation of Scotland’s interests in UK politics, mean that this situation is unlikely to change anytime soon: Scotland will continue to run financial deficits year after year, and England will continue to pick up the tab (cheers for that). The people who gain most from Holyrood’s generous spending are those like me, who have received a very valuable higher education, as well as many other benefits, at the general public’s expense. Many of us then fled south to benefit from the better wages and job prospects of London and the South East.
This is why the Conservatives have little to offer in Scotland: who wants fiscal responsibility when spending now gets you more than you paid for? Not me. But it doesn’t have to be this way.
An independent Scotland would largely have to balance the books, or at least convince sovereign debtholders that they will one day do so. My prediction is that when confronted with the harsh reality of paying their own bills, Scotland’s citizens would quickly become a lot more fiscally conservative. Perhaps this would be better for both: the rest of the United Kingdom would lose a fiscal drain, and Scotland could finally graduate to serious nation status, free to enjoy the powers and responsibilities that come with being an independent country.
This is my best attempt at a steel man argument for Scottish independence, which doesn’t quite convince me, but comes a lot closer than other arguments I’ve heard. There are however several reasons why I’m still reluctant to burn my Union Jack flags. Ultimately, I don’t think my dream of Scotland becoming a pro-business powerhouse, luring British corporations north with the promise of competitive taxes and effective regulation, is particularly likely. Scotland’s citizens have shown a large preference for re-joining the European Union, which would involve subscribing to their complex regulatory structures, endless bureaucracy, and bizarre industrial policy. As well as dominating Scotland’s political agenda for several years, this would likely involve a hard border with England – an economic non-starter.
Should Scotland vote to go it alone, there is also the reality of the medium-term fiscal austerity which would be required to make it credit-worthy. That’s not to mention the considerable costs that come with any of the currency options available to it, be that joining the euro or otherwise. These economic arguments, among many others, are why I still think Scotland is correct to spurn independence. As a resident of England, who plans to continue living there, I can, however, say with relative confidence that I would be better off if Scotland went its own way. Paying them off to stick around is nonsensical. If forced to confront the economic realities of a large fiscal deficit and an already high tax burden, Holyrood might think twice about its commitment to scrapping the two-child benefit limit.
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