Poor old Nicola Sturgeon. The news agenda at the start of this week was meant to be dominated by her new economic prospectus on independence. Then along comes Jeremy Hunt with his scrapping of the mini-Budget, which ensured everyone’s attention was on Downing Street rather than Bute House.
If you did miss it, yesterday saw the First Minister set out the latest – and what was expected to be the most substantive – paper on the economic plan for exiting the UK (or Scexit, as Nationalists don’t like to call it). Did it live up to expectations? Of course not. Putting together a sensible economic case for making Scotland the first part of an advanced economy to cut itself off from its established monetary and fiscal base, all while putting in place trade barriers with its most important trading markets, is like trying to fit a square peg into a round hole. There is no logical economic case for it.
Recognition of that, however, appears to be what has guided the production of the latest paper, Building a new Scotland: a stronger economy with independence. The last big push to make an economic argument for independence came in 2018 with the SNP’s Sustainable Growth Commission report. That document was put out to similar fanfare to this week’s paper. However, soon afterwards the SNP distanced itself from the report. Why? Because it made the fatal error of being detailed enough to provide an insight into the inevitable austerity that an independent Scotland would face as it grappled with bringing down an unsustainably large fiscal deficit.
You have to wonder if the First Minister acknowledges to herself that she is doubling down on a pitch for economic chaos while leveraging up on chicanery
The Growth Commission used Office for Budget Responsibility forecasts and official expenditure and revenue figures to give a starting deficit position, then modelled how that could be brought down to below 3 per cent over ten years. Although the SNP put its spin machine into action to deny it at the time, the proposals were clearly a blueprint for austerity, as the Institute for Fiscal Studies pointed out.
The SNP-Green government’s solution to dealing with the problem of Scotland’s large structural fiscal deficit is to ignore it. Incredibly, yesterday’s paper offers no financial modelling of the deficit under independence. ‘No estimate of the fiscal starting position is set out in this document, given the uncertainty over the outlook for the global, UK, and Scottish economies, and future fiscal and economic policy decisions by the UK and Scottish governments prior to independence,’ the document states airily in a section that merely provides a series of platitudes on ‘fiscal credibility and sustainability’.
The irony of putting out a proposal promising a fantastical future based on uncosted policies in the week Trussonomics has crashed and burned seems not to have registered with the Scottish government.
Other parts of the report seek to artfully deceive Scots. For example, the section on currency retains the 2018 ‘sterlingisation’ plan to unofficially use the British pound after independence, before eventually moving to a new Scottish currency. To make this sound reasonable, the document points to the diversity of currency regimes across Europe. This takes in countries using the euro to countries such as Sweden, with their own currency and also cases such as Denmark, which has its own currency pegged to the euro.
Unmentioned are relevant comparator countries that are either dollarised (such as Panama) or euroised (such as Montenegro). Pointing to examples like these would highlight the fact that no advanced economy uses the type of currency system being proposed in Scotland. There are good reasons for that. Sterlingisation brings with it serious systemic risk. If Scotland had opted for independence in 2014, resulting in a move to sterlingisation with secession in 2016, it would almost certainly have crashed the economy.
It is no surprise that the paper fails to reference the SNP’s Growth Commission report (it doesn’t even merit a footnote). But it is ironic that most of it is simply a less detailed rehash of the Commission’s policies, such as the now widely discredited currency proposal. Where it does differ is in talking more about the European Union and explicitly acknowledging there will be a hard border with England. But again, it skirts around the implications this would have for the Scottish economy, downplaying the associated costs and difficulties.
The key aim of the paper, then, appears to be to create a less informed debate around independence. The mistakes of the Growth Commission – of opening the curtain up too far and letting too much light in – must not be repeated. If the people are to be led to independence then they must take those fateful steps in ignorance. You have to wonder if the First Minister, in the wee small hours, acknowledges to herself that she is doubling down on a pitch for economic chaos while leveraging up on chicanery.
Nicola Sturgeon often says she wishes Brexit hadn’t happened, but it has clearly taught her a valuable lesson on how to sell separatist economics: paint with a broad brush, don’t get bogged down in detail, and be confident as hell when you walk on that stage to convince the public to back a policy that will damage their country and make their families poorer. It’s quite the racket.
Comments