With the rather spectacular success of Alex Salmond's Scottish National Party in the Holyrood elections of this year, 2011, the question of independence comes to the fore again. But, is an independent Scotland really in the interests of Alex Salmond? Scotland has a population of about 5 million people, or, expressed differently, about 8.5% of the British population. However, it spends 9.7% of total UK government expenditure, giving it a higher per head of population spending than other areas of the United Kingdom, including England. This addiction to the public purse in Scotland would pose some very harsh realities for any government of an independent Scotland.
The reality of the situation is that Scotland does not pay its way in the United Kingdom under the current system. As a result, Scotland receives a block grant from London of about £30 bn under the Barnet Formula. In the accounting year 2004-2005, a breakdown of spending in Scotland shows that spending was £47.7 bn. Whilst it is difficult to get accurate regional figures for tax revenues, it was estimated that the net treasury tax revenues coming from Scotland over the same period were about 36.4bn: included in this figure, £1.28bn is petroleum revenue. This means that Scotland produces a yearly deficit of roughly £11bn. That deficit is currently disguised in the UK-wide accounts. However, to join the Euro - presumably an aspiration of Mr Salmond should he achieve independence - a country requires a deficit of less than 3% of GDP: Germany has also insisted on a balanced budget approach. The current carnage in the Eurozone, and particularly with German anger at bailing out other Eurozone nations, is likely to mean a country will have to strictly conform to this regulation in the future. The persistent deficit in Scotland would mean almost certain rejection if it applied to join the Euro - which may not even exist by the time Scotland achieves independence. The deficit, and the Copenhagen criteria which requires new countries in the European Union to join the Euro, may even rule Scotland unable to join the European Union. Even if Salmond's Scotland did convince fellow European states of its membership credentials, a glaring hypocrisy is that Salmond is proposing independence on the one hand and handing over sovereignty to the European Union on the other which would perhaps confuse his supporters.
So, what is Salmond's response? Well, the Calman's proposals. They suggest that income tax could be regulated in Scotland by Holyrood. The reason: quasi-fiscal independence is the first step towards full independence and an attempt to close this deficit. With quasi-fiscal independence will come a growing call for monetary independence. As has been made obvious with the Eurozone crisis, fiscal and monetary policy are inextricably linked.
This blog has attempted to prove that Salmond would be stupid to demand the one thing he desires most. By their nature, when in fiscal difficulties, small states will tend to lean to the right of centre. And the concluding point would have to be that the whole raison d'être of the SNP is independence. Why, in an independent Scotland, would you vote for an independence party (look only to Sinn Féin in the Republic of Ireland). The SNP would have no part to play in an independent Scotland. The SNP are the Scottish equivalent of a party like UKIP: if the UK were to leave the European Union, UKIP would disappear in the same manor as the SNP would in Scotland. They are both 'one trick pony' parties. It, therefore, seems blindingly obvious to me that Alex Salmond is a chicken voting for Christmas.
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