Independent Scotland: socialist paradise or neo-liberal nirvana? - Spectator Blogs

11 September 2012

11:36 AM

11 September 2012

11:36 AM

Well, probably neither actually. But there’s every reason to suppose that just as some Unionists are fooling themselves when they discount the possibility of dear old Scotia thriving as an independent entity so some backers of independence may be deluding themselves if they think independence is a one-way ticket to a socialist paradise.

That’s the premise of this week’s Think Scotland column, written in the aftermath of Jim McColl’s decision to be out for independence. McColl, Heid Neep at Clyde Blowers and reckoned worth a billion pounds or so, is Alex Salmond’s latest boardroom success.


Admittedly McColl’s support is less than whole-hearted. It’s predicated upon Unionist reluctance to move much beyond the recent Scotland Bill. Independence is McColl’s preferred second prize. Anyway: I fancy an independent Scotland could prove more Thatcherite than the Thatcher years. The revolution will just have been delayed thirty years. A neo-liberal nirvana? Well perhaps that’s putting it too strongly too. Nevertheless:

If some Unionists make foolish arguments that can be distilled to an essence of Too Poor, Too Wee, Too Stupid to be independent so some nationalists err on the other side of the balance. I rather doubt that independence guarantees a Warmer, Bigger-Hearted, More Decent, Better Scotland. By which they mean, of course, a more left-wing Scotland. It may not actually turn out like that.

Even if one allows that a transition to independence passed smoothly, it’s plain that an independent Scotland’s finance minister would enjoy relatively little room for manoeuvre. This is the case even if concerns – quite reasonable concerns, it might be said – about monetary policy are settled in some satisfactory fashion.

Scotland is sufficiently prosperous to make a decent fist of independence. By many measures the country is the third-wealthiest part of the United Kingdom (bested only by London and the south-east of England). All this is encouraging.

Less cheerfully, however, it is also the case that Scotland’s fiscal position is more vulnerable than it might seem at first glance. The SNP, quite reasonably, argues that Scotland contributes her fair share of UK government receipts. According to the 2010-2011 Government Expenditure and Revenue Scotland figures, Scotland contributed 8.3% of UK revenue, more or less in line with her 8.4% of the UK population. If a “geographical share” of North Sea oil revenues are included that figure rises to 9.6%.

All this is quite encouraging too. Poke beneath the bonnet, however, and you quickly discover evidence that not everything is as healthy as it seems. For instance, Scotland contributes just 7.3% of UK income taxes, 6.8% of capital gains tax, 5.8% of inheritance tax and 6.7% of stamp duties. From this I think we may deduce that an independent Scotland would find it difficult to increase taxes on wealth. There isn’t enough of it to tax in the first place.

By contrast, Scotland “outperforms” other parts of the UK – that is, contributes a disproportionate amount of tax – on tobacco, alcohol and betting duty. Perhaps more significantly – since these “sin taxes” make up less than 5% of non-North Sea Revenue – Scotland contributes 8.8% of UK VAT receipts.

So where will an independent Scotland’s revenue come from? A broader or higher rate of VAT is one possibility. So too is increasing property taxes (Scotland contributes just 7.7% of council tax revenue).That will not be popular but it is feasible. Increasing taxes on income might also be possible but only at the risk of encouraging at least some Scots to move elsewhere. Whether one likes it or not those Scots who might find relocating elsewhere attractive are also those for whom doing so is likely to be easiest.

What about corporation tax? Well, excluding oil revenues, Scotland presently contributes 9% of UK corporation tax receipts. That’s encouraging too but it’s also why the First Minister has told business leaders he’d want to reduce corporation tax in Scotland to give the country a competitive advantage and make it even more attractive to foreign investors. This too is sensible, not least since many companies domiciled in Scotland could easily, if they chose, relocate south of the border.

All this being the case – and I think it is the case – it follows that, because of our location on the periphery and because of the size of our what would be our new neighbour, Scotland’s non-oil wealth is a resource to be farmed responsibly and with, to use a favourite government buzzword, some eye on its sustainability. Otherwise those resources risk being depleted.

Perhaps this is what the Labour party fears. Labour’s opposition to independence or more powers of any sort rests upon its belief that competition demands a “race to the bottom”.

It’s true that, on the spending side, Scotland could trim aspects of UK government spending that are relatively unimportant to Scotland (defence, some transport projects) and also true that, notionally at least, smaller government units can be more efficient than larger entities.

[…] An independent Scotland is not likely to be able to afford to be a high-tax country. That is, it seems quite unlikely it can cope with higher taxes than those applying in what remains of the United Kingdom. On the contrary, the logic of the balance sheet demands Scottish taxes actually be lower than those applied elsewhere.

Whole thing here.


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Show comments
  • rndtechnologies786

    Nice blog.

  • Alison

    Presumably Scotland’s income tax receipts include tax paid by people in the public sector. How much of this would be preserved if Scotland were independent?

    I’m not trying to stir things up one way or the other. Just asking the question.

  • alexsandr

    if there is independence what will happen to the SNP? And what will its supporters do. Will there new new parties, one left, one right?

  • terence patrick hewett
  • Wessex Man

    A good well researched article, I as an Englishman feel that Scotland should have it’s Independence and the Scots should be brave and vote for it in 2014. I would then look to see Wales and Northern Ireland also given their own referendum to be Independent and hopefully they too would vote for it!

  • PeterABell

    How unfortunate that Alex Massie falls so easily into the intellectually lazy folly of mistaking the ranting of unionists for the voice of Scotland’s civic nationalist movement. Campaigners for restoration of Scotland’s rightful constitutional status have never seen independence as anything other than a starting point for the building of a better nation.

    Maybe Mr Massie could do with getting out and about a bit. Maybe even meet some real Scottish nationalists. Perhaps even listen to what they are actually saying. Were he to do so he is likely to be surprised to find just how few of them utter trite phrases such as “socialist paradise”. Glibnesses which are more the province of those shrill voices that echo in the heads of the more rabid unionists.

  • Ahdinnaeken Nawahreallydont

    Alex is echoing the sentiments of the SNP’s Jim Mather and providing the figurative data to back it up.
    Salmond might need the disillusioned ‘left leaning’ ex-Labourite support, but they’ll be quickly ditched and forgotten in the unlikely event of a positive independence vote.
    It’s a hard call and I’ve still to see or hear anything to convince me that independence would be a clear improvement in the fortunes of the country.

    • PeterABell

      Who made the rule that nations must pass some contrived economic test in order to qualify for independence? Would the UK pass such a test? Probably without realising it you are suggesting that a nation’s sovereignty is no more than a tradeable commodity. That people should be prepared to sell their nationhood in return for promised gold.

      A nation is more than a balance sheet. I seek for Scotland no more than that status and those powers which other nations assume to be theirs by right. I do so for reasons likely to be incomprehensible to those shallow enough to imagine I might be swayed by some economic argument.

      • Charles Patrick O’Brien

        I would rather be independent and poor,than under my neighbours thumb,but we wont be,we have enough people who love our country to put in the extra effort to show the way.Very good point Peter,my nationalist views are not for sale.

  • FF42

    Wishful thinking has its place. It’s not clear what you are wishing for, though, Alex. I always had you down as a Unionist! Given the fiscal position of an independent Scotland would be broadly equivalent to that of the UK average, I would expect an independent Scotland to pursue a tax policy equally similar to the current one.

  • Wilhelm

    The SNP is not a nationalist party, it’s all for mass immigration and multiculturalism.

    A nation is defined by its people, change the people, you change the country. Fill the nation up with Africans and muslims, the landscape and buildings will remain the same , but the country will be different , All the parties are for this ethnic cleansing

    • Spammo Twatbury

      You seem to have interpreted “ethnic cleansing” to mean the exact opposite of what it actually means, Wilhelm. You racist dolt.

      • Wilhelm

        Twat squeals” Racist ”

        Why don’t you think of something original to say ? Your naivety is quite staggering. Scotland unlike England did not suffer the race riots last year because Scotland does not have a large black population.

        England is a multicultural dystopian nightmare, of black race riots, sharia law, honour killings, islamic terrorists, muslims molesting girls, halal meat etc etc.

        • PeterABell

          You missed out “brain-dead bigots” from your list. Don’t be shy!

          • Wessex Man

            Just a minute PeterABell you don’t even know if he’s English, with a moniker like his, I’d guess not. even if the idiot is theres no more brain dead bigots in England than in Scotland.
            We don’t have to pass sectarian laws to stop feuding football “fans” beating each other’s heads in!

            • PeterABell

              Did I say anything about him being English?

              • Wessex Man

                No you didn’t, sorry for my rash statement.

            • Flash for Freedom

              Salmond didn’t pass sectarian laws to stop football fans beating each others heads in, he passed it as a sop to a religious minority and to bully traditionally Unionist Rangers fans who are the main victims of this illiberal law. Only today an Englishman’s house was raided in Middlesborough because he allegedly blogged a few insults about the Pope. It was raided by Strathclyde Police! I wonder when they’ll be knocking on Stephen Fry’s door? Welcome to Salmond’s Dystopia.

            • ken mac

              Believe me there’s plenty more brain dead bigots in England than there is in Scotland and we have enough. No you don’t have to pass sectarian laws to stop feuding fans beating each others heads in. I seem to recall said fans, particularly in the eighties didn’t even need the excuse of sectarianism in order to beat each others heads in.

    • Spammo Twatbury

      You seem to have interpreted “ethnic cleansing” to mean the exact opposite of what it actually means, Wilhelm. You racist dolt.