Her Majesty’s Treasury and the Scottish government have been at war today. Both have released papers with conflicting predictions about whether the Scots would be better off outside of the UK. The SNP says individuals would be £1,000 better off out of the UK, while the Treasury argues they’d be £1,400 better off in the UK. Much of this analysis is based on negotiations that haven’t happened and economic forecasts that could easily change, but both papers offer much food for thought. Here are the five key competing claims you need to know from the fiscal policy papers:
1. A £1,400 UK dividend?
The Treasury’s Fiscal policy and sustainability paper (pdf) argues there is a £1,400 ‘UK dividend’ (from 2016-17 onwards) that benefits Scots — thanks to the pooled resources and shared risks of being in the United Kingdom. An independent Scotland would result in higher taxes and lower public spending, according to Danny Alexander. Alex Salmond on the other hand, has told the BBC ‘we calculate that as each individual in Scotland being £1,000 better off — that’s a £5 billion bonus, or a family £2,000 better off a year’ thanks to independence.
2. Too much debt?
According to the Treasury’s analysis, Scotland’s portion of the UK debt would be 74 per cent of its GDP in 2015-16; something they suggest could easily reach ‘unsustainable levels without policy action’. Alternatively, the SNP have said in their paper (pdf) Scotland’s predicted debt to GDP ratio is forecast to be lower than the UK’s under any potential outcome of negotiations, whilst pointing out Scotland is the 14th richest country in the world.
3. £2.7 billion to restructure Scotland?
The Treasury claims that there are £2.7 billion costs of setting up a new government and restructuring Scotland. However, a politics professor at the LSE told the Financial Times (£) that HMT has manipulated his figures to make them ten times larger his initial predictions. Salmond used this to claim the Treasury have been ‘caught red-handed trying to cook the books’.
4. Declining oil revenues?
The Treasury’s paper argues that revenues from oil are declining, which account for a significant chunk of Scotland’s finances. They are basing this on OBR forecasts, which are much lower than the Scottish government’s predictions. However, the OBR’s forecasts have been too optimistic in the past. The Scottish government in turn argue an independent Scotland would be entitled to a chunk of the UK’s £1.3 trillion assets.
5. A shrinking working-age population?
HMT’s analysis argues Scotland would need to increase its population by 24,000 a year for the next two decades to keep up public spending at its current levels — particularly on pensions. Eurostat reports that the population is currently growing at around 5,000 a year at the present, leaving a large gap to fill. The SNP agrees that an independent Scotland would have to increase migration, but argue they have policies in place to do that.
Give something clever this Christmas – a year’s subscription to The Spectator for just £75. And we’ll give you a free bottle of champagne. Click here.