Monday, June 13, 2011

Unionist expert backs Scottish independence

A piece I did during my tenure as Chief Editor of Newsnet Scotland. I will resumer publishing under the title Scottish Times in due course.

Analysis by Alex Porter

A clown twisting a balloon into a dog grabs children's attention briefly and increasingly briefly each time the child sees the same trick. The political editor of Scotland on Sunday (SOS) Eddie Barns's anti-independence articles have a similar impact.

In last week's SOS Eddie ran the lead story "SNP expert says split will hit economy". It's only once you've finally made it to the end of his piece that you realise that said expert is not in fact an SNP expert and he didn't say anything about how a split [independence] would 'hit' the economy.

The expert in question is economist John Kay who is not an SNP member but is in the Government's Council of Economic Advisors - an august body whose members straddle Scotland's constitutional divide. Having led his readers to believe that Kay is an SNP insider, Barnes reaches the breathless conclusion that Kay's opinion "undermines a vital plank of the First Minister's quest to break Scotland away from the Union". All that in the first paragraph and a half and typifies the recent hysterical reaction from the Unionist press since the landslide SNP election victory a month ago.

Professor Kay did mention that full independence would bring with it "complications" as does any responsibility and Kay does say that an independent Scotland would be "limited by the realities of globalisation" as all independent nations are but he didn't say that an independent Scottish economy would be "hit" or suffer in any serious way at all.

Kay, visiting Professor of Economics at the London School of Economics, supports fiscal autonomy which means all of Scotland's taxes being raised and collected in Scotland. Arguing that full tax powers would benefit Scotland, Kay's opinion actually undermines the postion of all the Unionist parties, none of whom support fiscal autonomy. As fiscal autonomy is not on offer it would be more credible to interpret Professor Kay's view as showing that continued Union will hit the Scottish economy. Indeed, Professor Kay actually said that an independent Scotland is a "perfectly viable economic prospect". Last week's SOS could easily have led with "Unionist expert backs Scottish independence" as its headline.

Professor Kay's take is that Scotland would benefit from being part of a larger state within the Union so long as it controls and collects all its own taxes. This is a reasonable opinion which finds wide support in Scotland.

His analysis does however ignore the the massive monetary downside of Britain's skyrocketing national debt and the consequent devaluation of the pound. The realities of UK PLC are that there is no economic umbrella as the Coalition Government's policy of currency devaluation destroys savings and pensions - a backdoor tax or wage cut. Devaluation brings inflation as overseas products become more expensive meaning your family budget doesn't stretch nearly as far as it did last year.

Considered political journalists can get the economics of independence badly wrong too. On the same day across the M8 at the Sunday Herald Iain Macwhirter perpetuated the unionist myth about Scottish banks being bailed out at English tax-payers' expense. Iain still hasn't got his head round the fact that it was the bank's shareholders and bondholder, based mostly in the City of London, that were bailed out at the expense of all taxpayers including Scottish ones. There are numerous examples of governments bailing out their home-based companies and banks who lost money through foreign investments. Why would an independent Scotland bail out London-based investment houses, who did not do their due diligence and so made poor investment decisions, at all?

And given Iain's left credentials perhaps he can tell us why any of these banks should have been bailed out by the taxpayer at all - a point ably made last week by Professor Kay.

Macwhirter moves on to the subject of fiscal autonomy: "Fiscal autonomy is fine, but do you want control of taxes in order to cut them to promote enterprise, or raise them to meet ambitious social objectives? You can't do both."

The point of fiscal autonomy is indeed partly that - the policy privilege of exerting your own priorities. However another key point which is completely missed by Iain is that having those powers, in itself, would give Scotland a wage increase. So, you have more money before making your policy choices as a nation and there are plenty examples to demonstrate this. So with an increase in income you actually can "do both" or incentivise enterprise while maintaining social spending for example.

That, at least, is the position of one internationally renowned expert in Economics. Professor Andrew Hughes Hallet of St. Andrews and George Mason University in Virginia this week backed the ability of Scotland to improve its economic performance by using the "whole range of fiscal policies" independence would bring.

I'm pretty sure Hughes Hallet's independence endorsement will not be described by Eddie Barns as "supporting a vital plank of the First Minister's quest to argue the SNP's case for Scottish independence". Something tells me that's not in Eddie's box of tricks.

News Scotland


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