Wednesday, 31 December 2014

The Economic Consequences of A 'Neverendum'

Just a few months ago we were assured that the Scottish Referendum would settle the independence question for a generation. Now it seems that far from accepting the result of the vote, Yes campaigners cannot wait to try again. There are three reasons why this 'neverendum' is a bad idea.

1. Firstly, according to SNP budget plans for the first three years of independence the oil price was to be $110 per barrel. In fact the oil price is about $60 and expected government revenues would be a quarter of what was so recently predicted. We already faced an annual budget deficit and the requirement to try and borrow from the markets at the same time as we were throwing over responsibility for our share of UK National Debt in a fit of pique over not being admitted to a sterling currency union. The No vote turns out to have rescued us from immediate bankruptcy as a country. Hasn't anyone noticed?

2. The major Scottish financial institutions have all made contingency plans to decamp to London. They announced this during the Referendum campaign. Now that the idea is out in the open and it hasn't had the negative commercial impact that might have been expected, it will be much easier to contemplate actually doing it. Loss of such a large industry would inflict huge damage on the Scottish economy.

3. Evidence suggests that inward investment decisions that had been postponed awaiting a resolution of uncertainty caused by the Referendum have been postponed again since the uncertainty is still not resolved. This is great news for parts of Northumbria and Cumbria that can expect investment intended to supply Scottish markets as well as their own. It is less obvious why politicians with Scotland's best interests at heart should wish to prolong this damaging uncertainty indefinitely.

It would be a good idea if Scottish politicians remembered that in the middle of all this constitutional argy-bargy there is a little matter of running the country to be considered.