This blog was first published in The Herald newspaper on 11 February 2022.
By Graeme Roy, Professor of Economics at the Adam Smith Business School, University of Glasgow
The First Minister has committed to a referendum on Scottish independence by the end of 2023. A new team has been established in government to support ministers in developing the case for independence. As in 2014, much of their work will no doubt focus upon the economic questions – the risks and opportunities – which will once again be to the forefront of the debate.
Often these discussions can become bogged down in technical discussions that bypass most of the public or in political arguments that add more heat than light. That is why a new series of articles – published by the ESRC’s Economic Observatory – provides such a welcome addition to the debate. The Observatory is publishing over a dozen free-to-access articles on Scottish independence drawing upon experts from here in Scotland and further afield.
While some of the topics will be familiar, from currency options through to fiscal sustainability, the series also looks at areas where the debate has either changed since 2014 or which were not covered in detail last time around. There is, for example, an interesting discussion of the ties between support for Scottish independence and the deindustrialisation of the 1970s and 1980s, and how this contributes to our understanding of trends in public opinion. There are insights too from other countries, most notably Ireland and the break-up of Czechoslovakia with its short-lived currency union.
Refreshingly, the series also offers reflections on the challenges that standard economic theory faces when attempting to analyse constitutional change. The key advice from this paper is that if either side in the debate presents a ‘definitive conclusion’ on what would happen post-independence then take it with a pinch of salt.
The issue of borders, unsurprisingly, is referenced by several authors as being crucial post-Brexit. With the UK having erected a ‘hard border’ with the EU, an independent Scotland would face a difficult choice over where to place its own economic frontier.
Regions within the same market tend to trade more with each other than they do internationally, even if trade barriers are low. So, whilst Scotland in theory might be able to pivot its trade patterns away from its current dominant market (rUK) to another (Europe), this could take decades, be costly and lead to huge numbers of ‘winners’ and ‘losers’. Those with a significant customer base in rUK will be the quickest to make contingency plans, but global companies might be more relaxed about an internationally outward facing Scotland.
Perhaps the most interesting contributions have centred upon the institutional changes that would be required. A central bank is the most obvious, but an efficient debt management office and the building of wider ‘fiscal capacity’ will be crucial for the effectiveness of policy over the longer-term.
What do I take from all of this? First, away from the political and social media noise that dominates debates, it is possible to have a respectful and informative discussion about issues at the heart of Scotland’s constitutional question.
Second, there are strengths and weaknesses in the current narratives from both sides. It is not enough for pro-independence supporters to roll-out soundbites about what Scotland ‘might become’ or to simply criticise UK policies, when there are important technical questions that need answered. Equally, it is not sufficient for unionists to only point to short- and medium-term risks without recognising that there are not legitimate areas of policy where people in Scotland might wish to take a different path.
Initiatives like this Economic Observatory series are a welcome sign of the commitment of the academic community to inform the public on these issues and to hold both sides to account.