The Sunday Times
December 03, 2006
Anti-enterprise Scotland go it alone? What a hoot
Talk of independence is growing but until Scots abandon their love affair with state handouts it will never work, says Tim Luckhurst
Anti-enterprise Scotland, with its low levels of entrepreneurial activity and high state handouts compared to the rest of Britain (more similar to France, Germany and Italy than an English-speaking nation) will not be able to survive an an independent state without the help of the English taxpayer.
Three hundred years of union have not made England and Scotland feel like the same country. Scots have thrived on the British stage ever since Lord Bute became the first Scottish prime minister of the United Kingdom in 1762, but they have never abandoned their distinctive status and identity. Scotland’s legal system, protected by the 1707 Act of Union, still survives, alongside unique educational and religious institutions.
The cynical view is that Scotland has remained part of the union only for the reason it joined in the first place: money. Scotland, according to unionists, is massively subsidised by the English taxpayer. Public spending, £1,503 per Scot above the English average, is financed by hardworking families in the home counties. Alone, Scotland would stagger into economic depression and collapse.
As the Scottish National party extends its opinion poll lead over Labour the broad picture is uncontested. More than £20 billion of Treasury funds come to Scotland from Whitehall each year, providing total public spending per Scot of £8,265. Scotland’s net deficit, that is spending that benefits Scots but is not raised in Scotland, amounts to 13% of gross domestic product (GDP), more than four times the figure for the UK as a whole.
One recent calculation estimates that just 163,000 Scottish taxpayers, from a population of 5m, make any net contribution to the British exchequer. The rest receive more than they pay out in reliefs, subsidies and benefits.
Even Alex Salmond, the SNP leader, admits that Scotland has the highest unemployment, the highest proportion of income support claimants and the lowest business survival rate in Britain. The difference is that he blames the union for Scotland’s poverty.
Salmond says the mere act of becoming independent would create 11,500 jobs and extra GDP worth £375m a year. The initial bonanza would come from such changes as Edinburgh becoming a real capital city with foreign embassies and Glasgow developing fully fledged radio, television and film industries. Aberdeen would emerge as the nerve centre of Europe’s oil and gas industry.
Oil is the brontosaurus in the living room. From the nationalist perspective Scotland is not subsidised at all. On the contrary, since the North Sea began to produce in the 1970s, billions of pounds worth of Scottish natural resources have feather-bedded Britain. Under an independent Scottish government they will fund Scotland alone.
Reality is more complex. Production is in decline and fresh resources lie beneath deep water to the west of Shetland. But despite the difficulty of exploiting them — and environmental pressures to reduce demand — the SNP remains adamant that “it’s Scotland’s oil”.
Of course the UK Treasury would demand compensation for historic investment in infrastructure. Taxed too hard, oil companies would look elsewhere. But there would be revenue for an autonomous Scottish treasury, and despite the vagaries of the oil price, promoters of independence regard “black gold” as the cherry on the nationalist sundae.
From this foundation, claims the SNP, Scotland would go on to build a vibrant private-sector economy capable of generating annual growth comparable to that achieved in carbon-rich northern European economies such as Norway and Denmark.
The flaw is simple but gigantic. Never mind that dreams about embassy relocation are demonstrably false — Norway, Denmark and Ireland all spend more on their diplomatic representation abroad than they earn from missions based in their capitals. The stark lacuna in the nationalist argument is Scotland’s debilitating political consensus.
There is no absolute barrier to Scottish prosperity. With a low tax, pro-enterprise government ensconced in Edinburgh the land that spawned Adam Smith and Andrew Carnegie might become the Hong Kong of the north Atlantic. But Scotland has not voted for a party prepared to cut taxes since 1955 and even then it supported the Conservatives only because they promised to build more council houses than Labour.
Scotland is not just dependent on the UK state; it is state-dependent full stop. A full 50% of Scottish GDP is spent by government. The state employs one Scot in four. Red Clydeside and the once communist coalfields of Fife have shed their shipyards and pits but the class warrior instinct continues to motivate the electorate. Even affluent Scots professionals, with expensive homes in genteel districts such as Edinburgh’s Morningside and Glasgow’s West End, describe themselves as “working class”.
The historically dominant Scottish Labour party wins seats whose economic profile would, elsewhere in the UK, dictate a secure Conservative majority. The party which for half a century has made of Scotland the only one-party state in democratic Europe resembles the one led by Tony Blair in name alone. It despises enterprise and champions state spending as the cure for all ills. Freed from English restraint by the devolved parliament that Blair still — incredibly — regards as one of his greatest achievements, it has spent wantonly.
Forget the £431m lavished on the modernist parliament building Donald Dewar said would cost £40m. It is trivial by comparison with the sums invested in flagship devolved policies including the abolition of student tuition fees and free care for retired Scots. The reason Gordon Brown’s infant son Fraser got the heel-prick blood test that revealed his cystic fibrosis is because Scottish hospitals are funded to perform them on all babies. Financed by block grant from Whitehall the Scottish executive is not disciplined by a direct relationship with taxpayers. It spends without electoral consequences.
The economists Professor Ronald MacDonald of Glasgow University and Paul Hallwood of the University of Connecticut compare this arrangement to an aristocrat giving his son a generous allowance and promising that, however much the boy spends, the allowance will always be paid. The problem for nationalists is that this is the economic and fiscal foundation on which autonomous Scottish prosperity would have to be built.
To have any hope of creating the thriving independent economy of which they dream, an SNP government would have to impose economic policies Scotland has rejected at every election since 1945 and which the party dare not even propose.
Forget oil. If Scotland wants autonomy it will afford it only by learning to love enterprise. But the Scottish Conservatives send just one MP to Westminster and the national ambition is to secure a safe job in the public sector. Dream on, Mr Salmond.
Tim Luckhurst is a former editor of The Scotsman and a former adviser to Donald Dewar
timesonline.co.uk
December 03, 2006
Anti-enterprise Scotland go it alone? What a hoot
Talk of independence is growing but until Scots abandon their love affair with state handouts it will never work, says Tim Luckhurst
Anti-enterprise Scotland, with its low levels of entrepreneurial activity and high state handouts compared to the rest of Britain (more similar to France, Germany and Italy than an English-speaking nation) will not be able to survive an an independent state without the help of the English taxpayer.
Three hundred years of union have not made England and Scotland feel like the same country. Scots have thrived on the British stage ever since Lord Bute became the first Scottish prime minister of the United Kingdom in 1762, but they have never abandoned their distinctive status and identity. Scotland’s legal system, protected by the 1707 Act of Union, still survives, alongside unique educational and religious institutions.
The cynical view is that Scotland has remained part of the union only for the reason it joined in the first place: money. Scotland, according to unionists, is massively subsidised by the English taxpayer. Public spending, £1,503 per Scot above the English average, is financed by hardworking families in the home counties. Alone, Scotland would stagger into economic depression and collapse.
As the Scottish National party extends its opinion poll lead over Labour the broad picture is uncontested. More than £20 billion of Treasury funds come to Scotland from Whitehall each year, providing total public spending per Scot of £8,265. Scotland’s net deficit, that is spending that benefits Scots but is not raised in Scotland, amounts to 13% of gross domestic product (GDP), more than four times the figure for the UK as a whole.
One recent calculation estimates that just 163,000 Scottish taxpayers, from a population of 5m, make any net contribution to the British exchequer. The rest receive more than they pay out in reliefs, subsidies and benefits.
Even Alex Salmond, the SNP leader, admits that Scotland has the highest unemployment, the highest proportion of income support claimants and the lowest business survival rate in Britain. The difference is that he blames the union for Scotland’s poverty.
Salmond says the mere act of becoming independent would create 11,500 jobs and extra GDP worth £375m a year. The initial bonanza would come from such changes as Edinburgh becoming a real capital city with foreign embassies and Glasgow developing fully fledged radio, television and film industries. Aberdeen would emerge as the nerve centre of Europe’s oil and gas industry.
Oil is the brontosaurus in the living room. From the nationalist perspective Scotland is not subsidised at all. On the contrary, since the North Sea began to produce in the 1970s, billions of pounds worth of Scottish natural resources have feather-bedded Britain. Under an independent Scottish government they will fund Scotland alone.
Reality is more complex. Production is in decline and fresh resources lie beneath deep water to the west of Shetland. But despite the difficulty of exploiting them — and environmental pressures to reduce demand — the SNP remains adamant that “it’s Scotland’s oil”.
Of course the UK Treasury would demand compensation for historic investment in infrastructure. Taxed too hard, oil companies would look elsewhere. But there would be revenue for an autonomous Scottish treasury, and despite the vagaries of the oil price, promoters of independence regard “black gold” as the cherry on the nationalist sundae.
From this foundation, claims the SNP, Scotland would go on to build a vibrant private-sector economy capable of generating annual growth comparable to that achieved in carbon-rich northern European economies such as Norway and Denmark.
The flaw is simple but gigantic. Never mind that dreams about embassy relocation are demonstrably false — Norway, Denmark and Ireland all spend more on their diplomatic representation abroad than they earn from missions based in their capitals. The stark lacuna in the nationalist argument is Scotland’s debilitating political consensus.
There is no absolute barrier to Scottish prosperity. With a low tax, pro-enterprise government ensconced in Edinburgh the land that spawned Adam Smith and Andrew Carnegie might become the Hong Kong of the north Atlantic. But Scotland has not voted for a party prepared to cut taxes since 1955 and even then it supported the Conservatives only because they promised to build more council houses than Labour.
Scotland is not just dependent on the UK state; it is state-dependent full stop. A full 50% of Scottish GDP is spent by government. The state employs one Scot in four. Red Clydeside and the once communist coalfields of Fife have shed their shipyards and pits but the class warrior instinct continues to motivate the electorate. Even affluent Scots professionals, with expensive homes in genteel districts such as Edinburgh’s Morningside and Glasgow’s West End, describe themselves as “working class”.
The historically dominant Scottish Labour party wins seats whose economic profile would, elsewhere in the UK, dictate a secure Conservative majority. The party which for half a century has made of Scotland the only one-party state in democratic Europe resembles the one led by Tony Blair in name alone. It despises enterprise and champions state spending as the cure for all ills. Freed from English restraint by the devolved parliament that Blair still — incredibly — regards as one of his greatest achievements, it has spent wantonly.
Forget the £431m lavished on the modernist parliament building Donald Dewar said would cost £40m. It is trivial by comparison with the sums invested in flagship devolved policies including the abolition of student tuition fees and free care for retired Scots. The reason Gordon Brown’s infant son Fraser got the heel-prick blood test that revealed his cystic fibrosis is because Scottish hospitals are funded to perform them on all babies. Financed by block grant from Whitehall the Scottish executive is not disciplined by a direct relationship with taxpayers. It spends without electoral consequences.
The economists Professor Ronald MacDonald of Glasgow University and Paul Hallwood of the University of Connecticut compare this arrangement to an aristocrat giving his son a generous allowance and promising that, however much the boy spends, the allowance will always be paid. The problem for nationalists is that this is the economic and fiscal foundation on which autonomous Scottish prosperity would have to be built.
To have any hope of creating the thriving independent economy of which they dream, an SNP government would have to impose economic policies Scotland has rejected at every election since 1945 and which the party dare not even propose.
Forget oil. If Scotland wants autonomy it will afford it only by learning to love enterprise. But the Scottish Conservatives send just one MP to Westminster and the national ambition is to secure a safe job in the public sector. Dream on, Mr Salmond.
Tim Luckhurst is a former editor of The Scotsman and a former adviser to Donald Dewar
timesonline.co.uk
