REMEMBER that crazy Independence thing? You know – the idea that Scotland should leave the Union and establish itself as an Independent state.
I know it seems odd now but people actually used to believe that stuff. Before Iceland imploded and the great Scottish banks were rescued by the London Treasury the issue even dominated political debate here. Thank God then for financial meltdown. At least it has brought people to their senses. No-one takes any of that separatist rubbish seriously anymore.
That anyway is the current dominant mood among so much of the Scottish political classes. But far from sealing the nationalists’ fate, I believe the banking crash and in particular, this week’s Pre Budget Report have actually, to coin a phrase, killed stone dead the number one argument deployed against the SNP – the so-called structural deficit.
The last few weeks have clearly been uncomfortable for Independence supporters. The unrestrained joy of Unionist commentators at the difficulties experienced by Scotland’s banks may have been distasteful but their euphoria did appear to have some justification. The success of RBS in particular used to be held up as an example of what we in Scotland could achieve. The spectacular fall from grace and profitability of what the First Minister called our greatest company was clearly good news then for the opponents of Independence, who in the final analysis, have to rely on crushing Scottish self-esteem to ward off the nationalist threat.
But then came the Chancellor’s statement to Parliament and in particular his borrowing forecasts. By 2010, Alistair Darling told us, the UK would be facing a deficit of #118 billion. This figure has changed everything.
For years Labour and the Conservatives have been trading on the alleged deficit that Scotland would inherit post-Independence. The result, we were told, would be massive spending cuts or equally huge tax rises. Indeed since Labour’s success in the 1999 election this has been the main tactic deployed against the SNP.
As an SNP strategist I remember being superficially amused at the numbers Labour appeared to pluck out of the air as an estimate for Scotland’s deficit. It might be #2 billion one day; #3 billion the next or even as high as #8 billion.
The figures may have been ludicrous, but I did not doubt their political effectiveness. After the establishment of the Scottish Parliament, under the leadership of both Alex Salmond and John Swinney the SNP tried to move the economic debate away from arguments about subsidies and deficits and on to the more dynamic ground of how to boost Scottish growth and living standards.
But despite some intellectual success, the basic political attack was hard to overcome. Fear is an important weapon to deploy in a negative campaign and scare stories over the deficit proved powerful.
Even the demolition of many of the “subsidy junkie” arguments by independent investigations failed to counter the power of the subsidy myth.
But at at stroke, as Tony Blair might say, the rules of the game have changed. The sheer scale of the actual UK deficit makes redundant any guess at the imagined shortfall facing an Independent Scotland.
And it’s not just the eye-watering number that is important – it’s the argument deployed by both Prime Minister and the Chancellor. Mr Brown and Mr Darling argue that by 2014 the UK will once again be borrowing only to invest. In other words, even deficit financing on this scale is perfectly possible for a government to carry out. It does not mean that the UK has failed as a political or economic entity and should be wound-up. It would seem difficult therefore to argue that Scotland’s independence is impossible because it may or may not face a deficit.
Interestingly the OECD this week set out its growth forecasts for member states over the next three years. These forecasts show countries of a comparable size to Scotland are poised to weather the storm rather better than the UK.
What all this tells us is that in general countries tend to increase borrowing when times are tough but improvements are made during an upturn. In addition, we can say with some confidence that the management of the UK’s public finances look particularly poor compared with other countries. More than anything, perhaps we can now move on to a serious discussion about the merits or otherwise of Independence instead of subjecting the people of this country to a demeaning culture of fear based on fantasy figures.
