BILL Clinton’s first Presidential campaign used the phrase “It’s the economy, stupid” to remind his staff of what really mattered to voters.
Edited by Andrew Goudie
Dundee University Press; 314pp; £16.99
As debate gears up before the referendum on Scottish independence, this collection of essays considers the likely advantages and disadvantages to the economy of various governance options without appearing partisan, leaving it to readers to sift through the information and analysis and come to their own decisions.
Goudie, a former chief economic adviser to the Scottish Government, notes that although his emphasis is on the economics of union, devo-plus, devo-max and independence, there are many other issues that will influence voters. His declared intention is “to bring a greater focus to the proposals for constitutional change”.
If the result of the referendum turns out to be a vote for independence, the nature of the economic arrangements will be crucial to the success of an independent Scotland. In this context, one chapter notes that in the last ten years, Scottish economic growth has mirrored that of the UK as a whole and has not lagged behind as is commonly believed.
Issues such as whether Scotland would choose to remain in the European Union and which currency it might choose are of crucial significance. Goudie agrees with the economist John Kay who notes that the choice of currency would be the single most important economic decision for an independent Scotland. In any case, he argues, genuine economic self-determination is a myth as choices are always constrained by the global economy and relationships between individual economies.
Goudie points out that a country can choose any currency it wishes without permission. Entering any monetary union as a partner – whether the EU for the euro or with the rest of the UK for the pound – again restricts the sovereignty of an independent country but limits vulnerability.
The remaining UK (RUK) would also have to redefine itself economically. The decision on independence does not affect only Scotland. It would not make sense for the RUK to cut Scotland out of its economy even if Scotland did not stay with sterling. If Scotland did remain with sterling, however, its economy would represent 8-10 per cent of the total sterling area, a percentage of greater significance than many euro zone economies within the European Monetary Fund.
The early chapters also look at the role of the Bank of England. The bank would be expected to give unprejudiced support to the Scottish economy if it remained within sterling but the RUK government might try to use it to limit independence. The trouble is that the assurances the bank would require and the RUK would want would amount to another unavoidable but not necessarily unwelcome restriction on independence.
Similar assurances would be required whatever currency was chosen. Gus O’Donnell, former Cabinet Secretary, believes that “A mark of a truly independent country is the ability to manage its own fiscal policy”. He proposes an Independent Office of Budget Responsibility for the Sterling Area to cut through the likely infighting. Sterling, after all, belongs as much to Scotland as to the rest of the UK.
Other devolution models would require similar assurances as the other parts of the UK would want to be sure that a Scottish government with enhanced powers could not damage the overall economy.
Goudie offers six tests against which the economic implications of current and possible future constitutional arrangements can be assessed. These are very helpful, and similar summaries are provided after each chapter.
John Elvidge, formerly Permanent Secretary in the Scottish Government, provides a reassuring and clearly written analysis of the constitutional implications of independence. He states that “no essential changes to governance arrangements in Scotland would be required. Nevertheless, he considers it worth looking at whether improvements could be made. He discusses the benefits of a written constitution and while not taking sides, he certainly does not advise against it. As someone who worked with different political arrangements in his time in office, he clearly considers coalition to be good for Scotland.
Scotland’s Future is an easy and informative read. The economic prospects of an independent Scotland are of crucial importance and this book stays within that remit. It is, of course, not the only issue and there are voters who will believe independence is the best choice irrespective of economic considerations. They should study the evidence presented here even if they then lay it aside.