George Kerevan: Independence vote offers only chance for Scotland to plan route to national prosperity

Published on Wednesday 25 November 2009 20:47

WHAT is the contemporary case for Scottish independence? Next Monday, the SNP government will set out details for holding a referendum on the issue.

The Unionist parties in Scotland, who have the votes to veto an independence referendum, claim constitutional discussions are a diversion from tackling the economic crisis. Of course, in Wales, Labour has signed up to a referendum by 2011, on more powers for the Welsh Assembly – but you won't hear about that from Iain Gray.

Yet constitutional issues – the anti-democratic structures and non-functioning of the British state – lie at the heart of UK politics.

The 30-year civil war in Northern Ireland was the result of the failure of the British state to grant civil rights to its Catholic citizens in that province. Who gets to be a UK citizen – black, European or Muslim – has dominated politics on the doorstep for a generation. And the Westminster expenses scandal is proof that, in the 21st century, British parliamentary structures are rotten to the core. No wonder the political class wants to divert discussion from constitutional reform.

Unfortunately, Nationalists (of whom I am one and an SNP candidate) have not done enough to situate the argument for independence in the context of solving basic, bread-and-butter problems. The success of the SNP government at Holyrood has destroyed the Unionist myth that a Nationalist administration would see the mass exodus of foreign investment. But just because Alex Salmond leads a highly competent government in a devolved Holyrood will not translate automatically into votes in a referendum to dissolve the Union – particularly in the context of the worst economic crisis since the 1930s and one involving the implosion of two iconic Scottish banks, a fact that has dented Scottish self-confidence.

Indeed, there is a case for saying that the SNP's success in becoming a party of government has hindered the movement from making the necessary argument for independence as the true radical solution to the economic emergency. As a result, there is a danger we are becoming painted as the new Scottish establishment, allowing Labour to evade responsibility for causing the crisis in the first place.

One bid to focus the independence debate on the economic crisis has come from the SNP's enfant terrible, Jim Sillars, in a new pamphlet. I don't always agree with Jim but his argument is attractive: the UK state is in terminal decline socially and economically, and Scotland must recover the sovereign right to make its own decisions or go down with the sinking British ship.

The decline of the over-centralised, arthritic British state was obvious during the early post-war decades. Chronic under-investment caused by short-term thinking in the City gave the UK a low-productivity economy that fell behind the rest of the industrialised world. The accident of North Sea oil arrived in time to pay for our imports for another generation but, in true Brit fashion, this windfall was blown on consumption rather than invested, as in Norway and Canada.

The North Sea bonanza had one lasting effect: it allowed Maggie Thatcher to slash tax rates and give Britain the semblance of a boom by deregulating the banks and pumping out credit. New Labour continued the pretence with an unsustainable house price boom that eventually burst the banks.

Meanwhile, the real manufacturing economy was ignored. In 1997, the year Gordon Brown became Chancellor, the index of industrial production in the UK was 99.7. Ten years later, in 2007, the high point before the collapse, industrial output stood only at 100.3. During the decade Mr Brown presided over the UK economy, output in manufacturing and energy industries essentially flatlined. In the same decade, German manufacturing output went up by an average of 2.9 per cent every year. Swedish factory output went up a stunning 5.8 per cent per year.

The collapse of the Brown boom has revealed that the British state remains as clapped out as ever. Ask yourself: once quantitative easing ends and interest rates return to normal, what will our bloated banking sector do for a living? With consumers desperate to run down debts, where will the next housing boom come from? Unless Scotland takes control of its own resources and investment decisions, the next generation of enterprising young Scots will be departing for jobs in China.

Yesterday, Jim Murphy, the Scottish Secretary, tried to pre-empt the SNP's referendum announcement by publishing plans to implement the fiscal proposals of the Calman commission. They are a poisoned chalice.

True, they would give Holyrood some extra tax-varying powers and some cosmetic borrowing powers. But the quid pro quo would be the end of the Barnett Formula that equalises public spending changes across the UK. A future Scottish government would find itself having to raise income tax rates substantially just to yield much the same revenues as at present, once the Treasury slashes spending. As a result, the Calman fiscal sleight of hand would do nothing to boost demand.

What Scotland needs is genuine control over capital investment to re-found our productive base. We require a new generation of industrial banks and a tax and monetary regime geared to local needs – not the City of London.

Semi-nationalised Lloyds TSB Scotland is to be sold to the private sector. Why not hand it over to the Scottish Government as an investment vehicle? Given how much Scottish taxpayers are about to be hit to pay for the sins of the banks, it would be a reasonable return. Ditto with the Scottish rump of RBS.

Of course, that will never happen because the London Treasury wants to sell these banks and pocket the cash. Scotland can take the road of dependency yet again and sulk about its lost banks. Or it can build its own future as a nation state. Pity they won't let you vote on it.

&#149 George Kerevan is SNP prospective parliamentary candidate for the Edinburgh East constituency at Westminster.