Issues faced by an independent Scottish state are no different from those faced by any developed European nation, writes Alf Young
This week, with a year to go to Scotland’s big vote, we’ve been showered with opinion polls and promised, if we vote Yes, a return of a privatised Royal Mail to state control, at least for mail circulating on this side of the Tweed. An as-yet-uncosted pledge, I should add.
Meanwhile, economists from the Institute for Fiscal Studies and the National Institute of Economic and Social Research have, between them, added another 125 pages of detailed analysis and projections on public spending and currency options post-independence, to a debate many voters still complain is devoid of facts.
Could that be why the split in opinion across these polls stubbornly sits where it’s been since this long, long journey to referendum day started? Even politicians are struggling to keep up. Douglas Alexander calls the debate so far “arid” and bemoans the way it is, too often, characterised by “shallowness, grievance and personal vitriol”.
On the other side of the Yes/No divide, Alex Bell, who quit as head of Alex Salmond’s policy unit in July, judges the argument to date “a tedious parade of Union Jacks versus Saltires, of pop identity about caring Scots versus heartless Tories”. For two years, Bell was deeply involved in formulating the Scottish Government’s core case for independence.
He told Newsnight this week he hasn’t even seen a scintilla of a draft of November’s white paper. However, Bell’s expectation, as he put it in his newspaper critique, is that it will “succumb to the temptation to focus on old songs and tired policies”. It could read like “a paen to the virtues of Caledonia,” he adds.
Bell accuses Salmond of denying a crucial truth. That “Scotland’s problems are common to the developed world”. That the challenges facing him as leader of an independent Scottish state would be “the same as those for David Cameron and Ed Miliband”. He goes on to list the big questions facing any developed European nation.
“What is the relationship between citizen and state if governments are weak in the face of a financial crash? Why should the young pay the pensions of the old if they are never going to see similar rewards? What is the best balance between taxation and services? How do we tackle inequality when the coffers are empty and the electorate untrusting?”
It will come as no surprise to regular readers of this column, that I share much of Bell’s analysis of the core challenges facing mature Western economies still struggling to rebuild the trust of hard-pressed individuals and families in the wake of the great crash.
With the question on the ballot paper on 18 September, 2014, having been replaced, de facto, by a First Minister who now asks “Do you want to belong to six unions or five?” we hear nothing about how even the kind of independent Scotland Salmond envisages will be better equipped to address Bell’s deeper questions.
Rather, we are told that, by breaking just one of those unions – the one that allegedly allocates complete fiscal authority to this nation state or that – we can break free of 300-year-old ties and predictably prosper. The bounty bestowed, as a result, has been calibrated at precisely £500 for each of us. Man, woman and child.
To be fair, not every advocate of a Yes vote seeks that price-is-right outcome. There are some – the greens, what remains of the radical left and those in the SNP who, unlike their leader, have not ditched their 79 Group principles – who see in independence a once-in-a-lifetime opportunity to create a very different kind of society.
But they are caught, on the coat-tails of a 2011 SNP juggernaut, behind a dominant advocate whose only long-standing fiscal pledge is to tax, in an era of widespread and aggressive multinational tax avoidance, corporate profits at a lower rate than the rest of the UK to lure, Irish-style, more footloose global investment here.
We are told state independence is the normal condition of nations in the 21st century. Look at the roll call. It’s growing all the time.
However, while that is true for states born out of liberation struggles in Eastern Europe, Africa and elsewhere, it is not the case for long-established Western democracies. Many of them – the British, the Dutch, the French – have gone from empire building to sovereignty sharing.
What is the European Union, which the SNP is so keen to join, but a union that has progressively attempted to pool more and more state sovereignty? And as the financial sector, telecommunications and the digital sector, the energy sector, big pharma, raw material extraction and others have globalised, the pressures to take collective action on everything from tax policy and migration controls to regulation and climate change have intensified.
Between Bell’s thoughts appearing and me writing this, the sheer scale of these challenges was highlighted afresh, across the Atlantic. Since the summer, the US Federal Reserve has been hinting the time is fast approaching when exceptional measures taken by Western central banks to combat the crash – rock-bottom bank rates and pumping new money into the economy by buying up stocks of bonds and other securities – will soon start to be unwound.
In Washington they call it tapering. But what a taper! The Fed has already bought in $2.5 trillion – yes, trillion – of bonds and mortgage-backed securities, in its version of quantitative easing. It puts the Bank of England’s current haul, £375bn, into context. But while Threadneedle Street has stopped intervening for now, the Fed hasn’t. It continues to buy more, at a rate of $85bn a month.
There was intense speculation, on Thursday, the Fed would begin to taper off that massive monetary easing. It didn’t. And with its chairman Ben Bernanke due to retire in January, there’s no sign the foot will come off the gas any time soon. Markets loved it. Equities surged. One leading bank is now predicting the FTSE could surge through the 8,000 barrier by the end of next year.
Great news for investors who want to make money on stock markets rather than invest in more genuinely growth-creating ways, like research, product development and infrastructure. Here Lord Turner has suggested that only 15 per cent of these vast financial flows actually go into growth-creating investment. The lion’s share fuels another boom – bubble even – in the price of existing corporate assets and real estate and helps enable many of us to continue living beyond our means.
The Fed blinked yet again, as it knows even the US recovery – George Osborne, please note – is still too feeble and its jobs market too depressed to start raising interest rates again or begin unwinding that mountain of bought-in bonds. Central banks, including our own, are stuck between a rock and hard place. They have long since run out of road on rates. They continue to push their special measures to unprecedented levels. Our debt addiction persists. State resources will be under severe pressure for years to come. Not the best of times to start state-building from scratch.