Economic bind

Published on 27/02/2013 00:00

You are right to question how much freedom a Scottish Government would have to vary tax and spending, if an “independent” Scotland enters a monetary union after a Yes vote in the referendum (Comment, 26 February).

Finance minister John Swinney is quoted as saying: “We welcome the acceptance by the UK Government that it will be in the best interests of both the Scottish and UK economies for an independent Scotland to use sterling as part of a formal monetary union.”

He goes on to say this would ­include a “fiscal sustainability agreement for both governments… to ensure deficits do not diverge significantly” but then claims this “will also ensure an 
independent Scottish Government has the full fiscal and economic freedom to vary tax and spending to deliver economic growth and to serve the best interests of the Scottish economy”.

How many contradictions can be contained in a single statement? How can an agreement between two “separate” governments, which ensures “deficits do not diverge significantly”, give one of the parties freedom to ­determine its own taxes and spending at the same time?

The other questions which arise relate to the current economic condition of the UK economy and the policies which any future UK Government will be forced to adopt in order to improve them. It is highly unlikely that a central bank which has been responsible for monetary policy in the past – whose policies have ensured that, for 30 years, Scottish economic performance has lagged the rest of the UK – will be overly concerned about furthering the best interests of an independent Scotland.

If, as Mr Swinney claims, the proposed monetary union will be “in the best interests of both the Scottish and UK economies”, why would either future government choose to change the ­arrangement? In other words, what kind of independence is the SNP offering?

Jim Fairlie

Heathcote Road

Crieff

Andrew Anderson (Letters, 26 February) challenges my (counter-intuitive) proposition that increased levels of social security spending in Scotland – bringing us to Nordic levels – would not improve the lot of the poorest sector of our society.

The reason for this perhaps surprising conclusion is precisely that we already have, as a proportion of GDP, a higher social spend than the Scandinavian countries.

For example, the OECD in 2007 cited 22.7 per cent for the UK (Scotland is around a sixth higher than that per capita), whereas Norway was only 20 per cent.

Poverty specialist Kristian ­Niemietz recently concluded “the distinction between a high-spending “Nordic Model” and low-spending “Anglo-Saxon model” has become completely obsolete”.

Even Sweden has begun to retreat from its notorious and oppressive high taxation rates; and several formerly repressive Eastern European states, freed from Communism, have adopted low, flat-tax, rates with no apparent harm to the social fabric.

It is time for Scots to examine why many of those who preach on poverty resemble, as Mr Niemietz puts it, a” one-club golfer”: the only stroke the commentators can play is heavy redistribution, a technique once described by a former Labour Chancellor as 
“legalised theft”.

Peter Smaill

Borthwick

Midlothian