Brian Wilson: Border costs post-independence

Sending a letter first class to Ireland will quadruple after independence. Picture: Getty

It’s an old trick to ask if a politician knows the price of a pint of milk. I tried a variation of the same theme this week while debating with a luminary of Scottish nationalism.

A questioner asked about postal charges between Scotland and England in the event of independence. As usual, the Nat response was that life would go on as before. I asked if he knew what it costs to post a letter from the UK to the Republic of Ireland, even just a few hundred yards between north and south.

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He didn’t, which seemed as careless as not knowing the price of a pint of milk. The answer is that, because Ireland is treated by Royal Mail as an international destination (as Scotland would become), the cost of postage is between twice and four times greater than the cost of a first-class stamp, for delivery within five days.

Consider the plea of a local politician in County Tyrone who paid £2.38 for a stamp that would have cost, at most, 62p if the letter had stayed within the UK. “It’s crazy,” she complained. “It is very expensive and nobody can understand it”. To which one might reasonably have replied: “It’s the border, stupid”.

In more rational times, quadrupled postal charges would represent quite an important issue and also an illustration of an under-stated truth – that borders are indeed very expensive and the costs are paid in money and jobs. I am not naïve enough to expect this to concern Nationalists but those who would be forced to pay their price might take note.

Cross-border postal charges being a tricky issue, they are ignored in the independence White Paper. However, there is a ringing commitment to re-nationalise the Scottish bit of Royal Mail, which merely confirms we would have two separate organisations. So any Universal Service Obligation would extend no further than Coldstream. Fine if you do not buy, sell or communicate beyond Coldstream.

Much-sainted Norway has the highest postal charges in the world, because of low population density. Scotland could soon, in this respect at least, be more like Norway. Super. And the same with telecoms. With a separate regulatory system, BT customers in England would be spared the requirement to subsidise people like me who live in inconvenient places. In fact, any service which currently offers flat rate charging across the UK would be replaced by Scotland-only charges reflecting the actual cost of living in a large landmass with only five million people. Expensive things, borders.

Border-free trade within the UK is worth £2,000 a year to every household in Scotland. A small price, snort the Nationalists, to pay for Freedom. But the rest of us may not regard borders as symbols of patriotic honour. In fact, we don’t like them. We sell twice as much to the rest of what is currently the UK as we do to the rest of the world, utterly unimpeded by borders, costs or bureaucracy. The White Paper doesn’t mention that either.

And that takes us on to the dreaded word “currency”, or money as it is also known. Alex Salmond claims the UK Government would agree to a shared currency because it would cost £500 million in cross-border transaction costs if there wasn’t one. That represents 0.03 per cent of GDP for the UK which, while unwelcome, is far too marginal to impact upon the massive implications of currency union.

What should concern us is the cost to Scotland. According to the Scottish Government, it would cost our businesses £600 million to export across the Scotland-England border without a shared currency, representing 4 per cent of GDP. Naturally, Nationalists think that is a price worth paying, a view unlikely to be shared by businesses which would become uncompetitive and/or move south. Expensive things, borders.

That’s before we get to the “border effect”, a well-researched phenomenon which demonstrates that different parts of the same country are more likely to trade with each other than with a neighbouring state. This is seen quite dramatically, for example, between the US and Canada. The best estimate is that the same effect would reduce real incomes in Scotland by 4 per cent after 30 years. Expensive things, borders.

Then there is the effect of turning the vast majority of customers for our financial-services sector into foreigners. Amidst many uncertainties, one stonewaller is that the Bank of England will only act as lender of last resort to banks headquartered within the UK. For good measure, EU law decrees that institutions must be located in the same regulatory jurisdiction as the majority of their customers. Both criteria are met by Scottish institutions at present. Create an international border and neither will be.

But this cuts both ways, I hear Braveheart voices cry. As the economic foundation of our socially-just society, we are going to cut Corporation Tax by 3 per cent. It says so in the White Paper. New employers will flock to greet An Tigear Ceilteach Ur as we shall call it – the New Celtic Tiger. Unfortunately, there will be places on the other side of our proud new border that can’t afford to see that happen. So the race to the bottom will begin. Dangerous things, borders.

But maybe the most tedious thing about borders is that they have to be enforced. We are promised a Scottish Borders and Migration Management Service to guard points of entry – but what about the new border in the middle? Make no mistake, there will have to be one unless we have exactly the same immigration policies, visa agreements, VAT and duty levels, and so endlessly on.

But the White Paper tells us that “Scotland has a different need for immigration than other parts of the UK”. That is a pillar of the Nationalist economic policy to pay for the pensions of an ageing population. But when half of these immigrants, who would not be allowed direct entry to the continuing UK, get on the first train to London, what happens if there is no border control? Don’t bother asking, for there is no answer.

Undesirable things borders, you might conclude, and very strange to start creating new ones in the second decade of the 21st century. When your Nationalist canvasser dismisses all this and tells you nothing would change, just ask them what it costs to post a letter to Ireland. They won’t know that either.