Scottish independence: The economic reality is that Scexit would be much worse than Brexit – Brian Wilson

We have heard a lot about opinion polls in recent months but almost nothing about economics, which is understandable during a pandemic. At some point, the two will again collide.

More discussion of the economic effects of Scottish independence is needed, says Brian Wilson (Picture: John Devlin)
More discussion of the economic effects of Scottish independence is needed, says Brian Wilson (Picture: John Devlin)

A foretaste was provided this week by a report from the London School of Economics on the trade implications of Scottish independence with the headline figure being the equivalent of a per-capita income cut of up to £2,800 a year. And that through trade alone.

The Chinese, American and Australian-trained academics responsible for the report have no skin in the game, other than objective reality. At some point, this kind of analysis will command interest, just as it did in 2014. The question is, how soon?

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Given that Brexit provides early confirmation that borders carry costs, it is timely to point out, as the LSE study does, that a border across the middle of our small island would cause two to three times more economic damage than leaving the EU.

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This puts opponents of Brexit who also support creating another border within Britain in a rather odd position, at least from an economic standpoint, which they seek to resolve by asserting (without a shred of evidence) that Scotland would rejoin the EU.

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Independence would hit Scottish economy harder than Brexit, say researchers
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Indeed, it was interesting that the Scottish government’s response to the LSE report was couched entirely in these terms. According to Fiona Hyslop, the business minister: “As an independent member of the EU, free from the damage of Brexit, Scotland would be part of the huge single market which is seven times the size of the UK.”

However, take note of what the LSE report had to say about that: “For an independent Scotland to be better off inside the EU, independence must destroy a sufficiently large share of Scotland’s trade with the rest of the UK that the EU becomes Scotland’s most important trade partner. However, the more independence reduces trade, the greater its economic costs.

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“In other words, for rejoining the EU to be economically desirable, independence itself must bring substantial economic costs.”

So let’s get this right. One, the entire independence rationale is based on rejoining the EU. Two, there is absolutely no guarantee or timescale attached to that objective. Three, even if and when achieved, net benefits from EU membership would depend on “destroying” much of what we have at present, two-thirds of our trade being within the UK. Put that way, it doesn’t sound a great offer.

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The LSE report suggests that, if independence was to happen, it would actually make more sense to seek a “common market with the remaining UK” than to seek membership of the EU since “if Scotland joins the EU, the Scotland-rUK border would become one of the EU’s external borders”. Well, of course it would – not just for trade but also travel and migration.

All this is pretty obvious though the paradox of deploring Brexit while advocating Scexit has gone largely undiscussed. The last thing the Nationalist faithful want to hear is that rejoining the EU is not only politically improbable but also economically self-harming and that, really, we would be better sticking with the rest of the UK.

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None of this is of any interest to the minority who do not care a hoot about economic implications, particularly for other people, so long as the objective of independence is achieved. That is a respectable position so long as it is stated in these terms. It is when the false cover of “re-joining the EU” is offered, or the cost of creating borders denied, that it demands exposure.

The short-term question is whether the next five years will be spent arguing about a referendum that will not happen; refusing to engage with potential Brexit benefits while suffering downsides; in order to pursue a, independence and b, rejoining the EU which, even if possible, would be damaging until we succeeded in destroying our current economic base.

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The alternative will be to compromise with reality and insist on using Holyrood’s powers and resources for Scotland’s immediate and urgent needs. It should not be impossible to make that case.

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