Peter Jones: Wealth is key to independence choice

People's perceptions of how their wealth will change is the deciding factor in voting Yes or No. Picture: Cate Gillon
People's perceptions of how their wealth will change is the deciding factor in voting Yes or No. Picture: Cate Gillon
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The referendum will be decided on whether people think they will be richer or poorer under independence, writes Peter Jones

One hundred days to go until Scotland makes the most historic decision since the old Scottish parliament decided 307 years ago to vote away the remnants of Scottish sovereignty. But after two years of research and discussion, are we any clearer about what this vote might mean for our living standards?

Recently, I met a long-time acquaintance. He is a professional campaigner. His career has been spent promoting various causes. Currently, it is the environment. He told me he is voting Yes as he believes that faster progress towards dealing with various environmental ills can be made in an independent Scotland.

If that is what he believes, fair enough. But he also added that if independence meant losing the last ten years of his growth in income, he would still vote for it. Too much store is set by achieving economic growth, he said, as it causes damage to the environment.

I didn’t like to say that the previous time I caught sight of him was in a queue waiting to board a Ryanair flight to France where he was having a week off visiting various friends. I should have, because it is only through economic growth that such cheap flights exist.

No-frills scheduled air travel exists not simply because of the web technology that makes booking a flight virtually cost-free, but also because economic growth has given millions of people enough income to enjoy a form of travel that just a half century ago was a luxury available only to the rich.

There are environmental issues here on which independence might have an impact, but let’s leave that for another day. More important here was my friend’s acknowledgement that people in an independent Scotland might be, if not poorer, less well off than our neighbours in future years than might be the case if it stays in the Union.

This was refreshingly honest. Less well off in relative terms does not mean that Scotland would be poor – by international standards it would still be a rich and successful country – but that is not what the Yes campaign is about. The Yes campaign is about persuading everybody that independence will make Scots even better off, whereas the No campaign says that everyone will be less well off. What people believe is the most likely outcome is what will determine the result 100 days from now.

This is not a question of one side telling the truth and the other side telling lies. Partisans of either side may believe that to be the case, but the reality is that the person who has a perfect grasp of what is going to happen in the future has yet to be born. This is a question of probabilities, what is most likely and least likely to happen.

Here, we really have to turn to what the people who assess these probabilities – economists mostly – think. They will be the first to admit that they cannot predict the future with any precision, but they are the best-placed people to assess what is likely to happen.

Last week, the Centre for Macroeconomics, which is funded by the Economic and Social Research Council, asked 46 economists working in Britain in universities, banks and other institutions: “Do you agree or disagree that Scotland would be better off in economic terms as an independent country?”

Opinion pollsters would call this a loaded question as it invites agreement with what the Yes campaign is saying. Despite this bias, 27 disagreed and only one agreed. Six neither agreed nor disagreed. The rest didn’t respond.

That is a near-unanimous verdict. The best that could be said from a Yes perspective is that seven (a quarter) rejected the idea that Scotland would be worse off. But if that means things are just the same, what’s the point of that?

You could respond, I suppose that in an economically “just the same” Scotland you could do more to address economic inequality through redistribution of wealth from the rich to the poor, one of the things that my campaigning friend is keen on. That, however, is unlikely to work. I learned from National Statistics last week, much to my surprise, that there is not that much personal wealth in Scotland.

One of the facts in the Compendium of National Statistics that they have put together to, among other things, help inform the referendum debate, says that median household wealth in Scotland in 2010-12 was £165,000. That compares to £207,000 in Wales, and £224,000 in England.

This figures measures wealth in terms of the assets that people have – mainly pension funds and the value of their house. Since a lower proportion of Scots own their own house (which also has a lower value) and have less in their pension pot than do the English and Welsh, that adds up to less personal wealth, and certainly much less excessive wealth (however that might be defined) to redistribute.

The hard fact seems to be that any wealth tax that might be introduced, will work a lot better and to more advantage to Scotland in its redistribution effects, if it was done in a UK of which Scotland is a part.

That brings us back to national income, which is different to wealth, and creating more income which can be taxed. I have now seen scores of studies from different sources and not one of them reckons that there will be more income, whether earned by individuals or companies, in an independent Scotland even when the income from oil is included.

Even the recent effort by the Scottish Government to show how greater productivity, an increase in immigration, the defence spending reduction and a couple of minor tax increases could result in a healthier balance of spending versus tax revenues doesn’t cut the mustard.

The Institute of Fiscal Studies reckons that by 2018-19, when it thinks the UK as a whole will have a very small surplus of tax revenues over spending, an independent Scotland would still have a deficit.

What that all means is that Alex Salmond has convinced no informed non-aligned observer outside Scotland that his sums add up to the story of greater prosperity with independence he is telling the home audience. And 100 days is not much time to turn that round.