Sorry Mr Mackay, economic case for Union, not independence, is ‘stronger than ever’ – Murdo Fraser

SNP Finance Secretary Derek Mackay told his party conference that Scotland could “more than afford to be independent”, but the nationalist prospectus is threadbare, while the unionist case is clear, writes Murdo Fraser.

Finance Secretary

Derek Mackay gets his hands on a nitrogen generator during a vist to Peak Scientific UK in Edinburgh. (Picture: John Devlin)
Finance Secretary Derek Mackay gets his hands on a nitrogen generator during a vist to Peak Scientific UK in Edinburgh. (Picture: John Devlin)

It is generally accepted that politicians can get away with saying things to their party conferences that would be inappropriate in any other setting. Personal attacks on opponents, third-rate jokes, laboured puns, and extravagant claims of future success are all fair game in the conference hall, likely to provoke an enthusiastic response from starry-eyed, ultra-loyal, party activists, many nursing hangovers from the previous night’s festivities.

It is in this context that we should view Finance Secretary Derek Mackay’s comments to the SNP conference in Aberdeen on Monday, specifically his claim that the economic case for independence is “stronger than ever”. Scotland can “more than afford to be independent”, Mr Mackay told SNP delegates.

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The timing of the Finance Secretary’s comments was somewhat unfortunate, coming out on the very morning that the latest Royal Bank of Scotland PMI report showed that manufacturing firms in Scotland had suffered a sharp drop in output last month, and a steeper decline in new orders. Scotland ranked only above Northern Ireland in parts of the United Kingdom in terms of business confidence, trailing behind the UK average.

Nationalists and unionists, carrying the Saltire and Union Jack respectively, meet. (Picture: Lisa Ferguson)

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It is not just on this measure that the Scottish economy is underperforming, after 12 years of SNP Government. We are in a decade of below average economic growth, with unemployment rates in Scotland higher than the UK average, and employment rates significantly lower.

On one estimate, there are some 30,000 more adults of working age in Scotland economically inactive compared to the UK average. Their participation in the workforce would provide a significant boost to the Scottish economy, not to mention a considerable contribution towards income tax revenues.

Independence miracle unlikely

Notwithstanding the SNP’s disappointing track record on economic issues, we are now expected to believe that independence will see a miraculous improvement not just in economic performance, but in our fiscal position. How, exactly, this is likely to come about remains a mystery.

The Scottish Government’s own figures told us in August that we run a nominal annual deficit of £12.6bn, representing seven per cent of Scotland’s GDP. This translates into a Union Dividend of just short of £2,000 for every man, woman and child in Scotland. It is this level of fiscal transfer from other parts of the UK that supports higher levels of public spending here, and these funds would require to be replaced in the event of separation if we were not to see dramatic tax hikes, swingeing public service cuts, or a combination of both.

We are still no clearer what exactly the SNP would do to fill Scotland’s fiscal gap post-independence, beyond vague promises about the need to “grow the economy”. At least the 2014 White Paper had one policy proposal which might have driven forward economic growth: the promise to cut corporation tax by three per cent below the UK rate. But even that has now been ditched.

SNP politicians will talk about how Scexit will allow Scotland to pursue a more liberal immigration policy, with a growing population driving economic expansion. Scotland’s track record in this area, after 12 years of SNP Government, gives little cause to be optimistic on that particular front.

Woeful lack of planning

Despite having free movement of people within the EU for decades, levels of inward migration to Scotland have been lower than average for the UK as a whole. What exactly would reverse this trend and attract more European immigrants to Scotland in the future – with higher taxes than the rest of the UK and with all the economic uncertainties around independence – is far from clear.

It is not just on the question of fiscal balances that the SNP’s economic prospectus is threadbare. We are still no clearer as to what exactly the currency of an independent Scotland would be, but the preference now seems to be for ditching the pound sterling and adopting an alternative, presenting clear challenges for Scottish businesses trading with the rest of the UK.

Moreover, at the weekend Nicola Sturgeon refused to rule out the prospect of a hard border between the Solway and Tweed in the event of Scexit, again presenting huge challenges for Scottish business. The UK domestic market is worth three times more to Scottish exporters than the value of the EU Single Market, yet the SNP, in an exercise in economic absurdity, wants to prioritise the latter over the former.

Against this backdrop, it is little wonder that whilst Scottish businesses whom I speak to on a regular basis may have their concerns about a no-deal Brexit, by far their greater concern is the prospect of independence – with a different currency, a hard border, a massive fiscal deficit, and a woeful lack of any long-term plan.

If Brexit tells us anything, it is that extracting ourselves from a 40-year-old economic union is more complex than anyone first imagined. On any logical basis, dissolving a 300-year-old economic, social and political union will be many times more problematic.

The fact is that the economic case for the Union is stronger than ever. Despite all the noise coming out of the SNP conference at Aberdeen this week, there is no evidence that that situation is about to change any time soon.