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An economic distraction Scotland can do without

A new independence referendum will only play well politically and nothing more; based on economic grounds – it would be very difficult to go it alone as the country has underperformed compared to the rest of the UK

Image Credit: Luis Vazquez/©Gulf News
Gulf News

While it is a concern as the last Scottish Referendum was so divisive, it’s not surprising. Nicola Sturgeon has always suggested this would occur, and was one of the first movers on June 24 to speak out and state “the vote makes clear that the people of Scotland see their future as part of the European Union”.

She has a point. Scotland voted in favour of the UK staying in the EU by 62 per cent to 38 per cent — with all 32 council areas backing Remain. Coupled with this, the SNP manifesto for May’s Scottish Parliament election last year stated there should be another referendum if there was a “significant and material” change in circumstances from the 2014 vote, such as Scotland being taken out of the EU against its will.

Essentially it’s been in the work in progress since September 18, 2014, waiting for the right moment and for the tide to turn in her favour.

But is this time different? Does she want Scotland to break off from the UK, or is it political games to get her say in Brexit negotiations?

Her ego would suggest she wants independence despite the economic facts, reminiscent of the Leave campaigners until it materialised (and immediately ran for the emergency exit). As with SNP party leaders before her, she has consistently — and detrimentally — put her independence pipeline dreams before managing the country effectively, in pursuit of the keys to Edinburgh Castle.

But based on economic grounds — it would be very difficult to go it alone. The country has underperformed compared to the rest of the UK.

As oil revenues collapsed, Scotland’s budget deficit grew and continues to pile on pressure on the country. The deficit is now equivalent to 9.5 per cent of its GDP, at nearly £15 billion, with latest figures showing bigger gap between tax income and spending than UK, at over £1,000 per head to be more precise.

Not only is Scotland spending more per head, but unemployment has risen to 5.3 per cent in contrast to 4.8 per cent for the UK as a whole. Further indication that the Scottish economy is better off together.

But trade could be the answer. If we gain independence, if we are accepted to stay in the single market, if the currency conundrum is resolved, this will boost European trade and bolster the economy, right?

Well, the EU has said Scotland can’t retain the UK’s membership and would have to apply as a new state. That causes problems that go beyond the UK, as it involves having to convince Spain that Scotland’s new independence wouldn’t create a path for Catalonia to break away.

Another option is for Scotland to attempt to become a member of the European Economic Area, the so-called Norway model, giving backdoor access to the single market, without being a full member of the EU. This is currently used by Liechtenstein, Iceland and Norway. But even with this option, what currency would be used in the newly-formed country?

Even if all these answers were resolved, and all went well, unfortunately Scotland’s economy would face severe challenges in the current circumstances. In 2015, 63 per cent of Scotland’s trade was done with the rest of the UK, representing £49.8 billion (Dh227.14 billion) — £2.1 billion more than the previous year, while only 16 per cent of business was done with the EU, a total of £12.3 billion.

Encouragingly, both figures represented a 4.4 per cent increase on the previous year, but there is a huge gap and if Scotland was to leave the UK, its biggest trading partner, this could have several implications and possible border taxes.

With all this in mind, the ultimate decision rests with Theresa May. As for Scotland’s First Minister, she must gain permission from her own parliament, then from Westminster, and only then will the conversation begin over the terms and conditions of the second referendum.

So perhaps this is political posturing by Sturgeon — looking to secure further devolution, more power and spending for her country. If so, she might believe it is a cunning move, but as May rightly put it “instead of playing politics with the future of our country the Scottish Government should focus on delivering good government and services for the people of Scotland”.

Whichever way you frame it, posturing or egotistical, it mounts pressure on a UK government that’s already on a complex and difficult journey, and drags Scotland and its people into more uncertainty and division.

— The writer is an MBA candidate, Cass Business School, University Of London.