A little history:
Those readers who are not UK-based may or may not be aware that Scotland, currently part of the United Kingdom (England, Wales, Northern Ireland and Scotland) has had a devolved government since 1999. For those really interested in history Scotland ‘joined’/was coerced/was bribed (depending on your perspective) into a union with England to form a country re-branded as Great Britain in 1707 under the terms of the Act of Union.People on both sides of Hadrian’s Wall have bitched and bickered about it ever since.
The SNP (Scottish Nationalist Party) was able to form a majority government following the 2011 elections and promised a referendum on independence for Scotland. The date for the referendum was set as the 18th September 2014 and voters will be presented with a simple yes/no question. ‘Should Scotland be an independent country?’
Jumping the gun slightly one feels, the Scottish Government has just announced that if the vote is ‘yes’ then Scotland will leave the UK and become an independent nation on 24th March 2016. From being regarded as a bit of a joke in some quarters, the practicalities and realities of an Independent Scotland are now having to be discussed in detail.It makes interesting reading and vested interests are queuing up to have their say.
The debate begins in earnest:
So far, the Scots appear to be unimpressed by the SNP’s arguments and that’s before some financial realities are fully appreciated.
66% of the population in Scotland is in the age range16-64 but there is a bulge in the graph in the 40-64 range. Exactly when do people start thinking seriously about pensions? I would hazard a guess and say sometime between the age of 40 and certainly by the age of 55. As of June 2012, 17% of the population was under 16 and current projections suggest that the percentage of the population over 65 will increase by 63% and overall the population is aging. If you’re 65 and in receipt of a state pension, guess who is funding it? Wrong. Your contributions to the kitty are already paying somebody elses pension. Yours will be paid for by the current workforce, the numbers of which expressed as a percentage of the total population are shrinking. This hasn’t escaped the notice of the pensions industry, even if the Scots in general haven’t started thinking about the problem yet but don’t worry, they will. If current and forthcoming Government pensions in Scotland are partially funded by the current workforce in the UK as it now is, what happens after independence? Workers in England will not take kindly to their contributions being paid ‘north of the wall’ after Scottish independence so how will the government of an independent Scotland plug the gap?
The Scots will also begin to wonder what currency their pensions will be paid in. Given that there is probably little appetite for joining the Euro-zone just at the moment one could be forgiven for thinking obviously pensions will be paid in Sterling. Welsh First Minister Carwyn Jones would beg to differ and he isn’t alone.The SNP Government seems to take it as read that Scotland would remain in a ‘Sterling Zone’ but the current Chancellor of the (soon to be England, Wales and Northern Ireland?) Exchequer George Osbourne also thinks differently and recent history proves both he and Jones have a point. I don’t know that it would be entirely accurate to portray the difference in the English and Scottish economies as similar to that between the economies of Germany and Greece but you get the idea.
Leaving aside any jokes about Haggis smuggling to Expat Scots in England, what happens when either the English or Scottish government decides to raise taxes on any given item or items? To put it in the vernacular booze and fags (cigarettes) are favourite targets of governments in need of revenue, not to mention any form of taxes remotely connected with car ownership. Presumably the current EU rules on cross-border taxation of items for personal consumption would apply. Or would they? An independent Scotland would have to apply to join the EU, wouldn’t it? Would they be able to opt out of the Euro? Would they be able to not sign up to the Schengen Agreement?
Just a coup[e of questions then and if the Scots are going to find it cheaper to ‘shop over the border’ you can bet that large numbers will do so. What happens to Scottish tax revenue then?
An independent Scottish Defense Force or will they hire the English? Diplomats and Spooks have to be paid as well. Anybody thought of that? If they haven’t somebody will mention it soon.
People vote with their wallets:
True other factors do come into it but very few if any governments anywhere in the world have been elected on a platform of increased taxation, even if they promise faithfully to spend the increased revenue on pensions and healthcare. Voters have learned that whilst such promises might be sincere at the time in practice ‘something’ usually crops up to prevent the implementation of such promises. You know the sort of thing. A war, the Ministerial limos need replacing, the old Swiss bank account is running a bit low or the ministerial mistress has had a real go at the credit card (again).. There’s always a good reason why in real terms pensions go down and healthcare suffers. Voters know this, ask the Swedes.
My bet is that the Scots will vote ‘no’ and I don’t think it’s even going to be close. It’s going to be fun watching/listening to the debate though.