Who wants independence and why?
The ruling Scottish National Party (SNP), led by Alex Salmond, believes Scotland, with its oil and gas reserves, could be a wealthy, independent country. Despite polls giving the Better Together' campaign a convincing lead, the Nationalists have been buoyed by an ICM poll showing almost half of Scots (47%) would vote yes if independence made them £500 a year better off (37% would vote no and 16% were undecided). The reverse is also true: if independence made them £500 a year worse off, only 18% would vote yes. This suggests the outcome will depend on the strength of the economic arguments.
Would an independent Scotland be better off?
A report by the Economic Affairs Committee in April found "no definitive answer", but identified "clear threats to prosperity" and found the upsides "limited". A geographical allocation of North Sea oil revenues would give Scotland 81% of oil and gas receipts but they cannot be relied upon. The oil price is uncertain, no one knows how long the oil will last and there will eventually be substantial decommissioning costs.
An independent Scotland shares the UK's debts and liabilities as well as its assets. Its share of public-sector net debt would be 8.4% or £93bn. Add the UK's future known liabilities and the figure rises to 123% of GDP. Scotland has no track record with international lenders and would be likely to pay a premium on its debt. Nor do the SNP's spending plans inspire confidence, says Simon Johnson in The Daily Telegraph.
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Better Together' claims the SNP has made £32bn of spending pledges without saying how they would be funded. But the 2011/2012 Government Expenditure and Revenue Scotland report says Scotland's finances were £4.4bn stronger than the UK's, or £824 per head, yet still in the red.
What would happen to the currency?
Would an independent Scotland use sterling, join the euro, or establish its own currency? This would dictate how much fiscal autonomy its government would enjoy, how secure its financial sector would be and how it would trade with the UK and the rest of the world, says Mure Dickie in the FT. The most likely outcome and the one favoured by the SNP is a currency union with the UK.
However, this would leave Scotland with little say over its monetary policy and require severe constraints on its fiscal independence, making it "independent almost in name alone", says Chris Giles in the FT.But the alternatives don't appeal, says Dickie.
Joining the euro is "politically toxic" because of the consequences for smaller nations during the eurozone crisis, while adopting its own currency would give Scotland true economic independence, but is risky. The foreign-exchange risk would "inflate the cost of trade with the rest of the UK". It would also initially be disruptive and establishing bond-market credibility would also be problematic.
Are there other implications?
There's the division of all sorts of bodies, from the armed forces to the NHS. And there's trade. Trade with the rest of the UK is worth more than two-thirds of Scotland's output and there is currently a level playing field regarding tax, laws and regulations. Change these and trade becomes harder. European Commission president Jos Manuel Barroso told the Economic Affairs Committee that an independent Scotland would not automatically remain a member of the European Union.
Untethered from the UK, Scotland would be vulnerable. Borrowing costs would probably rise. Foreign investment might falter. UK resources currently provide a buttress against hard times. Government support for RBS was equivalent to 211% of Scotland's GDP. Would the UK extend Emergency Liquidity Assistance to a Scottish bank if Scotland were independent? Scottish voters wonder what independence would mean for them. What if they have an English pension? Who will regulate their bank accounts? Answers are thin on the ground.
Are there any certainties?
Even a yes' vote would not mean change overnight. Professor John Kay of Oxford University believes negotiation between the Scottish government and the rest of the UK could take years. Who's to say the SNP will be calling the shots then? Much of the information about what would happen in an independent Scotland comes from the SNP; Alex Salmond releases a White Paper this month. But Scottish elections are due in May 2016 and the SNP may not win. Yet, says Severin Carrell in The Guardian, even without independence, from 2016 the Scottish parliament will have increased powers, including the authority to set its own income tax rates and devolve stamp duty, land tax and landfill tax.
A tidied-up tax system
The SNP is to use Sir James Mirrlees' radical review of taxation as its "starting-point" for a new post-independence system, says Eddie Barnes in The Scotsman. The review, which was written by the Nobel Prize-winning economist in 2011, claimed that the "absurd" mess of the UK tax system led to billions being squandered though abuse and avoidance.
Among his recommendations were that fuel duty should be replaced with congestion charges, savings left completely untaxed and income tax merged with national insurance. Although his call for reform has been largely ignored by UK ministers, Mirrlees now sits on the SNP Government's Fiscal Commission. The Yes Scotland campaign has also backed the idea of a new tax system for an independent Scotland.
Emily has extensive experience in the world of journalism. She has worked on MoneyWeek for more than 20 years as a former assistant editor and writer. Emily has previously worked on titles including The Times as a Deputy Features Editor, Commissioning Editor at The Independent Sunday Review, The Daily Telegraph, and she spent three years at women's lifestyle magazine Marie Claire as a features writer for three years, early on in her career.
On MoneyWeek, Emily’s coverage includes Brexit and global markets such as Russia and China. Aside from her writing, Emily is a Nutritional Therapist and she runs her own business called Root Branch Nutrition in Oxfordshire, where she offers consultations and workshops on nutrition and health.
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