IndyRef2 – The Economic Case
This widely anticipated document appeared on Monday to much dismay and not a few questions. The First Minister committed Scotland to using the British pound indefinitely, only later replacing it with a Scottish pound and re-joining the EU. The Scottish Central Bank will operate from Day One of independence, acting as banker for the Scottish government, ensuring ‘financial stability’ and overseeing financial regulation. Initial reserves would come from Scotland’s share of UK assets and borrowing.
But this leaves monetary policy with the Bank of England, meaning tight fiscal policy to control the economy and calm the markets, in other words austerity. Scotland can’t re-join the EU ptill a new currency is established. She ruled out joining the euro.
Three criteria would have to be met to introduce the Scottish currency:
- Key fiscal, financial and monetary institutions must be in place;
- ‘Market confidence’ in Scotland’s economic strategy;
- Adopting the Scottish pound must be in the ‘economic interests of Scotland’ and improve Scotland’s competitiveness and economic resilience’.
Plus another three requirements to precede the actual transition to the Scottish pound:
- The Scottish bank would need to have established its credibility and other Scottish financial institutions must command confidence;
- It would have to hold sufficient reserves of foreign currencies and sterling; and
- Scotland would need to be ‘fiscally sustainable’.
She says there would be no public spending cuts, increased borrowing or tax hikes, and would finance it all through a ‘windfall’ tax on oil and gas profits.
Top economist and independence supporter Professor Richard Murphy is dismayed. The Sustainable Growth Commission’s 6 tests have been replaced with 2 sets of 3 tests ‘structured to make it as hard as possible to ever get to a Scottish currency’ (Murphy). He said Scotland needs a timed plan of a maximum 3 years for the Scottish pound to be introduced. Informally using the British pound would leave Scotland tied to English interest rates, policies and regulation.
Unionist commentators cannot hide their glee, and independence-supporting Murphy goes as far as to say that the plan is good enough to kill independence. It is hard to disagree. The Central Bank and Scottish pound must be there immediately on independence, with initial central bank reserves coming from exchanging British currency in circulation for new Scottish currency, then from Scotland’s share of UK assets and bolstered by future trade.
Audit Scotland has raised concerns over the procurement and processes in awarding the ferry contract for the two late, over-budget ferries, particularly how much bidders may have known about CalMac’s technical requirements before tendering.
Meanwhile, Clyde Catamaran Group is to meet with Transport Minister Jenny Gilruth, saying it can deliver 50 catamarans over 20 years for £800 million, only £250 million more than the cost of Glen Sannox, Hull 802 and the ferries under construction in Turkiye. Experts have pointed out that catamarans are more suitable for shallow harbours and may provide the bulk fleet purchases which are becoming increasingly urgent due to the age of the current vessels.
Landlords and the Rent Freeze
Recent Scottish government legislation to freeze rents and ban evictions for six months has been criticised by landlords despite exceptions allowing rent increases up to 3% if their property costs increase, provided it is no higher than 50% of the rise in costs.
A coalition of landlords claims the Cost of Living (Tenant Protection) (Scotland) Bill breaches their human rights, with Tenant’ union Living Rent countering that the move shows landlords cannot be trusted, calling for rent controls immediately the rent freeze ends to stop landlords hiking rents again. Others say if landlords are so badly impacted, they should make the hard choice and sell unaffordable property.
Malnutrition in the over-65s
Food Train, a charity providing grocery deliveries and home cooking for older people is warning that nearly 20% of over-65s are at risk of malnutrition in the cost-of-living crisis. Malnutrition may mean lack of food or lack of the right kind of food or being unable to process food properly. The problem may be bigger as the charity only knows those people it engages with. Carers and care organisations are advised to look out for symptoms of malnutrition in those they care for.
may be slashed under draconian budget cuts by the Scottish government. Its operational funding last year was £45.6m, and its capital spend may be cut by 40% by 2025/26 from £2.5m to £1.5m. Projects threatened include peatland restoration, which was already behind schedule, and Scotland has failed to meet 11 of 20 agreed UN environmental targets. One in five animals and plants which the government considers important are threatened.
NatureScot recently withdrew its objection to a windfall farm extension near Rosehall and Lairg in Sutherland as there were already so many wind turbines in the area it could no longer be considered wilderness.
poses a new threat to cyber-security, as evidenced by the University of Glasgow’s new Thermo-Secure system. Cheaper thermal imaging cameras and rising access to machine learning mean hackers know computer and smartphone passwords in seconds by analysing heat traces left by fingertips on keyboards and screens. Anyone passing a keyboard which has just been used can take a picture revealing the heat signature of the keys pressed. The only defence may be to cover the keyboard or keep cleaning it. The system correctly guessed up to 86% of passwords from images taken within 20 seconds of keyboard use, even long passwords of 16 or more characters.
Royals and Offshore Windfarm Windfall
The Royal family may benefit from the recent offshore energy boom. The government’s Sovereign Grant of £86.3 million is a fixed proportion of profits from the crown estate which manages public lands owned by the crown and which owns all the seabed around the UK to about 12 nautical miles out. Its marine portfolio is now worth £5 billion due to increased demand for seabed leases for windfarms.
The amount of money royals receive can only increase each year or stay the same, never reduce, and now includes an ongoing sum to pay for Buckingham Palace renovations.
Retained EU Law Bill
All EU-derived laws will disappear from the statute book on 31st December 2023 unless actively retained by government, including food safety laws on allergens, chemical contaminants and food hygiene, and workers’ protections like holiday pay and safe working hours. It is feared laws may disappear through civil servants lacking the time to scrutinise them, and new laws may be passed instead as bilateral agreements which do not get proper parliamentary scrutiny unless specifically brought to parliament’s attention. The new bilateral military arrangements with Sweden and Finland were passed in this way.
The Scottish government plans to replace EU laws but the Internal Markets Act 2020 will now force Scotland to accept goods made or imported elsewhere in the UK, even if they are of a lower standard than Scotland’s.
Anyone doubting the new bill going through the Scottish parliament should look at Canada, which is next year extending provision to include the mentally-ill, and also to Belgium, where recently a physically healthy 23-year-old female was helped to take her own life due to being in a ‘medically futile condition of constant and unbearable physical or mental pain that cannot be alleviated’. Shanti De Corte suffered from post-traumatic stress disorder and depression after being involved in the Brussels Airport attack by Islamic State in 2016. Physically unharmed, she never got over the attack, attempting twice to take her own life. But this drastic solution denied her any future solution.
Many fear laws on assisted dying here will broaden quickly to include the disabled, vulnerable, or mentally ill, as in Canada.
National Care Service
There are fears as many as 75,000 jobs could disappear from local authorities when the new care service transfers provision from local authorities to local care boards. Cosla and trade unions Unite and Unison also fear for employment conditions and that the new service will be less accountable, saying jobs like IT a]nd finance will soon follow care jobs out of the local authority. The Scottish government claims services will still be delivered locally, but with national oversight, saying their Fair Work commitment will improve workers’ pay and conditions.
has been slashed by the new Chancellor, Jeremy Hunt, despite being promised only a couple of weeks ago. Monthly subsidies to people’s energy bills will only last to next April, and the price cap can be raised in April, when it may hit £4000 for an average bill. All other tax measures announced at that time have also been scrapped except English stamp duty changes and the rise in National Insurance.
Access to Cash
The Financial Conduct Authority will block branch closures and can fine banks hundreds of thousands of pounds for not complying with tough new rules over access to cash. Alternatives must be found if ATMs or branches are being closed or hours reduced. Around 20% of adults use branches regularly, with 6% using cash for everything, and already nearly half of the 1000 bank branches Scotland had seven years ago will have closed by the end of 2022.
Liz Truss has just resigned as Prime Minister after just six weeks in the job. But will whoever replaces her be any better? Will it make any difference to Scotland who is in charge?