Analysis

professor andrew hughes hallett

At one level, the economic case for independence is rather straightforward. Economic growth in Scotland has been 0.5-1% slower than in the rest of the UK (rUK) for 30 years or more.

Business investment runs at about half the rate, per unit produced, of that in rUK.

To compensate, Scots work harder than their counterparts in rUK (labour productivity is higher but the overall productivity level remains lower.

In fact, rUK-owned firms spend 1/20th on R&D of that spent in rUK.

That reduces the investment and innovations spending which could create the gains in productivity that would allow Scotland to become more competitive independently of England.

At the same time the UK economy has become weaker. Growth is slowing down. The burden of public debt has worsened.

The UK trade deficit is growing, which means more of the country’s assets have to be sold off to pay for that deficit, and rUK productivity has actually shrunk to below the level of 2007. It is now at only 90% of the EU level. Who would not want to break free of that?

This explains a lot about the UK’s weakening performance.

On the budget deficit, there have always been deep concerns about subsidies flowing north, but few about those flowing south.

North Sea oil production costs have halved since 2013, development costs have fallen by a factor of three, while output is up 20% and prices up 60%.

Yet the tax revenues appear not to increase.

Other “hidden” subsidies include inflated interest payments on the perceived Scottish share of public debt, taxes paid by commuters who work in the south, housing and pension subsidies created by a uniform system based on English conditions.

Independence would rectify these imbalances, offset the loss of UK subsidies, and lower the budget deficit to that which reflects the revenues actually raised and spent in Scotland. Prof Hughes Hallett is a member of the SNP’s Growth Commission and honorary professor at St Andrews University’s school of economics and finance