Independent Scotland ‘can rise above Brexit-style row’
SNP blueprint backs keeping pound for decade and paying debt at £5bn a year
NEWLY independent Scotland should rise above the type of Brexit squabbling that has mired the UK and the EU and agree to shoulder its share of Britain’s historic debt by paying £5 billion a year.
The SNP’S long-awaited independence blueprint also recommends keeping the pound for at least 10 years while limiting public spending in an attempt to reduce Scotland’s deficit – setting targets in line with the current rules for EU membership.
It suggests taking on its share of the UK’S debt burden as part of a “close and positive” relationship, insisting lessons should be learned “from the less than orderly approach to the Brexit discussions so far”.
A £5bn “annual solidarity payment” would cover debt servicing contributions, as well as continued funding for foreign aid and shared services.
Scottish Labour branded it a recipe for a decade of “unprecedented” cuts, but Andrew Wilson, chairman of the SNP Growth Commission which produced the report said: “It’s the opposite of austerity.”
The document, which was 20 months in the making, recommends an independent Scotland continues using the pound for a “possibly extended transition period”.
This would mean the country’s monetary policy, covering interest rates and the control of inflation, would be determined for many years by the Bank of England in London.
It also accepts a number of banks may move their headquarters down south following independence, but insists there would be very limited impact on operation activity as many of their executive functions are already based in London.
Meanwhile, the country’s deficit should be reduced to below three per cent within five to 10 years, it advocates, while national debt should not increase beyond 50% of GDP. Both of these policies would fit with EU membership limits.
The report suggests it would take up to a quarter of a century for Scotland to catch up with other successful independent countries such as Denmark, Finland and New Zealand.
It looked at 12 small advanced countries – with a particular emphasis on the three listed above – and found GDP per head was on average 14% higher than in Scotland. This translates to an extra £4,100 per person.
Billed as a “new case for optimism”, Mr Wilson – a former SNP MSP – insisted its vision for independence was not a “magic wand” but rather a toolbox for future success.
He said: “Scotland has potential far beyond its current performance. Our ambition should be to perform to the level of the best of the small advanced economies in the world and, in doing so, make the right choices about the sort of society and economy we wish to live in.”
But Professor Ronald Macdonald, one of Scotland’s most renowned macroeconomists, warned the proposals would lead to a currency crisis.
He said they implied massive spending cuts or tax hikes to generate the necessary cash reserves.
The Snp-commissioned report rejects forming a currency union with the rest of the UK – which the party advocated in 2014 – insisting a future UK Government could reject the plans, as happened during the last referendum campaign.
The blueprint goes on to set out a series of tests which should be met before a new Scottish currency is brought in, including bringing the deficit under control and ensuring
sufficient foreign exchange and financial reserves.
It suggests an independent Scotland would have set-up costs of around £450 million over five years, chiefly to establish four new bodies: a defence force, a foreign affairs and trade department, a security and intelligence agency and a central bank.
But transition costs would be recovered within six years, it argues. The document marks a substantial break from 2014’s White Paper by taking oil out of its sums – except to say that windfalls will be channelled to a “fund for future generations”.
Migrants would be attracted through measures, including tax breaks for the highly skilled and ‘golden visas’, which offer people the right to live in Scotland if they invest a certain amount in the economy.
The document insists “there is little sense in competing as a low cost or low tax location” after independence, but adds the tax system could be used to attract people and investment.