FXstreet.com (Barcelona) - Martin Beck of Capital Economics
notes that attention so far has focused on what independence would
mean for Scotland itself, but the question of what it would mean
for the remaining UK has seldom been addressed.
With its high level of public spending, Scotland is perceived by
many to be something of a drain on the overall UK economy,
suggesting that independence might be to the advantage of the
remaining UK. However, in practice, he finds that Scotland´s
departure from the Union, is unlikely to be a benefit and could
even present a net economic cost. The UK would probably retain some
of the disadvantages of current links with Scotland, including the
need to continue as a backstop to the Scottish financial sector,
but independence would offer few benefits in the near term.
Beck writes, "Admittedly, the direct fiscal consequences of
Scottish independence to the UK would probably be minor and could
eventually swing in the rest of the UK's favour. There are some
concerns that, if an independent Scotland probably took a major
chunk of North Sea revenues, it would leave a hole in the rest of
the UK's public finances. But oil revenues are not actually that
big and are forecast to decline. And Scotland consumes a
disproportionate share of public spending."
However, the potential monetary implications of Scotland exiting
the Union are more troublesome. The SNP currently plans to keep
using the pound after independence, which would probably involve
negotiating to use the Bank of England as a "lender of last
resort". In that case, the Bank and UK Taxpayers would be on the
hook if Scottish financial institutions got into trouble. The
importance of these institutions to the UK economy means that it
would be difficult for the UK not to stand behind them, whether it
wanted to grant Scotland this privilege or not.
He continues, "Of course, the residual UK might therefore insist on
overseeing Scotland's fiscal management via some form of treaty
imposing fiscal rules. But it is not clear how effective they would
be in practice." While an independent Scotland's continued use of
the pound would avoid disruption to UK firms selling north of the
border, there may be a continuing cost to exporters in the
remaining UK since Scottish oil exports probably cause the pound to
trade at a higher level than otherwise, but independence would mean
that the UK no longer shared in the tax revenue from those exports.
He finishes by writing, "The close knit relationship between
Scotland and the rest of the UK means that independence for
Scotland would still leave substantial economic ties in place. The
nature of some of those ties would present potential costs to the
remaining UK. But disunion would offer it little in the way of
benefits. So, for the rest of the UK, Scottish independence is
arguably och aye the no."