Saturday, 29 January 2011

Scottish Independence - the Pros and Cons

Seeing Dark Lochnagar comment on Ben's last post got me thinking about Scottish Independence again and this was compounded by the news that the Scottish Parliament at Holyrood may be given powers to raise its own taxes.



Scotland's devolution from the Union has been 125 years in the making.  Ignoring the whole issue of the signing of the Treaty of Union I am more concerned with Scotland's future.


The West Lothian Question
For how long will English constituencies and English Honourable members tolerate ... at least 119 Honourable Members from Scotland, Wales and Northern Ireland exercising an important, and probably often decisive, effect on English politics while they themselves have no say in the same matters in Scotland, Wales and Northern Ireland?
- Tam Dalyell, November 1977
As things stand, many of the political decisions that affect Scotland are decided in the devolved parliament in Holyrood.  Westminster exercises little executive power over Scotland these days but Scotland is still represented in the House of Commons with 59 seats.  This means that Scottish MPs have the power to influence legislation that does not affect their constituents, this is the West Lothian question, still unanswered 34 years on.

The easiest fix is to make Scotland an independent nation, no Scottish MPs in Westminster, no English influence in Scotland but this has political and economic ramifications  for both Scotland and the rest of the United Kingdom.

Another fix would be to propose legislation preventing Scottish MPs from voting on bills that would not affect Scotland but this suffers from the same political ramifications as full independence.

The third option that everyone but the nationalist parties ignore is the federalisation of the United Kingdom, granting increased powers to the Welsh Assembly, Northern Irish Assembly and Scottish Parliament while creating an equal English Parliament and reducing Westminster's mandate to foreign policy, monetary policy and defence. 

Scottish Income Tax

In the Scotland Bill 2010-11 there may be the potential to allow Holyrood to set Income tax for Scotland.  Most Scots should be excited by this because the could induce a lot of change for the whole of the UK (if they are gutsy enough to try) but it could also cause many economic problems for Scotland.

Since this bill is still in the research gathering phase there are almost no specifics but Scotland's future is dependent upon two specific points:
  • Will Holyrood have to balance its own books?
  • Will there be limitations on how much independence Holyrood will have to set taxes?

The Ramifications - Economic

On the spending side; for a long time Scotland has been a net beneficiary from UK tax revenues, the tax money spent in Scotland each year is greater than the tax raised from Scotland's residents.  If the Scotland Bill proposes that Scotland has to manage it's own budget then the future for Scotland is either austerity beyond what the Coalition has planned for the rest of the UK or eventual bankruptcy if they continue the generous welfare policy that they currently operate. If the Bill doesn't support a modification of Scotland's budget then it could exacerbate tensions between English and Scottish nationalists.

On the taxation side; if Scotland's tax policy is fully independent from Westminster's approval then Scotland has the potential to start competitive taxation within the UK.  If Scotland sets its income and corporation taxes far below those of England then there will no doubt be a migration of people and businesses north of the Borders which will reduce England's tax revenue leaving the Treasury with three options; raise taxes to plug the gap but make every other country richer, faster by driving people and businesses away (the Laffer Curve again), don't compete and slowly run out of money while Scotland gets rich or lower taxes to Scotland's levels or lower to directly compete (and in doing so refill the coffers).  Alternatively, Scotland could set its tax rates above those of the rest of the UK and see the previous scenario happen in reverse when the wealthy people and businesses that can relocate will move south.

The Ramifications - Political

As I mentioned earlier there are 59 Scottish constituencies represented in Westminster, 52 of those seats are held by two of the 'Big 3' parties.  If Scotland were made fully independent tomorrow then there would be a 9% ((59/650)*100=9.1%) reduction in the number of available seats in Commons,  Labour would lose almost 16% ((41/258)*100=15.9) of its seats in Commons while the Liberal Democrats would lose just over 19% ((11/57)*100=19.3%) of their seats and the Conservatives would have a majority with almost 52% of seats ((306/591)*100=51.8%).  In short, Scottish Independence (or the removal of Scottish MPs powers to vote on English matters) would dramatically alter the dynamic of British politics.

You could see why Labour and the Lib Dems would be reluctant to allow full independence or the limiting of voting powers of Scottish MPs.

There would also be the matter of the British Armed Forces, would they stay unified or would the Scottish Regiments/Squadrons be separated into a new organisation?

The Libertarian Angle

Well its simple really, whatever they choose.  If the Scottish Parliament held a public referendum and it revealed that an overwhelming majority of the Scottish public support independence then I'd support them.

The removal of Scottish MPs power to vote on English laws isn't an ideal solution but is better than the present situation in my mind (not just because it cripples Labour's opposition).  While the federalisation proposal has benefits and flaws, more reflective politics being the benefit but the flaw will be another layer of bureaucracy but it would be worth it if each 'state' were financially independent.

A libertarian - of whatever creed - believes in the reduction of the state, so instead of having to listen both Holyrood and Westminster (at times) and only having to listen to one is a step in the right direction.

It is a step towards localism which is another thing that a libertarian strives for.

I have already raised the potential for competitive taxation which is another plus in my book.

From a selfish point of view independence is the best solution because it would reduce the tax burden meaning either lower taxes or a quicker repayment of the national debt.

1 comment:

  1. Great article. However, I would add that it is has also been proposed that a federal UK was created where the various English Regions (The North West, the North East, Yorkshire, The South West, The West Midlands, The East Midlands, The South East East Anglia and London) had there own parliamentary with the same powers as Scotland. This would counteract fears of the an overall English parliament dwarfing NI Wales and Scotland's parliaments/assemblies and may help address the north south divide in England.

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