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It's the economy, stupid ... but who is making the best case?

Jim and Margaret Cuthbert

The most surprising feature of the Independence debate, one year in, is the extent to which key questions have been ignored or treated superficially by the major protagonists on both sides.

One such question is whether the current UK economic model is fatally flawed. Naturally, the Unionist side in the debate takes a positive view, talking about "the UK's stability and markets' confidence in the larger UK economy." But this rosy view ignores the long running decline in competitiveness, and mismanagement, of the UK economy. And the facts that, with international assets and liabilities now over 700% of GDP, and crippling levels of public debt, the UK economy is like a large undercapitalised bank, which is unlikely to withstand the next financial shock. The recent Jimmy Reid Foundation report by Jim Cuthbert gives much more evidence.

The SNP acknowledges problems and imbalances in the UK economy, but thinks these can be solved for Scotland while still remaining in a UK currency union. Their working group on the macroeconomic framework reached this conclusion largely on the basis of comparing Scotland's economic performance with the UK average. They almost completely ignored the stark imbalances within the rest of the UK, and the evidence of the UK's overall underperformance, which clearly indicates that the UK as a whole is far from being an optimal currency area. A forthcoming Jimmy Reid Foundation paper by Margaret Cuthbert gives much more detail.

Or consider the financial sector in the UK. It is now quite clear that getting this over-bloated sector under control is a key problem for the UK. And yet the independence debate is still conducted almost as if the financial sector will recover its pre-crisis importance.

And finally, consider the implications of Cameron's announcement of a UK Europe referendum. How can Scotland be expected, meaningfully, to decide on independence in advance of this? Yet the implications are hardly discussed

To probe such areas would not be to the disadvantage of the independence movement. So why have these issues not been properly examined? The basic problem is that the fundamental context in which the question of Scottish independence is decided must be when the UK itself faces an existential crisis – like a coming UK economic crunch, or in the UK's relations with Europe. By setting an artificial 2014 deadline for an independence referendum, the result has been to remove the independence debate from this essential context: and, as we have seen, to guarantee superficiality.

(Copies of the Jimmy Reid Foundation papers referred to can be accessed at www.cuthbert1.pwp.blueyonder.co.uk)

By Brian Ashcroft

Emeritus Professor of Economics at the Fraser of Allander Institute, Strathclyde University

What conclusions can prospective referendum voters draw on the economic case for and against independence presented by the 'Yes' and 'No' campaigns in the last few weeks?

Voters should try and read the documents and not rely on the views and opinions expressed about them by the Yes' and 'No' campaigns. And, yes, don't even rely on the views of commentators like myself.

In my opinion, the quality and depth of analysis in the two UK Government papers far exceeds that in the Scottish Government's case for independence paper. We can set aside the report of the Fiscal Commission Working Group because that report seeks only to ask what macro-economic policy framework should be put in place in an independent Scotland?

The two UK Government papers on the economy published so far are well grounded in theory and evidence. Written by civil servants, they are more balanced and objective than the pronouncements of the UK Government politicians and 'No' campaign officials. Both papers make a good case in identifying the risks to the economic well-being of Scots if they choose the independence route. The currency paper does this best because given the Scottish Government's declared option of retaining sterling, the paper very powerfully argues that this would be a second best to the present arrangements within the union. What that paper does less well is make the case that adoption of an independent Scottish currency after independence would necessarily be worse.

Both UK Government papers have to speculate on possible outcomes and it is inevitable that they focus more on worst-case scenarios and ignore the possible up-side. So the financial services paper makes a strong case that an independent Scotland would be in a weaker position to support the financial system given its relative size than is the case in the present UK. But future crises might not emerge and in the event of crisis there maybe would scope for a Scottish Government to internationalise the problem. I doubt it, but it is possible.

The Scottish Government's paper in contrast has a more difficult task. It chooses not to talk down Scottish industry but at the same time it wants to suggest that performance would be better under independence. So underperformance has to be laid at the door of the union. And policy in an independent Scotland would be more favourable to competitiveness and growth.

In the paean of praise to Scottish industry there is no mention of historic weaknesses such as a low business birth rate, low business research and development spend, low innovation, low quality investment and adoption of managerial best practices. These problems have bedevilled Scotland's development and enterprise agencies for years. It is difficult to see how such problems can be laid at the door of the UK union, particularly when other non-metropolitan parts of the UK do better on some or all of these indicators.

Moreover, there is little if anything proposed on the policy programmes that an independent Scottish government would deploy to raise the well being of the Scottish people. Even if independence was necessary for improved well being, which I don't think it is, we are almost asked to believe that it will be sufficient.

By David Bell, Professor of Economics at Stirling University

Two major contributions to the independence debate appeared earlier this week. On Monday the Treasury document analysing "Financial Services and Banking" in the Scottish economy was published. This 113-page tome was the third in a series which began in February with a paper on "Devolution and the Implications of Scottish Independence". Rumour has it that several more volumes will emerge from 1 Horseguard's Parade before the referendum. Those who rely on the paper copies may want to check that their floors are strong enough to carry the weight. The Treasury has been given the lead role by the Coalition in defending the Union and is clearly directing a lot of resources towards this objective.

On Tuesday the Scottish Government published its 69-page "Case for Independence", which builds on the 213-page first report of Scotland's "Fiscal Commission", published in February. It argues that the huge rise in inequality and the distortion of the UK economy in favour of London are reducing Scotland's competitiveness within the Union – a reflection of the views of Nobel prizewinner Joseph Stiglitz, who is a member of the Fiscal Commission. The Scottish Government is also leaving no stone unturned in its efforts to make the case for independence.

However, though they both focus on economic issues, the two documents read as if they are addressed to different audiences. The Scottish Government's paper seems to be aimed at the intelligent layman and is brimming with quotes that can readily be transferred to election leaflets. The Treasury paper, in contrast, is much more academic, with many references to the professional economics literature which the layman would struggle to understand. Not surprisingly, it is also clear from the documents that the Treasury has access to a wider range of statistical information. Because of their different audiences, it is difficult to rank the documents, but it is clear that at the end of this process, though it will undoubtedly have depleted the world's forests, we will know much more about the Scottish economy than has ever been the case before.

By Jo Armstrong Centre for Public Policy for Regions, University of Glasgow

This week saw the publication of two more reports from either 'side' of the referendum debate.

The UK Government outlined its views on the implications for Scotland's financial services and banking sector, arguing, for example, that independence will leave us with more expensive mortgages, savings being put at risk and job losses arising because of the introduction of a border with the rest of the UK.

The Scottish Government's latest report, on the other hand, outlines the inherent strength and diversity of the Scottish economy, and that independence and full control of all fiscal powers will inevitably mean the achievement of an even more robust and positive economic outlook.

If we are to believe the current polls, the electorate will be swayed by what they believe the impact independence will have on the fortunes of the Scottish economy and on them. This suggests we need detailed, accessible analysis of the relevant economic data now.

At present, the Yes-side is extremely limited on just such detail. For example, how will the full levers of power be used differently from today to deliver increased, sustainable, more equal economic growth than would be possible without independence?

On the No-side, will the electorate be able to make sense of the contents of possibly 13 lengthy reports (100+pages each) which mix serious with the trivial; no more Scottish bank notes is trivial, having no impact on the future of the Scottish economy?

Both sides are, unsurprisingly, embellishing their position. Their pitch is, compared to now, independence will unequivocally be better or worse for Scotland. In reality, the electorate know the future involves uncertainty whether independent or not. Both sides need to accept this and make clear just how robust their assumptions are that lead to either wholesale support for independence or remaining within the UK.

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