Ideally, come next September's referendum, we voters should be in a position to see clearly what is to be anticipated in the event of both a Yes and a No vote.
We should understand the visions for Scotland of both parties to the debate and also what could be different given a vote for independence as compared not just to the status quo, but also any changes being firmly offered by way of further devolution if voters opt to retain the union.
I am not holding my breath for receipt of any detail as to what is under offer in the event of a No vote, but now in the White Paper we have a fully articulated statement of the plans under the independence option. Nevertheless, at least on the economic and financial front, a number of uncertainties remain, some inevitable and likely to remain right up to the referendum itself.
Consider the fundamental issue of sterling. I have no doubt that the preferred solution is for Scotland to continue to use sterling, to remain with the same currency as our key trading partner. This is the option preferred in the White Paper. But at least three caveats must be noted:
1. The use of sterling would have to be agreed with the UK Government and this - to say the least - cannot be guaranteed.
2. Within a currency union there would be no Scottish independent monetary policy, and as good as no influence over that policy. On the fiscal policy front, any macro level freedom would be severely constrained, both by the UK authorities to avoid any risk to sterling and by the international markets in order to secure reasonable costs of borrowing for Scottish public debt. There would be enhanced flexibility over individual tax and spend policies, but at the aggregate level the constraints would be likely to be as tight as now.
3. It remains unclear how the Scottish financial sector would operate so far as oversight and regulation is concerned, crucially for crisis management and the like. The Government's Fiscal Commission believes there is a way forward. Other experts have severe reservations.
The alternatives to sterling are not attractive. The euro does not appeal at present; tracking sterling in some less formalised manner would cause major problems; and creating a new Scottish currency may make sense in the longer term but more immediately would be complex and expensive, introduce currency risk in dealing with the rest of the UK and require hyper-strict monetary and fiscal policies while reputation was being achieved.
To me, the other key area is that of the public finances. I would dearly love to see the end of the 'bedroom tax' and more funding for early years; and I support several of the moves proposed in the White Paper to achieve economic and social benefits. But they would all cost money. The forecasts made by this Government are far more optimistic than those from the Institute for Fiscal Studies and other informed and independent commentators. The key difference is oil and gas related revenues, where nobody knows the future, but the Government is more optimistic than others by several billions of pounds per year by 2016/17. At best the scale of such receipts is uncertain and liable to sharp swings. The public finances could well prove far more constrained than suggested in this paper.
In sum I suggest three key economic issues to consider. First, is the currency option feasible and what extra flexibility over the status quo would a currency union provide? Second, what if the public finances were much more constrained than the paper anticipates? What would be the casualties and the pressures? Third, on other economic policy fronts can we identify the positive developments in the event of independence which are not feasible under the status quo or some achievable enhancement of devolution? Of course independence is possible but how much value would it add?
Jeremy Peat is director of the David Hume Institute
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