THERE are no signs that the UK Government seems overly bothered by Nicola Sturgeon’s latest gestures towards a second independence referendum. Whitehall is reading her correctly, in my view. Her gestures are empty. No such referendum is imminent and no serious moves are being made by the Scottish Government to prepare for independence. The First Minister’s talk is hollow.

That the reshuffle has seen a minister cut from the Scotland Office, and that Michael Gove has been moved to a department concerned wholly with England-only matters would surely not have happened had Downing Street calculated that their services would be required to shore up London’s attempts to battle for the Union. On their view, the Union is safe. For now.

On the other hand, serious work is being done by well-placed think tanks in London to explore key aspects of what independence would mean, were it to happen. Last week, the Institute for Government published two weighty reports, on Scotland’s currency options and on the borrowing powers of a newly independent Scotland.

Both repay careful study. The Institute for Government (IfG) is as independent a think tank as there is. Aligned to no party and, indeed, to no cause, its work cannot be dismissed as the pre-determined groupthink of a pro-Union partisan.

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The currency paper breaks no new ground, but it reinforces once again how treacherous this territory is for those who yearn for independence. There is no good currency option for an independent Scotland. But the least worst option is to keep using the UK pound, at least in the short to medium-term, with a view to taking steps thereafter either to establish a new currency of Scotland’s own, or of seeking join the eurozone. But keeping the pound comes with a price.

Perhaps it will be a price that Scots are prepared to pay, but pretending that it is somehow a cost-free option, or a risk-free path, will not wash.

What it means, in short, is that without its own currency an independent Scotland would not be able to print money to buy its way out of economic trouble. When hard times strike, Scotland’s only options will be fiscal – that is to say, either taxes will have to go up, or public spending will have to be cut. Those dreaming of an independent Scotland in which investment in public services grows ever higher will find their hopes dashed, their dreams shredded. Independence, whatever form it may take, can be no socialist utopia.


The IfG’s second report, on borrowing, makes the point all the more starkly because it reveals this utopia to be beyond our reach not only when times are bad, but all the time. It is, straightforwardly, an impossibility.

Why? For the simple reason that Scotland spends more than Scotland earns. We run a deficit. Not only at the moment – in times of sky-high coronavirus spending – but all the time. The taxes raised in Scotland from businesses, consumers and workers do not cover the costs of public spending in Scotland. There is no getting around this fact. There is no getting away from it.

An independent Scotland would therefore have three options: raise taxes, cut spending, or borrow to finance the annual deficit. Naturally, we would want to borrow. That could be done, but it would not be cheap. Scotland, as a new state with no track record of paying its debts, would face a premium on its borrowing costs. Any new state would. But, in Scotland’s case, this premium would be made more difficult – and more expensive – for three reasons.

First, it is the stated aim of the Scottish Government to join the European Union as a new member state. EU law requires its member states, however, to have a deficit of no more than 3% of GDP (Scotland’s is 8% of GDP). Even with borrowing powers, therefore, Scotland would still need to raise taxes and/or cut spending if it wishes to join the EU.

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Secondly, to borrow in a currency other than one’s own is always more expensive. With an independent Scotland using the currency of a foreign power, it would pay a premium for issuing debt denominated in someone else’s currency.

And thirdly, both the European Union and the international bond market would in any event be looking for Scotland to reduce its deficit – that is, to cut the difference between how much we spend and how much we raise in taxation. To achieve this is relatively easy if you put into place policies designed to grow the economy. The IfG makes plain that Scotland would need what it calls a “clear growth model”.

Yet Nicola Sturgeon’s SNP has just invited into power a party that avowedly does not believe in growth. The Scottish Greens, by their own admission, are an anti-growth party, pursuing policies designed not to accelerate but to arrest economic growth. A finite planet cannot sustain indefinite growth, they insist.

To seek to join the EU, to seek to use the currency of another country, and to adopt policies designed to limit growth – these are all perfectly legitimate policy choices. Each of them is a choice the SNP has made. Fine, but here is the point: each and every one of these policy choices makes independence all the harder.

That the SNP has chosen to make them suggests that the UK Government in London is right. The SNP is not preparing Scotland for independence. Indeed, the opposite is the case. The SNP is making decisions of its own free will that have the undoubted consequence of making independence more difficult to achieve.

Is it any wonder that her political opponents are paying less and less attention to what Nicola Sturgeon says, and more attention to the implications of what her government does? For one thing is crystal clear – whatever the Scottish Government is up to, it is emphatically not preparing the ground for independence.

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