Posted by Euan Bennet on 26/08/2014
This is a piece that I’ve had the idea for for a while. Some of the “hidden” benefits of independence have been discussed elsewhere, such as the fact that £billions of defence spending allocated as “in Scotland” actually never comes near Scotland. That’s been quantified in the White Paper as a defence spend of £2.5billion will be £1billion less than is currently allocated, but about £1billion MORE than is actually spent – regardless of the purpose that’s an extra billion quid a year stimulating the economy. On top of that we will actually have proper defences for the first time in years, and kick Trident the fuck out of here.
Speaking of Trident, that’s another £160 million per year saving for Scotland – not including the planned £100billion replacement cost that Westminster is immorally choosing to spend a fortune on when 25% of children live in poverty.
Another “independence dividend” that has been mentioned is not having to pay our £60million share every year towards keeping Westminster MPs and Lords in the manner to which they have become accustomed. There are now 850 unelected Lords, each of whom claims an attendance allowance of £300 per day just for turning up to drink subsidised booze and sleep in the debating chamber – and that’s on top of all of their other public-funded expenses.
Then there is the debt repayments. This gets a bit complicated but it’s explained well here – £4billion a year.
What’s that total then? Over £5.2billion per year in savings already, plus £1billion extra economic stimulus compared to now. Not a bad start, but let’s look deeper.
A lovely future saving would also be Scotland’s share of HS2 – a joke (in international terms) of a model train set that is not going to come within 400 miles of Scotland, yet if there is a No vote we will pay an estimated £4.8billion towards its construction.
But since that’s planned future spending, I won’t include it in the total.
VAT – hidden in plain sight
VAT is, of course, one of the major economic powers that is currently retained by Westminster. It is a major source of revenue for the Treasury (£87.7billion – over 13% of total revenue in 2013/14). Some of this tax is rightly allocated as “Scottish” revenue by the UK Treasury, but a great deal of it isn’t: as explained here, an unknown amount of VAT is allocated according to where the Head Office of the company paying it is located. In a great many cases, that means London.
In the UK, export duty is calculated based on which port the exports leave from. To take one example, a lot of the £3.9billion of international whisky exports every year are shipped from ports in England – therefore the export duty is not allocated as Scottish, even though the product is legally protected as made in Scotland!
To explain this, all that is really required is an image. I’ll add a few words below, just in case.
The stark difference in life expectancy means that Scottish pensioners are effectively subsidising South-East England pensioners by dying early. A low life expectancy means many people in Scotland are dying either before retirement or not long after retirement. A high life expectancy means people generally live longer after retirement – 14 years on average in SE England. There is no pension “pot” despite what the No campaign are claiming – pensions are funded out of general taxation. Pensions will be more affordable in Scotland than the UK average. At the moment we are being forced to pay as if we have the UK average life expectancy when in fact we really don’t – in some parts of Glasgow male life expectancy is less than that in Gaza.
Now we’re into uncharted territory. The civil service – the people who actually run the country – has hardly been talked about during the referendum campaign. Under devolution the Scottish Government has its own civil service who work on Devolved matters. The UK civil service is responsible for all Reserved matters. See here for a great graphic showing what these are.
After independence, the Scottish Civil Service will expand to take on the new responsibilities – all powers, rather than the limited powers that they have under devolution. This will bring a) some savings to the Scottish budget, and b) even more significantly, a large number of jobs instantly created in Scotland, with the associated knock-on economic impact of that.
How do we estimate this?
On wholly reserved matters, let’s assume a population share of 8.6% of the civil service is working on Scotland’s “share” of their department. We can also assume that the same number or fewer jobs will be created in Scotland for the new civil service departments after independence. Let’s consider the “big three” departments for Reserved matters, based on a median civil service salary of £22,850 (http://www.pcs.org.uk/en/news_and_events/facts-about-civil-and-public-services/):
|Department||Number of UK jobs||Number for Scotland||Average total cost of salaries|
|Work and Pensions||104,890||9021||£206 million|
|Ministry of Defence||49,100||4223||£ 96 million|
By the time the numerous smaller departments are added in, the total cost on salaries alone will be over half a billion pounds. Remember, we are currently paying this already under the Union, for nearly all of these jobs to be supported in London. The independence dividend is the chance to build a streamlined, efficient civil service based in Scotland. Even if no improvements were made in efficiency, we are still talking about nearly 20,000 jobs created instantly in Scotland from the big three departments alone, with more than £400 million extra investment in the local economy.
The most important thing to remember when considering the costs and financial aspects of the debate is that we already pay for everything at the moment, and then some. If on day one of independence, we continue to do things exactly as they are at the moment, then we’ll be starting off with savings of over £6billion per year (as a pessimistic estimate) and beyond that, extra investment in our economy of over £2billion per year. This is even before considering borrowing powers, oil and gas revenue, and Crown estate revenue – the impact of each of these individually will dwarf the total estimates I’ve made here.
The choice we face in the referendum is: do you want this money to stay in Scotland and be spent on our population? Or do you want our vast wealth to continue to be squandered on propping up the mega-wealthy and major London infrastructure projects?
Edit 10:15am on 28/08/2014: replaced “export tax” with “export duty” for clarification.
Edit 14:25pm on 28/08/2014: added some links for Trident running/replacement costs.