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Counting the economic cost of Scottish independence


economy

Counting the economic cost of Scottish independence

Throughout the referendum campaign the economy has been a political football.

Those who favour independence say Scotland would be richer on its own, while unionists argue its economic future is safeguarded by remaining part of the United Kingdom.

Many Scottish business people have kept their opinions to themselves not wanted to risk offending customers, investors or even politicians.

In overall gross domestic product terms, Scotland accounts for 9.2 percent of the entire United Kingdom, however GDP per person is higher point out the yes campaigners.

Pro-independence businessman Ivan McKee said: “We’ve got higher gross domestic product per capita than the rest of the UK, this is a wealthy country, the problem is that that wealth doesn’t stay here to get best used for the economy, the businesses and the people of Scotland. Independence gives us the opportunity to take control of that.”

Oil and gas from under the Scottish waters of the North Sea are the source of much of that wealth, but ahead of the vote there was no agreement on sharing tax revenue from that energy.

Estimates of how much oil and gas is left vary hugely, but the Scots certainly have the bulk of it – around 96 percent – however, dwindling reserves are just one reason why Scotland would have to really grow its economy:

David Phillips, senior research economist at the Institute for Fiscal Studies, explained: “Scotland’s oil revenues will eventually decline to negligible levels and its population is ageing more rapidly than in the rest of the UK so unless it can grow its economy more quickly to make up for this it likely faces further pressures on its budget on top of those faced by the UK government and that would mean bigger tax rises or bigger spending cuts in the long term to get its budget into health.”

On the tax front, whatever the outcome of the independence referendum Scotland will get increased tax-raising powers.

That has been promised by Britain’s three main political parties, even if there is a no vote. That is part of the carrot being offered by London if the Scots reject independence. Currently Scotland provides 9.1 percent of Britain’s total tax revenues.

The reaction of the financial world has been another factor in the run up to the vote.

Scotland’s two biggest banks have said they would relocate to England in the event of independence, adding to the economic uncertainties.

What currency an independent Scotland would use is another question. Edinburgh wants to keep the pound, the major British political parties have rejected that idea.

with Reuters

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