Would an independent Scotland be financially sound?

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Wednesday, 01 February 2012 06:59

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By John Jappy

As a civil servant in London, and being part of the establishment, I always accepted the general view that an independent Scotland would not be able to survive on its own without financial help from the London Exchequer.

However, when in 1968 I was able to examine the so-called "books" for the first time, I was shocked to find that the position was exactly the opposite and that Scotland contributed much more to the UK economy than its other partners.  This was, of course, before the oil boom.

I realised that the Treasury would wish to keep this a secret, as it might feed nationalistic tendencies north of the border, which at that time were very weak.  I took the decision to keep an eye on the situation to see how long it would take for the true facts to emerge, which I felt would only be a short time.  However, the Treasury and the Establishment did an excellent job, aided and abetted by the media, to keep the myth about Scotland alive.  

In fact it took another 30 years before the first chink in their armour started to appear.  This came unexpectedly on 13 January 1997 when, in reply to a series of questions put by SNP Leader in the Commons, Alex Salmond MP to the then Tory government, Treasury Minister William Waldegrave admitted that Scotland had paid a massive £27 billion more to the London Exchequer than it had received since the Tories came to power in 1979.  Statistically this works out at £5,400 for every Scot.   

There were no attempts to refute these figures, which caused much embarrassment to the Tory Government of the day.  However, the facts were quickly covered up by the Unionist controlled media.

Then a year later with a Labour government now in power came a further bombshell.  Following further promptings by the SNP, on 21 August 1998, Mr Salmond received a letter from the House of Commons Library (ref. 98/8/56 EP/rjt) which gave a table showing that based on Scotland's GDP per capita, Scotland would occupy 7th place in the world's wealth league.  The UK was at 17th Place.

When the Labour government came to power it announced a 1p cut in the standard rate of income tax.  From my detailed knowledge of income tax, I felt that this was the worst possible thing that they could do, as extra monies would be needed following on from the Thatcher era, if they were to fulfil even a fraction of their promises to the electorate.  I came to the conclusion, and I still feel that I was right, that this was done by Labour to prove to the voters of Middle England that they could match the Tories in tax cuts.   

Despite the disclosures of 1998, attempts to deceive the Scottish electorate did not end there.  In March 1999 a Labour Party leaflet appeared which said that if the SNP were to forego Gordon Brown's 1p cut in the standard rate of income tax, every family in Scotland would be £250 worse off.  This became the major topic of a TV debate between Alex Salmond and Donald Dewar.  Salmond tried to point out to Dewar that he was using the wrong figures.  Watching the debate, I saw Dewar's eyes roll in his head for a few moments but he carried on regardless.  

After the debate it took the Labour Party a whole week to admit that they were wrong.  There was in fact a whole chain of errors which the Labour Party tried to blame on "printing mistakes".  However Labour could not deny the fact that in their calculations the UK average figure, which included the high wage earners in the city of London and the booming economy in the South East corner of England (which if I may say so were the result of the selfish policies of Mrs Margaret Thatcher), the figure used was almost double those of the average Scottish wage which at that time stood at £17,000 per year.

Looking closely at the figures and taking the year 2006 as a benchmark, I found that Scotland had an annual relative surplus of £2,8 billion, which works out at £560 for every man, woman and child.  In contrast the UK had a deficit of £34.8 billion.  

In November 2006, the U.N. published its annual "Human Development Index".  For the sixth year running, oil rich Norway topped the list, and won on such factors as generous welfare payments, education, high income and a long life expectancy.  Norway wisely created an "oil fund" in 1995 which in 5 years reached a total of £250 billion, so that Norway sailed through the Credit Crunch.   

Who are the real subsidy junkies?

Any lingering doubt that Scotland more than pays its way, or survives on subsidies, was dispelled by a new report published in October 2007.  Whilst the Daily Mail, which by no stretch of the imagination could be described as a supporter of Scottish nationalism, devoted a whole page to the analysis of the report which was based on tax paid per capita as against spending, Northern Ireland received £4,212 more than it paid in tax, North East England £3,133, Wales £2,990, N.W. England £1732, South West England £978, West Midlands £931, East Midlands £185 and lastly Scotland £38.  Only the South East corner produced a small surplus due to tax paid on the high wages within the city of London at this time (pre-Credit Crunch).

Analysis

It is no longer refuted that Scotland exports more per capita than the rest of the UK.  In 1968 when I first discovered that Scotland was in surplus in relation to the rest of the UK, its exports could be broken down into whisky, meat, timber, fish, and of course tourism which is a huge hidden income.  Those exports are supported by a population of only 5,000,000 as against 45,000,000 for the rest of the UK, quite a substantial advantage.

With the oil boom, Scotland's economy was transformed.  Scottish oil has to date funded the Treasury with £300 billion, which has pushed Scotland up from 7th place in World Wealth rankings, had it been in control of its own resources, to 3rd place.  

On 29 May 2008, Labour Chancellor Alistair Darling admitted in a back-handed way, that Scotland's oil revenue had been underwriting the UK's failure to balance its books for decades.  There is still 30 years of oil supply left in the North Sea (some 150 million barrels) valued at 2008 prices at 1 trillion dollars.  This excludes the new fields being brought into production in deeper waters west of Shetland.

Meantime whisky exports, which I listed in 1968 as one of Scotland's top assets, have risen at a phenomenal rate.  For example, whisky exports to China amounted to £1 million in 2000/2001, by 2007 they had risen to £70 million.  They have continued to rise, although I don't have more recent statistics.

On the economies of Independence, Scotland has also 18 times its requirements in North Sea gas, which on current trading is more expensive than oil.  The country exports 24% of its surplus electricity south of the Border, with much of the back-up by Hydro Electric unused.

Even if nuclear is excluded, the future looks bright, the new Glen Doe hydro station on Loch Ness which was opened by Scotland's First Minister last year can produce enough electricity for 240,000 homes.  Further projects down the Loch which have now reached the planning stage will increase this to over 1,000,000 homes.  Wind and wave energy will also contribute significantly in the future.

No doubt as the time draws nearer to the referendum on Scottish Independence, politicians will do their best to distort the figures, but the truth is something that never varies.


Before retiring, John Jappy was a senior civil servant in the Inland Revenue, working for the Accountant & Comptroller General's Branch based at Somerset House in London.  His duties involved liaising closely with Treasury officials to prepare accounts and financial information for UK government ministers.