The Scottish referendum on independence is one year away. Senior members of the SNP have been doing the rounds of the television studios, putting the case for independence. A combination of the one-year countdown and the political-media class happening to be up in Glasgow for the LibDem conference has brought the independence debate into sharp focus.
One of the more pressing quandaries is how an independent Scotland would pay its way, and on this question there are sheaves of economic analysis to show that Scotland both could and could not survive as an independent economic unit. So the SNP and the pro-Union brigades can pick and chose their evidence according to preconceptions. Much of that fiscal debate has become reduced to an exchange of contradictory “expert analysis”.
There are however some economic points worth making. Nicola Sturgeon, the Deputy First Minister of Scotland and Deputy Leader of the SNP has suggested that Scotland could survive on a strict diet of North Sea oil. Oil exports would form the basis of a sovereign wealth fund, similar to that of Norway, which would fund domestic spending. All reasonable enough. The problem however, comes when the SNP says that it also intends to keep the pound.
The problem with this is that, in both relying on oil as the chief source of Scottish revenue, and retaining the currency union with England, the effect would be to take one economy that relies on natural resources—Scotland—and then to bolt that economy onto another that is based on services and manufacturing. The Bank of England would effectively have rate-setting power over both the new UK and an independent Scotland, but the Governor would be an appointee of the Westminster government and so it is clear where his or her loyalties would reside.