Meeting of the Parliament 12 August 2014
I have listened with interest to the debate and I suggest that a more appropriate title might be “The economic uncertainties of independence”. With just 36 days left until the independence referendum, the people of Scotland lack key information on how independence would work. They lack information about the currency, start-up costs, pensions and taxation. Far from being an opportunity, it appears to be a leap into the unknown.
I will focus my speech on the two major issues of currency and taxation. It has been made clear that a currency union, the preferred option of this Government, is off the table. No matter how many times Alex Salmond repeats, “It’s Scotland’s pound”, that will not change the fact that if the rest of the UK does not want a currency union with Scotland we cannot force it into one. Even if a currency union was on offer it would effectively mean handing the key fiscal levers of the economy over to the central bank of another country, while losing our political union and influence.
Sterlingisation is an even less attractive option. No one is denying that Scotland could use the pound, but without a currency union we would be left without a lender of last resort. That is just not credible. According to the National Institute for Economic and Social Research, sterlingisation would have a knock-on effect on Scotland’s financial sector, creating a financial border whereby banks would be forced to move their head offices to the country in which the central bank was located. Financial sector exports generate 9 per cent of Scottish GDP, so that would be a huge loss to our economy.
It is perplexing that the party that pushed for this independence referendum—a party established in 1934 to fight for Scottish independence—seems to be fighting so hard against a Scottish currency. Instead it proposes a currency union while stripping away the political union that makes our currency union work.
Without a clear plan on currency there is no opportunity, only uncertainty: uncertainty for Scottish businesses, uncertainty for Scottish banks and uncertainty for the Scottish people. In effect, there are no answers, no credibility—no thanks.
The plan, or lack thereof, on taxation is even more worrying. When I asked Mr Swinney last week whether taxes would need to increase to pay for things promised with a yes vote, he replied:
“the answer is no: taxes will not have to go up to pay for independence.”—[Official Report, 7 August 2014; c 33153.]
However, David Philips, the Institute for Fiscal Studies economist, tells us:
“an independent Scotland could expect to be running a deficit of around 5% of GDP in 2016-17, which would be larger than that facing the UK as a whole, and would necessitate tax rises or spending cuts.”