Independent Scotland: neoliberal nirvana or Scandinavian paradise?

2 April 2013

So, an independent Scotland. Neoliberal nirvana or Scandinavian paradise? True, these are not the only choices available but as a useful shorthand for the size of the state and its optimal take of national revenues it will do for the time being. That is, should taxes rise, fall or remain much as they are at present? What external pressures will hamper Edinburgh’s ability to set its own course, free as the wind? And, for that matter, whose dreams are most likely to be confounded and whose worst fears most liable to be misplaced?

That was the subject of an article I wrote for the Scotsman at the weekend. The gist of it:

The battle for independence has entered a new phase. It is one in which realism is replacing fantasy and in which stubborn facts have a chance of supplanting wishful thinking and self-delusion. About time too, you may say.

The first of these awkward truths is that the age of easy money has ended. Austerity bites and independence offers no real alternative to continuing austerity. An independent Scotland would still have to bear the combined consequences of New Labour’s profligacy and the costs of the great economic crash of 2008. As a result of this it seems unlikely there will be any Tartan Social Democratic revolution after independence. Instead, Scotland is likely to be a small, low-tax, outpost of neoliberalism perched on the periphery of Europe.

For understandable reasons the SNP does not like to focus attention on this thrawn reality. It may not have sunk in just how difficult Scotland’s position might be after independence. John Swinney’s ballyhooed “secret paper” advising his Cabinet colleagues about some of the fundamental uncertainties that must inevitably follow independence revealed the true picture.

True to form, Swinney’s paper was encouragingly, admirably clear-headed and sober. Independence might indeed give birth to a new era of liberty and long-term economic opportunity, but the initial years would be difficult and, quite possibly, even painful.

There would be little room for increased public spending while deficit reduction and reducing long-term public debt would require difficult choices to be made. Moreover, any increase to the state pension would necessarily come at the expense of other government programmes.

[…] The Scottish Government’s own figures, however, make it clear that Scotland cannot tax its way to prosperity. According to the latest Government Expenditure and Revenue Scotland figures, Scotland contributes 9 per cent of UK corporation tax receipts but only 7.4 per cent of income tax revenues. Given the ease of both corporate and personal flight after independence, tax increases would be a “brave” or “bold” move. That is, they would prove disastrous.

Not everyone takes this view. Writing in these pages earlier this week Robin McAlpine, director of the Jimmy Reid Foundation, argued that “if people can be persuaded of the transformational effect of taxation, they will accept tax rises”. There is little evidence to support the idea, much-cherished on the Scottish Left, that the people actually wish to be persuaded that higher taxes are a good thing. Some 75 per cent of voters, for instance, oppose council tax increases.

Nevertheless, according to the latest Social Attitudes Survey, 57 per cent of Scots suspect independence will lead to higher taxes. By comparison, just 19 per cent expect an independent Scotland to reduce the gap between rich and poor. A plurality doubt independence will make any substantial difference to “inequality”.

In their collective wisdom the people are ahead of the politicians. For far too long Scottish politics has been a game of inputs, not of outputs. That is, the splendour of any given policy is measured by its munificence not by whether it actually achieves its stated goals. Money remains the root of all solutions even when experience demonstrates this is not actually the case. It is a mentality that sees high welfare spending as a mark of pride rather than evidence of terrible failure. No-one proposes eliminating the safety-net; celebrating the number of people it supports is a different matter.

But as the Social Attitudes Survey’s findings suggest, the people are not so sure. They may dislike inequality but they do not expect it to be reduced by higher taxes. Moreover, it is hard to avoid concluding that the expectation an independent Scotland will be taxed more punitively restrains the people’s enthusiasm for independence. The people are more neoliberal than they think they are.

The SNP leadership is aware of this. Alex Salmond’s charm offensive in Scottish boardrooms has long been buttressed by a promise that reducing corporation tax would be an immediate priority following independence. Last month, John Swinney went one better, telling the BBC he does not “envisage increases in personal income taxation” post-independence. If this is “Tartan Toryism” then let’s have more of it.

We are where we are. And we are not a Nordic country. In some respects this is regrettable. For all their supposed social democratic bona fides, countries such as Sweden and Denmark do not recoil in horror from the word “private”. Indeed, if Scotland is to absorb lessons from Scandinavia, these should be that welfare dependency and high taxation sap prosperity.

As Anders Borg, Sweden’s pony-tailed finance minister, warned last year, it is “problematic if you drive out entrepreneurs from your country because they are the source of job creation”. Excessive welfare, he argues, encourages “emigration from the labour market”. The result is permanent and crippling “social exclusion”.

Neoliberalism is, I think, often considered an insult in Scotland but an independent Scotland may well prove to be an admirably neoliberal country. The Institute for Fiscal Studies suggested last year that though the short-term outlook for an independent Scotland might be “no more uncomfortable” than that facing the UK as it is but that “in the longer term, the choices may be starker”. Oil revenues help provide a cushion but prudent planning suggests they should not be relied upon to any heroically optimistic degree.

Ironically, then, building a fiscally-sound house after independence might require Scotland to embrace rather than reject neoliberalism. Perversely, those right-of-centre Scots most concerned by independence may have as much to gain as their independence-supporting left-wing compatriots have to lose. If this is the case, then the present constitutional arrangements may indeed put a brake on Scottish aspiration but not, perhaps, in quite the way many supporters of independence imagine them to do.

Perhaps this is too optimistic. But there are times when even optimism must be allowed out for a gambol in the paddock. There may be less room for tax increases and rising public spending than some imagine. That’s a welcome reality, if only we can stick to it.

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  • global city

    If the Scots continue to be suckered into taking on as ‘identity’ the anti business, anti conservative, pro welfare socialist meme then they will most likely resemble a soviet.

  • terregles2

    I cannot believe that any country who has a Police Force and a Government that gives us Paris Brown can seriously present any argument for telling Scotland that we need them to govern over us. I have never seen anything like that ever anywhere in the world. The lunatics are indeed in charge of the asylum…!!!!!!!!!!!

  • Ray Veysey

    “if people can be persuaded of the transformational effect of taxation, they will accept tax rises”

    Good luck with that jock !

  • terregles2

    Wonder why so many reasonable non offensive opinions are still awaiting moderation after 20 hours and more. If we didn’t know better we might think the Spectator was trying to manipulate opinion.

  • A Serial Luncher

    Having lived in Norway this idea that the Scots are similar is farcical.
    Norway is, in cultural terms (not just economic), a country of middle class people while Scotland is not. Being on benefits there is socially unacceptable This idea that there is a cosy social democratic consensus is lefty make believe. Their version of UKIP is a bigger force than UKIP in Britain having been the 2nd largest party in their parliament. Their state is smaller than Britain’s as a proportion of GDP. The left wing coalition in power is in power by a cat’s whisker and then only due to a peculiar vote weighting quirk.

    • dercavalier

      Obviously you have only walked through Oslo City Centre. Next time you go spread your wings, visit the poorer areas, which although not sink estates like in England are still poor. Also Norway’s equivalent to UKIP while anti-EU is not a fascist outfit like UKIP UK.

    • terregles2

      Think that the only comparison that has been made between Scotland and Norway is that Norway became independent from Sweden in 1905.
      Don’t think you would find any Norwegians now thinking that having Independence was anything but a good thing for Norway.

  • Donafugata

    Do you know, I shall be absolutely delighted for Scotland to be independent.
    I just wish they would hurry up and go because the debate is becoming exceedingly tiresome.

    • dercavalier

      Well why are you coming here to comment? There are plenty of other sites to visit.

    • terregles2

      The Independence referendum vote is 2014. If you find the debate tedious why not debate the YES/NO in out of Europe referendum instead. That one though does not take place till 2016.

  • dercavalier

    What’s all this then Spectator? When I opened the web page I found all the excellent posts answering criticisms of Scotland by failed BritNatz, I found they were under moderation, although I could still read them if I clicked on a button. Is the Spectator now afraid of pro-Scottish points of view?

    • terregles2

      I was a bit puzzled to see my posting out of sight awaiting moderation. I would really like it if someone could tell me what could possibly be construed as in any way mildly offensive particularly as all sorts of racist abusive rants seem to pass without a problem.

      Could this be the same Spectator who was warning us that freedom of speech in an Independent Scotland might be under threat?

      • dercavalier

        My posts were also ‘half’ moderated although they are still available if you look, find and press a button. I just think they don’t like to be told the truth. It doesn’t suit the Spectator’s anti Scottish agenda notwithstanding that the Editor is a Weegie with a broad Glasgow accent.

        • terregles2

          Suppose we should be flattered. They are really sounding sillier and more hysterical in their anti Scottish “articles” every week.
          Stand by for the next piece of nonsense. It really says it all that they have to try and stifle any reasonable debate.
          They have no coherent response so instead block any differing opinion.

  • terregles2

    Can’t remember anyone saying that an Independent Scotland would not face the same economical challenges that many other countries are facing at the moment. Nobody anticipates that after independence there will not be tough economic decisions to be made and lots or hard work to be done to build a better country for our children and grandchildren.

    When people look at the mess Westminster has made of running the economy they feel that Scotland with self government could certainly not do any worse. The UK with its’ loss of triple A rating and the measures it is taking to improve the situation hardly inspires confidence.

    Strange that unionists believe every other country in the world is capable of self government al of them with the exception of Scotland. What a strange concept.

    Of course we will have challenges ahead but these are exciting challenges and we can achieve so much when we stop sending the wealth we produce to Westminster and then wait for them to send us our share back. Unfortunately under the present system we have to pay our share towards Trident, Afghanistan, Iraq etc and anything else that a Tory government deems to be important.

    • manonthebus

      Bravo. We look forward to seeing how it all pans out.

  • Daniel Maris

    Scotland falls into the Scandinavian pattern: small population, lots of land, lots of resources and a communitarian view of politics (since the rejection of Thatcherism).

    • Donafugata

      To make Scotland look a bit more like Sweden, maybe they could take some of our immigrants, for money, of course.

  • dercavalier

    Talk about waffle. Full of fancy words to make it appear erudite. This article is more woolly than the one put forward by Douglas Alexander a few weeks ago. And neoliberal? That is just another name for cloaking full blooded right wing capitalism. That is not going to happen in an Independent Scotland.

  • leoinlisbon

    One reason why the Scots are unlikely to vote for independence in 2014 is that independence would force them to make unpalatable choices that they have previously fudged. Another is that, if as Alex Massie suggests, Scotland was forced to adopt a
    neo-liberal, rather than a social democratic economic policy, there are large areas of Scotland which would not thrive. Irvine Welsh put it crudely when he said that, in the council schemes, drug dealers were the only entrepreneurs. Neo-liberalism requires people who believe the capitalist system. In much of Scotland, the culture is deeply hostile to the idea of wealth creation.

    • dercavalier

      So what? It is the same in many, many areas in England including London where drug dealing is the only entrepreneurial activity. And as I said above there is no chance that Scotland would adopt a neoliberal economy.

    • terregles2

      Scottish culture is deeply hostile to the idea of wealth creation.? Is it really?

      Only countries that govern themselves can create wealth for the benefit of their own country. You seem to present a really good argument in favour of Independence.
      The latest Government Expenditure Review show that Scotland contribured 3.6 billion per annum to the UK governent and has a fiscal defecit of 2.6% compared to a defecit of 6% for UK.

    • JPJ2

      Irvine Welsh favours independence-for positive reasons 😉

  • Jupiter

    An independent Scotland would probably end up being like a cross between Greece & East Germany.

    • dercavalier

      Try to gain some education before you attempt to enter into intelligent discussions. You are a pure example of the old saw … “It is better to be thought a fool than to take up a pen to write and remove all doubt.”

    • terregles2

      Scotland will be in a stronger position after independence. Westminster has made such a mess of the UK economy with losing Triple A etc.

      Westminster have proved they are not up to mananging Scotland’s rich resources and exports of Whisky, Textiles, Renewables, Hydro power, Food Exports, Technology, Gas, Stem Cell Research, Metals, Oil, Paper, Forestry, Fisheries, Tourism, Construction etc.
      Scotland’s food and whisky exports are growing rapidly to the expanding markets of China India etc, We need a competent government to manage this rapid growth not the incompetent Westminster.

      • manonthebus

        It all sounds very exciting, especially all those things you are going to sell. Purely out of interest (because I’m all for Scottish Independence – it’s a great country), how much do you make out of all those things today. You can ignore the oil because we know that will keep you going quite nicely for at least ten years, and more when the new fields off the Shetlands come into play.

        • Daniel Maris

          There is a huge amount of investment in oil taking place right now. Clearly the clever money thinks the oil bonanza is going to continue for at least 20 years.

          But the Scots have huge, huge renewable energy resources. Once an efficient way of storing that becomes available (and it isn’t far off) that will be immensely valuable.

          The Scots have a huge amount of land per capita as well. With 21st century farming (polytunnels and energy input) that will translate into a huge increase in agricultural production I believe.

          The future’s bright. The future’s Tartan.

        • terregles2

          It is not all the things we are going to sell it is all the things we are selling at the moment which according to the Government Expenditure Review 2011-12 show that Scotland has a fiscal defIcit of 2.6% which compares very favourably with the UK fiscal defIcit of 6%.
          We now know that Scotland more than pays its way within the UK.

          It is very exciting the idea of controlling the resources and foreign policy of your own country. The track record of the discredited Westminister government is too depressing for words.

          if you like to keep up to speed on Scottish news try

      • Daniel Maris

        Whisky exports have again shot up.

    • I_love_monday_mornings

      So we’d have nice food, good weather and win lots of medals at the Olympic games?

      • terregles2

        Nice food? No lots of nice money that we make from our booming Food Export market along with our nice booming whisky exports. That’s without taking into account all the other valuable resources that we have.
        The nicest thing of all though would not be wasting all our nice money on nasty things like Trident and illegal invasions of foreign countries.

    • Daniel Maris

      I’d say it will be a cross between Ireland and Sweden.

    • terregles2

      No reason to believe it would be in the same financial mess as the UK. Lost triple A rating and blundering on with a stagnant economy.
      The rest of the UK does not have one resource that Scotland does not have and indeed Scotland has a few more resources than the rest of the UK.

  • Atypical_Scot

    Huge difference in an independent Scotland would be the lack of the £6 trillion in private wealth that controls Westminster. The city ate all the pies, and now they want more. Not in Scotland though. Vote yes.

    • Ron Todd

      A Scottish government would have vested interests to placate just as much as Westminster As the public sector is and would likely remain a larger part of the Scottish economy the public sector unions would have proportionally more influence. The banks are also a proportionally large part of the economy so they would be doing their share of lobbying. The oil industry would be trying to have its voice heard over the screaming of the greenites.

      • dercavalier

        Let us kill another myth among the BritNatz. The public sector in Scotland is 23.5% whereas in England it is 23.1%. The difference is negligible. And what banks? Any there may be would be much better regulated. The oil industry WOULD be a loud voice in Scotland just like the City in England but at least the oil industry would be providing real jobs.

        • Ron Todd

          What banks? the ones that went bust and had to be bailed out by the British taxpayer

          • terregles2

            Is that the same banks the British goverment allowed to do what they liked then rewarded them for making the mess.

          • dercavalier

            Do you mean the ones that went bust and were bailed out by the UK taxpayer along with about 10 ‘English’ banks? They don’t exist in their former state. And they were registered in London and regulated by the Bank of England. Do you like living in the past?

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