SNP Would Bankrupt an Independent Scotland, But Benefit England
Politics / UK Politics Jul 04, 2009 - 02:48 PMBy: Nadeem_Walayat
The debate of Scottish Independence form the United Kingdom has again returned, with Increasing powers being transferred over to the Scottish Parliament run by the SNP government at Holyrood, there are again increasing cry's for FREEDOM, independence from Westminister rule. To counter this the policy of the Westminister governments has been to bribe the Scots with ever larger amounts of net subsidy, where the annual block grant has now reached £32 billion per year.
The prime driving force for Scottish independence is that of the perceived benefits from North Sea Oil revenues going wholly to Scotland rather than to Westminister. Whist it is true that 90% of North Sea oil revenues are due come from Scottish waters, however North Sea oil peaked in 2001, since which daily output has fallen by 50% in 8 years, the trend in declining output is expected to continue in the coming years as new oil fields are not able to make up for the declining output from existing fields, this is called PEAK OIL. The revenue to the government from North Sea oil has now fallen to £10 billion, of which £9 billions is attributable to Scottish oil fields set against the block grant Scotland receives of £32 billion from central government of which £8 billion is the value of the net subsidy.
There are also huge hidden costs to the oil industry that are not being factored in, and that is for the decommissioning of old oil rigs, where in an age of environmental awareness, dumping of the oil platforms in deep waters is no longer an option, therefore just as the costs of decommissioning nuclear power plants was never factored into their building similarly the costs of decommissioning oil platforms could result in a sharp drop off in revenues as the costs of which would ultimately be born by the Scottish Government either in less revenue or direct costs of decommissioning.
Scottish Economy Budgetary Deficit
The Scottish economy runs at a huge deficit that is only maintainable due to being heavily subsidised by England. The country's total income for 2007-08 was £45.2 billion against expenditure of £53.3 billion, therefore a net deficit of £8 billion (Source: BBC), therefore taking into account oil revenue of £9 billion this puts an Independent Scotland roughly where it already is today (£1 billion net surplus), but this is BEFORE the debt interest and bankrupt banks liabilities are taken into account as follows.
Debt and Bankrupt Bank LiabilitiesWhat the Scottish Nationalists conveniently tend to forget is the debt burden that would be transferred over to Scotland as a proportion of the population, i.e. approx 10% of the £750 billion of public sector net debt or £75 billion, which would demand interest costs of approx £4 billion per year.
Also the financial crisis has resulted in predominately scottish banks in the forms of RBS and HBOS, resulting in liabilities of more than £1 trillion, that and transference of 10% of public debt would greatly improve the remaining United Kingdoms balance sheet, as the costs of bank capital injections and interest payments far exceeds the revenues of North Sea Oil and if the scottish subsidy is taken into account there is a large net cost to maintaining the Union.
Therefore the net benefit to England from an independent Scotland would be estimated to be far more than the revenues lost from North Sea Oil, an estimated net saving of £20 billion per year with the added bonus of transferring the Scottish banks debts back to Scotland.
For many years the SNP have argued that an Independent Scotland could be just as prosperous as Ireland or Iceland, which is true, an Independent Scotland would instantly become another Iceland as debt liabilities levels would be approximately10X GDP, so that much of the revenues from North Sea Oil would need to be utilised to service this debt, none of which is heard in the one way SNP Independence Propaganda traffic.
Meanwhile the SNP are actively attempting to gain powers to borrow and spend upto £30 billion thus increasing the countries debt burden further, which would put the country on the path to bankruptcy. This is in addition to tax raising powers whilst at the same time demanding that the £32 billion annual grant be maintained which is an attempt to make the cost of the maintenance of the union grossly unfair to specifically English tax payers, whilst Scotland reaps the benefits of an extra £2,000 per head of extra public spending than England.
Scottish Currency
Scotland would not be able to float its own currency thus would either have the choice of continuing to use the British Pound or eventually join the Euro, therefore monetary policy would remain as is throughout the British Isles with Westminister setting interest rates, this would put the Scottish regime under strain due to inability to fully manage the Scottish economy in the eyes of the electorate and bring into doubt the whole exercise.
In fact the rest of the UK may withdraw Scotland from the Sterling Umbrella due to the out of control borrowing proposed by the SNP Government.
Off course as North Sea oil runs out then so will the calls for independence diminish so perhaps it is good that the SNP grasps this window of opportunity to cut Scotland loose from the UK, else the rest of the UK may be forced to continue subsidising Scotland for another 300 years. For England the optimum time for Scottish Independence has perhaps also just about arrived with the net grant subsidy to Scotland just about starting to cover the net gain from North Sea oil revenues.
In conclusion, the rest of the UK has nothing to fear from an independent Scotland, in fact the benefits out way the costs as business and UK citizens would still be able to continue virtually as is under the European Union banner. So perhaps it will be the English who will be gaining their freedom.
By Nadeem Walayat
http://www.marketoracle.co.uk
Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
Nadeem Walayat Archive |
Comments
Post Comment (Moderated)