Guest Blog: Managing an independent Scotland's economy
It’s regularly said that if you ask two economists the same question you’ll get two completely different answers, so it was a bit of a daunting task to put four of the world’s leading economists – including two Nobel prize winners – in a room and ask them to come up with recommendations as to how an independent Scotland could best run it’s economy.
Our report today is the result of some extensive discussion and some very intense debate, not on whether Scotland should be independent, but on the best way to manage Scotland’s economy after a Yes vote.
There are three key conclusions in the report.
Firstly that Scotland has the clear potential to be a successful independent nation. Our analysis of Scotland’s economy finds that in economic terms Scotland can be independent.
Secondly, that Independence would mean that decisions and policies in key areas could be tailored to the specific needs and circumstances of the Scottish economy – both in the short term and long term.
And finally – that to make the most of those opportunities Scotland needs a macro-economic framework (the way in which we manage budgets, borrowing, currency and investment) that promotes prosperity, fairness, economic opportunity and security.
The model we propose would see Scotland retain the pound in partnership with the rest of the UK. We believe this in the best interests of both countries, preserving a single market and supporting business and consumers on both sides of the border.
Political considerations might cloud reactions to this proposal ahead of the referendum but we expect the actual decisions taken post referendum to be different when common interests are more likely to lead to agreement.
But that is just one part of our conclusions. Our model would also greatly increase the economic and social policy levers at the disposal of policymakers in Scotland.
Holyrood would be responsible for 100% of tax and spending in Scotland. Welfare and social security policy could be set in Scotland’s interests. Regulatory policy could be used to drive sustainable growth. Scotland would have the ability to offer a counter balance to the geographic and business pull of London for example through changes in areas such as air passenger duty and to use economic or fiscal levers to tackle inequality.
We also recommend that Scotland follow the model of other countries with substantial natural resources at their disposal and create a stabilisation fund, helping to smooth out the value of oil and gas to the economy. That fund could evolve over time to ensure the benefits of oil and gas resources are available for future generations. This would significantly enhance the economic protection currently available to the people of Scotland.
Publishing this report is not the end of our work. We hope stakeholders in both the Scottish and UK governments, as well as business and economic organisations will now start discussions around this proposal and I look forward to the Scottish Government’s response. In the meantime we will continue to offer our advice on issues such as taxation, regulation and the economic opportunities open to an independent Scotland, if that is what people vote for next year.