Scotland … there are unintended consequences!

When Salmond first proposed holding a referendum during the current Scottish parliament, it was not going to be a simple in or out vote but a referendum that would allow the Scottish people to express the extent to which they would like a greater say over their affairs.

There is little doubt that a referendum along those lines, would have resulted in greater demands from the Scottish people.

From Cameron's perspective it seemed that regardless of the result in such a referendum where a series of options were laid before the Scottish people Salmond would be able to claim victory almost regardless of the outcome.

It seemed obvious that to force an in out referendum gave a better chance of maintaining the status quo as the SNP did not command a majority of votes in the election and the three major UK parties would all campaign against the SNP. From an initial clear lead in favour of remaining part of the UK, the polls are starting to narrow to the point where it is no longer such a clear picture.

If we try and understand why the “Better together” campaign does not seem to have any traction, we start to wonder what it is going to mean to the rest of the UK should Scotland leave the UK.  

The economic case in favour of Scotland leaving is clearly in Salmond's favour. Let us look at Scotland as an independent country for a minute.

1. It is food self sufficient … by this we mean it would not be a net importer of food.
Scotland accounts for almost 20% of the UK's agricultural and fisheries output. The UK as a whole is 30% dependent on imports of food. Scotland's population is equal to about 10% of the UK population. We can assume consumption is spread evenly over the population then we can calculate that Scotland would be a net exporter of food equal to about 35% of its output!
The rest of the UK's dependence on imported food would rise to 36% with some 9% coming from Scotland.

2. Scotland supplies some 45% of the UK power of which more than 20% is non fossil fuel based. (Nuclear, Hydro-Electric, Wind and Wave Power) Which indicates that Scotland would be the supplier of 40% of the rest of the UK energy supply.
Its own consumption is totally covered by its green energy production.

3. Scotland is responsible for more than 10% of the UK manufacturing output. Scotch Whisky being the UK's 5th biggest export.

4. Finally 70% of the UK North Sea Oil falls within what would become Scottish International waters. This amounts to some £21 billion, which, if Scotland chooses to require Scottish domicilium of the operating companies, could become an export for Scotland rather than the UK.

A picture starts emerging of a country that would have a positive balance of trade and is therefore self sufficient. It also becomes apparent that the contribution flowing to the UK exchequer from the geographic area of Scotland exceeds the amount flowing back into Scotland.

Current figures suggest that the per Capita GDP of the Scottish people will increase from  £22k to £25k, while there will be a small drop in the GDP per Capita in the rest of the UK.

What is less clear is the ownership of the businesses in Scotland. Certainly the North Sea  Oil fields are largely controlled by non Scottish resident businesses, and while Scotland might become the beneficiary of the Tax revenues it would not be the beneficiary of the profits that stem from many of the larger businesses. A similar situation exists with much of it's financial services industry.

This leads me to believe that while there is a clear gain in terms of GDP for Scotland the gain in terms of GNP (the proportion of National or Foreign Output that belongs to the citizens of a country) might be a lot less clear.

Ultimately, until negotiations subsequent the referendum have been completed there can be no absolute clarity about the end position … except that the Scots will be in the better negotiating position.  

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