The SNP has a frustrating habit of overstating – and therefore of undermining – its own arguments.
It is probably right, for instance, to say Scotland would remain a member of the EU after independence. But under precisely the same terms and conditions it enjoys now, as part of the UK? Given the hostility of major European states to the British rebate, that seems unlikely.
Likewise, nationalists are correct to dismiss the No campaign’s claim that North Sea oil has exhausted its potential. But that does not mean, as the first minister has indicated, Scotland will receive the full benefit remaining reserves. There is a reason multinational energy companies invest in our seabed resources, and it has nothing to do with the kindness of their executives’ hearts.
The party was at it again this week. After John Swinney announced that, under the SNP, an independent Scotland would borrow more to boost the economy, the Scottish government went on to say increased borrowing would not lead to higher deficits.
In one sense the government is right. If a sustained capital stimulus were to succeed in growing the Scottish economy, tax receipts would go up and the deficit would come down. But that isn’t going to happen straight away. It would be a few years before we started to see the effects of additional investment and, before we did, Scotland’s fiscal position would weaken.
The government’s refusal to acknowledge the downside of an otherwise excellent policy is all the more counterproductive because of the strength of its underlying point – that austerity has comprehensively failed.
It’s worth recapping the basics.
According to Oxford economist Simon Wren-Lewis, public spending cuts stripped 6 per cent – roughly £84bn – off the UK’s GDP between 2010 and 2013. You might think these cuts helped reduce Britain’s national debt (the debt the Tories insist caused the economic crisis). But no. UK debt has climbed steadily over the last four years and is due to peak at over 80 per cent of GDP in 2016.
Neither is there any meaningful sign of the recovery Osborne promised. As the New Economics Foundation has explained, recent increases in employment have done little to ameliorate the “severe and prolonged” post-crash squeeze on real wages. Indeed, average weekly earnings grew by just 0.7 per cent in the last year, well below the 1.8 per cent inflation rate. Improved jobs figures, in other words, disguise an explosion of low paid and insecure work.
So the economic case for higher spending – to lift Scotland out of what is shaping up to be a decade-long slump – is sound. But there is some political manoeuvring going on here too.
As I wrote in the New Statesman on Wednesday, the battle for working class votes is heating up. Having complacently allowed its base to seep away for years, Scottish Labour is finally trying to re-establish its left-of- centre credentials, hence the return of Gordon Brown over recent weeks and Johann Lamont’s pledge to raise taxes on high earners (using, she says, the new powers Scotland will gain if it votes No in September).
However, Scottish Labour is hog-tied by UK Labour’s 2015 strategy. In order to win the next year’s general election, Ed Balls believes Labour has to demonstrate it can be trusted to run the country’s finances. This means sticking to rigid spending constraints and securing “credibility” (a favourite word of austerians everywhere) with the financial markets. If Labour does win – and that is by no means certain – it intends to implement every one of Osborne’s planned 2015/16 departmental cuts.
Labour’s embrace of Tory austerity allows the Yes campaign to consolidate its control of the progressive ground in the referendum debate. The dividing line is clear: do Scots want continued Westminster rule and a shrinking state, or self-government and increased public investment?
But there is an added complication – one that relates to the SNP’s neurotic desire to scrub every last element of risk from the independence project.
The creation of a post-UK sterlingzone will come with stringent conditions, not least a limit on the amount of debt an independent Scotland could build up and a cap on the size of its deficit. These rules would form the basis of a “fiscal stability pact”, something the SNP talks approvingly of. In fact, in 2012, the first minister told the BBC that, within such a pact, “over the long-term your borrowing should not exceed 3 percent of GDP. I would argue that is no more than the fiscal discipline that a sensible country would have in any case.”
Yet Scotland’s 2012/13 fiscal deficit (including capital spending) was 8.3 per cent of GDP. At what point, then, would Scotland’s deficit have to start coming down? When Edinburgh decided it should or when London decided it should? More to the point, how do you reconcile a London-imposed and policed deficit cap with two or three years of deficit-financed expenditure? The sums, I’m afraid, just don’t really add up.
The SNP’s glazed insistence that independence offers only good things – that, after a Yes vote, we can borrow more without ratcheting up the deficit, or that we can exercise fiscal discipline and end austerity ¬– is Prozac nationalism at its worst. It encourages cynicism among an already cynical electorate. A bit more realism wouldn’t go amiss – sometimes the best way to win an argument is to begin by acknowledging its weaknesses.