Pages tagged with "Economics"

In some of our previous articles and on our recent Believe in Scotland campaign billboards we have highlighted some of the inadequacies that exist within the UK’s social support system. In particular, one of our billboards drew attention to the fact that the UK offers the worst state pension in the developed world.

In this article, we will consider the social welfare and support systems across some of the small, independent countries in Europe. In particular, we will look at Norway, Denmark and Ireland. This will allow us to analyse and compare the performance and policies of these smaller countries to those of the UK.

This will allow us to present a hypothetical picture of the type of social support that an independent Scotland would be able and likely to offer.

State pension

As we have already shown, the state pension is a gloomy aspect of the UK’s welfare system. So, how much exactly does the UK offer to old age pensioners?

The UK former state pension consisted of two tiers – the basic state pension (£137.60 a week) and an earnings-related additional state pension. The new state pension provides a flat-rate pension worth up to £179.60 a week.

Let’s see how this compares to other countries.

Flat-rate state pensions in countries across Northern Europe: a comparison of full entitlement

Small, independent countries offer a much greater state pension than the much larger UK

These figures highlight that small, independent countries offer a much greater state pension (including full entitlement) than the much larger UK. Therefore, it’s more likely that an independent Scotland would follow a similar path as its European neighbours. Indeed, the SNP has said that an independent Scotland would work to increase the Scottish state pension to match the EU average, effectively doubling it.

 Net pension replacement rate

The net pension replacement rate is another interesting way of analysing and comparing the state pension schemes across various countries.

The Organisation for Economic Co-operation and Development (OECD) defines net pension replacement rate as “the individual net pension entitlement divided by net pre-retirement earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners.”

The net pension replacement rate measures how effectively a pension system provides a retirement income to replace earnings as the main source of income before retirement.

This table demonstrates that the UK’s net pension replacement rate is significantly worse than several of the small independent countries across Europe. In fact, the only country that offers a state pension that constitutes a lower percentage of pre-retirement earnings is South Africa.

Public social spending

 Public social spending is another important factor that should be considered when analysing the effectiveness of a country’s social support system. Public social spending includes health, old age, incapacity-related benefits, family, unemployment and housing, among other things.

These figures highlight that, with the exception of Ireland in this case, Scotland’s Northern European neighbours with a similar population size outperform the UK in terms of public social spending. Indeed, both Norway and Denmark spend a significantly great share of the country’s GDP on public social services than the UK.

 Income distribution

Lastly, this article will consider the distribution of income – another important aspect of ensuring an equal and well-supported society.

The OECD provides an Income Distribution database that monitors the performances of countries in the field of income inequality and poverty. This is measured using the Gini coefficient, which is based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive (ranging from 0, in the case of perfect equality, and 1, in the case of perfect inequality). Therefore, with reference to the OECD’s database, we have compared the case study countries of this article.

This data, again, shows several small independent countries across Europe outperforming the UK. Indeed, Ireland, Norway and Denmark all provide greater income equality than the UK.

By analysing these various social support factors, it has become clear that small, independent countries largely outperform the UK and offer greater security to their citizens

Conclusions

 This article has drawn upon data from various countries across Europe, including the UK, Ireland, Norway and Denmark. By analysing these various social support factors, it has become clear that small, independent countries largely outperform the UK and offer greater security to their citizens. This includes pensions, income distribution and public social spending. Overall, it can be suggested that an independent Scotland would behave similarly to these small European countries and the Scottish Government has already set out various goals for an independent Scotland to prioritise social wellbeing factors and match European targets.

The SNP’s Social Justice and Fairness Commission recently published a report that sets out a road map to a fairer Scotland. At Business for Scotland, we have for several years supported many of the policies that have been proposed in this report.

Indeed, we are particularly happy to see that some of the concepts concerning fairer taxation that we have for years encouraged the Scottish government to adopt have been embraced within this report.

In 2019 Business for Scotland presented a report and plan on benefit corporation tax credits to Kate Forbes, who at that time held the position as the minister for public finance and digital economy.

So after years of promoting this concept and encouraging the Scottish government to support this idea of reforming the tax system and introducing incentives, we would like to offer a bit more detail on what exactly this type of taxation system could look like.

The UK taxation system

The UK’s tax system is widely recognised as dysfunctional. It is complex, ineffective and very centralised. Furthermore, any reforms that have been introduced have failed to keep up with economic and societal changes. The UK government often cuts corporation tax, which currently sits at 19%, in an attempt to make businesses more competitive and stimulate investment.

While it is true that too much tax can lower profitability and ultimately slow down private sector investment, this notion is not relevant to the UK’s current situation. Indeed, the UK government has no reserves and instead possesses a massive sovereign debt.

Cutting taxes will not stimulate the economy and will instead directly impact front line services

Furthermore, Brexit has greatly damaged private sector investment and the Covid-19 pandemic has had, and will continue to have, a critical and long-lasting impact on the economy.

Therefore, with the UK’s current economic situation looking rather grim, it is clear that cutting taxes will not stimulate the economy and will instead directly impact front line services.

Unified taxation powers

Corporation tax cuts can work, but only as part of a collection of flexible taxation powers and policies. For taxation policy to be successful it must involve a wide range of unified tax powers, otherwise the weight of taxation will be placed too heavily on one societal group. This issue has been recognised within the Social Justice and Fairness Commission’s report, highlighting that the burden of taxation must be shifted. The Joseph Rowntree Foundation has revealed that “the total cost of poverty to the UK economy is in the region of £78bn per year”.

A more balanced approach to taxation can be achieved in an independent Scotland. Indeed, with progressive policies such as those that Business for Scotland have advocated for years and that have now been proposed in the SNP’s report, Scotland can achieve a fairer tax system.

Changing behaviour

In 2019, we suggested to the Scottish government that rather than implementing ‘something for nothing’ tax cuts, taxation should be incentivised. For example, solutions such as benefit corporation tax credits could be introduced.

In the commission’s report, it is stated that taxation should be “used to influence actions or behaviours that generate good outcomes for society.”

This complements our campaigning and the ideas that we have proposed within many of our articles and reports. For example, in a previous article we offered a hypothetical scenario in which this concept was implemented:

Imagine if Scotland decided to avoid corporation tax cuts and instead raised taxation by 1%. While some may fear a decline in competitiveness, we suggest that this could be resolved through the numerous benefits of linking corporate taxation to the business pledge.

Under this system, businesses that are willing to make positive changes to company behaviour and support a more equal society will pay less in tax

This pledge asks businesses to behave in a way that benefits the company, wider society and the economy by changing corporate behaviours. However, because there is currently no profit to be gained from signing this pledge, it is easily ignored. Therefore, we advise that corporations should be able to earn back this loss and also gain further tax credits by signing this pledge and positively changing their behaviour. This may involve targeted investment and corporate behaviours that help create a better, fairer and more prosperous Scotland.

Positive changes rewarded

Under this system, businesses that are willing to make positive changes to company behaviour and support a more equal society will pay less in tax.

This system will fund itself with its benefit/cost approach. For example, corporates that invest in environmentally sustainable practices would pay less in taxation, but their contribution to society would help efforts to tackle the climate crisis and boost Scotland’s environmental and recycling sectors.

This concept of incentivising corporate taxpayers will also improve the growing issue of tax evasion and avoidance that exists across the UK. With the obvious benefits of this system, corporates are more likely to pay their taxes and ultimately this will increase Scotland’s taxation revenues by several billion every year.

Conclusions

Firstly, it is evident that the people of Scotland and the Scottish government desire change to the current UK taxation system and this emphasises the need for the powers to do so to be devolved to the Scottish Parliament. Secondly, we welcome the Scottish government’s proposed changes to create a fairer taxation system, particularly the concept of incentivising corporate tax.

For years, Business for Scotland has promoted the idea of benefit corporation tax credits, and we are pleased to see that the road map for an independent Scotland involves this progressive concept to encourage the development of a fairer and more prosperous country.

A think tank pushing for a campaign to 'revive faith' in Britain to undermine support for Scottish independence has supported the myth that Scotland benefits from 'redistributed' London taxes.

As you might be able to tell, the report by the Council on Geostrategy has a strange take on the tactics it believes are needed to win support from young Scots who increasingly support independence. Telling them that Scotland benefits from Londoners’ taxes is just one dubious strand of its arguments.

Every Westminster government in modern times has diverted billions of pounds of Scottish revenues to the UK

Both Believe in Scotland and Business for Scotland have shown that every Westminster government in modern times has diverted billions of pounds of Scottish revenues to the UK. Far from the UK subsidising Scotland, for years it has been the other way around.

The Council on Geostrategy report says many supporters of Scottish independence equate ‘Britain with empire and empire with evil’. The council would have a difficult time trying to refute that argument, given that both those facts are true.

The think tank’s report says that what it describes as ‘nationalist stereotypes about the British empire and the UK being worn out’ have to be dispelled to win over young Scots with a ‘morally attractive story about the UK’.

The report states: "In short, if the disintegration of the UK is to be prevented, faith in Britain needs to be revived.

"We need to remember what the UK is good for and that whereas German taxpayers are adamantly opposed to fiscal transfers to the Greeks, Londoners hardly bat an eyelid at the redistribution of 'their' taxes to Scotland."

And just to put icing on the cake the report goes on to suggest that independence negotiations "risk that resentment between the English and the Scots would rise to levels not seen since the 18th century".

The report goes on to suggest  ‘confounding’ the ‘nationalist stereotype of post-Brexit, Tory Britain as worn-out, xenophobic, and devoted to impoverishing the poor.' You might think it will be difficult to find the evidence to demolish that particular ‘stereotype’.

So who exactly are the Council on Geostrategy, the think tank behind this report? Its website describes it as ‘dedicated to making the United Kingdom, as well as other free and open nations, more united, stronger and greener ...'

It was launched in February this year by James Rogers and Viktorija Starych-Samuoliene. According to his LinkedIn account James Rogers was until 2017 director of the Global Britain Programme with the Henry Jackson Society, a neoconservative think tank.

You might remember that think tank as the publisher of a contested report last month on attempts by Iran to use disinformation to boost Scottish independence.

One of the authors of the report was described in a Daily Telegraph headline as 'the Oxford professor ostracised for defending the Empire’

The report gave no evidence of anything more than a handful of examples of Iran’s attempts. Nevertheless the Times newspaper gave the story front page treatment.

One of the authors of the new Council on Geostrategy report is Professor Nigel Biggar, regius professor of moral and pastoral theology at Christ Church, Oxford, described in a headline in the Daily Telegraph in February 2019 as ‘the Oxford professor ostracised for defending the Empire’.

The Telegraph story detailed the controversy sparked by an article published by Professor Biggar in 2017 asserting that the British Empire had not been all bad.

Independence opponents’ attempts to portray Scotland as too poor to stand on its own feet have been demolished by a new report showing the country bucked the UK downward trend and attracted more foreign direct investment last year.

The 2020 investments were made while renewed arguments in favour of independence were gaining increasing support.

An annual survey by professional services company EY reported 107 foreign direct investment (FDI) projects in Scotland in 2020, an increase of 6 per cent compared with the previous year. That success contrasts with declines in investment of 12 per cent for the UK as a whole and 13 per cent across Europe.

The countries that were the source of most investment into Scotland were the USA (39 projects), Ireland (10) and the Netherlands (8).

The survey ranked Edinburgh as the UK’s top city outside London for foreign direct investment

According to EY,  Scotland last year “bolstered its position as the UK’s most attractive FDI location outside London” .It accounted for 11 per cent of investment projects, up from 9 per cent in 2019

The survey ranked Edinburgh (pictured above) as the UK’s top city outside London for FDI, with 36 projects. Glasgow was fifth with 23 projects and Aberdeen seventh with 13.

The leading sectors for FDI in Scotland were digital technology with 19 projects, agri-food with 14 and business services with 11.

Scotland’s impressive performance came in the face of the global Covid 19 pandemic. It was recorded as opinion poll after opinion poll showed a majority of Scots supported a Yes vote in a second referendum, smashing the myth that independence would ‘frighten off’ investors.

Ally Scott, EY Scotland managing partner, said:  “Amid arguably the most challenging environment for FDI in living memory, it’s clear that Scotland has put in an impressive performance.'

Of course, Scotland’s economic performance is always used by opponents of independence as a reason why Scotland should remain within the UK. Economic success is used as an argument that remaining within the Union is essential to that success and economic problems are used as a reason why we can’t make it alone.

This survey, however, shows that there are specific reasons why Scotland is bucking the investment trends, none of them a result of remaining in the UK.

Scottish Enterprise has put the country’s appeal to global companies down to the quality of our workforce as well as a “competitive cost base, world-class universities and supportive business environment”. Linda Hanna, Scottish Executive interim chief executive, has praised the benefit of a 'team Scotland' approach across the public sector, business and universities.

London’s vote as most attractive region has almost halved since 2019, while Scotland’s has more than doubled

According to EY,  a survey of 570 international business “decision makers” found 15 per cent ranked Scotland as the most attractive part of the UK in which to establish operations — behind only London at 25 per cent, and up from the 7 per cent reported in 2019.

Ally Scott said: “Scotland has now narrowed the gap significantly with London. The scale of this two-year shift is illustrated by London’s vote as most attractive region almost halving since 2019, while Scotland’s has more than doubled.”

The Scottish government last winter unveiled an inward investment strategy that aims to attract 50 leading global companies to Scotland. The strategy prioritises nine “areas of opportunity” ranging from digital services to the exploitation of space. The plan as been described as a fundamental shift in approach to attracting investment from overseas and other parts of the UK.

It has a number of core Scottish government values at its heart which businesses will be expected to share. These include the fair treatment of employees and reduction of carbon emissions.

The Scottish government said the EY survey showed it had a “strong base from which to build” on FDI. “This supports the approach of the Scottish government’s inward investment plan to further internationalise the economy by focusing efforts on our existing global strengths,” it said.

The survey also showed that UK inward investment in manufacturing continued to decline compared with levels in EU member countries. The manufacturing drop has been attributed to Brexit, as Britain no longer has easy access to European markets.

Foreign direct investment is defined as  an investor establishing a substantial and lasting interest in an enterprise based in another country.

Since its inception in 2011, Business for Scotland (BfS) has called for a fairer, greener, more small business/entrepreneur focused approach to independence.  BfS have, therfore, championed the cause of wellbeing economics since before it was a widely used term. Believe in Scotland was always going to make the indyref2 case for independence based on Wellbeing economics, even if the Scottish Government didn’t, so we welcome the Scottish Government’s growing commitment to adopting that approach as evidenced in yesterday’s Social Justice and Fairness Commission Report. 

The next step is creating an economic vision for an independent Scotland that is practical, affordable and inspiring, which ensures the people of Scotland chose independence. To achieve this, Wellbeing has to become the lens through all socio-economic policy is viewed, Wellbeing isn’t just about society to think that is to miss one half of the only formula for success. 

Our poll carried out last month found that if the people of Scotland are offered independence alongside a wellbeing economics approach then 59% would vote Yes. That’s 8% more than the same poll (conducted on our behalf by Panelbase) found for the straight Yes/No question at 51% Yes. 

In a promising move Kate Forbes, Scotland’s Cabinet Security for Finance, has effectively been promoted, her department absorbing the responsibilities and junior ministers of Fiona Hyslop’s Economy brief. That’s notable because of the faith the FM is placing in Kate Forbes, but also because the more progressive thinker is now in charge of both finance and the economy. Also notable is that listed amongst Kate Forbes’ responsibilities, for the first time, is the phrase Wellbeing Economics. 

Where should Kate Forbes start?

Key questions are: What could we do differently? In what sort of country do we want to live? What could our economy and society look like if were to design it around the values, hopes and aspirations of Scots rather than the needs of the city of London? 

Answering these questions is the key to securing Scotland’s independence.

The global health crisis changed everything. People realise we cannot continue with the old, failed way of managing our economy. The Westminster system is creating huge inequalities, reducing social mobility, trapping families and pensioners in a cycle of poverty, keeping wages low while prices rise and negatively impacting climate change.

If we learned anything from the banking crisis, Brexit and Covid-19, it’s that our economic system and our way of organising society is unsustainable and needs to reset to add resilience and a sharp focus on the wellbeing of people, society, the economy and the environment. We must move away from a economy obsessed with the wealth of nations and focus on the wellbeing of nations. 

Scotianomics the research arm of Believe in Scotland/Business for Scotland is leading thinking on wellbeing economics and is developing a Manifesto for Wellbeing.

We looked at nations that were talking about pivoting to wellbeing: Norway, Finland, Sweden, Iceland, Denmark, New Zealand and even Scotland and even Wales. None had fully developed ideas, but all had suggestions from which to pick and choose. 

We created a wellbeing values framework, polled 1,000 voters living in Scotland and found there was majority support – mostly more than 75% – for each of the values/policy statement positions in our manifesto.

You might expect Labour, Green and SNP voters to agree with Wellbeing principles, they did and Lib Dem voters also agreed, albeit to a lesser degree. But would you be surprised that our poll found Conservative voters agreed with all the Wellbeing principles/policies we surveyed and even came out top on one of the key values? 

Have a read below and ask yourself: wouldn’t you like to live in a country with a social/economic/environmental policy framework based on this set of values? 

Wouldn’t you like to be able to vote to create such a nation?  The majority of Scots would.

Believe in Scotland’s Values framework for a Manifesto for Wellbeing

1. Quality of life, equality, fairness, happiness and health are all economic outcomes that should be given equal weight to economic growth
2. The focus of the economy should be to serve the needs of people and society more than the needs of big business and finance
3. To be able to live with dignity while experiencing wellbeing and security should be a basic human right, not something that comes only with wealth
4. You cannot have a thriving economy without a thriving society and you cannot have a thriving society without a thriving economy
5. Austerity has failed, it is slowing economic growth, harming people and society and making the country more susceptible to economic and health crises
6. Post coronavirus, our economic policies need re-engineered to generate higher levels of equality in health, wealth, wellbeing and access to opportunity
7. If we build society and our economy more successfully after coronavirus, we can create a new economic approach, allowing both our economy and our society to thrive and be more resilient in the face of crises
8. The nature of work is changing, we need to invest more heavily in innovation, encouraging better business practices and preparing for the future of work
9. Education is an investment in our children and young people, it should always be free and open to everyone
10. Small businesses are the backbone of our economy. Greater government investment in creativity and innovation is needed to help them grow and create better quality jobs
11. Government expenditure on welfare and health is higher due to inequalities in the current economic system and a wellbeing approach would reduce those costs
12. Economic success being more equally shared amongst society would result in better growth
13. Greater access to personal development opportunities for all will increase social mobility and benefit the economy in the long-term
14. Ending poverty, inequality and unfairness, while increasing minimum wage and job security will boost the economy
15. People need to feel more secure in their livelihoods. A universal basic income (UBI) for every adult citizen would provide that security and end both in-work and pensioner poverty
16. Decision making should be less centralised, to give people a greater democratic voice in local issues
17. We need to reduce our economy’s carbon outputs and waste, make transport more sustainable and make recycling and repairing far more prominent
18. Independence is a normal state of affairs for a country. With all the powers of a normal independent nation, we can create a more prosperous, fairer, greener, happier and healthier nation
19. Scotland is for the people of Scotland, but not just those born here or who currently live here - Scotland can be reborn in our newest Scots
20. Scotland’s civic nationalism is inclusive, internationally focused and welcoming. It rejects exceptionalism. We are not “better” than anyone else by virtue of being Scottish. We simply want the chance to use independence to create a nation that reflects our political, economic, environmental and social values and thus enhances our nation’s wellbeing in ways that cannot be achieved without nation status.

Our Manifesto for Wellbeing is a work in progress but it is obvious that Scotland and the rUK (Mainly England) are headed in different directions politically.  The UK will never adopt a wellbeing approach and the latest polls show Boris Johnson’s British nationalist Tory party with a 46% to 28% lead over Labour – regardless UK Labour offers nothing for Scotland anyway.  

The implementation of a wellbeing approach cannot happen unless Scotland becomes independent. We will push for the Manifesto for Wellbeing to form part of the case for independence put forward by the main independence supporting parties and we will offer Kate Forbes any sport we can to make that happen. Believe in Scotland will keep campaigning after independence to make sure all these values and ambitions are incorporated into the foundations of our new nation. 

It’s time to press reset – it’s time to believe in Scotland.

A sixty percentage Yes vote is achievable - with the right economic approach.

However, coronavirus changed everything; every rule of conservative economics has been shattered and the world is waking up to the need to truly build back better, to intertwine resilience, health, wellbeing and environmental sustainability into our socio-political approach.

The old mantras of the left and right only address half of the wellbeing equation each and as such, they are defunct, they represent the outdated political/tribal dividing lines of the last century.

Understanding that we can't consume our way back to recovery, that the world economy has collapsed twice in just over a decade and, with climate change the single largest threat to prosperity and wellbeing starting to have a greater impact by the day, we desperately need to rethink economics.

Fortunately that’s what the people of Scotland want. They don’t want to go back to pre-covid normal, because normal wasn't working. It was unjust, environmentally unsustainable, amplified inequality that impoverished communities and disadvantaged the small businesses that are the true backbone of our economy and the health crises has given people an opportunity to adjust their values.

Not only that, our poll - Panelbase for Believe in Scotland April 2021 - found that if you offer independence in parallel with a wellbeing approach to economics then 59% of the Scottish population would vote for Scottish independence. The same poll asked the standard Yes/No question without the wellbeing caveat and found 51% Yes 49% No, so it's plain to see that a wellbeing approach would, if properly communicated would add 8% to Yes but offers the opportunity grow independence support above 60%.

A poll by Progress Scotland in 2020 found that 75% of Scottish voters would consider voting for independence if it was offered in conjunction with the right economic approach - wellbeing economics is that approach.

A poll carried out by Panelbase for the think tank Scotianomics last year (full report here) found that supporters of every single political party in Scotland overwhelmingly supported a wellbeing approach to economics. Not only did it find SNP and Labour voters wholeheartedly supporting the key elements of a wellbeing approach (which might have been expected), Conservative voters came out top on some of the key wellbeing value measures.

Crucially it also explains why so many people would switch to independence; the popularity of a wellbeing economic approach is truly cross-party and also appeals most to older voters who are the most likely to vote against independence. It's not a tactical approach though, the reason it appeals to so many is that it is the right thing to do. We must cast off conservative (austerity) thinking and understand that left and right are outdated concepts, that society and the economy are two sides of the same coin - we cannot have a thriving society without a thriving economy and we cannot have a thriving economy without a thriving society. Traditional economic thinking sets left and right ideas, the two halves of the solution, against one another and that creates a boom and bust cycle for both society and the economy that we must break.

Want to know more about the Wellbeing approach?  Within days we will publish our outline Manifesto for Wellbeing and you can see it fort on our 22,000 strong Facebook Group.

Now here is the data bit!

Overall, there is a super majority level of acceptance of the need to move to a wellbeing approach. Lets look at one of the 17 value statements polled in October 2020 as an example:

Although it has wide ranging popularity across all age groups wellbeing economics appeals most to the older generations (often our most vulnerable) and those are the ones who need a safety net to allow them to vote with their hearts and switch to supporting Scottish independence.

There is significant majority support for a wellbeing approach across supporters of all parties and that includes Conservative voters, who are the least likely political demographic to support independence. 67% of Conservative voters agreeing with this key wellbeing statement (one of 17 wellbeing value statements in the survey) is a supermajority with 21% undecided and only 12% of Conservative voters disagreeing.

Conclusion 

The Scottish Government cannot enter into a new campaign without a new economic approach, one that is based both on the values of the nation and the post-covid economic reality.

Independence is within reach - we simply need to do the right thing by the people of Scotland and offer them a socioeconomic vision that they can be inspired by, one that will lead to greater prosperity, equality and environmental sustainability.

There’s no shortage of think tank reports emanating from south of the Border determined to portray the finances of an independent Scotland in as dismal a light as possible, all the better to convince us that a vote for independence would be economically disastrous.

The latest has just been published by the Institute of Government and, true to form, it has been seized on by union supporters as a harbinger of doom for independence. According to the leader of the Scottish conservatives Douglas Ross the report suggests that ‘plans for another referendum would smash Scotland’s fragile economic recovery into pieces’.

The Tory leader’s comments are another example of the habit he has established during the election campaign of talking complete nonsense. This report does no such thing. Here are five reasons why the IoG report cannot be interpreted as bad news for an independent Scotland.

1: It is based on Scotland’s fiscal position as a member of the UK. The current financial arrangement is determined by Westminster, the distribution of UK resources is decided by Westminster and control of the major economic policies which affect Scotland are the preserve of Westminster. These could and would change in an independent Scotland, as the report itself admits. It states: 'Over time, different policy choices made by an independent Scotland ...  could affect [its] economic growth and so change the fiscal pressures.'

The Scottish government must balance its budget each year. It is expressly forbidden from running a deficit

2: The portrayal of Scotland’s ‘deficit’ is false. The Scottish government must balance its budget each year. It is expressly forbidden from running a deficit. Indeed, as Believe in Scotland and Business for Scotland have consistently argued, Scotland has been subsidising the rest of the UK for decades.

It has been paying interest on UK debt which it is has not incurred and which has been apportioned by Westminster with no reference to where the money borrowed has actually been spent. How much- if any - of the UK’s debt which would be shouldered by an independent Scotland – has still to be agreed.

3: The portrayal of Scotland as a country spending more than it contributes to the UK is false. The report itself says that in 2008/09, the UK government received £10.6bn (in cash terms) in revenues from the North Sea. The vast majority of this (£8.9bn) was estimated to have been generated by oilfields that were apportioned to Scotland by the Scottish Adjacent Waters Boundaries Order 1999. As a result, revenues per person in Scotland exceeded those of any of the other UK nations.

As an independent nation, a Scottish government could also have chosen to smooth out the revenue fluctuations by saving revenues in good years

That has consistently been the case until oil revenues fell more recently, although they have since recovered to generate £1.2bn for the UK government.

The report also admits: ‘As an independent nation, a Scottish government could also have chosen to smooth out the revenue fluctuations by saving revenues in good years and borrowing more in lean years.’

4: The focus on the so-called deficit is in any case misleading. The report states: ’It is not essential for countries to run surpluses every year – or, indeed, at all. The UK government has run a surplus in only 12 of the years since the end of the Second World War. Countries typically grow from year to year and so can afford to borrow some money now since the burden of repaying that debt will be lighter in future when the economy is larger.’

The report also suggests there is a case for the rest of the UK to make payments to an independent Scotland to meet costs which would be classed as above being of benefit to Scotland itself.

And, of course. there is the huge potential for Scotland as a key provider of renewable energy.

5: The calculations on the fiscal position of an independent Scotland takes no account of the effects of the economic policy of a future Scottish government on economic growth. It’s a fairly sure bet that such a government would avoid such catastrophes as Brexit and would agree alternative routes to Covid recovery other than the austerity threatened by the Tory government at Westminster.

Again, the report states: ‘The fiscal arithmetic becomes easier if the economy grows faster – taxes generate more revenue and spending can be squeezed relative to the size of the economy without requiring cash or real terms cuts to spending levels.’

A new report by the Scottish Trades Union Congress lays out how Scotland’s transition to a low-carbon economy could create up to 367,000 green jobs … but only if the right policies are adopted.

The report presents a new vision of Scotland's potential, calls for a ‘fundamentally different approach’, examines how decarbonisation could transform different sectors of the economy and suggests ways to maximise job creation.

It says the right policies would create the highest number and best quality jobs, highlighting ‘the positive potential, depending on investment levels and time periods for delivery’.

However it warns that if the wrong policies are adopted it would be possible for Scotland to decarbonise without significant domestic job creation - and that any jobs which were created could be ‘primarily precarious and under-paid’.

The report may not put forward a specific argument for independence but there’s no doubt that independence would be essential to help Scotland fulfil the potential it describes

It suggests, for example, that ‘very ambitious’ roll-out of renewable energy could create up to 70,000 Scottish jobs - or less than 9,000. The difference depends on the policies put in place by governments.

The report may not put forward a specific argument for independence but there’s no doubt that independence would be essential to help Scotland fulfil the potential it describes.

The STUC today supported a motion that the Scottish parliament should have the power to hold a referendum on Scotland's future with or without Westminster consent. It also restated its view that Westminster should not attempt to block indyref2 if a majority of pro-independence MSPs are elected next month.

The overarching recommendations in the STUC's report on green jobs clearly state that ‘the scale of public investment recommended exceeds what the Scottish government alone would be able to access under current rules’.

And the commitment to public sector investment needed to reach the highest job targets is certainly beyond the level the current Westminster government would be likely to enact.

The report suggests a range of potential new jobs sector by sector. It includes:

Energy: 30,000 - 95,000 new jobs over more than 15 years in zero carbon energy (including renewables, hydrogen and storage) - but that would be reduced to 16,000 without the right policies.

Buildings: 61,000 - 136,000 jobs over more than 10 years in decarbonising buildings and broadband, plus a further 22,000 - 37,000 jobs over 3 years in building new social housing.

Transport: 26,000 - 60,000 jobs over more than 10 years in upgrading and expanding transport (railways, metros, EV charging and batteries, cycle and walking infrastructure, and zero-emissions freight & shipping), with a further 11,000 - 13,000 ongoing jobs in operations.

Manufacturing & Industry: 5,000 - 9,000 jobs new and ongoing jobs in manufacturing (including steel, CCS and re-manufacturing), alongside protecting existing employment numbers in chemicals and refining.

Waste: 17,000 - 23,500 jobs new and ongoing jobs in circular economies and waste management.

Land-Use: 17,000 - 43,000 jobs over 12+ years in nature restoration, reforestation and sustainable farming.

The report notes that countries that implement ‘more deliberate industrial strategies for decarbonisation, including public investment and/or local content rules - for example Denmark, France, Turkey, and Taiwan in relation to renewable energy - appear to be more successful at ensuring local job creation’.

Scotland is rich in natural resources, which gives it enormous potential in renewable energy, but being part of the UK holds it back from reaching that potential

And it says many examples of those industrial strategies it cites come from countries bound by EU state aid rules (including France, Spain, and Denmark). The EU state aid regime was removed from the UK by Brexit from 1 January, 2021.

Scotland is rich in natural resources, which gives it enormous potential in renewable energy, but being part of the UK holds it back from reaching that potential.

There was a 57% fall in investment in UK renewable energy in 2017 because the Westminster government banned renewable subsidies for onshore wind and cut subsidies on solar power. The number of people working in solar power in Scotland fell by 50% between 2016 and 2017, when the cuts were imposed.

Scotland generated the equivalent of 97.4% of its electricity consumption from renewable sources in 2020. Onshore wind delivers about 70% of capacity, followed by hydro and offshore wind as Scotland's main sources of renewable power.

Scotland has 25% of Europe’s entire offshore wind power resources, 25% of Europe’s tidal energy resources, and 10% of its wave energy potential. In 2018, Scotland accounted for 24% of the UK’s renewable energy generation.

Yet the STUC  report highlights that employment in Scotland’s low-carbon economy has fallen in the last five years.

STUC general secretary, Rozanne Foyer, said: “This research highlights that it is not too late for Scotland to create significant numbers of green jobs, but only if we take a fundamentally different approach.’

The Scottish government committed last September to a ‘national mission to help create new jobs, good jobs and green jobs’. It says that it will over the next five years create a £100million Green Jobs Fund.

While the Scottish government should use the powers it has to move STUC report closer to becoming a reality, the ’fundamentally different approach’ the report calls for cries out for the powers that will only come to Scotland through independence.

An independent Scottish government could implement the public investment required, it could introduce public ownership to ensure the transition to a carbon zero economy benefits the people of Scotland, it could allow us to foster a stronger, beneficial relationship with the EU and it could free Scotland from policies imposed by Westminster which hold us back from reaching our full potential to create green jobs.

Believe in Scotland founder Gordon McIntyre-Kemp said: 'The transition from oil and gas to renewables offers Scotland a huge opportunity and the STUC report is right to highlight the potential for new, green jobs if we harness the amazing natural resources we have. We should be world leaders in this field.

But Scotland needs the ability to take control of those resources and of the economic levers we need to maximise their benefits for the whole country. We can't trust Westminster to take the action and implement the policies needed. Only independence can give Scotland the powers needed to create the number of jobs this report shows is possible.

Many people have asked us what impact independence is likely to have on their existing pension schemes and investments.  In another post which you can read here, we have covered the state pension situation after independence. In that post, we have pointed out that:

• The UK has the worst state pension in the developed world. In 2016 it was only worth 29% of average income.
• The EU average is 70.5% meaning that UK pensions receive more than two times less than comparable countries.
• The 2019 SNP Conference voted that in an independent Scotland the Scottish Government should create plan to increase the Scottish state pension to the EU average, effectively doubling it.  The plan has not been published yet.

With regard to private pensions, we researched the facts and we found the following: 

The truth

Occupational pensions will not be affected by independence. Private pension assets will be protected by existing legislation after independence. These include personal pensions, cash ISAs, lifetime ISAs and private investments without a fund to administer them. You will still be able to purchase bonds and tax-free savings but the Scottish Government, and not the Westminster, will be responsible for those bonds and making contributions. 

The facts

Occupational Pensions

• Each occupational pensions scheme establishes the conditions that govern the operation and that the company has to fulfil regardless of political circumstances, in advance. If you are due an occupational pension you will get your full pension entitlement in an independent Scotland as your contract with the pension supplier will still stand.  
• In the case of final salary pensions, also known as defined benefit schemes, a fund is obliged to pay you the amount that was agreed in advance. The only occasions in which this has not happened has been when the firm has gone into liquidation, in which case there are adequate industry protections to guarantee your investment.
• The ultimate backstop is the Pension Protection Fund (PPF), which protects the entire pension of those who have already retired and 90% of those who are still working. This is subject to an annual cap of £38,505.61. 
• All protections that exist as part of the UK will also be in place in an independent Scotland.

Private Pension Assets

• Currently, private pension assets are mainly held in banks and other institutions which operate cross-nationally. For instance, the largest banks in Scotland are; Royal Bank of Scotland (owned by the UK Government), the Bank of Scotland (owned by Lloyds group) and Clydesdale (owned by an Australian banking group). These, and other banks, are all covered under UK regulatory frameworks because they are either headquartered in the UK or have subsidiaries there. Following independence, those companies will simply designate their offices in Scotland and England as their registered office for that nation and work under the pension laws of that nation. Your pension will be registered with the bank/pension provider in the nation in which you live. 
• The position expressed by the Scottish Government is that tax-free savings products, such as private pension savings, will be supported and honoured in full after independence. These savings products will also be protected by compensation schemes, providing protection in line with European harmonised rules of consumer protection.
• Scottish based savers will be Scottish residents and therefore no longer UK residents when it comes to tax-free savings and so will have access to tax-free savings schemes operated by the Scottish Government. Savers will be able to keep existing UK savings without paying tax on them but will not be able to contribute additionally to those specific UK funds. This is because the UK government pays towards these schemes and new schemes towards which the Scottish Government will contribute will be put in place.
• National Savings and Investment bonds will also be treated the same way. Scottish based investors will not be able to invest additional money in UK bonds but will be guaranteed their returns on existing investments and allowed to keep their NSI open. These private investments will continue to enjoy 100% security. At a government level, such financial assets will be divided between the two nations upon independence. The Scottish Government will have its own bonds and savings products that people will be able to invest in.
• In the event of an independent Scotland launching its own currency, your private pension will be paid in the Scottish currency, it is likely that the Scottish currency will be pegged to the pound sterling.  However, in the case of currency fluctuations, the policy under development from the Scottish Government is that the value of your currency will be protected and that there will be no detriment due to currency fluctuations. The full economic prospectus for independence will be produced prior to a new referendum campaign and we will link the relevant commitment to this page to confirm that arrangement.

Verdict

The question is not so much whether occupational pensions and private pension assets are protected as it would be fair to say that this is a certainty. The question, thus, is: how are they going to be protected? What would be the arrangement or policies put in place by the Scottish Government that would ensure this protection?

It is likely that a deal would be reached in which the Scottish Government would accept the full liability for pensions, in order to guarantee their value and for continuity. That is in Westminster's interests as well, as they would be required to honour these commitments anyway. It would also provide a guarantee for people from the rest of the UK that are living and saving in Scotland.

The Institute of Faculty and Actuaries has proposed a number of regulatory options for Scotland after independence, each with different trade-offs and benefits. An agreement with existing UK bodies could be reached, with the benefit of continuity, coverage and cost-effectiveness. However, this would limit the Scottish Government’s ability to tailor the insurance market and would require negotiations.

A likelier solution would be to create new equivalent Scottish regulatory bodies, which would likely be funded by a proportionate industry levy (as is currently the case for the UK bodies). This would offer flexibility and the capability of changing regulation.

The Scottish Government’s stated policy is to give priority to reaching a single agreement for the joint regulation of occupational pensions, which would minimise disruption, yet offer little flexibility. The rules and practices of the UK Pension Regulator will also be adopted. The government would also establish a Scottish equivalent to NEST, providing both continuity for those already investing and giving the Scottish Government greater control over future contribution rates.

The second-choice option is to establish a Scottish pension regulatory and pension protection scheme to achieve regulatory alignment for occupational pensions, as well as private pension assets.