It is economics, not culture, that will determine the future – and that looks less good for Mr Salmond’s independence case. Scotland could certainly survive. It would be wealthier in terms of gross domestic product per head than Italy, New Zealand or Spain and close to the UK average. But even if it received most of the revenue flowing from North Sea oil, a diminishing resource that lies in its waters, it would be likely to face austerity. As a newly independent small country with large fiscal deficits and high public debt, it would not command a triple A credit rating and would thus face higher borrowing costs than the UK. To reduce this, it is likely to have to cut public spending.
Mr Salmond wants Scotland to keep sterling until it decides to join the euro. But it would have to do this either without agreement, meaning it would have no central bank as lender of last resort, or by an accord under which the residual UK would insist on strict fiscal rules, meaning Scotland would enjoy independence in neither monetary nor taxation terms. The regulation of financial services would also be an issue. Scotland is home to several large institutions, including Royal Bank of Scotland and assurers such as Standard Life. An independent Scotland would have a limited ability to stand behind deposits.
And what of devo max? That is the vaguest option. A Scotland bill currently going through Westminster will give Scotland’s parliament at Holyrood in Edinburgh the power to raise about 35 per cent of tax in Scotland. Devo max would probably increase that to at least 60 per cent.
Under one variant proposed by Reform Scotland, a think-tank, Holyrood would control most taxes, including income tax and corporation tax, leaving Westminster with value added tax and national insurance. But to avoid deep public spending cuts, Scotland would need its “geographical share” of oil revenues. Professor Arthur Midwinter, a former adviser to Holyrood’s finance committee, says devo max would be a “recipe for political conflict with the UK”.
Some food for thought from today’s FT.