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Tuesday, 10 January 2012

On Scottish independence

So the Scots want independence and they think that they can just vote on the matter and walk away from the United Kingdom.  Well, if that's what they want to do, then I am not going to try to stop them and I will be quite happy to see the back of the Barnett formula.

I am not particularly fussed about losing any oil revenue because total offshore oil and gas receipts to the Treasury since North Sea oil started flowing amount to £163 billion or just under £4 billion a year.  But bear in mind that a lot of that comes from the English side, particularly the gas which is much more profitable than oil.  The field that pays the most PRT is the Centrica owned Morecambe Bay field which operates 6 platforms often manned by 2 people (for all 6). Compare that with the cohorts who operate the deep water oil platforms and the cost differential is obvious.

Add to that the fact that North Sea Oil has to compete with Middle East oil that costs a quarter of the price to get out of the ground while until recently the only serious competition for UK gas has been Siberian gas pumped halfway round the world, and it becomes obvious that while oil offshore from Scotland may have supported the eastern half of the Scottish economy for many years it hasn't been a cash cow to the Treasury on the scale that most Scots believe, and has a much smaller impact than the City or the UK pharmaceutical industry.

Net income to the Treasury from Scottish oil receipts probably do not cover the transfers in the other direction, and that disregards the fact that the oil industry is simply doing what the rest of the UK commercial economy does - paying its way by paying taxes on its profits.

But before the Scots think they can just walk away, here are some points the rest of the UK might want to consider.

Economy

It would be unacceptable to think that an independent Scotland could free itself from its share of the National Debt.  Any independence settlement would have to include an obligation on the Scottish government to raise sufficient funds to pay an amount equal to 10% of the National Debt to HM Treasury.  This might not be possible immediately on independence, so the UK Government should charge interest on the unpaid balance and take suitable security, such as an assignment of revenues from North Sea oil fields until the amount has been paid in full..

Similarly, it would be unacceptable for the residual UK Treasury to continue to fund either State pensions or the pensions of public sector workers resident in Scotland, and an agreement acceptable to the rest of the United Kingdom would be needed.


Banking

The UK government (or tax payer) has incurred considerable expenditure (£75 billion or thereabouts at the last count) on the purchase of shares in HBOS/Lloyds and RBS.  There is no particular reason to consider that the ownership of those shares should vest in an independent Scottish government rather than HM Treasury which actually bought the shares. It would be appropriate for the majority owner to transfer the headquarters of those companies south of the border. 

Some changes of name might be appropriate, perhaps to Lloyds Halifax and the Royal Bank of the United Kingdom?

Tax

It would of course be quite unacceptable for any nominal Scots resident in the residual United Kingdom to  bung their savings offshore and claim non-domicile status so that any offshore income falls outside the scope of UK taxation.

Similarly, any acceptable settlement would require provisions in the UK tax code to prevent predatory activities against the UK corporate tax base, including the non-deductibility of management expenses and similar payments made to Scottish resident companies by their UK subsidiaries.

Defence

We wouldn't like our new neighbours to be able to offer third countries a forward base from which to launch attacks against the rest of the island, a problem resolved 400 years ago by the Act of Union.  In addition to the UK equivalent of the Munro Doctrine, the only acceptable short term solution would be the retention by the United Kingdom of so many military bases and assets in Scotland as the United Kingdom saw fit, until such time as the United Kingdom chooses to relinquish them.  The Scots may not like it but when you live next door to a nuclear power 10 times your size you can't have it all your own way.

Environment

Because the SNP sees itself likely to expand its links with the rest of the Celtic fringe and Scandinavia, there is a reduced need for transport links between our countries, which are costly to maintain.


I suggest that this means that the northbound carriageway of the downgraded C74 could be reduced to a single track with passing places while the southbound carriageway would be reopened as a combination of cycle route and natural corridor along which wide-ranging animals can travel, plants can propagate, genetic interchange can occur, populations can move in response to environmental changes and natural disasters, and threatened species can be replenished from other areas.

Transport

While the foregoing environmental measure might be detrimental to certain areas in the North of England, the economic impact could be mitigated or reversed by the construction of a further high speed rail link (HS3) to Carlisle and Berwick-upon-Tweed.  HS3 would be relatively expensive, but the cost could be met entirely from the annual savings in transfers from London to Edinburgh.

2 comments:

Jive Lad said...

Good analysis.

I think it is a 'win-win'.

Bring it on, and whilst we're at it, let's rebuild Hadrian's Wall :-)

albertmbankment said...

Perhaps we could repatriate all the troublesome Jocks who dominate our unions. And what, I wonder, would be the policy with regard to the carpetbaggiing Jock MPs and councillors who represent English constituencies? I think they should be sent back home.

Could we, just as a thought, require them all to wear tastefully discreet fabric badges on their clothing; a yellow star or a pink triangle, perhaps. To save time and trouble before the actual repatriation were to take place, we might 'concentrate' them into special camps, purely for their own protection, of course.