This is a reprint from the Spectator this week…
Scotland’s deficit is higher than the UK average — an estimated 7 per cent of GDP, as opposed to the UK’s 2 per cent. It’s not hard to work out why. In 2018-19, Scottish public spending was 13.6 per cent higher per head than the UK average and revenue collected was 2.6 per cent lower. Scotland accounts for about a tenth of the UK’s population and a tenth of its economic output — but more than half of the increase in total annual government borrowing in cash terms.
How could the Scottish government possibly sustain that level of expenditure in the absence of the UK subsidy (about £10 billion a year)? It would have to go, tam o’ shanter in hand, to the bond market, but with the size of Scotland’s deficit, as well as the share of the UK’s debt it would inherit, the interest rates would be far more onerous than those currently available to the UK.
Bankruptcy would soon follow.
Would the IMF come to Scotland’s rescue, as it came to the UK’s in 1976? Maybe, but only at the cost of a huge reduction in spending on public services such as education, already a complete basket case under the SNP’s stewardship.
But let’s suppose the Spanish government waives its objection to Scotland joining. That wouldn’t exactly save the day. For starters, there would be the small matter of the hard border with the rest of the UK, not something conducive to trade with Scotland’s largest export market.
Then there’s the fact that Scotland would have to adopt the euro and become part of Schengen, both of which are non-negotiables for any new member states. But crucially, Scotland’s annual deficit of 7 per cent of GDP puts it over the 3 per cent threshold that automatically triggers the EU’s ‘excessive deficit procedure’, i.e. the
EU would insist on an eye-watering austerity programme as a condition of joining.
And if the people of Scotland want to know what that would involve, I’m sure plenty of Greeks would be happy to tell them. (Youth unemployment of 40 per cent? Not sure that will go down well in Glasgow.) It would make the levels of austerity imposed by George Osborne and Philip Hammond — which the SNP ceaselessly complained about — look like a mosquito bite compared to full-blown malaria.