Scotland Is Now says Europe is 'always welcome' in January
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Bob Lyddon was speaking exactly a week before next week’s Holyrood elections, in which Ms Sturgeon is targeting an overall SNP majority she believes would strengthen her case for a second independence referendum. However, Mr Lyddon, the founder of Lyddon Consulting Services Ltd, said her case rests on a series of fundamental misunderstandings about Scotland’s finances.
Mr Lyddon cited recent reports published by the Institute for Fiscal Studies and the Institute for Government suggesting an independent Scotland would be saddled with a budget deficit of between seven and eight percent of its GDP.
He explained: “In fact, the fabled oil and gas wealth delivers only £700 million or 10.6 percent of Scotland’s £66bn of tax revenues.
“Public expenditure is £81bn, leaving a shortfall between of £15bn or 8.8 percent of GDP.
Put simply, Nicola Sturgeon’s sums don’t add up
“Put simply, Nicola Sturgeon’s sums don’t add up.”
However, neither report told the full story, Mr Lyddon stressed, with Scotland certain to lose jobs if it broke away from the UK.
He explained: “Two major sources of employment and taxes are public sector work and pensions management.
“Scotland carries out a disproportionate share of these activities, although Wales and Northern Ireland have significant public sector work.
“After independence there would need to be an exchange of this work: Scottish public sector work conducted now in England, Wales and Northern Ireland would be repatriated, but the larger amount of English, Welsh and Northern Irish carried out in Scotland would move in the other direction, with Wales and Northern Ireland likely to be the major winners.”
When it came to pensions management, Mr Lyddon said monies would be moved “beyond the SNP’s grasp”, arguing: “No English, Welsh or Northern Irish saver would want to risk a cash-poor SNP finding a way to put its shovel into their pension pot.
Additionally, there was the question of what currency an independent Scotland would use, Mr Lyddon pointed out.
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He added: “The SNP and Alba have substantially diverged in their claims about continuing to use the pound.
“They thereby muddy the waters around the fact that EU membership would necessitate Scotland establishing its own currency, a currency which would become hard thanks to its joining the Danish Krone (DKK) within the Exchange Rate Mechanism (ERM) as a precursor to its redenominating into the EUR.”
Such a move could be “disastrous” for Scotland’s export revenues, which equate to 50 percent of its GDP, Mr Lyddon argued.
Moreover, there was a general acceptance by the SNP that an independent Scotland would take over a share of the UK’s national debt in line with its share of the overall population.
Thus, given Scotland’s population of 5.5 million out of the UK’s 67 million, it would take over £154bn – or 88 percent of its GDP.
He warned: “With a GDP of £169bn, a GDP per head of £30,727, an annual budget deficit of between eight and nine percent of GDP, and a national debt of 88 percent of GDP, Scotland might not even secure an Investment Grade credit rating of BBB.
“That is Italy’s rating and its budget deficit was in the region of 2.5 percent pre-pandemic, not 9 percent.
“The only plausible lender is the rest of the UK, and in either the pound or one of these hard currencies, but not a new currency of Scotland, unless that was already on course to join the ERM.”
Mr Lyddon said: “Why should the rest of the UK be left holding any portion of the debt taken on to bail out Scotland’s banks in the Global Financial Crisis?
“The rises and falls of Royal Bank of Scotland and Bank of Scotland and their rescues were presided over by Gordon Brown (Scottish) and Alasdair Darling (Scottish), and the benefits of the expansion and the rescue accrued primarily to Scotland.
“Scotland, if it wishes to become independent, should take the residue of this mess with it, and be grateful that the bill was shared with the rest of the UK for an interim period.”
In all likelihood, national debt on day one of independence would be £184bn, or 109 percent of 2019 GDP – assuming GDP would be sustained, which Mr Lyddon argued it would not be.
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