The UK needs Scotland - but Scotland doesn't need the UK

As the debate about independence for Scotland heats up a bit, I am amazed at just how insistent our London based leaders are in keeping Scotland in the Union.  Such unanimity is very rare in politics.  Just think of the EU and the range of views among our political, business and media elites over what relationship the UK should have with the EU.  But when it come to Scotland, everyone in positions of power in London all share exactly the same view - Scotland must remain within the UK.

One reason given for this is that without the largesse that comes from London , we Scots would be quickly reduced to penury.  This view, while quite pervasive is of course nonsense.  I am not even sure that its proponents believe it.  But they have to say something and beyond vague generalities about being stronger together and sharing the same values and other platitudes, they fail to make any positive case for the Union.  This I think is both deliberate and revealing.  For it is my firm conviction that the UK in its current form, needs Scotland far more than Scotland needs the UK.  In particular the position and world view of our London based elites would change dramatically and for the worse (from their point of view) if the UK were to be reduced to England, Wales and Northern Ireland.  I can think of at least five reasons which explain why our elites badly need Scotland to stay in the Union.

Economic - This may come as a bit of a surprise, but despite the Unionist claims to the contrary, Scotland is a net contributor to the UK economy in more years than not.  Scotland has many successful industries, for example tourism and agricultural products.  One of which, whisky is an iconic brand throughout the world.  And of course there is North Sea Oil.  While it may have passed its peak in terms of production, there is still barrels of oil out there to be recovered and discovered.  The UK continues to depend on the taxes from North Sea oil and gas to balance its books.  Without these revenues the UK government would be in an even bigger mess than it currently is.  The revenues from Scotland’s share of these reserves are just too important for our London based elite to give up without a struggle.

Military - This was the reason the UK came into being in the first place.  England needed to secure its northern border.  While this is no longer a factor - no-one really thinks that Russia or another continental power is going to try and invade the UK.  However Scotland is still vital for the UK and its military ambitions.  It is a useful place for airbases, but most of all, it is the home for the UK’s nuclear submarines.  Where else in England , Wales or Northern Ireland could they be based?  Not a choice the military brass and politicians would want to make.

Size - Despite what many people say, size does matter.  Especially for countries that want to be seen as great powers.  Now the current UK is not that large a landmass as major countries go.  The UK is slightly larger than Romania and a bit smaller than Italy.  But without Scotland it becomes much smaller.  A UK of England, Wales and Northern Ireland would be smaller than Uruguay and just slightly larger than Tunisia.  If it was just England on its own, well it would be very slightly smaller than Greece and very slightly larger than Nicaragua.  Quite a downgrade in size for a great power.  (Not to be contemplated.)

Self-Image - This is clearly related to the above in that for most of our elite and for many English people in general, Great Britain and England are pretty much the same thing.  I image that most English people would find it incredibly difficult to draw a map of the UK without Scotland.  Probably even more difficult for them to draw a map of England alone.  It is, I suspect, way beyond their ken to conceive of the UK without Scotland’s land mass to the north.   It is even worse for our London based elite, whose image of themselves is very much related to the notion of Great Britain and all that goes or rather, went with that name.  The largest Empire in the world, once upon a time.  Yet without Scotland there is no Great Britain, or rather, it reverts to a mere geographical term, without any political substance.  There would also be the loss of the Union flag.  Union Jack no more.  Whatever remains of the UK would need to devise a new flag.  And what would this new country be called?  To be Prime Minister of the UK of England, Wales and Northern Ireland does not have anything like the same ring to it as Prime Minister of the UK of Great Britain and Northern Ireland.  (We do not like this at all.)

Status and Standing in the World - Here we come to the crux of the matter.  While the economic and military aspects of Scottish independence can be negotiated and dealt with, however reluctantly, the other consequences for the rest of the UK are enormous.  Or at least for their London based elites.  Just what standing in the wider world would or could this truncated UK command.  For how much longer could this truncated and much diminished UK retain its permanent seat in the Security Council of the UN?  Many in the UK are proud to talk of the UK “punching above its weight” in international affairs.  But much of this is a residual of our Imperial past, when GB did rule the waves.  I suspect that the loss of Scotland would be seen by our London based elites and by the rest of the world as a massive blow to their power and influence.

So the next time some Unionist politician or cheerleader waxes lyrical about the UK and how much Scotland would lose from leaving, just ask yourself - how much more would the UK lose from an independent Scotland?

It’s Osborne’s Recession

Recently we have had a seemingly never ending succession of bad news about the UK economy.  All the indicators and forecasts suggest that we are in for a very bumpy ride ahead.  If we are not in recession we are pretty close to it.  It also seems that our national debt is getting bigger not smaller.  Now all this is bad news for our nasty Coalition and the Chancellor in particular.  So he and his chums in the media have taken to blaming the crisis in the Eurozone for our troubles.  If only these fickle foreigners would get their act together then everything would be fine and dandy over here.

No matter how loudly and how often this line is repeated it remains untrue, and as near a lie as one can get.  Even the IMF, that bastion of fiscal austerity has challenged the government’s li(n)e.  According to their latest report on Europe, the reason the UK has experienced a large build up in public debt is because of the costs of the large loss of output following the crisis.  And of course this large loss of output is directly down to decisions taken by one George Osborne.  Raising VAT, freezing public sector wages, reducing welfare payments and engineering a large rise in unemployment through cuts in the public services can only have one outcome - a severe reduction in demand leading to a large loss of output.  Not quite the story of public sector profligacy the government is usually so keen to tell.

The recent forecasts for the economy are also very revealing about the true source of our economic woes.  Not only do they agree that there is likely to be substantially less growth in the economy overall - down from 2% to 1%, but the source of this anemic growth has changed.  More details here.  Forecasters now expect domestic demand to subtract 0.4% from the economy as consumers, business and government all cut back whilst they expect net trade to add 1.3%, much more than previously.  So despite the Eurozone crisis our exports are likely to hold up.  What this means of course is that our continued economic woes are all down to Osborne himself and his misguided policies.  Time to stop trying to blame someone else.

Osborne's answer to government debt - more household debt

The economic prospects for the UK and most of the EU do not look good.  There have been little, if any, signs of growth in the economy.  At this stage in the life of the government it would be reassuring to know that our triumvirate of Cameron, Osborne and Clegg had some alternative ideas of how to get us out of this mess.  However there is little evidence of this either.  Everything is focussed on reducing the government’s deficit.  All our woes are down to the last Labour government’s mismanagement by allowing all this government debt to rise and rise.  This of course is nonsense.  Without the rise in government borrowing the major banks would have collapsed bringing down the whole economy with them.  So most of the borrowing was necessary.  At some stage it should and will come down.   But in four or five years?

Such a massive contraction can only come about by reducing government spending in an abrupt and drastic way.  And such a contraction will inevitably have a knock-on effect on the growth prospects for the economy as a whole.  There are really only two ways in which the economy can grow in these circumstances.  The first is through a massive revival of exports.  The large effective devaluation of the pound relative to other countries is supposed to help this process.  However it also crucially depends on the rest of the world wanting to buy our goods and services.  While some other countries are doing quite well and there has been a slight growth in exports, there has been nothing like enough to compensate for the reductions in government spending.  Add to this the fact that key export markets such as the EU are also in the doldrums, suffering the same austerity measures as us in the UK.  The woes of the Eurozone economies are beginning to make the pound less competitive viz a viz the Euro.  So far, and we are now three years into a large devaluation of the pound there is nothing to support the view that export growth will alone revive our ailing economy.

The other way to compensate for reduced government debt is to increase personal and household debt.  And believe it or not this seems to be the Coaltion’s latest great white hope.  This is Alice in Wonderland economics.  Though that may be a tad unfair to Alice.  To get us out of the current mess, created in the main by our nasty Coalition, we all have to start spending more and more.  And this has to happen in a situation in which wages for those still in work are being frozen, benefits are being cut, while unemployment is forecast to rise.  In these circumstances the only way that private spending can rise is through individuals and households taking on more debt.  As Paul Krugman puts it - “So we have the spectacle of a government that inveighs against the evils of debt pinning all its hopes on an assumption that over-indebted households will dig their hole even deeper.”  Not an attractive proposition.  And one that is most unlikely to happen.  All the recent indicators show that household spending is not rising.  

All of which makes the prospect of a double dip recession that bit more likely.  Do our three wise men at the helm have any other ideas?  Where is Alice when you need her?

The Economy - It can only get worse

It looks like the economic policy of our nasty Coalition - cuts, cuts and more cuts - is finally coming up against reality.  A clutch of organizations, including the Bank of England, the Office for Budget Responsibility, the OECD and the CBI, have all revised downward their forecasts for growth in the UK economy.

It’s not hard to see why growth is going to be very hard to achieve.  For example the IMF in its October edition of World Economic Outlook, offers a fascinating insight into how spending cuts impact on the economy.   According to the IMF spending cuts of 1% of GDP can subtract as much as 2% from growth.  Now this is likely to be the case for us in the UK because the usual factors which historically have mitigated the effects of spending cuts are absent here.

Firstly in previous cases countries have aggressively cut interest rates and devalued the currency.  However that has already happened here.  With interest rates at 0.5% there is no scope for them to fall further.  Rather, all the indications are that they will rise sometime this year.  The UK has also benefitted from a approximate 20% devaluation in the exchange rate of the pound.  Further depreciation is unlike to occur in the near future, if at all.

Secondly, in all previous cases where spending cuts have been associated with economic growth this has come from a switch to exports.  However there is little likelihood of growth in external demand for UK goods and services in the near future.  Europe is, like the UK, in the middle of a period of austerity, Japan is still in the doldrums and the USA is about to start its own austerity programme in 2012.  That leaves China, India and the developing world.  Alas for us, all of the rest of the world will also be competing for what little export growth there is.  For more information about the IMF paper, please visit Duncan’s Economic Blog.

Bear in mind that our nasty Coalition is proposing spending cuts of some 6% over the next four years.  So unless something miraculous happens pretty soon we are in for a lengthy period of bad times.  Remember also that these spending cuts are only now beginning to happen.  The country as a whole has still to feel the full effects of the rise in unemployment, the wage freezes and the resultant loss of spending power for most people and families.

At this point is also worth remembering that all this talk of spending cuts and reduced economic growth means a real loss of services and lowering of living standards for most people in the country.  For all their talk of efficiency savings and protecting front line services, cuts of the order planned by the Coalition can only lead to reductions in services or the actual loss of some services.  Over the summer and autumn we will be begin to see exactly what and where these cuts will be.

It is also worth remembering that all this talk about how “We are all in this together” is just that - all talk.  Further evidence of just how nasty the Coalition is.  I still await with interest to find out just what Messrs Cameron, Osborne, Clegg et al, are going to have to give up, as a direct result of the spending cuts.  Not to mention the chief executives and directors of our banks and financial companies.  I don’t see many, if any, of them suffering much.

The only option open to the rest of us is to protest.  Loud and clear and as often as possible.  Let your MP know what you feel and let the likes of Cameron, Osborne and Clegg know as well.  Write, email, join in any local protests and campaigns.  A determined opposition can work wonders, just look at Tunisia and Egypt.

The Budget - or how not to solve a crisis

That was really exciting wasn't it? Even by the (very low) standards of previous budgets this one was pretty pathetic. Faced with an unprecedented global crisis all we get is a bit of tinkering here and there and an enormous amount of borrowing. The borrowing is actually OK. It makes no sense to cut back on public spending during a recession, especially one as serious as this one. What is most depressing about the budget is the complete lack of thinking and questioning that has gone into the budget.

It was very revealing that all three of our major UK parties are essentially singing from the same hymn sheet. One after another they parrot the same line – we cannot afford to pay for public services or pensions and there just has to be significant cut backs in provision. The only real difference is in degree. Labour says not just now, but the cuts will come in a couple of years, while the Tories say we need to cut back now! The Lib Dems as usual are somewhere in the middle.

Now who exactly is this We that can't afford to pay for decent public services? Why the good old United Kingdom. And is this very same United Kingdom not the sixth largest economy in the world and about the 16th richest country in the world? So, just to get this right, we are asked to believe that the 16th richest country in the world can't afford to pay for good public services and can't afford to pay for decent public pensions? Not only can the 16th richest country in the world apparently not afford this so-called extravagance, in fact we need to cut back on services and on the paltry pensions most of us currently get.

It is very interesting to note that the people who are saying this – the politicians in charge of our main UK parties, the Institute of Directors, the CBI, the leader writers of the right wing press etc, are all themselves pretty generously paid, to put it mildly. And they represent and speak for the well paid. Who in all of this is speaking out on behalf of the low paid, the poor and the majority of middle income families? Certainly not the Labour Party or New Labour as now is. Something would seem to be wrong with our democracy when none of the main UK parties is able to articulate an alternative vision of how to get out of this mess without punishing the less well off.

Without getting into to too many details here are two alternatives to the current prognosis. The first is to have a fairer and more equitable taxation system. Over the last three decades income and wealth inequality has risen dramatically in the UK, while at the same time the tax burden on the better off has declined. Labour's proposal to introduce a 50% rate for those earning over £150,000 per year is a welcome step, but is more about appeasing those residual Old Labourites still in the party, than a serious attempt to rebalance the tax system. Much more needs to be done.

From the perspective of reducing public spending, one major way to do so would be to revisit the Defence budget. Something that seems to be off limits for all three main parties for some reason. The very name itself – Defence - is absurd, when you consider how little defending we do and how much attacking, invading and occupying the UK does. And in addition to the vast sums currently spent, the government wants to spend even more on upgrading Trident and building two new aircraft carriers, at a cost of £25 billions or more. None of which have been or could have been of any use in Iraq or Afghanistan. If we as a country decided to just have a Defence force – based on fisheries protection and coastal security – we wouldn't need even a half of our current Armed Forces, let alone nuclear weapons and aircraft carriers. This proposal would also I contend make the country safer. Invading and occupying Muslim countries is not an obvious way to reduce hostility to the UK. Nor for that matter is our carte blanche support for Israel's continuing occupation and ethnic cleansing of Palestinians.

I would suggest that a combination of a fairer taxation system and scrapping our Armed Forces in favour of a realistic Defence Force would allow the UK to get through this crisis without the need for cuts in socially useful public spending. Why is it then that both these options are apparently off limits for our political leadership? Why is there no real debate in Parliament and in the mainstream media? We seem to have descended into a situation in which all our political elites, irrespective of party, are in such close cahoots with the main business and financial elites that alternative options are hardly ever raised. There seems to be something rotten in the state of our United Kingdom.