I am often asked how bad would a Scottish exit be for the UK economy?
I reply by stating that I would like Scotland to stay in the union. It is important it is their choice, and even more important that they then unite behind the democratic decision they are about to make, whichever way it goes. I still expect Scotland to vote to stay in.
The facts are straightforward. Scotland has 8.3% of the UK population. At current rates of economic growth it would take three years to replace the lost Scottish output. At current rates of inward migration it would take a generation to replace the lost numbers of people, but as the aim is to bring the rate down more it would take a couple of generations. I am not recommending that we have to seek to replace the lost people, merely trying to give a sense of relative size.
Scotland receives 9.3% of total UK spending. Whilst the Scottish government and the UK Treasury disagree about some of the detail, they say that Scotland receives somewhere between 122% and 116% of the public spending per head of the rest of the UK.
Scotland contributes 7.3% of the Income Tax revenue of the UK, 2% lower than her share of the public spending. Other taxes are variable, from the 14.1% of total UK spirits duty the Scots pay, down to 5% of Stamp Duty.
The SNP point out that Scotland contributes the lion’s share of production and company taxes on oil and gas output. As we have seen , these tax revenues are now in decline, reducing the Scottish total tax contribution.
One of the big arguments is over how quickly this will decline. If it does so with no obvious replacement, then Scotland in the UK will need to draw more money from the rest of the UK to make up the shortfall.
The English case to keep Scotland in the Union is based on history, politics and sentiment. It is not an economic necessity from England’s point of view.