14 March 2016

Sturgeon: independence only equivalent to worst financial crisis for 70 years


Nicola Sturgeon agreed to be interviewed by my friend and former boss Andrew Neil on the BBC’s Sunday Politics at the weekend. Based on the results, I doubt she’ll be doing that again in a hurry.

To be fair, it was good of her to agree to appear a few days after it had been revealed that an independent Scotland would have a deficit this year twice the size of the rest of the UK. She is much more reasonable than her predecessor and did not deny the existence of said deficit. But she still deserves a large chunk of the blame for putting her name in 2014 to the fantastical independence White Paper that promised public spending largesse in the event of Scottish independence. If Scots had voted Yes, the country would be beginning its life as an independent entity this month with a black hole of £15bn. That’s more than the entire budget of the NHS in Scotland. To fill the hole the Scottish government could put up taxes and slash spending and try to borrow on the markets, of course, although it would be doing all this without being part of a banking union while trying to get itself into the EU, which means applying to join the Euro.

You can watch the whole interview here.

However, one aspect of it struck me as most odd. When asked about the Scottish deficit she indicated it was nothing remarkable: “We would be dealing with it in the same way as the UK dealt with its deficit in 2009-10 when they had a £153bn, 10.2% of their GDP. Countries suffer deficits but what we would be doing is building on the fundamental, underlying strengths of the Scottish economy.”

The implication there – nothing to see here, move along – is that the shock from independence would have been perfectly normal. But that rests on admitting that Scottish independence, which 18 months ago was pitched by the Nationalists as the land of milk and honey, would have had an impact on the Edinburgh government’s finances equivalent to the fiscal aftershocks of the financial crisis of 2008, which was the worst financial disaster for seventy years. So, that’s ok then…

Iain Martin is Editor of CapX.