Wednesday, 10 September 2014

Reasons to oppose Scottish independence, #5: the details don't add up


What was and is it for, all that training in quantitative methods, all those efforts to write better and analyse others' writing, all those long hours staring at the stats tables and economics graphs? What does being a public policy expert really mean, if it is not to look at the details and point out where they need fleshing out?

Nothing, that's what - and so it is with the 'yes' campaign's offering on Scottish independence, so shot through with holes that it makes a swiss cheese look like a superdense dwarf star. One (albeit partisan) commentator has labelled it 'weapons-grade drivel'. To be honest, that's a bit unfair - the Scottish Government published a massive door-stopper of a White Paper, Scotland's Future, to ward off many of these accusations, and it makes a good stab at answering quite a few of the obvious questions involved in setting up a new state. It's backed up by a whole library of never-read but impressive-looking background studies, too.

A lot of effort has gone in there, but that's not the problem: the problem is the 'yes' campaign's dishonesty in pretending that much of Scottish life will remain the same after a seismic and fundamental upheaval. That's where 'no' is going wrong, by the way, with its counter-offer of more devolution, because that puts the spotlight right back on 'Westminster politicians' that no-one likes or believes any-more, allowing nationalist claims to remain shrouded in obfuscation, doubt and downright untruths. But we digress.

Scottish independence may well be desirable. That's for Scots to decide. In the long term, perhaps that'd settle our problems of overlapping competencies and competing loyalties. We doubt it here at 'Public Policy and the Past', but there's at a highly respectable case to be made for that position. But it must be done properly. It can't just be an act of faith. And we would advise very strongly against anyone buying on the basis of today's prospectus.

Let's just take a few isses at random, shall we? Three spring to mind instantly that will cause Scotland and the rest of the UK (rUK) immense headaches if we do move to independence negotiations in a couple of weeks (and then stay at it for a couple of years).

First, universities. It is deeply unconvincing for the Scottish Government to claim that everything can go on as before if Scotland does become an independent state. rUK students would automatically become foreign students from another EU state; they will, in principle, then be entitled to freedom from tuition fees. That's it. That's the bottom line. No amount of hand waving, no evasions or or denials can change that single fact. What does that mean? It means that they will be entitled to free tuition in Scotland under EU rules, and there'll be nothing that either set of negotiators can do about it. Scottish universities would have to declare themselves legally 'distressed', probably on a case-by-case or time-limited basis, to get round this, which isn't exactly a PR coup in the making. We leave to your imagination the chaos this will cause in Scotland (which will no doubt have to cap student numbers severely, without being able to discriminate between Scottish and rUK students under EU law) and in rUK, which will see student numbers fall. Do Scottish voters know that the unintended consequence of this will be fewer free university places, and not the guarantee of that right in a future Scotland's constitution (which is not the 'yes' campaign's to promise anyway)? If not, they should be told.

Next, research policy. Scotland's extremely successful university and non-university research base does very well out of the United Kingdom's research council funding system, gaining more cash than their per capita numbers or level of pump-priming state investment would suggest. That's because Scotland has a vibrant, cutting-edge base of new industries clustered around world-class universities. Now the Scottish Government and the 'yes' campaign again reassure us that nothing will change - that Scottish researchers will still be able to apply for UK Research Council grants. They've been chuffing down some seriously powerful hallucinogens if that's what they really believe. No new rUK state is going to allow a competitor anywhere near its research funding, and although of course cross-border collaborations will continue, the bureaucratic rules and form-filling that will involve will grow and grow as the two new states drift apart. They're bad enough already. Trust us on this one. What will actually happen is that Scottish science funding will fall, or that the Scottish Government will have to make that difference up - along with all the other spending pledges they've made, from better childcare facilities to higher pensions. Can someone please tell me why you'd pull out of a science funding system where you took all the prizes? Anyone? Oh, I forgot - tumbleweed can't talk.

Then let's move on to pensions. Scottish Chartered Accountants have asked four really, really boring questions about these (you can download the full report there if you'd like) - on cross-border arrangements, the compensation regime when things go wrong, moves towards a single-tier state pension that are already underway, and the possible costs of different tax relief regimes. Now you've probably already dozed off on those dread words of tedium, but bear with it. What the chartered accountants were basically saying (and answer there has come none) is that EU law means that cross-border pensions must be fully funded. This would plunge many schemes based in Edinburgh, but with rUK members, into enormous deficits given the stringent rules applied. There would again be nothing that rUK or Scottish negotiators could do about it if both states wanted to obey EU rules - which Scotland must if it wants to stay or get back in. Welcome to a world of higher pension costs in a market that already fleeces consumers on charges. How will funds be asked to cope with higher costs from different regulatory regimes, when and how will Scotland set up a new compensation safety net - and how will tax reliefs be managed as Scotland's and rUK's pension arrangements drift apart? This hasn't mattered inside one state. You can just invest where you like. Now it will matter, to the detriment of anyone on either side of a new border who's been foolish enough to leave their cash in the 'wrong' state - one reason why Standard Life has today announced plans to move its headquarters to rUK if Scotland does indeed vote 'yes'. Pension state liabilities are another matter, but untangling National Insurance liabilities will undoubtedly be a nightmare. What happens if you'd paid half your NI in Scotland, and half in rUK? No-one seems to know.

We could go on, but fear it'll be too boring. All of this would get worked out in the end - a pensions crisis, for instance, would be far too painful for anyone to contemplate - though in terms of cases one and two, it's hard to see how Scotland's high-tech industrial future is served by independence in the short- to medium-term. But the examples are just indicative. Ask yourself this: if university, science and pensions policy looks so shoddy, what else is hiding out there?

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