Energy, Jobs, Business – Dream economic future that could hide a nightmare 

The debate around energy in a separate Scotland has generated plenty of heat, and some light.

Alex Salmond says a separate Scotland could be “the Saudi Arabia of green energy”, rich in alternative sources of power. Westminster conceded that Scotland is an “energy hub” but warned independence will lead to higher bills – perhaps by up to £200.

There’s no doubt that Scotland has the right conditions to generate electricity – there’s no shortage of wind, water and waves. Under the SNP administration, Scotland has already become a world leader in green technology. Then there’s North Sea oil and gas to add into the mix.

Both sides agree a single market in which energy can flow between Scotland and the rest of the UK as required is the best way forward.

But while the Scottish Government asserts that it will continue after independence, the Department for Energy and Climate Change in London say that’s “unlikely”. And that, says DECC, means higher bills. For example currently everyone pays around £1 extra on their bill to fund infrastructure necessary to deliver energy to some of Britain’s remotest locations.

The people who benefit, many in the Highlands and Islands, save around £36 off their bill as a result. Take away the contribution of the 23 million households in the rest of the UK and that leaves Scotland’s 2.4 million households footing a much higher bill.

According to DECC if you add together all those sorts of costs and divvy them up between five million people rather than pooled across 50 million, Scots would face an extra £189 on their bill.

There’s also the issue of renewables.

The SNP want Scotland powered solely by green electricity by 2020, hence the march of the windmill across the nation. But though wind is free, windmills and the power they generate are not. They require huge levels of subsidy. Currently UK bill payers fund the expansion of alternative technologies in order to reduce the nation’s carbon footprint.

But if Scotland separates, the Westminster Government is unlikely to continue to subsidise what would become foreign windfarms. The remaining UK could put up its own turbines in the shallow seas off England, a new nuclear power station being built will cut carbon emissions and if it still needed to buy green energy in order to hit carbon targets it would do so wherever it was cheapest – that could as likely be from France as Scotland.

If Alex Salmond wants to continue his support for wind the subsidy money will have to be generated in Scotland – either through higher bills or higher taxes. The alternative would be to turn the turbines off and let them rot. But then where would the energy come from?

Currently almost a third of Scotland’s energy comes from the two nuclear power stations at Torness and Hunterston. But the SNP are committed to a nuclear-free Scotland and they are coming to the end of their lifespan.

Wind might make up the gap, but only when it blows. If the turbines don’t turn Scotland would have to import electricity and the laws of supply and demand dictate that since power will be scarce on those days it will be expensive.

It also raises questions around energy security. The SNP’s White Paper sets out “enhancing security of supply” as an aim of independence. Yet Scotland could find itself occasionally reliant on another country to keep the lights on.

The very fact the SNP policy on energy is essentially to keep things as they are points to an understanding that it’s the best arrangement.

The decision for Scots is whether any perceived benefits of independence in other areas outweigh what seems a clear case of making things more difficult than they already are in this one.

Jobs

Alex Salmond was widely seen to have skewered Alistair Darling in their last TV debate when he repeatedly asked what job-creating powers Scotland will be given in the case of a No vote.

Much of the First Minister’s hopes for a jobs bonanza after a Yes vote rely on his flagship policy to slash corporation tax by 3p in the pound, which it’s hoped would tempt more firms to move to Scotland creating more jobs.

Trouble is even his own adviser – Nobel prize-winning economist Joseph Stiglitz – warned in the summer that cutting corporation tax could create a “race to the bottom”.

And it can be portrayed as a sop to fat cats. Green Party leader and Yes campaign bigwig Patrick Harvie expressed doubts about the policy and the trades union body the STUC dubbed it “misguided, damaging and wrong”.

Scottish Government research estimates the policy would increase inward investment by 1.9%, boost employment by 1.1% and output by 1.4% over 20 years. The total cost of the ­policy is put at just shy of £400 million.

An increase in employment of 1.1% only adds up to 27,000 extra jobs. That’s not a lot over the course of two decades. And there are questions about whether the money might be better spent. A £10 million inducement to tempt internet giant Amazon to set up in Fife created 1,300 jobs at one fell swoop.

One area in which jobs seem to be at risk in the event of independence is Edinburgh’s mighty financial sector that employs more than 30,000 people. Many firms have set up shell companies in England so they can switch their headquarters if they feel the need after a Yes vote. The jobs won’t disappear overnight but there is a parallel. Montreal was a financial powerhouse until Quebec started pursuing a policy of splitting from Canada.

Since then many companies have taken their business to the more settled Toronto.

Business

Given independence will lead to two things business doesn’t like – borders and uncertainty – the SNP know they have their work cut out convincing captains of industry that independence would be good for them. But convince some they have.

Those favouring a Yes vote have been attracted by a suite of policies set out in the White Paper designed to woo wealth and boost productivity. The most eye-catching is a promise to cut corporation tax by 3%.

The Scottish Government also wants to foster entrepreneurship to improve Scotland’s woeful record on setting up new firms. Thousands of ambitious Scots move to ­England to start their business ventures. The SNP would look to boost exports. That goes without saying as everything currently sold into the rest of the UK would suddenly be classed an export.

The Scottish Government also promises streamlined regulation though even if Scotland did have a rational regime of regulation, any business looking at where to locate would have to weigh up what was more attractive – Scotland’s streamlined oversight or the remaining UK’s 55 million consumers, 10 times that of Scotland. And that’s the rub for an independent Scotland.

For if the independence debate is a battle between head and heart it’s worth pointing out business has no heart. Companies exist to make money and to that end they like as many potential customers and as few barriers as possible.

Some firms might not like Westminster policies but they like being in a common UK market with a single currency and a common regulatory regime.

The SNP proposals for business post-independence are not without merit but, while Scotland can be separate politically from the rest of the UK, it can’t be sealed off economically.

Verdict

At the start of the referendum campaign a poll found Scots would alter their vote depending on whether they’d be £500 better or worse off. Over the last two years both sides have calculated sums bigger than that in their favour.

The Treasury claims Scots are £1400 better off if they stay in the union, the SNP reckon it’s £1000 each in their favour. Which all goes to show you can prove anything with numbers.

But the independent experts are not so easily dismissed. The scrupulously independent Institute for Fiscal Studies found a separate Scotland would start life £6 billion worse off. That’s not to be sneezed at.

Just like the questions raised around the issue of pensions by credible bodies like the Institute of Chartered Accountants of Scotland. They queried how a Scottish Government would keep its pension promises when the population is ageing faster than the rest of the UK. They weren’t impressed by the answers even though the issue is a vital one to the hundreds of thousands of Scots who rely on their pension income.

And whether you are better or worse off isn’t just a question of the pound – or Euro or Scottish groat – in your pocket there are quality of life issues like what TV channels we’d receive in Scotland and whether we’d still get a shot at winning the lottery and leaving Scotland, in or out of the UK, behind to move to Monaco!

The Scottish Government says oil revenues will fund their spending promises and that the ageing population conundrum will be solved by opening the floodgates to tens of thousands of immigrants – though it doesn’t explain where those newcomers will be housed, schooled or how they’ll be integrated successfully. Scots could find themselves out of pocket and overwhelmed in a separate Scotland.