An independent Scotland's economy would flourish

'In 1979, those fighting in Yes for Scotland were hamstrung both by the Scotland Act's association with an unpopular, stumbling government and a grim winter of strikes and snow. Then as now, there was division. Labour refused any part in a joint campaign for a Yes vote with the SNP. 'We will not soil our hands,' Helen Liddell pleasantly declared. Brian Wilson launched, with force and vigour, a Labour Vote No outfit: it deterred many Labour activists from supporting the paltry devolution measure, and in a major success won a Court of Session judgment forbidding party political broadcasts during the campaign: the Tories apart, those of the other three would have supported or endorsed the Scotland Act.' 1979 Revisited by John McLeod in the Herald, July 29 1997.

A boost for independence

By Lynne Robertson in the Herald

The team from the David Hume Institute in Edinburgh also claimed devolution was unlikely to improve Scotland's business prospects because of the restricted budgetary powers of the Holyrood Parliament. Independence, they believe, would end the uncertain business climate set to emerge from devolution, by offering direct control over both finances and international economic relations.

The findings were unsurprisingly seized upon by the SNP which claimed the report supported assertions that an independent Scotland would prosper, but attracted widespread criticism from Scotland's other major political players and business leaders.

Welcoming the report, SNP chief executive Mike Russell said: "It totally demolishes Labour's negative scaremongering against Scotland's prospects as an independent nation. An independent Scotland would be the seventh-richest country in the industrialised world, in terms of GDP per head, according to a House of Commons Library analysis. The prosperous nations in Europe are small, independent countries such as Ireland, Norway, Sweden and Luxembourg."

The CBI Scotland branded the research as "conjecture" and added: "Over time, different laws, different areas and different taxes from England would emerge and therefore the balance of advantage remains quite clearly for business in Scotland remaining within the UK."

Both Labour and the Scottish Conservatives and Unionists used the study to attack the SNP over its separatist stance, with the Tories claiming independence would lead to increased taxation and poorer services, while the Scottish Liberal Democrats described the report as "confused".

The independent study was funded by the Edinburgh-based corporate finance and development group MacDonald Orr Ltd to provide definitive research for the Scottish business community in the constitutional debate.

Eminent academics David Simpson, honorary professor of economics at Edinburgh's Heriot-Watt University, Professor Brian Main of Edinburgh University, and the former chief economic advisory to the Department of Trade and Industry, Sir Alan Peacock, were engaged to predict the potential impact of both devolution and independence on Scotland's business. They conducted research into the experience of comparable European nations such as Ireland, Norway and Denmark and found they had flourished.

The report concluded the present system of dispersing Government funds through a block grant system provided few opportunities for an innovative economic policy, with the current devolution proposals building on existing fiscal dependence. Presenting the report, Mr Sandy Orr, joint managing director of MacDonald Orr and an eminent figure in Scottish business circles, described it as "a significant contribution to the current election debate".

While the three academics denied their findings were coloured by political influence, two admitted to previous historic connections with the SNP and the Liberal Party.

Professor David Simpson, who stood as an SNP candidate in the 1970s, said: "The three of us have very different political views, but nevertheless we concur in our analysis of the situation which seems to suggest that there is a potential for considerable improvement in the performance of the Scottish economy.

"We are also of the view that an independent government would have a scope for using a wider range of policy instruments than is possible under the present situation or will be possible under the devolved Government.

"There is a widespread misconception or expectation that the devolved Parliament will lead to improvement in economic answers in Scotland . . . nevertheless we are obliged to point out that economic powers of the devolved Parliament are severely limited, in particular the powers of economic policy are confined to essentially one policy instrument, the ability to vary, within limits, the standard rate of income tax. In practical terms, it seems as if it is only possible to proceed in one direction.

"Devolution is not worth the name in terms of bringing Government more to the people if in fact substantial revenue-raising powers are not given to the region and, in this case, the nation."

Warning of the dangers of devolution, Sir Alan added: "In the present context, the result of partial devolution of Scotland will only be political instability in the UK."

Working on current figures, Professor Simpson said independence could cost £2bn, involving either a reduction in spending or an increase in revenue to comply with the conditions of Maastricht, allowing entry into Europe. - April 9