With the latest figures showing Scotland’s GDP shrinking, is the economic case for independence all but dead?

Glasgow Prepares For The Independence Vote
Scotland risks falling into recession (Source: Getty)

Daniel Mahoney, deputy director and head of economic research at the Centre for Policy Studies, says Yes.

In the short to medium term, the case for independence is absolutely all but dead. Scotland’s economic growth was over four times slower than the UK’s last year, and Scottish output actually fell in the fourth quarter of 2016.

Figures published by the Scottish government last year also highlight just how precarious Scotland’s fiscal position is. Scotland’s budget deficit is now higher as a percentage of GDP than any other European Union member state.

An independent Scotland would currently face a toxic combination of fiscal instability, higher taxes and lower government spending. And, of course, if an independent Scotland were to leave the UK’s single market in order to remain part of the EU single market, its long-term fiscal position would face further challenges. Scotland trades over four times more with the rest of the UK compared to other EU countries, making the short and long-term economic case for independence highly questionable.

Mark Littlewood, director-general of the Institute of Economic Affairs, says No.

Spot price statistics about the Scottish economy are a rounding error in weighing up the benefits of Scottish independence.

It is certainly not the case that Scotland needs to be richer to make departure from the UK viable. An independent Scotland would be around about the fiftieth largest economy on the planet and somewhere in the top 30 on an income per capita basis. That makes Scotland larger than Hungary or Bulgaria and richer than South Korea or Spain.

Of course, this doesn’t mean an independent Scotland would face no challenges. But it may well be better for them to tackle such challenges in their own fashion, rather than to be largely subject to Westminster rule and diktat.

As with Brexit, a vote for ending current constitutional arrangements is no guarantee of increased prosperity and growth, but it does provide an opportunity to pursue these goals with much greater freedom and flexibility. The economic case for an independent Scotland remains credible and strong.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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