The LSE on the economic consequences of Scottish Independence

One of the many things which the issues of Brexit and Scottish Independence have in common is that, while the absolutists on both sides will never admit it, there are complex arguments both in favour and against.

One of the concerns which is applies to both is the potential costs if you create barriers to trade between the parts of what had previously been a single trading area when you leave a trading bloc or tear apart a nation state.

A lot of people - I was one of them - were very concerned about the potential impact on British exports to the EU had there been what was variously called an "Australian" or "WTO terms" or more accurately a "No deal" Brexit and were relieved when Britain and the EU did finally manage to reach a deal on Christmas Eve.

Anyone who has paid the least attention to the Brexit process will be aware that one of the most difficult issues has been agreeing how to handle the border in Ireland, One of my biggest concerns about Scottish Independence is that the enormous difficulties which we have had in reaching and implementing agreement on how to manage the border in Ireland would also apply to the border between England and Scotland, especially if an Independent Scotland were to rejoin the EU. 

(It is, by the way, far from certain that an independent Scotland would be allowed to join the EU but that's what the SNP say they would want to do.)

Obviously as someone who lives in a border county I am very concerned about this. The consequences for the border areas of both Scotland and England, such as Cumbria, if we had anything resembling a "hard border" between England and Scotland could be quite serious.

As the SNP in their constant battle for another Independence referendum continues, in a truly stunning display of cognitive dissonance, to use the problems with Brexit as an argument for independence, the London School of Economics has published an interesting and timely comparison of the relative threats to the Scottish economy represented by pulling Scotland out of the UK as against pulling Scotland out of the EU.

It is not remotely difficult to quantify that the former threat could be up to three times as large.

As the study shows (and similar work has shown before) the 27 countries of the EU take about 19% of Scotland's exports, while the Scottish government's own figures show that the rest of the UK takes about 60%.

The LSE study assumed that even with a shared common market after independence, trade costs between Scotland and the rest of the UK would increase by 15-30 per cent. 

EU membership would ease trade with the bloc, but lead to a harder border with the UK and similar levels of overall long term damage to trade, it said.

“Rejoining the EU following independence would do little to mitigate [the overall trade costs] and in the short run would probably lead to greater economic losses than maintaining a common economic market with the rest of the UK,” Thomas Sampson, an associate professor of economics at LSE told the Financial Times..

The LSE report calculates that impediments to trade created by Brexit will reduce Scotland’s long term real income per capita by 2.0 per cent. The study finds that independence would cut income by a further 4.5-6.7 per cent even if Scotland stayed in a “common market” with the rest of the UK (rUK) — and that rejoining the EU would do little to reduce the impact.

“This analysis shows that, at least from a trade perspective, independence would leave Scotland considerably poorer than staying in the United Kingdom,” said analysis co-author Professor Hanwei Huang.

I can respect and understand the views of those Scots who voted for both Brexit and Independence. It is a consistent position, even though I disagree with them.

I respect and agree with the position of the majorities of Scots who voted "Remain" and "No."

I can also think it is just about possible for a reasonable and intelligent person to take the view that both were "on balance" decisions and that the balance comes out differently between the two.

What just does not make any sense is to argue the fundamentalist position on one issue and back the opposite side on the other one. 

E.g. I just cannot see how you can argue that Scotland being in the UK is an intolerable affront to Scottish pride and nationhood but everyone who voted for Brexit is a xenophobic racist idiot. 

Or that Brexit has been bad for the Scottish economy but independence will be good for the Scottish economy. 

If you think that Brexit has been bad for Scotland, you should expect Independence to be like Brexit on steroids.

More details of the LSE report are given in an FT article which you can read here.