Research and analysis

What staying in the United Kingdom means for Scotland - with references

Updated 21 August 2014

© Crown copyright 2014

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This publication is available at https://www.gov.uk/government/publications/what-staying-in-the-united-kingdom-means-for-scotland/what-staying-in-the-united-kingdom-means-for-scotland-with-references

Front page of booklet

1. A United Kingdom. A united future.

On 18 September, you will be asked to make a big decision on the future of Scotland: to remain in the United Kingdom or to leave and become a separate state – permanently.[footnote 1]’[footnote 2]

HM government believes that there are many reasons why Scotland should stay in the United Kingdom.[footnote 3]

Family sitting round table. Text on image reads: 'This booklet is available in large print audio and Braille. Please write to: Scotland Office, 1 Melville Crescent, Edinburgh, EH3 7HW.'

It’s for you to decide[footnote 4] and you should make your choice knowing all the relevant facts.

This booklet provides important information[footnote 5] about the issues that affect Scotland’s future. If you would like to know more about any of the information found in this booklet, www.gov.uk/youdecide2014 has further resources, publications and announcements.

2. By staying in the United Kingdom, our economies grow together.

[footnote 6]’[footnote 7]’[footnote 8]’[footnote 9]

Workman with van

2.1 More businesses and jobs.

Many thousands of Scottish jobs are connected to trade with the rest of the United Kingdom.[footnote 10]

For example, 200,000 Scottish jobs are supported by banking, insurance and finance,[footnote 11]’[footnote 12] and the industry itself estimates that 9 out of 10 customers live in the rest of the UK.[footnote 13]’[footnote 14]

2.2 All the advantages of the pound

As part of the United Kingdom, Scotland has one of the oldest, strongest and most stable currencies in the world[footnote 15]’[footnote 16]’[footnote 17] backed up[footnote 18] by 31 million taxpayers[footnote 19] and the strength of the Bank of England.[footnote 20]’[footnote 21]

It would not be possible[footnote 22] to recreate today’s currency arrangements across two separate states.[footnote 23] Staying within the UK is the only way to keep the pound we have now.[footnote 24]’[footnote 25]’[footnote 26]’[footnote 27]

2.3 Closest trading partners

The United Kingdom economy is set to recover[footnote 28]’[footnote 29] faster than every other G7 nation.[footnote 30]’[footnote 31]

As two-thirds of Scottish exports go to England, Wales and Northern Ireland[footnote 32]’[footnote 33] – more than the rest of the world combined[footnote 34] – putting up an international border with the rest of the UK would slow growth just as our economy is starting to take off.[footnote 35]’[footnote 36]

3. By staying in the United Kingdom, your money is safe and goes further.

[footnote 37]’[footnote 38]’[footnote 39]

Couple unloading groceries

3.1 A bigger economy that protects us all.

The United Kingdom economy is the sixth largest in the world.[footnote 40] Our collective size,[footnote 41] strength[footnote 42]’[footnote 43] and diversity[footnote 44] allow us to grow[footnote 45] and succeed together,[footnote 46] and help to protect jobs[footnote 47] in difficult times.[footnote 48]

In 2008, for example, we were able to provide Scottish banks[footnote 49]’[footnote 50] with support worth more than twice Scotland’s national income.

3.2 Cheaper bills.

The United Kingdom’s financial standing helps keep interest rates low.[footnote 51]’[footnote 52] That means cheaper loans and mortgages for you and your family.[footnote 53] And because the costs of investing in Scotland’s energy networks and renewables are shared across the whole of Great Britain,[footnote 54] staying in the UK would keep future energy bills for Scottish households up to £189[footnote 55] a year lower.

3.3 Safe savings and pensions.

With Scotland as part of the United Kingdom, your savings in any UK bank or building society are protected by a guarantee of up to £85,000.[footnote 56]’[footnote 57] And State Pensions are more secure because costs[footnote 58]’[footnote 59] are shared by 31 million taxpayers across the UK.[footnote 60]

4. By staying in the United Kingdom, Scotland’s public services are more affordable.

[footnote 61] [footnote 62]

Pharmacist

4.1 Shared public institutions.

Scotland benefits from over 200[footnote 63] United Kingdom institutions and services, including: the BBC, the National Lottery, Her Majesty’s Passport Office, Research Councils UK and the DVLA.

An independent Scotland would need to create new public institutions, which would be complex and expensive.[footnote 64]

4.2 Lower taxes, higher public spending.

As part of the United Kingdom, Scotland’s finances are much stronger[footnote 65]’[footnote 66]’[footnote 67] with lower taxes and higher public spending.[footnote 68]

The UK government estimates that the long-term financial benefit of staying in the UK is worth £1,400 every year to each person living in Scotland.[footnote 69]

4.3 More support for public services.

As part of the United Kingdom, Scotland benefits from public spending that is around 10% higher than the UK average.[footnote 70] This helps fund vital public services like health, education and transport.[footnote 71]’[footnote 72] By staying in the United Kingdom, Scotland’s public services are more affordable.

5. By staying in the United Kingdom, Scotland has a strong voice in the world.

[footnote 73]

Mother with baby

5.1 An influential voice in important places.

The United Kingdom is a leading member of the UN and the only country in the world that is also a member of NATO, the EU, the Commonwealth, the G7, the G8 and the G20.[footnote 74]’[footnote 75]

As one of the EU’s ‘big four’ nations,[footnote 76] the UK is more able to protect Scottish interests[footnote 77] in areas like agriculture and fisheries.[footnote 78]’[footnote 79]’[footnote 80]

5.2 Protecting our people and promoting our interests.

For centuries Scottish people have been at the heart of the United Kingdom’s armed forces,[footnote 81] which keep us safe at home and abroad.[footnote 82]

You can rely on help from over 200 embassies and consulates around the world if you get into difficulty.[footnote 83] Scottish businesses are supported around the world by the UK.[footnote 84] This includes successfully promoting Scottish exports such as whisky.[footnote 85]’[footnote 86]

5.3 Help for the world’s poorest.

The United Kingdom is the second largest aid donor in the world.[footnote 87]’[footnote 88] Our collective influence and reach means that we are helping to end extreme poverty,[footnote 89] saving lives during humanitarian crises[footnote 90] and making vital contributions to international peacekeeping missions.[footnote 91] In response to Typhoon Haiyan in the Philippines, the UK helped 1 million people by providing food, water, shelter and lifesaving medicine.[footnote 92]

6. By staying in the United Kingdom, Scotland is stronger.

[footnote 93]’[footnote 94]’[footnote 95]

Workers in high vis

6.1 We all benefit from being together.

Collectively, the United Kingdom’s 4 nations contain more than 60 million people [footnote 96] and nearly 5 million businesses. [footnote 97]

This larger community provides more opportunities to succeed[footnote 98]’[footnote 99]’[footnote 100] and greater financial security [footnote 101].

6.2 A successful family of nations.

For over 300 years,[footnote 102] Scotland has flourished[footnote 103]’[footnote 104]’[footnote 105] as part of the United Kingdom. Together with England, Wales and Northern Ireland, Scotland has created one of the world’s most successful families of nations.[footnote 106]

6.3 A strong Scottish Parliament.

Scotland already has its own Parliament[footnote 107] that makes decisions about hospitals, schools, policing and other important matters.[footnote 108] From next year [footnote 109], the Scottish Parliament will be getting even more powers to set tax rates and decide if and when to borrow money [footnote 110].

The referendum on 18th September means making a big decision that affects everything: how you live and work, what money you use, the tax you pay, the laws you abide by and the passport you carry.

The UK Government believes that by staying united we have much more to share and much more to gain.

6.4 Find out more

Join the debate

Family in countryside
back page

  1. “In the event of a vote in favour of leaving the UK, in the eyes of the world and in law, Scotland would become an entirely new state.” Scotland analysis: Devolution and the implications of Scottish independence, HM Government, February 2013, paragraph xiv, page 7. ↩

  2. “This paper is based on independent expert opinion from two leading authorities on the issue of state formation and how this is seen in international law. They are James Crawford SC, Whewell Professor of International Law at the University of Cambridge, and Alan Boyle, Professor of Public International Law at the University of Edinburgh.” Scotland analysis: Devolution and the implications of Scottish independence. Scotland analysis: Devolution and the implications of Scottish independence, HM Government, February 2013, paragraph xiv, page 7.For full expert opinion see: Opinion: Referendum on the Independence of Scotland – International Law Aspects, Professor James Crawford SC Professor Alan Boyle, February 2013 ↩

  3. “UK government believes that Scotland is stronger in the UK, and the UK is stronger with Scotland in it. We will continue to make the positive case for how people in Scotland can have the best of both worlds: decisions on important issues taken in Scotland, within a strong and secure UK… To inform the debate about Scotland’s constitutional future, we are undertaking a programme of analysis on Scotland’s place in the UK and how it contributes to and benefits from being part of the UK. We are publishing the Scotland analysis series…. It will provide people in Scotland with the facts and figures that are currently unknown or taken for granted, and explain how the UK in its current form works.” Informing the debate on Scotland’s constitutional future, HM Government ↩

  4. “Both governments agree that all those entitled to vote in Scottish Parliamentary and local government elections should be able to vote in the referendum”. Agreement between the United Kingdom Government and the Scottish Government on a referendum on independence for Scotland. HM Government and The Scottish Government, Edinburgh, 15 October 2012, paragraph 9. ↩

  5. To inform the debate about Scotland’s constitutional future, we are undertaking a programme of analysis on Scotland’s place in the UK and how it contributes to and benefits from being part of the UK. We are publishing the Scotland analysis series…. It will provide people in Scotland with the facts and figures that are currently unknown or taken for granted, and explain how the UK in its current form works.” Informing the debate on Scotland’s constitutional future, HM Government. ↩

  6. “GDP figures reveal that the economy has grown at its fastest rate in six years…. ‘Today’s figures show that Britain is coming back - but we can’t take that for granted. We have to carry on working through our long term economic plan. For the first time in a decade all three main sectors of the economy - manufacturing, services and construction - have grown by at least three per cent in the last year.’” Chancellor George Osborne, quoted in HMT statement, 29 April 2014. Source: Gross Domestic Products, Preliminary Estimate Q1 2014, Office for National Statistics, 29 April 2014 ↩

  7. Source for the data in Appendix 1, table 1: Scotland - GDP statistical bulletin (2013 Q4), Scottish Government, 16 April 2014.UK - Gross Domestic Product, Second Estimate (2014 Q1), Office for National Statistics, 22 May 2014 ↩

  8. “Since 1963, growth in economic output per person has been slightly stronger in Scotland than in the UK, averaging 2.0 per cent in Scotland and 1.9 per cent in the UK overall.” Scotland Analysis: Macroeconomic and fiscal performance Source for this data is: Scottish Government, GDP Statistical Bulletin (2010 Q1 and 2013 Q1); ONS, UK Real GVA excluding North Sea oil and gas (KLH7 and UIZY); ONS Mid-year population estimates; General Register Office for Scotland. ↩

  9. “Over the past 300 years, the UK economy has become increasingly integrated and interconnected. Scottish growth has contributed to, and benefited from access to, the large and diverse UK economy. The UK provides a large, stable and diverse economic environment in which Scottish businesses have thrived and which is very attractive to foreign investors. A large domestic market is a crucial aspect of this environment and businesses and consumers benefit from the free flow of goods, services, labour and capital. The domestic market is supported by a UK-wide system of tax and regulation, as well as a single labour market, a common knowledge base and integrated infrastructure. This produces tangible benefits for Scotland’s macroeconomic performance.” Scotland Analysis: Macroeconomic and Fiscal performance HM Government, September 2013, page 15 ↩

  10. “[A]lmost 1 million jobs – 962,000 – depend on links to the rest of the UK. This is a clear indication, if anyone wanted one, of the extent to which the Scottish economy is integrated with the rest of the United Kingdom.” Scottish Jobs and the UK, Brian Ashcroft, Scottish Economy Watch, 3 June 2014 ↩

  11. “The sector employs almost 100,000 people directly and around the same again indirectly.” Financial Services in Scotland, Fact, Scottish Financial Enterprise ↩

  12. “Being part of the UK helps support the Scottish financial services sector, which generates employment not just in financial services firms, but in the professional and other services that support the sector. For example, over 40 per cent of Scottish postal services and nearly 30 per cent of Scottish accountancy services are sold to the Scottish financial sector.” Scotland analysis: Financial services and banking, HM Government, May 2013, p. 6 ↩

  13. “The Scottish financial services industry estimates that 90 per cent of its customers are located in the rest of the UK, and the market is highly integrated for most financial products” Scotland analysis: Financial services and banking, HM Government, May 2013, page 7. Source for this estimate is: Speech by Owen Kelly, Chief Executive of Scottish Financial Enterprise at the Scotsman Conference, A Question of Independence: The Economics of Independence, June 2012. ↩

  14. “It is worth noting that Scotland is, in itself, a relatively small market; most providers of financial services in Scotland serve the market that is the UK as a whole and, in some cases, 90% or more of their customers are outside Scotland.” Scottish Independence and Financial Services - An Industry Observer’s Perspective, Owen Kelly, Chief Executive, Scottish Financial Enterprise ↩

  15. “The pound is one of the oldest and most successful currencies in the world…. The value of the pound lies in the entire monetary system underpinning it. A system that includes the Bank of England and the tens of millions of UK taxpayers who stand behind that financial system” Rt Hon George Osborne MP, Chancellor of the Exchequer, 13 February 2014. ↩

  16. “From and after the Union the Coin shall be of the same standard and value throughout the United Kingdom as now in England”. Union with England Act 1707, Article 16. ↩

  17. “Before the union of the Scottish and English crowns in 1603, Scotland was on a silver standard with its own measure of silver, the Scots pound. The exchange rate between the Scots pound and the English pound was fixed at 12:1 in 1603. With the union of the Parliaments in 1707, the Scots pound was abolished as an official unit, although its private use persisted through the eighteenth century.” What monetary arrangements for an independent Scotland? Lawrence H. White, University of Missouri, page one. ↩

  18. “The UK’s official holdings of international reserves, which consist of gold, foreign currency assets and International Monetary Fund assets. These reserves are maintained primarily so that the UK government’s reserves could be used to intervene to support sterling. The value of the Government’s reserves was $107 billion at the end of April 2014.” Statistical Release: UK official holdings of international reserves April 2014, HM Treasury, 6 May 2014. ↩

  19. “30.8 million individual income taxpayers in 2011-12”. Income Tax Liabilities Statistics, 2011-12 to 2014-15, Her Majesty’s Revenue and Customs, 30 April 2014, page 7 ↩

  20. “The Bank of England is the central bank of the United Kingdom…. the Bank was founded in 1694 with a founding charter that stated its purpose was to ‘promote the public good and benefit of our people’.” Bank of England: The Bank of England: About the Bank. ↩

  21. “Maintaining confidence in the currency is a key role of the Bank of England and one which is essential to the proper functioning of the economy.” The Bank of England website: Banknotes ↩

  22. “HM Treasury would advise the UK Government against entering into a currency union. There is no evidence that adequate proposals or policy changes to enable the formation of a durable currency union could be devised, agreed and implemented by both governments.” Scotland analysis: Assessment of a sterling currency union, HM Government, February 2013, page 9 ↩

  23. “A formal sterling currency union is very different to the current arrangements and would be a profound economic change for both states. Both states would become exposed to fiscal and financial developments in each other’s economies.”… “The recent experience of the euro area has shown that it is extremely challenging to sustain a successful formal currency union without close fiscal integration and common arrangements for the resolution of banking sector difficulties.” Scotland analysis: Assessment of a sterling currency union, HM Government, February 2013, page 8 ↩

  24. The Chancellor has said that there will not be a currency union between the continuing UK and an independent Scotland. The Chief Secretary and the Shadow Chancellor have supported this position: “It would cost jobs and cost money. It wouldn’t provide economic security for Scotland or for the rest of the UK… sharing the pound is not in the interests of either the people of Scotland or the other parts of the UK.” Rt Hon George Osborne MP, Chancellor of the Exchequer, February 2014. ↩

  25. “As a Scot and as Chief Secretary to the UK Treasury… I couldn’t recommend a currency union to the people of Scotland.” Rt Hon Danny Alexander MP, Chief Secretary to the Treasury, February 2014. ↩

  26. “It would repeat the mistakes of the euro area…you’d be trying to negotiate a monetary union as Scotland is pulling away from the UK… Scotland will not keep the pound if Scotland chooses independence.” Rt Hon Ed Balls MP, Shadow Chancellor, February 2014 ↩

  27. A formal sterling currency union is very different to the current arrangements and would be a profound economic change for both states. Both states would become exposed to fiscal and financial developments in each other’s economies.”… “The recent experience of the euro area has shown that it is extremely challenging to sustain a successful formal currency union without close fiscal integration and common arrangements for the resolution of banking sector difficulties.” Scotland analysis: Assessment of a sterling currency union, HM Government, February 2013, page 8 ↩

  28. “GDP figures reveal that the economy has grown at its fastest rate in six years…. ‘Today’s figures show that Britain is coming back - but we can’t take that for granted. We have to carry on working through our long term economic plan. For the first time in a decade all three main sectors of the economy - manufacturing, services and construction - have grown by at least three per cent in the last year.’ ” Chancellor George Osborne. Source for these figures is: Gross Domestic Products, Preliminary Estimate Q1 2014, Office for National Statistics, 29 April 2014 ↩

  29. See Appendix 1, table 2: [Scotland - GDP statistical bulletin 2013 Q4, Scottish Government, 16 April 2014[(http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GDP2013Q4). UK - Gross domestic product, second estimate (2014 Q1), Office for National Statistics, 22 May 2014. ↩

  30. See Appendix 1, table 3. OECD Economic Outlook, analysis and forecasts, Organisation for Economic Cooperation and Development, 6 May 2014. ↩

  31. See Appendix 1, table 4. Source: World Economic Outlook, International Monetary Fund, April 2014 ↩

  32. “Of total Scottish trade, a majority was made with the rest of the UK” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, paragraph A3, page 90.) Source for this data: ONS, Quarterly National Accounts (2013Q1); Scottish Government, Scotland National Account Project (2012 Q3 and 2012 Q4) ↩

  33. See Appendix 1, table 5. Quarterly National Accounts Scotland, Fourth Quarter 2014, Scottish National Accounts Project, Scottish Government, 14 May 2014, Supplementary Tables, Table 9 ↩

  34. “The rest of the UK is, by far, Scotland’s biggest economic partner. In 2011, Scotland sold goods and services worth £45.5 billion to the UK, double the levels exported to the rest of the world. It is also four times greater than Scottish sales to the rest of the European Union. Overall, exports to the UK represent 29 per cent of Scottish Gross Domestic Product but the importance of the UK market is even higher in some sectors. For example, financial and insurance services in Scotland sold nearly half their output in the rest of the UK in 2009.” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013 p. 15. Source for this data is: Scotland’s Global Connections Survey 2011 ↩

  35. “[E]ven if an independent Scottish state and the continuing UK were to enter a sterling currency union, a ‘border effect’ would still be likely to emerge which would reduce the level of real incomes in Scotland by 4 per cent after 30 years or £2,000 per Scottish household per year and £100 per UK household.” Scotland analysis: Assessment of a sterling currency union, HM Government, February 2014, paragraph 2.6, page 22 ↩

  36. “The ‘border effect’ is the observation that trade is higher within countries than between countries. If in the long run, the border between an independent Scotland and the rest of UK border affects trade like the current border between the Republic of Ireland and the UK, then we estimate costs at 5.5% of Scotland’s GDP.” The border effect on trade between an independent Scotland and the UK, David Comerford, University of Stirling, 2 May 2014 ↩

  37. “The UK’s Financial Services Compensation Scheme (FSCS) pays compensation to savers if their banks fail. It guarantees consumer deposits in a UK bank up to £85,000. The scheme, and any compensation payouts, is funded through charges on the banks and financial firms that are covered by the FSCS.” Scotland analysis: Financial services and banking, HM Government, May 2013, page 9 ↩

  38. .“If Scotland were to be become independent, it could create particular difficulties for the Financial Services Compensation Scheme (FSCS). In an independent Scottish state, FSCS-eligible deposits held by Scottish firms (and which would therefore be covered by the Scottish compensation scheme) would be over 100 per cent of Scotland’s GDP, representing a significant contingent liability of the state – and a much more significant proportion than in the UK as a whole.” Scotland analysis: Financial services and banking, HM Government, May 2013, paragraph 4.35, page 80 ↩

  39. “The Pension Protection Fund (PPF) protects millions of people throughout the UK who are members of eligible defined benefit pension schemes. If the sponsoring employer has a qualifying insolvency event and there are insufficient assets in the scheme to cover benefits at the same level as PPF compensation, the scheme will enter the PPF, which will pay compensation to members… The UK has a large number of defined benefit schemes, meaning that the risk is spread.” Scotland analysis: Financial services and banking, HM Government, May 2013, page 82 ↩

  40. See table 7 at Appendix 1. The UK’s GDP is $2535bn, the sixth largest in the world behind the United States, China, Japan, Germany and France, and ahead of Brazil. World Economic Outlook, International Monetary Fund, April 2014. GDP current prices in US dollars. ↩

  41. See table 8 at Appendix 1. The UK’s GDP is $2535bn, the sixth largest in the world behind the United States, China, Japan, Germany and France and ahead of Brazil. World Economic Outlook, International Monetary Fund, April 2014. GDP current prices in US dollars. ↩

  42. See table 9 at Appendix 1. OECD Economic Outlook, analysis and forecasts, Organisation for Economic Cooperation and Development, 6 May 2014 ↩

  43. See table 10 at Appendix 1. World Economic Outlook, International Monetary Fund, April 2014 ↩

  44. “Scotland’s economy has particular strengths in a number of sectors such as energy (including North Sea oil and gas) and finance. However, these sectors are comparatively vulnerable to economic shocks, which has a significant impact on Scottish economic and fiscal performance year-to-year. The integration of the Scottish economy into the larger and more diverse UK economy shields the Scottish economy from the damaging effects of economic volatility and limits the impact of global crises. Scotland’s growth has avoided some of the volatility observed elsewhere in comparable European countries.” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013 p. 6 ↩

  45. GDP figures reveal that the economy has grown at its fastest rate in six years…. ‘Today’s figures show that Britain is coming back – but we can’t take that for granted. We have to carry on working through our long term economic plan. For the first time in a decade all three main sectors of the economy – manufacturing, services and construction – have grown by at least three per cent in the last year.’” George Osborne, quoted in HMT statement, 29April 2014. Source: Gross Domestic Products, Preliminary Estimate Q1 2014, Office for National Statistics, 29 April 2014 ↩

  46. See Appendix 1, table 11. Scotland – GDP statistical bulletin (2013Q4), Scottish Government, 16 April 2014. UK – Gross Domestic Product, Second Estimate (2014Q1), Office for National Statistics, 22 May 2014 ↩

  47. Scotland’s employment rate for the period January to March 2014 (seasonally adjusted) was 73.5%. Regional Labour Market Statistics, May 2014, Office for National Statistics, 14 May 2014 ↩

  48. “Scotland has performed well relative to comparable independent countries: Scotland has very slightly higher economic output per person than Denmark and Finland, significantly higher than Portugal and not far behind Austria, Ireland and Sweden. Having been weaker in the 1970s and 1980s, growth in output per person is above the median for comparable independent countries over the 1990s and 2000s. Over the past 20 years, Scotland has maintained a significantly higher employment rate than the median of these countries. “ Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, page 6. ↩

  49. “In 2008, the UK Government spent £45 billion recapitalising the RBS in order to protect the deposits and savings of households and small business. In addition, the bank received £275 billion of guarantees through the UK Government’s Asset Protection Scheme. This combined support from the UK Government to RBS is equivalent to some 211 per cent of Scottish GDP in 2008.” Scotland analysis: Financial services and banking, HM Government, May 2013, page 7 ↩

  50. The UK Government also spent £20.3bn recapitalising Lloyds Banking Group, which includes HBOS. HM Treasury Resource Accounts 2011-12: The Comptroller and Auditor General’s Report to the House of Commons, National Audit Office, July 2012, Figure ↩

  51. We estimate that an independent Scotland within a sterling currency zone would face long-run average borrowing costs of between 72 and 165 basis points over UK borrowing costs.” Scotland’s currency options, Angus Armstrong and Monique Ebel, The National Institute of Economic and Social Research, 8 October 2013, page 3. ↩

  52. See Appendix 1, table 6. “Various independent bodies forecast that an independent Scotland’s deficit in 2016-17 would be substantially larger than suggested by the current Scottish Government in Scotland’s Future. The most pessimistic scenario in Scotland’s Future predicted a deficit of 3.2 per cent of GDP, equivalent to around £1,000 per person. However, the independent bodies all forecast a Scottish deficit above 5 per cent of GDP, or around £1,700 per person. This difference, of around £700 per person, can be entirely accounted for by differing views on the prospects for tax revenues from North Sea oil and gas production. The table at Appendix 1 summarises forecasts of Scotland’s fiscal position in 2016-17. ” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, Box IC, page 27. Sources for the estimates are: Most pessimistic scenario (‘Scenario 2’) in Scottish Government (2013), “Scotland’s Future: Your guide to an independent Scotland”. IFS (2014) “The next five years look better, but tough choices remain for Scotland”. Citigroup (2014) “Update on Scotland’s Fiscal Deficit”. CPPR (2014), “CPPR Briefing Note – Fiscal implications for an independent Scotland when assuming that it takes on a low, or zero, share of existing debt”. ↩

  53. “The National Institute of Economic and Social Research has done the most detailed analysis on that point and calculates that an independent Scotland would have an interest rate premium over gilts of between 0.72 and 1.65 per cent. That would add £1 billion to £2.2 billion in debt interest payments in an independent Scotland, and at the central point on that range that would mean an extra £1,700 a year in mortgage interest payments.”. Chief Secretary to the Treasury Danny Alexander, evidence before the Scottish Parliament’s Economy, Energy and Tourism Committee, 19 February 2014 ↩

  54. “Scotland, Wales and England currently enjoy a fully integrated Great Britain (GB) energy market. The GB energy market is ten times larger than Scotland’s alone and therefore costs can be spread across 30 million households and businesses. The scale of the UK economy provides an attractive environment for investment. This makes it easier and cheaper to achieve the UK’s energy goals – maintaining energy security while decarbonising and keeping bills as low as possible.” Scotland analysis: Energy, HM Government, April 2014, pages 5 – 6 ↩

  55. Without unrestricted access to the integrated GB market, the costs of supporting Scottish energy network investment, small-scale renewables and programmes to support remote consumers would fall on Scottish bill payers alone – this would add at least £38 to annual household energy bills… in 2020. In addition, if the full costs of supporting large scale Scottish renewables fell to Scottish bill payers the total potential increase would rise considerably – up to £189 for households…. in 2020. This could rise even further depending on an independent Scottish state’s share of historic energy liabilities and how these are paid for.” Scotland analysis: EnergyHM Government, April 2014, pages 5 – 6 ↩

  56. “The UK’s Financial Services Compensation Scheme (FSCS) pays compensation to savers if their banks fail. It guarantees consumer deposits in a UK bank up to £85,000. The scheme, and any compensation payouts, is funded through charges on the banks and financial firms that are covered by the FSCS.” Scotland analysis: Financial services and banking, HM Government, May 2013, page 9 ↩

  57. “If Scotland were to be become independent, it could create particular difficulties for the Financial Services Compensation Scheme (FSCS). In an independent Scottish state, FSCS-eligible deposits held by Scottish firms (and which would therefore be covered by the Scottish compensation scheme) would be over 100 per cent of Scotland’s GDP, representing a significant contingent liability of the state – and a much more significant proportion than in the UK as a whole.” Scotland analysis: Financial services and banking, HM Government, May 2013, paragraph 4.35, page 80 ↩

  58. “Pensioners make up 19.8 per cent of the population in Scotland compared to 19.2 per cent in the rest of the UK. By 2032, based on Office for National Statistics population projections, this gap will have doubled, with Scotland’s pensioners making up 22.0 per cent of its population compared with 20.8 per cent in the rest of the UK.” Scotland analysis: Work and pensions, HM Government, April 2014, page 10. Sources for this data are: Office for National Statistics 2012 based population projections; Department for Work and Pensions calculations. ↩

  59. “The public finance projections in this paper follow the same approach taken by the Office for Budget Responsibility (OBR) in its Fiscal Sustainability Report (FSR) for the UK. The projections show that, in the years ahead, an independent Scottish state would face a substantially greater fiscal challenge than if Scotland remains part of the UK…. These greater fiscal challenges are driven primarily by:…a more rapidly ageing population than the rest of the UK, driven by a shrinking working age population. The effect will be to place increasing pressures on pensions and other age-related spending, and reduce economic growth and tax revenues.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, page 6 ↩

  60. “30.8 million individual income taxpayers in 2011-12” Income Tax Liabilities Statistics, 2011-12 to 2014-15, Her Majesty’s Revenue and Customs, 30 April 2014, page 7 ↩

  61. “Scottish onshore tax revenues per person have been only slightly lower than the UK average since devolution in 1998. Over the same time period, public spending per person in Scotland has been around 10 per cent higher than the UK average.” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, page 7. ↩

  62. “Managing the fiscal effects of the benefits of natural resources and an ageing population are exactly the sorts of challenges that fiscal unions, such as the UK’s, are able to smooth over long periods of time. For example: differences in regional demographics; the benefits of windfalls in coal and oil revenues; and lower debt interest costs from low borrowing rates, have and continue to be shared across the UK. At various times in the history of the Union, different nations will have ‘paid in’ or ‘drawn out’. But over time, everyone is stronger for having the insurance and economies of scale that the UK’s fiscal union, large economy and credible institutions provide.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, page 7 ↩

  63. There are “over 200 public bodies that currently serve people and businesses in Scotland and which may need to be replicated in a new independent Scottish state.” UK Public bodies that operate in Scotland, HM Government, 21 June 2013 ↩

  64. “In the event of independence, inevitable costs would result from an independent Scotland needing to set up and run new institutions…. Scotland would be entitled to a share of UK assets, for example public buildings in Scotland, and would have some existing organisations that functions could be transferred to. However, the set up costs for new organisations or transferring of functions to existing organisations still comes at a significant cost.“ Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, paragraph 2.3, page 36 ↩

  65. Scottish onshore tax revenues per person have been only slightly lower than the UK average since devolution in 1998. Over the same time period, public spending per person in Scotland has been around 10 per cent higher than the UK average….. Based on the earliest available data, Scottish receipts since 1981-82 have been almost twice as volatile as UK-wide receipts while Scottish public spending has been just as stable.” ↩

  66. See Appendix 1, table 12. The Government Expenditure and Revenue Scotland figures for 2012-13 illustrate that Scotland’s fiscal position is weaker than the UK to the tune of £500 per head. Government Expenditure and Revenue Scotland 2012-13, Scottish Government, 12 March 2014 ↩

  67. “An independent Scotland’s relatively large budget deficit at the point of independence would mean that Scotland’s debt as a per cent of GDP would be likely to be on an increasing path from year one. In contrast, the OBR forecasts UK debt to be falling from 2016-17 and the UK to be in budget surplus by 2018-19. In the event of independence, the allocation of the national debt would be subject to negotiation. The UK Government has stated its clear position that an independent Scottish state would become responsible for a fair and proportionate share of the UK’s current liabilities. A population split of national debt at the end of 2015-16, would mean an independent Scotland took on debt of around 74 per cent of its GDP. HM Treasury projections use this as the debt ‘starting point’ for an independent Scotland. They show that due to the persistently large annual budget deficits, debt quickly reaches unsustainable levels without policy action.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, page 9- 10 ↩

  68. “As part of the UK, Scotland will be able to support similar levels of public services with lower levels of tax. In particular, while the Scotland Act 2012 will provide the Scottish Government with further powers to vary tax and spending as part of the UK, an independent Scotland would need to increase tax by £1,400 per person just to maintain its current level of spending….As part of the UK, with similar levels of tax, Scotland will therefore be able to continue to support higher levels of public spending by continuing to pool tax revenues.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, page 10. ↩

  69. “[T]he benefit for people in Scotland of remaining part of the UK – the “UK Dividend” – is worth around £1,400 per person every year over the 20 years from 2016 17. This is the amount that each person in Scotland would be better off by every year, from lower taxes and sustained public services as part of the UK.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, page 1 ↩

  70. “Scottish onshore tax revenues per person have been only slightly lower than the UK average since devolution in 1998. Over the same time period, public spending per person in Scotland has been around 10 per cent higher than the UK average” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, page 7 ↩

  71. “Scottish onshore tax revenues per person have been slightly lower than the UK average since devolution in 1998. Over the same time period, public spending per person in Scotland has been around 10 per cent higher than the UK average.” Scotland analysis: Fiscal policy and sustainability, HM Government, May 2014, paragraph 1.3, page 18 ↩

  72. Spending in Scotland in 2012-13 (note this includes spending by the Scottish Government, UK Government, local government and local government public corporations): Health - £11.2bn, Education - £7.7bn, Transport - £2.9bn. Country and Regional Analysis 2013, HM Treasury, 9 December 2013, Table A21 ↩

  73. “As one of the world’s largest economies, the UK is a member of the G7, G8 and G20 – the key bodies of global governance. Its membership contributes to the UK’s strong voice in world affairs, from economic, finance and trade policy to social, security and environmental issues, all of which are important to Scotland.” Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 1.19, page 23. ↩

  74. “The UK is one of five permanent members of the UN Security Council, and the only state in the world which is a member of the EU, NATO, G7, G8, G20 and the Commonwealth.” Europe and international – summary leaflet, HM Government, 13 March 2014. ↩

  75. “The UK is regularly recognised in international comparisons for its outstanding tradition of nurturing these activities and networks, and YouGov research has described the UK as a ‘soft power superpower’.The UK brand is also considered to be strong in comparison with other nations around the world.” Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 2.18, page 43. Source for these surveys are: Britain: A soft power super power?, YouGov, October 2012; Anholt-GfK Nation Brand Index 2012 ↩

  76. See Appendix 1, table 13. Sources: a – European Union Population 2013, Eurostat, 2013 figures. b – Annual National Accounts, Gross Domestic Product at Market Prices, Eurostat, 2013 figures. c – The Voting System at the Council of the EU Council of the European Union. d – Seats by Member State, European Parliament. ↩

  77. As one of the largest Member States, the UK’s size and importance are reflected in the composition of the EU’s two legislative bodies: the Council of the EU and the European Parliament. The UK currently has the equal highest number of votes in the Council (29) and the third largest European Parliament delegation (73 MEPs)”. Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 3.3, page 58 ↩

  78. “The UK uses its influence on behalf of Scotland on a whole host of issues of particular interest to people and businesses in Scotland, such as budget contributions, fisheries, agricultural subsidies and Structural Funds.” Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 3.8, page 60 ↩

  79. ” Scotland benefits from UK influence in Europe, both in annual negotiations on management priorities and in discussions on the reform of the CFP framework itself, as shown by recent successes in the Fisheries Council. Reforms that will benefit Scottish fisheries (such as a more ‘regionalised’ CFP and the elimination of discarding of dead fish) are high priorities for UK government in reforming the CFP, and are areas that UK negotiators secured crucial agreements on in reform negotiations in 2013.” Scotland analysis: EU and international issues, HM Government, January 2014, Case study: Fisheries, page 59 ↩

  80. The UK fought hard for the right of the Scottish salmon industry to secure protection against what it saw as unfair (dumped and subsidised) trade from imported Norwegian salmon. The UK successfully secured anti-dumping and safeguard measures despite fierce opposition within Europe.” Scotland analysis: EU and international issues, HM Government, January 2014, Case study: Farmed salmon ↩

  81. “For hundreds of years, English, Scottish, Welsh and Irish soldiers, sailors and airmen have fought shoulder-to-shoulder in all parts of the globe. Through their long, shared history, the UK Armed Forces have become emblematic of the spirit of the UK in all its diversity – a country which can take pride in the history and traditions of the Scottish regiments whilst knowing that, when required, they will blend seamlessly into an integrated and formidable fighting force in defence of the UK and its interests. As it has done for over 300 years, Scotland continues to play an integral part in all aspects of the UK’s defence.” Scotland analysis: Defence, HM Government, October 2013 p. 30 ↩

  82. “As part of the UK, Scotland benefits from the full range of UK defence capabilities and activities. These defend UK airspace, patrol the surrounding seas and help to protect everyone in the UK against both natural and man-made threats.” Scotland analysis: Defence, HM Government, October 2013, page 6 ↩

  83. “The UK’s diplomatic global network represents Scotland worldwide, employing over 14,000 people in 267 Embassies, High Commissions, Consulates and other offices in 154 countries and 12 Overseas Territories around the world.” Scotland analysis: EU and international issues, HM Government, January 2014, page 6 ↩

  84. “Scottish businesses benefit from the active support of UK Trade & Investment’s (UKTI’s) 169 offices in over 100 countries.” Scotland analysis: EU and international issues, HM Government, January 2014, page 6 ↩

  85. In 1996, with the support of the UK Government, the EU successfully challenged Japanese excise taxes on alcoholic beverages which discriminated against Scotch whisky… Since then, the UK Government has provided strong support to the efforts of the SWA (Scotch Whisky Association) to remove and prevent a range of trade barriers across a large number of countries, notably India, Thailand, Uruguay and the Philippines.” Scotland analysis: EU and international issues, HM Government, January 2014, page 28 ↩

  86. “…This work was recognised by the SWA which said: ‘the industry works closely with the UK Government… FCO, BIS, UKTI, DEFRA, and the British Embassy network. The generally high quality level of support received over many years supports the industry’s market access ambitions. Scotland analysis: EU and international issues, HM Government, January 2014, page 28. Quoting SWA written evidence to the Foreign Affairs Committee inquiry ↩

  87. And, as part of the UK, we pool our resources to make a real difference with international aid, as the second largest aid donor in the world…” Scotland in the UK, HM Government, p. 16. Source: Net official development assistance from DAC and other donors in 2013, Preliminary data for 2013, OECD ↩

  88. “The UK is on track to achieve its commitment to meeting the global target of spending 0.7 per cent of Gross National Income (GNI) on ODA from 2013 – the first G8 country to do so. Scottish taxpayers – like all UK taxpayers – can be proud of the contribution they have made to achieving this.” Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 1.53, page 33 ↩

  89. “UK support for the Global Fund to Fight AIDS, TB and Malaria will save a life every 3 minutes for the next 3 years and dramatically improve the lives of millions of people.” A life saved every three minutes, Department for International Development, 23 September 2013 ↩

  90. See an example below on help following Typhoon Haiyan ↩

  91. “The UK’s Armed Forces regularly work with partners from the Foreign and Commonwealth Office and the Department for International Development, with allies and partner nations, and with non-governmental organisations and others to prevent conflict in unstable countries and support humanitarian missions.” Scotland analysis: Defence, HM Government, October 2013, page 6 ↩

  92. “The UK has provided £77 million in humanitarian support to help 1 million people affected by Typhoon Haiyan. This includes: matching the first £5 million donated to the Disasters Emergency Committee Appeal for the Philippines, ensuring leading charities have the resources they need to help victims of the typhoon and make the public’s generous donations go even further; £8 million for the Rapid Response Facility so partners on the ground can provide crucial humanitarian aid, including temporary shelters, bedding, blankets and solar lanterns, £8 million to fly vital supplies such as water purification kits and medical support, as well as teams of humanitarian and medical experts, to flood hit areas, up to £9 million for the deployment of MOD assets HMS Daring and HMS Illustrious to the Philippines to support the aid effort, the deployment of 21 NHS staff trained to operate under emergency conditions, £30 million to support the UN and Red Cross emergency appeals for the Philippines, including a £3 million allocation to ensure women and girls are not disproportionally affected by the crisis, a £2 million allocation to increase nutrition provision and £1 million allocation to help 3,000 people to receive the tools and materials they need to rebuild their houses. The funding will be used to deliver vital supplies to more than 500,000 victims of the Typhoon Haiyan and support UN and Red Cross teams working on the ground as they coordinate the international relief effort, up to £15 million additional funding for the humanitarian response to cover unmet needs and provide support for early recovery including a £3 million allocation being injected into the fishing industry in the hardest hit fishing communities, and £2.5 million allocation to help restore farming.” Typhoon Haiyan: Latest updates on UK aid, Department for International Development, 8 May 2014 ↩

  93. “The analysis in this paper shows that as an impediment to trade flows, the border is likely to reduce the level of real income in the Scottish economy by around 4 per cent after 30 years, with the effect building over time.” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, page 8 ↩

  94. “even if an independent Scottish state and the continuing UK were to enter a sterling currency union, a ‘border effect’ would still be likely to emerge which would reduce the level of real incomes in Scotland by 4 per cent after 30 years or £2,000 per Scottish household per year and £100 per UK household.” Scotland analysis: Assessment of a sterling currency union, HM Government, February 2014, paragraph 2.6, page 22 ↩

  95. .“The UK sits at the nexus of a huge variety of international groupings, of many of which it is a founder member, leading player or major contributor.” Scotland analysis: EU and international issues, HM Government, January 2014, paragraph 2.43, page 49 ↩

  96. “The population of the UK was estimated to be 63.7 million in mid-2012” Statistical bulletin: Annual Mid-year Population Estimates, 2011 and 2012, Office for National Statistics, 8 August 2013 ↩

  97. There were an estimated 4.9 million private sector businesses in the UK at the start of 2013” Business population estimates for the UK and Regions: 2013 statistical release, Department for Business, Innovation and Skills, 5 November 2013. ↩

  98. “Of total Scottish trade, a majority was made with the rest of the UK” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, paragraph A3, page 90. Source for this data is: Scotland National Account Project (2012 Q3 and 2012 Q4) ↩

  99. See Appendix 1, table 14. Quarterly National Accounts Scotland, Fourth Quarter 2014, Scottish National Accounts Project, Scottish Government, 14 May 2014, Supplementary Tables, Table 9 ↩

  100. “Scottish businesses benefit from the active support of UK Trade & Investment’s (UKTI’s) 169 offices in over 100 countries.” Scotland analysis: EU and international issues, HM Government, January 2014, page 6 ↩

  101. “The UK’s Financial Services Compensation Scheme (FSCS) pays compensation to savers if their banks fail. It guarantees consumer deposits in a UK bank up to £85,000. The scheme, and any compensation payouts, is funded through charges on the banks and financial firms that are covered by the FSCS.” Scotland analysis: Financial services and banking, HM Government, May 2013, page 9 ↩

  102. The Act of Union came in to effect on 1 May 1707. Union of England Act 1707 ↩

  103. “Average annual growth in onshore GVA per head from 1963 to 2012 was 2.0 per cent in Scotland compared with 1.9 per cent in the UK.“ ) Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, paragraph 1.8, page 18. Sources for this data are: Scottish Government, GDP statistical bulletin (2010Q1 and 2013Q1); ONS, UK real GVA excluding North Sea oil and gas (KLH7 and UIZY); ONS mid-year population estimates; General Register Office for Scotland. ↩

  104. “Scotland has performed well relative to comparable independent countries: Scotland has very slightly higher economic output per person than Denmark and Finland, significantly higher than Portugal and not far behind Austria, Ireland and Sweden. Having been weaker in the 1970s and 1980s, growth in output per person is above the median for comparable independent countries over the 1990s and 2000s. Over the past 20 years, Scotland has maintained a significantly higher employment rate than the median of these countries.“ Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, page 6. ↩

  105. “…in 2011, output per person was £20,511 for Scotland… behind only London and the South East.” Scotland analysis: Macroeconomic and fiscal performance, HM Government, September 2013, paragraph 2.1, page 16. Source for this data is: ONS, Regional Gross Value Added (December 2012). ↩

  106. .“What we have is precious. What we have works. Our incredible family of nations and people… Together, we created world class institutions like the NHS and the BBC. When Europe faced its darkest hour, we stood together as a beacon of hope.” Prime Minister David Cameron, 15 May 2014 ↩

  107. The powers of the Scottish Parliament and Government were established by the Scotland Act 1998 and were further increased in the Scotland Act 2012. The Scotland Act 1998, The Scotland Act 2012 ↩

  108. “The Scottish government is responsible for matters including health, education, justice and policing and local government.” Maintaining and strengthening the Scottish devolution settlement, HM Government. ↩

  109. From April 2015, the Scottish Parliament will have the power to set Stamp Duty Land Tax and Land Fill Tax. As well as additional borrowing powers. From April 2016 the Scottish Parliament will have the power to set Scottish rates of income tax. Scotland in the UK, HM Government, 7 May 2014, page 4 ↩

  110. “The Scotland Act 2012 transferred more powers to raise taxes from the UK government to the Scottish Parliament along with other measures to strengthen and develop the devolved institutions.” Maintaining and Strengthening the Scottish Devolution Settlement, HM Government. The Scotland Act 2012 ↩

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