Estimating the costs of independence: An independent Scotland is unlikely to be a land flowing with milk and honey

There has been an interesting debate between Patrick Dunleavy and Iain McLean about the costs of Scottish independence. Jim Gallagher adds his voice to the debate to outline the context of the different costs and highlights why these numbers matter.

It’s not surprising that the Scottish government tell voters in a referendum that an independent Scotland would be flowing not with milk and honey, but with low taxes and high public spending. Business tax would be reduced, and public spending increased to produce a more equal society. This particular argument about numbers, however, has its roots in a UK government publication that suggested Scotland’s fiscal position would be markedly less idyllic. One reason would be the additional costs arising directly from setting up a separate state. Iain is surely right to say that the £200 million suggested by Patrick won’t pay that bill.

Different kinds of independence costs

In principle it should be possible to split these state-building costs into 3 categories:

  1. One-off, non-recurring, costs of transition (this is where Patrick’s work was first referred to). These matter a lot in the short-term, but, amortised over decades, are not all that significant.
  1. Additional costs from setting up new Scottish institutions to discharge functions currently managed at a UK level. Obviously Scotland would need a Treasury, Foreign Office and other core national government functions. But as Iain rightly points out the big money is in the main non-devolved functions of government–tax collection and benefit payment. Patrick says these are not ‘set up’ costs. Iain disagrees. But regardless of what they are called, they will have to be paid.

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