I can see three desirable contributions that could come from such a pamphlet : one, generally strengthen the arguments for independence; two, deal with the Scottish Nationalist Party (SNP)’s contradictory and weak policies in the Yes campaign particularly around its plans for the economy and the financial system and the European Union that are the Achilles heel of the Yes campaign; and three, unite all these left currents and the thousands of independent activists around a left wing pole of demands that shifts the SNP to the left and deals with the attacks of the NO campaign on the case for independence.
How does the pamphlet fair on these three counts? That is what we will explore in the review of its contents.
The Case for Independence
In general the pamphlet succeeds in strengthening the case for independence. It argues correctly in my view that an in independent Scotland where North Sea oil and other resources are fully nationalised would see the majority of Scotland’s population be better off. Also, a democracy without a monarchy and their special crown powers would lead to a more democratic society. Finally, not being part of NATO would mean that it would less likely that Scotland would be involved in any foreign military adventures against the wishes of the majority of the population. These are all achievable for a liberal capitalist democracy. But the problem is that none of these policies are SNP policies and they are not widely advocated in the YES campaign which is dominated by the SNP.
The major issue with the pamphlet is that it is marred by factual errors and partial statements which give misleading conclusions. This the pamphlet shares in common with many of the SNP’s statements and policies. The problem with this is that opponents of independence are able to seize on these errors and this misinformation, highlighting them in propaganda and public utterances and so discrediting the whole argument for independence.
Here are a few examples and we will give more when we examine if the pamphlet meets our second and third objectives. Fox says that independence is a threat to political and economic power of the British state. One might agree with former although SNP independence would see an almost permanent Tory majority in the rest of the UK and Scotland staying in NATO . But there is a threat that SNP independence is the start of a dynamic that could wind up with a radical political finish which could see Scotland eventually leave NATO and be a model for the rest of the UK. But is it the case for economic power?
Table one below shows: Scotland’s public spending deficit (£ billions) over the last seven financial years with the it’s per capita and geographical share of North Sea Oil tax revenues ; the total UK public spending deficit (£ billions); the deficits (percentage) in terms of GDP for both Scotland and the UK; and the tax revenues (£ billions) from North Sea Oil.
Table 1 deficits in £ billions and % GDP
You can see from the table that the UK without Scotland would be better off. They would reduce the deficit by than more than would lose out in Scotland receiving its geographical share of tax revenues from North Sea Oil. In 2012/13 financial year this net benefit would have been £12.1 billion, Scotland’s deficit with its geographical share of North Sea Oil Revenues.
The pamphlet states that total tax revenues for North Sea oil in the last year were £26 billion. They were in fact £6.5 billion as table one shows and the highest they have ever been in one year since 19179 was £12.4 billion. This type of wrong information puts question marks over the real benefit of North Sea Oil which is key to independence.
The pamphlet’s also claims that Scotland pays more tax (including geographical North Sea Oil revenues) as percentage (9.8%) of the total UK tax than its share of the total UK population (8.4%). But omits to say that more is spent on public services in Scotland (9.4% of the total UK public sector spend) and this is for a larger monetary total than the tax revenues because the UK is running a £120 billion public spending deficit.
This is why another of pamphlet’s claims that every person in Scotland will be £500 a year better off is preposterous. All that would happen is that the deficit will be smaller (£12.1 billion) in absolute terms with the geographical share of North Sea Oil tax revenues. But the deficit would now be owned by Scotland and would have to be financed by Scotland while currently it is owned by the UK and financed by the UK’s whole economy. And because of the volatility of North Sea Oil tax revenues the Scottish public spending deficit as percentage of GDP could be larger than the UK’s.
Similarly, the pamphlet contrasts Norway’s prosperity with Scotland but fails to mention it is largely because of the majority control of their North Sea Oil industry through state ownership of Statoil for over 20 years before it was partly privatised over a number of years (Norway still owns over 70% of the company). Norway was then able to keep most of its North Sea Oil revenues for the public good. The SNP conveniently don’t mention this so as not have the demand for nationalisation of the North Sea Oil industry raised in Scotland. It would have been useful for the pamphlet to have raised this as we show later nationalisation of North Sea Oil is key to the economic and financial viability of an independent Scotland.
The pamphlet also hails the Eastern Europe former so called communist states successful independence and membership of the European Union (EU). But again fails to mention that most of these countries have been in financial crisis, have had severe austerity imposed by the EU and International Monetary Fund. The latest example is Serbia which on the brink of bankruptcy and is seeking a loan from the UAE rather than seek a bailout from the IMF. Many of the people in these countries long for the economic and social security of the old so called “communist states” if not their lack of democracy.
Most of the false assertions that I have covered in this section have also been made by the SNP which have been dissected and exposed by the NO campaign.
The Achilles Heel
Any meaningful contribution from the left to the independence debate must strengthen the arguments of the Yes camp. The SNP is coming under attack for its plans on the economy and financial system as being unworkable and unacceptable.
The deficit is running at £17.5 billion, we have real cuts of over £6 billion many of the result of the SNP freezing council tax for several years. If the cuts were restored which is one of the demands that should be put on the SNP we would have a deficit of £23.5 billion (17.5bn plus 6bn form the restoring the cuts). But Scotland’s geographical share of North Sea Oil tax revenues for the last fiscal year id just under £6 billion. This is only enough to restore the cuts never mind reducing the deficit which still has to be funded by borrowing on the international financial markets. Meaning that the SNP’s idea of putting some of the tax revenues from North Sea Oil into an Oil fund is fanciful – it would have to be funded by tax rises or spending cuts as the NO campaign is saying.
The pamphlet rightly says that North Sea Oil should be nationalised but fails to draw the link the SNP’s funding hole and the increased revenues from Nationalisation – in the last fiscal year nationalisation of North Sea Oil would have produced £20 billion tax revenues. This still does not cover the gap in the deficit and restore spending cuts but as we have pointed out how much oil is produced is determined by the oil companies – reducing the amount when prices fall. Under nationalisation production could be increased when prices are low to a level that ensures Scotland has no deficit or in the years when prices produce a budget surplus put the surplus into an oil fund as we have advocated previously.
The deficit and the volatility of oil revenues, size of Scotland share of the UK debt and the partly nationalised RBS is why the SNP is advocating their “Sterling Zone”. Total UK public debt at end September 2013 £1293 billion (the UK government’s headline figure excludes £115 billion of debt raised for the financial bailouts). Scotland’s per capita share of this debt would be £109 billion. There are arguments around repatriations for historic North Sea Oil revenues but on the negative side as we have shown more is spent per head of population in Scotland on public services than the UK as a whole. Also, £65 billion of the debt run up in the financial crisis was to bail out to Scottish banks (Lloyd’s bailout happened because they were forced to take over the toxic Bank of Scotland). The argument that the banks were the responsibility of the UK government does not hold under independence. AIG, Lehman’s, Merrill Lynch run up most of their losses through their London operations overseen by the UK’s financial regulatory authorities but they were US registered companies and it was the US government and US central bank that took responsibility for these banks, bailing them out or not or arranging for them to be taking over by other US banks.
It is for all of the above that the SNP wants a “Sterling zone”. Under this plan the Bank of England (BOE) will underwrite RBS, issue our currency while the HM Treasury (HMT) will issue our debt to cover our annual deficit and carry our historic debt. Much more extreme than the Euro where countries raise their own debt and underwrite their own banks although they have received bail out loans from the EU/ECB with draconian measures attached.
The SNP’s proposal has been rebuffed by BOE, the HMT, the UK government and the opposition. Even if such a plan was to come in play the BOE and HMT would require strict control over Scotland’s economy and budget and Scotland would be tied to the BOE’s monetary policies and interest rates.
The pamphlets answer to this is a Scottish pound tied to the pound (but no mechanism is described for how this will be carried out) and tighter regulation of the banking industry. Tying a Scottish pound to the pound would require large currency reserves to buy and sell the Scottish pound on the currency markets to keep it in a narrow range against the pound. Where are these reserves going to come from. Regulation is not going to stop RBS having further loses if there is another financial downturn (it is still loaded with toxic assets) and who would underwrite it in such a scenario. This rooted in the pamphlet’s analysis of the financial crisis which it says was entirely predictable but few on the left including Fox failed to do so although some in his party did. Fox sees the crisis as the result of a credit boom rather than locating it in the policies that were designed to deal with the structural crisis that started in mid 1970s. Fox partly blames Bernanke for the mess but he did not head up the US central bank (FED) until January 2006 long after the policies were put in place that led to the financial crisis and 20 months after the FED lit the blue touch paper by starting to raise interest rates and is generally credited with saving capitalism from a depression.
The answer to the currency problem is to float the Scottish currency backed up by nationalised oil tax revenues. The currency would be relatively strong because of the lack of deficit which is not dependent on the volatile smaller tax revenues from a privatised North Sea Oil industry. It is not essential to have the pound to trade internationally or with the rest of the UK after all most of its trade is with Europe and the US who don’t have the pound!
RBS should be nationalised and, deleveraged and detoxified of its bad assets and turned into a people’s bank used to fund renewable energies, public transportation and social housing financed by the oil fund. This measure would be extremely popular as the Scottish public is extremely hostile to banks and RBS in particular because of their role in the financial and economic crisis.
The pamphlet skirts around the European Union (EU) and the Euro. It falls in to the SNP’s trap of believing that Scotland would not be forced to take the Euro but accepts it is a future possibility to use the Euro. The SNP now admits that they will have to negotiate to enter the EU albeit after the independence vote but before Scotland becomes legally independent. Scotland would be considered a new member state that is the clear message from EU commission. The Euro exceptions given to the UK and Sweden were because they were member states prior to the introduction of the Euro. The EU is tightening its control and any new member would be expected to eventually join the Euro have its budget and financial system tightly controlled by the EU/ECB. Witness the EU’s protected negotiations with Iceland.
The pamphlet missed the opportunity to clear up the contradictions on EU and put forward a policy that has Scotland outside a neo-liberal institution. It could have advocated joining the European Free Trade Association which would enable it to trade with the EU as Norway has done while trying to build a peoples’ Europe by linking up with progressive forces across the continent that are resisting the EU’s austerity drive.
The SSP have made the same error as they did with the Make Poverty History (MPH) campaign in 2005. Here they counterpoised Make Capitalism History (MCH) to the populist MPH. This completely let MPH off the hook as the MCH had little resonance in the broader campaign and put no demands on MPH. The correct demands then were cancel the debt and repatriation payments. These were concrete demands which would have put pressure on the MPH reformist leadership and shown a practical solution to millions supporting MPH.
Similarly counterpoising an Independent Socialist Scotland to the SNP’s “independence” lets the SNP off the hook. Support for a Socialist Scotland is small and the SSP can be easily ignored by the SNP only being used to create the illusion of a broad “Yes” campaign. Concrete demands around restoring the cuts, nationalising oil, creating real jobs, nationalising the banks (effectively RBS) , no monarchy/no crown powers and no to NATO would put real pressure on SNP and deal with the real weaknesses in their policies that are being exploited by the NO campaign
But the Socialism put forward in the pamphlet seems to be no more than being the best fighters for social reforms and some nationalisations. A sort of modern “Spirit of 45” without the monarchy. There is no mention of extending democracy beyond the parliament or dealing with women’s issues which are currently in the headlines in Scotland – violence against women and prostitution – or immigration or LGBT. Or of eliminating the rule of capital and replacing it by an economy planned, owned and run by the majority. This is a great pity as the pamphlet could have drawn on the rich history of the SSP’s policies on these issues that were developed over ten years plus and presented them in a popular appealing way.
Uniting the Left
The SSP is one of several small left currents that exist in Scotland. The others include (apologies if I have missed you out): International Socialist Group (Scotland); International Socialist Network; SWP, Solidarity, Socialist Party Scotland, Green Left, RCN, Left Unity and the Radical Independence Conference as well as thousands of independent activists. Most of whom were in the SSP with the exception of the Green Left and Left Unity prior to the Tommy Sheridan affair – although many young people in these currents have become active since the Sheridan affair split the SSP. The SSP then claimed over 3,000 paper members and polled nearly 250,00 votes, 6.5% of the total, and elected 6 MSPs in the 2003 elections to the Scottish Parliament. In the 2011 Scottish elections they received just over 8,000 votes, 0.4% of the total. Its annual conference that was once attended by hundreds now has numbers in the tens.
Yet Fox still portrays the SSP as the only serious socialist party in Scotland now ordained by the SNP through their seat at the table of the “YES” campaign. There is too no acceptance from him of being partly to blame for the Sheridan split. Others who were in and some still in the SSP accept their part in helping create the Sheridan monster and recognise they were wrong to keep the truth from the membership.
As a consequence the pamphlet written by Fox comes over at times as recruiting material for the SSP to help restore them to their former glory and rightful place in Scottish politics. I would have liked to have seen the pamphlet more orientated to the left currents and activists I mentioned above taking up the debate about how one creates a left pole of attraction in the independence campaign. One that can develop demands with large support that confronts the SNP’s weak policies and strengthens the YES campaign and hence the chances of winning the referendum. At the same time bringing all the left currents together as part of a process of re-aligning the left and eventually moving to a new united left movement and potential party.
That vital role is likely to be filled by the Radical Independence Conference which has its next conference on 23 November 2013. Over a thousand, including many SSP members, are likely to attend as we enter the last year of the independence campaign. Let’s hope the conference can develop a succinct set of demands that can pressurise the SNP to move left and also help win over the large numbers of don’t knows to the Yes camp.
Ralph Blake is the pen name of an economist in the Scottish financial industry and a former head of research at global investment banks.
2012/2013 data derived from data from HMRC, HM Treasury and ONS
For 2013/2013 the Treasury includes payments from interest on UK debt bought by the Bank of England. Most economists exclude this number from the annual deficit because the Bank of England has paid for the present value of these interest payments and these should be offset against the money they printed to do this.
 Fulbrook, Mary, The People’s State, Yale University Press 2005.
 Bloomberg – £1020bn in Gilts, £226 bn index linked Gilts, £39bn Treasury Bills, £4bn Transport bonds, £4bn Bank of England bills
 Money Market Madness, Scottish Socialist Voice, 321, January 2008; Sub-Driven Recession Coming Soon to a Neighbourhood near You, SSP pamphlet May 2008.