Which way now for public services in Scotland?

In September, Scottish residents will vote in an independence referendum. I asked experts working in housing, local authorities, social work, charities and public health what impact a yes vote might have on social policy – for the full piece, head over to the Guardian.

The piece looks primarily at social policy, but I’m including two important comments that look at related issues of economic and business impact:

Jeremy Peat, director, David Hume Institute
The referendum campaign to date is characterised by masses of material from the interested parties on both sides, but still an inadequate flow of clear information and evidence-based and objective analysis. On the economic front the key, inter-related, issues are regarding currency and the extent of enhanced freedom on monetary and fiscal policy that independence would bring. The choices on the currency front are fourfold.
If a sterling currency union were agreed – not impossible despite the Chancellor’s protestations – then monetary policy would be set by the Bank of England in the interests solely of the rest of the UK. There would be very severe constraints imposed on the fiscal front, both on the level of deficit and (some) specific taxes and policies. Any ‘sterlingisation’ – unofficial use of the pound – would again mean severe constraints, this time to keep the international markets happy. There would be a host of other risks.
1Adopting a new currency would allow more freedoms in principle, but in practice a really tight policy stance would be required if the currency were to be pegged to sterling (as would make sense) at least until credibility in the markets was achieved. A new Scottish currency is seen by many nationalists as the real route to independence. There is logic to this, but also heavy costs in terms of getting there and staying stable – especially as this would be a petro-currency and liable to high volatility.
2Adopting the euro used to be Plan A, but ‘events’ in recent years have reduced its popularity. If Scotland took up the euro, then monetary policy would be set by Europe and fiscal policy would be mightily constrained.
There is no straightforward solution on currency that also achieves strong policy independence. Another key point to note is the fact that the rest of the UK is far and away Scotland’s strongest trading market. Any outcome that introduced currency uncertainty into that trade and/or heavy transaction costs would be deeply unwelcome. Finally, it is important that a degree of certainty be achieved ‘ere too long, to reduce the risks of corporate and capital flight.

Liz Cameron chief executive of the Scottish Chambers of Commerce
“The full implications of Scottish independence would, of course, not be known until post-referendum negotiations were completed between Scotland and the rest of the UK and between Scotland and international bodies such as the EU. Social policy would not be known until the outcome of elections for the government of an independent Scotland was apparent. Equally, the full implications of a ‘no’ vote are also unknown as the outcome of the 2015 General Election is a variable, as is the result of any future UK-wide referendum on the UK’s continued membership of the EU. What can be said with certainty is that Scottish businesses will continue to adapt to change, from whatever source, just as they have done with the advent of devolution and with the effects of the financial crisis and recession.
“Whatever the outcome of the referendum, Scotland will continue to face major challenges as the economic recovery gains momentum. Skills issues are important for businesses and we are keen to ensure that potential skills gaps are addressed before they result in barriers to growth. Similarly, businesses are keen to ensure that young people do not get left behind as the jobs market continues to improve. Scottish Chambers of Commerce is currently working with businesses across the country to identify new opportunities for young people to gain employment at a suitable skill level within Scotland’s small and micro businesses. Scottish businesses are ambitious for growth and we need to make best use of our most valuable resource: our people. Some of the relevant powers are devolved whilst others currently rest with the UK Government. Either way we must ensure that businesses are supported to grow, to create wealth and jobs and to secure Scotland’s economic success.”

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