The referendum’s focus has largely been on what Scottish citizens have been promised; a living wage and 30 hours of subsidised childcare per week during term time included. However, Alex Salmond’s claim that the average Scot will be £1,000 better off per year clashes with that of the UK Treasury, who suggest that Scottish citizens will be £1,400 poorer per year, and subject to possible tax increases to cover the costs of independence. Meanwhile, the impact of a Yes vote on the average British citizen has been overlooked for the most part.
Value of the pound
Both Westminster and the Bank of England have made it clear that keeping the pound is not a viable option for an independent Scotland. David Nicholls, Alliance Manager at UKForex, says it is likely that the value of sterling could fall by between five and ten percent in the event of a Yes vote. “The UK will be a weaker economy without Scotland, and until the uncertainty over monetary and fiscal responsibility is cleared up, sterling would weaken against the euro and dollar in the aftermath of a Yes vote.” Professor Philip Booth, of the Institute of Economic Affairs, however, disagrees, and explained to the BBC that as Scotland does not constitute an especially large proportion of the UK economy, there is no obvious reason as to why the value of sterling will fall.
National debt
If a fair share of assets – such as sterling – are withheld from an independent Scotland, it could theoretically walk away from its share of UK national debt – between £100 – £143bn of the UK’s total £1.4trn. There is the possibility that this will be written off, as was the case with Libya in 2008, though this is unrealistic, given that Libya’s was deemed odious debt. If the UK were to take on Scotland’s share of the debt, it would most likely seek something in return – possibly a share of future North Sea oil revenues. In the meantime, a higher proportion of debt to GDP could result in tax hikes and reduced public spending, due to a higher interest rate on Exchequer borrowings.
UK housing market
The September 2014 Rightmove House Price Index states that, historically speaking, uncertainty has always had some form of negative impact on housing market activity. Taking into account the speculation surrounding factors such as potential interest rate increases, the availability of wholesale funding for lenders and the location of several major financial institutions, the market is likely to see a dip. “Even the very debate around Scottish independence and possible implications for the economic outlook for the rest of the UK could cause uncertainty in the minds of potential home-movers”, said Miles Shipside, Rightmove Director and Housing Market Analyst. “Should the independence vote win the day, there could be months of uncertainty with the forthcoming general election causing further disruption.”
Investment potential of the UK
Currently no predictions of a major impact on international investment in the UK exist: chiefly because investors are aware that alternative currency arrangements would not take place for at least two years, much like when EU nations moved from their own currencies to the euro. However, the prevailing sense of uncertainty surrounding all aspects of the referendum, particularly the currency debate, could cause international investors to withdraw from the UK. “Fears of a continued fall in the pound may see overseas investors look to take their money out of the UK,” explained Nicholls. “However, a collapse in the UK economic recovery is unlikely, and we expect most international investors to keep funds in the UK while they see how the situation plays out over the following 18 months.”
2015 general election
In the event of a Yes vote, there would be a period of at least ten months following the general election in which Scotland would remain part of the UK. Pending the separation, the long-term interests of remaining MPs in Scottish seats are unlikely to correspond with national interest. It is possible that next year’s general election could be postponed until May 2016, two months after Salmond’s planned “break up”, marking the first delay since 1940. UK Parliament insists that if the election does take place as planned, the government would “seek to act in the interest of the new UK state, even if its majority depended on Scottish seats.” Without a Scottish presence in Westminster, Labour would lose over ten percent of their 258 seats, which could profoundly affect the political landscape of the UK by keeping the party out of power for years, or even decades.