I realise there isnt a great deal of point in writing this as most of the people who may end up reading it either don’t care as they aren’t affected, or probably agree with me anyway. But it may get shared around and change a few people’s minds or at least open a few eyes ahead of a possible key turning point for a country that I like and is important to me. Ive read a lot about the forthcoming referendum in Scotland, and particularly comments from people across the political spectrum on their own opinions of this particular debate. I note a worrying consistency in the rationale for independence which contains a number of logical fallacies which I think need pointing out, although, as ever, when you point to someone that they might be wrong the natural human tendency is to retreat even further into their original ideological belief. So perhaps this exercise is futile; in any case, I feel compelled to share my view. I should also point out that I really have no stake either way in this debate, aside from an emotional one, and my views are probably as unbiased as they are likely to be. If anything, I think I am of the opinion that the rUK may likely benefit from Scottish independence in the mid-long term, particularly as I am a relatively right-wing voter, the reduction of power of the Labour party in the rUK probably means that in the future we are likely to gravitate slightly towards more free market, smaller state policies than we might do otherwise (which I firmly believe are in the best interests of everyone ultimately). I find it amusingly ironic that the country that gave the world Adam Smith is now so resolutely socialist-leaning. A quote I read today seems to sum up my understanding of the rationale of a significant proportion of ‘yes’ voters: “We want the old and vulnerable protected, we want those who need state benefits receiving it, we want free education for our kids, we want a free NHS service for those that need it, and we wanted a government WE voted for to be in power so we that OUR needs and wants are listened to and acted upon”. Let’s de-construct this argument for a second: First point to note about this I think, is that for the most part, don’t all of these things actually exist? Right now “old and vulnerable” people receive a pension from the government. This is essentially paid for by existing tax payers right now – there is no such thing as the national insurance scheme (look it up if you don’t believe me). Existing tax payers go quite some way towards taking care of the retired segment of the population who, if they hadnt managed to save up for their own retirement otherwise, would be in a very dire situation. I am not saying that the state pension system is perfect, and shouldnt be refined, but it is a whole lot better than no state pension at all. By the way, paying for current pensions is already the single largest government expense and already consumes 20% of the UK’s entire government budget (and is set to grow materially). If you want to increase the current pension payments by, say 15% which isnt a massive increase, that means another 3% of the UK’s budget, i.e. equivalent to the ENTIRE government budget that gets spent on transport. Or nearly the entire government budget that gets spent on policing. Just think about that for a second. Those who need welfare benefits receive them. The UK already has one of the most generous welfare systems in the world. We have generally had a consensus for the past several decades that it is overall more beneficial to society to help protect those less fortunate for whatever reason, be it disability, injury, inability to find a job etc. This leads to better happiness, less crime, more stable environment for businesses and individuals to actually create growth and wealth in the economy and so it is worth having those tax pounds extracted from companies and individuals who create wealth and distributed to those who don’t, but need the money. However, human beings respond to incentives – they respond really, really strongly to incentives. If you engender an environment or situation whereby someone can choose not to work and be financially equivalent or better off, then they will chose to do so, as this gives them a higher quality of life (i.e. more free time) than having to work 35+ hours per week to be able to purchase the same goods and services. Although there is inevitable abuse of the system now, simply raising the level of benefits that people get is not a smart solution as it will only tend to increase this effect. As for free education and free NHS service, as far as Im aware, these ‘government benefits’ are already in existence – I fail to see how independence is going to make them even MORE free. The rUK is remarkable unlikely to meddle with the NHS or education as these are so fundamental to the fabric of our society, and Scotland is likely to have enough devolved powers to continue to run these services as it sees fit in a no-independence scenario in any case. All these items mentioned in the above quote currently account for c. 67% of government spending, or about £478 billion per year projected in 2014. I.e. these things consume by far the majority of all government spending in the UK, and this would therefore be true in an independent Scotland. The UK spends more than it receives in tax revenue each and every year – in the last fiscal year it overspent by £107bn. If an independent Scotland manages to keep its share of spending on these services at the same level, then it will also still have a large budget deficit. The logical conclusion from my point of view to all this is that: 1) all these services already exist, and are better than the vast majority of other countries in the world. 2) Increasing the level of these services by even modest amounts will result in very much higher levels of government spending, because they account for such a large overall proportion of government spending already 3) Material increases in total government spending is absolutely not affordable or possible because government spending already runs at a substantial deficit. Furthermore there are a number of reasons why independence runs the risk of a material decrease in these levels of services. I don’t need to point out all the negatives in great detail but a key one as has been pointed out is currency risk and the associated problems this may have for government spending. Remember that budget deficit? That gets funded every year by borrowing money from investors. If investors don’t want to lend you money, or it becomes expensive to do so, then you can no longer borrow as much. By definition you can no longer afford to keep government spending where it is at, and since the vital services (as per the quote above) account for 67% of government spending, they have to be cut – it would be impossible to stop spending entirely on defence, transport and policing which make up the majority of the rest of the budget, and you can’t stop spending on interest on existing government debt (the remaining piece of the pie) as this causes a debt default and the ability to borrow dries up completely. The last point of the persons argument is somewhat more worrying. We operate in a democracy which although not perfect, has seen the greatest rise in living standards in history of the world over the past several centuries. Arguing for independence because one particular subset of people did not vote for the CURRENT government is effectively arguing against democracy. Everyone who holds a particular political opinion will at some point find themselves in a situation where the current government does not represent their views. This will be absolutely no different in an independent Scotland, because within Scotland there is a diversity of political views, and this will ultimately be represented by several political parties, who will be in power at various times. There will be somewhat more right-wing and somewhat more left-wing governments over time, whatever the parties are ultimately called. This is a complete non-argument. In summary. there is a good reason that the current UK government has not and does not increase levels of services in pensions, welfare, education and healthcare. It is not because it doesnt want to – these would all be fantastic vote winners. It’s because it CAN’T. It is financially impossible, at least other than temporarily. There is absolutely no reason why this would somehow become suddenly financially possible for an independent Scottish government. Governments have to operate within the realm of reality, just like individuals. If anything there is greater risk to the downside for these services as the SIGNIFICANT amount of instability a separation would create mean it will be harder to fund spending on these services. This almost certainly cannot be rectified by simply increasing taxation or other short term methods. Does this mean you shouldnt vote for independence? That is not what I am saying. But go into this with your eyes open to the facts. The real facts, and not biased facts espoused by politicians with a vested interest in a particular result. You may want independence for ideological reasons. That is fine. But for purely rational, economic reasons, it doesnt make any sense at all. This essay has been purely to discuss one particular comment on a narrow aspect of government services. I haven’t even touched on the issues of: currency risk playing havoc with mortgage and loan rates; instability of North sea oil revenue, and the havoc that could play with an independent Scotland budget; the loss of jobs and industry that are likely to occur in the short term, The issues surrounding the EU; how to carve up the various government departments, defence forces and associated infrastructure. There are a host risks to the downside of independence. It’s not a popular argument pointing out the negative aspects of something. But this doesnt make it an invalid argument. Please think about these things carefully before you vote Scotland!
Posted on: Mon, 08 Sep 2014 12:20:24 +0000
Trending Topics
Recently Viewed Topics
© 2015