Nicola Sturgeon has suffered a fresh blow after being warned the transition to Scottish independence would be “difficult and painful”, bringing with it immediate “significant economic costs”. Last month, the Prime Minister and SNP suffered a damaging blow after the Supreme Court ruled Scotland cannot proceed with a planned independence referendum without the consent of the UK Government. Recently, the Scottish Government released the third in a series of papers aimed at demonstrating how Scotland would function if it did indeed split from the rest of the UK.
The document, entitled ‘Building a New Scotland: A stronger economy with independence’ attempts to deal with elements such as currency, re-joining the European Union, trade and borders.
Jonathan Portes, Professor of Economics at King’s College London; Senior Fellow at UK in a Changing Europe think tank, acknowledges the paper is a “serious attempt at setting out a prospectus for an independent Scotland”.
But the expert told Express.co.uk: “Overall, there is no reason that over the medium to long term Scotland could not be a well-run and prosperous country outside the UK.
“However, the transition is likely to be difficult and painful, and in the short run to involve significant economic costs.”
Professor Portes has identified “two big issues” from the recent Scottish Government paper on independence that could blow a huge hole in Ms Sturgeon’s blueprint and “damage” the country’s economy.
He argued: “If, as the paper correctly states, Brexit has damaged the UK and Scottish economy by raising trade barriers with the EU, then it follows almost automatically that Scexit, by raising trade barriers between Scotland and England/Wales, will damage the Scottish economy.
This will only partially be compensated by reduced barriers with the EU, just as UK trade deals with the rest of the world can only partially compensate for Brexit.
“So, while the paper is correct that Brexit is a negative economic consequence for Scotland of being part of the UK, it is not one that can be reversed by Scexit, which at least in the short term would make things even worse.”
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The second major issue identified by the expert is around fiscal policy and specifically, the planned move to Scotland’s own currency following a split from the rest of the UK.
Professor Portes continued: “The paper sets out sensible principles for Scottish fiscal policy but largely dodges the issue of what tax rises/spending cuts would be required to deliver them over the medium to long term (in the short term, the huge rise in energy prices would be good for Scotland fiscally but that is not expected to last long.).
“The currency issue is largely a political one. Economically, it would be perfectly logical and achievable for Scotland to use the pound as a transition and then to create a Scottish pound.
“However, that would be entirely dependent on a cooperative and consensual approach to independence from the UK and Scottish governments. The experience of Brexit does not suggest that this is guaranteed.
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“Similarly, whether the EU would or would not insist on Scotland joining the euro would depend on politics, not economics (I’d guess that they would not in fact insist on this).”
Last month, Ms Sturgeon’s independence plans suffered a huge blow when the Supreme Court ruled that she does not have the power to hold the vote without the UK Government’s consent.
Court president Lord Reed rejected the argument from the Scottish Government that any referendum would simply be “advisory” and would have no legal effect on the union.
This would have seen people only being asked to give their opinion on whether or not Scotland should become an independent country.
Ms Sturgeon has stood firm and admitted that while she was disappointed but respected the court’s ruling, judges do not make the law and only interpret it.
The First Minister insisted a referendum remained her preferred option, but without an agreement in place, the SNP would use the next UK general election as a “de facto referendum” in an attempt to show that a majority of people in Scotland support independence.
However, Prime Minister Rishi Sunak has followed the lead taken by his predecessors Boris Johnson and Liz Truss by insisting that the UK government will not allow a second independence referendum to take place anytime soon.