Future of UK and Scotland conference

The Economic and Social Research Council has launched its Future of Scotland programme that will provide evidence and analysis across a broad range of policy areas. This includes a two day conference in Edinburgh,The Future of the UK and Scotland, that brings together a large number of academics and policy specialists.

This is a very welcome approach for two reasons. Firstly, the programme recognises the UK dimension to the debate. Secondly, it seeks to provide some objective evidence to a debate that is all too often dominated by arid rancour.

I found this morning's session particularly helpful, as it focused on the Scottish economy in national and international contexts.

Dr Angus Armstrong from NIESR, explained that the proposed currency union is more than just a monetary union. Just as the Euro crisis has demonstrated, it is not the currency but the national economies that are the problem. His paper takes us through the setting of common interest rates, financial infrastructure, a banking union, and probably most topical, how the currency union might provide liquidity support. He suggested this might be done through a liquidity support contract. However, this would be complex and difficult to enforce across different jurisdictions. He also highlighted a problem I hadn't considered before. If we had an oil price boom, Scotland's economy would be in growth while England's would slump. This would require very different monetary policies. The same applies in reverse if the oil price crashed.

Paul Johnson from IFS, painted a very dismal picture of the UK and Scottish economies over the next ten years. Scotland would not be exempt from this and has added pressures of starting from a higher spending base and more challenging demographic change. He recognised that independence would give us the opportunity to design a different tax system, even if the constraints of the currency union meant the overall pot size was  similar. His charts show that income is spread more equally in Scotland than England, largely because of the London effect. This makes tax redistribution in Scotland politically challenging. This confirms my view that we should focus on wages - such as Ed Miliband's pre-distribution approach.

Professor Peter Sinclair gave an entertaining presentation, rich in Scottish historical precedent. He felt England had been well governed by Scots, but perhaps were not quite ready for independence! The meat of his paper was to contrast the economic performance of large and small countries. Mixed evidence at best for small countries would be a fair summary. An important factor is that we would have to factor in higher borrowing costs, at around an extra 55 basis points and that's not cheap.

The papers and slides should be available on the ESRC website soon at www.esrc.ac.uk/scotland. Well worth a read and one to watch for further events and information.