Dirty Tricks


I've yet to make up my mind about how to vote in Scotland's 2014 referendum on independence - there's a long way to go yet.

But I appreciated this article in The Scotsman by George Kerevan - for laying bare the underhand and nasty tactics of the 'Better Together' (BT) campaign. 

Now politics is a rough old business sometimes and I enjoy a bit political knockabout as much as the next person - though I draw the line at the use of 'dirty tricks' and 'black propaganda' to completely misrepresent the views of your political opponents.

Fun's fun, as they say - but to me these BT people have crossed a line. 

"An argument that simply runs out of currency"

By George Kerevan

Creddit where credit is due: the Better Together campaign pulled off a coup with its publication of a leaked cabinet paper from John Swinney, laying out fiscal options in the post-independence period.

However, what the document actually says is very different from the spin put on it by the No campaign. Quite the opposite in fact.

It’s worth having a look at the supposed “secret” document, which you can find on the Better Together web page. But beware. When you log on you’ll find the front page of the document boldly proclaims “top secret – the truth about taxes, spending and oil in a separate Scotland”. Clearly this is not part of the internal memo but a mock-up supplied by the creative geniuses behind Better Together to put their own spin on the contents. You’ll also see they have redacted the first part of the paper. I wonder why?

The Better Together editors insert comments throughout the document. Frequently these are at odds with the text. For instance, the running commentary says: “Today [the SNP] claim that Scotland is better off than the UK. They admit internally that we’d soon be worse-off.” However the text in question is actually quoting a forecast from the Office for Budget Responsibility (OBR), which advises the Chancellor of the Exchequer. So it’s the OBR that claims Scotland is fiscally better off, not Mr Swinney. What the document actually says is: “Before 2016-17, Scotland is projected to have a smaller deficit, as a share of GDP, than the UK.”

The paragraph in the leaked document then says: “In 2016-17, the OBR forecasts suggest that Scotland would have a marginally larger net fiscal deficit than the UK.” Proof things will be worse under independence? Even here, the No campaign spin doctors are twisting things. For a start, the OBR forecasts Scotland’s deficit (for the single year) at a paltry 2 per cent. Assuming independent Scotland had economic growth of 2 per cent or more – which it could with such a stimulus – it would easily fund this deficit. Far from being worse off, Scotland would be getting richer at around £500 per person per year on these figures. (By the way, the OBR only gets Scotland’s 2016-17 deficit lower than for the rest of UK by predicating unrealistically low oil prices.)

The central argument of the No campaign is that pooled sovereignty allows the sharing of economic and fiscal risks in an uncertain global economy. By itself, that is reasonable point of view. Any small nation can easily find itself facing adverse economic conditions; eg Finland lost 15 per cent of its GDP in three years, after the collapse of the Soviet Union destroyed its main export market.

Of course, Finnish growth soon bounced back and by 2000 was a phenomenal 6 per cent as the Finns went into the mobile phone business. Which is my point: the experience of small, industrial nations in Western Europe is that they respond faster and more successfully to economic crisis than do bigger nations. In other words, the economic insurance argument of the Better Together campaign is disproved by real life.

Examples are legion. Tiny Iceland’s banks went kaput in 2008 sending unemployment to an unheard 10 per cent. But Iceland has recovered and unemployment is below 5 per cent – it’s nearly 8 per cent here. Last month Iceland even had its international credit rating raised – unlike Britain. Sweden, despite the downturn, has a government debt less than half the UK’s. Swedish growth hit a record low in 2008 but was back at an all-time high by 2010. In 2008, Switzerland had to bail out its own banks, which had liabilities several times larger than the country’s GDP. These days the Swiss authorities are desperately trying to stop everyone else’s money poring into their country’s restored banking system. Ireland has just had two years of faster growth than Britain plus it has a healthy export surplus.

Meanwhile the UK has still not recovered the level of output it had before the banking crisis. Britain’s total debt is still rising and economic growth has stalled. Yet the majority of small nations in Western Europe have made a faster and stronger recovery. This knocks the case for pooled fiscal risk on the head.

We need to ask how these small countries managed to dig themselves out of an economic hole as fast as they did? The answer has nothing to do with being wise. Anyone could see the Irish and Icelandic economic car crashes coming a mile away. But Western Europe’s small independent democracies have significant advantages when it comes to changing economic direction quickly.

First, these countries were able to tailor fiscal policy to their own local needs. A bigger nation may have superior borrowing powers but its fiscal policy ends up a compromise that may not suit specific regions (eg Scotland) when it comes to promoting recovery. Ireland’s export-led recovery is predicated on its low corporation tax. Sweden returned to growth by slashing income tax, especially for low-income families. Iceland refused to bail out its banks with taxpayers’ money and banned the export of capital to ensure bank funds were invested in the local economy. In the UK, where the government still panders to the City and Russian oligarchs, none of these things were done.

Second, in a small democracy solidarity makes it easier for a government to ask for the necessary economic sacrifices during an emergency – provided everyone contributes equally. In Britain however, vested interests always seem to be exempted from national sacrifice. In Britain, Chancellor Osborne is protecting bankers’ bonuses from the EU. In Iceland, they jailed the bankers who caused the crisis.

Better Together are congratulating themselves on the headlines their coup garnered, which focus on John Swinney prompting his SNP ministerial colleagues not to spend before the economy is strong enough to merit it. Actually, that sounds to me as if Mr Swinney is a better bet than George Osborne.

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