During the referendum campaign I attended the George Galloway 'Just Say Naw' meeting in Glasgow. The contribution which stood out for me, and still resonates to this day, was that of Glasgow University's research professor of macroeconomics and international finance, Ronald MacDonald. He gave a withering critique of every aspect of the Yes campaign's economic case for independence – including its impact on currency choice, deficit and debt.
The deficit and debt arguments had never been properly aired during the campaign. Using layman's language to communicate complex economic arguments, he not only destroyed the economic case for independence but also warned of the economic catastrophe if the country voted Yes. A fiscal deficit of £4 billion would have arisen even after the fabled £6 billion of oil tax receipts had flowed into the Scottish treasury. Professor MacDonald then argued that the only alternative to reducing this deficit would have been to go to the money markets and borrow. But how do you borrow when Scotland's population share of UK inherited debt in 2014 amounted to £120 billion?
We were told that paying off the debt over 20 years would have cost £6 billion a year with the interest payments associated with servicing the debt estimated at an extra £5 billion a year. The combined cost of the fiscal deficit, the debt and associated interest payments thus amounted to £15 billion a year. To put that figure into perspective, Scotland's NHS costs £12 billion a year.
This message failed to get across as the nationalist leadership cleverly rebutted such inconvenient truths as being part of a wider conspiratorial 'Project Fear' campaign designed to undermine the case for independence. The economic argument which did connect with the electorate focused almost exclusively on currency choice to the exclusion of the fiscal deficit and debt figures.
I went into the meeting thinking that my knowledge of the economic debate was better than most. I left it, four days before the referendum, in a panic, wondering why I had not heard about the £15 billion debt. If the electorate had been properly informed of the dire economic cost and the austerity that awaited if the nation voted Yes, the dynamic of the referendum debate would have dramatically changed and would have boiled down to the following question: is bankruptcy a price worth paying for Independence?
If a referendum broadcast slot had been dedicated to getting this figure and this question across, it would have convinced far more than just half of the 30% of undecided voters to vote for the Union. The constitutional question would indeed have been settled as the threadbare oil-dependent pro-independence argument would have been exposed to the electorate for the cruel con it was.
The most bizarre aspect about the SNP's clamour for another referendum is the complete absence of any new economic case. The only attempts at rectifying this were the recent Indy2 conference and the Common Weal white paper project, whose well-intentioned efforts to tackle how an independent Scotland would create deficit parity with the UK without cutting public services, has subsequently been brutally dismantled, exposing an alarming naivety in strategic thinking.
How much weaker would the economic case for an independent Scotland be bearing in mind that oil receipts have slumped to £60 million and show no sign of recovering in the next couple of years? To answer that question let's revisit Professor MacDonald's 2014 figures and put them into a 2017 context. This would give us an updated snapshot of what the economic battleground might look like which will shape the next economic referendum debate.
Due to the collapse of the oil price since the last referendum, Scotland's fiscal deficit has increased from an estimated £4 billion in 2014 to the current £15 billion. Even if we leave Scotland's share of the UK national debt unchanged at £120 billion, paid off over the same 20-year period at £6 billion a year incurring the same £5 billion in interest charges, the combined debt in 2017 would rocket to more than £26 billion a year – more than twice Scotland's NHS budget. If the aim of the pro-UK side this time is to achieve what they should have done the first time and deliver the knockout blow to the economic case, the current set of figures could not provide it with better ammunition.