INDEPENDENCE: KILL OR CURE FOR EDINBURGH?

Will independence kill Edinburgh, asks Scot-Buzz editor Bill Jamieson...

A few days ago, says Bill, I was approached with an invitation to speak at a Spectator debate on the subject “Scottish independence would be the ruination of Edinburgh”. It is always flattering to be asked to speak at a debate, particularly one hosted by The Spectator, a wonderful magazine we should all read till the print falls off.

But this was a challenge I felt compelled to duck.

There are aspects of independence that concern many. None of us know what the currency will be, what tax rates and levels will be, what the pension arrangements will be, whether we will be in the EU or out the EU or stuck half way between. We don’t know what the regulatory regime will be or the future control of interest rates or who will police the banks or who will be the Lender of Last Resort.

Seldom before has such a blank cheque been put before voters.  But “the ruination of Edinburgh”? Quite the contrary, I sense.

One sure beneficiary of independence will be our capital city. Indeed, it could expect the biggest expansion since the creation of the New Town. Edinburgh would be set to boom.

The city has done well out of devolution and the creation of the Scottish Parliament. They have brought in their train an expansion of the government and administrative sector. More powers equals more administrators equals more offices equals more service sector employment.

To the four pillars of economic life in the capital – financial services (resilient despite the banking debacles), universities pulling in thousands of fee-paying overseas students, an arts and creative sector  whose economic contribution is constantly undervalued, and hotels,  hospitality and tourism must be added a fifth: government in all its manifestations and outcrops.

Independence would be almost certain to result in a quantum leap of government functions in the capital.

And no more eloquent prophecy was provided of the boom that lies in store than that from one of the most outspoken business critics of independence, Rupert Soames. Shortly before he announced he was leaving his post as chief executive of Aggreko to take up the poisoned chalice of Serco, he made a speech that continues to circulate round the business world like some furtive, samizdat text, its fiery contents burning its way through the boardroom printers.

Soames drew attention to the Scottish government document listing all the functions which it believes would be better if they were regulated exclusively by Scottish politicians and civil servants.

This is what he said - and it is worth quoting at length in view of its implications for Edinburgh…

“The list is long: consumer protection, industry regulation, energy markets, implementation of EU legislation, competition law, international trade, immigration, public provision and procurement.

So a future Scottish Government will need to have all the infrastructure and regulatory bodies to administer these functions and pull these levers.

Presumably therefore, we will need a Scottish Food Standards Agency, a Scottish Civil Aviation Authority, a Scottish Telecommunications Agency, Advertising Standards Authority, Broadcasting Standards Authority, a Competition Commission, with its associated Appeals Tribunal, a Financial Services Authority, Gambling Commission, Pensions Regulator, perhaps even a Gangmasters Licensing Authority.

Will Scotland, with life sciences being a key sector for growth, want to have its own Human Fertilisation and Embryology Authority? Or will it be just liberty-hall for those who want to experiment on human genetics?

And then let us think of international trade and foreign affairs; how many civil servants will be required to develop and promote Scotland’s unique approach to trade matters at the European Commission, the World Trade Organisation, at the IMF, at the World Bank?

How many embassies will Scotland need to have in order to protect and promote the interests of its citizens and businesses? Let’s take a wild guess, and say: the same as the Republic of Ireland, which has 72 embassies. So that’s 72 properties, 72 ambassadors, 72 consulates to staff. 

The UK Competition Commission costs £22 million a year and has 122 people; how much would a uniquely Scottish equivalent cost?

The point is simply this – there are high fixed costs to being an independent government and there is not a lot of point having the levers unless you have the means to pull them. It is absolutely certain, in my view, that an independent Scotland, that aspires to pull all the levers needed to deliver policies optimised for the conditions that pertain in Scotland, is going to require a massive expansion in the headcount and budget of the Scottish Civil Service.

Now my point here is not that it could not be done, and countries such as Ireland have the complete range of government bodies.

But it comes at a cost. In 2012, there were 46,000 people employed in the Civil Service in Scotland, but of these, 29,400 worked in UK-wide government departments, and 16,000 in the devolved administration.

If we look at Ireland again, in 2008 there were some 37,000 full-time equivalent people employed in the Irish Civil Service, and I can think of no reason to suppose that Scotland would need many fewer. So doing some quick sums, I get to an additional cost of an Independent Scotland’s civil service of around £700 million a year in people-related costs, which is about £140 a year for every, man woman and child in Scotland. And this is just in administration, and before they start spending money…

How will that £140 per year every man woman and child be paid back?  Will the Scottish people see noticeably better service from a Scottish Embassy than from a British embassy? Will the Scottish Ambassador be able to get Aggreko and Clyde Blowers meetings with the Brazilian Energy minister that the British ambassador cannot? Will the Scottish Civil Aviation Authority make the Scottish economy grow faster, and society more equal, than the UK CAA? Does the UK Competition Commission do such a bad job for Scotland that it is worth spending £22m a year setting up one of our own?”

Well, now you see how Scotland’s capital city stands on the brink of an epochal boom were we to vote ‘Yes’ on September 18.

Independence a “ruination”? Jobs, city centre property, offices, service functions, ancillary services, embassies, legations, offices for international institutions would flood in – bring it on!

Only one figure is conspicuously missing from the Scottish government’s 600-page plus White Paper - an estimate of the cost of all of this.

Ah! Surely only myopic actuaries and accountants and those of petty minds would raise such an issue! When the finger points to the moon, don’t these people always look at the finger?

But cost matters. Because that great Edinburgh boom could run out of steam soon after it got underway.

How – or more accurately, who would have to pay for this? Here Rupert Soames gave us a clue.

“Let us make a wild guess and assume that in reality, much of this additional cost would be borne by businesses, and the costs of independent government would be largely borne by Scotland’s 330,000 businesses, rather than being spread across the UK’s 2.2 million “

One starts to get a measure now of why many businesses are increasingly apprehensive. Firms worried about “uncertainty”?

That, is suspect, may be the least of it. The boom will come at a price.