Is it not humiliating for Scotland to be subsidised by the UK?
Once a nationalist is defeated on the numbers of the economics independence they usually try to change the narrative. Accepting that Scotland does receive revenue from the UK they argue that this is humiliating for Scotland and that only they have pride in their nation.
An alternative arrangement of this is that Scotland’s relative deficit has arisen within the Union so highlighting it is argument for the Union. The trouble for this nationalist argument is that this position has existed for a very long time and is largely a result of Scotland’s sparse population, more of that later.
No matter what the reason it doesn’t change the financial position.
However a cursory glance at the data shows that the concept of a subsidy does not apply, unless one believes that basic rate taxpayers are subsidised by higher rate taxpayers. To be fair that is a position held by some proponents of a flat tax however the general justification for higher rate tax is that those that benefit the most from society should contribute the most back. In that sense it is not a subsidy but a fair payment and contribution for the opportunities presented by the society in which these successful individuals thrive.
It’s no different when it comes to the UK.
The UK deficit or surplus can be segmented in many ways but when broken down to the regions and nations of the UK a clear pattern emerges.
Firstly Scotland’s financial position is entirely respectable in this context (even after taking account of lower oil receipts). Indeed compared to the nation of Wales or the province of Northern Ireland Scotland has a much stronger position. Further compared to many comparable sized parts of England Scotland is in a much healthier position. The financial position of the UK is largely supported by the South East and London. Or to put it another way, take away London and the South East and the financial position of the remainder of the UK deteriorates to a Greek style unsustainable deficit.
So does this mean that London and the South East and subsidising the rest of the UK (including Scotland)? No, it simply means that London and the South East are the most successful parts of the UK, but crucially, their success depends on their position in the UK. Let me put it another way if the rest of the UK decided to split off from London and the South East and blockade them both sides would suffer greatly. To coin and phrase they are better together.
Just like the success of higher rate taxpayers depends on being part of a wider society, London and the South East thrive because of their place within the UK, therefore it is only right that they should pool and share some of their wealth with the rest of the UK.
Therefore from a Scottish perspective part of the success of London flows from Scotland’s participation in the UK, a financial transfer from London is not a subsidy but just a repayment of the wealth that is flowing from Scotland to London.
The trouble for nationalists is that if Scotland were to become independent then London would be unlikely to suffer significantly as capital would continue to flow freely from Scotland to the magnet that is London and the South East, however Scotland would suffer as it would no longer receive a fiscal transfer payment from London. Indeed it would suffer so much that it is likely it would hasten a capital flight to London.
Scotland is not a subsidy junkie. It is one of the most successful parts of the British Isles. As a consequence of that success the powerhouse of landmass, London and the South East, grow stronger, it’s only fair and equitable that Scotland should receive some payback for its support in generating that success. The question nationalists have to answer is why on earth would they want to deny Scotland a repayment which is rightfully ours?
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