What if Scotland votes No or Yes?

On Thursday the people of Scotland will vote on whether to become an independent country. Yes or No, it is a vote that will have huge ramifications for future generations. Recent opinion polls suggest that the referendum is very close; at the time of writing, the latest polls have shown that the No campaign has a narrow lead. The most recent, a Survation poll for the Scottish Daily Mail, showed No with 52% and Yes with 48% of the vote.

What if Scotland votes No?

Change is coming to Scotland even if the vote goes in favour of union. In a last-ditch attempt to halt Scottish independence David Cameron, Ed Miliband and Nick Clegg have promised ‘devolution max’ (or ‘devo max’), devolving more tax and spend powers to Scotland. Currently, the Scottish Government has limited powers over tax and can only raise or lower income tax by 3p in the pound. Devo max would offer much greater control over taxation, expenditure and welfare policy.

The exact configuration of devo max is unclear. Would the Scottish Government control corporation tax? Inheritance tax? VAT? Would it control tax on North Sea Oil? Would it be able to borrow money to pay for infrastructure investment? Could the Scottish Government cut Air Passenger Duty (APD)?

From a transport perspective, for example, the Scottish Nationalist Party (SNP) has criticised APD and claimed that it reduces tourism to Scotland. The SNP has promised to cut APD in half and eventually abolish it if the country goes independent. This led Willie Walsh, the chief executive of International Airlines Group, which owns British Airways, to claim that English people would hop to Scotland to take cheaper flights. APD might be one of the taxes that devolved to Scotland under new arrangements with devo max.

The extension of new powers to Scotland would mark a new stage of devolution and would likely lead other parts of the UK, such as England and Wales, to cry out for greater regional powers of their own. If Scotland has such extensive powers, why not us? Devo max raises lots of questions, but it may prove to be a necessary compromise by pro-union politicians in order to prevent the break-up of the UK.

What if Scotland votes Yes?

It is difficult to predict quite what will happen if Scotland does vote in favour of independence. Some nationalists expect that independence would create a nirvana of the northern hemisphere, whilst some unionists fear it would unleash an ‘economic hell’. But clearly, there are too many variables to make a safe prediction about how an independent Scotland would end up.

Some key considerations an independent Scotland would face in transport and infrastructure are:

Infrastructure

Infrastructure would be a key priority of an independent Scotland. The Scottish Government’s white paper on Scottish independence ‘Scotland’s Future’, argues that currently Scotland is constrained by the Westminster Government having the final say on the size of its budget. ‘Scotland’s ability to support much-needed infrastructure development has been hampered by decisions taken elsewhere, both in terms of overall spending limits and in the ways in which we are allowed to spend our money as a result of Treasury rules,’ it says.

According to the SNP an independent Scotland would be able to spend more on infrastructure and in a way that better responds to Scotland’s needs. However, this would, of course, depend on how much an independent Scotland could afford to put towards infrastructure.

This goes to the heart of one of the biggest issues in the independence debate, which is whether independence would result in more money for an independent Scotland to spend on its priorities. Arguably, they could change spending priorities or raise taxes, but these would have to fit alongside a range of other promises made by the SNP, such as maintaining free tuition fees, cutting corporation tax etc. There is another option – borrowing to pay for capital expenditure. But a newly independent Scotland’s ability to borrow would depend on the resolution of the currency debate and also how well it wins the trust of markets. Would an independent Scotland spend more on infrastructure? It’s difficult to say either way. It also depends on how attractive Scotland is to private investors.

Rail

An independent Scotland would have greater control over rail franchising arrangements. Although the Scottish Government decides on who wins franchises, they are limited by the UK’s overall approach. The Scottish Government’s white paper says that ‘an independent Scotland will be free to pursue legislation that enabled alternative approaches, including public-supported and not-for-profit models.’ This means that an independent Scotland could reconsider its franchising rules: it could renationalise the railways, maintain the status quo or enact something similar to the Labour Party’s proposals for allowing state-run and not-for-profit companies to tender for franchises.

The white paper states that: ‘High-speed rail is a key priority.’ In April, Alex Salmond said that an independent Scottish Government would commission a feasibility study into a high-speed rail line running from Scotland to England. He said that this would bring high-speed rail to Scotland much faster than under current plans. This is in addition to current Scottish Government plans to build a high-speed compatible link between Edinburgh and Glasgow.

Renewable Energy

Between 2010 and 2013 Scotland saw £13.1bn of investment and an associated 9,143 jobs in the renewable energy sector. Scotland’s renewable energy potential is incredible; there is more wave and tidal power equipment being tested in Scottish waters than in any other country.

According to the Scottish Government, an independent Scotland would remain part of the UK-wide market for electricity and gas, as long as security of supply for Scots was not compromised. But they argue that it would only be fair if there was an Energy Partnership with the Westminster Government, which would see a joint approach to the energy market.

But Michael Dall, lead economist at Barbour ABI, said: “There are a large number of projects in the pipeline in the renewable energy sector, which is subsidised by the UK-wide renewable obligation, calling these into question. If Scotland does choose independence, it’s likely that negotiations between UK and Scottish Governments will be prolonged and complex, posing a potential risk to both public and private sector contracts.” Although a Scottish government, which places enormous emphasis on Scotland’s renewable energy potential, would likely look to other ways to continue to invest in the renewable energy sector.

If Scotland goes independent there will be many debates, compromises and uncertainty along the way.