Scotland in the UK April 2014 Contents Know the facts 1 Scotland in the UK today: the best of both worlds 3 Our economic strength and security 6 The UK Pound 7 Our single market 7 Financial services 9 Our shared United Kingdom 12 Our place in the world 16 Conclusion 19 1 Scotland in the UK Know the facts On 18 September 2014, who use their services to people in Scotland will take understand the benefits to one of the most important Scotland of being in the decisions in our lifetime - to UK and the implications stay in the United Kingdom of leaving. or leave it and become a separate independent state. The UK Government has undertaken a major As Secretary of State for programme of analysis Scotland, I have been all to explain the benefits over our country in recent of Scotland being months discussing the part of the UK and to referendum with individuals, examine the implications communities and a wide of independence. This range of organisations. short booklet sets out All over Scotland, people the main conclusions have asked me for clear, so far. The detailed simple information that analysis - and much more can help individuals, the information - can be found organisations they online at www.gov.uk/ work for and the people scottishreferendum. Scotland in the UK 2 The UK Government wants everyone in Scotland to be well informed before the referendum. So I would encourage organisations to make this information available to ensure everyone can understand the positive case for Scotland remaining in the United Kingdom. Alistair Carmichael MP Secretary of State for Scotland You may wish to join the debate online by accessing @YouDecide2014, www.gov.uk/scottishreferendum and facebook.com/youdecide2014 f 3 Scotland in the UK Scotland in the UK today: the best of both worlds Being part of the UK gives allows us to pool benefits in the Scotland the best of both good times and share risks in worlds. the bad times. At Holyrood we have a powerful And our devolution settlement Scottish Parliament that is flexible. The Scotland Act controls more than £27 billion 2012 extended the powers of of spending - around 60% of the Scottish Parliament with all public spending in Scotland. the largest devolution of tax The Scottish Parliament has powers from Westminster in the power to make and change 300 years. the law to meet Scottish needs and aspirations on childcare; From April 2016, further education; training and skills; devolution will give the enterprise; health and social care; Scottish Parliament additional justice and policing; housing; the tax powers, so it will be environment; agriculture, fisheries responsible for raising one- and rural affairs; and the arts, third of the money it spends culture and sport. in Scotland. These powers include a new Scottish Rate At the same time we benefit of Income Tax which will allow from being part of the UK; with the Scottish Government to a UK Parliament that takes decide the rate of tax that decisions on behalf of everyone people in Scotland pay. The in the UK on the economy, UK Government has also defence, national security and announced powers to enable international affairs. We benefit the Scottish Government from being part of a larger, more to issue its own bonds and diverse and stable economy that borrow for capital investment Scotland in the UK 4 Main powers that are reserved and devolved Main devolved: COURTS EDUCATION HEALTH AGRICULTURE POLICE BUSINESS ENVIRONMENT FISHING SUPPORT CULTURE TRANSPORT SPORT FIRE & RESCUE & ARTS Scotland Act 2012 adds: Stamp Scottish Duty Landfill Tax Borrowing rate of Land Tax powers income tax APRIL 2015 APRIL 2015 APRIL 2015 APRIL 2016 Main reserved: DEFENCE & WELFARE MACRO THE NATIONAL SECURITY ECONOMIC CONSTITUTION POLICY FOREIGN AFFAIRS IMMIGRATION BROADCASTING ENERGY REGULATION 5 Scotland in the UK such as major transport An independent Scotland projects, hospitals, schools would need to apply to all and flood defences. international organisations it wished to join and establish The UK is four nations united its own domestic institutions. and free of borders. Together There are more than 200 UK we created the NHS and public bodies that currently the BBC, fought for freedom perform functions in Scotland in world wars, celebrated - the government of an Olympic success and built the independent Scotland would best and most enduring union need to decide how many of nations in the world. of these would need to be Independence would mean replicated. Creating and Scotland leaving the UK to running these institutions form a new state. The rest would have to be funded by of the UK would continue. Scottish taxpayers. UK laws and institutions - like the Bank of England - would continue to operate in the continuing UK and the continuing UK would retain its membership of organisations like the EU, the UN, NATO and the G7. Scotland in the UK 6 Our economic strength and security As part of the UK, Scotland’s across Scotland, England, economy has performed Wales and Northern Ireland. strongly. Over the last 50 The size and diversity of the years, growth in economic UK economy has helped output per person has been protect us from economic slightly stronger in Scotland shocks, like the 2008 banking than the UK average. This crisis. The UK Government demonstrates that Scotland spent £45 billion recapitalising does well from being part of the Royal Bank of Scotland the UK, outperforming small (RBS) in 2008, and the bank independent countries. From also received £275 billion of 2000 to 2012 Scottish growth state guarantees and loans. per head was higher than In total this support would Denmark, Finland, Ireland, have been twice the size of Luxembourg and Portugal. the whole Scottish economy in that year, including North Within the UK, we pool Sea oil. resources and share risks Growth rates in GVA (Growth Value Added) per head Sweden 1.6% Scotland 1.2% Austria 1.2% Finland 1.1% Ireland 0.8% Luxembourg 0.8% Portugal 0.2% Denmark 0.1% 7 Scotland in the UK The UK Pound it would mean being exposed The UK is one of the most to much greater risk, with the successful monetary, fiscal possibility that UK taxpayers would and political unions in history, be asked to bailout Scotland in the and the current arrangements event of a fiscal or financial crisis. bring significant benefits to Scotland. Taxation, spending, Our single market monetary policy and financial The UK’s large domestic market, stability policy are co-ordinated with one currency and one set across the whole of the UK to of rules, allows businesses to the benefit of all parts of the trade freely across the whole of UK. Risks are pooled and the the UK benefiting businesses, UK has a common insurance workers and consumers. In 2011, against uncertainty. Scotland sold goods and services to the other parts of the UK worth If people in Scotland vote to over £45.5 billion. This is double leave the UK, we would also be the amount we export to the voting to leave the UK pound. rest of the world and four times That is part of the choice that as much as to the rest of the we are being asked to make. European Union combined. The Scottish Government has This trade is supported by a proposed a currency union with common business framework that the continuing UK. All three is the basis for every stage of a major UK political parties have business from hiring employees, ruled out a currency union to borrowing money, to getting because it would not be in the goods to market either online or interests of the continuing UK on the high street. or an independent Scotland. For an independent Scotland, a currency union would make it more difficult to adjust to economic challenges, as we have seen for European countries in the euro currency union. For the continuing UK, Scotland in the UK 8 In the event of independence, the Scottish Government would have to choose between: adopting the pound informally, in the way that Panama and Ecuador use the US dollar (so-called “sterlingisation”), meaning Scotland would have no control over its interest rates and no lender of last resort for its banks; joining the euro, which an independent Scotland could be obliged to do as part of joining the EU, and would mean the euro replacing the UK pound in circulation and Scottish interest rates set by the European Central Bank; creating a new Scottish currency, which would give the Scottish government full control over all economic policy, but would mean uncertainty about the value of savings and pensions, and huge costs to business. Within the UK, we benefit from the strong UK pound, without any of these risks. 9 Scotland in the UK Scotland analysis: Regardless of the choice of BankingFinancial sector Services assets as currency, independence would Banking sector assets as a proportion a proportionof GDP of GDP put an end to all of this. It would mean businesses that work across the UK having 1 to deal with two sets of rules Iceland and regulations and two tax 880%1 2007 systems, all of which would increase costs and create uncertainty, making it harder to do business across the whole UK. Scotland2 The UK Government’s analysis puts the potential cost per 1254%2 current if household in Scotland every independent year of putting a border between Scotland and the wider UK economy, and establishing different regulatory Ireland3 and other systems, at £2000. 894%3 2007 Financial services The size of the UK economy means that it can sustain and support a vibrant and secure financial sector.