Speculation is building as to what the economic impact of Brexit will be, more so since the Conservative Party Conference confirmed the strategy was to go for a hard Brexit. The problem is that the EU Leave vote only gives the Westminster government a mandate to leave the European Union and not the single market, the customs union or even for the swiftly abandoned database to name and shame employers of EU nationals. Technically Theresa May can interpret the Brexit vote mandate anyway she wants but morally, given the key Leave promises of savings from membership fees and maintaining access to the single market, she must at least attempt balance gaining some control over immigration with minimising the damage to trade, jobs, wages and pensions. The fact that she looks like she isn’t even going to try may well be because she knows she will fail, be seen to do so and therefore prefers to deliver on EU immigration and blame the fallout on everyone else for voting leave.
The one thing everyone seems to be forgetting when forecasting the economic impact of Brexit is that it hasn’t actually happened yet and likely won’t for almost two and half years. The slower growth predictions, drop in the value of the pound, even the predictions of job losses and lower wages are all virtual, they are worries about an event that lives far enough in the future to matter little yet. As a result predictions on the impact on the economy and on people’s voting intentions, be it for a General Election or in an independence referendum are looking so far into the future as to be largely unreliable. The new poll for the Herald by BMG is a case in point, they asked: “Do you want a new independence referendum?” and served up various Brexit scenarios and on one came up with a 55 per cent support for a second referendum in the event of a hard Brexit, but claimed Yes supporters were divided on timing. There are several problems with this, firstly I myself don’t want a referendum before Article 50 is triggered, nor do I want one probably in 2017, as for 2018, May or September looks good, but it depends on the circumstances. In others words I want to start the next campaign from a position that I believe Yes will win from. I wouldn’t wait till Yes polls 60 per cent, because if the political circumstances are right I think we can win from 50/50. For when we start to see the Brexit negotiations go wrong (they will go very badly wrong) the now far away threat of Brexit will begin to loom large on the horizon, feel less virtual, indeed feel very real. Then Scottish voters will look to the only escape route on offer and independence will have an “away-from” motivation that it somewhat lacked in 2014.
During the EU referendum my research stated that in the worst case scenario of a hard Brexit, Scotland’s GDP could drop by £7 billion and as result damage the Scottish Government’s revenues by as much as £2.24bn per year. In debates Leavers said “oh well, he would say that wouldn’t he, he wants a Stay vote in Scotland so he can go on about independence”. Trust me I didn’t want an English and Welsh Leave vote to take us out of the EU. However, it’s worth noting that the Fraser of Allander Institute which under past leadership had significant Unionist leanings has come up with a figure of £8bn lower GDP for Scotland under the worst case scenario, with exports down by more than 11 per cent and real wages falling seven per cent, equivalent to around £2,000 per year for someone on average full-time earnings, while there would be 80,000 fewer jobs. That a pro indy economist’s worst case scenario is significantly better than an institute with a track record of not saying anything positive about independence (albeit under different management) should make you very worried indeed.
Ask people you know who voted No in 2014 just how they will feel about independence when they see Westminster slashing budgets, endangering their jobs and by going for a Brexit Scotland didn’t vote for, and a hard Brexit that that the UK did not give them a mandate for? Ask them if a fully thought out plan for enhanced prosperity with the powers of an independent nation which is still an EU member makes independence more attractive than in 2014? That’s where the Herald’s 55 per cent support for indyref2 gets interesting, because not only was all the research done prior to the Tory party conference that confirmed a hard Brexit with a distasteful hint of xenophobia, it was also before the leaked Treasury document predicting that a hard Brexit would cost the UK £66bn. The next poll will be even more interesting. I suspect the Herald also asked: “if there was an independence referendum tomorrow how would you vote?” and will be publishing on Sunday to clash with Nicola Sturgeon’s conference closing address. There will be a correlation between indyref2 support but it won’t be a 55 per cent Yes unless they ask: “If there was a referendum in 2018 and all the predictions of economic and wage damage looked accurate how would you vote?” In a year’s time however as the UK Government’s Article 50 negotiators try to get a win on immigration and the EU confirms that it will cost them full access to the single market, 55 per cent should be the minimum target for Yes.
Nothing is ever simple though, the UK must also do a deal to maintain tariff free access to the EU for products, both sides will want that (indeed need that) so the loss of Financial Services Passporting is the likely punishment for the UK and the UK will almost certainly negotiate away access to Scotland’s fisheries for a better deal. Then as long as the EU continues to suggest Scotland would stay a member (as opposed to being able to rejoin) if we vote for independence we have the magic formula for a convincing Yes vote. A rock solid roadmap to prosperity with the powers of independence, maintained EU single market access, no hard border with the rest of the UK and no customs checks but the ability to protect and grow our finance sector by attracting tens of thousands of finance jobs from London that rely on EU passporting rights – that’s the game changer.