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22/11/13 18:35

Speech to the Institute of Chartered Accountants of Scotland

Deputy First Minister Nicola Sturgeon
Institute of Chartered Accountants of Scotland
22 November 2013

Thank you Kirsty for that introduction.

And thanks to ICAS for arranging today's event.

I very much welcome the significant contribution that the Institute has made in identifying the range of issues to be addressed as part of the debate on Scottish independence.

In particular, I welcome the ICAS paper “Scotland’s pensions future” - published back in April - which set out a series of questions about the future of state, public and private sector pensions in an independent Scotland.

Let me say at the outset, specifically on the issue of pensions, that I wholeheartedly agree with ICAS that existing pensioners, people of working age, employers and the pensions industry as a whole, need clarity on the arrangements for pensions in the event of a Yes vote in next year’s Referendum.

Of course, just as is the case in the UK now, the future of the pensions system in an independent Scotland will depend - to a large extent - on the policy decisions of future governments.

Nevertheless, people want - and deserve - to know that pension provision in an independent Scotland is affordable into the future, that we have properly considered the transition issues that will arise, and what the opportunities will be in an independent Scotland to better manage our pensions and ensure that we have sustainable and fair arrangements in place for this and future generations.

That is why we published our own paper, “Pensions in an Independent Scotland”. It considers all of these issues and indeed addresses directly the questions raised by ICAS. It also sets out the genuine opportunities that independence offers to deliver an affordable, fair and efficient pensions system in Scotland – one that rewards hard work and incentivises saving, while also tackling pensioner poverty. It is available on the Scottish Government website for anyone who wants to read it.

Our White Paper on independence - to be published on Tuesday - will address these kinds of issues across the entire range of responsibilities that will transfer to the Scottish Parliament if we vote Yes next year.

It will set out the economic, social and democratic case for independence; it will demonstrate our financial strengths; it will detail how we will become independent - the negotiations, preparations and agreements that will be required between a Yes vote next year and Scotland becoming independent in 2016; it will describe what a newly independent Scotland will look like; it will illustrate how the current government would start to use the powers of independence to grow the economy and tackle inequality; it will set out some of the consequences of voting No; and it will answer a range of questions that have been asked.

It will be, without a doubt, the most comprehensive and detailed blueprint for the independence of a country that has ever been published.

No doubt, the No campaign's script in response to it has been written before they have even seen it. The Spectator magazine claimed two weeks ago to have already seen the UK government's rebuttal of the White paper - which I think says it all. So, the attacks will be predictable and I'm sure you heard many of them from Alasdair this morning.

But the White Paper hasn't been written for the No campaign. It has been written for you, for the public.

So I encourage you to read it when it is published next week - in full or even just the parts that are of personal interest to you - and make up your own mind. It will be widely available and accessible - online and in hard copy.

And while I can't promise it will top the Christmas best-seller list, I do expect it to be widely read and to have a substantial impact on the debate.

I look forward - though more in hope than in expectation - to the publication of the UK government equivalent, setting out in detail the consequences for Scotland - for our economy, society, membership of the EU - of staying part of the Westminster system.

So, the White Paper is next week. What I want to do today is put forward the essence of the case for independence.

It can be summed up as follows: firstly, Scotland can more than afford to be independent. There is nothing about our economy or our public finances that should act as a barrier to independence. On the contrary, had we been independent over the past few years, we would be better off today than we are. And if we become independent, the powers to build on the enormous strengths of our economy and steer it and our public finances to a more sustainable future will lie in our own hands.

Secondly, while we are not immune from the challenges facing ever other nation on the planet - challenges like constrained public finances and an ageing population - and independence will not make us so, neither are we uniquely incapable of dealing with these challenges - on the contrary, my argument is that independence will better equip us to deal with these challenges.

And, thirdly - and most fundamentally - decisions about Scotland are best taken in Scotland. We have demonstrated that through devolution and, if decision making in Scotland is the right principle for health and education, it is right, too, for the economy and welfare.

Let me deal, firstly, with affordability. By any measure, Scotland is a wealthy and productive nation.

Our economic output, per head, is roughly equivalent to the UK's - about 99% of the UK average - and that is without oil and gas. With oil and gas, it is 20% higher. In terms of GDP per head, as an independent country, we would rank 8th in the OECD league table.

We account for 8.4% of the UK population. However, last year we contributed 9.9% of UK revenues and got 9.3% of UK public spending in return. We are not subsidised.

Our fiscal position - although in deficit, like that of so many other countries - is nevertheless stronger than the UK's. Last year, that relative surplus was worth £4.4 billion, or £824 per person.

And last year was not a one-off. Over the past five years, we have been in a stronger fiscal position than the UK to the tune of £12.6 billion.

And while you will hear those on the no side of the debate repeatedly talk about higher public spending in Scotland, the fact is that higher levels of spending per capita are exceeded by the higher levels of tax generated per capita in Scotland compared to the UK as a whole - a point validated in the IFS report from earlier this week.

In fact, in every year for the past 30, tax per head generated here has been higher than in UK as a whole. Every year for the last 30 - that means when oil prices have been high AND when oil prices have been low.

So, the starting point for an independent Scotland will be - relative to the UK - a strong one.

Even with responsibility for a population share of UK debt, our finances will be stronger and our debt to GDP ratio lower than the UK's.

But the starting point is just that - a starting point. The decision we make next year shouldn't boil down to a static analysis of our finances at any particular point in time - however positive such an analysis might be.

The real economic choice we face in the referendum is about the future and what outcome will best equip us to face that future and the challenges it presents. Because the future, unlike the past and present - is not fixed. It is ours to build and to shape.

Which brings me to my second point - we are not immune in Scotland from the challenges facing other countries. But we are just as capable as any other country of meeting them - indeed, I will go further and argue that we will be be better able to meet them with powers in our own hands. That is precisely why I support independence.

Like the UK - and countries the world over - Scotland needs to get out of deficit, pay down debt, put our finances on a sustainable footing and support our ageing population.

But the key to doing that is good economic management; it is growing our economy, increasing our working age population and increasing revenue as a result. There are no shortcuts and no one owes us a living. We need to earn our success.

So, the fundamental economic question is this: will we be better able to do that as a regional economy in the UK, with a one-size-fits-all economic policy and no power over immigration, tax and welfare, having to compete with the gravitational pull of London and the SE with very limited economic levers of our own that we can use to balance the playing field - or will we be better able to do it with these levers in our own hands?

As far as the economy is concerned, it's the answer you reach to that question that should decide whether you vote Yes or No.

I suspect you have heard a fair amount this morning about the IFS report published on Monday, so let me say a word about it - because it actually underlines the point I am making.

The report projects levels of revenues and spending over the next 50 years. Now, put to one side the inherent limitations and uncertainties of such a long run analysis - it's 50 years this weekend since the assassination of JFK and I doubt if anyone could find a forecast from 1963 that comes close to accurately predicting the state of our economy today.

Indeed, the IFS admits these uncertainties and the sensitivity of its analysis to even small variations in assumptions.

But the more fundamental point is this. It is a forecast based on the assumption that Scotland - albeit as an independent country - would follow broadly the same policy path as the UK. And it concludes that, if we do so, we will face stiff challenges in our public finances - hardly surprising given that the same analysis projects that the UK will be in deficit for each and every one of the next 50 years.

But the whole point of independence is not that we do things the same. It's that we get the powers to do things differently. And that we use these powers - for example, to create a competitive business tax environment - to grow our economy faster and raise more revenue.

So my point is that the future is not fixed - we can shape it, but only if we give ourselves the power to do so.

As the IFS itself says about its own forecast, on page 7 of its report:

'These factors...could also evolve differently if Scotland were independent rather than part of the UK; in addition, they could be substantially affected by the policies chosen by the government of an independent Scotland'

That is precisely my argument. The No camp - understandably from their perspective - want to use the IFS report as a stick to beat the Yes side with. But actually, it should be a very loud wake up call to all of us that the status quo is not an option.

And can we succeed if we do things differently?

Well, the past can never be an accurate predictor of the future but it should give us serious pause for thought.

If, over the 30 years to 2007, we had matched - not exceeded or beaten, just matched - the average growth rate of comparable European countries, our economy would be nearly 4% bigger than it is today - equivalent to around £900 for every person in the country.

So the essence of the case for independence is not that it will absolve us of the responsibility of facing up to some pretty big challenges - it is that it will better equip us to deal with these challenges.

Take demographics and pensions as an example.

We are told regularly by those on the No side that we can't be independent because we have an ageing population.

It's an interesting variation on the usual 'we are too small and too poor' theme. It seems we are now too old as well.

Well, the fact is that Scotland does have an ageing population - but we are not unique in that. We can argue about whether Scotland faces a more or less acutely difficult scenario that other countries. In fact, our pensioner population is growing slightly less quickly than the UK as a whole. Our dependency ratio - if you include pensioners and young people amongst the dependants - is slightly better than UK and likely to remain so for the next few years. But, if you consider just pensioners in that ratio, it's slightly worse.

Again, though, that's not the real point. The real point is what are we going to do about it? How are we going to grow our working age population to support the increasing number of people living longer into old age? How are we going to provide the opportunities for more of our young folk to stay here? And how are going to encourage more skilled labour to come and work here?

Will we be more able to do that as part of a one size fits all UK immigration policy that doesn't even pretend to base it's approach on the particular needs of the Scottish labour market - a policy that has just resulted, for example, in the scrapping of the post study visa, denying young people that we have helped educate the chance to stay here and contribute to our economy?

Or will we be better served by the ability to design the detail of our own policy, with the needs of our own economy as the driver in our decision making?

Who decides, who drives policy, whose interests determine the levers that we pull - these are the essential questions at the heart of this debate.

Just as in life and in business, there is nothing inevitable or pre-destined about success or failure. It lies - to a large extent - in our own hands. And, just as I'm sure none of you would allow another business to decide the investment priorities, employment strategies or wage rates of your business, neither should we as a country allow the economic and fiscal decisions that will drive the performance of our economy, to be taken in Westminster.

Which brings me to my third and final point.

Decisions about Scotland are best taken in Scotland. That is a sound principle, because it is here that we have the best understanding of our circumstances and the best chance of making decisions appropriate to them. Of course, in the modern world, all countries will at times decide to co-operate with others - on currency, for example - as we propose for an independent Scotland - or by being part of institutions like the EU. That is what it means to be independent in an inter-dependent world. But the decisions about when to co-operate - and when to exercise powers independently - remain with domestic government.

The principle of decisions being better taken in Scotland is not a novel one. We embraced it when we voted for our own parliament. And while not everyone will agree with all of the decisions taken by that Parliament, it is because we are already effectively independent in health and education that we don't have tuition fees for students and we do have an NHS free from the upheaval being experienced by its counterpart in England.

You know, if you look back at the debates in the run up to the devolution referendum, you will be struck at how similar the arguments against devolution were to the arguments we hear today against independence.

'The tartan tax will lead to foreign investors saying no to Scotland'. That was William Hague just before the 1997 referendum. As we know now, he was wrong - Scotland is the best performing part of the UK - outside London - for foreign direct investment.

Here's another one. Devolution will - “encourage a brain drain, a flight of finance as well as skilled labour, add to the burden of business taxation, create a climate of political uncertainty and damage the standing of Scottish financial products.” That was Michael Gove.

It sounds more than a bit familiar, does it not? The point is that these predictions were wrong - 100% wrong. So I simply ask this - if they were wrong then, why should we believe the same predictions - from the same people - now?

Because when it boils down to it, independence is simply the completion of the powers of our Scottish Parliament. The extension of a principle we already apply - successfully in my view - to health, education, the justice system, local government and transport to the economy, welfare and international relations.

So, that in summary is my case for independence.

The No side will - as their default position - tell you that everything will be far too difficult. That the sky will fall in and the four horsemen of the apocalypse will roam the land. In the same breath as they tell you we can't have a currency union - even though the interests of the rest of the UK would be as well served as Scotland's by having one - they tell you that we will no longer be able to watch Dr Who.

Now, to be serious, I don't ask you to dismiss what they say - well, not all of it. I simply ask you to remember that they have a vested interest in telling you that this, that and everything else simply won't be possible or workable.

Ultimately, every individual will have to weigh up the arguments on both sides and make up their own minds.

Emotion will come into - there is no doubt about that. But the case we will make is not an emotional one - it is rational, reasonable and responsible.

It will invite you to judge - not between competing certainties; after all we live in world where there are few certainties for any country or individual - but what outcome you think will best equip us to build, through our own efforts and endeavours, a better country for this and for generations to come.