Scotonomics: Economic truth of independence white paper on migration

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The economics of migration

THE Scottish Government has outlined an approach to migration that could not be further from the current UK administration. No hostile environment here. The message from the Scottish Government is “welcome”. Not only do we need you, but we want you. The Building a New Scotland: Migration to Scotland After Independence paper is, as you would hope, principally about migration. It makes me yearn for independence.

It outlines how the process of immigration would change after independence. But much more than that, it offers a vision for immigration as essential for Scotland.

It is almost unrecognisable from the current UK position. If someone asks me, “What difference will independence make?” I will point them to this paper. An independent Scotland would be an understanding, welcoming and principled country. The argument for independence is only partly an economic one.

The benefits and moral duty to treat immigrants as human beings are strong enough not to warrant an economic argument. However, the Cabinet Secretary for Social Justice, Shirley-Anne Somerville (below), in her introduction, says, “This is also about our economic prospects”, which creates the opportunity for us to have a look at the paper.

Where does immigration fit into the wider economic vision for Scotland?

When I start to analyse these Building a New Scotland papers, I look for consistency of message on economic matters.

There is not one mention of a wellbeing economy. Nor a just transition. Or community wealth building.

These are the three economic frameworks that will transform Scotland.

Net zero – the umbrella economic framework I suppose you could call it – is mentioned once.

If this is about our “economic prospects”, it would be good to cover them, don’t you think? Otherwise, it is easy to be left with the feeling that there isn’t actually a plan. Apart from increasing GDP growth.

We all have an advanced understanding of economics, and we know that increasing GDP is a failed economic vision. Trickle-down economics does not work – focusing on growing the size of the pie only increases the size available to the wealthiest in society.

It is frustrating to see this simplistic “Economics 101” idea being used as the narrative of another Building a New Scotland paper. This just doesn’t cut it anymore.

Scotland’s economy fundamentally changes when we issue our own currency

The Scottish Government's plan for independence is firstly to continue using sterling and then move to our own currency. Once this happens, Scotland will have a very different economic framework. It will stop using taxation as a way to fund public services. As a currency creator, Scotland will spend first. It will then tax and borrow, if it so wishes, to account for and manage the effect of this spending on the economy.

This is a very different position from Scotland’s initial years as an independent country using rUK’s currency. This completely turns the “economic argument” for immigration on its head. While it is true that increasing the tax base pays for services while using rUK’s currency, this is not the case when Scotland issues its own currency. The argument changes. Immigration doesn’t stop being important, but the idea that it is all about the tax base disappears.

Perhaps the most frustrating thing about this paper is the unfavourable light that it shines on the main economic paper A Stronger Economy With Independence. Compare this statement from the migration paper: “This Scottish Government believes that immigration policy should be made according to the needs of Scotland’s economy, public services and communities, and should have dignity, fairness and respect at the heart of how it deals with people navigating the system.”

Yes! Strong, forthright language. We will decide what is best for us.

Now look at this paragraph regarding financial services from A Stronger Economy with Independence: “Arrangements would be put in place to enable financial services and products to operate in the same way following independence as they do now. This would maintain confidence and financial stability.”

Note the very different tone as we doff our caps to the Bankers. I will rewrite this using the language from the immigration paper. “This Scottish Government believes that financial regulation should be made according to the needs of Scotland’s economy, public services and communities, and should have dignity, fairness and respect at its heart.”

Better?

It seems that independence allows us a higher moral and ethical plane when it comes to creating and structuring our new society. But that doesn’t seem to apply to our economy. With independence, we will see the end of the hostile atmosphere for immigration, but financialisation and wealth extraction will continue.

Not too wee, but too empty

At the heart of the economic argument, I believe, is that Scotland needs a bigger population. Many readers will have no doubt seen this graph (source unknown).

Scotland is not too wee, but from an economic point of view, it is too empty. The Union dividend is a much smaller “natural” population.

From 2011 to 2021, the population growth in Northern Ireland was twice that of Scotland. By 2033, the population in Scotland is expected to grow by only 50,000 people. Over a similar period, Ireland is expected to see a 10% rise. By 2027, there will be more people living in Ireland than in Scotland.

In Scotland, immigration is the sole driver of population growth, and it is crucial for Scotland to be able to prosper as a small nation outside of a bigger economic union, and I would argue even as part of a bigger union like the EU. Scotland needs to significantly increase immigration if it wants to prosper. The economic message: you are welcome. On that most important point, we agree with the Scottish Government.