John Ferry John Ferry

Humza Yousaf fails to make the economic case for independence

Humza Yousaf (Credit: Getty images)

Try to start a speech with a joke to warm up your audience. That’s always good advice. And so Scotland’s first minister, Humza Yousaf, began his speech at the London School of Economics this week by light-heartedly pointing out that the LSE might be a world-class institution but it only came fourth in a recent newspaper ranking of Britain’s best universities. Scotland’s St Andrews University, on the other hand, he said, came out in first place.

He went on to say he was reminded of a ‘famous saying’ that there are two types of people in this world: ‘Scots, and those who want to be Scottish’. I’m guessing you’ve never heard of this famous saying, mostly because it isn’t a famous saying, but, whatever, it got a smattering of a laugh.

Keep this in mind the next time you hear Scotland’s First Minister frame his opponents as misbelievers

His next line though must have sounded odd to a London audience. ‘There is the third of course – those who lack any ambition whatsoever – but we shall look over those individuals.’ This did indeed seem to go over the heads of his listeners. It was a dig at those Scots who fail to fall in line with the nationalist cause. He was placing the malcontents who refuse to simply wrap themselves in the flag and ‘believe in Scotland’ in a separate category where their opposition can be pathologised and ultimately dismissed.

For those who understand the nature of nationalism, it was a telling part of a speech in which Yousaf claimed to lay out an evidence-based economic argument for secession. His intolerance of sceptics signalled the opposite: a faith-based approach that is the antithesis of evidence-based reason.

His fervoured commitment to secession, regardless of what it means in reality, also came across in the contradictions implicit to his arguments, and in the evidence he chose to leave out. He lamented the uncertainty caused by Brexit but failed to engage with the reality of making Scotland the first part of an advanced economy to cut itself off from its in-place currency and fiscal base. If you were looking for hard-nosed answers on how an independent Scotland will issue billions of pounds worth of sovereign debt with no borrowing record and no currency of its own while managing outsized twin fiscal and trade deficits, then you had come to the wrong place.

He accepted that, post-Brexit, the SNP is now campaigning for a hard border with England, but key analysis on what this would mean for the Scottish economy went unmentioned. The critical evidence is a 2021 research paper produced by the LSE’s own Centre for Economic Performance, which played a central and respected role in examining the economic impacts of Brexit. The modelling suggests that, in terms of trade-related impacts alone, ‘the negative impact of independence on Scotland’s economy is two to three times greater than the costs of Brexit’. Secession would hit Scotland’s economy harder than Brexit primarily because Scottish trade with the rest of the UK is four times larger than its trade with the EU. Over 60 per cent of Scottish trade is with the rest of the UK.

The second conclusion of the research paper is that ‘rejoining the EU would do little to mitigate the costs of Scottish independence’. While EU membership would boost trade with the bloc, it would also lead to additional increases in trade costs with the rest of the UK. These effects roughly offset each other.

‘For an independent Scotland to be better off inside the EU, independence must destroy a sufficiently large share of Scotland’s trade with the rest of the UK that the EU becomes Scotland’s most important trade partner. However, the more independence reduces trade, the greater its economic costs. In other words, for rejoining the EU to be economically desirable, independence itself must bring substantial economic costs,’ says the research – which remains as relevant today as in 2021.

The analysis clearly highlights a lack of logic in the economic argument that Scotland should become independent in order to rejoin the EU. This is obviously why it goes unmentioned by Yousaf. In turn this highlights the duplicity of a politician claiming to make arguments based on rationally weighing up evidence.

More seriously, the research has been carefully and deliberately ignored by Scottish government civil servants. They have published no less than 11 papers on secession in the past year and a half, none of which mention it. Damningly, a freedom of information request published in December showed that the Scottish government is very much aware of the paper.

Keep this in mind the next time you hear Scotland’s First Minister frame his opponents as misbelievers. The lack of faith they hold is rational because it stems from taking a true evidence-based approach to assessing his policy.