The economy of an independent Scotland

Wendy Alexander's attempt (March 6) to demolish my column about the Scottish economy under the current administration's stewardship does me great service. It makes my point for me, better than I could have done myself. Instead of coming back with an explanation of how a very large government deficit has arisen and what might be done to reduce it, she does no more than argue about the details of the numbers. That is entirely passive and demonstrates that she is relying on numbers-bashing to respond to an issue that would, in any other economy, indicate that something was seriously wrong.

Similarly, she offers no plans for improving Scotland's poor rate of growth; nothing to reverse the emigration flow that holds unemployment down; and nothing to boost competitiveness, investment or skills. There is no vision for the future, no goals for the economy and no plans to deal with the imbalances that have built up over the years. Where is the leadership in that? My point exactly.

On the numbers themselves: (a) Your readers should, indeed, reflect on the Zimbabwe analogy. The Reserve Bank of Zimbabwe data implies a deficit of 10% of GDP in 2005; IMF data a deficit of 18% of GDP. While not identical, Scotland's deficit is clearly in the same league and possibly worse. Zimbabwe's debt is in instruments that can be monitored, while that of our executive is not.

(b) I have been given access to the expert evidence given to the Finance Committee of the Scottish Parliament. In it, confidence intervals are given for the process used to estimate income tax receipts in Scotland. They suggest the likely errors in those revenue figures are probably 8.5%. Since income tax receipts are among the most easily measured components of any budget, my hypothetical example looks uncomfortably accurate.

(c) The 2%-3% deficit figure of earlier years was not an SNP construction, but one that emerged from a calculation sent to me by Labour Party workers in London and the then regional correspondent of the Economist (your letters, 2001). Alternative calculations like these suggest that the Gers figures might be inaccurate.

(d) I do not have figures for graduate employment in 2004/5, but those for 2003/4 are available on the web from the Scottish Executive. They state that 65,720 students graduated in 2003/4, of whom 57% found work in the UK. It is difficult, therefore, to see how 80% of them could have found work in Scotland. This report says that 79% of those with jobs remained in Scotland, ie 45% of those graduating. Ms Alexander has confused those having jobs with the total that graduated.

(e) On OECD data, small countries that have grown faster than Scotland over the past 10 years include: Ireland (7.1%), Luxemburg (5%), Iceland (4.4%), Finland (3.8%), New Zealand (3.1%), Sweden (3%), Norway (2.6%), Netherlands (2.4%), Belgium (2.3%), Austria (2.2%) and Denmark (2.2%). Not one of those is in catch-up mode (Ireland's income per head surpassed the UK in 1998). Ms Alexander's comparison with the poorer countries here just confuses income levels with growth rates.

The most revealing comment in Ms Alexander's letter is that she thinks that the budget deficit has risen from 7% of GDP to 12% in six years. What has she, or the executive, been doing all this time? That is a 70% increase. Yet she gives no explanation, no remedy, and no plans or targets for reducing it.

Either there has been a colossal mismanagement, or the executive does not possess the means to stop a deterioration started down in London. If it is the former, then we may need a new team. If the latter, it is high time Scotland had the ability to look after her own economy.

Andrew Hughes Hallett, Professor of Economics and Public Policy, George Mason University, Fairfax, Virginia, USA

Which version is to be believed?

WENDY Alexander and the Labour Party would like to have it all ways.

While her colleagues have done their best to trash Scotland's reputation and present the country as being inhabited by subsidy junkies, too poor to be independent and too feckless to do anything about it, Ms Alexander would have us believe that in reality Scotland is indeed "the best small country in the world", enjoying the fruits of the "Union dividend" as never before.

So, which is it? If what Ms Alexander claims is true - and it is a big if - how does Scotland find itself in the position of having massive deficits and in receipt of those alleged subsidies from England?

According to Ms Alexander, Scotland is breaking records by the score, but according to her Labour colleagues, Scotland is a basket case that needs the largesse from our southern neighbours in order to survive.

Thus, on the one hand Scotland cannot possibly manage on its own because we do not have either the ability or the nous to do so. On the other hand, we are doing so well that we would be fools to throw away all the advantages of the Union dividend.

We could argue until the kye come hame about the economics of independence and neither side would be able to prove their hypothesis one way or the other.

Or we could look at the Labour Party's record in Scotland and ask ourselves if we can seriously be expected to believe a word it says. Labour, together with the Tories and the LibDems, lied for years about the true worth of Scottish oil; it has lied consistently about the reasons for the war in Iraq and about the consequences of that war.

Jim Fairlie, Finance Spokesman, Free Scotland Party, 1 St Ninians, Heathcote Road, Crieff

Intellectual oasis in a reactionary desert

Wendy Alexander is a rare construct in Scottish political life in that she is one of the few who has actually managed to gain my admiration for her ability to build a reasoned argument based on evidence. Where we part is on how the evidence is gathered and interpreted.

From my perspective, existing as an intellectual oasis within the reactionary desert of Scottish New Labour's modern conservatism must engender a sense of frustration and thwarted ambition that comes from a realisation that the true enemy to her vision for a smart, successful Scotland comes mainly from within her "ain kin".

Curiously, I find that her vision for Scotland chimes with my personal vision for my child in the medium term. In a speech during the secret celebrations of the Union, she quoted that her aspirations for her children were that "we will have left all traces of dependency or a lack of self-confidence behind having overcome a chippiness that was always more firmly rooted in our minds than based on Britain's borders". This is something with which I concur fully.

What better way than to have the national ability to seek to build global economic and societal bridges rather than sustain a limited, tired and dependent monogamous relationship where the partners are only staying together until the children have flown, as is increasingly frequent, the nest?

Vision implies aspiration and the application to follow the dream. The extent of Wendy Alexander's analysis is that "securing voters' confidence requires accepting the facts and acknowledging that the Union dividend has outperformed the oil windfall in each of the past 10 years and that North Sea oil output is declining, and that it will continue to do so".

Is that our future? Continued reliance on the decreasing goodwill of a dominant partner who on a whim could throw us out of the house when we cannot continue to satisfy them?

Wendy Alexander should aim high and if that is not achievable within the current political quagmire, try to aim a little higher. When she meets Austrians, Swiss or Norwegians, does she berate them into giving up autonomy and subsuming themselves to their larger neighbours?

I don't think she would be so impolite as to question their ambition and I only wish she would extend that courtesy to her fellow Scots.

Paul Cochrane, 10 Grants Way, Paisley

Lesson from Ireland

AFTER part of Ireland became independent and free of Britain in the early part of the past century, there followed many decades of near-absolute poverty-level existence for a great many Irish people before, in time and with the help of the European Union, it became the eminently successful and thriving country it is today. Those Irish people who fought for their country's freedom made no bones about the difficulty of going it alone, but insisted that their cause was right and the sacrifice worth while.

Those promoting Scottish independence today should learn from this; claiming the break-up of the United Kingdom would not have a downward economic effect on a great many Scottish people is both dishonest and self-defeating. Many undecided on the matter must be dismayed at the SNP's absurd disclaimers every time an independent business or social expert gives a point of view contradicting its vision of a Scottish Utopia.

If breaking up the UK is worth while, then it should not matter that there will be an inevitable and heavy price to pay, as was the case with the Irish.

Alexander McKay, 8/7 New Cut Rigg, Edinburgh