It's time for Scots, English to File for Divorce

It's Time for Scots, English to File for Divorce
By Matthew Lynn

Nov. 29 (Bloomberg) -- Next year, England and Scotland will mark the 300th anniversary of the 1707 treaty that melded the two nations together. What better way of celebrating that than by filing for divorce? Far-fetched? The latest polls suggest there is growing support for a separation on both sides of the border.

The English and the Scots appear to be fed up with each other. And a split would be the best outcome for both countries. Scotland might take the chance to emulate the miraculous success of Ireland. England would be able to cut its taxes at a stroke. It might even get the Conservative government it voted for, rather than the Labour one the Scots wanted.

There is no doubt that there is now real momentum behind independence. ``Although Scottish independence in the foreseeable future is still unlikely, the chances that it might happen have risen from below 1 percent to perhaps 10 to 15 percent,'' Douglas McWilliams, chief executive of the Centre for Economic and Business Research in London, said in a recent report.

An ICM Ltd. poll in the Sunday Telegraph this month found that 52 percent of Scots supported full independence for their country. In September, a YouGov Ltd. poll showed 44 percent of Scots in favor of independence, compared with 42 percent against. The level of support had almost doubled since 2000. Meanwhile, the Scotsman newspaper reported this month that 51 percent of Scots favored full independence versus 39 percent against.

The English are even keener to get rid of the Scots. The ICM poll showed 59 percent of English voters supported the break-up of the union as well.

2007 Elections

``We are becoming Britain's Quebec,'' Stuart Thomson, a bond-fund manager at Resolution Investment Management in Glasgow, Scotland, said in a telephone interview. ``It is going to be a constant case of ``will they or won't they?'''

The crunch may come next year. Elections for the devolved Scottish Assembly are set for May 2007 -- and the pro- independence Scottish National Party may well emerge as the strongest grouping. If that happens, the momentum for a split would become unstoppable.

There would be nothing for either side to fear from that. In fact, both would be better off without each other.

It is a myth that countries need to be big to prosper. The Paris-based Organization for Economic Cooperation and Development last year counted only five countries as ``high income'' -- the U.S., Luxembourg, Norway, Switzerland and Ireland. The U.S. is a big place, but the rest of them are pretty small. That still hasn't stopped any of them getting rich.

Irish Model

The list includes another small Celtic nation on the edge of Europe. Through a modest amount of deregulation and a lot of tax- cutting, Ireland has turned itself from a relative backwater into one of the most successful economies in Europe. It has long since stopped blaming its problems on the English, and set about creating a dynamic economy of its own.

Could Scotland follow in its tracks? It couldn't do much worse than it is now. The Scottish economy is a mess, dependent on a bloated public sector and showing few signs of life. ``If Scotland had simply matched the success of Ireland since 1997, our nation would now be 6,000 pounds a head better off,'' the Scottish National Party said in an analysis this month.

There are few more entrepreneurial people in the world than the Scots. Just take a look at the numbers of companies around the world with names starting with ``Mc'' or ``Mac.'' And if the birthplace of Adam Smith can't create a thriving free-market economy, then who can?
North Sea Oil

True, it wouldn't happen quickly. ``You had 70 years of pain in Ireland after independence,'' Thomson said. ``You probably wouldn't get that in Scotland, but it might be a long time before the economy started to flourish.''

And how about the English?

The accounts of the two countries are hard to disentangle. The U.K. government collects a lot of tax revenue from North Sea oil, and that presumably would have to go to the government in Edinburgh. The financial details of the separation would take a lot of haggling -- as they do in any divorce. Still, the chances are that the English would pay lower taxes as a stand-alone nation.

Most importantly, the English would get the kind of low-tax, free-market government they want. At the 2005 election, the Conservative Party won more votes in England than any other party. Many of the main figures in the Labour government are Scottish, including Chancellor of the Exchequer Gordon Brown. And they are kept in power by Scottish votes.

Better Off Apart

In reality, the political cultures of the two countries have drifted so far apart, they are no longer compatible. The Scots want a Scandinavian-style social democracy with high taxes, generous welfare and big government. In Scottish politics, there are virtually no right-of-center voters left. The Conservative Party won less than 16 percent of the vote in Scotland last year.
The English want a U.S.-style free market with lower taxes, and a smaller state. The only reason they can't have it is because of the Scots. That is hardly healthy.

As the divorce lawyers like to point out, once a relationship has broken down, you are better off apart. England and Scotland have reached that point. The 300th anniversary of the union should be the last.

(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net