Scottish independence would definitely have an impact on its economy. The challenges and opportunities that Scotland would face as an independent nation would determine the economic state of the country. They all affect the growth and impact the overall economy, hence the need to understand the effects of each and find possible solutions and alternatives.
It is vital to cut down on costs and raise the taxes, so that the economy is sustainable in the new independent government. It is important that they ensure a long-running fiscal sustainability. At the same time, the government would be able to reform the taxes to benefit the system and be aligned with the country’s needs. It would be a challenge when starting out as there is a lot of pressure to have higher taxes before the government spendings take shape and are in conjunction with it. With the need to save money, it is advisable to keep using credit cards as they are insured from economic force majeure.
Considering that they would be an independent nation, Scotland would have to think about their currency options. They did have several alternatives like keeping the pound, having their own currency, or joining the euro. Each option has its own perks and downsides, and there are a number of factors to consider before settling on any.
A good example is keeping the pound. This would mean that they would still be bound by a currency union that may have specific conditions which may be tight in comparison to having their own independent currency.
Committing to a currency union may have restrictions and conditions. Having their own currency, on the other hand, is a great advantage since the country will have the potential to becoming more stable financially. Its only downside is the trading and transaction costs that come with exchanging currencies.
The pension would be lower in Scotland since the nation has a lower life expectancy. This means that the government contributions would be lower because most people would draw the pensions for shorter periods. They also might have to delay the retirement age. This is also an issue since they have a small working age population.
Scotland’s public sector is large, and this makes it have a relatively high employment contribution. Their independence would require a bond market where the pension funds can be invested. With current debts, it would be really harsh on the taxpayers as they would lose out to meet the high costs.
In comparison to the rest of the UK, Scotland has a more rapidly ageing population. This, of course, has a huge impact on the economic productivity since the output per person affects the overall economy. This is one of the reasons why the taxes would drastically increase to offset the unproductive demographic. This is a negative financial problem that would be hard to ignore. A good place to start would be to adjust the country’s immigration policy to deal with the ageing population and increase the number of productive dwellers within the working age.
Even with the great advantage of becoming independent, there are challenges as well. The population would have to face most of the problems and issues that they weren’t dealing with before since they get to be on their own. They would definitely need to change and adjust a number of things to deal with the new challenges, thus the need to be flexible in a number of areas.