:00:09. > :00:13.some serious stuff out there. Tonight on Newsnight Scotland, we
:00:13. > :00:17.will be talking to a man whose views on the independence debate have more
:00:17. > :00:19.than the usual interest. 40 years ago, Gavin McCrone wrote a report
:00:20. > :00:24.which has entered the annals of nationalism, suggesting that North
:00:24. > :00:29.Sea oil could make Scotland as rich as Switzerland. I will be asking him
:00:29. > :00:31.if he still believes that. Also tonight, how farmers have been
:00:31. > :00:39.coping with the unpredictable weather this year.
:00:39. > :00:42.Good evening. There is a book published tomorrow called Scottish
:00:42. > :00:45.Independence: Weighing Up The Economics. The author is not only a
:00:45. > :00:48.former chief economic adviser to government in Scotland, he is the
:00:48. > :00:52.one who wrote perhaps the most talked about civil service briefing
:00:52. > :00:56.paper in Scottish political history. The new book by Professor Gavin
:00:56. > :01:01.McCrone asks whether independence would make people better or worse
:01:01. > :01:07.off. He looks at the key areas of the economic debate, including
:01:07. > :01:11.growth, currency options, choices about society's priority and Europe,
:01:11. > :01:15.and oil. This extract from a previous edition of this programme
:01:15. > :01:21.may remind you why the name is so familiar. In 19 seven four, a report
:01:21. > :01:25.commissioned either Tory government was buried for three decades. Why?
:01:25. > :01:31.It said an independent Scotland could be economically prosperous.
:01:31. > :01:36.This paper has shown the advent of North Sea oil is completely
:01:36. > :01:46.overturned the traditional economic arguments used against Scottish
:01:46. > :02:01.
:02:01. > :02:05.nationalism, wrote the author, would never have expected the civil
:02:05. > :02:09.servants briefing paper to have a made public. That is not what they
:02:09. > :02:10.are for. But he reckons he was right then and that history proves his
:02:10. > :02:18.point. I'm joined now by Professor Gavin
:02:18. > :02:25.McCrone in the flesh. Let's start with oil, as that created all the
:02:25. > :02:28.fuss. Actually, you like Alex Salmond's idea of an oil fund.
:02:28. > :02:33.The only thing is whether you can afford to put money in it at the
:02:33. > :02:37.moment. But in principle, that is what they should do? There should
:02:37. > :02:41.have been an oil fund way back. If there had been, the whole economic
:02:41. > :02:47.situation of the UK would be different now. But things have
:02:47. > :02:51.changed. What I take from your book is that the question we asked a
:02:51. > :02:55.minute ago, whether Scotland could still be as rich as Switzerland from
:02:56. > :03:02.North Sea oil, your answer would be? It has changed. In the early 1980s,
:03:02. > :03:08.the oil revenues, in present-day prices would have been �28 billion
:03:08. > :03:12.to �30 billion. They are now between �5 billion and �10 billion, so there
:03:12. > :03:18.is a big difference between the situation is now and then. What I
:03:18. > :03:24.wrote in 1974 was intended as a briefing paper for the incoming
:03:24. > :03:28.government. But you think the problem now is that even if an
:03:28. > :03:34.independent Scotland took all its oil income, it would still need all
:03:34. > :03:39.of it to pay for basic spending? problem is that Scottish public
:03:39. > :03:44.expenditure per head is substantially higher than the UK
:03:44. > :03:50.average, 10% higher. The income from taxes for the government without oil
:03:50. > :03:55.is only equal to the UK average, so there is a gap, and that gap would
:03:55. > :03:59.have to be filled by all revenues at the moment. And even so, according
:03:59. > :04:06.to the Scottish government's own figures, there would be a 5%
:04:06. > :04:11.deficit. But the crucial point is that we are in the middle of a
:04:11. > :04:14.financial crisis. Written has a deficit. But your point is that even
:04:14. > :04:20.if we could put that to one side, you would still need the oil money
:04:20. > :04:23.to meet current spending. An issue came up last week - what criteria
:04:23. > :04:27.should be used in the future? Let's say Scotland that become
:04:27. > :04:33.independent, and in the future, there was some possibility of
:04:33. > :04:36.setting up an oil fund. What criterion should be used? I was not
:04:36. > :04:40.clear from your book what you thought on that. Do you think that
:04:40. > :04:45.when you managed to balance the budget without using oil money, you
:04:45. > :04:48.could put the oil money in an oil fund? Or perhaps would you try to
:04:48. > :04:52.balance the current budget without using oil money? Normally, one would
:04:52. > :05:02.try to get the budget deficit down to at least 3%, which is what the
:05:02. > :05:05.European Union rule is. If you are at 3%, the debt is not growing,
:05:05. > :05:12.because if the economy is expanding at the normal rate, that is more or
:05:12. > :05:20.less equal to the 3%. So if you can get it down to about 3% in normal
:05:21. > :05:26.times, anything over and above that could be put into an oil fund.
:05:26. > :05:33.you get the current budget to a 3% deficit, and then you can use oil
:05:33. > :05:36.money or the oil money that remains to put into an oil fund or use some
:05:36. > :05:40.of it for capital projects. Norwegians have put a substantial
:05:40. > :05:47.amount of it into an oil fund, and it is now the biggest wealth fund in
:05:47. > :05:57.Europe. That means there reserves are bigger than their national
:05:57. > :06:00.
:06:00. > :06:06.debt. This 1974 paper, you say you were a civil servant at the time.
:06:06. > :06:09.But in a way, that is not the point. The point is that had it been
:06:09. > :06:15.published or the information in it been made public, it could have had
:06:15. > :06:20.a substantial effect on both the chapters of the SNP at the time, and
:06:20. > :06:23.arguably, the chances of the British government, saying, we had better do
:06:23. > :06:29.something different with the oil money? The time I wrote it was just
:06:29. > :06:37.between the Labour and Conservative government. The Labour government
:06:37. > :06:40.had just got a depth of the situation. In that paper, I was
:06:40. > :06:46.saying, we know how much oil we produced in 1980, and you ought to
:06:46. > :06:51.be able to get this amount of revenue from it. But you will not do
:06:51. > :06:54.that unless you do something about it. When the Labour government came
:06:55. > :07:03.in, it did take the measures necessary to do that. So the revenue
:07:03. > :07:06.in 1980 was actually larger than I predicted. But the point is that it
:07:06. > :07:11.would have been helpful to the public debate, had that information
:07:11. > :07:15.being made public, and the British government deliberately did not make
:07:15. > :07:22.it public. I don't know about that. In the period running up to that
:07:22. > :07:24.election, there were two issues of the Observer newspaper on two
:07:24. > :07:30.successive Sundays, and they both said approximately the same as I was
:07:30. > :07:38.saying. So it was known by a lot of people. Let's come back to the
:07:38. > :07:45.present. Setting up an oil fund, any idea when you think that might even
:07:45. > :07:49.be a possibility? Not for quite some time. It depends on how any
:07:49. > :07:55.government would manage the other finances in Scotland. Would we cut
:07:55. > :08:01.public expenditure or raise other taxes? What would we do to get the
:08:01. > :08:05.balance budget in balance? The SNP have an idea of a currency union
:08:05. > :08:12.with the UK. You are sceptical about that. We have seen how difficult it
:08:12. > :08:18.is in Europe at the moment. It means there would be very little
:08:18. > :08:24.separation. You don't think you could have a separate fiscal policy?
:08:24. > :08:27.No. Why not? Look what happened in Europe. They are moving towards a
:08:27. > :08:31.situation where they are tried to get control of each other's fiscal
:08:31. > :08:37.policy in order to stop some countries building up huge debts. It
:08:37. > :08:40.makes it very difficult to run a separate fiscal policy. So if you
:08:40. > :08:44.had an independent Scotland that was in a currency union, do you think it
:08:44. > :08:50.would be possible for Alex Salmond to carry out what appears to be his
:08:50. > :08:54.flagship Wallasey, to reduce business taxes 's -- flagship
:08:54. > :08:59.Wallasey. I don't think so. There would be all kinds of problems with
:08:59. > :09:08.that. If Scotland tried to cut its corporation tax to the kind of level
:09:08. > :09:12.that the Irish have, the northern part of England is in a worse state
:09:12. > :09:15.than Scotland economically. Scotland is actually one of the richer parts
:09:15. > :09:19.of the UK now. The north of England and Wales would be up in arms about
:09:19. > :09:23.it, because the whole point would be to attract investment that otherwise
:09:23. > :09:29.might have gone to them. Let me quickly go through some of the
:09:29. > :09:33.points that struck me in the book. You say that whatever arrangements
:09:33. > :09:41.had been in place in banking regulation, you don't think Scotland
:09:41. > :09:47.could have survived. It would have been in the same position as Ireland
:09:47. > :09:56.or Iceland in 2008. Well, it banking industry in relation to GDP is
:09:56. > :10:00.bigger than either of them. It depends a lot on whether the
:10:00. > :10:05.headquarters were in London or in Edinburgh. If you think it would
:10:05. > :10:09.have been a problem before, what is the solution? If Scotland became
:10:09. > :10:13.independent, do you think the best thing that could happen would be
:10:13. > :10:19.that RBS and HBOS are headquartered in London and would therefore come
:10:19. > :10:24.under the rest of the UK's regulatory system? In the case of
:10:24. > :10:28.Lloyds, which owns HBOS, it would be bobbly be headquartered in London,
:10:28. > :10:33.and its Scottish bit would just be subsidiary. And the Scottish bid
:10:33. > :10:38.would be regulated by the Scottish regulator. What about RBS?We don't
:10:38. > :10:44.know. It might be tempted to move to London. But you think it would be in
:10:44. > :10:47.the interests of Scotland if it did? It would have to be separately
:10:47. > :10:53.regulated in the two countries. What went wrong with Iceland was that one
:10:53. > :10:57.of their banks operated simply as a branch in Britain. You have written
:10:57. > :11:01.this took about the debate. What do you make of it? Do you think the
:11:01. > :11:09.pro-independence people are running a good campaign? I don't want to
:11:09. > :11:14.comment on that. I don't want to fall on either side. I have tried to
:11:14. > :11:18.be impartial. I think the pro-independence side have a lot of
:11:18. > :11:22.questions to answer about the currency and the European Union and
:11:22. > :11:27.so on, and about the financial sector. The financial sector would
:11:27. > :11:33.have to be we struck did if we became an independent country, and
:11:33. > :11:38.that would be quite a headache. And what about the no party? They can't
:11:38. > :11:45.agree on what they would put in its place instead. Do you think they
:11:45. > :11:49.should be trying to do that? Yes. Public opinion polls have shown that
:11:49. > :11:55.image or to your people would like to see more devolution. In fact,
:11:55. > :11:58.more people seem to say that Dan that they would like independent at
:11:58. > :12:05.the moment. We know the Scotland act 2012 will introduce a lot of
:12:05. > :12:10.additional powers. But perhaps we should go beyond that. The Liberal
:12:10. > :12:15.party want to set up a system which would be like a federal system in
:12:15. > :12:24.the UK. We have had various people reducing papers on that. You think
:12:24. > :12:30.there should be more debate on that. I understand you claiming you
:12:30. > :12:34.do not want to take sides. What I got out of your book was that the
:12:35. > :12:40.gist of it seems to be that the independence thing is not a very
:12:40. > :12:46.good idea, and it certainly is not a very good idea right now? In a way,
:12:46. > :12:54.this is a bad moment. The UK as a whole is heavily in deficit. That
:12:54. > :12:59.adds a problem. Let me ask you a very blunt question. What would have
:12:59. > :13:07.two happen to convince you to vote yes? I don't think I want to answer
:13:07. > :13:11.that question! In the terms of the book? I think a lot of the issues
:13:11. > :13:16.which I mention in the book really have to be given answers to. And
:13:16. > :13:21.they are not at the moment. The European thing, we don't know what
:13:21. > :13:24.is going to happen. I tend to think on the whole that it might be easier
:13:24. > :13:32.for Scotland to become a member state of the European Union than a
:13:32. > :13:37.lot of people make out. It has to be agreed by the other 28 members. One
:13:37. > :13:41.of them could veto. What else would you need to know to vote yes?
:13:41. > :13:46.would need to know what is going to be done about the financial sector.
:13:46. > :13:50.We will have to leave you there. Thank you. Now, as we witness the
:13:50. > :13:53.clouds gathering tonight, this year has been a bit of a mixed bag for
:13:53. > :13:56.weather. A nondescript winter followed by a late cold snap meant a
:13:56. > :14:00.delayed spring. Consequently, it was a tough start for our growers and
:14:00. > :14:03.farmers. However, since then things have picked up with the warmest July
:14:03. > :14:06.in years for most parts of the country. Notably in the North East,
:14:06. > :14:10.where they have been enjoying some good growing conditions with hot dry
:14:10. > :14:13.weather. At least they were until Ian Hamilton turned up to find out
:14:13. > :14:17.how things were doing. This year has been a bumper crop fur
:14:17. > :14:25.fruit growers, thanks to a warm, dry, sunny summer. Well, until I
:14:25. > :14:30.arrived. Even the dog will not come out of the car. In this part of
:14:30. > :14:34.Scotland they grow food on an industrial scale. On this form alone
:14:34. > :14:38.outside Arbroath, they employ more than 300 people at the height of the
:14:38. > :14:44.growing season, picking and packaging fruit. Mainly
:14:44. > :14:51.strawberries. They are grown under 200 acres of tunnels, each of 100
:14:51. > :14:57.metres long. The fruit is sold directly to supermarkets the UK.
:14:57. > :15:04.certain times of the year, the Tayside region, if you like, would
:15:04. > :15:10.produce a large percentage. It is probably going on for 35%. That is
:15:10. > :15:16.quite a lot? Yes. At certain times of the year. Other times it would be
:15:16. > :15:21.less. It is a significant part of the UK fruit total. North of here is
:15:21. > :15:26.Aberdeenshire. There you will find some of the best farming land in
:15:26. > :15:31.Scotland, growing a variety of crops and raising some of the best beef
:15:31. > :15:41.cattle in Europe. Like the fruit growers of Angus, these farmers have
:15:41. > :15:48.
:15:48. > :15:52.also had a good season. Andrew Booth runs a family farm. They will open
:15:52. > :15:56.the doors and their books for others in the industry to scrutinise. I
:15:56. > :16:03.cannot think of any other sector would do that. But they do not view
:16:03. > :16:10.it that way. We are competitors but also friends and colleagues. Farming
:16:10. > :16:15.is not an industry with mass of companies with lots of employees.
:16:15. > :16:24.For us to improve the system, we need to learn of them, and they
:16:24. > :16:28.learn from us. The opportunity is to get ten years worth of business in
:16:28. > :16:33.three years. You are open to criticism but I have got pretty
:16:33. > :16:41.thick skin. I can handle that. European Union are making some
:16:41. > :16:44.radical changes to the common agricultural policy. But any changes
:16:44. > :16:49.make winners and losers. One major concern is that farmers will be
:16:49. > :16:57.discouraged from being productive as the subsidy shifts from productivity
:16:57. > :17:04.to how much land they have. European Union as commanded it wants
:17:05. > :17:08.to play on the active farmers. -- has demanded it wants to pay only
:17:08. > :17:12.active farmers. No further criteria to say they will give more money to
:17:12. > :17:17.more active people and less money to less active people. The risk is that
:17:17. > :17:21.the money will go from people who are active and productive, to people
:17:21. > :17:31.who are relatively inactive and unproductive. If all I have to do is
:17:31. > :17:33.
:17:33. > :17:40.keep what will actually amount to one 40 acres, -- one Cal to 40
:17:40. > :17:46.acres. , than I might very well be tempted to say I will keep my money
:17:46. > :17:51.and cut my level of production and has -- have a nice easy life.
:17:51. > :17:56.farmers, to survive it is about diversifying. For some it is about
:17:56. > :18:00.tourism and farm shops and cafes. For David Smith, it is renewables.
:18:00. > :18:05.You cannot see them because of the low cloud over the Aberdeenshire
:18:05. > :18:10.Hills. But he assures me that he has invested in four large wind
:18:11. > :18:14.turbines. That has more than doubled his farm income. But he has got
:18:14. > :18:22.concerns that farmers like him are being squeezed out of the market by
:18:22. > :18:28.foreign developers. I am really frustrated at the difficulties of
:18:28. > :18:31.trying to get finance. It is sad to see there are several farmers who
:18:31. > :18:36.have actually got planning permission, and because of the
:18:36. > :18:40.difficulties they are encountering, they have had to sell to foreign
:18:40. > :18:46.companies and all the profit is going abroad. It is a shame. Money
:18:46. > :18:52.should be staying in Scotland. It is our facilities so we should be seen
:18:52. > :18:55.the benefit. Farmers are a canny lot. They know that one good summer
:18:55. > :18:58.will not make an agricultural business. But at least this year
:18:58. > :19:03.they are enjoying the fruits of their efforts.
:19:03. > :19:11.Now a quick look at tomorrow's front pages. Starting with the Scotsman,