FOR THE GOOD OF SCOTLAND

Counting the Benefits of Independence

The second in a series of three papers published by the Scottish National Party to explain the economic case for Independence.
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Foreword

The debate about Scotland's constitutional future is inextricably linked to the arguments about her economic well-being. It is essential that the choices made by Scots at the next election are informed by a quality debate based on quality research and argument.

This autumn, the Scottish National Party are publishing a series of papers to outline our contribution to this fundamental debate. Entitled "For the Good of Scotland", these papers explain the natural strength of the Scottish economy, and the advantages - economic and social - which can be delivered by Independence.

In the first of these papers, the SNP challenged the myth that Scotland is somehow subsidised within the United Kingdom. The final paper in the series will present the SNP's own policy perspective for the first four years of an independent Scottish Parliament.

However, this second paper: "Counting the Benefits of Independence", details the extra jobs and wealth which would be generated by a process of political Independence itself, irrespective of any policy change.

The report spells out the initial benefits of such things as Edinburgh becoming a real capital city, with an independent Parliament and embassies; Glasgow becoming a media centre, with a national broadcasting system; and Aberdeen becoming a real oil and gas capital, housing the most powerful Energy Department in Europe.

Unlike the other two papers, this report has been independently prepared by Mackay Consultants, a leading firm of economic and management consultants in Scotland. It represents an objective and non-political assessment of the economic benefits of Scotland becoming an independent nation in Europe.

In contrast to the scaremongering of our political opponents, the SNP are setting out a powerful and positive case, demonstrating that Independence is the key to generating a new prosperity for Scotland.

Alex Salmond MP National Convener Scottish National Party


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Key Summary Points

This report, prepared by Mackay Consultants, represents an objective and non-political analysis of the initial benefits of Scotland becoming an independent nation in Europe, in terms of extra jobs and GDP.

The report assesses the positive impact solely of the Independence process itself, i.e. it assumes no policy changes in how an independent Scotland would be governed. It is the first such analysis in the course of the debate about Scotland's constitutional future.

The report utilises Mackay Consultants' independent model of the Scottish economy.

The experience in Ireland, Denmark and Norway is that thousands of jobs exist because of the independent status of these nations, which are in many respects comparable to Scotland.

The extra jobs and GDP which would be generated in Scotland as a result of Independence involve such things as Edinburgh becoming a real capital city, with a Parliament, ministries, embassies, etc; Glasgow becoming a media centre, with a national broadcasting system; and Aberdeen becoming a real oil and gas capital, housing the most powerful Energy Department in Europe.

In terms of the direct and indirect effects on both the public and private sectors, the report calculates that the initial impact of Independence could be up to 11,500 extra jobs in the Scottish economy, and extra Scottish GDP worth £375 million per annum.

An extra 4,550 jobs are forecast as a result of the greater institutional requirements and attractiveness of an independent Scotland, with up to 7,000 additional jobs being generated in the private sector.

The report dismisses the argument that Independence would lead to job losses, by pointing to the actual experience of small, independent countries, and relevant survey data. It also highlights the fact that the only other hydro-carbon rich economy in northern Europe - Norway - has experienced 25 per cent more GDP growth than have the UK or Scottish economies over the past sixteen years.


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CONTENTS

THE INITIAL ECONOMIC IMPACT OF AN INDEPENDENT SCOTLAND IN EUROPE

A REPORT for the SCOTTISH NATIONAL PARTY

by MACKAY CONSULTANTS October 1995

The initial economic impact of an independent Scotland in Europe

1.0 INTRODUCTION

1.1 We were commissioned by the Scottish National Party (SNP) to assess the initial economic impact of an independent Scotland in Europe. The SNP has already produced a static analysis of the economics of independence and will shortly produce a dynamic analysis. This report is concerned with an aspect which falls somewhere between those approaches, namely the effects of independence in Europe itself on the Scottish economy.

1.2 An independent Scotland would obviously have its own Parliament. There would be government departments and a civil service, probably along the lines of those in the United Kingdom, albeit on a much smaller scale. Some foreign governments would have embassies or representatives in Scotland. As a member of the European Union, some EU institutions could be located in Scotland. There could also be an autonomous public sector broadcasting corporation and other bodies following independence.

1.3 These bodies would employ people in Scotland and there would be additional economic impacts through their expenditure. They are the subject of this report.

1.4 Mackay Consultants have one of the two independent models of the Scottish economy (the other being that of the Fraser of Allander Institute at Strathclyde University). We were asked by the SNP if we could use our model to produce an objective and non-political assessment of this impact, and this report endeavours to do that. It has been produced completely independently of the Scottish National Party's own analyses of the economics of Scottish independence.

1. 5 Section 2 of the report gives a brief description of the current position in Scotland. We thought that it would be useful to examine the experience of other comparable countries, such as Ireland, Denmark and Norway, and that is summarized in Section 3. Finally, Section 4 gives our estimates of the likely economic impact of independence in Europe.


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2.0 THE PRESENT SITUATION IN SCOTLAND

2.1 Scotland does not have its own parliament at the present time, although that will form part of the policies of some of the political parties at the next general election. Scottish members of parliament (MPs) are elected to the UK parliament at Westminster in London.

2.2 The Secretary of State for Scotland is responsible in Scotland for a wide range of statutory functions which in England and Wales are the responsibility of a number of departmental ministers. He also works closely with ministers in charge of Great Britain departments on topics of significance to Scotland within their fields of responsibility.

2.3 The Secretary of State's statutory functions are administered by five main departments, namely
These departments are collectively known as The Scottish Office. Their main responsibilities are set out in the figure on the following page.

2.4 In addition there are some other Scottish departments for which the Secretary of State has responsibility, e.g. the Registrar General for Scotland and the Scottish Record Office. He also bears ministerial responsibility for the activities in Scotland of several statutory bodies whose functions extend throughout Great Britain, such as the Forestry Commission and the Training Commission.

2.5 At the present time the Scottish Office employs about 11,000 people, most of whom are based in Edinburgh. This number has declined in recent years, mainly as a consequence of constraints on public expenditure and also increased efficiency. Another factor which should be highlighted in the present context is contracting-out or privatization, i.e. some previously Scottish Office functions are now carried out by external agencies.

2.6 For example, the figure on the preceding page includes the following "executive agencies": 2.7 There are also other publicly-funded bodies in Scotland outwith the Scottish Office. Examples of these are: 2.8 Mention should also be made of the few UK/GB bodies which are based in Scotland. These include: 2.9 On the other hand, many UK departments are not represented in the Scottish Office. They include: 2.10 Finally, a few foreign countries have representations in Scotland, because of the importance of trade links. Examples are the USA, France, Germany, Italy and Norway in Edinburgh, Iceland and Pakistan in Glasgow, and the Faroe Islands in Aberdeen. However, the US government have suggested that they may close their Consul-General in Edinburgh.


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3.0 EXPERIENCE IN IRELAND, DENMARK AND NORWAY

3.1 We thought it would be useful to examine the experience of other comparable countries such as Ireland, Denmark and Norway. They are similar in size with Scotland and have similar economies in some respects. This section gives a summary of the positions in those countries.

Ireland

3.2 Ireland became independent of the UK in 1922. The basic law of the state is the Constitution adopted by referendum in 1937. It sets out the form of government and defines the powers of the President, parliament and government. Ireland has two Houses of Parliament, a Dail of 166 members and a Senate of 60, of whom 49 are indirectly elected and 11 are nominated by the Taoiseach (prime minister).

3.3 The government consists of not less than seven or more than fifteen ministers. The Taoiseach is appointed by the President on the nomination of the Dail. All members of the government must be members of the Dail or Senate but not more than two may be members of the latter body. The Taoiseach, Tanaiste (deputy prime minister) and the Minister for Finance must be members of the Dail.

3.4 There are sixteen departments at present and about 30,000 civil servants, of whom about 12,000 work in the central government departments in Dublin.

3.5 Ireland is a member of the European Union and of the United Nations. It is not a member of NATO.

3.6 It has fifteen members of the European Parliament. There are about 360 Irish people employed in the European Commission and from time to time some civil servants are there.

3.7 There are thirty nine foreign embassies in Dublin. Of these twenty one have their chancery in London. Twenty nine countries have honorary consular representatives in Ireland. All of these have embassies as well, apart from six (Columbia, Ecuador, Luxembourg, Monaco, Peru, Sri Lanka).

3.8 The Department of Foreign Affairs has a staff of 470 at headquarters in Dublin. It maintains forty seven embassies abroad where an additional 330 permanent staff are employed as well as 225 local staff. It has sixty honorary consulates abroad.

3.9 The population is about 3.5 million. About 43% is under the age of 25 and about 27% is under fifteen.

3.10 The Irish economy is very heavily dependent on trade. Despite the gradual decline in the relative importance of agriculture that sector remains very important. It accounts for 8% of GDP, 14% of employment and about 21% of exports. These figures compare with EU averages of 2.8%, 5.8% and 9% respectively. The UK remains the main source of imports and the main market for exports but its importance is declining as trade expands with the EU and other countries.

3.11 The Industrial Development Authority (IDA) has offices in many parts of the world and has been very successful in attracting inward investment to Ireland, by offering tax and related incentives. About 1,000 foreign firms have set up manufacturing operations in Ireland. The Trade Board has about twenty three overseas offices.

3.12 Radio Telefis Eireann (RTE) is the national broadcasting organisation, created by statute in 1960. It has separate but interlinked divisions catering for radio and television. The services were inaugurated in 1926 and 1961 respectively. The cost is borne by a television licence fee and by commercial revenue. The total staff of RTE is about 1,900.

3.13 Radio programmes are broadcast nationally on three networks. One of the three programmes is in the Irish language and another is also transmitted to Europe on the Astra satellite and in part to North America on the Galaxy satellite.

3.14 Television is broadcast nationwide on two channels. An Irish language television station is envisaged to commence in 1996. RTE, jointly with Telecom, owns and operates Cablelink, one of Europe's largest cable television companies. In addition to RTE services, Cablelink provides four British television channels and twelve satellite channels.

3.15 Independent local and national radio services are arranged through the Independent Radio and Television Commission, a government appointed body. The local independent commercial radio sector now consists of twenty one franchise stations around the country.

3.16 Tax relief is provided for corporations and individuals for foreign and domestic investment in films, including television films. This has led to a significant increase in film production. Where the previous norm had been two to three films a year, 1993 and 1994 saw a dramatic increase with about twelve films completed in 1993 and eighteen feature length films and eleven major TV drama series completed in 1994. These ranged in size and theme from international blockbusters to indigenous stories produced on relatively low budgets. The 1994 films included "Braveheart".

3.17 Each year there are film festivals in Dublin, Cork and Galway. The permanent Irish Film Centre is home to a number of film related organisations dealing in production, distribution and exhibition.


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Denmark

3.18 Denmark has a population of just over five million. Following a referendum on 1 January 1973 Denmark became a member of the then European Community, together with Great Britain and Ireland. Danish membership of the EC was motivated by economic as well as political considerations. The existence of a large free-trade area in Western Europe was seen of crucial importance to the Danish economy. With the enlargement of the EC in 1973 and the free trade agreements between other states which did not join the EC (among them the Nordic countries), Denmark attained the primary goal of her post-war market policy.

3.19 The Danish parliament, Folketinget, has 179 elected members. At the last general election these seats were taken by representatives of eight political parties. Sixty one of the representatives are female. In addition to the elected representatives 360 people are employed in the administration of the parliament.

3.20 In Denmark there are twenty ministries, employing about 4,000 people.

3.21 There are 65 foreign embassies, consulates or delegations in Copenhagen. We have been informed that these employ about 550 people.

3.22 Political, cultural and economic contacts with other countries are maintained by ninety embassies and consulates general throughout the world. Currently 640 persons are posted outside Denmark, and the Foreign Office employ 1050 people in Copenhagen.

3.23 Denmark became a member of the EC in 1973. At the beginning of 1973, the Danish parliament was informed by the Prime Minister that EC activities accounted for 585 jobs, excluding activities in the Department of Customs and Excises. Of the 585 jobs, 367 were new. In addition 278 new positions were created in the Department of Customs and Excises. We do not know how these numbers have changed since then but they are presumably larger because of the expansion of the European Union (EU).

3.24 Of the 13,200 statutory European Commission staff based in Brussels, 422 (3.2%) are Danish. The percentage representation of Danish nationals has dropped 0.6% since 1980.

3.25 Following the Edinburgh Summit in December 1992 the number of seats in the European Parliament was increased largely to take into account German unification. Denmark has 16 of the 567 seats (2.8%).

3.26 Denmark is a member of NATO and the United Nations.

3.27 Copenhagen is the location for a relatively large number of international bodies. At least ten such organisations have their headquarters in the city, including UNICEF, UNDP and the World Health Organisation (WHO). Other examples are the International Council for the Exploration of the Sea (ICES) and the Commission of the Council of Baltic Sea States.

3.28 Since 1980 there have been great changes in the electronic mass media in Denmark enabling the population to receive numerous channels by radio or television. DR's (The Danish Broadcasting Corporation) traditional monopoly has been broken. There are two television channels which can be received by almost all households, namely DR-TV and TV2. DR-TV is state funded whereas TV2 is financed commercially. DR has three radio channels broadcasting nationally, namely P1, P2 and P3.

3.29 The estimated numbers of employees are:
     		TV 	Radio   Joint Staff	Total
      DR 	1400 	1100 	1000		3,500
      TV2* 	600	600

     * figure includes 300 employees in regional TV.

3.30 Denmark also has a large number of local radio stations, but these do not broadcast nationally. In 1994, there were 53 of these stations registered with one or more employees.


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Norway

3.31 Norway gained its independence from Sweden in 1905, a union which had lasted since 1814. Prior to that Norway had been under Danish rule since 1300.

3.32 The current population is approximately 4.1 million. Unlike Norway's Nordic neighbours Sweden and Finland, the population voted in a referendum in November 1994 not to join the European Union, after an emotional campaign by both the "yes" and "no" sides. Norway continues to be a member of EFTA, and has ratified the EEA agreement (European Economic Area agreement). Norway is a member of NATO, and a staunch supporter and member of the United Nations.

3.33 The Norwegian Parliament, Stortinget, has 165 seats. At the last general election these seats were taken by 100 male and 65 female representatives from eight different political parties.

3.34 In addition to the elected representatives the parliament is the work place for 320 people. This figure has been rising steadily over the past twenty years, because of the increasing service expectations of those using the parliament, according to the administrative head of the Storting.

3.35 There are fifteen ministries in Norway with 3628 employees.

3.36 There are 45 foreign embassies, consulates and delegations in Norway. Most of these are in Oslo but there are a few consulate representatives in some of the main ports.

3.37 Norway's national interests abroad are maintained by 500 persons working in 60embassies, 11 consulates general and seven delegations. In addition 600 are stationed in Oslo at the Foreign Office.

3.38 The Norwegian Trade Council has 300 employees. 150 of these are posted outside Norway in 37 countries, and these persons have diplomatic status. The Norwegian Trade Council has some offices of its own; others are represented from national embassies.

3.39 After the national referenda in Austria, Finland, Sweden and Norway regarding membership to the European Union, Norway's "No" has seen the country continue as a member of EFTA. EFTA comprises now of only four member countries and as of November 1994 the secretariat has been reduced. Of the 110 positions in the organisation, Norwegians hold 43 of them. These jobs are both in the central Brussels secretariat and ESA (EFTA surveillance agency).

3.40 Up until September 1992 there was only one national television channel produced by NRK (The Norwegian Broadcasting Corporation) the state financed broadcasting corporation. In the autumn of 1992, TV2 came on the air. A commercial station, TV2 was the first to challenge NRK's monopoly. When the government gave the concession to TV2 the west coast location of the company's headquarters was important in the decision, with jobs being created in another part of the country. Many households access cable television and for those homes TVNorge is the largest and most significant cable station broadcasting to large parts of the country from Norwegian soil.

3.41 In the early 1980s laws prohibiting commercial radio broadcasting were lifted and local radio stations became the norm. NRK's monopoly of the national airwaves was not broken however until 1994 when P4 was launched. Broadcasting from Lillehammer, the station is financed commercially. P4 has one 24 hour channel, NRK broadcast nationally on four channels.

3.42 The estimated numbers of employees are:
	Television	Radio	Joint Staff	Total
NRK	985		631	1,386		3,002
TV2	350					350
TVNorge 220*					220
P4			40			40
Total	1,555		671	1,386		3,612
* figure includes 220 freelancers

3.43 There are numerous small local radio stations scattered around Norway. In Spring 1995 they had 1,500 employees, but in addition to that there are around 10,000 who help out on a voluntary basis. The Association of Local Radios in Norway estimates that this group contributes with one thousand man years of unsalaried work.

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4.0 THE INITIAL ECONOMIC IMPACT OF AN INDEPENDENT SCOTLAND IN EUROPE

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4.1 This final section of the report assesses the likely economic impact of independence in Europe. Attention is focused on five key aspects, namely:
  1. parliament
  2. government departments
  3. embassies and consulates
  4. European Union/international agencies
  5. broadcasting and films
There will be other activities arising from independence but we believe that the above will represent the main initial impact.

4.2 We should stress that this impact is quite distinct from an analysis of the economics of independence. As mentioned in Section 1 the SNP have produced a static budget for an independent Scotland and will shortly produce a dynamic budget. This report is concerned only with the specific issue of independence in Europe.

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Parliament

4.3 Scotland does not have its own parliament at the present time, unlike Ireland, Denmark and Norway. Ireland, with a population of about 3.5 million has two houses of parliament, the Dail with 166 elected members and the Senate with 60 members (of whom 49 are indirectly elected and 11 nominated by the Taoiseach). The Danish Parliament, the Folketing, has 179 elected members for a population of just over five million. The Norwegian Parliament, the Storting, has 165 members for a population of about 4.3 million.

4.4 A Scottish parliament would presumably be of a size similar with these three, e.g. with about 200 MPs. We understand that such a size of Parliament is SNP policy.

4.5 Based on the foreign experience, a parliament of that size would probably be served by about 400 people.

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Government departments

4.6 The populations of Ireland, Denmark and Norway are 3.5, 5.1 and 4.1 million respectively The Scottish population is currently estimated at 5,142,000 which is very close to the Danish level. Based on the foreign experience, therefore, we would expect an independent Scotland to employ about 12,000 people in its central government departments or ministries.

4.7 It is difficult to make precise comparisons between these other countries and Scotland because of differences in the distribution of responsibilities between central and local government, the role of executive agencies and other public bodies etc. Nevertheless, on a "like-for-like" basis we estimate that the equivalent figure in Scotland is currently about 10,900.

4.8 The other 1100 jobs can be presumed to be located in government departments in London.

4.9 We should stress that this is not the total number of civil service or public sector jobs. Others include school teachers, doctors and nurses, local government officials etc. These would be largely unchanged and our concern here is primarily with central government functions.

4.10 As set out in Section 2, the Scottish Office enjoys a considerable degree of administrative autonomy from Whitehall in London and employs a large number of people in Edinburgh. The Scottish Education, Environment, Home and Health Departments are responsible for virtually all their specific responsibilities in Scotland, with little or no input from London. Consequently, we would expect their functions and size to remain largely unchanged after independence in Europe.

4.11 The other two departments, namely Industry and Agriculture and Fisheries, are undoubtedly under-represented. A significant proportion of their responsibilities are still serviced from London.

4.12 The best example is probably energy, which is very important in Scotland because of the North Sea oil and gas industry. Although about 40 of the (then)-Energy Department jobs were transferred to Aberdeen recently, most of the people involved with the North Sea industry are still based in the Department of Trade and Industry (DTI) in London.

4.13 Given the importance of the energy industry in Scotland, including other indigenous supplies such as coal and hydro-electricity, an independent Scotland would certainly need to have a much larger and effective energy department. We would expect government energy policies to be significantly different from those of the UK government, particularly in relation to the North Sea oil and gas. The Ministry of Industry and Energy in Norway, together with the Norwegian Petroleum Directorate, are probably the best comparisons and Scotland could have similar bodies.

4.14 Other natural resources are also under-represented in Scotland, as indicated in Section 2. Although the Scottish Office has some responsibilities for agriculture and fisheries, the main authority remains in London with the Ministry of Agriculture, Fisheries and Food (MAFF). An independent Scotland would have to take over those responsibilities given these industries' importance to the Scottish economy.

4.15 An exception is forestry. The Secretary of State is the lead minister for forestry and the Forestry Commission is headquartered in Edinburgh. This function would be expected to continue after independence, albeit on a reduced scale.

4.16 The Department of Trade and Industry is one of the largest government departments in London, with a wide range of responsibilities including regional development, inward investment, energy, export services, competition policy and consumer affairs. There are very few people in the Scottish Office dealing with these responsibilities, so an independent Scotland would undoubtedly have to increase its capabilities. Other related bodies located in London include the Central Statistical Office and the National Audit Office.

4.17 Some activities are already delegated to Scottish Enterprise, Highlands and Islands Enterprise and the local enterprise companies, and that could be expected to continue, albeit with changes. Negotiations and dealings with EU institutions, notably for the implementation of common policies, will become increasingly important.

4.18 There would also have to be a new department or departments to take over the responsibilities of bodies like the Treasury and the Inland Revenue. Monetary and fiscal policy do not presently come within the remit of the Scottish Office and an independent Scotland would need civil servants to perform these functions. The precise scope would depend on the extent to which Scotland chose to follow different policies and on what agreements were made with bodies such as the Bank of England and the UK Treasury.

4.19 In this context the progress over the next few years towards European Monetary Union (EMU) will be very important because it will determine to a large extent the level of independence which individual Member States will have in their economic policies. Nevertheless Scotland, as for other Member States, would still need to control many aspects of economic policy.

4.20 As discussed in Section 2, other departments which are under- represented in Scotland are the

* Ministry of Defence
* Foreign and Commonwealth Office.

Some of their functions would have to be established in Scotland.

4.21 The specifics of the defence policy of an independent Scotland are outwith the remit of this report but obviously some Ministry of Defence functions would have to be transferred from London.

4.22 An independent Scotland would need a Ministry of Foreign Affairs. In Dublin the Department of Foreign Affairs has a headquarters staff of 470, in addition to those in embassies abroad. The equivalent numbers in Copenhagen and Oslo are 1050 and 600 respectively. We do not anticipate an independent Scotland in Europe requiring such large numbers but there would probably be a need for a few hundred foreign affairs staff.

4.23 Overall, we estimate that a Scottish government would employ about 1100 more people than are currently employed in Scotland by the Scottish Office and other central government bodies. This is not to imply that there would be an increase in government functions and bureaucracy, because the opposite is much more likely. It simply represents a transfer of existing government activities, which are concentrated in England, to Scotland.

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Embassies and consulates

4.24 The next category is embassies and consulates. The number and size of these would obviously depend on the decisions of foreign governments, and there would be a high degree of reciprocity with what Scotland decided to do overseas.

4.25 In Copenhagen there are 62 foreign embassies, consulates or delegations, employing about 550 people. In Norway there are 45, mostly in Oslo, but with a few consulate representatives in some of the main ports. There are 39 foreign embassies in Dublin of which 21 have their chancery in London.

4.26 For the purposes of this analysis we have assumed that there would be about 40 foreign countries represented in Scotland, employing between 350-400 people. The reasoning behind the smaller number is the belief that in the future the European Union may represent its members, rather than individual member states, in areas such as the Far East and South America.

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European Union and international agencies

4.27 Another category is European Union or other international agencies which could be established in Scotland. As discussed in Section 3 there are many such bodies in Copenhagen, including the headquarters of UNDP, UNICEF and the World Health Organisation, but very few in Oslo and Dublin.

4.28 The EU has a policy of locating new institutions in different member states. In 1993 agreement was reached on locations for various new institutions, as shown on the map below.

4.29 The European Environmental Agency in Copenhagen has a staff of about 50. The European Training Foundation in Turin employs about 290 people. The Office for Veterinary and Plant Health Inspection and Control in Dublin is part of the Commission and is not a decentralized Community body. It employs about 100 people.

4.30 The European Monitoring Centre for Drugs and Drug Addiction in Lisbon employs about 30 people. The European Agency for the Evaluation of Medicinal Products in London currently employs about 100 people which is expected to rise to 200. The Agency for Health and Safety at Work has been set up in Bilbao.

4.31 The European Monetary Institute (EMI) was established in Frankfurt on 1st January 1994. The future European Central Bank, which will replace the EMI, will also be located in Frankfurt.

4.32 The Office for Harmonisation in the Internal Market (trade marks etc) is located in Alicante with a staff of about 200 people. Europol and the Europol Drugs Unit are located in the Hague. The European Centre for the Development of Vocational Training (CEDEFOP) has been moved from Berlin to Thessaloniki in Greece. Finally, there is the Foundation for the Improvement of Living and Working Conditions which was set up in Dublin in 1975 and currently employees about 70 people.

4.33 It would be reasonable therefore to expect that, over time, some EU activities would be located in an independent Scotland. However, this is more likely to happen with new activities than the transfer of existing ones and the creation of the former will clearly depend on the attitudes of Member States towards the Commission taking on new responsibilities.

4.34 The SNP in the past has proposed the establishment of an Alternative Energy Research Institute, which could be located in Scotland. This could be part of the existing Joint Research Centre run by the European Union. Other possibilities for Scotland include EU activities related to fisheries and other natural resources.

4.35 It is difficult to assess the likely economic impact of these activities because they are uncertain at the present time but we believe that 300-400 jobs is a reasonable estimate.

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Broadcasting and films

4.36 We were asked to include as part of this study the broadcasting/film sector, which has been subject to recent debate following the release of the film "Braveheart" about William Wallace. Much of that was filmed in Ireland because of the tax concessions available there.

4.37 Scotland already has BBC Scotland, covering both television and radio, the two independent commercial television stations Scottish and Grampian, plus various commercial radio stations. However, most of the television programmes shown in Scotland are produced outwith the country and there has been pressure on the BBC recently to decentralize much more of its production work from London.

4.38 If Scotland were independent it would be reasonable to expect some increase in this activity. We do not know what would happen to the BBC but Ireland, Denmark and Norway all have independent broadcasting corporations.

4.39 Based on the level of employment in these countries (see Section 3), compared with the existing level in Scotland, we estimate that independence would result in an additional 400-500 jobs in the broadcasting/film sector in Scotland.

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Summary

4.40 To sum up, therefore, we estimate that the employment impact of this aspect of independence would be:

parliament				400
government departments and agencies	1,100
embassies, consulates etc		350 - 400
European Union/international agencies	300 - 400
broadcasting/films etc			400 - 500
total					2550 - 2800

4.41 The mid-point of that range is just over 2,600. The figure could be higher, depending for example on the specifics of economic policy and defence policy, but we believe that 2600 jobs is a reasonable estimate of the initial direct impact. That figure is in full-time equivalents and the actual number of jobs could be much higher depending on the extent of part-time working, for example.

4.42 It is usual in economic impact studies to take account of indirect and induced effects. In other words, the increase in government activities in Scotland and the establishment of embassies and EU/international bodies will generate spinoff benefits for the Scottish economy through their expenditure and also that of the employees involved. The simplest way of doing that is to apply a 'multiplier' to the direct impact.

4.43 For Scotland as a whole the value of the multiplier is likely to be about 1.75 so the total employment impact will be 2600 x 1.75 =
* 4550 jobs.

That figure takes into account all the expected direct, indirect and induced effects.

4.44 It is difficult to translate this increase in employment into economic output (or gross domestic product, GDP), but it can be done by applying an output-employee ratio to the employment estimates. The average for Scotland is currently about £27,500. However, that figure is too low for the type of activities considered in this report and we believe that £40,000 would be a more reasonable figure.

4.45 Applying that to the employment estimates gives an increase in annual economic output or GDP of

* £99.6 million - £109.6 million

of which the mid-point is about £105 million. If we apply the same multiplier value of 1.75 the total increase in economic output would be about £185 million per year.

4.46 In other words we estimate that if Scotland became independent, the ensuing activities discussed in this report would result in the creation of about 4,550 jobs and in Scottish GDP increasing by about £185 million per year.

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Private sector

4.47 There would also be increased activity in the private sector following independence in Europe but that is much more difficult to quantify. Dublin, Copenhagen and Oslo are the headquarters for various companies and other organisations which may not have located there if they were not national capitals.

4.48 Scotland, however, is already the headquarters for quite a few companies which operate on a UK wide, indeed international basis. The financial services and whisky industries are probably the best examples, although there has been a significant diminution in the independence of the latter over the past few years.

4.49 Based on the example of Dublin, we would expect an increase in corporate activity in Scotland following independence. Some companies operating internationally would establish subsidiaries or expand their representation in Scotland. That would also apply to trade organisations, transport bodies etc as well as the range of lobbying and representational groups which have sprung up around Whitehall in recent years.

4.50 A study for Scottish Enterprise in 1991 concluded that in the longer term up to 15,000 jobs could be created in Scotland even if only the Petroleum and Engineering Directorate of the (then) Department of Energy were relocated to Aberdeen. Many of those jobs were predicted to be in oil companies who believed that they had to have substantial presences in London close to Westminster and Whitehall. If Scotland were independent then some of those involved would obviously relocate to Aberdeen or Edinburgh.

4.51 The 15,000 figure is extremely high particularly as it only referred to the relocation of part of a department and was suggested as a longer-term response to the building of a Houston-type effect as a result of one-stop decision-making on oil and gas issues being created. However, even a fifth of that total, i.e. 3,000 jobs, would be a substantial boost to the Scottish economy as a near term response by the private sector to the location of a powerful energy department in the North East of Scotland. If there were similar effects in other industries the total could rise to say 4,000 jobs. With a multiplier of 1.75 the total could be up to 7,000 additional jobs.

4.52 We know that some people have predicted that Scotland would lose jobs because of independence, the suggestion being that some companies would transfer all or part of their activities to England. However, we doubt that that would happen. The actual experience of cities such as Dublin, Copenhagen and Oslo demonstrates that small independent countries in Europe can support substantial private sectors of the type forecast in this report.

4.53 Much would depend on the policy and fiscal initiatives which were pursued by a Scottish government after independence, and that is not a subject for this paper. In the forthcoming dynamic budget for an independent Scotland which will be produced by the SNP, the type of initiatives which would be pursued by a Scottish Government will be outlined. This will give an indication of whether the type of competitive economic base which is demanded by business as the key requirement after independence will be delivered.

4.54 In any case, there is limited substantial evidence to suggest that independence would have a detrimental effect on the business community. For example, a System Three poll in March 1992, commissioned by BBC Scotland, surveyed business people in 200 of the top companies based in Scotland on their attitudes towards independence in Europe. Only 2% said that they would even consider relocating outwith Scotland in the event of independence.

4.55 In addition the comparative evidence can be taken to support the view that independence may lead to an increase in economic growth. Over the last 16 years the Scottish economy has matched UK GDP growth of 2% on average per year. In contrast Norway, the only comparative hydrocarbon-rich economy in Northern Europe, has experienced growth of 2.9% per year since 1979. This has meant that Norwegian GDP has grown by 57% since 1979 whilst Scottish and UK GDP growth has been 32%.

4.56 There would also be temporary construction employment whilst new buildings and other facilities were constructed for both the public and private sectors.

4.57 Clearly, the private sector assumption is more speculative than the public sector impact noted in paragraph 4.46 above. Nevertheless, it is possible. If it happened the overall employment created could be therefore about
* 11,500.

4.58 These additional jobs would not increase economic output by the £40,000 per year average used above. Applying the lower average of £27,500 would result in a total increase in annual economic output of about
* £375 million.

4.59 We should stress again that these last two figures are speculative and would only be realised if there was a strong, positive response from the private sector, particularly the oil companies. Nevertheless, the higher increases are certainly possible and should not be regarded as unattainable.

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