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Currency, oil and debt: The economics of Scottish independence

Jobs, currency, debt and oil revenues loom large in the independence referendum battle.

Incapacity benefit: Widespread changes proposed

The first Scotland Tonight debate on independence focussed on economics, the issue that voters consistently tell pollsters is first in their list of priorities.

Jobs, currency, debt and oil revenues loom large in the independence debate and they were prominent in the Scotland Tonight clash between Deputy First Minister Nicola Sturgeon and Secretary of State for Scotland Michael Moore on Thursday night.

Scotland's economy is more diverse than ever, no longer reliant on manufacturing. The financial services sector employs 95,000, "Silicon Glen" provides 55,000 jobs, the whisky industry sustains 35,000 posts, and 40,000 people are employed in Scotland's defence, aerospace and marine industries.

Oil is a crucial sector of the economy, providing 150,000 jobs in Scotland and contributing £11.2bn to the Exchequer in 2011/12. An important technical point, however, is how this money is distributed.

Jo Armstrong, from the Centre for Public Policy for Regions, said: "The only way Scotland has a fiscal position better than the UK's is adding in a geographical share of North Sea tax revenues. Excluding it, Scotland's position is significantly worse than the UK's, so it is a very, very important part in the debate around whether Scotland's fiscal position is better or not than the UK's."

Excluding oil revenues, Scotland's GDP in 2010/11 was £22,816 per capita against £23,242 for the UK. However, adding a geographical share of off-shore production revenues, Scotland's GDP jumps 22% to £27,732.

An independent Scotland would be in debt from day one, taking on board a share of the UK's public sector debt.

Paul Johnson, director of the Institute for Fiscal Studies, explained: "Debt in the UK continues to rise. It's already gone through the £1trillion barrier. By 2016, we expect the outstanding stock of debt to be 80% of national income. You'd expect that to transfer across to Scotland with debt of 80% of national income. For a small country particularly, that is a very substantial level of debt to be sitting on."

On the deficit, however, Scotland is currently in a stronger position than the rest of the UK. Including a geographical share of North Sea oil, Scotland's deficit is 2.3% of GDP, significantly lower than the UK's six percent.

The question of currency has been another contentious issue. First Minister Alex Salmond’s preference is for an independent Scotland to enter into a currency union with the remaining United Kingdom, creating a “Sterlingzone” with a shared monetary policy decided by the Bank of England in London.

As with many questions, currency would have to be negotiated by the two governments.

Sir John Gieve, former Deputy Governor of the Bank of England, told STV: “If a new Scotland wanted to have a formal currency union, it would need to agree the terms with the remaining UK government. I would expect that government to drive a pretty hard bargain. For example, it would want to constrain how much the Scottish Government borrowed.”

Small business owners are among those looking for answers from both the Yes and No camps, and one businesswoman from each side explained their position to STV.

Sarah Jane Walls, director of The Residence, believes Scotland could prosper as an independent country. She said: "When I think of Scotland, I think of a strong, independent country that can stand on its own. It doesn't scare me; it scares me if we don't have that -- where will we go?"

However, Ruth McKay, owner of Uniq marketing, warned that independence would cause "uncertainty". She said: "From my perspective, and the conversations that I'm having, it creates a great deal of uncertainty. We're speaking to colleagues right across Europe and the world and people are asking what's going to happen next."

With Scots not casting their vote until September 18, 2014, there will be more debates, more claims, and more questions about Scotland’s constitutional future.

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