Why global crisis has left case for independence in tatters

It may have been a good soundbite, but the 'arc of prosperity' has blown up in Alex Salmond's face, writes

TIMES like these remind us of the fundamental case for the Union. Strong cultural, familial and institutional bonds tie us together. But they do so on top of the proposition that completely underpins the Union – that we are stronger together, weaker apart. The economic buffeting of the smaller countries surrounding Scotland has surely driven that point home once and for all.

For the past two years, Alex Salmond has unstintingly claimed that an independent Scotland would join a battling brotherhood of similar small and prosperous nations. To support his assertion, he has wilfully distorted statistics and ignored the very different economic histories and structures of the nations he brigades together.

But he was successful in establishing his catchphrase – "the arc of prosperity" – in the political discourse of Scotland. He must now be rueing the day his spin-doctors coined this phrase, because, having sought to surf the upturn in these economies, he is now condemned to suffer their downturn.

The facts are worth rehearsing. Iceland is effectively bankrupt. A small country with very real strengths in energy, fishing and tourism exposed itself horrendously to the global financial system. It now is turning to the IMF for assistance and – humiliatingly for a Nato member – is being offered financial support by the Russian Federation.

It's all very well for Alex Salmond to splutter now that you can't compare Iceland to Scotland. But we didn't hear any such caveats last year when he made Iceland the poster boy for the arc of prosperity.

There are some real issues that point up challenges for the SNP's separatist agenda. Iceland was outside the euro – and the protection of the European Central Bank – as Alex Salmond intends an independent Scotland to be.

Now I know the SNP says it will keep the pound, and therefore have the Bank of England as their central bank. But the only other country I can think of that has another sovereign nation's currency as its official currency is Ecuador, which uses the US dollar. Arc of dependency, anyone?

Let's turn to Ireland, whose economic record was manfully defended in The Scotsman on Tuesday by Marc Coleman, a former economist with the European Central Bank and the Irish department of finance.

I recognise the success of the Irish economy in recent years. The country has transformed in recent decades – a tribute to the impact of membership of the European Union and to the political leadership of Ireland. But if we are to make comparisons between the two countries, they should be honest ones.

Scotland was the second country in the world to industrialise. We now have a successful, diversified, post-industrial economy after 200 years of being an industrial economy completely integrated into the first industrial nation in the world. Ireland has had substantial growth in recent years, but it was from a far lower and more agrarian base.

Despite substantial growth, investment in public services remains lower than in Scotland. And this week's emergency budget saw the real costs to Irish families of Ireland's economic difficulties. Increased taxes. Means testing. Child benefit and child allowance cuts. What a contrast with Scotland, where Alex Salmond has a budget of £30 billion – twice what Donald Dewar had in 1999 – and got an extra £1 billion from Treasury, too, and where one of the main levers for injecting demand into the Scottish economy – capital spending – is under the control of the Scottish Government.

It is only political ideology that stops Alex Salmond using PFI schemes to build the schools, hospitals and prisons that our communities need – and that the construction industry and CBI Scotland are crying out for. I'm happy for the minority SNP administration to call itself a government – if only it would get on with governing. As Bill Clinton once said, "to govern is to choose", not to posture.

Marc Coleman quite rightly says that Ireland is able to make its own decisions, to take responsibility for its own economy. Scotland can do that, too – it just doesn't need to leave the UK to stand strong. It is an irony of history that an international financial disaster – Darien – impelled Scotland into a Union with England. That Union has been the most successful single market in history. In the face of a global financial challenge, the past few days have shown the enduring strength of the Union. An independent Scotland could not possibly have rescued Royal Bank of Scotland and HBOS. The recapitalisation of £37 billion alone is larger than the Scottish Government's annual budget.

Doug McWilliams, of the Centre for Economics and Research, estimates that the total support for the two Scottish banks – including the underpinning of bank interlending – is, at about £100 billion, equivalent to the Scottish annual GDP.

Jim Murphy, the Secretary of State for Scotland, was right to point out that commentators are saying that the "arc of prosperity" now looks like an "arc of insolvency". Alex Salmond may be uncomfortable with that, but those who live by the soundbite have to endure the consequences, too.

Our banks have been rescued – and that is a good thing. They are important pillars of the Scottish and UK economy. But the case for independence is in tatters – and that is also a good thing.

• Anne McGuire is the Labour MP for Stirling.