If Scotland were on its own the international financial markets would smash us into submission without a second thought

In the last financial year it had a budget deficit of 6.1 per cent of GDP and early this year the Office for Budget Responsibility forecast that in the year to March 2023 that deficit would fall to around 4%.

Central banks around the world were raising interest rates to counter inflation but all was broadly calm for the UK until two things happened.

First, Vlad the Mad invaded Ukraine, causing gas prices to rocket and the UK Government to come up with a support package for households and businesses which might have cost over two years up to £150 billion. That figure was a media guess and the actual figure was likely to be much less but even if correct it meant a temporary increase of about 3% per annum in the UK budget deficit – so 4% would have become about 7% for two years.

The second thing that happened is the Truss Government announced a dash for rapid growth which as well as proposed supply side reforms introduced about £50 billion a year of unfunded tax cuts – about a two-percentage-point rise in the budget deficit.

The Government didn’t help things with the social and political naivety of its approach but the bottom line is that an increase in the UK budget deficit to less than 10%, quite a lot of that rise being temporary, has caused financial mayhem. Let’s hope Jeremy Hunt can indeed save the day.

So what lessons should we take from all this for Scotland?

Scotland, if it separated from the UK, should expect to take its share of accumulated debt with it – how could that not be the case when we have benefited from the related spending? Unfortunately for us our budget deficit in the year to March 2022 was 12.3%, roughly double that of the UK. This year that percentage will rise rather than fall.

If the extra £2000 a head, funded by the UK, which we get to spend on public services in Scotland is removed that is a financial shock equivalent to more than 5% of our GDP.

A separate Scotland would have no banks of its own, only branches of UK and foreign banks. We might have something called a central bank but that bank can’t do much if it doesn’t have a currency of its own – to get the equivalent protection to our economy which the Bank of England currently provides we would have to join the euro, unless we did that we couldn’t join the EU anyway.

The SNP waffles on about the wonderful renewable energy resources we have but the truth is that wind turbines only provide useful amounts of power for well under half of the time. To provide power on a still winter’s night these resources are all but useless. To overcome that you have to find ways of storing renewable power which makes it so expensive that a £2500 a year cap would seem like a dream – a dream a separate Scotland could not realistically afford.

Huge cuts in public spending and tax increases would be needed but even if they were imposed a Scottish Government would have to turn to the international bond markets to raise money in a currency which was not its own and with a far weaker fiscal position than that of the UK. Small countries with their own currency such as Denmark run very conservative fiscal regimes. Denmark’s annual budget deficit is minimal and its overall debt as a proportion of the size of its economy is one-third that of the UK.

The events of the last few weeks have shown how events in financial markets really do affect the lives of ordinary people.

If Scotland were on its own the international financial markets would smash us into submission without a second thought. The effect on our economy, our public services, our ability to maintain our standard of living would be devastating. Nicola Sturgeon says we can’t afford to stay in the UK any more, unfortunately she is having a laugh – on us.

Read more by Guy Stenhouse:

Scotland needs to be a low-tax economy too – and here's where to start

Politicians should pay attention to the royal masterclass to save Union