My thoughts on the 2014 Scottish Independence Referendum

The Aunt Sally question is best disposed of straight away. Can Scotland, with its own distinct culture and history, be an independent state separate from the rest of the UK? Yes is the unequivocal answer.

But there are critical questions. Why should Scotland tear up a 300 year partnership which appears to have worked in the collective best interests of the four Home nations? Would our economic, cultural and social relationships be enhanced or diminished as a result of separation? Would Scotland be a more economically prosperous nation, with independence unleashing a wave of innovation, entrepreneurialism and increased confidence in our own abilities? Would it be advantageous to be a smaller nation in an increasingly globalised economic world? Would we be more respectful and tolerant of others, both within and outwith our borders?

The twin themes of economics and identity are likely to dominate the next 12 months.

Identity
Only a small minority will fall into the category of feeling totally and exclusively Scottish. For them voting Yes is, as they say, a no-brainer. In a recent interview with the New Statesman, Alex Salmond stated that he has a British aspect to his identity in addition to his affinity for Scotland and Europe. If this is the case for the First Minister, it is likely to be so for the vast majority of Scots. This is illuminating in light of Professor John Curtice’s Scottish Social Attitudes Survey research which showed that, paradoxically, it is not how Scottish one feels but how British people in Scotland still regard themselves that will be a determining factor. It is the degree to which people in Scotland still share some sense of fellow-feeling with those living elsewhere in the UK which is likely to be key to the referendum result.

Michael Ignatieff, former UK journalist and Canadian Liberal Party leader, provides a revealing insight. Following the Quebec referendum, it was found that the strongest argument for leaving countries intact turns out to be that when confronted with a stark choice of separation, people do not want to choose between different parts of their identity. In Canada post-referendum, the joke was that what Quebeckers really wanted was an independent Quebec inside a united Canada. It appears that the SNP has this in mind when promising that in an independent Scotland everything will change, but actually nothing will change. Witness the pledges to preserve the monarchy, sterling, NATO, pensions and most recently a benefit cap on welfare reforms.

Economics
Unlike campaigns for independence in other countries – for instance the break-up of the Soviet Union, the collapse of Yugoslavia and the drive for an Irish republic, where historic reasons were at the fore, Nationalists cite the economy as their main driver for change, with an independent Scotland becoming wealthier and more prosperous as a result of the dissolution of the fiscal union with the rest of the UK.

Conscious of the paucity of information and debate on the economic implications for the UK of Scottish independence, the House of Lords Economic Committee launched a short inquiry last year. We received oral evidence in Scotland from the leaders of all the main parties in the Scottish parliament, along with business and local authority leaders. The only relevant politician absent was the First Minister, who refused invitations to address the committee. Further, we were denied the use of Holyrood (as had other Westminster committees) in which to hold any evidence sessions.

This struck me as an ominous sign for the tone of the coming debate. Whatever the outcome in September 2014, we will have to live with each other as harmoniously as possible. Michael Ignatieff reveals that the Quebec referendum brought both fracture and division. So, aware that maintaining harmony and civility in Scotland will not be an easy task, we have to be alert and ready to challenge these negative factors. Already there are some dark clouds on the horizon.

At the Edinburgh International Book Festival in August, Andrew Marr noted that the deepening debate has become very aggressive and risks unleashing a toxic brand of anti-English feeling. This from an individual who, whilst he has lived for decades in London, reaffirmed his loyalty to Scotland by saying that he would choose a Scottish passport over an English one should the Union be dissolved. Unsurprisingly, Marr is alive to the fact that a Yes vote would entail damaging consequences for the rest of the UK, resulting in it being a smaller figure on the world stage, with implications for its permanent seat in the UN Security Council and reduced voting power in the EU. Both sides in this referendum may turn out to be losers.

Size matters
For Scotland and the rest of the UK, global considerations are critical. John Kay, a Scot who is one of the UK’s leading economists and former adviser to the First Minister, wrote recently that the degree of economic independence available to a small country in a global market for goods, services and capital, is inevitably limited. Having had practical experience in the Northern Ireland Office, which entailed regular contact with the Republic of Ireland, this strikes a chord. For both parts of the island, an intimate relationship with a larger entity, whether with the UK for the North or the EU for the South, has been fundamental in their economic (and social) progress. The UK single market has allowed Scotland to flourish. Scottish exports twice as much to the rest of the UK as it does to the rest of the world combined.

Increasingly, in the global economy, the size of a nation’s economy is becoming aligned with the size of its population. Witness the present slow but inevitable transfer of economic, and in the process political, power to countries such as China and India, each with approximately double the population of Europe. Indonesia, Mexico and the Philippines are making huge developmental strides. Africa, with powerful assistance from Chinese inward investment, is developing apace. With money and technology increasingly mobile in the global economy, size matters.

Professor Gavin McCrone makes clear in an excellent new book (Scottish Independence: Weighing up the Economics) that it would be a huge mistake to think that in an interdependent world, Scotland could pursue policies without regard to how other states might respond. Earlier this year Alex Salmond was unequivocal regarding Scotland’s membership of the EU. It would be automatic given the supporting legal advice received by the Scottish government, he declared. There was only one problem – the supporting legal advice, which bizarrely the Scottish government fought in the courts not to disclose, never existed in the first place.

In a letter to the House of Lords Economic Committee on 10 December 201. EU Commission President Barroso made clear that if parts of a territory of a Member state would cease to be part of that state because it were to become a new independent state, the treaties would no longer apply to that territory – in other words, a new independent state would, by the fact of its independence, become a third country with respect to the EU and the treaties would no longer apply on its territory. Regarding applicant states, Barroso cited Article 49: ‘If the application is accepted by the Council acting unanimously, an agreement is then negotiated between the applicant state’. It is not my intention to argue that Scotland would be refused admission into the EU. But undoubtedly difficult negotiations will ensue.

Currency
The currency issue will be the most problematic. Over the past 25 years, the SNP have adopted at different times the stance of supporting an independent Scottish pound, the Euro, and now, despite the First Minister describing it as a millstone around the Scottish neck, the pound sterling. They are adamant that their principal objective – to break up the fiscal union with the UK – will ensure complete control over the monetary and fiscal levers in an independent Scotland. But by willingly entering a monetary union with the rest of the UK, representing 91.5% of the monetary union population, there is no way that the borrowing and expenditure levels of an independent Scotland, at 8.5% of the entity, would not be subject to oversight and considerable control by the rest of the UK. This is clear to those in the SNP like former leader Gordon Wilson and deputy leader Jim Sillars, who describes the proposed currency union as ‘a policy waiting to be torn apart’. The SNP would be well advised to negotiate with the UK government on the basis that they will fail and will have to adopt their own Independent currency.

It is insane to contemplate any monetary union other than on terms agreed by the UK The first question any UK government will ask is: who will provide Lender of Last Resort to a foreign country, where in 2008 two of its banks were bailed out to the tune of 211% of the Scottish GDP, if there is little control over the tax and spending to which the larger (UK) entity is exposed? It is this very issue which has paralysed the Eurozone since the global financial crisis in 2008, with Germany consistently refusing to bail out what they view as other profligate countries. The House of Lords Economic Committee pithily states that ‘the proposals for the Scottish government to exert some influence over the Bank of England, let alone the rest of the UK exchequer, is devoid of precedent and entirely fanciful’.

Uncertainty
The SNP government seeks to convince people that the transition to an independent Scotland will be seamless. They have announced that in the event of a Yes vote, Scottish independence will be declared in March 2016, sixteen months after the referendum, in a midnight flag-swapping ceremony at Edinburgh Castle. It is fanciful to imagine that our ties can be severed and an independent country established in a timescale shorter than that taken to re-organise the Scottish Police forces. The reality will be years of negotiation and accompanying uncertainty. As Professor John Kay has stated, no one knows what an independent Scotland would actually be like since protracted negotiations between a putatively independent Scotland, the rest of the UK and other international bodies is inevitable. Negotiations with bodies such as Bank of England on currency, EU on membership application, NATO, where it has already been made clear that Scotland could not join if it was engaged in a territorial dispute with the rest of the UK over Trident, and now the Commonwealth, where the Secretary General has stated that Scotland will have to reapply if it was independent. So whilst it is far from clear what is really meant by an Independent Scotland as presently advocated by the SNP, it is clear that the vision as presently articulated provides no comfort to the electorate that ripping apart the economic cohesion we presently enjoy will yield a wealthier and mode prosperous Scotland.

The referendum will be one of the most important democratic decisions we will be required to exercise. Opinion polls show that those advocating independence are lagging behind considerably. But much can change in 12 months. In 1995 Quebec voted No to separation from Canada by the slenderest of margins – 50.58% – despite polls showing margins of 60:40 against just 12 months earlier. So it is wise to guard against delusion. Self-delusion, as witnessed in the recent global financial crisis and in the ill-fated Darien scheme, which precipitated the 1707 Act of Union, is the first step to disaster.

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