Opinion: The Scottish independence referendum – a lack of wisdom in the pro-UK camp?

September 14th "Welcome to Scotland"In September 2014, the Scottish public will vote on independence from the rest of the UK. As of mid-April 2014, the opinion polls suggest that the pro-UK camp is ahead, but over the past few weeks the pro-independence camp has been fast catching up. Why?

One reason seems to be the spat between the London-based UK administration and the Scottish National Party (SNP) over the role of Britain’s sterling currency. All three main UK national parties stepped in behind a sudden policy of non-cooperation with an independent Scotland over the retention of sterling north of the border.

When I first heard of this new policy from Chancellor Osborne, I was shocked. It seemed foolish, looked spiteful, even petulant, and I said so. In addition, it seemed inevitable that it would create an anti-Scottish perception of the London administration in the lead-up to the referendum.

Well, indeed that seems to have happened. Now the vote in September looks like it will be a close-run thing.

The idea of appearing to block the use of Sterling in a potential post-independence Scotland appears to have come from civil servants, not politicians, especially so when one considers that all three parties appear to be using almost identical phraseology – one can easily picture the one-page briefing headed ‘lines to take’.

What seems to be the pro-UK strategy here?

On the surface it appeared to be designed to flush out a lack of preparation on the Scottish economy by the SNP – and to send then into disarray. This was very unlikely to be successful – not because of SNP preparations, but because over time it was going to become clear that even if the UK does not co-operate over Scotland’s use of Sterling, it may simply continue to use the currency and use a bit of guile to overcome any trip-wires set by London.

Scotland could just ‘keep calm and carry on’, at least until it established its own currency or adopted the Euro. The ‘No Sterling’ strategy, however, seems to economists of many different persuasions to be a paper tiger.

There are downsides of course to such an approach, especially in reduced scope to act to repair economic problems (reserve requirements, interest rate changes, or fiscal policy). But, at least for a period of years, these are unlikely to be prohibitive, especially if the rest of macroeconomic and fiscal management is sound enough.

However as one ‘off-message’ Conservative MP has pointed out, it will be detrimental to the rest of the UK to have a bumpy and fractious economic transition if Scotland votes for independence.

It was thus inevitable that the SNP would find the refusal of London to ‘allow’ Scotland to use Sterling to be an empty threat.

One theory doing the rounds was that the ‘No Sterling’ strategy came to the Treasury civil servants via the Ministry of Defence. The strategy so devised, it is alleged, is that, as an insurance policy, if Scotland voted for independence, the UK could trade access to Sterling for a guarantee to keep the Trident nuclear deterrent at its Clyde base.

But confusion reigns. A UK Minister for Scotland David Mundell is reported to have said that he accepts that the SNP would stick to its policy of closing the base, forcing the UK to move it elsewhere. He stressed that no compromise was likely. On the same day, Scottish SNP Cabinet Minister John Swinney expressly ruled out a Sterling-for-Trident deal, and complained about UK pressure for a tit-for-tat compromise.

Both the ‘No Sterling’ strategy and the ‘Sterling-for-Trident’ strategy seem to have quickly unravelled, as I believe was predictable. It is time to stop handing out propaganda victories to the SNP and make it clear that London will accept the democratic choice of this part of the UK, and assist in a smooth transition – even though we believe that separation is unwise.

* Paul Reynolds works with multilateral organisations as an independent adviser on international relations, economics, and senior governance. He is an elected member of FIRC and an Executive member of Liberal International (British Group).

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22 Comments

  • Douglas McLellan 14th Apr '14 - 9:09am

    “It seemed foolish, looked spiteful, even petulant”

    This strikes me as how the entire No campaign looks. Its clear that the SNP did not ever expect to get to this position as a lot of their policy positions on independence look made up on the spot. Its clear that Swinney & Salmond disagree on the policy on keeping the pound in a permanent currency union. However, rather than deep, technical and coherent responses to independence we get everything from activists complaining about a lack of information about passport prices in an independent Scotland (every Liberal philosopher would roll in their grave at that level of debate) to shrill warnings that Lord Robertson gave last week.

    We even see many people complain about Salmond rather than debate the Liberal ideals of power resting with the people and then given to appropriate levels of government. Not one argument has been put forward against the idea of independence, only the real and perceived problems with it. I can understand Labour & Tories scrabbling to keep power but it has been disappointing to see the Lib Dems attack the SNP as opposed to the idea of independence. Of course, that might be because there is no Liberal argument against independence…..

  • Let’s be clear. No-one has said Scotland can’t keep using the pound in the way Panama uses the US dollar. What has been said is that Westminster doesn’t want a formal currency union. Once in, it would be difficult to get out of. And what would such a Union involve? Presumably some kind of restraint on fiscal policy? A banking union? Would we see a Westminster chancellor produce a budget, get it voted through the Commons and then sent for approval in Edinburgh? I can’t imagine Westminster allowing Edinburgh a free hand on fiscal policy knowing that if they wish to be reckless they will have to bail them out. Of course Westminster couldn’t afford to be reckless because rUK is so much bigger. There’s a danger that Scotland could simply free ride – the concern Germans had about the club med when the Euro was formed.

    More than that, as Martin Wolf has said, a central bank that is responsible to multiple governments is accountable to none. It’s all very well saying the BofE is ‘independent’ – well it is when setting interest rates. But it is a fundamental part of the state. It’s Governor is appointed by the UK government. Are we going to need a vast quangocracy to manage this currency union? If so, it sounds rather illiberal and undemocratic to me.

    As for what to do to fight the Yes campaign, I have said before that there is only one person who can save the Union and that is Ed Miliband. His total silence in the debate is baffling. Does he believe that by speaking he can only enhance the Yes campaign. Like him or not, Ed is the only person who can legitimately promise a future for Britain that is neither Thatcherism or New Labour. It’s clearly too late for Clegg, not that I’m sure he ever really wanted to anyway. Darling is yesterday’s man. The Tories are everything most Scots hate.

  • Tony Greaves 14th Apr '14 - 12:25pm

    If Yes Together really want to win they should (1) kick out the Tories who are a hindrance not a help (Tory voters in Scotland are all going to vote No anyway). (2) tell the Westminster establishment to keep out of it and stay away, and conduct a Scottish debate between Scots (residents of Scotland) in Scotland. The Liberal Democrats should present positive quasi-federal proposals for a Scottish future after a No vote with lots of Willie Rennie’s “sunshine” – and challenge Labour to follow and agree. No voters need positive stuff to vote for or they will stay at home.

    Tony

  • Tony – I understand your point about getting Westminster to stay out of it but if Salmond is going to make wild promises about what the rUK will offer post-independence it’s a bit difficult to stay quiet. The fact we now seem to be in a position where we technically live in one nation, but those outside Scotland must but out of an issue that isn’t their business tells us really how bad things have got. There is deep disillusionment in Scotland with UK leadership, but it a disillusionment shared by many of our national regions.

  • Daniel Henry 14th Apr '14 - 12:39pm

    What Tony said.

  • Why not just remove Trident from Scotland and take that issue out of the mix?

  • Linda Forbes 14th Apr '14 - 1:02pm

    Given there will be a General Election between the date of the independence referendum date and implementation of its outcome, and that we cannot know the complexion of the next UK government, is it not feasible that many of those campaigning for the Better Together vote may no longer be in a position of influence? I understood politicians of now cannot fetter the activities of a future Parliament but perhaps I’m wrong.

  • David-1
    I hope you are not suggesting that this should be done quickly ———“At the touch of a button.”

  • Hold on a minute Paul – what about the democratic choices of people in England, Wales and Northern Ireland? Even if the politicians at Westminster were inclined to discuss a currency union, wouldn’t the issue have to be put to other countries in the UK in a referendum? I think its this democratic response that should have been given – rather than the message that the Government at Westminster won’t let Scotland used sterling, which has indeed been vulnerable to misinterpretation.

    This issue illustrates the fact that a pro independence vote in Scotland in September, brings into focus the rights and opinions of people elsewhere in the UK. I think this might also include a demand in due course for a referendum in the rest of the UK about the negotiated separation terms. For these reasons I’m not sure independence is a certainty even with a yes vote, especially if its a narrow one. Scope in these circumstances I would have thought to negotiate in good faith on separation terms and then have a second referendum in Scotland itself on choosing between the known, negotiated consequences of independence, and the federal/devo max option denied this time round. Latter might we hope be in the context of a UK wide review of constitutional arrangements that all the parties at Westminster must take seriously. I don’t think this ends with a yes vote, unless its a landslide.

  • Matt (Bristol) 14th Apr '14 - 1:49pm

    What Ian Morley said, with regard to a currency union, at least. It makes sense that the UK’s voter’s would have a say on an extra-national treaty with economic implications; this is the logic all three main parties have agreed for EU treaty reform, surely?

    The thing is, there is no precedence for a peaceful secession of home territory in this nation’s history so the role of the people of each territoy in the UK is unmapped; there was no democractic consultation of the mass of the Irish people in either 1914 when the Home Rule Act (which was for devolution, not secession) was passed and then mothballed, or in 1921 (might have that date wrong) when the Anglo-Irish Treaty that ended the Civil War was signed. The nearest thing to a democratic mandate was the 1918 general election, which resulted in the Civil War.

    It is clear that 2014/15 represents Salmond’s best chance of independence, possibly for all time – an unpopular Tory-led government with no significant Scottish presence, with an unpopular and apparently embattled junior partner, provides him with the chance to steal Labour’s traditional clothes and posture before his public as the defender of social democracy and the champion of freedom from the ‘other’ of London, all in one go. With Labour so far unable to fully articulate a simultaneously clear, credible, and realistic unionist alterniative to either Cameron or Salmond (a very tricky act to pull off), he has at least the appearance of space to expolit.

  • Paul Reynolds 14th Apr '14 - 2:01pm

    Fair point Ian !

  • I think if the Lib Dem response to Yes vote will be along the lines proposed by Ian Morley ie you have voted for independence but now we are going to prevent it by other means then we really are heading for a constitutional crisis. The Lib Dems were instrumental with other unionist parties in preventing us from having a devo max option in the referendum and for them now to say a yes vote is really a vote for something else is astonishing in its arrogance. You need to begin to realise that you are increasingly bracketed with the Tories in Scotland.

  • jeremy Talbot 14th Apr '14 - 8:17pm

    I am English and have taken great interest in the attempt to make Scotland “Independent”
    Firstly in todays world none of us is really independent, we are all interdependent.
    What I truly cannot understand is how the people who say they will vote for “Independence”
    blindly disregard the constant bad consequences predicted by just about everyone who is
    anyone in trade, commerce, politics, the military , the media etc etc. There appears to be
    a blind faith in people that everything will be fine if we can just be free, presumably of the
    English.The fact is that it is unlikely to be fine, there are already some 400,000 Scots working
    in England, presumably because they couldn’t get the job they wanted in Scotland. Add to
    this the number of jobs lost when major companies in finance, manufacturing and defence
    move south and who knows what the figure will be. The loss of tax take plus the burden of
    establishing all sorts of additional Scottish infrastructure must mean increased taxes.
    Is it really worth it?

  • Paul Reynolds 15th Apr '14 - 3:28am

    Good debate and useful, sensible contributions. What emerges I believe is the need to win the vote and keep Scotland in the UK. Tory ministers setting out conditions for negotiation after the pro-independence camp wins the vote (some of which seem to be economically disbeneficial to the rest of the UK and thus lack credibility) is only going to help the SNP. The continuing Sterling-for-Trident spat is also diverting attention from the glib ‘socialist magic’ economic policy of the SNP. Without transfers from the rest of the UK, and with Salmond’s rising list of Cloud Cukoo Land promises, voting for independence is not only a leap in the dark, it is a jump over a cliff. Similarly Lord Robertson’s ‘global military catastrophe’ warning if independence is voted for, is so wikdyly over the top sounding it can only encourage independenc voters.

  • Toby Fenwick 15th Apr '14 - 8:06am

    The currency union should be a point of major weakness for the SNP, as they’ve promised the earth without being able to deliver it. Indeed, the SNPs new-found attachment to sterling is clearly intended to convince undecided voters that independence is low risk, and will mostly look and feel like devo-max; this also explains the SNPs new found enthusiam for NATO and the monarchy.

    I am pleased that the Westminster parties got together to rule out a currency union. It isn’t in the interests of the UK to underwrite 90% of the Scottish financial sector, which would be a direct subsidy to a foreign competitor. It isn’t in the UKs interests to have an annual argument with Scotland over their fiscal policies, budget and taxation- can you think of a more poisonous narrative than “we can’t do this and that because the UK won’t let us?”

    In any event, there is almost no upside for the UK in agreeing to a currency union that isn’t delivered through the SNPs alternative of a currency pegged to sterling that poses none of these risks to the UK.

    I favour Scotland in the Union, but whatever happens in September, that Union will change. It would be great if it could move us towards a fully federal UK, complete with a Parliament for England and meaningful English regional devolution.

    As for Hammond’s reported comments re: Trident, given the Government’s stated position, he should resign or be sacked. I’m keen to scrap Trident anyway, as most of you know .

  • Paul Reynolds 15th Apr '14 - 10:46am

    Toby makes a solid case, as ever. There is no suggestion I think that an independent Scotland using Sterling, whether unilaterally or through negotiated conditions imposed by London, would necessarily be a good thing for the rest of the UK. To an extent it would depend on those conditions, or if unilaterally, on the UK’s response. If there was no agreement it could be detrimental economically to both parties…. hence the weakness of the UK’s ‘no Sterling’ strategy and its Sterling for Trident approach. However this is not the main issue. The ‘no Sterling’ approach is helping the SNP’s political approach because in effect it is saying to the Scottish voter ‘you can vote for independence if you like, but if you do we will screw up your economy’. That is not the intentional UK message but that is an understandable received subtext, no doubt being encouraged by the SNP. That is the propaganda victory the pro-UK camp is inadvertantly handing to the pro – independence camp. It enable the SNP (wrongly) to claim that ‘London’ is hostile to the Scottish people. I argue that the pro-UK camp needs to shift away from explaining the bad things that will be done by the UK when the Scots vote to separate, and more towards the positive reasons to stay in the UK and the flaws in the SNPs fiscal and constitutional proposals – that leap over the cliff that the SNP manifesto represents.

  • @Jeremy Talbot

    You may have been following the debate but it seems only the Project Fear side of it! Are the English people living and working in Scotland – 10% of the population and I am one of them – here because we couldn’t get the job we want in the rest of the UK? No it’s because Scotland is the UK`s third most economically productive region after London and SE England ( and that’s excluding North Sea oil). What we see in Scotland is an increasingly large political fault line developing between us and England. The Lib Dems have become an extension of Toryism by other means, UKIP is on the rise in England but not in Scotland and Westminster is completely incapable of reform and of operating pi cc use for the benefit of the UK.

  • In response to Hireton, I wasn’t proposing that we should prevent Scotland from becoming independent if that’s what people vote for, indeed I said negotiations on independence should proceed in good faith. Its just that its plausible to envisage, in the event of a narrow vote in favour of independence, the demand growing in Scotland itself for a second referendum. Negotiations will proceed for the best part of two years – what if opinion polls demonstrate a swing back against independence during that time, especially if a currency union is not possible and membership of the EU is blocked? Is it really arrogance to deny a second chance to vote on the known facts, so long as people can reaffirm their support for independence? I want home rule for Scotland (and for the other countries of the UK for that matter) and if the Labour and Conservative parties are finally shocked into realising that this is the way forward if the union is to be kept together, then it would be undemocratic in my view to deny Scotland a chance to vote for that if their referendum prompted it in the first place.

  • Toby Fenwick 15th Apr '14 - 9:20pm

    Paul: I agree, and I’m dying for Better Together/unionists to put forward tge positive federalist case, with some certainty it will deliver: we don’t want a 1979 Jam Tomorrow scenario.

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