Saturday 15 February 2014

The threat of independence

I’ve long thought that the SNP were running a clever campaign. That is one of the reasons why I have thought it intellectually worthwhile to try to challenge it. The debate is interesting because the opponent is worthy. It may surprise some people on both sides that a supporter of the UK should respect the SNP case for independence. But really I suspect most Scots, who are not completely dogmatic, can see some merit in at least some aspects of each side’s position. What has most impressed me is that the SNP have been pragmatic. They have put forward a vision of independence which can best be described as the minimum necessary to be called independence at all. This has commonly been called independence lite. It amounts to a desire for Scotland to be independent politically and to the greatest extent possible fiscally or economically, but for everything else to stay the same. This position is barely different from so called devolution max, which quite a lot of people in Scotland say they support. Personally I think devolution max inevitably leads to independence, but that’s another story. Once you begin to understand what the SNP are arguing for, you realise how difficult it is to argue against. If they could obtain independence lite, most of our lives would carry on much the same. Many of us would barely notice the difference. But from an SNP perspective even a sliver of sovereignty is enough to satisfy, for it can be portrayed quite accurately as a seed that can grow into any tree they want. It should now be clear why the SNP position is so cunning. They want to maintain most aspects of the present relationship that exists within the UK, because they know that most Scots on both sides of the debate want that too. No one wants to have to show their passport at Berwick, everyone wants the same sort of rights that we have now within the UK to continue, we all want the sorts of things that work well in a UK context, like pensions and currency to continue. The tricky task, for those of us who oppose independence, has been to point out that some of these things may be contingent on us remaining in the UK. The standard reply has always been that to doubt that such and such would continue is to engage in scaremongering. What this amounts to is that to disagree with the SNP vision of independence lite is to be insincere, someone who is trying to con the Scottish people. You see now why I respect my opponent. He is slippery and clever.

But what happened recently I am afraid is less clever. The UK government together with the Labour party have said that one of the main planks of independence lite, currency union, is not going to happen. Moreover, and this is really the most important point, the Permanent Secretary to the Treasury has said the same thing. This is the person who advises governments of whichever party. This is not some slippery politician, but someone whose reputation depends on giving sound, consistent advice. He has not given this advice out of spite, or because he is against Scotland, but for reasons that are logical and reasonable. He does not believe that currency union would be in the interests of the rest of the UK (rUK) after Scottish independence. Of course, it is possible to disagree with this reasoning, but that is beside the point. He is saying that this is the advice that he would give to any future government. If the SNP are unwilling to believe this, then they are saying that they are unwilling to believe anything that their political  opponents say. But this is not to debate. It is a refusal to listen at all.  Moreover it would be rather hard to negotiate with people you so little trust.

Independence lite just got a little heavier then. If there is to be no currency union between an independent Scotland and rUK, this is something that we all would notice. Scotland would have to come up with another currency arrangement. There are a number of perfectly sensible options. In my view, the most sensible option would be a new Scottish currency pegged to the pound with a Scottish central bank to back it up. This is perfectly possible. After all even Iceland with a population the size of Aberdeen has its own currency. Lucky for Iceland that it did, for when faced with economic meltdown a few years ago the currency took the strain. The difference between renewed prosperity in Iceland and continuing poverty in Spain is that Iceland had its own currency. There are also disadvantages to having your own currency. There may be fluctuations up and down and pegs can break as we learned from the ERM some years ago. The biggest disadvantage however, is that having a separate currency would lead to additional transaction costs and would damage Scotland’s position within the single UK market. But really this is the least worst option. Serious countries with a financial sector the size of Scotland’s do not attempt to use another country's currency without the benefits of a currency union and the safety net of a lender of last resort.

The option of independence then may have become a little heavier. But the response of the SNP to the news from the three main UK parties has made it considerably heavier still. Threats to not pay Scotland’s share of the UK national debt contradict the logic of their own campaign strategy. Some nationalists have seized on the fact that in January the Treasury guaranteed the whole of the UK’s debt. The reason for this guarantee is now clear. What if the Treasury had only guaranteed a future rUK’s share? Well Mr Salmond’s threat would immediately have caused bondholders to fear that a proportion of the national debt was liable to default. This would have had alarming consequences for the whole UK economy and would have been damaging for all of our pensions. The Treasury guarantee however, does not mean that an independent Scotland would have no share of the national debt.  The Treasury note says “An independent Scottish state would become responsible for a fair and proportionate share of the UK’s current liabilities.” This isn’t a matter of choice for an independent Scotland, but a matter of international law. It is therefore not a bargaining chip that Mr Salmond can use to try to bully rUK into maintaining a currency union when they clearly do not wish to do so. If the two sides cannot agree over this matter it will be decided by the court of international opinion. It is clearly not in the interests of the international community to allow places like Catalonia, Flanders or for that matter Texas to secede without accepting their fair share of mutually incurred debt.  

The SNP’s threats unfortunately show which way divorce negotiations would go. It is this which is most damaging to the SNP’s case for independence lite. What sort relationship would exist between rUK and Scotland if we threatened not to accept our share of the national debt? Remember that quite a large proportion of that debt was incurred when a Scottish Prime Minister and a Scottish Chancellor chose to bail out two Scottish banks. If we were to renege on that debt, what do you think the people in rUK would think of us? You see actions have consequences. The SNP vision of independence lite depends on the goodwill and friendship of the people we now call our fellow countrymen. The SNP wants to maintain a social union, wants to continue using many presently shared UK institutions, wants us to have the same rights in London as we do in Edinburgh, wants life to go on pretty much the same as it does now. I want these things too. But how much of this social union would survive a messy divorce? How much would survive if Scotland somehow were able to persuade the international community that we need not take our share of the national debt. Independence lite begins to look heavier and heavier. The threat to not pay our share of debts is dishonourable and wrong. To make such a threat seriously is irresponsible and frankly scares me very much, for if carried through it  would have consequences that are impossible to predict. It would damage perhaps irreparably our relationship with our neighbours and the wider international community. It would affect each of our lives profoundly. The existence of such a threat is a reason in itself to vote no.