Saturday 21 February 2015

Independence is becoming ever less likely

The SNP’s defeat in September has had a startling effect on Scottish politics. Huge numbers of people appear to have switched allegiance from the party they supported for years Labour. This is liable to greatly influence UK politics for some time. It makes it much harder for Labour to win a General Election. It potentially gives the SNP influence over UK matters that it has never had before. It enables the argument to continue that Scotland votes one way while England votes another. It makes Scottish politics tend to resemble Northern Irish politics with the major party in Scotland, just like in Northern Ireland, only standing there. If only the No parties joined together to form a common opposition to the SNP we could all vote according to our respective tribes just as if we were in Belfast. But does any of this bring independence any closer? The answer to this question has to be no. Independence is less likely than it was a year ago, indeed it is much less likely.

Over the medium term there are only really two interesting political questions. The first is how to solve the problem of living beyond our means, make our debt levels sustainable and continue to obtain a degree of economic growth. The major UK parties have reached a consensus on this. The programme of austerity that the Lib Cons in the end followed resembled very closely the programme set out by Labour. They followed plan B. If Labour get in next time they too will follow plan B. Each party will seek gradually to reduce the deficit. There will be differences in emphasis and differences in supposed timetable, but the market will determine the progress.  The rest is noise. The main political issue then is one of competence. Who is most competent to run the economy? Well in this your prejudice is as good as mine. The SNP, of course, are not part of this consensus. Their fundamental goal is to break up the UK. Naturally enough their economics would make the UK broke. After all it’s the UK they are set on destroying. But in fact even if they did get into a coalition, the SNP’s policy of spending ever more money we don’t have could not last long. There is a clear majority among UK parties for gradual deficit reduction and the SNP cannot change this. Nor can they change the fact that the bond market ultimately controls the actions of a chancellor. So assuming we don’t go down the self-destruct route,  à la Grecque, austerity will continue no matter how many nationalists are elected in Scotland.

The other interesting issue is Britain’s relationship to the EU.  If the Conservatives are elected there is likely at some point to be a referendum on EU membership.  This issue has to be faced anyway whether there is or is not a referendum as Britain’s relationship with the EU is changing whether we like it or not. In fact the difference between being in and being out is not that different. Even if Britain voted to leave, it’s hardly likely that we would cease to have some sort of trade agreement with the EU and we would still therefore be liable to adhere to some of the EU’s rules. Alternatively even if we choose to stay in the EU, we are going to be part of a different club from those countries who chose to enter monetary union with each other. If they go further down that path of integration and union we are going to find ourselves on the outside looking in whichever way we might vote in an EU referendum. The difference between voting to leave and voting to stay is a matter of degree. However, voting to leave would have major consequences for Scotland.

The SNP think their best chance of obtaining independence is for England to vote to leave the EU while Scotland votes to stay. With a Scottish parliament packed with nationalists they hope to engineer this into a divorce. It’s worth looking in some detail however at this scenario. Firstly, it is simply false that in a nationwide referendum, parts of the UK can have a veto.  When we voted on whether to remain in the EU in 1975 no-one seriously thought that Scotland could veto our choice. Logically if Scotland could veto the UK leaving the EU in 2017, then the Borders or Aberdeenshire should be able to veto Scotland leaving the UK. So if the whole UK votes to leave, the whole UK will leave. But what if an SNP majority in the Scottish parliament attempted to organise a second independence referendum? I have no idea if this would succeed. The UK Government of the time could block it in the same way that Spain has blocked Catalonia. But it is possible that the UK would permit such a second referendum, for the simple reason that the SNP would self-evidently lose it. It’s worth looking at why this is so.

If Scotland had voted for independence in 2014, there would have been no chance whatsoever of the UK having a referendum on the EU in 2017. The reason for this is that breaking up the 300 year old Union would haven been so complex that it would have had to have been completed prior to any divorce negotiations with the EU. But the same applies in reverse. It would be so complex for any Government to negotiate a withdrawal from the EU that there simply would not be the time or the energy to negotiate Scotland’s withdrawal from the UK. Trying to have two divorces at once would be a recipe for chaos. It’s rather hard to get a rational electorate to vote for chaos.

The whole long term “independence in Europe” strategy of the SNP is not really about Europe at all. Few Scots live and work in the EU and those that do would most likely be able to do so whether the UK were in the EU or not. Huge numbers of Scots however live and work in other parts of the UK. The SNP’s strategy was always about the UK. The key issue for SNP strategists has always been how to secure the long terms rights of Scots to live and work in the UK if Scotland became independent. Without that you could never persuade rational Scots to vote for independence.  The answer that the SNP came up with was the EU. But here’s where things become tricky for the nationalists, for if the UK leaves the EU, a German would prima facie have no more right to live and work in the UK than an American or a Japanese person. Such rights if they existed would depend on bilateral agreement and negotiation. The same at least in the long term would apply to an independent Scotland. The EU was the guarantor that everything would stay more or less the same after independence. But if the UK left the EU, it would be very hard to argue that everything would stay more or less the same in Scotland. All would be changed, changed utterly.

If Scotland were in the EU, while the UK was not, the border between Berwick and Gretna would be the border between the EU and the non EU. It would become the equivalent of the border between Belarus and Poland. It’s hard to see how the EU could not require such a border to be manned.

If Scotland were in the EU while the UK was not, it is hard to imagine that there could be a currency union between them. A currency union between separate nation states is hard enough, but one between those who are in different trading blocs is harder still to contemplate. Moreover, how could Scotland remain part of the UK single market if we chose to be in a different trading bloc? In general it makes little sense for Scotland to choose to leave a trading bloc (the UK) with which we do upwards of 70% of our trade in order to remain in a different trading block (the EU) with which we have comparatively little trade. Much of the Scottish economy, especially in financial services depends on being in a close economic relationship with the UK. But this close relationship would simply not be possible if Scotland were in the EU while the UK was not. The paths of our economies would diverge. There might be tariffs between non EU UK and EU Scotland. It is obvious that the economic harmony, which exists between Scotland and the other parts of the UK, would be hugely damaged if we chose the EU route rather than then UK route. Our prosperity would therefore be damaged. It is going to very hard to persuade a rational electorate to vote for this assuming it remains rational.

The SNP are not going to be able to win a referendum in 2017, because it is going to be still harder for them to make a rational case for it than it was in 2014. Imagine if a year ago the oil price had suddenly fallen as it has in the past few months. Would it have made a vote for independence more or less likely? The fact is that at present the only parts of the UK that are making a profit are parts of the south of England and London. Tax raised in London especially is transferred around our country, helping people everywhere including Scotland. This is the major benefit of being part of a single nation state. We help each other out. While Scotland in the 1970s contributed more than we took out, at the moment we contribute less. These things go in cycles. This is how we maintain a currency union. It is the fact that we are also a transfer union which maintains the stability of our economy. We have a transfer union because we are a single nation state.  Leaving this transfer union would obviously make Scotland poorer, for at the moment we are taking out more than we put in.  But we would be poorer in another sense too, not merely because we would have less money. The most important loss would be the special relationship which exists in the UK which enables us to transfer money freely between the various parts according to need. This special relationship is the key to successful monetary union. It exists in every nation state, but never between nation states. It is indeed what defines a nation state. Think of why there is a dispute in the Eurozone at the moment. Greece is living beyond its means. It has debts that it cannot pay. What Greece wants is for other members of the Eurozone to transfer money to it. If the Eurozone were a single nation state this wouldn’t be a problem. It would be automatic. But fundamentally Germans are unwilling to transfer money to Greece, because Greeks are not Germans. It is for this reason above all that they should never have decided to share a currency, for without transfers it is doomed to fail. On the other hand we transfer money between the various parts of the UK because we are all British. We are one people or else we would be foreigners to each other. If that were the case there would never have developed the monetary union, the shared pound that underpins our prosperity. Currency union in the end requires a common people united by history. It is this that we have that the Eurozone lacks. 

Scotland’s choice then in a 2017 referendum would be between remaining in a Union where we are treated as family (the UK), hardly something to be given up lightly, and leaving in order to stay in a Union (EU) where we would be treated as foreigners. We could in the end expect no more from the Germans than can the Greeks.

Scottish politics has become irrational. Huge numbers of people were caught up in the emotion of the referendum and the legacy of that continues. But the SNP know that any second referendum would mean that their case would once more be examined in close detail. They must know in their hearts that they simply cannot win that argument rationally and if they lost it a second time it would be game over for their dream. They could try to win using irrationality and emotion, but Scotland has shown already that we have too much sense in the end to be taken in. We rejected the SNP in September 2014 when they had a better argument than now. We would reject them again if they asked us again with a worse argument. So my prediction is this. No matter how many SNP MPs are elected, no matter whether the UK votes to leave the EU or not, there will be no second referendum any time soon. The reason for this is simple. The SNP would lose it.

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