Updates and Links

It’s been a few weeks since I posted on here, not least because I have been busily writing and posting elsewhere. This post just gives a few links to recent pieces and other contributions I’ve made to the debate.

One of the critical questions in the campaign is what will happen after a No vote — what is a No vote a vote for? Each of the parties campaigning for a No vote has published proposals outlining their vision for Scotland’s constitutional future within the Union. The Lib Dems’ proposals are here and the Scottish Labour party’s are here. The Scottish Conservatives’ proposals were developed by a group called the Strathclyde Commission (chaired by Lord Strathclyde, the former leader of the House of Lords and minister in David Cameron’s cabinet). Along with Alan Trench, I was one of two independent advisers to the Strathclyde Commission. We tried to write a report that is short, readable and accessible. It was published on 2 June 2014. You can read it here. It explains why the Union is important and why we should be flexible in thinking about what our Unionism requires. It analyses the Scottish Parliament and explains just how impressively powerful a body it already is, before making some recommendations as to its reform. And it explains how we think devolution should be developed from here. The headline proposal is that we think income tax should be devolved more or less entirely, making the Scottish Parliament responsible for rates and bands of income tax in Scotland, but there are also important proposals about welfare devolution and other matters. Ruth Davidson MSP has accepted our recommendations in full; they are likewise supported by the Prime Minister and the Chancellor.

Over the course of 2014 a series of unofficial No campaigns have been launched. Among these is Vote No Borders. A while ago I agreed to write a short piece for Vote No Borders each week in the run-up to the the referendum. My first was on independence itself and what it would mean for Scotland. My second was on the SNP’s plans for “indy-lite” and why they could never work. My third was on devolution, and picked up on some of the themes of the report of the Strathclyde Commission. Future pieces on the Vote No Borders site will consider the Union and why it is good for Scotland; defence and security; EU membership; reasons why we should vote No; reasons why we should not vote Yes; and other matters. There is also a short video of me talking with Vote No Borders about devolution and why it (and not independence) is the best future for Scotland: you can watch that here.

Elsewhere, I’ve written for the Scotsman on what I think should happen in Scotland after a No vote; and in the New Statesman on why I think the Tories have better answers to that question at the moment than the Scottish Labour party does. I’ve also written a long piece for the think-tank, Demos, and for an EU think-tank. Neither is published yet but I’ll post links to them here in due course, and if you’re on twitter follow me @ProfTomkins and I’ll alert you to when and where they appear.

I will keep posting from time to time on Notes from North Britain. I’ve a long piece which I’ll put up here soon on EU membership; and there will be more in due course. Thanks for following. Happy summer. Vote No.

PS: almost forget! I’ve also written the introduction to a fascinating book on Rangers FC and the independence debate. You can buy the book here.

Unanswered Questions

Here are some things we know:

1. The United Kingdom and Scottish Governments disagree over whether independence will make Scots richer or poorer. The Treasury says we’ll each be £1400 better off every year for 20 years if we stay in the Union. The Scottish Government says that after 15 years of independence we’d each be £1000 per year better off.

2. The Financial Times says the first figure is “specious”, because it’s inevitably based on assumptions and projections about future costs, which are notoriously difficult. But the FT also says that the Scottish Ministers’ figure is “more egregious” and “an insult to the intelligence of the land of Adam Smith and David Hume”. And the FT is not alone in pouring scorn on the magic beans fantasy economics offered by the Scottish Government. Check out the verdict of the independent IFS, for example, which highlights the serial ways in which Mr Salmond’s projections are unrealistic, over-optimistic, and not shared by independent experts.

3. The independence White Paper, as well as being legal junk, is now also economic junk, based as it is on projected oil revenues which John Swinney has now had to admit are completely over the top: his five-year outlook of £48bn has been downgraded to a maximum of £39bn. And even that is well above the OBR’s forecast of £16bn. It is worth noting in this context that, as the Herald reports, “the OBR have consistently over-estimated such revenues in the past”.

And now here is one (rather important) thing we do not know:

1. What would independence cost?

The Treasury yesterday tried to put a figure on what it considered would be some of the costs of independence. But even their figure appears not to take into account a range of factors that have been highlighted in previous contributions to the debate, such as the loss to Scotland of EU payments (under the structural fund and the common agricultural policy), which Scotland would not be entitled to in the period between becoming independent and acceding to the European Union — and it seems inevitable, on the SNP’s chosen timetable, that there would be such a period. So any figure given by the Treasury yesterday of the independence price-tag is highly likely to be an under-estimate.

The Treasury’s analysis of the costs of independence comprised a series of factors: (a) that an independent Scotland would start off in life in a worse financial position than the rest of the UK; (b) that an independent Scotland would face start-up costs for a range of public institutions and services; (c) that an independent Scotland would face higher borrowing costs; (d) that an independent Scotland’s oil and gas revenues would be lower than projected by the Scottish Government; (e) that the more rapidly ageing population of an independent Scotland would further squeeze Scotland’s public finances and (f) that the uncosted policy promises contained in the independence White Paper would in fact cost at least £1.6bn every year.

On BBC Radio Scotland yesterday John Swinney disputed the Treasury’s numbers but was unable to supply alternative figures of his own. In one interview he was asked 11 times — or was it 13? — what the start-up costs of independence would be. On each occasion he could not answer the question. Perhaps the maths are too difficult for him, so let’s break it down a bit, and work our way through the Treasury analysis step by step.

Starting off in a worse financial position

Onshore tax revenues per person are lower for Scotland than for the rest of the UK (i.e., we pay less in tax) whilst, at the same time, public spending in Scotland is higher per head than it is in the rest of the UK. This is known as the “Scottish fiscal deficit”. And it is about £1000 higher per person per year in Scotland than it is the rest of the UK. This is not a Treasury estimate: it’s based on three independent sources — the IFS, Citigroup, and the Centre for Public Policy and Regions. Unanswered question 1: how would an independent Scotland fund the Scottish fiscal deficit: by implementing spending cuts of £2.5bn, by increasing taxation by this amount, or by borrowing? in other words, how would an independent Scotland avoid an austerity programme far worse than anything contemplated by the UK Government? “Vote Yes for Austerity” — perhaps that was the theme of YesScotland’s new cinema ad that we’ll never now see.

Start-up costs

An independent Scotland would need a new (or a much enlarged) tax collection agency. It would also need new agencies to process and distribute welfare payments, as well as armed forces, security and secret intelligence services, new regulatory agencies, and a new diplomatic corps, etc. The creation of such agencies would inevitably require spending on staff and training, building, infrastructure and equipment, and IT. We know that none of this comes cheap (remember the scandal over the cost of the new Scottish Parliament building?). To put it into perspective, under the Scotland Act 2012 a new body, Revenue Scotland, is being created now in order to collect the new Scottish Landfill Tax and the new Scottish Stamp Duty, both of which are devolved to the Scottish Parliament under that Act. On the Scottish Government’s own figures, it is costing £20.2 million to establish Revenue Scotland and to run it for five years. £20.2 million just to collect two small taxes. (In 2006-07 Scottish receipts from Landfill Tax were £75 million; in the same year Scottish receipts from Income Tax were £10.5 billion — a sum 175 times greater.) The Treasury estimates the cost of extending the powers of Revenue Scotland so that it could collect all taxes in an independent Scotland to be £560 million. The Institute of Chartered Accountants in Scotland (ICAS) puts it even higher, at around £750 million. The Scottish Government’s own figures show that the annual running costs are estimated to be £575-625 million.

And that’s just tax collection. What about welfare payments? Again, the Treasury has estimated that the IT costs alone would set Scotland back by up to £400 million. And what about the armed forces, and international representation? Here, the Scottish Government appears to think that everything could be covered through Scotland inheriting her share of existing UK assets but, as I and others have shown over and again, it is nothing like so simple. As a matter of law, for example, the overseas property of the UK would not fall to be apportioned between an independent Scotland and the rest of the UK: rather, the UK’s international representation, including its network of embassies and consulates around the world, would become the international representation of the rest of the UK, in the event that Scotland voted to leave the UK to form its own state. Scotland would have to build its own from scratch.

The Treasury has estimated that the start-up costs of a Scottish state’s new institutions is likely to be at least £1.5bn. Scottish Ministers dispute this figure, but refuse to supply an alternative. Unanswered question 2: if the Scottish Ministers do not accept that it would cost an independent Scotland £1.5bn to establish the institutions and public services it would need, what is their alternative figure and how has it been calculated?

Higher borrowing costs

Peter Jones in the Times today writes as follows: “If it wants to invest in infrastructure at the rate it thinks is needed, pay for new buildings to house the staff replicating services now provided by the UK, and deal with financing shortfalls caused by uneven tax revenue flows, an independent Scotland will need to borrow and pay interest, every non-aligned analyst has concluded, at higher rates than does the UK”. Unanswered question 3: how much will that cost? (And who are these “non-aligned analysts”? They include the National Institute of Economic and Social Research, Prof Charles Goodhart, Prof Ronald Macdonald, Jeffries International, Citigroup, Deutsche Bank and Blackrock.)

Oil and gas revenues

See above, “things we know”, point 3. The question about oil and gas revenues has been answered, but only in a manner that undermines the forecasts underpinning last year’s independence White Paper. I wonder if there will be a second, revised, edition later this year…?

Demographic challenges

The elderly pay less tax and rely more heavily than most on health and social care. The proportion of working-age taxpayers to the elderly (and to children, who pay no tax and consume state-funded education services) is of critical importance to effective management of public services. All the evidence shows that Scotland faces particular pressures in this regard: projected population growth is less than for the rest of the UK yet, at the same time, Scotland’s population is ageing more rapidly than that of the rest of the UK. Sources for this evidence include National Records of Scotland (in evidence to the Scottish Parliament) and the UK Statistics Authority, as well as the IFS. To my knowledge, Scottish Ministers do not dispute this evidence. They propose that an independent Scotland would meet this demographic challenge through attracting immigration into Scotland. Yesterday, the First Minister said that an independent Scotland would need to attract 24,000 people into Scotland annually. But this poses several problems for him. First, within six years of independence Scotland would need a new city the size of Dundee to accommodate its 150,000 new immigrants. Secondly, there is no guarantee that Scotland would attract that many people to migrate annually (the UK Government has said that 15,000 annually would be more realistic; the IFS have said that 7,000 is nearer the mark). Thirdly, there is a direct clash between Scotland having an immigration policy such as this and Scotland becoming a member of the Common Travel Area with the rest of the UK and with Ireland. The CTA requires its members to follow a broadly similar immigration policy. Mr Salmond cannot guarantee that the border with England would remain open at the same time as seeking to bring 150,000 new immigrants into Scotland in the first six years of independence. Yet, on his own figures, without the new immigration Scotland fails to meet its demographic challenge. So unanswered question 4 is: how is Mr Salmond’s new immigration policy consistent with the commitment given by his Government in the independence White Paper that “there will be free movement across the border between Scotland and England”?

The SNP’s policy promises

That independence White Paper was famously uncosted. So the Treasury have run the policies through their models and have costed them as follows: increased childcare provision will cost £570 million in the first year; reducing Air Passenger Duty by 50% will cost £130 million in the first year; and reducing Corporation Tax by 3 points below the UK rate will cost £300 million in the first year. That’s £1bn of additional public spending in the first year. And that’s looking only at the SNP’s first term spending commitments, saying nothing of their further commitments thereafter (such as the further increases they have promised in childcare provision). Our fifth unanswered question is: how is all this to be paid for?

I shall resist the temptation to ask, finally, what the currency is in which an independent Scotland would meet these costs. I’ve asked that question before. It’s still unanswered.

Yesterday was an unusually noisy day in the ongoing indyref campaign. Amid the noise and haste a lot of big numbers were thrown by each side at the other: £1400 here and £1000 there. To my mind, the numbers themselves are of little consequence. But what does matter, it seems to me, are questions I’ve tried to set out here: just the latest in a long and growing line of unanswered questions about independence which the Scottish Ministers are either unwilling or unable to answer. Their refusal just piles on more and more reasons to Vote No. There is a better future for Scotland than this.

 

Scotland and Europe, Part 1

One of the Known Unknowns in the independence debate is whether and, if so, how and on what terms an independent Scotland would accede to membership of the European Union. Scotland and Europe, Part 2, will deal with those issues fully, soon. It will show that Scotland would accede to the EU — eventually — but that on no credible view would it do so before the projected Independence Day of March 2016. As such, Scotland would start its life as a new state outside the EU, a fate that would cost Scottish households dear. More of this anon.

But the results of the European Parliament elections have interrupted me. These results are important for the indyref: not because they tell us anything very much about what the result is likely to be come 18 September, but because they will shape the way the campaign develops from here — and in ways that do not suit the planned SNP narrative.

Have you ever wondered why the date of 18 September was chosen (by the SNP) for the independence referendum? September is an unusual month for a poll in the UK. We vote most often in May, with October and March generally being the default substitutes. I’m told by SNP insiders that the date was chosen because it was the closest possible date to the European elections. There are two schools of thought as to how Yes can win the referendum: the first is that they need a “gamechanger”; the second is that they win by stealth. As the months drag on, more No voters turn Undecided and more Undecideds are converted to Yes; meanwhile once a Yes voter always a yes voter — there is never any going back once someone has made their mind up to leave the UK. This in a nutshell is the second school of thought and for four or five months it seemed as though it might have got it right. From December 2013 until April 2014 the polls started to close; reports were rife of panic in the Better Together camp; and “momentum” was reported to be with the Yes camp, and building. No more. Momentum has stalled; the polls show that No’s lead is growing once again; and the stories from the Better Together campaign are of renewed focus, increased resources, and more effective campaigning. So we’re back to the first school of thought. The European elections were supposed to be the gamechanger that Salmond needs.

How? In short: UKIP. Long since forecast to win the poll in England, UKIP have struggled even to get a foot in north of the border. We all know those images of UKIP leader Nigel Farage seeking refuge in an Edinburgh pub when one of his ill-fated sojourns to Scotland went sour. This is not because Scotland is vastly less Eurosceptic than England. UKIP, despite its name, seemed to be anything but a UK party. It was England’s National Party; and it could not get going in Scotland because here we already have a successful National Party of our own, thank you very much.

If UKIP won in England but were frozen out in Scotland, Salmond would have used this in two ways: as an answer to his own EU problem; and as a wedge to show that Scotland and England were further apart politically than ever, that their National interests were diverging and not converging, that these really were two countries, and that they should be independent of one another. No doubt, we’ll hear plenty of this despite the European election results. But be in no doubt: those results make this a far less credible story than Salmond wanted. No gamechanger this.

UKIP did much better in Scotland than expected. They pushed the Greens into fifth place and the Lib Dems into a sorry sixth, and took the Lib Dems’ one Scottish seat in the European Parliament. We all knew the LDs were going to lose the seat, but the majority view was that it would go to the SNP. As it is, instead of SNP 3, Lab 2, Tory 1; we’ve got SNP 2, Lab 2, Tory 1, UKIP 1. This matters, because it brings the Scottish result more clearly into line with others in the UK: the result in London, for example, was Lab 4, Tory 2, Green 1, UKIP 1. It matters also because the one party in Scotland from whom UKIP did not take votes is the Tory party. The Conservatives’ share of the vote in Scotland went up (as it has done now in more than a dozen consecutive elections). The centre-right in Scotland is growing and the left-wing idealism that Caledonia is Dreaming a socialist future (Gerry Hassan) and that Scotia is about to Blossom into a socialist nirvana (Lesley Riddoch) has been shown to be a view beloved of the National Collective but not so much of national electorate. Surely the maddest reason of all to support Scottish independence is that it would embed Scottish social democracy: it would do precisely the opposite, and place it into greater jeopardy than any No vote. But, again, I’m anticipating future posts …

Back to the Euros. What now of the two uses Mr Salmond had wanted to make of this weekend’s results? First, do they make it any easier for him to deflect uncertainty over the status, timing and terms of an independent Scotland’s EU membership? They do not. The results demonstrate neither an overwhelming English majority in favour of the UK leaving the EU; yet nor at the same time do they show that there is no support for such a move north of the border. I fully accept that Euroscepticism may be more prevalent in England than in Scotland, but it is a difference of degree, not of kind. There is no evidence to support the view that a No vote in the independence referendum will lead to Scotland being taken out of the EU against its will by Eurosceptic voters in the rest of the UK. Whereas there is every evidence that an independent Scotland would not be able to join the EU until some time after independence day and, moreover, that Scotland would never be able to join the EU on terms as favourable as those currently enjoyed by the UK.

Secondly, do this weekend’s results support the view that, for all Mr Salmond’s bluster to the contrary, Scotland and England are in fact not two nations in pursuit of divergent political goals, but continue to have far more in common with one another than is convenient for the Scot Nats to admit? Yes they do. One of the SNP’s most dangerous foxes has been shot. It is not UKIP that seek to set Scotland and England on different political courses: it is the SNP. London has one UKIP MEP; so does Scotland. And so does Wales. And so does the North East region of England.

I take no pleasure in UKIP’s success. I am enthusiastically of the view that the United Kingdom should play a leading role at the heart of a reformed European Union. But I am also of the view that political differences between Scotland and her southern neighbour are much exaggerated; that it suits those who seek the break-up of Britain to perpetuate such exaggeration; and that arguments seeking to set Scotland up as if it is some sort of northern cure for English diseases are both deluded and dangerous. A major element of SNP strategy unravelled this weekend. Unionists can surely welcome this without for a moment endorsing either the policies or the personnel of the wretched UKIP.

 

 

 

Two Positive Cases

There are lots of very good reasons for not voting Yes in September. I’ve written about a number of them here (notably, the SNP’s disaster of a non-policy on the currency) and I’ll write about others in due course (such as the prospects of Scotland’s EU membership). It is important, come 18 September, that we understand the reasons for not voting Yes as well as the many positive reasons why we should vote No.

In this post I make not one but two positive cases for a No vote: a positive case for Britain and a positive case for the Union.

What’s so Great about Britain, Anyway?

(1) A Global Force for Good

The UK enjoys a hugely privileged position in the world, being at the helm of the EU, the UN Security Council, NATO, the G7, the G8 and the G20. On 18 September we have a genuine choice to make: do we want to be small nation, minding our own business, a spectator of rather than an active participant in world affairs, sheltering behind our larger neighbour? Or do we want to continue to be part of one of the world’s most influential and extraordinary states?

Britain is the soft power superpower of the world. Our heritage, culture and language, the strength of our education and culture sectors, our promotion of free speech, parliamentary democracy and the rule of law are unrivalled anywhere in the world. The UK is the world’s second largest donor of international aid. Administered in large measure from East Kilbride, the Department for International Development has enabled five million children to go to primary school and has provided food aid for six million people. By 2015 DfID will have helped immunise 55 million children against preventable disease and will have helped save the lives of 50,000 women in childbirth and a quarter of a million new-born babies. UK aid by 2015 will have helped secure access to clean, safe water and sanitation for 60 million people worldwide.

We are a force for good in the world, but this reaps benefits at home, too. International scholarships helped bring more than 40,000 international students to Scotland in 2012 — more than 12% of the UK’s total. British Council school partnership programmes, such as Connecting Classrooms, enrich learning for school children in Scotland and the rest of the world alike.

Our seat at the top table is something we’ve become so accustomed to that we take it blithely for granted. But it is only through such a privileged position in the world that we are able to drive through the changes we want to see, whether it be our anti-corruption initiatives, our reforms of global financial regulation, or the global labour market reforms the UK has championed through its leadership of the G20, for example.

Throughout our history — and still now — the UK has played a lead role in strengthening the rule of law, in supporting democracy, and in protecting human rights around the world. From the campaign against the slave trade in the eighteenth century to the drafting of the European Convention on Human Rights in the 1950s, and more recently in relation to the creation in 2006 of the UN Human Rights Council, the UK has been in the driving seat of progress, enlightenment and reform. We make a major contribution to UN peace-keeping, where we are one of the top five financial contributors, paying some £365 million annually in assessed contributions.

The promotion of human rights and democracy are central policy objectives of the UK’s Foreign Office and, because of the UK’s global impact and influence, we are able to make a real and lasting difference the world over. To take a handful of examples: in 2013 alone the UK-led campaign for the abolition of the death penalty had results in Morocco; the UK’s support for peace, development and women’s rights had results in the Philippines; and the UK’s campaign to protect journalists and access to public information had results in Vietnam. After seven years’ work a UN Arms Trade Treaty was adopted in 2013 with 156 countries voting in its favour at the UN General Assembly. This was a major achievement for British diplomacy, as the UK was one of the states that had launched the campaign for the Treaty. But top of the list for 2013 was the UK’s ground-breaking work in its PSVI — the Preventing Sexual Violence Initiative — which was a core theme of Britain’s 2013 Presidency of the G8 and which led, among other successes, to a new UN Security Council Resolution and UN General Assembly Declaration on sexual violence within conflict.

When we say “Britain is a force for good in the world” and when we remind ourselves that “Britain punches above its weight” on the world stage these are cliches. But they are true. We are, and we do. But we don’t sing and dance about it very much. We’re more prone to beating ourselves up about our mistakes than we are to moments of self-congratulation. But we should be mighty proud of our role in the world. The United Kingdom of Great Britain and Northern Ireland is one of the Great States of the modern world. An independent Scotland would, I am sure, play its small part too, in human rights campaigns and in the drive for democracy. But it would be just that: a small part. The extraordinary contribution that Great Britain makes to the world, to justice and to humanity itself, would be diminished. Lose a third of your own land mass and your global influence is inevitably diminished. Fail to keep your own people together and what sort of advert is that in an emerging economy for democracy, rights and the rule of law?

(2) Tolerance, Good Governance and Justice at Home

It is not just in the international arena that Britain’s greatness shines: it’s true also at home. To my mind one of the most remarkable instances of this at the moment is staring us all in the face: it is this very independence referendum. UK Prime Ministers since the 1980s and have calmly and authoritatively said that if Scotland votes to leave the Union, then the rest of the country, while it will be sorry to see the Scots go, will not stand in the way. In 2011-12, with the SNP’s extraordinary election victory, this commitment was put to the test. And the UK came through it with honour and dignity. The immediate reaction of the UK Government was that there must be the referendum of which the SNP manifesto had spoken, and that it must be “legal, fair and decisive”. Fearing a prolonged battle in the courts, which would be in no one’s interests but the lawyers’, the UK Government went out of its way to legislate to ensure that the referendum could be lawfully held. What other state would do this: would not only countenance its own peaceable break-up but would act so as to facilitate this? The UK does not want Scotland to leave, but it has none the less acted to enable the Scottish electorate decisively to make the call as to whether Scotland should leave or not. The contrast with Spain, for example, could not be greater. The Spanish will not even allow the Catalans a referendum, never mind accept, as the British have done, that the outcome of the referendum will determine the matter. Even Canada — nice, friendly, liberal, progressive Canada — did not accept before the 1995 Quebec Secession Reference that a Yes vote would necessarily mean that Quebec would leave to become its own state.

Scotland, too, deserves credit for the way the independence debate has been undertaken. There has been no violence. No shot fired. No stone thrown. This should be a mark of pride that we can all share in. I’ve written before of the credit that is due to the SNP for the way they have sought to engineer a modern, civic nationalism in Scotland that (largely) avoids the dangers (and worse) associated with the dark force that is ethnic nationalism. But the truly remarkable thing about this independence referendum campaign is that it is happening at all. A lesser state than Britain — a Spain, for example, or even a Canada — might have sought to avoid it or to cancel it or to deny it any effect. But not the UK. Here we say “bring it on” and we voluntarily give the SNP’s aspirations the force of law. The UK is an extraordinary place: it recognises that the true force of its rule lies not in coercion and command, but in consent and compact. It says to the people of Scotland not “you will obey”, but “we invite you to stay”.

Union: What’s in it for Scotland?

The core of the case for the Union has two strands: trade and jobs; and prosperity and security. Each would be jeopardised or diminished with independence. Each is safeguarded by Union. The Union was born out of this recognition 307 years ago. Scotland needed free trade with her southern neighbour, and England needed security to her north. Whilst the nature of the economic case for the Union, and the nature of the security the Union brings, have each changed over the intervening three hundred years, it is a remarkable feature of the case for the Union that in the early twenty-first century the core of the argument is as it was in the eighteenth. This makes the argument for Union all the stronger, for it is rooted not only in a cool-headed practical assessment of what is in Scotland’s best interests now, but draws also on history. Arguments that cut with the grain of history are always liable to be more powerful than those that seek to cut against it.

(1) Trade and Jobs

Fully 70% of Scottish exports are sold to the rest of the UK. Just pause there for a moment: Scotland trades more with the rest of the UK than with the whole of the rest of the world put together. Scotland’s trade with the rest of the UK is worth four times her trade with the EU. In the last decade the value of Scottish trade with the rest of the UK has increased by 62% (whereas the value of Scottish trade with the EU has increased in the same period by a mere 1%). Given the eye-watering scale to which the Scottish economy depends on doing business with the rest of the UK, why would any sane person wish to erect an international frontier between Scotland and the rest of the UK? Why turn this trade from domestic to international, with all the added costs and disincentives that would apply? A “border effect” would inhibit and diminish Scottish trade considerably. Compare, for example, the US and Canada where, despite commonalities of language, free trade agreements and the relative openness of the border, it remains the case that Canadian Provinces do twenty times as much trade with each other as they do over the border in the US. The border between Canada and the US has been estimated to reduce trade by 40%. Migration within Canada is fully 100 times greater than migration from the US to Canada. Here, it has been estimated that the “border effect” could cost each Scottish household £2000 annually.

There are 360,000 jobs in Scotland created by companies in the rest of the UK. A further 240,000 Scottish jobs depend on exports to the rest of the UK. That’s 600,000 jobs. As many as 200,000 jobs in Scotland depend on the financial services industry. Fully 90% of Scottish companies’ financial services business is with the rest of the UK. Nine out of ten pensions sold from Scotland are to customers in England, and eight out of ten mortgages lent from Scotland are to borrowers in England. This economic activity requires a single domestic market with a single currency in a single regulatory regime.

Scotland’s economy is performing well in the Union. Scotland has a higher economic output per head than Denmark and Finland, and significantly higher than Portugal. And Scotland has maintained a consistently higher employment rate than comparably sized countries in the EU. Indeed, Scotland has the highest employment rate of all the nations of the UK — and there are more people in work in the UK now (30 million) than ever before in our history. We have a higher employment rate even than the USA. Whereas the EU single market is still replete with trade barriers, in the UK our domestic market sees genuinely free trade, meaning that Scots have ten times the job opportunities they would otherwise have. The United Kingdom is the sixth largest economy in the world, despite being only the 22nd biggest country in the world in terms of population. Who wouldn’t want to be part of it? This, it seems to me, is a principal reason why so many school and campus votes have seen large victories for the No campaign. Young Scots have no desire to cut themselves off from the large English markets south of the border. Scots are an aspirational people — and it is Union that gives Scotland a domestic market ten times the size it would be under independence in which Scots can work and trade in order to realise their aspirations.

(2) Prosperity and Security

Trade and jobs are about economic opportunities. But economic Union is also about sharing risks, absorbing shocks, and pooling resources, leading to greater stability and security for us all. Take oil and gas as an example. North Sea oil and gas is a lucrative business, but it is also highly volatile. The oil and gas is expensive even to locate, never mind to extract, and the price of oil can decline sharply. Tax revenues from North Sea oil and gas fell by a whopping £4.5 billion in 2013. That is the size of the Scottish schools budget. That kind of economic shock is much easier to absorb in an economy of 63 million people than it is in one of only 5.3 million people. The UK Government supported the injection of over £45 billion into RBS in 2008, and offered the Bank a further £275 billion of guarantees and state support. This total was more than double the size of Scotland’s economy that year — it was 211% of Scottish GDP including geographical share of North Sea oil. The Union delivers for Scotland economic security, as well as economic success.

The Union is good for Scotland. Public spending in Scotland is £1200 per head higher than the UK average. At the same time, onshore tax receipts are, per person, lower for Scotland than the rest of the UK. In numerous ways, Scotland does disproportionately well out of the Union. In 2012-13, for example, Scottish universities secured more than 13% of the UK’s research council funding: some £257 million. This isn’t just good for Scottish universities: it’s good for Scotland as a whole. It was estimated in 2010 that Scottish universities contributed £6.2 billion to the Scottish economy (not least through the 39,000 people they employ). It is not just in raw economic terms that the Union delivers for Scotland: it delivers also in cultural terms. The UK’s national broadcaster, the BBC, receives some £300 million annually from Scottish licence-fee payers, but makes nearly £4 billion of programming which is free-to-air in Scotland.

Conclusion

“Scotland is not oppressed and we have no need to be liberated.” Not my words, but those of First Minister Alex Salmond in January 2012. He’s absolutely correct, as he was in the same paper when he wrote that “Ours is a lucky nation, blessed with natural resources, bright people and a united society. We have an independent education system, legal system and NHS. They are respected worldwide.” As part of the United Kingdom, Scotland is indeed a “lucky”, “blessed” nation. It can take pride in being part of one of the leading countries of the world. It enjoys all the benefits and privileges that come from the centuries of tolerance and good government that are the hallmarks of Britain’s unrivalled contribution to the world. And in Union with the rest of the United Kingdom, Scotland is free to enjoy not only her own but to share in all of Britain’s wealth and prosperity in harmony and security.

 

 

 

 

Reasons to be Cheerful

The mood music in much of the Scottish press is that it’s all doom and gloom for the No campaign, and that “momentum” is building in favour of a Yes vote in September. Some of my Nationalist friends are making the basic political mistake of believing their own propaganda and are beginning to lose their heads. One even wrote to me last weekend suggesting that it was time I self-administered some Hemlock. Such a lovely thought, that even one’s friends wish upon their political opponents the curse of suicide.

Never has it been more important to remember that we Unionists will win this referendum campaign by being the reasonable ones. Let the petty Nationalists trade in poison. The one thing we won’t do is to win the argument by descending to their gutter level.

So … time for a cool, hard-headed and clear-eyed analysis of why it is that the media mood has turned up the heat on the No campaign. There are four reasons for it: the polls; the Labour party’s proposals for further devolution; reported tensions within the Better Together campaign; and the idiot rogue minister who told the Guardian that there could be a currency union between an independent Scotland and the rest of the UK, despite the concluded view to the contrary of the Chancellor of the Exchequer, the Chief Secretary to the Treasury, the Shadow Chancellor, and the Permanent Secretary to the Treasury.

In this post I consider each of these in turn and I show that, on analysis, none is actually bad for the No camp and, moreover, that none will help Yes.

The polls and the media

For more than 18 months, from the launch of Yes Scotland and Better Together in the early summer of 2012 until the turn of the year, the polls were remarkably stubborn. For all the fire and brimstone, for all the bluff and bluster, and for all the claims and counter-claims, No was holding a comfortable lead and Yes was stuck in the 30s. This makes for lousy news. “Polls still not moving” is a rubbish headline. I did a lot of media in 2013, broadcast and print. I could see journalist after journalist pulling their hair out, desperate for a new angle. Old school news-hounds were struggling to make news out of hashtag indyref. And for good reason: nothing was happening. What did these reporters want to happen? For the polls to move. It didn’t matter which way: what mattered was that they moved at all. “No are soaring away, out of reach, over the finishing line with a year still to run.” There’s a story. Likewise “Yes are catching up, within touching distance, the outcome now too close to call”.

In 2014 the polls have moved. Not a lot. Just a little. But they have moved. Whereas in the last quarter of 2013 Yes were averaging at about 39% they are now averaging at about 42%. It’s no longer 60-something 30-something, but 50-something 40-something. If I was a Yes campaigner, I would not be jumping up and down about this: 58:42 behind means losing the referendum by some hundreds of thousands of votes. That’s not close. That’s not putting the result into the too-close-to-call category. That’s an unambiguous win for No. And that’s what the polls tell us we’re heading for.

Actually, that’s what some of the polls tell us we’re heading for. More accurately, it’s what the pollsters tell us. When actual votes are taken, the SNP do much worse than this. Schools up and down the country have held mock votes in which, routinely, No out-polls Yes not by three-to-two but by two-to-one or sometimes even three-to-one. Scotland’s newly enfranchised young voters are showing no enthusiasm for independence. And neither are older voters in any of the various council and Holyrood by-elections we’ve had in Scotland in the last couple of years. The picture, over and again, is of Unionist parties securing many times more votes than a declining SNP are able to muster.

None of this means that we should be complacent about the result. Yes will throw everything they’ve got at this campaign. This is their one chance. This is what the SNP have been waiting for for eighty years. And we should likewise throw everything we’ve got at ensuring that Scotland’s place in the Union, and indeed in the world, is not jeopardised by the folly of separation. How could we be complacent when there is so much at stake? But we should be confident. Confident that we have the arguments, that we will make them with clear heads and proud hearts, that fact will defeat fantasy, and that fearless questioning of the SNP’s foolishness will deliver for Scotland – and for Britain – the right result. A bit like this, perhaps.

More powers now!

It’s been said many times, albeit not by very many people, that a key component of No’s winning strategy should be to make a compelling counter-offer. The SNP have set out their vision of Scotland’s future as an independent state. What is our rival vision of Scotland’s future within the Union? How should the Scottish Parliament be taken forward and develop? Where next for devolution? The longer the campaign runs the more the evidence mounts that this is an obsession of a small number of commentators and not a major factor on the doorstep. If most Scots have only a vague idea of what the Scottish Parliament does now, how can it be the settled will of the Scottish people, still less their informed opinion, that Holyrood should have “more powers now”? What Scots want, it seems to me, is a strong sense of Scottish autonomy within the Union. The truth is that we could have that now – and we could have had it for years – had the ample powers of the Scottish Parliament been used to nurture it. For the Scottish Parliament is already responsible for nearly two-thirds of public spending in Scotland. It runs our health service, our schools, universities and nurseries, our criminal and civil justice systems, our police force. It has extensive powers over arts and culture, transport and the environment, local government and planning, and much, much else besides. Yet still the inchoate demand for “more powers now” goes up.

What more powers? Beyond the SNP’s hard-core there is no appetite that Holyrood should take charge of foreign or defence policy, immigration, monetary policy or financial services regulation. Fuelled by largely ill-informed criticism of the “bedroom tax” (which is not, in fact, a tax at all) there is an emergent sense that some aspects of welfare, or social security as we used to call it, should be devolved. But when pollsters ask whether unemployment benefit should be any different in Scotland from the rest of the UK, or whether the state pension should be any different in Scotland, overwhelming majorities say No. If there is no desire to see these matters done differently north of the border, why devolve them? Should the state pension in Scotland be paid for from tax receipts drawn from all parts of the UK, or should it become the responsibility uniquely of Scottish taxpayers? Again the clear answer is that it should be the former. And when put like this, the oft-asserted clamour for “more powers now” crumbles.

This is not to say that there ought to be no further welfare devolution. If there are parts of the social security budget that are closely tied to substantive powers already devolved to Holyrood, then there is at least a powerful prima facie reason for considering their transfer to Edinburgh. Public housing is a devolved responsibility in Scotland, for example. So why not devolve housing benefit? Likewise, social care is a matter for which Scottish Ministers are responsible in Scotland. So why not devolve the attendance allowance? And so on.

But, seriously folks, does anyone really think that the independence referendum is going to be won or lost on the basis of whether or not housing benefit and the attendance allowance are to be devolved at some point in the future? Come on. What might have greater salience is a suggestion made by the IPPR’s recent report on welfare devolution, that there should be a general and unrestricted power of competence in the Scottish Parliament to add to the social security benefits legislated for by Westminster. On this model, the UK would set the floor, but not necessarily the ceiling. Scots would be entitled to at least the same welfare benefits as people in the rest of the UK but, if Holyrood legislated for it (and, of course, paid for it) they may have access to additional entitlements as well.

Even if I’m generally sceptical of the “more powers now” argument, however, I am absolutely committed to the reform of devolution. The Scottish Parliament is grossly imbalanced. Its budget is massive – approaching £36 billion – but its 129 members are responsible for raising only a fraction of the money they spend. What is needed, it seems to me, is not “more powers” so MSPs can spend even more of our money, but responsibilities to match the extensive powers which the Scottish Parliament already enjoys. Now, there is no federal or “multi-layer” system anywhere in the world where the “sub-state” legislature (to use the jargon) is responsible for raising the whole of its budget. The US states, the Canadian provinces, the German Länder: none have the power to raise through taxation or borrowing all of the money they spend. But the fiscal powers of the Scottish Parliament are weak in comparison with the US, Canada and Germany. Even after the new tax regime of the Scotland Act 2012 comes fully into force Holyrood will be responsible for raising less than one third of its budget – that is to say, less than one fifth of the public money spent in Scotland.

It is this gap between what the Scottish Parliament is responsible for spending and what it is responsible for raising that I would like to see closed. Why? For several reasons, not least because it is offensive in point of principle to have an elected Parliament that is responsible only for spending someone else’s money. Politicians should be required to face the voters whose money they are seeking to spend, to explain to us how and why they want to tax us. Unlike the prospective devolution of individual bits of the welfare budget, conferring on the Scottish Parliament serious fiscal powers (i.e., powers to tax us) is likely to transform the role of Scottish Ministers and the public perception of the Scottish Parliament. If what we crave is a strong sense of autonomy within the Union, what we need in order to realise this is a grown-up Parliament, responsible for making on our behalf the most difficult decisions about who, what and when to tax.

Sadly, the Scottish Labour party does not agree. Its proposals for further devolution fall painfully short. They recognise that “the tax system is at the centre of the state and its relationship with citizens, households and commercial organisations” but they want to keep the Scottish Parliament at arm’s length from that relationship, whereas it should be at its heart. Under Labour’s proposals setting the basic rate of income tax for Scottish taxpayers would be split between the UK Government and Scottish Ministers, such that one quarter of that rate would be set in Westminster and three-quarters in Holyrood. In addition, Holyrood would be given the power to increase, but not to decrease, the higher rates of income tax (currently 40% and 45%). Labour calculate that these powers would mean that the Scottish Parliament would be responsible for raising another £2 billion of its budget. Whilst it is true that these proposals would help close the fiscal gap to some degree, they are far too limited and constrained to generate the full sense of fiscal responsibility that the Scottish Parliament needs if it is truly to develop.

Labour’s plans were met with derision – especially among those commentators who have long been signed-up members of the “more powers now” school. Labour’s plans are grudging, ill-thought through, and obviously the product of a badly divided party, which does not know what to do with the devolved institutions it created fifteen years ago. The proposals are a compromise of an already compromised party. Worse, they are nakedly partisan. To propose that Holyrood should have the power to increase rates of income tax on the wealthier members of society but not to decrease the rates of income tax for anyone is so one-sided that it is nothing less than constitutional gerrymandering. It’s also completely incoherent. Done in the name of avoiding a “race to the bottom” by means of tax competition, it actually facilitates tax competition, albeit only a one-way competition in which income tax can go up and up and up but never down. In truth it’s got nothing whatever to do with tax competition: the real rationale for Labour’s cock-eyed proposals is their fear of the West Lothian Question. If Holyrood had the core of the power over income tax for Scottish taxpayers, why would we still need 59 Scottish MPs in the House of Commons on Budget Day? The more responsible the Scottish Parliament becomes for policy (including fiscal policy) north of the border, the more urgently we require to address Scotland’s over-representation in the Commons. The West Lothian Question has been parked for too long. It’s time for a West Lothian Answer. With enhanced fiscal devolution for Scotland, fairness to the other nations of the United Kingdom demands that Scots’ over-representation in the Commons comes to an end.

No doubt that’s part of the reason why Labour’s devolution proposals were so underwhelming. But regardless of the reasons for it, underwhelming they were. Does this matter much in terms of the independence referendum campaign? My judgment is that it really does not. What matters is that all the Unionist parties are committed to further devolution for Scotland. The detail of precisely what further devolution grabs the attention of only the tiniest number of voters. It may matter to the commentariat, to the handful of academics (like me) who write about these things. But in the real world? I don’t think so.

I think Labour know this. Certainly there was evidence in their spring conference that they had grasped it. The proposals published by the Devolution Commission were not the highlight of the conference. Far from it. Much more important was an altogether different document. The report of the Devolution Commission is 297 pages long. Its main text comprises 659 paragraphs. My guess is that it will be read  by fewer than 659 people, and probably by fewer than 297. (I’ve read it, so that’s one.) Altogether shorter, and much better written, was a glossy little number launched at the conference by Anas Sarwar MP, Scottish Labour’s deputy leader. This is a hugely upbeat document, which loudly celebrates what Labour consider to be their achievements and sets out an unambiguously positive message about what Scottish Labour wants to do in the future.

Together We Can is crammed with Labour positives. It’s all about transforming lives, a common purpose, a fairer Scotland, big challenges and radical policies, solidarity, equality and social justice. It’s full of great Labour lines – believing in something bigger than independence – pooling and sharing resources – sharing power for the benefit of all the people in the United Kingdom. It’s got some real passion in it. It’s a hugely important document, because it is in this “Red Paper” (red is everywhere in it) that the Scottish Labour party has finally found its voice again. You may say that it’s empty rhetoric, that it’s merely aspirational rather than deliverable, that it contains precious few actual policies and even fewer that are costed. (Unless you share their vision of big government you may also say that it’s a terrifying lurch to the left.) But it’s what the people who live in my neighbourhood and in countless similar neighbourhoods across Glasgow and west central Scotland have been aching to hear. My neighbours don’t want separation from their comrades and cousins south of the border. But they do want to vote for a party that goes out of its way to do as if it represents them. We’ve heard far too little of this from Scottish Labour in the last, well, decade. There’s been not only a lack but a near total absence of confidence. There have been plenty of tribal attacks on the SNP but there’s been very little positive about why the Scottish working class should come back to Labour. Now, finally, Scottish Labour has woken up again. And unlike the report of the Devolution Commission, this message will be read. There’s to be a two-page summary of Together We Can mailed between now and 18 September to every household in Scotland. This matters, and it matters a whole lot more to ordinary voters in neighbourhoods such as mine than the finer points of who should set which rates of income tax and whether housing benefit should be devolved in 2017 or 2018.

Better Together?

The third thing the media have hit us with in the last couple of weeks are scare stories about the dysfunctionality of Better Together. It’s badly led, we’re told. Its chief executive is out of his depth. They waste too much time on Twitter. They’re not getting their message out where it matters. They’re being out-spent, out-fought and out-manoeuvred by Yes Scotland. And so on. Yet, what you never hear is just how remarkable a body Better Together is. British politics is tribal, sometimes brutally so. Scottish politics is tribal, almost always brutally so. Yet here we have a genuine cross-party pan-Unionist campaign group that is working together to try to defeat the machine politics of the SNP. Yes, I know that the Greens, the SSP, and other assorted Trots and lunatics of the deep-freeze far left are also hangers-on at Yes HQ. But, really, any pretence that this is anything other than an SNP-led and an SNP-funded operation has long since melted away.

Within Better Together there are bound to be tensions. And in today’s 24/7 news media there’s bound to be the occasional leak of an argument here or a disagreement there. Fortunately, the media-saturated public doesn’t get as excited about these things as bored newsmen with nothing much else to report.

Of course, we all have our frustrations with Better Together, just as the SNP and the Scottish Government have their evident frustrations with Blair Jenkins and his leadership of Yes Scotland. But the answer is not to sit on the sidelines and point the finger. The answer is to get involved, get out on the campaign trail and pull your finger out. My personal frustration with Better Together is that I live in a constituency in Glasgow that was once rock-solid safe Labour and which the SNP won by a single-figure margin in 2011. You would have thought that Better Together would have targeted the area where I live in order to stop it slipping further into YeSNP hands. Yet, whilst we’ve had several Yes newspapers pushed through the door and at least one Yes meeting in the local community hall, there’s been neither sight nor sound of Better Together. So, within the last few days, I got in touch with them on their website, plugged in my details, and within 36 hours I’d been invited to go canvassing in my neighbourhood this coming weekend, which I shall do. I’m reassured also that the famed sophistication of the SNP machine must be at least slightly over-stated if their activists are blowing resources by pushing their literature through my front door. There ain’t too many Yes voters in my house!

Currency union redux

The final nail in the Unionists’ apparent coffin, and the immediate cause of my friend’s ill-judged Hemlock remark, was the Guardian story on Saturday that an unnamed minister in the UK Government had “admitted” that, as the SNP have asserted all along, the Chancellor ruling out any currency union between an independent Scotland and the rest of the UK was a campaign bluff and that of course the rUK would not desert the Scots in the event that they vote Yes in September. It is fair to say that the immediate reaction amongst my most well-informed Unionist friends to this front-page story was wild fury. It was demanded that heads roll, that the culprit be not only sacked but shot, and that the damage to the UK’s credibility caused by the story was such a gift to the Nats that it could be the very game-changer Mr Salmond is said to need. I confess: for a day or two I shared in all this – the fury, the demand for retribution, and the fear that our credibility was shot. But I was wrong. Fury is said to be blind for a reason, I now see.

This has given the Nats nothing. That is to say, it has given the Nats nothing that they weren’t claiming anyway. They already said that ruling out a currency union was “bluff, bluster and bullying”. It isn’t any of these things. As I explained in a long post here a few weeks ago, the judgment that the rest of the UK could not sign up to a currency union with an independent Scotland is one that is firmly based on an accurate reading of the Treasury’s independent and expert economic analysis, reinforced by a hard-headed and deeply realistic sense that, in any event, the House of Commons would never agree to the ceding to Scotland of the political sovereignty which would be required in order to make a currency union work successfully. To have the Chancellor, the Shadow Chancellor, the Prime Minister’s office, the Chief Secretary to the Treasury, the Deputy Prime Minister, the Secretary of State for Scotland, and many others, take to the airwaves yet again in the last week to reinforce and explain all this is not terrible for the No campaign. But it is bad news for the Yes campaign.

It’s bad for Yes because it puts back into play the deep uncertainty in people’s minds about the currency that an independent Scotland would use. As I’ve explained before, ruling out a currency union does not mean that Scotland cannot use the pound. But it does mean that the conditions under which Scotland could use the pound are seriously unattractive. So unattractive, indeed, that the SNP’s own fiscal commission concluded that it would not be in Scotland’s national interest. As with the argument about “more powers now”, I sense that it’s not the detail of the issue that will make the difference. What will get through to the voters is simply that there is great uncertainty about the currency an independent Scotland will use. There’ll be no currency union. But will we still use the pound anyway? Or will we use some new currency of our own? If so, will it be pegged to the pound, or will it be allowed to float freely? And is the only long-term monetary future for an independent Scotland not to join the euro, one day?

The truth is: we don’t know. I don’t know. You don’t know. The SNP don’t know. Yes Scotland certainly don’t know. The only thing we do know is that the SNP’s preferred position on the currency is not going to happen. All three Unionist parties have ruled it out not only for good economic reasons but for sound political reasons too. And that the SNP prefers to give greater credence to an unnamed, invisible, unknown minister talking out of turn to the Guardian rather than to the clear, authoritative, expert and published judgment of the Governor of the Bank of England and the Permanent Secretary to the Treasury speaks volumes as to how desperate they are to hear only that with which they already agree.

The bread and butter of my day job is to teach law. One of the first and most important lessons we law professors try to get across to our students is that not all arguments carry equal weight. Some are better than others. It’s often hard to tell which ones are right. But it can be much easier to identify those which are plainly wrong.

We Unionists have the arguments on our side. We have a little over five months to make sure those arguments are heard and understood. Get out there and join me in making the case. Let reason prevail over folly. Let the weight of facts and argument crush the bluster and nonsense of the Nationalists. Keep your heads. We’re winning. Be part of it.

 

Reforming Devolution, Deepening Union

About a year ago Ruth Davidson MSP, the leader of the Scottish Conservatives, asked me if I would act as an independent adviser to the Strathclyde Commission. This is a Commission, chaired by the former Leader of the House of Lords, Lord Strathclyde, set up to review Scottish devolution. The Commission’s work is ongoing: it is due to report to Ruth Davidson next month and, as I understand it, the report will be made public in May.

On the opening day of the Scottish Conservatives’ 2014 conference there was a question and answer session with two members of the Commission and with me. I was asked to say a few remarks setting out how the Commission has approached its work. The full text of what I said is set out below. For the record, I should of course stress that these are my views. I am speaking neither for the Strathclyde Commission nor for the Scottish Conservative party.

My Lords, Ladies and Gentlemen,

It is an honour to speak with you this afternoon.

Our most important task is to win the referendum in September. Everything the Commission does is undertaken with that over-riding objective in mind.

The choice before us in September is not “independence versus the status quo”; “change versus no change”. A No vote is guaranteed to mean that devolution will change and develop. How do I know this? I know it because it’s already been legislated for, in the Scotland Act 2012. This Act, described at the time of its enactment by the then Secretary of State for Scotland as the largest transfer of fiscal powers within the United Kingdom in its history, will bring to Holyrood a substantial degree of fiscal devolution. These new powers — as long as Scotland votes No to independence — will come fully into force in 2015 and 2016. Now, this is not “jam tomorrow”, as Nationalists sometimes claim: it has already been legislated for. So the choice we face on 18 September is one between bringing devolution to an end (for there will be no devolution if Scotland becomes independent) and developing devolution further.

The Scottish Parliament is already a remarkably powerful body. Since 1999 it has been responsible for more than 60% of the public money spent in Scotland. It has a budget of £35 billion. This puts the spending powers of the Scottish Parliament on a par with those of the German Lander, the Canadian Provinces and the Australian States. This is the context within which any clamour for “more powers” should be understood. This is not to say that we cannot or should not seek to make it even more powerful — but it is, as I say, necessary to remember that Holyrood is already a Parliament possessing very significant powers. Perhaps, if I may say so, it has been one of the failures of the Unionist parties not to have made this rather clearer to the people of Scotland.

I want to clear up a little terminological confusion. There is a tendency amongst commentators to describe any conversation about further powers for Holyrood as a conversation about “devo max”. This is a mistake. Devolution is a Unionist solution to the problem of multi-national government in the UK. We have the one state — the UK — but there are distinct nations within that state. Devolution is an avowedly and firmly Unionist solution to that rather unusual characteristic.

“Devo max”, by contrast, is a Nationalist invention. Invented and articulated in the SNP’s “national conversation” of 2007-09 it is designed not to strengthen or to deepen the Union, but to break it. And that, of course, is the very opposite of what the Strathclyde Commission is seeking to do. The Commission’s job is to take a hard look at the devolutionary arrangements we find ourselves with and to consider how they may be improved and developed to the mutual benefit of Scotland and the rest of the UK alike. This means, for example, that we are thinking not only about the devolution of powers to Scotland, but also about the devolution of powers within Scotland. And it also means that we are thinking about the issues with the whole of the UK in mind. No Unionist party should be thinking about the future of devolution in one part of the United Kingdom without thinking through the consequences for the Union as a whole.

The Commission’s aim is ambitious, but the prize is great. Our aim is to find a Unionist and devolutionary future for Scotland so compelling that the alternative — separation and the break-up of Britain — looks so misguided that it simply become unthinkable. The prize, if we are successful, is that Scotland’s place in the Union will be as secure for the next 300 years as it has been for the last 300.

Thank you very much.

There is, of course, much more to be said about how and why “devo max” is (as I described it at the conference) a “perversion” of how a Unionist would understand devolution. There is not a single country anywhere in the world governed under a system of “devo max”. I write more about this in an academic article which is about to be published in the Law Quarterly Review. There is also a good deal more to be said about the specifics of further devolution. For now, I shall say nothing about that. The issues are mined in depth in the ongoing series of “devo more” papers published by the IPPR (and freely available on their website).

There is just one point of process that I shall make now. Consider how devolution has been delivered in the UK. It has never been imposed by London. It has been delivered only after a clear demand for it has been made in the relevant part of the UK. Oftentimes the strength of that demand has been tested in a referendum (including in Scotland in 1997). Now that we have devolution in Scotland there is only one body that could legitimately make that demand: the Scottish Parliament. After the independence referendum there will — alas — still be an SNP majority in the Scottish Parliament. For Westminster to deliver further, enhanced, devolution consistently with the way in which all devolution in the UK has been delivered to date, it will require the SNP to make the case for it. Thus, “what No means” is a question not only for “the No camp” (as the Deputy First Minister likes to call us) but is also a pressing question for the Scottish Government and for the SNP.

If, after independence is defeated on 18 September, the SNP want “more powers” for Holyrood, they had better start engaging with the very questions the Strathclyde Commission is engaging with: what is the best future for Scottish devolution?

The SNP’s Currency Nightmare

The Chancellor’s contribution this week to the independence debate was dramatic. What does it mean? And where do we go from here?

What the Chancellor said was that there will be no currency union between an independent Scotland and the rest of the United Kingdom. He said this on the basis of independent, expert and hard-headed analysis — all made public — prepared by HM Treasury and signed off by the Permanent Secretary to the Treasury, no less (the civil servant who is leading the UK Government’s ongoing series of Scotland Analysis papers, about which I’ve written before). The Chancellor’s verdict — that it could not be said to be in the best interests of the rest of the UK to enter into a currency union with an independent Scotland — is not a narrowly partisan position adopted in the interests of the Conservatives. It is, on the contrary, a position with which the Liberal Democrat and Labour parties whole-heartedly agree. For the Lib Dems, Danny Alexander gave a statement agreeing with the Chancellor and for Labour Ed Balls wrote in the Scotsman explaining his reasons why a Labour government could not “enter into a new sterling monetary union to share the pound with an independent Scotland”.

None of this means that an independent Scotland could not use the pound. Any country anywhere in the world could use the pound if it wanted to. Likewise, the UK could abandon the quaint notion of having a currency of its own and could use the US dollar if it wanted to. But, for the UK to use the dollar in this way — or for an independent Scotland to use the pound in this way — would have massive drawbacks. (Just pause to wonder: why is it that so few states in the world use the currency of another state? Why is it that most states in the world prefer to have a currency of their own?)

Using the currency of a foreign state without entering into a monetary union means that you surrender the entirety of your monetary policy to that foreign power (in the words of the Scottish Government’s own Fiscal Commission, it would mean that “the Scottish Government would have no input into the governance of the monetary framework”). Using the pound without entering into a currency union would mean that the Scottish Government would have no power to print money. Its borrowing would be in a foreign currency, making it inevitably more expensive. Even if it had a central bank it would have no power to create reserves. Any shock to the economy would have to be absorbed using only fiscal policy (because Scotland would have no monetary policy of its own). Suppose that the oil price crashes (and it is notoriously volatile): any shock to the economy would have to be absorbed by putting taxes up or cutting public spending. Murdo Fraser MSP drives the point home even further:  an independent Scotland unilaterally using the currency of a foreign state would mean, he says, that “there would be no one to stand behind our financial institutions in the event of another economic crisis. That means waving goodbye to RBS, to Standard Life, to Aberdeen Asset Management, to Alliance Trust, and to a whole host of other financial institutions, who would have no interest in continuing to be based in Scotland without that protection. It would be a disaster for the Scottish economy”.

For all of these reasons, surrendering all control over monetary policy is a deeply unattractive option, which is why — perfectly sensibly — the Scottish Government has not proposed it (and why its Fiscal Commission recommended against it). It may well be, however, that it is the position which the Scottish Government will be driven to now that the “three Chancellors” have ruled out a currency union. Their only alternative is to concede that the current SNP leadership have got it all horribly wrong and that the likes of Jim Sillars have been right all along, and that an independent Scotland should have a new currency of its own.

Pausing there, why have the SNP leadership not already adopted this as their policy for an independent Scotland? The Scottish Government’s Fiscal Commission was surely correct to say that it’s this option that would give policy makers in Scotland “maximum policy flexibility”, representing “a significant increase in economic sovereignty”. The answer, of course, is that it would be very expensive, especially in the short term. Everything that currently happens in Scotland in sterling would have to be re-denominated into the new Scottish currency. Every contract. Every mortgage. Every salary. Every wage packet. The new currency might fly. Or it might sink. It would be immediately vulnerable to the verdict of the bond markets, which are notoriously ruthless in attacking perceived points of weakness. Sterling is a safe bet (or as safe a bet as you can get in this game). A new Scottish currency might not be. This is not to say that Scotland is too poor or too wee to have a currency of her own. But it is to say that the SNP have quite rightly realised that the risks are such as to make the option unattractive to the naturally risk-averse Scottish electorate.

Of honourable and dishonourable cases

And here we come to the nub of the problem. There is an honourable case to be made for independence. It’s not a case I would personally agree with, but that’s neither here nor there. There is an honourable case to be made for it. But it’s a case that is honest and upfront with people about the risks involved. It is a case that, in answer to any number of questions about “what would happen …”, says “we cannot be sure, but come with us anyway because, whatever happens, we will finally be free”. This is the case for independence that is made by stalwarts such as Jim Sillars. It’s rooted in faith — an unbending belief that whatever the manifold risks of independence they are worth taking because the goal is so prized. But this is emphatically not the case for independence which the SNP leadership have sought to make. Their case, in stark contrast to the Sillars crusade, is to do as if a vote for independence poses no risk at all. We’ll still have the same Queen, the same pound, the same EU membership. We’ll still share with the rest of the UK a deep social union and a common welfare system. There will be no border controls at Carlisle or Berwick, because we’ll still be in the same common travel area. We’ll still have the BBC. The whole of the SNP’s independence white paper is premised on this approach to independence: the dominant refrain of Scotland’s Future is “seamless transition”.

This choice — the choice of the SNP to go with the “gradualists” led by Salmond and not the “fundamentalists” formerly led by Sillars — has shaped everything about the independence campaign, on both sides of the argument. Better Together would look altogether different if the No vote it was trying to secure was an answer to the question “will you opt for independence despite all its risks”? The SNP leadership are not running the campaign Sillars wants them to run because they know that only a minority of Scots would vote for it. We know that somewhere between a quarter and a third of Scots (and no more than that) would vote for independence no matter what. The campaign which the SNP are running is designed not for these people (who are going to vote Yes in any event) but for the people it needs to persuade: that is to say, for the people who are not yet of the view that independence is worth the risk. And how do you do that? By de-risking it. By doing as if independence can be achieved “seamlessly”.

This would be a brilliant and, for the Unionists, an extremely dangerous strategy but for one flaw. The flaw is that independence can be achieved “seamlessly” only if an awful lot of people sacrifice their own interests to the advantage of the Scots. “Automatic” EU membership for an independent Scotland would happen only if all the other Member States of the EU (including those, such as Spain, with their own separatists to deal with) acted in the interests of Scotland to bend or break the EU’s rules even where it was manifestly not in their own interests for them to do so. SNP bluster insisted that it would be so. When it was pointed out to them, by Better Together, by the UK Government, by politicians from across Europe, by the EU’s own leaders, and by numerous independent academic experts, but only after an awful lot of bluster, assertion and, indeed, deception, did the SNP finally cave. They now recognise, as we had said all along, that an independent Scotland’s EU membership would require to be negotiated and would not be automatic.

Currency union is much the same. A currency union between an independent Scotland and the rest of the UK (“rUK”) would require the Bank of England to play the lead role in ensuring the financial stability of both states; this would make taxpayers in the rUK ultimately responsible for underwriting the financial stability of what would be a foreign power (Scotland having voted to leave the UK). Even with a rigorous fiscal pact agreed between an independent Scotland and the rest of the UK, it was never clear why rUK taxpayers should expose themselves to such a risk. The UK Government said as much in April 2013, when the Chancellor in a speech in Glasgow said that it was “unlikely” he would agree to such a currency union. I wrote about that here.

Enter the Governor

In January 2014 the Governor of the Bank of England delivered a speech in Edinburgh in which he set out the issues in more detail. In particular, he explained how a successful, durable currency union would need a banking union to underpin it and would require each party to the union to share fiscal risks. The Governor made it clear that this, in his words, would require “some ceding of national sovereignty”. What he meant was not only that an independent Scotland would have to cede some of its national sovereignty to the rUK but also that the rUK would have to cede some of its national sovereignty to Scotland. The Governor concluded his speech by noting that “decisions that cede sovereignty and limit autonomy are rightly choices for elected governments and involve considerations beyond mere economics”. His job was to set out the economic considerations that should be borne in mind when figuring out how to make a currency union successful; it is for the politicians then to decide whether acting on these considerations is in the public interest or not.

The Governor’s speech should have left no-one in any doubt that, for a currency union to be successful, the rUK would have to cede a degree of its national sovereignty to the newly independent Scottish state. To anyone with any sense of British politics, that should have been more than enough for folk to realise it was never going to happen. Sovereignty over fiscal affairs cannot be ceded by Chancellors or Prime Ministers acting alone (or even by “three Chancellors” acting together): such a move would require legislation. And the House of Commons is famously reluctant to cede sovereignty to anyone, never mind ceding it to a newly foreign power that had just decided to leave the jurisdiction! Be under no illusions about this: if Scots vote Yes in September, the rest of the UK will feel rejected. And why should a state which has just been rejected then turn round and offer to cede some of its sovereignty to the very country that has just rejected it?

For these reasons, the clarity of the Governor’s January speech confirmed in my mind that the Chancellor’s 2013 position that currency union was “highly unlikely” really meant that it was “inconceivable that the rUK would sign up to it”. There would have been a case, in my view, for leaving it there.

But that’s not how the SNP interpreted the Governor’s speech. They spun it as if it was a slap in the Unionists’ faces. The Governor said that there is a way to make a currency union work — and, moreover, that he could make it work — as long as the political will were there. The political will may be there on the SNP side but, for the reasons given above, if they ever truly believed it was there equally in London they are fools. The SNP misread the Governor’s “we could make this work” speech as an endorsement of the idea that “it will happen”. In other words, they completely overlooked the basic distinction at the heart of his speech between economics and politics. What he actually said was that, economically, a currency union could work but only if the politicians agreed to cede a degree of national sovereignty.

Enter the Chancellor

Mr Osborne’s speech picked up precisely where the Governor left off and dealt more or less exclusively with this all-important question: why would he or any other rUK politician seek to persuade the House of Commons that it was in the interests of the rUK for it to cede a degree of national sovereignty to the newly independent Scottish state?

He dealt first with the SNP’s oft-repeated assertion that a currency union would be in the rUK’s best interests just as much as it would be in Scotland’s. They assert this (as if the SNP are the arbiters of what’s in the rUK’s interests!) because of the large volume of trade between Scotland and the rUK. Keeping the same currency minimises transaction costs and is good for business. Well, yes, all true. Except that only 10% of rUK business is with Scotland, whereas 40% of it is with the eurozone and 20% of it is with the US. On the SNP’s own analysis, then, it would make four times as much sense for the rUK to adopt the euro and twice as much sense to seek a currency union with the USA than to seek a currency union with Scotland. Thus, when the true scale of rUK trade is understood, SNP insistence that a currency union is in the rUK’s best interests rings hollow.

Having dealt with this the Chancellor then explained the political risks that would be entailed for rUK taxpayers in entering a currency union with an independent Scotland. The banking union which the Governor had said would be necessary would put rUK taxpayers “on the line for banks in a foreign country, asking them to underwrite a Scottish Government guarantee on deposits held in Scottish banks and asking them to put their money at risk whenever Scottish authorities extend emergency support to Scottish banks”. Moreover, there would be “little prospect of any benefit flowing in the other direction”, for Scotland could make precious little contribution to supporting a big English bank. What would be in this for the rUK? “Nothing but exposure” was the Chancellor’s reply.

The Chancellor then turned to the fiscal pact: i.e., the second element, along with a banking union, that the Governor had said would be required for a currency union to be successful. He quoted remarks, uttered by both the First Minister and the Cabinet Secretary for Finance, which showed that they had failed to understand the nature of the fiscal constraints under which an independent Scotland would have to operate were it to be in a currency union with the rUK. Contrary to the views of the First Minister, such fiscal constraints would mean that Scotland would not be free to set whatever rates of taxation it wanted; and contrary to the views of Mr Swinney, they would mean that Scotland would not have full control over its tax policy. SNP ministers’ views are “a million miles away from the fiscal risk-sharing the Governor has said is the foundation of an effective currency union”, said the Chancellor. But so, of course, are Mr Osborne’s views. Just like Mr Swinney, the Chancellor would never sign up to the sorts of constraints on tax and spend which the Governor of the Bank of England has said would be necessary for a currency union to be successful.

For all of these reasons, the Chancellor concluded, he “could not … recommend” that the rUK should enter into a currency union with an independent Scotland: “that’s not going to happen”, he stated. “The people of the rest of the UK would not accept it and Parliament would not pass it.”

Nationalist reaction

The Nationalists reacted in four ways, each of them profoundly wrong. First, they said “it’s Scotland’s pound too”, insisting that no-one could take it away from us and that Mr Osborne was “bullying Scotland”. Secondly, they said “if we cannot keep the pound, we’ll not take our share of the UK’s debts”. Thirdly, they said “it’s all just campaign talk, it’s a bluff that will change on day 1 after we vote Yes”. And finally, they said that the Chancellor’s stance was in breach of the Edinburgh Agreement. This last point is perhaps the most disingenuous of the lot, and I’ve dealt with it before. It is time for the SNP’s wilful misrepresentation of the Edinburgh Agreement to stop.

That the SNP reacted in these ways was not surprising. But what has been disappointing is the way that some in the Scottish media — and several commentators who should know better — have failed to see how ill-conceived the SNP’s reaction has been. Let’s look at this in more detail.

First, the line that it’s Scotland’s pound too. This is straightforwardly wrong in law. There is no secret about this. I’ve written about it at length here. I told the House of Commons Scottish Affairs Committee all about it last month. Better Together posted my legal analysis on their Facebook page. And the Treasury’s supporting documentation, published alongside the Chancellor’s speech, contains a perfectly accessible four-page annex on “the legal position of the UK pound”. The currency is not Scotland’s (and it’s not England’s either). It is the currency of the United Kingdom. If Scotland votes Yes to independence it will have voted to leave the United Kingdom: that’s exactly what “independence” means — independence from the United Kingdom. If Scotland leaves the UK it leaves the UK’s public institutions, which would become the institutions of the rest of the UK. The UK’s assets and liabilities would fall to be apportioned equitably between the rUK and an independent Scotland, but the pound is neither an asset nor a liability. Any gold or other reserves left in the Bank of England would fall to be apportioned. So would the national debt. But the pound itself would not. It is Scotland’s pound now because and only because Scotland is part of the UK. If Scotland votes to leave the UK it votes to leave the UK’s pound. 

It really could not be more simple, could it? But it is staggering how many folk get all this wrong. Iain Macwhirter, one of Scotland’s leading political commentators, wrote on his blog that “the pound is common property”. Straightforwardly wrong in law. For Macwhirter, the UK Government setting out and standing up for what is in the best interests of the rUK was as act of “coercion by the UK political establishment, an act almost of economic warfare”. Such bellicose interpretation is so over the top that it would not be out of place on the most extreme of the Nationalist blog sites. STV’s Scotland Tonight has a strong claim to be Scotland’s flagship news and current affairs programme, but its researchers were evidently too busy to read the legal analysis on the position of the UK pound which the Government, the House of Commons and others have published, leaving its hapless presenter to ask the Chief Secretary to the Treasury why his Government were refusing to apportion the pound as an asset and failing to correct the First Minister when he said that the Bank of England is an institution of which an independent Scotland would have a share. An all-party House of Lords committee explained as long ago as April 2013 that the SNP’s plans for sharing the Bank of England post-independence were “devoid of precedent and entirely fanciful” but, since then, neither the Scottish Government nor its Fiscal Commission have done anything to explain why these conclusions were mistaken. One can only assume that this is because they know damn well that they are not mistaken.

As for Scotland refusing its share of the national debt, this is basket-case economics. The debt is currently the UK’s. In order to reassure creditors (and to preserve its credit-rating) the Treasury has made plain that it will continue to honour the debt even in the event of Scottish independence. But this does not mean that Scotland would be born debt-free. On the contrary, as part of the separation negotiations the rUK would secure from Scotland an agreement to service an equitable share of the UK’s debt. There is no chance that Scotland could walk away from this obligation without punishing consequences being imposed at the hands of the international money markets. An independent Scottish state would need to borrow from day 1. There is no question about this (for those in doubt, Ian Smart explains it here). A responsible Scottish Government would do everything it could to ensure that it was able to borrow on the most favourable terms possible. This precludes absolutely any refusal to service a fair share of the UK’s debt.

Conclusion — where does this leave us?

The intervention of the “three Chancellors” has generated a lot of heat. Nationalists are furious. Iain Macwhirter said on television during the week that the Scottish Government genuinely did not see this coming. Their hysterical over-reaction would suggest that, on this score, Macwhirter is correct. But I have to say I find this extraordinary because, as I set out in the opening paragraphs of this post, all the signs were there for those who bothered to read them. As usual with political heat, it will soon die down. And, when it does, we will be able to see that the intervention of the “three Chancellors” has also shone a welcome and penetrating light on an aspect of the independence debates that the SNP had tried valiantly to keep obscure.

This goes back to the point made above about “honourable and dishonourable cases” for independence. The SNP’s entire approach to independence is to do as if, having voting Yes, Scotland will breezily and unilaterally be able to cherry-pick exactly which bits of the old British state it wishes to keep and which bits it wishes now to discard. The currency is just one of several bits that the SNP want to keep. But they present this as if it is a policy that poses no problems: the mere fact that they want it will be enough. Mere assertion that it is Scotland’s pound, as long as it is repeated often enough, will be sufficient to make it so, even when both the law and the interests of the rest of the UK point in diametrically a different direction. Those with long memories will recall that we saw the same tactic deployed in 2011-12, when the argument was whether the Scottish Parliament, without help from Westminster, enjoyed the legal competence to pass legislation authorising a referendum on independence. The SNP insisted, wholly without legal foundation, that it did. The SNP was wrong yet, when the UK Government suggested a solution, they were abruptly shouted down with cries of Westminster “boots” “stomping” all over “Scotland’s referendum”. Over the course of some long months, it was patiently and calmly shown that on analysis, the UK Government had got the law right and the SNP had got it wrong, and Nationalist talk of boots and stomping was replaced with rather more mature language of co-operation and respect. It was the same again with last year’s stramash over “automatic” EU membership. And now we’re on our third go around the same loop. This week’s cries of “bullying” and “economic aggression” will sooner or later give way to a cold, hard realisation that everything the Chancellor has said is based on clear, authoritative, expert and independent economic analysis, all of which has been put freely into the public domain. You can read it for yourself. And, when you do, you will see that it really is not in the interests of the rUK to enter into a currency union with an independent Scotland; that this really is not an unlawful power grab for “Scotland’s pound”; that this really is not a bluff; that a currency union really has been taken off the negotiating table; that it really is not going to happen; and that the UK has compelling reasons for having arrived, calmly and rationally, at this conclusion.

This shines light on the question which we in Scotland have to answer on 18 September: should Scotland be an independent country? Independence means independence from the United Kingdom. Independence means leaving the UK behind. And independence mean leaving the UK’s institutions behind, including the UK’s pound. By all means use the UK’s pound as a foreign currency. Be Panama if that is what you want. It’s your right to choose that for your national destiny if that’s what you want. But be clear about one thing, good people of Scotland. Independence means leaving the UK. Vote for that and you cannot then turn around to demand that the bits of the UK you actually like (such as the pound) come with you. Are you in, or are you out? Are you staying, or are you going? It’s your choice, Scotland. And this week, thanks to the Chancellor, we found some much needed clarity about what, precisely, that choice entails.

The hidden costs of independence

I appeared as a witness before the House of Commons Scottish Affairs Committee on 15 January 2014, alongside two other academics: Prof Kenneth Armstrong (whose expertise is in EU Law) and Prof Iain McLean (who is a political scientist). You can read the transcript here. Or you can watch the evidence session online via the parliamentary website but, be warned, we were kept there for three full hours. The first question we were asked was whether we thought that the SNP’s proposed timetable for achieving independence was realistic – they have suggested that it could all be done and dusted within 18 months. We said that it was not, and this caught the attention of the press, appearing as the front page headline in the following day’s Herald. This, however, was far from the most important material we covered.

Much more important was that we brought to the Committee’s attention a number of legal errors which undermine several of the claims made by the Scottish Government in their independence white paper, Scotland’s Future, which was published to much fanfare in November.

The background is that, in terms of public international law, what would happen in the event of a Yes vote in the independence referendum in September is that Scotland would become a new State in international law and that the rest of the United Kingdom would continue as the “continuator” State. This position was authoritatively set out in the UK Government’s first Scotland Analysis Paper and in the legal opinion co-authored by Professors James Crawford and Alan Boyle that was annexed to that paper. This legal analysis has not been seriously questioned by the Scottish Government in the last 12 months.

The consequence of this is that institutions of the United Kingdom would automatically become institutions of the rest of the United Kingdom in the event of Scottish independence. Thus, for example, the UK’s security and secret intelligence services would become the security and secret intelligence services of the rest of the UK (“rUK”). The Bank of England is a UK institution. So is the BBC. As UK institutions they would not fall to be apportioned equitably between the rUK and an independent Scotland.

The UK’s assets and liabilities, on the other hand, would fall to be apportioned equitably between the rUK and an independent Scotland. The apportionment of the UK’s assets and liabilities would constitute a large part of the separation negotiations that would have to follow any Yes vote in the referendum. Whilst the details would be a matter primarily of political negotiation, those negotiations would take place within a broad framework of international law. International law provides a number of presumptions that are likely to shape such negotiations. Among these presumptions are the following:

  • The UK’s fixed property in Scotland (e.g. Government buildings) would become the property of the new Scottish State; conversely Scotland would have no claim on the UK’s fixed property in the rest of the UK or overseas
  • The UK’s movable property in Scotland would become the property of the new Scottish State where it is specifically for local use
  • Other assets and liabilities would fall to be apportioned equitably. This may be calculated by such means as share of population or, possibly with regard to the national debt, for example, by share of GDP. Historical contribution appears to be of no relevance: thus UK fixed property in Scotland would become the property of the new Scottish State even if its construction had been paid for UK taxpayers as a whole, and no compensation would be due to the rUK

Working out how these principles and presumptions would apply in the context of unpicking a 307-year-old Union is inevitably going to be a complex task.

In the Scotland Analysis Paper on Defence, an indication was given of how complex these negotiations would be in the context of HM Armed Forces. In that Paper it was noted that “an independent Scottish State could not simply co-opt existing units that are primarily recruited or based in Scotland, as these are an integral part of the UK armed forces … While many military personnel and capabilities are located in Scotland, these do not operate in isolation; … they depend on close integration with other capabilities, services and infrastructure spread across the UK”. Movable military and defence assets located in Scotland would not therefore become the automatic property of an independent Scotland. If they are integral to the defence and security of the UK as a whole they are not “specifically for local use”.

The Scottish Government’s independence white paper appears to be have been written without regard to the distinction between institutions (on the one hand) and assets and liabilities (on the other). As a result, Scotland’s Future falls into legal error in numerous places. The following are among the key examples.

On the pound, the white paper states that “The pound is Scotland’s currency just as much as it is the rest of the UK’s” (p. 7). This is incorrect. The pound is Scotland’s currency now precisely because Scotland is part of the UK now. If Scots vote to leave the UK they will be voting to leave the UK’s institutions, including the pound. As we all know, Scotland could then seek to negotiate its way back into these institutions but the rUK would agree to this only if it was persuaded that it was in the national interest of the rUK do to so. And, as we further know, the current UK Government have indicated that it is “highly unlikely” that it would be in the interests of the rUK for it to enter a formal currency union with an independent Scotland, at least without a binding fiscal pact. This does not mean that Scotland would be unable to use the pound: any State may use the currency of another State (as Panama uses the US dollar). But for a State to make this choice means that that State has no control over its monetary policy or interest rates: rather, these matters are effectively surrendered to a foreign power.

On the UK’s embassies, the white paper states that “Scotland would … be entitled to a fair share of the UK’s assets” (p. 13) and that “Scotland would be entitled to a fair share of the UK’s extensive overseas properties (or a share in their value) allowing us to use existing premises for some overseas posts” (p. 211). Again, this is mistaken. International law provides that State property would remain the property of the continuator State (the rUK) unless it was located in the territory of the new State (Scotland). In the Scotland Analysis Paper on EU and International Issues, the UK Government correctly state that “An independent Scottish state would not be entitled by right to any UK diplomatic premises, equipment or staff” (para 2.16). As the Government go on to state: “the legal position is clear: the bodies that support the UK now … would continue to operate on behalf of the remainder of the UK on the same basis as before Scottish independence. If an independent Scottish state wanted to continue to receive services from UK institutions or utilise them to carry out functions in relation to Scotland, that would be a matter for negotiation and would have to be agreed with the continuing UK” (ibid).

On defence assets, the white paper states baldly that “we will inherit a share of existing UK defence assets” (p. 234). While the white paper acknowledges that the matter will have to be negotiated, it suggests that Scotland’s share could be calculated based on population, giving it a share of assets worth £7.8 billion (ibid). As we have seen, however, such a crude calculation overlooks the complexity of the fact that that which is integral to the defence and security of the UK as a whole might not fall to be apportioned with an independent Scotland at all. Working out what an independent Scotland’s share of the UK’s defence infrastructure would be is a more complex matter than simply dividing the UK total by Scotland’s population share and, moreover, is likely to result in Scotland’s share being markedly less than is assumed in the white paper.

Finally, on security and secret intelligence, the white paper states that “In the early years we will make a significant level of investment in setting up the [new Scottish security and intelligence] agency. Scotland, of course, already has a substantial existing capital stake, from our investment in UK intelligence infrastructure. We will expect investment to be recognised in the arrangements that are agreed with the UK as part of the independence settlement” (pp 266-7). Again, this is flawed as a matter of legal principle. Past investment and historic share are not material factors in determining how assets and liabilities should be apportioned equitably. Just as rUK taxpayers would not be compensated if UK property in Scotland became the property of an independent Scottish State, neither would Scotland’s historic contribution to UK institutions affect the fact that such institutions would simply remain those of the rUK in the event of independence.

Two conclusions may be drawn from the above analysis. The first is that core elements of the Scottish Government’s approach to independence are based on assumptions which are highly questionable in law.

The second is that the costs of independence may be considerably greater than has generally been understood. If an independent Scotland would have no right to a share of the UK’s embassies and diplomatic services, for example, it follows that it would have to purchase, rent or build its own. The Scotland Analysis Paper on EU and International Issues explained something of the increased costs that would have to be met by Scottish taxpayers in the context of Scotland seeking accession to the EU as a new Member State.

It may be, however, that this is but one example of the hidden costs of independence – a matter which I think we are going to hear much more about between now and September.

A Year in the Life of the Indyref

What did we learn in 2013 in the debates over Scottish independence? Here’s a personal view of five of the year’s highlights.

1. Pre-negotiation?

It is clear that the UK Government is contingency planning in the event of a Yes vote. The Government would be mad not to be, not least because in the detail of the contingency planning one finds all manner of things that are wrong with or absent from the SNP’s account of what independence would entail. The UK Government’s line in 2012 had been that it was not contingency planning: this shifted early in 2013. The new line was that the Government would not “pre-negotiate” the terms of independence — any such negotiations would be dependent upon there first being a Yes vote in September. But even this line has not always held, and the Government would in my opinion be well advised not to stick to it too rigidly in 2014.

One of the biggest hits the No side of the argument scored in 2013 was when Chancellor of the Exchequer George Osborne came to Glasgow in April to explain just how unlikely it is that the UK Treasury would sign up to the currency union the SNP want for an independent Scotland (“iScot”). This does not jeopardise iScot’s chances of using the pound (in the sense, for example, that Panama uses the US dollar), but it does mean that were iScot to do so it have no control over its monetary policy, its interest rates, and the like, making it more dependent on London (not more independent of it): like Panama, it would be using the currency of a foreign power. This is all well and good, and the Chancellor brilliantly succeeded in putting the SNP firmly on the back foot and keeping them there for some weeks (where they grew increasingly uncomfortable) but what is this if it is not pre-negotiation? This stuff works, and the UK Government should not be scared of doing more of it in 2014.

2. Campaign v Campaign or Government v Government?

Each of the lead campaigns showed their limitations during 2013. Better Together struggled over the summer to maintain the momentum established by the UK Government in the earlier months of the year. Better Together and the UK Government are still feeling their way as to how they should operate most effectively in relation to one another. In 2013 it didn’t matter so much that they sometimes got this wrong, but no such mistakes can afford to be repeated in 2014 (and they know this).

On the other side things are both far worse and rather clearer. Yes Scotland had a horrible year. They lost key people (because they were under-performing). They were caught making payments to so-called “independent” experts for their newspaper columns. The group “Labour for Independence” appears to have been exposed as something of an SNP front (although there are, typically, two views about this). And the big noise Yes Scotland made about having been illegally hacked seems also to have been rather misjudged, although this is a murky story which few have got to the bottom of. By year’s end, with the launch of the White Paper (of which more below), it was clear that Yes Scotland were in the background and the lead role on their side of the argument was going to be taken by the SNP Government.

This is both a problem and an opportunity for YeSNP: their rainbow alliance of non-SNP pro-indy parties and groups has more or less evaporated (save for some irrelevant far-left types who talk to no-one but themselves and the hapless Eddi Reader, WHO LIVES HERE). However, if this is a battle between the full resources of the SNP machine and the Scottish Government, on the one hand, and Better Together, on the other, we are going to be monstered. Yet, if this is a battle in which Better Together are going to have to call on the services and resources of HM Government does this not play into the First Minister’s hands? For it is he who (wrongly) wants to make this into a Scotland v England battle or, perhaps, a Scotland v English Tories battle. This just underscores the importance of the Unionist side sorting out the proper working relationship between Whitehall and Better Together. But it also belies the unrealistic aspirations of those who saw in the independence debates a chance for a new politics to emerge. No such new politics came to the fore in 2013 and none will in 2014 either. This is party on party, Government on Government. I have no trouble with this: politics is as politics was, and it would do us all a lot of good if there were less dreaming of new dawns and more engagement in the politics we have.

3. Positive v Negative

By far the most tedious refrain of the year is that we Unionists have nothing positive to say, and that it’s all doom-laden scare-mongering. This is bollocks. Here’s some evidence that it’s bollocks. And here’s some more. Two great pieces, each thoroughly positive, about why we are better together than apart. Each gives reasons — yes, positive reasons — as to why we should vote No to independence and Yes to Union and ongoing devolution.

4. Hope v Fear (or Hopeless v Fearless)

Related to (3) is the allegation that Yes Scotland is a campaign of hope whereas Better Together is a campaign of fear: “project fear”, as some have dubbed it. This is just silly. The truth is that each side employs both hope arguments and fear arguments. Most of what the SNP says about “Westminster” is fear: we should be afraid of the Tories, of the bedroom tax, of austerity, etc, as if there would be no right-of-centre politics in iScot, no need to balance budgets, and no need to bring our sky-high welfare spending under control. Likewise, there are plenty of hope arguments on the No side. It is by voting No that we secure the full opportunities of the UK’s rich jobs market to aspiring Scots. It is by voting No that we ensure there are no obstacles to trade in the UK’s single market. And it is by voting No that we all get to share in the delights of the success enjoyed by British athletes and sportsmen and women, wherever in these islands they are from.

Instead of “hope” and “fear” what strikes me as characteristic of Yes and No arguments is that so many of them are “hopeless” (on the Yes side) and “fearless” (on the No side). The SNP’s blind insistence that iScot would be an instant Member State of the European Union simply because we say so is a hopeless position for them to have adopted. And Better Together’s insistence that those advocating the break-up of Britain should explain exactly what the implications would be for pensions, for public broadcasting, for currency and for EU membership are precisely the fearless questions which should be asked and asked and asked again until we get some credible answers.

5. The Failure of the White Paper

To provide credible answers to the many questions which have been asked of the SNP’s plans for independence was the task which was supposed to be performed by the independence White Paper, which the Scottish Government published in November. But despite the document’s absurd (and wholly unnecessary) length, the White Paper manifestly failed to deliver. Yes, we all know that it runs to 650 pages and yes, we all know that within them 650 questions are set out and addressed. But what those few of us who have actually read and studied the White Paper know is that the big questions are afforded no credible answers at all. The real purpose of the White Paper, it turns out, is to deceive the vast majority of voters who will never read it into thinking that because it’s so damn long every conceivable question must have been fully answered somewhere within. The ploy is a desperate one and it will not work. We’ll keep asking the questions. We’ll keep spelling out the implications of independence. We’ll keep making the case for the Union. And we will prevail.

Happy new year.

The Obligations of the UK and the Misrepresentations of the SNP

We know that the Scottish Government want an independent Scotland to continue to use Sterling as its currency. We know also that the Scottish Government want an independent Scotland to enter into a formal currency union with the rest of the UK rather than simply peg its economy to the currency of a foreign state (as Panama pegs its currency to the US Dollar). We know also that the United Kingdom Government have expressed grave reservations about whether such a currency union would be in the best interests of the rest of the United Kingdom. This week the First Minister of Wales added his voice to the debate, arguing that such a currency union would not necessarily be in the best interests of Wales, either.

Unlike much of the blether in the endless indyref debates, this really matters. It matters because there are thousands of votes at stake. Uncertainty about the currency an independent Scotland would adopt sends voters into the arms of the No campaign. If you want to keep the Pound, the only guaranteed way of doing this is by rejecting independence. For one thing, it is not impossible that an independent Scotland would be required to join the Euro as a condition of its entry as a Member State into the European Union. But even if this does not happen, it may well be that Scotland could not negotiate its way into any currency union with London.

The reason for this is obvious. The eurozone is a currency union and it is in crisis. It is in crisis because monetary union without corresponding fiscal union does not work. If you want a successful single currency you have to have a fiscal pact to go with it. But to sign up to a fiscal pact means you lose fiscal autonomy: you can no longer tax and spend whatever you like, because you have to secure the agreement of the monetary authorities first. In the context of Sterling, this means the Bank of England. An independent Scottish Government led by the SNP would never agree a fiscal pact with London, for that would make Scotland more dependent on the UK, not independent of it. Yet, without such a fiscal pact, the Treasury have made clear that the prospects of a currency union are remote indeed.

The SNP are desperate to convince Scots that there is no threat to the Pound, that Scotland would not have to join the Euro, and that London would agree to the currency union that the SNP want.

Yesterday the SNP’s desperation got the better of them. On BBC tv’s Reporting Scotland, John Swinney MSP, Cabinet Secretary for Finance in the Scottish Government, said as follows:

Clearly, the people of Scotland will be given the proposition that Sterling will be the currency of an independent Scotland and the UK Government has signed up to respect the outcome of the referendum so we would expect them to respect the outcome of the referendum and therefore to respect the currency position that we have set out as part of that process.

This is abject nonsense. Worse, it is seriously misleading. I do not know whether Mr Swinney was deliberately trying to mislead the people of Scotland or whether he is so incompetent that he did not know his words were a blatant misrepresentation of the truth.

What the UK have “signed up to”, as Mr Swinney put it, is to respect the verdict which the Scottish electorate will deliver in September’s referendum: “yes” or “no”. The UK have not “signed up to” every whim and fancy of the Scottish Nationalists. Nor have they “signed up to” accommodating the policy preferences of the SNP regardless of whether they are in the best interests of the rest of the UK. The question of the currency will not be on the ballot paper come 18 September: that ballot paper will ask only “Should Scotland be an independent country?”, not “In the event of independence should Scotland keep the Pound Sterling?” and not “Do you agree that the Treasury should agree to a currency union even if this cannot be shown to be in the best interests of the rest of the United Kingdom?”.

The outcome which the UK has “signed up to respect” is the decision of the Scottish people on the question of whether Scotland should be independent at all, not the partisan views of the SNP on the institutions, laws and currency that an independent Scotland might adopt.

The basis of Mr Swinney’s misleading claim is paragraph 30 of the Edinburgh Agreement of October 2012. It is worth recalling what this Agreement is and why we have it. UK Governments since at least the 1980s have recognised that were the people of Scotland clearly to demonstrate that it was their settled will that Scotland should leave the UK and become an independent state, the rest of the UK would not stand in the way. UK Government policy is that they do not want Scotland to leave, but that they respect the fact that it is the right of the people of Scotland to make the decision.

This is not to be taken for granted (although it routinely is). The Canadian Government made no such concession to Quebec in the 1980 or 1995 referendums there. And, as I understand it, Spain has made no such concession in respect of Catalonia.

When the SNP won their historic majority in the 2011 Scottish parliamentary elections, the reaction of the UK Government, consistently with what I have just said, was to facilitate and not to obstruct the independence referendum that the SNP had promised in their manifesto. But the UK knew there was a big problem. The SNP had won a majority at Holyrood, but Holyrood lacked the power to legislate for a referendum on this topic. Had the UK wanted to obstruct the referendum, it would have sat back and done nothing. Mr Salmond would have legislated for his referendum and that legislation would then have been challenged and, in my opinion, quashed in the courts. But the UK, to its immense credit, did not want to obstruct the referendum: it wanted to find a way of making it happen and of making it happen lawfully. At first the SNP kicked up an almighty fuss that UK boots were stomping all over a vote that should be “made in Scotland” but, having thrown their toys out of the pram, wiser heads prevailed and the Scottish Ministers came to see that the UK was right. A lawful referendum would require the legal support of the UK Government in the form of something which, technically, is known as a section 30 Order. The toys were discreetly gathered in again, and talk of “boots” and “stomping” was replaced by the language of the Edinburgh Agreement.

The Edinburgh Agreement is the political deal that was struck by the two Governments in order that the section 30 Order could be made. Without the Edinburgh Agreement there would have been no section 30 Order. Without the section 30 Order there would have been no legal authority for Holyrood to legislate for the independence referendum. Without legal authority the referendum would have been unlawful and, as such, liable to be quashed in the courts.

So what does the Edinburgh Agreement actually say about “respecting” the “outcome”? The relevant provision is paragraph 30 of the Agreement. In full, this paragraph states as follows:

The UK and Scottish Governments are committed, through the Memorandum of Understanding between them and others, to working together on matters of mutual interest and to the principles of good communication and mutual respect. The two governments have reached this agreement in that spirit. They look forward to a referendum that is legal and fair producing a decisive and respected outcome. The two governments are committed to continue to work together constructively in the light of the outcome, whatever it is, in the best interests of the people of Scotland and of the rest of the United Kingdom.

Notably, this paragraph commits the UK Government to nothing which the Scottish Government is not also committed to: both governments must respect the outcome of the referendum as decisive, whatever that outcome is. A 51% to 49% win for No must therefore be respected as decisive every bit as much as a 51% to 49% win for Yes would be. If Yes win by a single percentage point, Scotland will be independent and the Union will be no more. There will be no going back. Likewise, if No win even by the tiniest of margins, the Scottish Government must respect this as a decisive outcome and must work constructively with the UK Government in the best interests of Scotland and the rest of the UK alike.

If there is a Yes vote, paragraph 30 of the Edinburgh Agreement effectively commits both governments to negotiate and to do so in good faith. But — and this is the key point which has been missed by Mr Swinney as well as by many of his supporters — while the Scottish Government would negotiate on behalf of the people of Scotland, the UK Government would negotiate on behalf of the rest of the UK. It would “sign up to” only that which could be shown to be in the best interests of the people of the rest of the UK. This is as true of currency union as it is of any other aspect of the independence negotiations that would follow any Yes vote. The UK Government would close the border between Scotland and England if, in its view, that were in the best interests of the rest of the UK. Scotland’s interests would be a matter for the Scottish Government exclusively. Likewise, the UK Government would enter into institution-sharing arrangements with the Scottish Government only if, in their view, this was in the best interests of the rest of the UK. Just because the Scottish Ministers want to share UK institutions such as Sterling, DVLA, aspects of the welfare system, and so forth, is no reason at all why the UK should “sign up to” such arrangements.

The UK is bound to negotiate: for sure. And, I would add, the UK is bound to negotiate in good faith. But, in the event of a Yes vote, the UK would be bound to negotiate in the interests of the rest of the UK and in those interests alone.

In the event of independence there will be no currency union with the UK unless and until that can manifestly be shown to be in the English, Welsh and Northern Irish national interest. And, the UK position is clear: this is not going to happen without the sort of fiscal pact that a proud and stubborn Nationalist like Mr Swinney would never sign up to.

So, we ask again, what is Plan B?