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?

 

Anticipating the White Paper

This is a peculiar moment in Scottish politics, and it’s very un-Scottish. We have known for more than a year that there would be an Independence White Paper, in which the Scottish Government would set out the detail of its plans for independence. We have known for months that it would be published in the autumn of this year, and we have known since the SNP’s conference in October that it will be published on 26 November. But no-one, it seems, knows what is in the White Paper or even what sort of document it’s going to be. Rumours abound that it is 500, 600, even 900 pages long.

Secrecy dominates the process. This is policy-making by a closed-circle elite and, as such, it marks an unwelcome break with Scotland’s recent past. The process in the 1990s by which Scotland made plain its demand for home rule was remarkably transparent. The Scottish Constitutional Convention was as open a body as could be imagined. It was all-inclusive, owned by no political party, and proceeded by consensus.

This style of constitutional policy-making has gone on to characterise the whole of the devolution era. The Calman Commission, appointed in 2008 to review Scottish devolution, conducted its business in the open, holding meetings all over the country, conducting more than 50 public evidence sessions and placing hundreds of papers online for all to read. Like the Scottish Constitutional Convention, it was a multi-party affair, in which politicians worked side by side with experts drawn from the professions and Scottish civil society.

The burden which the White Paper is expected to carry is heavy indeed. The Scottish Government have made no effort to downplay expectations. It is the White Paper that will explain how pensions will be funded in an independent Scotland. It is the White Paper that will tell us which UK services the Scottish Government proposes to share after independence. And it is the White Paper that will outline the nature, size, scale and costs of the new defence and security arrangements that an independent Scotland will need in order to keep its people safe.

But, as commentators on both sides of the argument have come to recognise, there are some matters that the White Paper cannot resolve. Whether an independent Scotland would be able to join a currency union with the rest of the UK, for example, is a matter that will depend on difficult, detailed and technical negotiations with the Treasury and the Bank of England.

Indeed, it is a striking feature of the SNP’s plans for independence that much of Scotland’s future would depend on negotiations such as these. Scotland, we have learned, would seek to negotiate membership of NATO. And we know, of course, that Scotland would seek to negotiate membership also of the European Union.

No-one should under-estimate how difficult these negotiations would be. I’m not for a moment suggesting that Scotland could not negotiate these matters successfully: of course we could. But the process would not be easy and the outcomes cannot be guaranteed. We know that the nuclear question poses real difficulties vis-à-vis NATO. And we know that the terms of Scotland’s membership of the EU would be strongly contested – would we have to adopt the Euro as our currency? Would we have to join the Schengen free movement area, meaning that the rest of the UK would have no choice but to close the border between Scotland and England? I’m astonished that there has so far been so little attention devoted to this question.

One theme of the White Paper is therefore likely to be that there is much about independence which cannot be known in advance. We cannot know for sure what the currency will be. We cannot know for sure what will happen as regards NATO and Trident. And while we can be confident, in my opinion, that Scotland will accede to membership of the EU we cannot know what the terms of accession would be.

Those who vote Yes at next year’s referendum will therefore – and inevitably – be voting for the unknown. It did not need to be this way. Were the Scottish Government going into this referendum with a clear policy that Scotland would have her own currency, or would not seek to join NATO, there would be much less uncertainty about what any Yes vote would mean. Likewise, had the SNP sought to prepare the Independence White Paper in the open rather than strictly behind closed doors, we would have had a much richer national debate about the meaning of independence.

Despite all the uncertainty, however, this is not a suck-it-and-see referendum. There is no prospect that we could vote Yes in September, negotiate for a bit, change our minds because it’s not all going our way, and come running back to the Union. Yes means Yes. Whatever that turns out to mean.

Lessons from Wales

Last week’s news from Wales was doubly important for those of us who advocate that Scotland should vote No to independence and Yes to devolution next September.

Home rule and fiscal responsibility

One of the Nationalists’ most devious foxes was shot, when David Cameron’s Tory-led government stood alongside Labour’s First Minister of Wales to agree a package of fiscal devolution for Wales. One of the Prime Minister’s most significant achievements as leader of his party is to have buried the Conservatives’ historic opposition to devolution. Mr Cameron is a keen and committed home ruler. In the Scotland Act 2012 his government delivered further devolution for Scotland. Last week his government followed suit for Wales.

It was little noticed given the emotion of the occasion, but in his interview on the BBC Radio 4 Today programme on the day of Margaret Thatcher’s funeral earlier this year, Mr Cameron explained something of the ways in which his party has moved on from the iron lady’s heyday in the 1980s. “Devolving power … to the nations of our United Kingdom” was identified as a principal change, and one he is rightly proud of. With a Welsh first name and a Scottish surname perhaps it is no surprise that David Cameron is a genuine Unionist rather than an English politician of the old school, unable to understand the basic difference between England and Britain.

It was Labour’s achievement, eagerly supported by the Liberal Democrats in the 1990s, to show how the old, London-centric, unitary account of the British constitution was no longer apt. While the consequences for the centre, in terms of finance and representation (the Barnett formula and the West Lothian Question) remain to be fully worked out, under the Prime Minister’s leadership, and once again with the eager support of the Lib Dems, all three Unionist parties are now wedded not only to the theory but also to the practice of genuine home rule for the nations of the Union. As I have said before, to be a modern-day Unionist is to be a devolutionist.

But devolution in both Scotland and Wales remains work-in-progress. The Scotland Act 2012, which will come fully into force only in 2016 (and, of course, only if we vote No to independence next year), begins the task of bringing fiscal responsibility to Holyrood, to sit alongside the Scottish Parliament’s already vast spending powers. Such was the key recommendation of the Calman Commission; and Calman’s Welsh equivalent, the Silk Report, recommended a year ago that a similar degree of fiscal responsibility should be conferred in Wales. What happened last week was that the UK Government agreed.

There are, however, two differences of note between what we’ll have in Scotland from 2016 and the position that is developing in Wales. The first is that Cardiff Bay will obtain powers over income tax only if this is agreed in a Welsh referendum. There was no referendum in Scotland before the equivalent powers were conferred in the 2012 Scotland Act. This may have been because, unlike in Wales, there was a tax question in the original Scottish referendum in 1997. None the less, it was a mistake on the part of the Unionist parties not to have a referendum on the powers contained in the Scotland Act 2012. It was a mistake because, without such a referendum, ordinary people in Scotland know next to nothing about what is actually in the 2012 Act. It is unloved, misunderstood, overlooked and ignored: this would not have been the case had there been a referendum here.

The second difference is technical. Under the Scotland Act 2012 the Scottish Parliament will have the power to set the Scottish rate of income tax, but whatever rate it adopts will have to be the same across all tax bands. At the moment the main bands are 20% and 40%. Under the Scotland Act the UK Government will levy income tax for Scottish taxpayers at 10% and 30%. It will then be for the Scottish Parliament to decide whether it wishes to make up the whole of the difference, less than the whole of the difference, or more than the whole of the difference. But, whatever it decides, its decision will have to be the same across all bands. So the result could be that in Scotland the main bands are 22% and 42%, or 19% and 39%, but it could not be that the bands become 19% and 42%: what goes for lower band taxpayers must also go for higher band taxpayers. By contrast, the Silk report recommended that this “lockstep”, as it is called, should not apply in Wales. If accepted, this would mean that the National Assembly would have more flexible fiscal powers than those which will be available to Holyrood after 2016.

We do not yet know the details of the way in which Scottish devolution will develop further after we have voted No to independence, but last week’s events in Cardiff surely confirm that develop it will. SNP scaremongering that a No vote will mean a reduction in (or even the abolition of) Holyrood’s powers have been exposed for the crude lies they are.

Constitutional process

Also important, however, about last week’s news from Wales is the fact that it reminds us as Unionists that Scotland’s relationship with the rest of the UK is not the only element of the Union. Scottish political life can be terribly parochial, as if the only centres of power that matter are Edinburgh and London. A truly Unionist vision of Scotland’s place in the UK after a No vote will take into account not only the English but also Wales and Northern Ireland. This is a challenge for Unionists, but also an opportunity: if approached properly it will help Scots move on from the navel-gazing of the independence referendum to consider with a little more maturity the future of the whole of our country.

To those of us who consider that constitutional debate should be a multi-party affair, rather than a one-man band, Wales again has something valuable to teach Scotland. Further devolution was delivered last week because all the Unionist parties agreed that that it was the right thing to do. There was no pressure from the threat of separatists. This was not designed to kill nationalism dead. It was done because it is believed in. It strengthens the Union. It’s the future for Wales, and after a No vote next year it will be the future for Scotland, too.

For a summary of the issues discussed here, see my very short analysis published in the Scotland edition of The Times on Saturday 2 November. 

Defence, Security and Scotland Analysis

The United Kingdom Government is in the process of publishing a long series of papers analysing all manner of aspects of Scottish independence. Something like 12 or 13 papers are planned for the series. To date, seven have been published. Some of these have been more important than others. It was the first Scotland Analysis Paper that set out what Scottish independence would mean legally (the answer is that Scotland would become a new State and that the rest of the UK would continue as the “continuator” State: this is important because it has implications for (e.g.) EU membership, for the distribution of assets and liabilities, including the national debt, and other matters). It was the second Scotland Analysis Paper that set out what the currency options would be for an independent Scotland, where it was explained that just because the SNP claim that there would be a currency union with the rest of the UK does not necessarily mean that there will in fact by any such currency union. For the rest of the UK to agree to such a deal, there would have to be a fiscal pact between the two countries (in order to avoid the sort of chaos we see in the Eurozone) and this would make Scotland more dependent on London, not independent of it.

The two most recent Scotland Analysis Papers have focused on Defence and Security. I’ve read them both, as I have all the papers in the series. Neither is as important as were either of the first two papers in the series, and neither has had nor will have anything close to the same impact on the “indyref” debate. But both are excellent in achieving exactly what they set out to do. Not that you’d know this from the way they have been spun by Scotland’s commentariat.

This is because the nature and purpose of the Scotland Analysis Papers has been misunderstood. It is not the purpose of these papers to seek to persuade Scotland’s voters to reject independence in next year’s referendum. Rather, it is the purpose of the papers to explain and to analyse (often in great detail) what the issues are which ought to inform how we vote next year. The point of the papers is not to furnish us with reasons to vote No: their point is to draw attention to the huge and complex range of issues which will need to be explained in order for anyone to vote in an informed way.

Of course, the papers are prepared and published under the auspices of HM Government. And of course HM Government has a view on how it would like the referendum to be determined. But the analysis papers are not advocating a No vote in the referendum. They should be read not as a list of reasons to vote No, but as a source of questions to be asked about what is actually at stake.

This matters for two reasons. At the constitutional or legal level it matters because this is what the independent regulator of the referendum (the Electoral Commission) called for. In its formal advice on the referendum, published earlier this year, the Electoral Commission found that there was significant demand among voters for factual information about what independence would mean. The Commission called on both the Scottish and the UK Governments to publish such information. This is what the Scotland Analysis Papers do: they are the UK Government’s means of delivering what the Electoral Commission (quite rightly) demanded. But at the political level it matters also because one of the strategies adopted by the SNP and Yes Scotland is to do as if voting for independence won’t make that much difference to anything. People will still go out to work. Children will still go out to play. The rain will still fall. All that sort of thing. It suits the SNP and Yes Scotland to play this game because they know they can win only by appealing to the middle ground, by not frightening the horses, and by underplaying the huge significance that tearing up a 300-year-old Union and becoming a new State would actually have. Thus, a critical function of the Scotland Analysis Papers is to set out dispassionately and in detail exactly what any Yes vote would entail — for its consequences, contrary to the impression the SNP seeks to make, would be enormous.

It may well be that few voters are all that bothered about what independence would mean for Scotland’s defence and national security. Questions of identity and, of course, of economic well-being (including economic security) loom much larger in most voters’ minds. But this does not mean that defence and national security are unimportant and, in any case, it is the purpose of the Scotland Analysis Papers not to win votes but to inform voters. What is and what is not electorally salient changes with the seasons. I remember a time when defence policy did influence the outcome of general elections (in the 1980s) and the only reason why questions of national security are not electorally salient is because we take so much of our collective security for granted. We are hugely privileged to be able to do so (many people in the world cannot) and we owe this privilege to the police and to the security and secret intelligence services. Because so much of what they do is secret, the security and intelligence services are never able to be given credit for all they do to keep us safe.

What the defence and security papers do is to set out something of the ways in which the United Kingdom currently defends and secures Scotland and her people: the money that is spent, the training that is given, the employment that ensues, and the opportunities that accrue in terms of regional and indeed global reach, of scale, capability and influence. The papers contrast what currently happens in other small European countries, similar in population size to Scotland, and explains the costs of defence and security in those countries.

In contrast, we know next to nothing of what the Scottish Government would propose by way of detailed strategies for the defence and security of an independent Scotland. This is yet another burden that will have to be carried by the forthcoming Independence White Paper, it seems.

The conclusions drawn by the defence and security papers published by the UK Government are stark. Scotland is both safer and more secure as part of the UK than it could be as an independent State. Defence and defence-related employment in Scotland would inevitably reduce upon independence. At the same time, costs would rise, at least if Scotland wanted defence forces comparable with those found in such places as Denmark, Norway and Finland (for example). The capabilities of a newly established Scottish security and intelligence service could never match those enjoyed by the UK. The UK’s global partners in intelligence-sharing could not be guaranteed to share their secrets with an untested Scottish security service, leaving Scots more exposed to international risks (including from cybercrime). Defence assets located in Scotland which are integral to the defence of the UK as a whole would not pass to an independent Scotland: as part of a UK institution they would in international law continue as a public institution of the rest of the UK. An short, “an independent Scottish state could not come close to replicating the level of defence and security that comes from its place within the UK” (Defence paper, p. 14). Likewise, “the creation of an independent Scottish state will, … without proper planning and investment lead to a reduction in the capability of its government to protect Scottish interests, infrastructure and people” (Security paper, p. 19).

Alex Massie, whose commentary on Scottish politics is normally both insightful and well-informed, is not alone in misunderstanding the reasons why these conclusions have been reached in the damning but misguided critique he posted about them on his Spectator blog earlier this week. He described them as “drivel” and, “worse … exasperating drivel”. If it had been a sound-bite from a campaign speech that “we must vote No or risk our collective security”, Massie would have a point. But, as I have shown, this is not at all their purpose. The point is not that we “must vote No or else …”. The point is that we would be well advised not to vote Yes unless and until we have heard something compelling — something convincing — from the SNP and from Yes Scotland as to how their policy of independence would not risk Scotland’s defence or collective security. It is to remind us what is at stake. It is to insist that there is much more at stake than the SNP would have us believe. And it is to seek to inform voters about the questions which should be asked — and answered — before anyone casts their vote, whichever way they intend to cast it. “Vote No or else …” would be scaremongering, and the voters would see straight through it, but that is not what is going on here. What is happening is that difficult, vital questions are being asked of the SNP’s pet project, questions to which as yet there are no answers.