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?

 

4 thoughts on “The Obligations of the UK and the Misrepresentations of the SNP

  1. A well written post. In Italy we are following the news on this issue. I had heard the discussions on the currency and the veiled threat regarding the ship yards, but I had never considered all the other institutions that Scotland would either have to negotiate to keep or to create from new, ie DVLA.

  2. Pingback: The SNP’s Currency Nightmare | Notes from North Britain

  3. If there is a ‘No’ vote there will be much crying in the halls of the SNP of cheating, bullying and misrepresentation. They will never let the small thing like a popular vote put them off their dream. They will be back in 10 years wanting another go..

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