Influential UK and EU politicians have waded into the Scottish independence debate recently, heaping uncertainty onto the crucial issues of currency union, EU membership, and the provision for social security and public services. These interventions present important challenges for the SNP, and the Scottish public will require satisfactory answers to these questions if they are to vote ‘Yes’, writes Mark Shaw.
Over the past several weeks, the terms of debate over an independent Scotland have been changed by a series of high-profile interventions by British and European political figures. These interventions have served to highlight the challenges faced by separatist movements, and the difficult task of negotiating the problems created by the breakup of an EU member state. Three key areas have emerged as particularly important; currency union, membership of the EU, and continuing provision for social security and public services. While the outcome of these challenges to Alex Salmond’s plan for an independent Scotland remains to be seen, they have highlighted three crucial policy areas separatist movements, and the ‘Yes’ campaign in Scotland in particular, must tackle in order to develop comprehensive cases for independence. Failure to do so in this case leaves a great deal of uncertainty over the shape of an independent Scotland.
The first intervention into the debate came at the end of January when Mark Carney, Governor of the Bank of England, made clear that Scotland would have to accept that any currency union with the continuing UK ‘requires some ceding of national sovereignty’. Scotland is placed in a uniquely difficult position; unlike other potential separatist regions within the EU, such as Catalonia, it cannot claim prior membership of the euro. Any agreement on currency union with the continuing UK would have to be negotiated between the UK and Scottish Governments. The Conservatives, Labour, and Liberal Democrats ruled out this possibility in a second, remarkable, intervention into the debate on 13 February. Chancellor of the Exchequer George Osborne declared that the pound was not ‘an asset to be divided up’, and the UK would not entertain the notion of a currency union. In ruling out this possibility, Osborne compounded Mark Carney’s warning on sovereignty while shifting the terms of the debate.
Independence movements require economic credibility in order to persuade undecided voters to opt for independence. Indeed, data from the Scottish Social Attitudes Survey suggest that 52% of Scots would support independence if they were £500 a year better off in an independent Scotland, while 72% would oppose it if they were £500 a year worse off. The issue of currency is therefore a crucial one for nationalists to address, and this is especially the case in Scotland. While the SNP have, in the past, supported membership of the euro, their policy throughout the referendum campaign has been to keep the pound. On this issue, the Scottish public is strongly in agreement. A Panelbase poll conducted in the days following Carney’s remarks on currency union showed that 58% of voters favoured keeping sterling in some form; only 4% favoured euro membership, and 11% supported the creation of a new Scottish currency. In order to win the support of undecided voters, credibility of economic and fiscal proposals seems to be vital.
The second issue facing the ‘Yes’ campaign is membership of the EU. In a surprising intervention on 16 February, Jose Manuel Barroso declared on the Andrew Marr Show that it would be ‘very difficult, if not impossible’ for Scotland to reach the required agreement of all EU states for membership. Barroso’s comments represented a startling external intercession into what has hitherto been largely a national debate. They also highlighted the difficultly faced by separatist movements in EU states; there is a great deal of uncertainly over whether a newly independent region can ‘inherit’ the rights to membership of the EU, and in other cases the Eurozone, from its former ‘parent’ state. States that face similar calls for independence from regions are likely to resist the prospect of automatic membership. Indeed, comments from Spanish Prime Minister Mariano Rajoy in November 2013 indicated his belief that Scotland would face ‘an uncertain future’ in which it would ‘remain out of the EU’. In any case, as Merijn Chamon and Guillaume Van der Loo have argued elsewhere on this blog, it is likely that there would be a gap between independence and the conclusion of accession negotiations for any newly independent region.
While the issue of membership of the EU for an independent Scotland remains to be settled, voters are strongly in favour of continuing Scottish membership. Although Euroscepticism has increased in Scotland, as in the rest of the UK, 68% of people in Scotland feel that Scotland should either ‘definitely’ or ‘probably’ be a member of the European Union. A complicating factor here is the prospect of a referendum in the UK on EU membership, promised by David Cameron. Voters in Scotland are faced with a choice between an uncertain path to EU membership outside of the UK, and the possibility of remaining within a United Kingdom that may choose to withdraw from the EU.
Finally, former Prime Minister Gordon Brown called attention to a third major issue faced by separatist movements, namely the arrangements for the division of assets and the continuation of services. Brown’s speech highlighted uncertainty over the provisions for continuing payment of benefits, particularly pensions, after independence. Brown argued that separation would mean that ‘the British pension stops, the national insurance fund that you’re paying into is broken up’. Brown’s argument was that an independent Scotland would not have the security of the much larger British pensions system to ensure payments at current levels. The way in which the provision of services, especially pensions, is divided is a question that must be addressed by nationalist groups. In the case of Scotland the shape of any division of a range of assets and services, from pensions to the BBC, remains an unknown quantity. Recent polling indicates that 57% of Scottish voters would like to see the Scottish Parliament make decisions about welfare benefits, although this was down from 64% in 2012. However, voters are unsure about the potential benefits of any change in welfare provision. In the 2013 Scottish Social Attitudes Survey, 22% of respondents believed that they would be better off in old age in an independent Scotland, compared to 13% who thought they would be worse off; the rest thought it would make no difference or were undecided. In public service provision, the same survey reported that 32% thought they would be better off, while 30% thought they would be worse off with independence.
The overriding theme linking these three debates – on currency, EU membership, and service provision – is uncertainty. Without the benefit of any agreement on how assets and liabilities would be divided, with conflicting opinion on the possibility of continued EU membership, and with the ruling out of a formal currency union, the SNP face three key challenges in the months ahead. Satisfactory answers to the questions surrounding these challenges, or at least the most pressing of these questions, will be needed to win over a Scottish public that is deeply divided over the case for independence.
Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.
About the Author
Mark Shaw is a PhD candidate at Durham University, where his ESRC-funded project on British policy toward the European Union is focused on the interaction between the media and policy.
Mark : An ideology is defined as “a politically determined statement to mask particular beliefs, or interest systems”
Statements by
-Osborne on currency
-Cameron on drawing Barroso to spout against iScotland in return for supporting his NATO application
-Brown; a former chancellor who will loose his seat in 2016
Interest system
-All the above loose either position or credibility in an iScotland.
Come on Mark, your article didn’t fool me.
SCOTLAND HAS NO LEGAL IN INTERNATIONAL LAW ANY OBLIGATION TO PAY THE DEBT THAT’S WHY THE UK GUARANTEED THE DEBT TO THE MONEY MARKETS – OOSBORNE IS WEAK HERE.
THIS IS THE SECOND WHY OSBORNE IS IN A WEAK POSITION OVER DEBT:
With Osborne’s “feckless” political strategy still dominating the political press, Professor Christine Bell of Edinburgh University reflects on just why the UK u-turned at this point in the referendum campaign. “While recent poll results may have triggered the intervention, the u-turn from the governments ‘no pre-negotiation’ stance may also be related to the shadow of international law that places the debt issue as potentially the biggest card in the Scotland’s post-referendum negotiation hand (as the Scottish government know and so have emphasised)”.
Professor Bell explains that, “legally under international law the position is clear: if the remainder UK keeps the name and status of the UK under international law, it keeps its liabilities for the debt. The UK took out the debt, and legally it owes the money. Scotland cannot therefore ‘default’
Although I would disagree with Professor Bell in that Scotland was part of the UK whilst the debt was accumulated it is silly to claim Scotland has no responsibility for the debt on separation, of course it does.
You also did not fully quote professor Bell she actually said ” if the remainder UK keeps the name and status of the UK under international law, it keeps its liabilities for the debt. The UK took out the debt, and legally it owes the money. Scotland cannot therefore ‘default’. It can be argued that international law does, however, contemplate that on dividing, the two resulting states share out assets and liabilities equitably. “
I did not fully quote as Scotland has overpaid our share of the debt.
THE DEBT ISSUE:
Scotlands percapita share is 8.6% of £1.4tn = £120.4bn.
On debt, Business for Scotland’s analysis of Scotland’s financial position is based on official government data and has been verified by one of the country’s leading independent economic brains.
It proves two key things. First, that every year for the past 32 years – the period covered by the Government Expenditure and Revenue Scotland (GERS) report – has included a deduction from Scotland’s block grant equivalent to our population percentage share of UK debt. Over that period, that amounted to £64.1 billion.
At this stage Scotland is culpable for £120.4bn – £64.1bn = £56.3bn
Second, during that time, had Scotland been an independent country with its geographic share of oil revenues established under international law (as would be the case under independence which includes £2 trillion untapped oil and gas in the Clyde and Rockall, and £2 trillion in the North Sea and Moray) Scotland’s borrowing would have been ZERO..
Ipso facto, Scotland has paid £64.1bn servicing debts it did not need. Bang goes the great unionist myth. Peter Jones claims that my analysis does not consider the interest on debt prior to 1980, but in the footnote of the study he was critiquing it plainly states that this was factored in (inter article below).
Further, if Scotland inherits a population percentage share of UK debt, that would be 8.6 per cent, but if we stay in the UK and continue to generate 9.9 per cent of UK revenues then we effectively overpay for the debt.
Scotland more than pays its own way in the UK. We contribute 9.9% of UK taxes but get 9.3% of UK spending. Scotland was in a stronger financial position than the rest of the UK to the tune of £824 per person. If Scotland were an independent country this lost money would stay in Scotland.
At this stage, we could call it just £50bn, and call it quits with Westminster, since for the last 30 years year on year the gave us a £30bn blockgrant under Barnett Formula mentioned above from our £56.9bn taxes the difference being £29.9bn (max).
£29.9bn * 30 years = £897bn.
£879bn Westminster have secured from Scotlands taxes – so we could actually call it quits, fair and square as this would be for all Scotlands obligation and discharge the debt agreed above £50bn post YES.
IT WOULD TAKE SCOTLAND ONLY 5 YEARS TO PAY THIS.
SCOTLANDS CREDIT RATING GOES SKY HIGH:
-NO mortgage rate hikes
-NO Inflation hikes in line with Mark Carney rates
-NO sky high borrowing rates
THE SCOTTISH GOVERNMENT WOULD USE THIS TO EFFECTIVELY SEAL A YES VOTE, AND CONFIRM THE CUREENCY QUESTION.
The No Campaign does not like this analysis because it is powerful, solid and the data is correct.
It is keen to sustain the great financial con trick because it fits very well with its relentless scaremongering and negativity – but it does not stand up to intelligent scrutiny
Sorry Rob you did not fully quote because Professor Bell did not say or mean that which you claim.
On the rest of you comment Scotland has done nothing of the kind because Scotland as an independent state has not existed since 1707.
To be blunt the whole idea that Scotland has done this or done that is gibberish, it is not Scotland’s oil it is British or UK Oil. Scotland has been fully part of the UK, it has sent MPs to the UK parliament sometimes they have actually chosen and controlled the UK government with Scots filling all the major posts in our government, that is as it should be, but name another part of the UK which has on its own had that much effect on our nations government.
Mark, this really what’s going on with currency:
THIS IS WHAT’S REALLY GOING ON WITH SCOTLANDS DEBT AND CURRENCY NEGOTIATIONS:
The UK government up until now has clearly stated that it is not going to ‘pre-negotiate’ the break up of the Union. Yet very recently apparently the UK Chancellor George Osborne, along with support from the Labour party, is to rule out in advance a currency union.
The UK government are in a very very weak position over debt, and George Osborne went straight with to the jugular – currency.
What do you expect to pay the debt with?
In response the Scottish government has raised that they have a card to play: a possible refusal to take on a share of the UK’s national debt.
So what is going on?
Take a quick read of this to find out:
http://www.futureukandscotland.ac.uk/blog/currency-reflections-legal-issues
You’ll see that Westminster are frightened.
George Osborne has no authority over BoE policy, Mark.
THE BoE is independent.
The BoE was nationalised in 1947, and was made independent for Monterey Policy in 1997 to stop encroaching EU influence.
This independence meant that the assets controlled by the BoE became owned by the BoE as the BoE was responsible for Monetary Policy, including currency ownership and quantitative easing.
Mr Salmond was speaking directly to Mark Carney as he is in charge if Monetary Policy, whose economic plan will fail for the rUK, if a crash comes, and Scotland does not have a LENDER OF LAST resort.
Monetary policy in the UK usually operates through the price at which money is lent – the interest rate. In March 2009 the MPC announced that in addition to setting Bank Rate, it would start to inject money directly into the economy by purchasing financial assets – often known as quantitative easing.
The BoE can do this as the BoE own the currency.
Scotlands lender of last resort is to be the BANK OF ENGLAND, and the use of the currency which is owned by the Bank.
The reason the BoE could conduct quantitative easing was that the BOE own the currency, and we own the BoE share of 8.6% as the BoE is nationalised.
THAT’S how Scotland will have the pound as plan A, and the BoE will able to control monetary policy and influence economic growth and control inflation in an independent Scotland and rUK.
The Bank of England is not independent it is controlled by the government which sets its goals the treasury and parliament can at any time remove the freedom for the bank to operate on monetary policy, that which government gives government can remove.
A currency Union is a political matter going past the date of independence that has nothing to do with the Bank of England. Scotland’s lender of last resort will not be the Bank of England because there is no agreement on a currency union.
There is no dispute that Scotland owns part of the Bank but that is an asset to be divided on independence, unless agreed otherwise all sharing ceases at that point, as all parties involved on the UK side have dismissed a currency union that is final.
While the bank has not been subject to parliamentary intervention, my point about Scotland owning the BoE jointly is valid. I have urged the SNP to make contact with the EU Court to underpinn the right to BoE, and with it assets and liabilities. Osborne will be proven to silly in his “abstract” brinksmanship position in the months to come.
CURRENCY UNION WILL BE MAINTAINED, BUT WHY….?
Osborne can’t force a plan B on Scotland as the currency is not only joint owned but in the best monetary and fiscal interests of Westminster.
His lip service to the NO campaign only serves to expose the desperate desire to maintain the POLITICAL union. With that they have the continued authority to cover up, conceal, and gag people, and lie about Scotland, Wales, and Northern Ireland’s contribution to Westminsters Treasuary.
The truth is that Sterling hasn’t crashed because it still, presently, benefits from Scottish exports contributing to the UK’s overall balance of payments.
Upon Scottish indy the UK can agree to a Sterling Zone currency union or it can reject it. If it rejects a Sterling Zone currency union then Scotland’s exports will no longer contribute to the rUK’s balance of payments, resulting in the rUK BoP deficit doubling from around 5% to around 10% of GDP. An overnight doubling of the rUK’s BoP deficit would be catastrophic for sterling and, in all likelihood there would be a run on the pound as the money markets attempt to dump Sterling.
To mitigate this the rUK Treasury will hike interest rates in an attempt to stabilise the currency but it will fail just as it failed during the infamous Black Wednesday. In short, the pound needs Scottish exports (Oil/Gas, fisheries, whisky etc) to help keep down the BoP deficit.
Also, after indy Scotland will negotiate its fair share of the UK debt (minus assets). This debt will be repaid to the UK Treasury, not to the money markets. It is inconceivable that the rUK would wish that debt to be paid back in anything other than the pound Sterling thereby, ipso facto, bringing about a currency union.
Finally, why would the rUK Government wish to inflict transactional costs for businesses in rUK to do business with its second biggest trading partner when there is a viable way to avoid such additional overheads?
The rUK can, of course, reject a Sterling Zone. If it does that then it will be blowing two big holes in its feet. I suspect, however, upon a YES result in the indy referendum common sense will prevail and a pragmatic solution will be sought.
It’s too hard to believe that the UK chancellor of the exchequer seriously asking us to believe that he is contemplating damaging the entire UK economy following a yes vote? Does he think English company bosses will accept the millions of pounds of extra costs that tariffs would entail, not to mention the VERY SHARP downward tilt in the balance of payments without oil receipts and how the money markets, as said, would react?
There are about 400,000 English people resident in Scotland who will be livid that a UK government has just made it harder for them to travel back and forth to see their families, and all because of a fit of pique that, in a democratic vote, the Scots voted to run their own affairs.
Scotland is England’s second biggest trading partner; Osborne choose to ignore this vital fact pertaining to England’s financial health.
Scottish oil revenues, businesses, institutions and ordinary workers have worked hard for sterling and contributed to its strength in this currency Union that benefits the English economy very greatly, as it stoped interest rate hikes on mortgages on both sides of the Border by the BoE.
As Osborne and Carney won’t want Scotland to take a plan B as this also means substantial transaction costs, on £60bn worth of trade totalling £700m, this pragmatic solution is a Sterling Zone. It’s every bit as much of a benefit to the rUK as it will be to indy Scotland.
Sorry Rob, all parties who can form a government after the elections have already stated there will be no currency union, the Treasury report says there is no legal authority that can force the UK to join a currency union and that assertions (made in the white paper) are premised on a misunderstanding of the nature of a system of currency and a flawed analysis of the legal position of the UK pound and the Bank of England. Therefore your arguments cut no ice.
I can understand the imperative for the SNP to claim vote yes and there will be no change, we will still have the financial support of the UK and will still be in the EU, but such arguments are built on sand.
I do wonder if the SNP understand the meaning of independence you want to have a currency union even though that will entail giving up your fiscal control, you want to remain in the EU even though 70% of our laws come from there, what part of independence and democracy is going to be left for the Scottish people.
The SNP are the ones who need to paint their vision for an independent Scotland, they should do so without needing the agreement of other parties, other states or claiming it will be alright on the night.
An interesting piece, Mark. You may wish to acquaint yourself with Professor Michael Keating’s evaluation of Manuel Barroso’s comments: http://www.futureukandscotland.ac.uk/blog/scottish-independence-and-eu. Keating is not the first (and I doubt he will be the last) informed commentator to thoroughly rebut Barroso’s line (see, for example, the comments of former French EC Commissioner). Professor Catherine Schenk’s 2013 evaluation of currency options for an independent Scotland is also worth perusing: http://policyscotland.gla.ac.uk/catherine-schenk-on-currency-in-an-independent-scotland/
For clarification, the ‘yes’ campaign is not simply an SNP platform but has wide civic and political support (trade unionists, third sector, business, as well as the Scottish Greens, Scottish Socialist Party…). For e.g. The STUC announced this week that a majority of trade unionists in Scotland canvassed favoured independence.
The onus in answering many of these questions also lies at Westminster’s door. In contrast, Scotland’s Future is a far more comprehensive response to questions raised.
We will dismantle each claim by Unionists, one by one.