Scottish Independence Vote Could Mean The End Of....

Described as Scotland's "biggest choice since 1707" (McLean et al, 2013, p. ix), the upcoming referendum on Scottish independence will provide a pivotal event for the current and future populations of Scotland as voters get the opportunity to decide whether or not they are to remain a part of Great Britain or become an independent nation. As McLean et al (2013) have referenced, 1707 was a year of major importance in Scottish history because it saw the passage of the Union with England Act by the Parliament of Scotland, thus legitimising the reciprocal Union with Scotland

In the two-year Scottish referendum campaign, Whitehall and Westminster have been in denial about the prospect of Scotland voting Yes to independence. Suddenly, as the opinion polls show it as a very real prospect, the London-based political establishment is anxiously thinking about the implications.

“The consequences, not just for England, but Wales and Northern Ireland, are frankly unimaginable,” one senior Whitehall official said today. This is not an obscure debate about more devolution: some MPs fear the peace process in Northern Ireland, or at least order on the streets, could be at risk, and that there could be new demands for a united Ireland. There would inevitably be calls for a stronger Welsh Assembly, more devolution to the English regions and even an English Parliament.

If Scots vote to walk out of the marriage, there is no guarantee of an amicable “velvet divorce”. Alex Salmond could afford to be conciliatory in victory. He would invite a vanquished Alistair Darling to join all-party talks to ensure a smooth transition to “independence day” in March 2016.

Yet an angry public mood in the rest of the UK, especially in England, could push the political parties into rejecting a friendly separation. Cabinet ministers already describe the SNP’stimetable as “completely unrealistic,” when there are complex issues like the Trident nuclear weapons base on the table. Speaking privately, they suspect that there would be trade-offs, and that Mr Salmond might ditch his “non-nuclear Scotland” policy in return for concessions in other areas.

The prospect of Scottish independence is riddled with paradoxes and uncertainties. The great uncertainties include the timing of the Scottish vote, what people will be asked to vote for and how they will exercise that vote. The paradoxes are many, including the notion that victory for the SNP could be very good news for the Conservative Party, at least in the short to medium term, despite the fact that Tory grassroots supporters (according to ConservativeHome) keep the union intact. It would also be a paradox if the coalition government pre-empted the SNP government and called its own referendum on independence, as has been suggested is under active consideration. Until recently it would have been unthinkable for the Conservative and unionist parties to have entertained such an idea.

I am not concerned here with arguing the pros and cons of Scottish independence, but it is worth spending a few moments considering the impact of a ‘yes’ vote on the main Westminster political parties. These have long maintained support for the union while acknowledging Scotland’s right to self-determination.

Much of the debate at grassroots level has so far been driven more by emotional or sentimental attachment to the union, or Scottish national identity, than by political self-interest. That is entirely understandable, but, since the outcome of a referendum – especially one for the full-blown version – remains uncertain, the parties need to consider how wholeheartedly they should continue to assert their position of scepticism.

The results of polling to date show that a referendum on ‘independence-lite’ or ‘devo-max’ would be more likely to succeed than a vote that would overturn the last 300 years of constitutional unity in its entirety, and which would create a completely separate state akin to the Republic of Ireland.

Therein lies the problem with much of the polling evidence so far. Politicians seize on any poll outcome that tells them what they want to hear, yet most simply ask about ‘independence’ as an abstract concept devoid of detail. There are also concerns about forecasting other variables, such as turnout: for instance, the reported 53 per cent opposed to independence in November 2011 (for the Scottish Daily Mail) was predicated on the basis of all but two per cent saying they would cast a vote. Such a turnout level would be unprecedented: it is a near-certainty that a higher proportion of the sample was not even registered to vote.

Notwithstanding last May’s SNP election victory, most polls over the past two years have indicated that more people would vote against independence than would vote in favour of it. However, ‘devo-max’ would be a different kettle of fish. Most referenda turn either on making the case for change (such as this May’s AV referendum) or on assuaging people’s fears. That is also, for instance, why an in/out referendum on EU membership would likely fail: voters dislike Britain’s relationship with the EU, but they are more fearful about the consequences of total withdrawal.
It is harder to assess the real outcome of a referendum without exploring all three options. Helpfully, this was done in a recent BBC poll that was heavily spun by all the major players involved. As the following table shows, it is as true to claim that just over one in four supports full independence as it is to say (as Alex Salmond, indeed, did) that more than six in ten back “real economic power for Scotland”.

	Scotland	England
Devo-max	33%	14%
Full independence	28%	24%
No change	29%	40%

On either independence model, a ‘yes’ vote would represent a dramatic new dawn in British politics, especially if Scotland were to raise and spend its own finances, since it would make it unthinkable for Scottish MPs to remain in Westminster. In such a situation the immediate consequences would be devastating for Labour. Scotland returns 59 MPs to Westminster (reducing to 52 after the 2013 boundary changes), of whom 41 are Labour. Without Scotland’s MPs in the 2010 Parliament, David Cameron would have won an overall majority of 42. An independent Scotland could make a Labour government in Westminster nigh-on impossible.

For the Conservatives, without the glue of competitive electoral politics it would be even harder to maintain unity. The Conservative Party is, of course, itself a coalition of interests, spanning One Nation and Thatcherite, eurosceptic and europhile, libertarian and authoritarian. The obvious result, even if not immediate, would probably be a split between right and left, perhaps with some UKIP supporters rejoining a right-leaning party taking in eurosceptics and Thatcherites.

This will, doubtless, also have significant implications for the Liberal Democrats, spanning as they do ideals from Orange Book to verging-on-Socialist. Again, the obvious outcome would either be for the Lib Dems to provide a home for ‘wet’ Tories, or for the Conservative Party to provide a home for those of the Lib Dems who could not join a rebranded Conservative Party, unless and until that party’s right wing has peeled off into a separate entity.

Between now and any referendum date, these skirmishes will continue hugely to influence politics in both Holyrood and Westminster. Labour faces the danger of being seen to side with Scotland’s deeply unpopular Conservatives – especially if they oppose ‘devo-max’ – which is quite possible if it entails removing Scottish Labour MPs from Westminster. The Lib Dems are already tainted by association with the Tories, while the SNP government must define its mission beyond independence if it is to avoid becoming surplus to requirements after the referendum.

Alex Salmond is, though, a very canny, adept politician. The bigger picture requires him to be careful about timing vis-à-vis economic recovery and the Westminster political agenda. It also means that other political priorities will need to be sacrificed. For instance, some suggest that if his party legalises same-sex marriage, that would lose twice the number of votes for independence that it will gain. But, if Salmond succeeds in achieving his life-long ambition, his legacy will be to have had a profound impact on politics throughout the whole of the United Kingdom – for my lifetime, and probably my children’s, too.

Andrew Hawkins is chairman of ComRes

Credit: Totalpolitics

Via - .Publications.parliament.uk
The Economic Implications for the United Kingdom of Scottish Independence

Chapter 1: Introduction

Why this report?

1.  In 2014, the people of Scotland will take a momentous decision. They will cast their vote in a referendum on their country's future. If they vote "Yes" to independence, the 300-year old Act of Union with the rest of the UK would lapse. After a period of negotiation, Scotland would emerge as an independent state. If they vote "no" a divisive issue in Scotland will be settled and it will continue its existence as part of the United Kingdom, with its own devolved government.

2.  The Scottish Government's view of the way forward after a "Yes" vote in 2014 is set out in "Scotland's Future: from the Referendum to Independence and a Written Constitution", published on 5 February 2013. It envisages that Scotland would become independent in March 2016. The deputy First Minister of Scotland calls it a first contribution to clarify the process that would follow a "Yes" vote and proposes to the UK Government "that we now engage in discussions on the process of the transition to independence in advance of the vote".[1]

3.  The British Government's approach is very different. It aims to clarify the issues before the referendum and, in the words of the Chief Secretary to the Treasury, "is undertaking a large programme of analysis to establish a robust body of evidence to inform the debate on Scotland's place in the United Kingdom".[2] But, as the Secretary of State for Scotland told us: "What we will not do is get into pre-negotiations."[3]

4.  The decision the Scots will have to make is not a simple one. It will have far-reaching constitutional, political and social, as well as economic, consequences. Nor will their verdict be confined in its effects to North of the Border. It will have important implications too for the rest of the UK which again will not be solely economic.

5.  It is however on the economic effects that this report will focus. Polling evidence shows that the expected economic impact will be an important factor for the Scots in making their decision. Voters in Scotland deserve the best evidence-based assessment of the likely economic consequences of independence. We have sought to collect and assess that evidence as part of our analysis of the economic implications for the whole United Kingdom.

6.  This report does not make a case either for or against independence. We have examined the leading academic, business and political experts on the economics of independence, and we have sought to present their analysis and conclusions in as clear and digestible a form as we can. We hope to inform the debate both in Scotland and in the rest of the UK in the run-up to the referendum.

7.  This is a simple objective but a complex task. As the evidence we heard made clear, the Scottish and the rest of the UK economies are at present closely integrated. Cross-border trade is far greater than would be the case had they not been for so long a single country: more than two thirds of Scotland's exports of goods and services go to the rest of the UK, mainly to England.[4]

8.  This report considers a number of economic aspects of separation, including:

(i)  What might be the impact of Scottish independence on the single market in the United Kingdom? (Chapter 2)

(ii)  What effects would independence have on international investment in Scotland? (Chapter 2)

(iii)  What implications would independence have for the decisions of major as well as of medium and small companies as to where they decide to locate and to what extent would these be affected by the possibility of different regulatory regimes North and South of the border? (Chapter 2)

(iv)  What currency would an independent Scotland use, and what would be the arrangements for its management? (Chapter 3)

(v)  What would be the role of the Bank of England if Scottish financial institutions needed emergency support? (Chapter 3)

(vi)  What arrangements would be made for the regulation in Scotland of Scottish financial institutions? If the Bank of England were expected to support at-risk financial institutions in Scotland, should it also have authority over financial regulation there? Would this be compatible with EU requirements on national regulation by member states? (Chapter 3)

(vii)  What would be the division of assets and liabilities between an independent Scotland and the rest of the UK? How would an independent Scottish Government assume its substantial share of UK national debt? What impact might there be on the creditworthiness of the rest of the UK? (Chapter 4)

(viii)  What would be the underlying fiscal position of Scotland post-independence without a block grant transfer from Westminster? What fiscal policy would an independent Scotland pursue and would it be constrained by fiscal agreements with the rest of the UK? (Chapter 4)

(ix)  Would an independent Scotland become a member of the European Union and on what terms? What might be the impact of the United Kingdom's renegotiation of its relationship to the EU? (Chapter 5)

(x)  What defence arrangements would exist in an independent Scotland and what implications would these have for the cost of defence in the rest of the UK, including the potential cost of re-siting Britain's independent nuclear deterrent? (Chapter 6)

9.  The economic implications of Scottish independence for Scotland and for the rest of the United Kingdom are not symmetrical. Broadly Scotland's GDP is around one-tenth of that of the rest of the UK.(See Appendix 5). The impact on the rest of the UK might still be important in certain circumstances: for example if significant financial institutions based in Scotland and active in the rest of the UK were to fail, that might hit the rest of the UK as well as Scotland. There would be economic as well as strategic implications for the rest of the UK in defence. The main economic effects of independence would be felt in Scotland. An early, transitional problem would be assuming its share, perhaps £93bn, of the UK's public sector debt. The impact on defence strategy of Scottish independence could have significant economic implications for the rest of the UK; so also could the adoption of sterling as the currency of an independent Scotland in monetary union with the rest of the UK, as proposed by the Scottish Government.

10.  One factor in particular adds to the complexity of our task. A "Yes" vote in 2014 would be a vote for independence. It would be followed by a long period of negotiation between the Government of Scotland and that of the rest of the UK on a whole host of issues included in the list of questions above. That process might last for years, said Professor John Kay of Oxford University[5] and other witnesses. Moreover, the President of the European Commission, Mr Jose Manuel Barroso, also made clear to us that a newly-independent Scotland would not automatically remain a member of the European Union.[6] Some EU foreign ministers, including the Spanish, have since expressed agreement.[7] If Scotland wanted membership, it would have to apply and negotiate terms. A newly independent Scotland would not inherit some of the special terms with Europe that currently apply to the United Kingdom, for example its opt-out from the Euro.

11.  Given the complexity of these issues, and the relative shortness of time before the referendum, it is of the utmost important that Scottish voters are presented with the key issues as soon and as clearly as possible. Since the consequences of the Scottish vote will also be felt throughout the country, the people of the whole of the UK also need the British Government to state its position. In the course of our inquiry, however, we have become increasingly concerned that both Edinburgh and Westminster are not being open with the Scottish people or the British people as a whole. Examples of the former include the First Minister's rejection of our invitation to give us evidence and the complete refusal of the Scottish Government to accept that it would have to apply for EU membership, as shown by the evidence of the Cabinet Secretary for Finance, Employment and Sustainable Growth.[8] An example of the latter is the official reticence by the British Government on the implications and costs of Scottish independence for defence. Although the British Government has now published the first in a series of papers on the issues, on the UK's legal and constitutional framework,[9] they failed to respond in time for our committee's report to a request for a simple list of planned papers on economic themes and a timetable for their publication

12.  Even more concerning, many Scottish companies whom we asked for evidence simply refused (though some to their credit accepted: the Chairman of RBS and the CEOs of Standard Life, Aggreko plc and the Weir Group). This was so even though the committee visited Edinburgh and Glasgow to take evidence. Regrettably, and without attributing blame, we formed the impression that a conspiracy of silence seems to have developed in Scotland which is inhibiting open debate; Councillor Gordon Matheson, Labour Leader of Glasgow City Council, even spoke of "a climate of fear [that] even extends to asking the questions publicly".[10] Scotland needs and deserves a fully-informed debate, based on fact and free from rancour, well before the referendum vote. To help bring it about the Scottish and British Governments should be more open about how they see the outcome of negotiations after a "Yes" vote; each should indicate the "red lines" of its negotiating stance on such crucial issues as currency, defence, division of assets and debts and negotiations with the EU before the referendum so that voters can make an informed choice.

13.  The task we set ourselves of providing an objective account is therefore a challenging one. However, amongst academic economists, there is a wide and broad consensus on the issues and the likely scale of their impact. For example, the importance of the future price of oil to an independent Scotland's future fiscal balance, and the blow which even a modest fall would represent to it, came through from much evidence we heard, including the important paper by Professor Alex Kemp of Aberdeen University.[11]

14.  The downside risk, of things going badly for Scotland alone, is clear. Its people enjoy an insurance policy against disaster in the form of the willingness of the United Kingdom to draw on its broader resources to protect them in hard times. This would not be so if Scotland goes it alone. On the other hand, the rest of the UK would lose the economic benefit of most oil reserves in the UK Continental Shelf.

15.  There are potential upsides too, even though they are harder to quantify. Few of our witnesses endorsed the view that independence would set loose Scottish entrepreneurial spirits in a way that would improve its economic performance, but they could not rule out such an effect either.

1. It will be for the Scottish people to balance their assessments of the risks, which are undoubtedly great, with their hopes for the benefits; and indeed to weigh in the scale with economics the non-economic factors which should inform their decision. We aim in this report to set out the economic facts and the arguments to help the people of Scotland make their once-in-a-generation decision.