Westminster will find it hard to counter the Brexit case for Scottish independence

The UK Treasury chief who was at the heart of Project Fear during the Scottish independence referendum of 2014 is singing a different tune after the Brexit referendum. In an extraordinary article in the Financial Times (£)  summarised here,  Sir Nicholas McPherson sweeps away most of economic and financial problems associated with independence..

With the UK leaving the EU, there is a golden opportunity for proponents of Scottish independence to reappraise their economic prospectus. Clearly, membership of the EU will lie at the heart of it. That will enable Scotland to have access to the biggest market in the world without the uncertainties that are likely to face the rest of the UK for many years to come. It would also provide a historic opportunity for Edinburgh to develop further as a financial centre, as London-based institutions hedge their bets on the location of staff and activities. If Royal Bank of Scotland, the state-backed bank, relocates its headquarters as part of that process, that would strengthen the long-term sustainability of the Scottish financial sector.

.. the EU has a huge interest in fast-tracking membership for a country whose citizens have been members of the bloc for 43 years and have voted to remain by 62 per cent to 38 per cent.     

In the longer term, there could be a case for tying the Scottish pound to the euro. 

It also has a chance to set out a tax policy for the longer term. An independent Scotland committed to the EU would have an extraordinary opportunity to attract inward investment as well as highly skilled migrants. But, since it will be competing with Ireland, it needs a tax system that is equally competitive. That points to low corporate taxes and keeping marginal rates of income tax down. It may also point to a smaller, more efficient state.

The aftermath of the EU referendum contains many lessons. Perhaps the most important is that without a plan for what happens next you risk months, if not years, of uncertainty and drift. The Scottish government is in a unique position to take a more far-sighted approach. If it can develop a clear and coherent economic strategy ahead of any future referendum, it not only stands a better chance of winning it will also increase the probability that an independent Scotland inside the EU can hit the ground running.

That is from an ex-mandarin at the very top of the Whitehall establishment  clearly so jaundiced by the Brexit vote that he is prepared to endorse the economic case for Scottish independence.

The political case is put by Michael Keating, editor of the blog for the Centre for Constitutional change even if the UK negotiates the most favourable terms of association with the EU.

The essential point is that, the more free trade the UK negotiates with the EU, the easier it would be for Scotland to keep itself in both the UK and European markets. A Norway-type deal, with full UK membership of the single market, would be the best of all for Scotland’s economic interests. 

 A recent article in the Economist suggests that this could be a way of keeping the United Kingdom together. In practice, the opposite is likely to be true. The more free access there is to both markets, the less need there is for Scotland to stay in the UK and the easier independence becomes. In fact, this was the whole point of the independence-in-Europe argument adopted by the SNP thirty years ago. The downside of the Norwegian model is well known. Norway has to accept most EU policies but has no vote in making them. By accepting economic union and rejecting political union, Norway has marginalized itself, while finding a political compromise that both pro- and anti-EU supporters have come to live with. England and Wales might end up in the same place but Scotland, unlike Norway, has expressed a preference for EU membership. If the UK were to get a Norway-style deal, Scotland would have a strong motive to go for independence, which would give it a seat in the EU councils. Indeed, the ironic outcome of this scenario is that both the remaining UK and Scotland would be subject to European rules but only Scotland would have a say in making them.

 

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  • terence patrick hewett

    Sorry to re-post Brian but it has already started:

    Constitutional Reform Group’s Draft Act of Union comes out this week and will be put forward as a basis for discussion.

    Proposals include:

    * Westminster reduced to 146 MP’s – that will be popular.

    * Each nation and region of the UK having full sovereignty over its own affairs

    * The governance of in no particular order, England, Scotland, Wales and
    Northern Ireland should be reinvented within a new voluntary union.

    * Nations and regions of the UK envisaged to pool sovereignty to cover the matters they wish to be dealt with on a shared basis.

    * A reversal of the UK’s current constitution in which sovereignty rests in the centre and is then devolved to regions.

    * A new Act of Union would come into force only if passed by referenda majorities in all of the four nations.

    * Big transfers of development and wealth from London and the SE to the rest.

    How to hobble the English hegemon is the big circle to square and they have several suggestions but no proposal to split England into regions which to my mind is the only way to satisfy Wales, Ireland and Scotland.

    But Brexit has now given the regional idea a fighting chance: In a UK within the EU it would have had no chance whatever since it would be vulnerable to the entirely justifiable charge that the European anti-christ has come up with yet another plot to destroy England, land of hope, beauty and the Women’s Institute.

    I did not think the greyhound would be this fast out of the traps after Brexit.

  • terence patrick hewett

    They have: and my money is on federation whose time has come at last Erne.

    It will of course never satisfy the Archimandrites of Engelhass.

  • Obelisk

    It’s time has come.

    And gone. It was prior to the introduction of the current devolutionary settlement. In hindsight, the half hearted structure implemented by Blair was never likely to stop Scottish demands for independence. It merely provided a platform for the Nationalists.

    A federal United Kingdom where both England and Scotland were broken into distinct regions might have averted what is coming. MIGHT.

    It would have disrupted the ability of the SNP to build a united bloc and it would made English power somewhat more diffuse in it’s application.

    But it’s too late to dwell on that now, because I feel we are well past the point when federalism would have satisfied the Scots. It is a solution to a problem that existed twenty five years ago.

    Besides, Federalism only really works when there is a big central idea all citizens can subscribe to no matter what area of the country they live in. Hence in the United States, areas as diverse as Texas and New York are united by the common thread of being American.

    In the case of the United Kingdom though the big central idea of being British has already collapsed. Large portions of the populations of both England and Scotland are more comfortable describing themselves as English and Scottish respectively rather than as an all encompassing British it seems. I would suspect those proportions will grow. If Scotland declares independence, the very idea of a British identity could end up being repudiated in the emotional fall out.

    Without that idea, Federalism is not so much independence prevented as independence delayed.

  • terence patrick hewett

    I think you are wrong Gav: Ireland was squashed like a bug by the EU in 2008 and 2010: and we all know what happens to small nations like Greece.

    The peasants are revolting and what is coming out of Oz from the latest Irish diaspora is not printable: and it is filtering through to the Dáil and the Irish press. This has only just started.

    There is a fundamental political re-alignment in progess in the 4 nations and I rather think that federation with a massive transference of wealth is a powerful augument against being Europes bitch.

    The old order passeth but it will fight until it is removed from the levers of power.

  • Obelisk

    The problem is that from the perspective of Nationalists, either Scottish or Irish, trying to convince us that Europe is a nefarious overlord is a bit ineffective because well…the English have fulfilled that role for most of our history. And the English tend to be ones most strenuously objecting to the this ‘nefarious overlord’ which, I believe, constitutes something of an irony.

    From my perspective as a Nationalist, in regards to Europe, it is far better to be a voice in the choir (even if a small one) rather than one of the Head Choirister’s footstools.

    I understand your perspective, but to me it sounds as if you understand that post Brexit, the existing order cannot hold. You are hoping for an orderly landing that maintains some semblance of the United Kingdom. I think the existing order cannot hold, but I believe when such things crumble they rarely do so in a fashion that can be described as orderly.

    If and when it collapses, the collapse will be complete. No overarching Federation, no realignment of the United Kingdom. Just a flat out break with Scotland, and a couple of years after that the loss of the North of Ireland as it’s geographical, economical and cultural position within the rump United Kingdom becomes untenable.

    England and Wales will be left to pick up the remaining pieces.

  • terence patrick hewett

    Ah well we are just skating around the ice-rink at the moment: things will become clearer when we start to thow ice-balls at the band!!!

  • Korhomme

    The Draft Act of Union sounds like the German Länder, the federal compromise. As such they cannot negotiate independently from the EU.

    I doubt if a similar structure in the UK would allow Scotland to remain in the EU while England and Wales leave.

    What then of Gibraltar? It’s a ‘crown dependency’, but otherwise separate from the UK. It voted by 96% to remain in the EU. As it isn’t a ‘part’ of the UK, Gibraltar could remain while the UK leaves.

    So, could ‘our wee country’ or even Scotland become a crown dependency? Self governing apart from external relations and defence? Would the English accept this?

  • terence patrick hewett

    Just come across my post on Slugger before Cameron won the General Election: Mystic Meg, eat yr heart out!!!

    “Cameron narrowly wins the May 2015 general election; he attempts to re-negotiate the UK’s relationship with the EU and makes the expected pigs-ear of it. The UK exits the EU after a referendum, triggering a Scottish exit from the UK. A constitutional crisis occurs which inspires an Anglo-Celtic Federation of independent nations, trading with the world. The challenge engages science and industry and the Federation becomes highly competitive, successful and rich and to everyone’s surprise the Republic of Ireland joins leaving Scotland isolated and shackled to the rotting corpse of the EU. Scotland applies to join but receives the reply that a referendum of all the constituent nations will have to be held. Brittany then declares UDI and applies to join their Celtic brethren in Cornouailles shortly afterwards followed by Normandie, Picardie, and the Pas de Calais. The Hundred Years War starts all over. Scotland cannot resist the temptation of wholesale arson, rapine, pillage and slaughter and is welcomed back into the Federation.”

    Lynton Crosby has got feck-all on yrs truly!!!

    http://sluggerotoole.com/2015/05/01/sinn-fein-discombobulated-over-the-european-union/

    “Trouble is that Call me Dave has not the intellect, imagination, leadership or the courage to do it.” Oh Dear!

  • smcgiff

    Do crown dependencies get massive subsidies?

  • Korhomme

    Who from? the EU or the UK?

  • Korhomme

    A thought experiment: suppose our we country was, today, independent. Would we then vote to join the EU, or vote to join England and Wales?

  • smcgiff

    The UK.

    NI currently is very much supported by the rest of the UK.

  • Korhomme

    And will England continue this (I’m discounting Scotland), and make up any EU subventions? And if so, then why? What does England get from NI?

  • hgreen

    There are a couple of major things that would glue a federal UK together. Money and defense. Scotland, Wales and N.i. will all require subvention from England.

  • Thomas Barber

    They dont need subsidies they’re all tax havens.

  • eireanne3

    A few Unionist MPs that are occasionally needed to make up conservative numbers?
    A 10 billion subvention (or whatever it is) seems a rather high price for a few Loyal seats.
    They would probably cost less elsewhere in England or Wales

  • rationalplan

    How do you actually transfer large amounts of wealth and development from the South East and London? A large reason for it’s continued wealth is that is the largest and most diverse jobs and skills base in Europe. All 18 million of City South East have a tight web of commuter lines feeding into central London. It’s this deep pool that feeds international business requirements and other high order services and skills.

    Unless you plan mass population movements, confiscatory levels of tax and forcing companies to move to the regions then you have a non starter here. Oh and good luck trying to implement that before London and South East declares independence tells you to get your tax money from elsewhere.

  • Obelisk

    It’s hard to participate in the thought experiment because an independent Northern Ireland would fragment within hours. But I’ll try.

    It also offers us two choices that aren’t equivalent. Joining England and Wales would be becoming part of a country.
    Joining the EU would be becoming part of an organization.

    By saying England and Wales, you imply an independent Scotland. An independent Scotland should be assumed to be within the European Union because that is the raison d’etre of the current case for independence.

    Likewise, the Republic of Ireland is part of the EU.

    Divided as we are, we still maintain strong cultural links to both the Republic and to Scotland.

    I would also argue that this island is a natural economic unit, as our membership within the single market has demonstrated.

    I would suggest then that, if starting from a neutral perspective in this fantasy independent Northern Ireland, membership of the EU would be the clear winner on every single point.

  • hgreen

    You are aware that London and the SE got rich off the back of the talents and resources from all over these islands? There isn’t something special in the water down there. Resdistribution of wealth from wealthy to less wealthy areas occurs all over the world.

  • Obelisk

    If economic common sense was enough of a glue, Remain would have won by a country mile. And that wasn’t even in regards to a political union such as the United Kingdom that requires a much deeper emotional investment.

    If all that is left for the Union to argue is that it pays for everything then it doesn’t deserve to survive.

    Should the Union be preserved just because some people are in the habit of presuming it to be there?

    Regardless, the above article demonstrates Scotland does have a clear economic path that it can embark on.

    Similarly, Northern Ireland also has a way out if it chooses to take it.

    I feel Wales does not. Wales seems too closely bound to England at the moment to even think about separation. If it does come to that, it will be deep into the coming century and beyond our present concerns.

  • Roger

    Scotland wouldn’t.

  • Roger

    Wales is part of England. Was annexed how many centuries ago. It’s not a jurisdiction. Arguably it has a status distinct from say Devon. Arguably.

  • Roger

    Gib isn’t a Crown dependency.

  • Roger

    What does Dublin get from Donegal. What does Paris get from Languadoc? Isn’t that pretty silly. Brit nationalism is alive and well. Every inch, we hold.

  • Korhomme

    Is the underlying question for N Ireland then this: is it better to be in a union with the (remnants of the) United Kingdom, or is it better to be in a union with the EU?

  • Obelisk

    At the moment, no. But if Nationalists are wise they will move to reframe the debate on the constitutional question in such terms….should Scotland leave and Brexit NOT be the fantastic wonderland leave promised.

  • Kevin Breslin

    It’s like trying to keep the family together when one member has gambled away the family car.

  • cu chulainn

    Dublin is in the same nation as Donegal or Fermanagh.

  • Katyusha

    Oh and good luck trying to implement that before London and South East declares independence tells you to get your tax money from elsewhere.

    Solidarity in the UK!

    In all seriousness, far from being “confiscatory”, tax rates in the UK are low by European standards. And coincidentally, the UK has levels of inequality and deprivation that are the worst in Northern Europe.

    http://inequalitybriefing.org/brief/briefing-43-the-poorest-regions-of-the-uk-are-the-poorest-in-northern-

    High tax rates. Transfer of wealth. Public spending and investment. Not always a bad thing.

  • Brian Walker

    Terence, I read the Guardian too and have even talked to the Salisbury group. Not impressed
    .

  • terence patrick hewett

    Been following this for some months see:

    “And the horse coming up unnoticed on the outside is the Constitutional Reform Group’s Draft Act of Union in July. One of the options is a federal solution which if Brexit comes off will have to be presented to the UK sharp-shoot. If Brexit comes off fundamental constitutional reform will be inevitable.”

    http://sluggerotoole.com/2016/06/04/hannan-leaving-the-eu-would-be-a-leap-into-the-light/

    The pdf file link for Constitution Reform Group Discussion Paper DP01 is:

    http://www.constitutionreformgroup.co.uk/?wpdmdl=151

    It is a discussion paper for a proposed constitutional reform, not a partisan position: I believe that the UK as it is presently constituted is well past its sell by date, if only because the forces of the Industrial Revolution and Empire which welded it together are no longer there.

    I also believe that England as hegemon would rather face federation than dismemberment of the UK: and as such the other three nations (and of course the balance of undeveloped England) would be in a very strong bargaining position.

    But all this depends on how history pans out with the EU. The EU faces an even greater existential threat. But what is a 100% surety: that the status quo ante bellum is no longer sustainable: Brexit has and will concentrate some minds.

  • rationalplan

    Yes it already sends 20% of it’s GDP to the rest of the UK. You can propose higher taxes I suppose, but there will be a limit before there is an open revolt and it still won’t make people leave London for Swansea or Bradford. You can’t make companies move to sub optimal locations with out consequences. London is the biggest city, it therefore has the largest labour market and therefore will attract companies that require specialised labour as it will have the deepest pool of available labour. It will also have lots of specialised industries that cross fertilise with each other etc etc.

    You can’t take that away without doing serious harm.

  • The UK will not breakup. 91.2% of Northern Ireland trade & 85% of Scotlands is not with the EU. Both run huge deficits and are subsidised by the UK barnett formula giving both much higher spending per head of population than England. 85% of NI & 65% of Scottish exports go to the rest of the UK. Scotland would have to go independent and then give powers to the EU inc joining the euro

  • right – deficit of 9% whilst EU membership requires 3%. SNP indy plan based on high oil prices. Scottish trade with EU down 20% last year..barnett formula…

  • Economic case for EU trumped by lack of democracy and sovereignty. Economic case for staying in the UK much stronger and cultural ties much stronger.

  • Isle of Man and CHannle Isles are already outside the EU but have customs union with EU and are members of the Common Travel Area

  • 100,000 volunteers during WW1….

  • lol

  • Korhomme

    The EU has quite a few such arrangements with odd bits of members’ territories. Might be a model for NI, though still implies a border control. New SoS wants the CTA to continue, but where then is the passport control into the UK?

  • Roger

    If the oil money stayed in Scotland; if they could set their own taxes like corpo tax., I think they’d do quite nicely. It’s too easy to look at an economy through a prism of the status quo. While I don’t think an independent Scotland is likely, I previously didn’t think Brexit was either. But I do think an independent Scotland would be less msrginalised and its economy would do better. Just look at the economies of Ireland and Northern Ireland: chalk and cheese.

  • Jams O’Donnell

    It’s not a question of trade. It’s a question of sovereignity, like the Brexit referendum.

    Scots would rather run their own country in their own interests, rather than be ruled and over-ruled by governments that 80% of the time we haven’t voted for and don’t want. In the EU without the rest of the UK we would have a much larger say in our own affairs than at present, where fifty-odd SNP MP’s in Westminster will always be out-voted.

    We want to own our own future, win or lose.

  • Jams O’Donnell

    And the house.

  • Jams O’Donnell

    ‘Cultural ties’ between England and Scotland are pretty tenuous, believe me. We are two very different people, with different legal and educational systems and language (‘Scots’ is not ‘English’). Plus 250 odd years of one sided exploitation.