Leaving two unions unwillingly

If you divide the Scottish electorate into four parts, the unhappiest – and on recent voting possibly the most numerous – are those who face being dragged out of Europe and the UK against their will, to use the First Minister’s form of words.

To them I offer the optimism of this conspiracy theory: at their meeting in Bute House last year Theresa May and Nicola Sturgeon made a pact to go as hard as they could – May on the Brexit terms and Sturgeon on a second independence referendum.

Mrs May could then use the prospect of the break-up of the UK to back off from hard Brexit and accept Britain staying in the single market. Sturgeon, in turn, could use that concession to withdraw the threat of a referendum in 2018 or 2019.

The otherwise sensible politician who outlined this theory to me didn’t wholly believe it. But neither did he completely dismiss it.

It is an attractive idea, but I doubt that the two women trust each other enough to make a deal like that stick. However, both are inherently cautious and such an arrangement would answer some of their problems.

Mrs May was one of the quietest ‘Remain’ campaigners, but her swift conversion to hard Brexiteer surely owes more to the necessity of keeping her parliamentary party together than personal conviction.

Does she really want to spend the rest of her premiership negotiating trade agreement after trade agreement in an endless progression? And having spent six years as Home Secretary trying unsuccessfully to curb non-EU immigration, she also knows that getting net migration down to less than 100,000 a year will take much more than ending free movement.

Does she want to be remembered as the Prime Minister who took us out of Europe and lost the Union while David Cameron, the real architect of both disasters, gets away with being forgotten? The threat of a Scottish referendum might give her the excuse she needs to temper her demands in Brussels and carry her party (the Conservative and Unionist party) with her.

Ms Sturgeon is also naturally cautious – witness the timidity with which she is using her new tax powers. A referendum holds the prospect of one of two bad outcomes for her.

The least bad is that she loses it. She may then go down in nationalist history as the leader who at least tried for independence, but her political career would be over. Premiers who lose referenda do not survive long in power.

The worst outcome is that she wins it. Then she would be in the position Mrs May finds herself in now, being dependent on the goodwill of an adversary whom she has gone out of her way to antagonise.

Ms Sturgeon wants independence, but she is much more realistic about it than her predecessor, who thought things could be true merely because he wanted them to be. She accepts that an independent Scotland would start life with a large budget deficit which it would have to finance by borrowing.

Given the recent history of the Scottish economy, private or public lenders like the IMF would insist that the new government follows a stringent policy designed to bring the deficit down to a sustainable level quickly.

That would mean far more savage austerity than Scotland has experienced so far under the protection of the Barnett formula. It probably would also mean tax increases, which the First Minister has so far mostly avoided for fear of driving high earners out of Scotland.

The separation negotiations would mirror those between London and Brussels: agreement would be needed on the division of assets and liabilities – including future liabilities such as pension payments and the proportion of the national debt Scotland would have to assume.

She would also have to achieve a favourable trade deal. The rest of the UK is by far Scotland’s largest export market. It cannot afford a hard border.

And unpalatable as it will seem to die-hard nationalists, Scotland’s hand will be as weak as the one Mrs May is playing now. At the end of the negotiations Scotland will have to persuade the UK to recognise it as an independent country. Until that happens no major European power will grant recognition and EU membership will be out of the question.

Then what will the whole thing have been about?

First published by the David Hume Institute

Comments

  1. Joseph MELLON says

    Scots tend to assume deep and devious plans behind British government actions and inactions. A more probable explanation of TM’s course is ‘Bambi in the headlights’.
    Why no Brexit strategy for months?
    Why now a hard Brexit?
    Why not expect NS’s referendum announcement?
    Bambi!

    • David McCandless says

      I don’t think ‘Scots’ in general do make that sort of assumption. There are certainly a few nutters out there who do blame Westminster machinations for all their ills, but I think they just post online a lot more than anyone else.

      • Joseph MELLON says

        David: it is not just ‘blame for ills’, it would also be ‘credit for being canny’.
        That is an assumption that ‘Westminster’ is cleverer and more competent than it actually is.
        That mythology has been dispersed by continual evidence of serious and serial incompetence: the Iraq war; the Afghan catastrophe; the Libyan shambles; the Brexit referendum; the Brexit negotiation (non) strategy; and the latest NI budget cockup, to just pick an egregious few from a rich set.
        (Bedroom tax, Cameron at EU meetings, Sadiq Khan’s clumsy visit to Scottish Labour’s conference, Corbyn forgetting his notes, Labour infighting…)

        I also think Theresa May was surprised by the independence referendum announcement – even though she had effectively forced a cautious and probably reluctant Nicola Sturgeon into it. May is reacting to events not managing them, and hasn’t the space and time to calculate the effects even of those actions which are under her control.

  2. Iain says

    Your penultimate paragraph starts with the sentence “And unpalatable as it will seem to die-hard nationalists, Scotland’s hand will be as weak as the one Mrs May is playing now.”
    Surely one difference in Scotland’s case is that the remainder of the UK would need to do a deal with a newly-independent Scotland to maintain access to the bases at Faslane and Coulport, which gives Scotland some leverage in those negotiations.

    The possibility of such a deal was hinted at in 2014 (see here: https://www.theguardian.com/politics/2014/mar/28/independent-scotland-may-keep-pound) and there’s an interesting take on this issue in Eric Joyce’s blog:
    http://www.ericjoyce.co.uk/2014/03/scotland-nuclear-weapons-crimea-arse/

    • Joseph MELLON says

      Another lever in independence negotiations is the national debt.

      As the BoE and the Treasury confirmed during the last referendum: the national debt is owed by the rUK and not a newly independent Scotland.

      That is rUK would have to offer something to persuade Scotland to adopt part of the national debt. Considering the vast oil revenues transferred to England in the last 45 years…

      If Scotland starts with zero national debt then even a 9% deficit is (short term) manageable.

      And of course the IEA is now predicting a new oil price high.
      https://www.forbes.com/sites/rrapier/2016/11/30/iea-projects-a-75-increase-in-oil-prices-by-2020/#5d51d0737a67

      The world may look quite different in 2019.

Leave a Reply

Your email address will not be published. Required fields are marked *