The sum of the whole is greater than the sum of its parts

The road to a referendum on Scotland’s membership to the 305-year union of the United Kingdom is now being paved.  Aggressively pursued by Scotland’s First Minister, Alex Salmond, the referendum appears set for autumn 2014.  That is at least according to the most recent snippet of spin to come from Alex Salmond, who is determined to defer the referendum to a later date than that wished for by Westminster.  The desire of Alex Salmond to push the date of the referendum into the politically distant future, and that of Westminster to have any such referendum held as soon as plausibly possible revolves around the same pivotal point.  That is, the majority of people in Scotland, according to a number of recent polls, do not actually wish to secede from the UK.  The reality however is that Westminster will likely agree to an autumn 2014 referendum in exchange for concessions on the design of the referendum, including the question being asked and allowing 16 and 17 year olds to vote.

A read through of the Scottish National Party’s “Your Scotland, Your Future” brochure on the benefits of Scottish independence would, initially at least, have you believing that Scotland will be the 21st century frontier of prosperity.  Once finally freed from the “Tories down South” grip of tyranny, Scotland will enter a golden age of economic and social development and be granted a seat at the top table of the World’s governing bodies. There is however a difference between optimism and half truths and Mr Salmond is a proponent of the prior, but a dealer in the latter.

Scotland has a history of innovation, among a phlethora of other achievements, and as a result is an international leader in a number of industries and home to world renouned Universities. This provides Scotland with a pool of potential for the future.  Maximizing that potential is the holy grail of many governments and yet Alex Salmond and his party are surprisingly light on the details.  Since Scotland already has many devolved powers, the crux of the argument relates to a want of fiscal autonomy.  Scotland cannot be blamed for this, particularly given the mismanagement of the UK economy over past decade.  Independence would allow a Scottish parliament complete control over taxation, from value added tax to income and corporation tax.  It could set and collect levies on tobacco and alcohol should it wish and could provide attractive government subsidies to support and attract industry.  These are all trademarks of fiscal autonomy, but one large component is missing…currency.  The SNP has proposed to keep the British pound sterling for the sake of continuity.  This presents two immediate problems.  Firstly, it is the Bank of England that sets interest rates and prints money, leaving the Bank of England with significant control over how Scots spend and save as well as the value of their money.  The ongoing European crisis is an example of how surrendering these levers of the economy to an outside bank can have devastating consequences.  For now, the economies of the UK home nations are reasonably well aligned so such a situation would seem unlikely in this instance.

The second problem relates to Alex Salmond’s desire to have an independent Scotland join the EU.  The Lisbon Treaty requires all newly joining nations to accept the euro as its currency, something Alex Salmond apparently does not want.  If the euro were forced upon Scotland in exchange for membership then Scotland would still be without control of its currency, but with the added impact of the already existing imbalances between the eurozone economies.  The UK, through Westminster agreed a number of opt outs from the EU, one of which included joining the euro.  Whether an independent Scotland would still be covered by the original UK opt outs is a question for the lawyers, but my guess would be no.  Brussels is currently and will continue in the future to seek further powers from member states, which could, ironically, leave Scotland with less independence that it currently has.

Many questions regarding North Sea energy reserves, defense and the national debt remain to be answered.  On these issues Alex Salmond acts like a disgruntled spouse who wants the house but not the mortgage.  His belief that an independent Scotland should not take a share of the of the debt accumulated in bailing out the banks rest upon his claim that the losses made by the banks were made by their London branches and Scotland should not therefore have a hand in paying for it.  This begs the question as to what Alex Salmond would say if the UK government were to announce that Scotland would not see a penny of the money received in tax from any of the financial institutes based in London or from the eventual resale of the nationalized banks, of which the Royal Bank of Scotland is one.

Claims that an independent Scotland would have a seat at the top table are also flawed.  Scotland would certainly gain an independent voice with the EU and UN, but a seat at the top table it would not have.  Power in the EU has tended to reside between the Germany, France and the UK, as these are the biggest contributors to the EU budget.  Increasingly Germany and France have become the controlling nations with Germany the senior partner.  Alex Salmond is sorely mistaken if he believes an independent Scotland would have a significant say in the future of the EU or the eurozone, should Scotland join.  Further still, the UK is one of 5 permanent members of the UN Security Council with decisions coming from Westminster.  Should Scotland leave the UK, it should not expect to have continued representation at this particular top table.  Scottish ministers are currently heard in Westminster and vote in parliament on issues affecting the UK.  Scotland therefore has a voice that is heard around the world through organizations like the EU, the UN, the WHO and WTO.  The voice of an independent Scotland would not be so loud, nor for that matter would the rest of the UK’s.  The sum of the whole is definitely greater the sum of its parts.

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