Price on independence
The season of goodwill has brought little sign of any rapprochement between the two camps that have locked horns in the independence debate. And it is the economy that has become the focus of what promises to be an increasingly rabid exchange.
The New Year’s left-field announcement by Her Majesty’s Treasury to guarantee the massive £1.4trn-worth of UK debt until independence was, says the Treasury, made to calm apparent market concerns that an independent Scotland might default on its share. But what may have been a politically motivated manoeuvre designed to expose the risks inherent within independence may actually have been the first 2014 Unionist own goal.
For with no obvious concerns in the City about even the prospect of Scottish independence, never mind it defaulting on part of its share of a bill that it doesn’t yet own, all the move succeeded in doing was to firmly reinforce the scale of the financial mess that we are already in as part of the UK and alert the markets to the possibility that rUK’s debt might be even higher than previously thought come independence day.
Indeed, while City bond traders and economists may have broadly welcomed the Treasury’s clarification of, frankly, the bleeding legal obvious, that it would stand behind all Government-issued debt which it already solely owns, they also warned that in the event of a Scotland that simply walked away, the rUK’s debt to GDP ratio, which is already 76 per cent, would rise significantly – by about 10 per cent – which could in turn alarm the rating agencies and force hefty interest hikes.
Never mind that this was a series of events started on a falsehood that the First Minister had ever explicitly threatened to default – there was no such bluff – it does leave a seductive but potentially corrupt taste in the mouth. Could a newly independent Scotland just walk away and all at the gift of the largesse of the UK Treasury?
Dr Angus Armstrong, director of macroeconomic research at the National Institute of Economic and Social Research, made a significant intervention when he said the Treasury’s move showed “the referendum is not just an issue about Scotland’s future but one that is relevant for everyone in the UK”.
And that is an increasing theme of this debate. For regardless of the vote in September, things across these isles need to change. And while the narrative up to now has been principally about more powers for Scotland, as the Unionist camp scrambles around trying to find a carrot to tempt voters away from the attractions of ‘Yes’, there is a change in the air. What was simply the ‘Scottish question’ is inevitably becoming the ‘UK question’ as people wake up to the imbalance that a concentration of political power and economic wealth in one place has created.
What Vince Cable recently described as London “sucking the life out of other parts of Britain” is a proposition slowly eating into the psyche of us all. Scotland’s battle with who it is has had the advantage of being within a definable nation but the problems it incurs are not unique as politicians from the northern parts of England would concur for none of us seem to get an equal share. And it is to the detriment of us all that our children’s career choices tend to be restricted to either staying at home or moving to London. These will be conversations had in homes in provincial cities throughout these lands.
Increasingly, senior politicians in all camps – I have heard the same from Andy Burnham, Neil Kinnock to David Steel and Geoffrey Howe – are recognising the dangers, both politically and economically, of the concentration of power and equity – often so irrevocably linked – in one place. This has never really been a battle between Scotland and England but a problem between London and the rest of the UK and never is that more apparent than in the City where evidence of restraint on bankers appears to be something of a distant memory.
This week, former deputy leader of the SNP and Holyrood columnist, Jim Sillars, will publish his socialist vision for an independent Scotland. He will argue that the Scottish Government’s White Paper simply offers a scaled-down version of what we have today – a mini-UK. He presents an inspiring argument for change. He asks why we would vote for independence to just get more of the same. And no doubt, this divergence from mainstream SNP thinking will be the subject of much glee within Better Together. However, it will be misplaced. For regardless of his critique, he will still vote ‘Yes’. And I predict his intervention could be a marked one for the many undecideds.
But there is an opportunity here for the Unionist parties to gain traction from recognising that the referendum debate has highlighted the economic and political imbalance contained within the UK as a whole. Labour, in particular, would do well to adopt some of what Sillars says. If the choice is independence or more of the same, then why not start talking about a revision of the nation’s economy? Ed Miliband making noises about curtailing bankers’ bonuses is good, it is populist, and will gain as much support as his freeze on energy bills did. But inherently, it accepts that despite the crash, it’s business as usual and even with some fiddling, the structures remain the same. There would be something much more attractive to Scots, who are scunnered with the status quo, to offer a radical prospectus for change on the economy and how it is shared.
London accounts for almost a quarter of the UK’s economy. It is doing even better after the banking crash than during the bubble. House prices have risen 15 per cent since the start of the financial crisis and the 10 richest boroughs of London are now worth more in real-estate terms than Northern Ireland, Scotland and Wales combined. It is, as Austin Mitchell, the Labour MP for Great Grimsby observes, a “bloated, bumptious Babylon” and “a deadweight crushing the life out of Britain”.
Regardless of the referendum, the UK’s economy needs recalibrated. The concentration of power and wealth within such a small geographic area helps to create inequality, gives rise to a stark political deficit most keenly felt by Scots and contributes to a policy framework that leads to such bad policies as the so-called bedroom tax. If independence is not the answer, something needs to change.