Does the SNP really want independence?

I know that sounds like a silly question.

Back a couple of years ago, one of the ideas being proposed about the referendum was that it should include a third option – devo-max or devo-plus. In July 2012 I noted the multiple reasons why – though undecided on the Yes/No question – I was against these options, and moved on: there seemed no reason to dwell on what was not going to be voted on.

Tom Gordon outlined the difference between the two, and who was supporting them, in the Herald:

Devo Max Devo Plus

Devo-plus was supported by LibDem Tavish Scott, Conservative MSP Alex Fergusson and Labour’s Duncan McNeil plus Reform Scotland, a think-tank based in Edinburgh that is, it says, independent of its parent think-tank Reform based in London:

devo plus could be a credible alternative to independence, if that option was rejected in the referendum.

Devo-max was floated as “full fiscal autonomy” and was supported primarily by the SNP:

Devo Max is intended to make Scotland more accountable for its spending. At present, Holyrood is responsible for 60% of all public spending in Scotland but has a say in setting and raising just 6% of it, through business rates and council tax.

Under Devo Max, Edinburgh would be responsible for raising, collecting, and administering the vast majority of taxes and benefits, and would receive a geographic share of North Sea oil revenue. EU rules mean VAT would stay the same across the UK, and financial regulation, employment, and competition law would also remain reserved.”

And, though this hardly needed saying then: under Devo-Max, the clearing banks of Scotland could continue to be owned by UKFI, which is managed by a board appointed by the Chancellor at Westminster, and Scotland would continue to use the pound sterling: the Bank of England would remain the lender-of-last-resort for all UK banks. The Scottish financial system would continue to be run from London.

Lesley Riddoch suggested in the Guardian in October 2012 that the only reason Devo-max wouldn’t be on the ballot paper in referendum was that it would win hands-down.

But the obvious problem for people keen on devo-max and devo-plus was that both were dependent on the UK Parliament legislating to transfer Scotland’s “geographic share” of the oil revenues to Holyrood’s control. Whereas if Scotland became independent, Scotland would have the oil in its territorial waters as of right. And obviously, devolved Scotland doesn’t have the right to get rid of the nuclear weapons at Faslane, whereas independent Scotland does – but rUK would have to pay for it.

Still, consistently, for three years, voters have backed “more powers for Holyrood” over either independence or the status-quo devolution:

In October 2011 the pollsters first offered a “third” option, “transfer more powers from Westminster to the Scottish parliament, including tax and welfare but excluding defence and foreign affairs” alongside “full independence for Scotland” and “keep the current arrangement of a Scottish parliament with its existing powers”. Those options were backed by 33% (more powers), 28% (independence) and 29% (status quo) respectively. In February those options polled 30%, 26% and 32% and in July 37%, 23% and 29%. In short “more powers” has generally been the most popular choice all year.

The most recent results of the Scottish Social Attitudes Survey say:

32% of Scots say that their first preference is for the Scottish Parliament to be responsible for everything apart from defence and foreign affairs, a position often dubbed ‘devo max’. 31% say their top preference is for the Scottish Parliament to make the key decisions for Scotland about everything, including defence and foreign affairs, i.e. independence. Meanwhile ScotCen’s research also shows 25% back the status quo with taxation and welfare benefits still mostly be decided by Westminster, while 8% do not want any devolution at all.

However, no less than 42% of all Scots say that ‘devo max’ would be their second preference. This option is backed by 79% of those whose first preference is independence and by 66% of those who would most like to see a continuation of the status quo. As a result, if voters were asked to choose between independence and more devolution, 61% would back ‘devo max’ and only 39% independence. Equally in a run-off between ‘devo max’ and the status quo, ‘devo max’ would win by 62% to 38%.

In February 2013, the Fiscal Commission Working Group produced its first report. This report proposed that “day-to-day monetary policy discharged independently by the Bank of England”, which would be, in this plan, Scotland’s central bank and lender of last resort. Holyrood would be “responsible for financial regulation”. (The Bank of England is independent of control by Westminster by the Bank of England Act 1998.) UKFI, which owns the majority of Scotland’s clearing banks (Bank of Scotland, Royal Bank of Scotland, TSB) has one shareholder, the Chancellor of the Exchequer, and via him, Westminster Parliament.

As I said (almost) in July 2012:

In essence, what appears to be being proposed for Scotland by [this report] is that the Scottish government shall have all of the fundraising powers of a national government – while still being part of the UK. If Scottish devolved finances failed, the UK government would still have to bail Scotland out.

The reason why I ask the question, does the SNP really want independence? is because the version of independence they are proposing, in which Scotland makes use of the UK pound and has the Bank of England as lender of last resort, is essentially devo-max: independence but not. The Scottish economy would be run by decisions made in London, at the Bank of England and in the UKFI boardroom.

Almost all of the possible and delightful options for an independent Scotland rest on the presumption that Scotland is a country with a stable and healthy economy, under the control of the Scottish Parliament. The version of independence being proposed here by the SNP is not that option. In effect – it seems to me – the SNP were attempting to get the devo-max option onto the ballot paper for September, by surreptitiously removing the independence option – not, in fairness, because they didn’t want independence, but because they thought it more likely they could win a referendum with devo-max.

Alex Salmond is reported to have said in a speech in June 2012:

“There’s a view abroad in Scotland that perhaps it would be better from where we are now … that rather than become an independent country, at least in the first stage, that the fiscal base should increase to something near 100 per cent. And it’s a very attractive argument,” he told the audience.
“It has a major problem, and that is that the UK Government, while they respect the right and ability of Scots to decide on independence, are not prepared to accept the right of the Scottish people to decide on devo max.”

Note that this is not a question of rUK hanging on to Scotland’s share of national assets. An independent Scotland would take it with it a share of the national debt proportional to the population, and its negotiated share of the sterling in the Bank of England, to provide the basis of a National Bank of Scotland. But in the “currency union” envisaged by the FCWG which just happens to correspond neatly with the SNP’s preferred second option on the ballot paper, this couldn’t happen: Scotland can’t both lay claim to the Bank of England as lender-of-last-resort and get to claim its share of the Bank of England’s sterling deposits.

Red HerringNor could a Scotland in that situation join the EU. I’ve said before that EU is a red herring, and so it is for an independent Scotland: but a Scotland that is still bound to control from London, that has no clearing banks nor control over its lender-of-last-resort, is a country that cannot fulfil multiple chapters of the EU Enlargement Conditions. The best it could say, in a full currency union with the powers hopefully envisaged for the Scottish board members and shareholders at UKFI and the Bank of England, is that the majority partner in the relationship – rUK – had agreed to (most of) those Enlargement Conditions. As Scotland would have no power by itself to amend any that turned on controlling its own economy, Scotland could not commit to meeting Chapters 4, 9, 17, 32 and 33.

Membership of the EU requires a country to be working towards monetary union: joining the euro and transferring its national central bank to the European Central Bank. There is, however, no particular time limit set on how long this may take: Scotland with its own currency and central bank would enter the EU with the same level of commitment as Denmark or the UK.

The FCWG report is a hopeful document. If all goes well – if the rUK government, the Bank of England, the Chancellor of the Exchequer, and the board of UKFI, are all in favour of the idea of a currency union, then maybe it could work out OK and some kind of agreement could be patched up with the EU over the chapters of enlargement that rUK would have to guarantee on Scotland’s behalf.

Labour, the LibDems, and the Conservatives – the three parties of rUK government – have all said they won’t support a currency union. George Osborne, the current Chancellor, has also said he won’t, and as he’s the shareholder of UKFI, the board answer to him. The Bank of England’s reaction was a highly qualified maybe – if and only if the conditions satisfied the BoE and the agreement was made permanent. This kind of federalised arrangement can’t be imposed from Scotland against the will of the other partners: so Devo Max is not on.

Devo MaxA long discussion with a Yes voter on Tuesday afternoon, Just_Charlene, and the YesFalkirk Twitter account, clarified this for me, because both were arguing quite passionately that Scotland shouldn’t be financially independent – were arguing for the SNP plan of using sterling, without a central clearing bank if necessary, because that would be less scary a change for voters. I asked permission to cite, and JustCharlene initially gave it and then evidently thought better of it and deleted all her tweets for the whole afternoon.

Update: She kindly repeated her assertion that in her view Scottish voters aren’t willing to make the “scary choice” of real independence.

The SNP has discovered the benefits of devolution leading towards independence. When the first Scottish Constitutional Convention was being held, the SNP declined to be part of it: consistently Yes voters have argued that there is no point in holding a second Constitutional Convention until after independence. But there would be no independence referendum happening this September if the SNP had not twice won elections in a devolved Scottish Parliament. Those arguing that what we need is more powers devolved to the Scottish Parliament, should note that Holyrood has never yet made full use of the powers devolved to it already.

None of this necessarily means that independence is ruled out. The referendum is on: if enough people vote and get a majority for Yes, independence is on. But necessarily, because of the way in which it was proposed by the SNP, the conditions for independence are negotiated by the SNP. And if the SNP are still tied in to the idea of Scotland using sterling and not needing its own central national bank, that is a fatal beginning to negotiations.

If you have got this far and are thinking I only say this because I am secretly a No voter, I’d note that others more committed to a Yes vote than I am see the problems too. From the Radical Independence website:

Finally, the radical alternative is take the Norwegian road and nationalise the oil, introduce progressive taxation and join the European Free Trade Alliance.

It is key that the left wing of the independence movement advocates the radical currency option otherwise they will become caught in the SNP’s currency trap which will only weaken the case for independence.

IlovescotlandPrecisely so. I won’t vote for an undefined and undeclared devo-max option. That’s neither definite independence nor the status quo.

It’s a frequent challenge flung at those who aren’t committed to voting Yes that we are scared of change. But a Yes campaign that is scared to commit to the obligations and opportunities of new currency for Scotland, but wants to cling to the pound, is just as scared of change as the most worried No voter – just less honest about it.


For the benefit of those asserting that “of course” Scotland could continue to use the pound, look at the Isle of Man or Jersey, here is the Isle of Man’s relationship with the European Union and Jersey’s & Guernsey’s. None of them are members of the EU: they have a special, negotiated relationship as Crown Dependencies of the UK.

7 Comments

Filed under Currency, Scottish Politics

7 responses to “Does the SNP really want independence?

  1. The difference, to me, is that five years later we can decide “Right, we’re now ready to change the currency.” – and that’s a decision that we would make unilaterally, without getting permission from anyone else.

    Independence would give us the ability to tie ourselves into a fiscal pact, change it, and make the decision that we believe is best for Scotland at the time. Devo-Max wouldn’t give us that.

    • What do you envisage?

      The “currency union” which the Bank of England – who were the only party to issue even a qualified maybe to the SNP’s plans – said would have to be binding and permanent. In other words: no, Scotland could *not* unilaterally decide to change currency.

      Two: the “we’ll just use the pound and we won’t have a central lender of last resort” which appears to be the SNP’s current plan, that leaves Scotland outside the EU unable even to *apply* to get in, because a country that isn’t financially independent can’t fulfil the conditions?

      Not to mention the hazards of a country with a significant proportion of the GDP dependent on financial services, just not having its own currency or clearing banks or lender of last resort.

      • No international agreement can ever be binding and permanent. There was serious consideration of countries leaving the Euro, and there will be countries that leave currencies in the future.

        _Personally_, I’m in favour of a Scottish currency. But countries have engaged in currency unions while still being separate countries before, and while it can cause issues (see: The Euro), it doesn’t make them any less individual countries.

        • Just a heads-up: it becomes easier to follow a discussion on this blog if you never let comments/replies get nested more than three times.
          So I’m going to leave a longer reply to your comment as a reply to this blog.

  2. No international agreement can ever be binding and permanent.

    A situation where Scotland entered into an agreement with rUK to become a country technically outside Westminster’s governance, but making use of sterling currency, accessing the Bank of England as lender of last resort, would not be an international agreement and could certainly be made binding and permanent: it would be devomax. Of course *in principle* Scotland could try to quit it – presumably, by holding a referendum (assuming our economic overlords were willing to pay for that) and becoming an independent country – but in practice, the Bank of England in particular would naturally require that any agreement made would ensure that they retained binding control over Scotland’s economic decisions – and this would need to be legislated for in the Westminster Parliament.

    There was serious consideration of countries leaving the Euro, and there will be countries that leave currencies in the future.

    Hm. Well, if you read the recent history of Greece in detail, you’ll understand that while in theory a country can leave the euro, in practice it’s really not that simple – especially not a country which has experienced a financial crash which its own banks were not able to weather. The situation the SNP are promoting for Scotland is one where explicitly Scotland’s banks wouldn’t be able or intended to weather a financial crash: we’d be dependent on the Bank of England, and subject to the control of decisions about cuts made by the Westminster Parliament – or the Crown, depending how that was legislated for.

    Nor would Scotland be “joining Sterlingzone” as countries joined the eurozone. To become part of the Eurozone, a country had to have its own central bank. The plan proposed by the SNP is that Scotland shouldn’t have its own central bank. Scotland not only couldn’t “join a Sterlingzone”, we wouldn’t be able to propose ourselves for EU membership.

    _Personally_, I’m in favour of a Scottish currency.

    As anyone who genuinely supported Scottish independence would be.

    But countries have engaged in currency unions while still being separate countries before, and while it can cause issues (see: The Euro), it doesn’t make them any less individual countries.

    Different set of circumstances. One of the conditions for joining the euro is that you have to be an independent nation, fully in charge of your own resources – that’s a basic for joining the EU. The SNP is not proposing that.

  3. “A situation where Scotland entered into an agreement with rUK…would not be an international agreement”
    An agreement between two nations would not be an international agreement? I don’t see how.

    I agree that leaving a currency isn’t simple. I suspect that’s one of the major reasons that the SNP want to not think about it.

    • Because Scotland, entering into a “currency union” with rUK without ever having independent resources of its own, agreeing to let the Bank of England and the Westminster Parliament make economic decisions that can override the Scottish Parliament, would not be in any sense* an independent nation. (In any case, it appears that Alex Salmond is acknowledging that Scotland can’t impose a currency union on rUK without rUK wanting to do that…)

      *I realise this is arguable, but: the whole currency union thing would have to be legislated from Westminster. It would be on Westminster’s terms, not on Scotland’s. There would be no advantage to rUK / Westminster in any arrangement where the Scottish Parliament could end the deal when it become disadvantageous to Scotland: the Bank of England would be liable to bailout Scottish banks under the proposed arrangement, and the Bank of England/Westminster Parliament would want to ensure they had control of economic decisions made by Scottish Parliament without any option of default or departure by Scotland.

      If the SNP don’t want to think about leaving UK currency, the SNP don’t want to think about independence.

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