A No majority appears the most likely response on 18th September, and a very high turnout. Those are neutral facts.
Alex Salmond won last night’s debate – he was more skilled rhetorically, and has only one weak point that Alastair Darling can use. As Darling had used that weak point well in the previous debate, Salmond had evidently taken counsel with his speechwriters and devised several excellent rhetorical responses to Darling’s factual and accurate criticisms of the SNP’s plans. They both bellowed at each other a lot and I doubt if their shouting-across-each-other attitude convinced anyone. That’s my opinion.
As the audience interrogation exposed, Labour’s failure to oppose the Tory/LibDem destruction of the welfare system and privatisation of the NHS, was their worst weakness in trying to campaign for Better Together.
Why I’m voting No:
Alastair Darling was right about currency union. It’s bad policy.
And as Alex Salmond has repeatedly made clear, and did explicitly in last night’s debate, calling currency union the “sovereign will of the Scottish people” if Yes gets the majority, we won’t have a choice about this. The policy was outlined in the White Paper, has been promoted as the only option by the First Minister: Yes majority can be lawfully taken by the SNP and the Tory/LibDem government as their mandate to create currency union.
Yes, the Tories have leaked – and occasionally said openly – that they will support currency union: unsurprisingly, as currency union is the best thing for the finance industry that funds them. SNP in government in Scotland, Tories in government in Westminster, Salmond in a position to be able to claim a mandate for currency union, and within the Yes movement, neither organised political opposition to currency union nor open discussion of why it matters that currency union mustn’t be installed: I don’t see how, after 19th September, any political power in the UK – except possibly Labour, and I’d hate to have to count on them in this contingency – could prevent the two parties of government from doing this.
To be clear, the SNP’s plan for currency union, and Alex Salmond has said he has no other, is that Scotland will join Andorra and Monaco to become the third country in Europe with no central bank: Westminster will legislate for Scotland to make use of the Bank of England. Salmond hopes to have one Scottish government appointee on the monetary policy committee. This is not independence: this is devomax. If the SNP and the Tories don’t get to legislate this arrangement of inequality for Scotland at Westminster, Salmond says, he will have Scotland default on its share of the national debt and Scotland will “just use the pound”.
I think this was a canny decision on the part of the SNP. In 2012, it became evident that most people would vote for an undefined devomax rather than independence. The SNP have simply ensured that they can.
Supporters of this plan have defended it in all sorts of absurd ways: from comparing Scotland to Ireland of 90 years ago to the Isle of Man or Harrods today. (In Harrods, you can use all sorts of currencies to shop. Scotland, if the supporter last night hadn’t noticed, is a lot bigger than Harrods, and Harrods is required by the UK government to pay its business rates and taxes in pounds sterling.)
If Yes were to get the majority, and if the SNP were actually supporting independence, then Scotland gets to have its share of the national assets currently with the Bank of England, and would be able to set up its own central bank either with its own currency pegged to the GBP initially or with the euro. Scotland also takes a share of the UK national debt. These shares would be based on GDP/population and are fairly well worked out already in international law. None of this would be particularly easy, but the SNP are proposing that Scotland shouldn’t even start doing it: just let the Tories legislate currency union instead.
Because Alex Salmond doesn’t favour independence, and has made clear that if you vote Yes you are giving your consent to his scheme, in any case none of the preparations for independence will happen right away: if currency union can be stopped, it will be stopped at Westminster in May 2015 after a Labour majority ensures the Tory and SNP plans can’t proceed further.
(If there’s a Tory win in 2015 (even less probable than a Yes majority in 2014) then the Tories can legislate currency union for Scotland: there’d be no way to stop them, and the Scottish government would be abetting them.)
At that point, the SNP still in government, they could of course announce that Scotland will default on our share of the national debt and begin independence “just using the pound” and known internationally as defaulters. No matter how many Nobel-prize winning economists say “sure, let’s do that!” it doesn’t sound like the prudent course to me.
But yes, several microstates do “just use” the currency of the larger country they’re dependent on: and crown protectorates like the Isle of Man do, and yes, the British Empire did try to require that its colonies use the pound sterling, as Yes Scotland supporters fondly hark back to when arguing Scotland could use the pound too – or like Panama, which has used the US dollar since it became a state.
(More sensible Yes supporters try to claim the currency union like the eurozone: it’s not. Each country entering the eurozone did so as a nation with sovereign control over currency and its own central bank, which ceded some powers to the European Central Bank. iScotland would never have these sovereign powers in currency union legislated by the Tories: the only resemblance is that, like countries in the Eurozone, it wouldn’t be in the power of Scotland to decide to leave. That would be for the legislators at Westminster and the Bank of England to decide. Other Yes supporters argue that “just using” the pound would be exactly the same as being part of the sterling area from the 1930s-1970s: because nothing whatsoever has changed in the financial world since the sterling area stopped existing forty years ago.)
But let’s talk about Panama.
Panama is the southernmost country of Central America and the whole North American continent. It was for about eighty years part of Columbia. The US wanted to build a canal allowing ship transport to cross the continent without having to circumnavigate the whole of South America: Columbia wasn’t cooperating. A French engineer, Philippe Bunau-Varilla, and an American lawyer, Nelson Cromwell, together arranged for Panama to become an independent country and grant the US sovereign rights “in perpetuity” for the construction of the Panama Canal. Panama attempted to renegotiate this treaty from the 1960s onward, but got nowhere: the US finally gave up their rights in 1999, having no further need of them.
Panama uses the US dollar, as several Yes supporters have pointed out, and it prospers. The Adam Smith Institute points out that Panama banks don’t have a central lender: if they fail, they fail. Wages stay low, the labour market is “elastic” – little job security. Everyone who had their savings or their business in a failing bank loses: ASI think this is an excellent free market plan for Scotland. And of course Panama never had a choice: they were independent by the grace of the United States, their currency was the decision of the United States, and their main national asset and source of government income, the Panama Canal, has all dues paid in US dollars – very convenient for US businesses.
That is the model that Alex Salmond is proposing for iScotland. Why vote for that?
As Adam Tomkins notes here in Currency and Credibility, the Tories – any UK government, but the only party that’s even halfway to considering it is the Conservatives – would not legislate currency union, nor would the Bank of England consent to it, unless “accompanied with fiscal constraints” – that Tomkins thinks the SNP would never agree to. I think he’s wrong (if Yes gets the majority) because I think Alex Salmond has now laid his political career on the line: either he gets currency union, or he goes under. The argument that people make that this is all a complex bluff on Salmond’s part is possible, but not convincing to me.
What neither Alex Salmond nor Alastair Darling – nor anyone else in power of any political flavour – has mentioned is this: if Yes gets the majority, unless currency union is installed, UKFI would have to fission.
UKFI is the Royal Bank of Scotland, Bank of Scotland, Lloyds Group and TSB. If iScotland were to be a genuinely independent country, against the will of the SNP government and the Tory/LibDem government, then this huge banking group would have to divide its assets according to its customer base and split into two – rUKFI and ScotlandFI. That, like financial independence for Scotland, would be the sensible thing to do: it won’t be easy. Because it won’t be easy, good sense would suggest that planning the operation begins as soon as possible: the SNP and the Tories are apparently not wanting to talk about it at all and try to avoid the issue.
With currency union, UKFI can remain intact, and as a banking group whose assets dwarf the Scottish GDP, it would have huge financial clout in Scotland, much greater clout than the government. Scotland would become the tool of the banks and the Westminster government, and no way out. Why would I vote Yes to get that?
No way out? People tell me that “oh, Scotland could just default on the agreement”. Tell that to countries who made the mistake of getting into an agreement with the World Bank or the IMF, or look at the Eurozone treaty. International finance is serious business. A country cannot simply decide they’ll walk out of their agreements.
There are few voices in the Yes movement opposing the SNP’s plans for currency union. There’s no concerted opposition. The hugely ignorant ideas about currency and the economy expressed by Yes supporters in favour of currency union go uncontradicted by a Yes movement more concerned with pushing up their share of the vote than working for a properly independent Scotland.
[Update, 7th September 2015: A year later, it’s finally revealed that a majority on the board of Yes Scotland knew that there had to be an alternative plan to Scotland using rUK currency: but none of them spoke out then.]
While I do see possibilities for opposition if Yes gets the majority, the only sure way to stop this horrible folly is to vote No.
So that’s what I’m doing.
Updated to add the link to and quote from Adam Tomkins.