Thursday before last, George Osborne (UK’s Chancellor of the Exchequer) declared that UK would not support a currency union with Scotland if it decides to go it alone in the Scottish independence referendum to take place in September this year. Similar statements were issued by Labor and Lib Dem, which means that all three major Westminster parties have now precluded any possibility of an independent Scotland continuing the pound, at least with the UK’s consent.
This was quickly followed by Alex Salmond (First Minister of Scotland) calling Osborne’s speech nothing but “bluff, bluster and posturing” and claiming that Westminster was simply trying to intimidate the Yes camp (as supporters of independence are called), and that as soon as Scotland did attain independence, rUK (the colloquial name for the rest of the UK) would be eating its own words. For why wouldn’t they want a currency union with Scotland? Scotland has been doing better than England on all economic and social factors, and its people generally seem to be happier. Not only that, a sterling union would prevent uncertainty and losses for businesses such as RBS (Royal Bank of Scotland: a large chunk of their business takes place in the City and Vince Cable, the business secretary, has already said it makes more sense for RBS to move to London in case of a Yes vote, but Ross McEwan, RBS’s head honcho, remains noncommittal). Moreover, a larger part of North Sea oil revenues would go to Scotland due to geography. A sterling union would just make more business sense, Salmond emphasized, for what was perhaps the thirtieth time.
Scotland is undoubtedly strong in terms of natural resources, ranging from fertile land to oil and gas as well as mineral resources and coal mines. Scotland generates almost one-tenth of UK’s revenues, a generous proportion for its size, and more tax revenue than the UK. Currently these revenues go to Westminster; an independent Scotland would mean a substantial loss of revenue for rUK. That explains why the UK is playing strict headmaster.
Salmond has also been threatening that if not allowed a sterling union, independent Scotland would not pick up its share of UK debt, a claim that is quite at odds with his own statement that the pound is as much theirs as it is UK’s, which begs the question: wouldn’t the same be true for debt? Not only that, the threat makes the Yes camp come off as a petulant schoolboy arguing over his pocket money. Not paying back debt that is legally theirs means Scotland will be birthed as a nation whose only credit history is a massive default, and the size of whose economy isn’t all that large to begin with. Who wants to lend to that?
Ever since Scots got used to increasing devolution of power from Westminster since 1997, there has been a growing feeling that more autonomy, more social democracy and more of the general good life will come only with independence. The nationalist feeling only rose as Scotland gained their national institutions from England. Perhaps there is a sense among the Scottish that they don’t want what they see as UK’s charity. Salmond likes to compare an independent Scotland to nations like Norway and Denmark, implying that small countries can make it too. He portrays a vision of a content nation, removed from UK’s endemic problems of staying outside the EU as well as financial and political difficulties. A fresh start is appealing, especially to the younger generation. But that’s not always how things play out.
A sizable section of the Scottish population belongs to the Yes camp, and perhaps an even bigger section wants to remain with the UK. But by far the largest majority of Scots who will vote come September remain undecided. Polls show support for the Yes campaign has grown after the currency episode. Perhaps Salmond indeed pulled off his “bluff and bluster” act. Perhaps there was even some truth to it.
Other options include a wholly new currency, or joining the eurozone. The former brings its own problems of sustainability, and the EC president, José Manuel Barroso, has already warned that Scotland would find it extremely hard to win unanimous approval to join the eurozone as its 29th (ring any bells?) member State. Some smaller countries also adopt existing currencies without the owner nations’ approval. This has been done with the American dollar, for instance. But it is doubtful that Scotland could retain the pound without UK’s permission and with no central bank to bail out large Scottish banks such as RBS. If they do adopt this option, the Bank of England will certainly not pick up independent Scotland’s debt defaults, not just due to the inherent risk it involves but perhaps also out of a sense of spite. Nations are not much different from people and relationships.
Salmond and his right-hand (wo)man, Nicola Sturgeon, have thus far ignored all three serious economic arguments raised against an independent Scotland: on currency, pensions and the eurozone. Instead of coming up with viable alternatives, they have simply closed their ears to what they do not want to hear. Perhaps they know the game is up. But change is in the air, and as long as the Westminster unionists continue to issue what seem to some to be threats, the Scottish voter will only get increasingly alienated. The future of Scotland has never been more uncertain. Ladies and gentlemen, gear up for some exciting times ahead.