Daily Archives: August 11, 2014

Perspectives on the Scottish independence referendum

Just go to the end if you want the Boris Johnson bit.

It is easy to lose perspective when you are immersed in a continuous, heated debate in places like twitter. Most people do not pay as much attention to these issues as you do. Or, they live outside Scotland, or outside the UK, and they have different understandings and points of reference. They see the debate through different eyes. What are the implications?

What shorthand language we can reasonably use to skip over what we already know, and what we might need to explain?

The obvious example is about the meaning of independence. It is quite common for people new to the debate to quickly realise that independence doesn’t mean independence, and/ or declare that its supporters are stupid if they think it means independence, and/ or that it’s not worth bothering about:

Yet, many have known for some time that the meaning of independence has changed – partly to reflect the SNP’s pragmatic response to interdependence – and many still think that it’s worth doing, for reasons other than a desire to remove themselves completely from the world around them.

What might people need to know about the Scottish context?

The example that springs to mind is Thatcherism and Conservatism. “Not identifying with the Conservatives” was more important to support for devolution than identification with parties like the SNP. There is still great potential in Scotland to demonise the Conservative party. Some people have long memories about the poll tax and associate with Thatcherism the decline of important industries and an assault on the welfare state in Scotland. The Conservative party does terribly in the Scottish part of UK General Elections and secures about one-sixth of Scottish Parliament seats. It still has little chance of forming part of a coalition government in the Scottish Parliament because its inclusion would undermine the status of any other party.

Most importantly, a Conservative-led UK Government, which received little electoral support in Scotland, can sometimes be used to good effect by the Yes campaign (particularly in reference to policies, like the ‘bedroom tax’, that Yes supporters argue can be abolished in an independent Scotland). Things are so bad, for some, that people like David Cameron and George Osborne have to think twice about saying what they think about the referendum, for fear of their statements backfiring.

What might we recognise when engaging with people who view the debate in the rest of the UK?

The main thing is that UK political parties are operating in two arenas. They want to influence the independence debate, but they are also mindful of how their strategies will look to their larger audience, primarily in England. What goes down well in ‘Westminster’ politics, for one audience, may be damaging in Scotland.

Usually, this example is best served by looking at the rising importance of UKIP in England and the need for the main parties to respond, often by taking a tougher line on things like the EU (a referendum now seems inevitable) and immigration. Or, we might note that the UK Government’s rejection of a currency union plays well in the rest of the UK.

However, today, it is best served by the comments attributed to Boris Johnson. Someone who seems, to many, to be an entertaining oaf, worthy of election to London Mayor, and discussed as a potential future leader of the Conservative Party, can be a liability to the No campaign in Scotland. Something that might play very well to many audiences in England – along the lines of ‘Scotland is already privileged, and it deserves no more’ – has the potential to derail the No campaign in Scotland:

http://www.dailyrecord.co.uk/news/politics/boris-johnson-accused-letting-slip-4034087

http://www.scotsman.com/news/politics/top-stories/boris-johnson-vows-to-resist-scots-tax-devolution-1-3505113

http://www.thetimes.co.uk/tto/news/uk/scotland/referendum/article4172632.ece?CMP=OTH-gnws-standard-2014_08_10

 

 

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Scottish independence: what is the next step in the currency union debate?

When I wrote a post, trying to put the currency ‘Plan B’ debate in context, I got two main replies about the UK Government strategy: (1) to state unequivocally, ‘there will be no currency union’; and (2) to show the markets, and the public, that it is prepared to take on all of the UK debt if no deal can be done with the Scottish Government. The first often seems like a masterstroke, since it has put the Yes campaign, and Alex Salmond in particular, in a tight spot – and it has been exploited to great effect by the No side. I’m not so sure about the second strategy, which might provide reassurance about its economic responsibility, but also gives a little bit of light to the Yes campaign.

This side of the indyref debate, the aim is to win the vote – and the rejection of a currency union seems, most of the time, to be a very clever way to do so, even if there have been times when it had the potential to backfire. Let’s try to put this in order of appearance:

  1. The initial rejection. George Osborne announced the ‘no currency union’ line in Edinburgh in February. At the time, it seemed like a good strategy, and I was surprised at how effective the rebuttal – this is ‘bluff, bluster and bullying’ – often seemed to be – or, at least, how confident the SNP was about making such statements (see also Scheffer in the New Statesman).
  2. The cross-party agreement. Osborne’s statement was made all the more powerful by equivalent statements by Labour and the Liberal Democrats, which suggested that no UK Government would accept currency union. This time, the message came from people often seen as less objectionable than Osborne.
  3. The Salmond/ Darling debate. This issue became Alistair Darling’s most effective resource, particularly when he pressed Alex Salmond on his apparent lack of a ‘Plan B’.
  4. The media coverage, since the debate, has focused primarily on the ‘no Plan B’ issue.
  5. The No campaign has produced some rather striking campaign material to reinforce the point.

So far, so good for the No campaign, particularly if the currency issue continues to dominate the media coverage.

I’m not so sure about the debt issue, for two main reasons. First, no one ‘owns’ this decision in the same way. There is not the same sense of clear, decisive, decision making. Instead, we are piecing together a strategy from background discussions, some intelligent speculation (e.g. by John McDermott and Joseph Cotterill in the FT) and bitty replies to media questions – such as when Darling described being ‘phlegmatic’ about writing off Scotland’s share of the UK debt, amounting to approximately £120b, or £5b per year (10% of a new Scottish budget?). It has yet to be a key feature of the currency debate, and people are starting to ask questions.

Second, there is much more unresolved doubt about the effect of this aspect of the debate on voters. If you lose the pound, oh No. If you don’t have to pay a huge debt, oh Yes.

The assumption, so far, has been that a decision to refuse to pay the debt is ‘not in Scotland’s interests’ because ‘the markets’ would punish the Scottish Government, or lend only with high interest. Scottish Government debt would be expensive and our mortgage payments would go through the roof. If true, everything falls into place: if Salmond and his colleagues complain, and threaten to walk away, it seems like an empty promise or a remarkably irresponsible threat. Why would you entrust an independent Scotland to such fools?

Yet, on the other side of the coin, is an argument that could become persuasive to many voters: the UK Government refuses to negotiate. It rejects a currency union and it has already decided to pay the equivalent of Scotland’s share of the debt. The UK regards itself as the ‘successor state’ and, as such, has agreed to maintain its control of all assets and liabilities. In this context, Salmond and colleagues have not made irresponsible threats. Rather, the Scottish Government has not been given a choice, since the UK Government has decided not to share. More importantly, the Scottish Government would not default on its share of the debt, because it has no share on which to default. It ‘loses the pound’ but is remarkably debt free, and shoulders no blame for the outcome. No assets, no liabilities.

I’m not saying that this is a likely outcome. Nor am I saying that I am good at predictions (indeed, to show how bad I am at predictions, note that I still think there would be a currency union after a Yes vote). What I’m saying is that, if the currency debate continues to dominate, and people want to hear something new in the next Darling/ Salmond showdown, maybe this is what they’ll get. And maybe, next time, the debate won’t be so one-sided.

Update 25.8.14: this topic made the news in the lead up to the second debate:

Scotland ‘should not take on UK debt’ unless it can keep the pound (The Telegraph)

Nobel economist: Scots would be right to refuse to share UK debt if London won’t share pound (The Herald)

26.8.14 Scottish independence: John Swinney says ‘No currency, no debt’ (BBC)

 

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What is the Barnett Formula?

A lot of the Scottish Independence debate takes place on the assumption that people know what the Barnett Formula is. Yet, when I ask people if they know what it is, many simply say ‘no’ and many say ‘yes’, perhaps because they think that everyone else knows what it means. Here is a quick description. The Scottish budget, transferred by the UK Treasury, comprises two elements: an initial block settlement based on historic spends and the Barnett formula to adjust spending in Scotland to reflect changing levels of spending in England. The formula only relates to changes in the level of spending. It is based on an estimate of populations within the UK. Initially this was a 10–5–85 split for Scotland, Wales and England which suggested that Scotland would receive 10/85 of any increase in comparable spending for England by UK Government departments (or lose the same amount if spending fell). This comparability varies according to department. While some are almost fully devolved (e.g. Health, Education), others are partly devolved (e.g. Transport) and only the comparable spending will be applied to Scotland. The size of these ‘Barnett consequentials’ are based on three estimates: Scotland’s share of the UK population; the change in levels of spending of UK Government departments; and the level of comparability in specific programmes.

The crucial thing to note is that a change in spending on, say, health in England does not mean a direct change in health spending in Scotland. Instead, the change is made to the overall Scottish Government budget, and the SG decides if it will follow the UK lead or, for example, find money for health from another public service.

So, Barnett underpins a lot of indyref discussion because Scottish spending is linked to spending in England, producing some anxiety about the effect of ‘austerity’, even if the impact is not direct.

Another thing to note is that Barnett has a weird history and that it has stood the test of time, despite repeated calls for its replacement. To some extent, the wider system will change if there is a No vote, because the Scotland Act 2012 provides a way for the Scottish Government to borrow (from the Treasury) to invest in capital projects, and gives some more (albeit very limited in practice) powers to change the rate of income tax.

 

 

 

 

 

 

 

 

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Would Scottish Independence Save the NHS and Keep Education Free?

There have been two quite-surprising messages from the Yes campaign recently: independence is the only way to protect the Scottish NHS, and independence is the only way to keep Scottish compulsory education free. I say ‘surprising’ because both areas have been devolved since 1999 and the Scottish Government has developed or maintained distinctive policies without much interference from the UK Government. It is tempting to conclude that these arguments represent little more than the hype that campaigners feel they have to generate to get attention – and No campaigners have generally been dismissive of these claims. Beyond the hype, what is the argument in each case?

In health, there are two arguments. First, the UK Government is cutting (or will cut) NHS spending in England, which has a knock-on effect for the Scottish budget. The Scottish Government would either have to cut Scottish NHS spending or find the money from another service (as in higher education, if UK spending falls when it charges fees). Second, the UK Government is pursuing a ‘privatisation’ agenda, which is anathema in Scotland. Yet, so far, this relates largely to the use of the private sector to deliver services. The NHS remains tax funded and, in most cases, free at the point of delivery.

In education, the argument from Teachers for Yes seems to be: if you vote Yes, you can stop funding nuclear weapons and give education greater priority in the budget. This can be used to fund education directly – teachers, buildings, equipment – and indirectly, by reducing poverty and, therefore, reducing inequalities in education outcomes (or, for example, spending more on childcare and pre-school services). Independence would also give the opportunity to enshrine a right to education in a written constitution. The press release contrasts this vision with a UK future of austerity, with reduced spending on education in England having a knock-on effect on Scotland.

There is a more sophisticated case that could be made by the Yes campaign, which could go something like this:

  • our priority is to reduce inequality
  • at the heart of health and education inequality is income inequality
  • only independence gives us the levers to introduce a more progressive tax and benefits system and reduce income inequality.
  • This might be boosted by the desire of many to reduce spending on areas such as defence and, for some, to increase taxation.

Or, it could simply argue that everything is connected; that a tax and benefits system underpins all efforts to ‘join up’ the delivery and funding of public services. Some of that argument is in the Scottish Government’s White Paper.

However, I don’t think that the Yes campaign is making that sophisticated case. Or, at least, I haven’t yet seen it. Instead, the focus is on the idea that staying in the UK means sticking with the austerity agenda – and less money for public services such as health and education. What it doesn’t address is that the austerity agenda would be faced by an independent Scottish Government as much as a devolved one. What it doesn’t address is that, under devolution, the Scottish Government has been responsible for using a devolved budget that has generally been very large and has only now begun to shrink – and that, if UK austerity really does start to ‘bite’, a devolved Scottish Government will have some scope to borrow and tax to offset the effect (although I qualify that statement here). Consequently, it is too easy to dismiss. While it might have an effect on some voters inclined to vote Yes, it is also vulnerable to ridicule and could easily backfire.

See also: a discussion of the Barnett formula, which underpins a lot of this debate

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