Was it really a ‘Black Wednesday’ for Alex Salmond and the Yes Campaign?

I guess, when the RBS, and other financial institutions announce that they are leaving Scotland, you’re supposed to think it’s a bad thing for Scotland or, specifically, a bad thing for the Yes campaign. Perhaps it ties in with the narrative of chaos and capital flight, as people and businesses worry about financial instability and the value of their money, and start to move it somewhere safer. The economy is usually the big issue in the debate, so this doesn’t look good. As usual, you can rely on the Telegraph to put this in stark, personal, terms, ‘the most high-profile rebellion against Alex Salmond’s Yes campaign so far’, the Daily Mail to describe “’Black Wednesday’ for Salmond’, and the Daily Record to have ‘Alex’s Black Wednesday’ on its front cover as this news combines with the statement from BP about preferring to stay within the union (and a Record poll suggesting the return of a No lead).

Yet, if we scratch below the surface, I wonder about how effective a message that will be to undecided voters. I think you might see three levels of debate and, therefore, three types of response from people more sympathetic to the Yes side:

  1. The discussion with economic and financial experts. John Kay (on Newsnight 10.9.14 at abut 30 minutes) responded by saying that: (a) this is a ‘brass plate’ measure, with the operational and jobs side remaining unaffected (confirmed by the banks); and, (b) there really aren’t any Scottish banks left anyway (RBS is 82% owned by the UK Government, Lloyds is not primarily Scottish, Clydesdale is owned by National Australia Bank). Kay went on to argue that the debate is somewhat artificial anyway: the flow of money and capital is global, and it does not recognise national borders. A focus on those borders distracts you from the interdependence between global financial institutions and governments, and the declining ability of governments to control the economy and financial sector.
  2. Yes campaigners in the media. Alex Salmond argues that the crisis and uncertainty are caused by the UK Government/ political party refusal to assure the markets by agreeing to a currency union.
  3. Yes campaigners on the ground. I wonder if you will see a different message, to chime with the current mood (or, at least, one strand of it) about the prospect of social democracy in Scotland, and to remind people how unpopular banks and bankers became after the financial crash. It might go like this: ‘those are the banks that failed and were bailed out. We are facing austerity because the government put so much money into saving the banks and the bankers. They profit, and make huge salaries, while we suffer. Why should we care about banks moving to London so that they can be bailed out again at taxpayer expense?’ This may seem more impressive to some than the idea that an independent Scotland would not have allowed banks to fail in the first place (see point 1).

More importantly, will people talk about this development being a bad deal for the rest of the UK? The argument is that a large number of financial institutions are moving, to some extent, to London to make sure they are protected by the Bank of England and UK Government. So, a Scottish Government may be able to operate unencumbered by that responsibility. Scottish taxpayers will still receive services given by banking institutions protected by the rest of the UK. To some extent, the refusal of a currency union by the leaders of political parties is there to assure the rest of UK public; to present an image of strength, to stand up for the UK interest, and to demonstrate economic and governing competence. I’m not sure that they can do this when people think through the implications (this point is put much better by Robert Peston). The UK Government can promise to reject a currency union but, as far as I can tell, the Bank of England will still act as a lender of last resort (or, indeed, a lender on a regular basis) to ‘Scottish’ banks.

See also: the main problem for an independent Scottish Government is the potential loss of financial and legal services, which account for a large proportion of Scottish economic activity. On the financial side, see the NIESR report here – http://niesr.ac.uk/sites/default/files/publications/dp434v2.pdf – and, on the legal side, see this thread (click on the date) initiated by @loveandgarbage

See also: Ben Chu in the Independent blog ‘How Scotland could be better off without its big banks’


Filed under Scottish independence, Scottish politics

5 responses to “Was it really a ‘Black Wednesday’ for Alex Salmond and the Yes Campaign?

  1. Dram

    There was always going to be a bit of an economic freak out leading up to, and right after separation. It will pass. Everyone wants to make money, so, shortly there after, when the dust settles, it will all pass.

    Don’t panic, stay the course. Or, if you will, “Keep calm and Independence on!”

  2. Andy

    For Scotland to prosper (that is for the country and people to be better off than had they stayed with the union) they have to create wealth which involves attracting inward investment. now the SNP propose to operate a corporation tax 3 points below the rest of the UK. That might work or it might not. It did for Ireland for 15 years until the euro crisis. the multi-nationals are fickle and capital is flying out of Ireland.
    Oil is an income but will be offset largely by the removal of subsidy from the rest of the UK. The oil income will decline inevitably and experts can argue how fast. Factors affecting investment by companies in oil recovery are the price of oil which is lightly to remain relatively stable as fracking reserves in the US increasingly meet their demand for energy. With higher oil recovery costs the more expensive oil in the North Seas becomes more difficult to extract meaning less tax . Trident goes and there is unlikely to be any military ship building orders coming North of the border. HS2 and infrastructure investments in England are increasingly going to concentrate away from the border. Scotland is not Norway. The Spanish are not big fans of separatist movements. How quickly will Scotland get back into the EU will depend on many factors and may include Scotland having to accept the euro as membership. you could be out of the club for between 5-10 years however by then the scottish economy will no longer be dictated to by those nasty English but by those nice people in Berlin !! (The greeks wouldn’t agree with you calling them nice). Following my drift. This is not about Celtic or Rangers, Tories or Socialists its about a country. Scotland will still be Scotland on the 19th September with all its proud history. What however is important is what future will face it? The YES campaign cannot answer that because the key decision on fiscal union is not agreed. The No campaign can state that Scotland will become a very different and potentially uncertain place. Are your grandchildren’s futures worth this level of uncertainty?

    • Dram

      My grandchildren already face uncertainty in the UK, as do yours. Time for a change. More and more the NO side sound like scared naysayers, afraid of their own shadow, afraid of something new. “ooooh what about this, oooh what about that.” In the end, business is business, after a fashion, the business community will settle down and come back to Scotland to make money. If they ever leave at all, I don’t think they will. How about you guys help us make it work. There will be bumps, yes, and worries, yes. But it can work, if we do it together. Don’t be afraid. Join us!

  3. Pingback: Scottish Independence | Paul Cairney: Was it really a ‘Black Wednesday’ for Alex Salmond and the Yes campaign?

  4. Pingback: Scottish Independence | Paul Cairney: Was it really a ‘Black Wednesday’ for Alex Salmond and the Yes campaign?

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