The Brexit shambles: charting a path through the rubble

Jim-Gallagher

In a paper published this week by Nuffield College, Oxford Jim Gallagher argues that in responding to June’s Brexit vote the UK and Scottish governments must proceed rationally, on the basis of the evidence, and pursue the national interest. They should not feel bound by the Leave campaign’s promises and should seek to stay in, or as close as possible to, the single market. The paper is summarised here.

In an attempt to unite the Tory party David Cameron has split the country. He has left the governments of the UK with a shambles to clear up. It is not at all easy to see a path through the rubble, but if governments focus on the things that really matter ­­­ – the economy, the territorial integrity of the UK – then perhaps they will be able to discern a way forward.

The first thing they need to do is understand the nature of the vote. Just like the vote in the Scottish referendum, it was as much a cry of distress as a political statement. Like the Leave campaign, the Leave vote is more protest than proposal. Of course, there are those in the UK who are ideologically opposed to Europe, but what got leave over the line in the referendum were the votes of the politically alienated and economically distressed. The present setup, economic or constitutional, is not working for them, and they were led to believe (by a notably mendacious campaign) that leaving the EU would solve their problems.  Those who thought things couldn’t get any worse for them were not put off by George Osborne’s warnings about risk.

In that sense voters are like students – they give the answer to the question they would have liked the examiner to ask. But in this referendum, it was the question setters who failed.

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Will Brexit lead to the break up of the UK?

robert_hazell (1)

The differing referendum results in the UK’s component parts have led to immediate speculation about a second independence referendum in Scotland and a border poll in Northern Ireland. Robert Hazell assesses the situation.

Scotland (by 62–38) and Northern Ireland (by 56–44) voted to remain in the EU, but were outvoted by England and Wales. This has led to immediate speculation that there might be a second independence referendum in Scotland, and a border poll in Northern Ireland to seek re-unification with the south. Scotland’s First Minister Nicola Sturgeon has said that a second independence referendum is ‘highly likely’, and Northern Ireland’s Deputy First Minister Martin McGuinness has (not for the first time) called for a border poll. How likely is it that a referendum to leave the UK might be held in Scotland, or Northern Ireland; and how likely is it that such a referendum would be carried?

In both countries the two questions are closely connected. Having lost the 2014 independence referendum, Nicola Sturgeon is not going to call for another one unless she is confident that next time it can be won. She is likely to wait until the polls consistently show support of 60 per cent or more for several months. Since September 2014 the polls have suggested that Scotland is divided more or less 50–50, when Scots are asked if they would support independence now. It might be expected that Brexit would give a boost to support for independence, but our Brexit devolution seminar on 19 May suggested several reasons why that might not be the case.

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What follows the referendum: negotiating Scottish independence, or delivering Devo More

Earlier this year Alan Trench gave a lecture at the University of Ulster’s Belfast campus about what might follow the vote in the Scottish referendum. In this article, he picks out the key points.

The full speech is available on the Social Science Research Network here, or can be downloaded directly here

Perhaps the most important and novel part of the lecture is where I map out what would follow a Yes vote – the sort of steps needed, particularly on the rUK side to tackle the many uncertainties that will follow. This is a separate issue from that of the strengths of each party in the negotiation (discussed here earlier in the week).  This would call for a great deal of imaginative thinking, in the midst of a first-order constitutional crisis. In particular, it seems to me that:

  • The negotiating process needs to move with all due speed, to preserve the democratic legitimacy of both rUK as well as an independent Scotland. There is no good reason for rUK to seek to prolong the process, and plenty of reasons for it not to.
  • The 2015 UK General election presents grave problems for that – the time lost to campaigning in an election and briefing a possible incoming new government means it will be impossible to make a proper start in negotiations before June 2015, since even provisional agreements reached under the present government might lack support from the new one.
  • One option – which appears to be gaining some support, particularly among Conservatives– is to postpone the 2015 election. But the present government has already been in office for 4½ years, and has no mandate to negotiate something so important to rUK as Scottish independence.
  • A better option would therefore be to hold a general election early, before the end of 2014, so there was both certainty about the composition of the UK/rUK Government and that government had a political mandate for independence negotiations. This would need approval by a two-thirds majority in the Commons, under the Fixed-term Parliaments Act 2011.

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10 things you need to know about what will happen if Scotland votes Yes

robert_hazell

As the Scottish independence referendum draws closer the outcome is hard to predict. Both Westminster politicians and the wider public are asking what – in practical terms – would happen if the Scots were to vote Yes. Robert Hazell offers a 10-point overview of what the road to independence might look like.

 

The timetable

1. Scotland will not immediately become independent. On the SNP’s proposed timetable, it would take 18 months for Scotland to achieve independence, in March 2016, just in time for the next elections to the Scottish Parliament in May 2016. In that 18 month period there will need to be intensive negotiations on all the issues listed in point 5 below, and more.

2. This 18 month timetable ignores two potential difficulties. The first is the UK general election in May 2015. That will require a pause in the negotiations of at least two months while the UK team of negotiators campaign in the Westminster election. A change of government in the UK will result in new negotiating teams, who will need time to get up to speed.

3. The second difficulty is the need for legislation. There might be a need for paving legislation at the start of the negotiations. Legislation will also be needed at the conclusion to grant Scotland independence on the terms which have been agreed. On many issues Alex Salmond wants a partnership or sharing arrangement with the UK (sterling being the most notable example). That will need to be given effect in legislation, along with the division of all the main assets and liabilities of the UK state. The legislation will be big and complex, and some of it will be controversial. There may need to be several bills rather than one omnibus bill. The legislation is likely to take a year or more to be passed by Westminster. For comparison, the Scotland Act 1998 took 11 months to pass, but in very favourable circumstances and with a huge government majority.

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Can the Union Survive? (It’s about the British identity, stupid. But what is it? )

In the latest of a series of British Association/Royal Society of Edinburgh seminars, the question was debated in sparkling style by a stellar panel of Vernon Bogdanor John Curtice, Michael Keating and Adam Tomkins. This summary requires no additional commentary.

Vernon Bogdanor thought the decision on independence was more momentous than was admitted by either side. Both sides agree that nationhood matters less in a globalised world but they go too far. Separatism can’t be fudged by social union. Nationhood still matters. The EU hasn’t really got a foreign policy and its future shape will probably not be what the founding fathers wanted. Even in the eurozone it really matters in which country you live.

Independence means a fundamental discontinuity which cannot be fudged. There would presumably be a governor general in Edinburgh and a high commissioner in London. Scots would enjoy no leverage at Westminster. Like Norway with the EU, Scotland would be consulted but little noticed. As EU decisions are faxed to Oslo so Scotland would become a “faxed democracy.”

Has the question already been answered? It isn’t really a question about £500 more or less better off per person. It is primordial, like the Irish in the 1920s. Will Scots say: “We do not belong with you any more?”

There is insufficient analysis of what holds the UK together and we should be extremely grateful to the SNP for raising it.  What’s being asked is a primordial question of identity.

On identity, John Curtice partly disagreed with Bogdanor. Scots were a nation of dual identity. The referendum is not about how Scottish they feel – everyone does – but how British. Not all “Scottish onlys” are in favour of independence.. Identity does not provide a sufficient guide for how to vote and a No vote may be a conditional vote. This is where the economy is crucial. Scots are no more nor no less keen on independence than they were 10, even 40 years ago. Labour made the mistake of thinking Scots wanted a lovely partnership with London. The SNP realised they really wanted devolved government to defend Scotland’s interest against London. They voted for SNP competence rather than independence. They believe that only foreign affairs  and defence are clearly not Edinburgh’s business but opinion in favour of maximum devolution is not widely shared. For example only a third of Scots want different pensions from the English. They don’t want to leave the UK safety net behind.

If the vote is No, England is not looking for devolution so a symmetrical Union solution is unlikely. But more taxation powers for Edinburgh could be win:win for both Scots and English as that means Scots would  pay for more of their services themselves. Wrangling over the (already contracting) Barnett formula should go away.

George Osborne’s veto on currency union flopped in Scotland but seems to have made the English keener on the Union. They are recording 3:1 in favour of Scotland staying in and that independence would not be good for England and Wales either. This means that if there’s a Yes vote the English may strike a tough deal.

Michael Keating insisted that “independence” and “ sovereignty” don’t mean want they used to. Even with a No vote, the relationship will be reconfigured in a way not very far from “independence lite.” In Scotland the sovereignty of the Crown or Parliament was never quite established as in in Westminster ; that’s why Scots are quite happy to discuss a divided or multiple sovereignty.

It used to be said that welfare and taxation policy were essential to sovereignty. That’s changing. The debates on welfare and independence are linked. The present welfare state is unsustainable. The social compromise in Scotland is mediated differently from England and will probably mean higher taxation. In 10 years’ time there will be more autonomous devolution but probably not full independence.

Adam Tomkins delivered a scathing critique of the SNP White Paper “Scotland’s Independence.” It failed to distinguish between institutions ( which would cease to apply to Scotland such as the Bank of England, the BBC, the intelligence service and embassies) and assets which would be fairly apportioned on independence. Apportionment was a highly complex task but doable. He delivered the stark verdict: the SNP’s assumptions are wrong in law and the White Paper is a false prospectus.

Final thoughts : Michael Keating thought that after a Yes vote, independence could be negotiated by the May 2016 deadline of the next election to the Scottish Parliament.(The Constitution Unit has doubts).

Vernon Bodganor didn’t see how Scottish membership of the EU could be denied. And something must be done for English cities to redress the imbalance of London and central government.

There is deep concern in Dublin that a Yes vote would destabilise the power sharing St Andrews Agreement in Northern Ireland.

A better articulation is needed of the Union state.

John Curtice spoke for the panel consensus. The referendum was the No campaign’s to lose but he didn’t underestimate their capacity for messing it up.

Scottish Independence and the UK general election

At Nicola Sturgeon’s lecture on Scottish independence on 13 February, she was asked about the 2015 general election, and how that might affect the timetable for Scottish independence.

If Scotland votes Yes this September, then the timing of the UK general election in May 2015 presents difficulties for the Scottish government and for the UK government.  It presents difficulties for the Scottish government, because they propose an 18 month timetable for the independence negotiations, from September 2014 to March 2016, and the UK general election falls right in the middle of that.  The negotiations will be very intensive, and involve every senior Minister in the UK government, with separate teams leading on finance, defence, energy, transport etc.  If there is a change of government in the UK in 2015 all those ministerial teams would change; and the new Ministers might start to unpick what had been agreed so far.  That could slow down what is already a very tight timetable.

The UK government will also be in difficulty if there is a change in 2015.  It will be in particular difficulty if Scottish MPs hold the balance of power in the new Parliament.  That is most likely to happen if Labour is the largest party in the May 2015 elections, but depends on Scottish MPs to form a government (as happened in 1964 and 1974).  On the SNP timetable, those Scottish MPs would be short lived, and due to leave Westminster in March 2016, when Scotland becomes independent.   If the removal of those MPs meant that the government was unlikely to command the confidence of the House of Commons thereafter, the government would be a lame duck government from the start.

Formally there is an answer to what would happen in March 2016 (if that is Independence Day, and the date when the Scottish MPs depart).  It is provided by the Fixed Term Parliaments Act.  Under that Act, if the government loses a formal no confidence motion, and no alternative government can be formed within 14 days, then fresh elections must be held.  But that formal constitutional answer might not be a sufficient answer to the political difficulties facing the government from the outset.

We could have a ‘temporary’ or ‘transitional’ government for a period of time until Scotland formally leaves the union.  Public sentiment in the rest of Britain is unlikely to be sympathetic to the idea that the Scots who are leaving the Union are ‘imposing’ a government on the rest of the UK (think of the headlines in the Sun and the Mail).  Another twist is that the UK government negotiating the terms of Scottish independence would be responsible to a Westminster Parliament which still contains Scottish MPs.  The UK government should be negotiating on behalf of rUK, the rest of the UK after Scotland has departed.  But if Scottish MPs held the balance of power at Westminster, they might be able to ensure terms which were more favourable to Scotland.

For Ed Miliband being reliant on short lived Scottish MPs to form his first government would be a nightmare scenario.  He will be praying even harder than David Cameron for a No vote in September.

The UK Government and an independent Scotland: taking a currency union off the table

The announcement by Chancellor of the Exchequer (and Danny Alexander and Ed Balls) that the UK Government is not prepared to establish a currency union with Scotland for use of the pound in the event of Scottish independence (see also BBC News coverage here) is a serious blow to aspirations of the SNP for a form of ‘independence lite’. The Chancellor’s speech is available here, and the Treasury analysis – the eleventh paper in the ‘Scotland Analysis’ series – on which Osborne drew in his speech is available here.

The logic of ‘independence lite’ was that it would avoid disrupting many key symbolic and economic ties between an independent Scotland (iScotland) and the remainder of the UK (rUK), so comforting swing voters about the limited scale of the risks of independence.  Those risks are real; think of how attractive Scottish investment trusts and insurance companies look if the complexities and exchange-rate risks of using a different currency are introduced into the equation, for example.  But this shift in the ground also emphasises a number of key issues about the implications of a Yes vote, and what would happen after it.

The first problem – which is particularly the case with the idea of a currency union, but applies to many other important issues – is the asymmetry of interest.  A currency union is central to the way the SNP has formulated its model for independence.  (That view can be contested, of course – whether by the likes of Jim Sillars on, essentially, autonomy grounds, or by Angus Armstrong and Monique Ebell on economic ones, relating to the flexibility of economic policy instruments and the implications of a debt burden.)  But it is of marginal interest or benefit to rUK at best, poses a serious risk at worst, and concluding that the risks of it from an rUK point of view exceed the benefits is a reasonable judgement to come to.  This isn’t the only issue where iScotland has a strong interest in something of limited concern to rUK, either.  In bargaining situations, iScotland has got to have something convincing to offer to rUK – and other than staying in the UK, or the Clyde nuclear bases, it’s hard to see what that might be.

The second problem is what the Yes side do in response to being denied a currency union – the ‘Plan B’ for iScotland’s currency.  There aren’t many currency options; they are using the pound without a currency union (‘dollarisation’, or perhaps ‘sterlingisation’ is the better term), establishing a Scottish currency, or seeking to join the Euro.  (The clearest exposition of those is in a video put together by NIESR, available here.)  The first and third of those pose major problems – dollarisation/sterlingisation would be unstable and expose iScotland to a range of monetary policy risks over which it had no control, while membership of the Euro normally requires having a national currency first, and then joining the Exchange Rate Mechanism to start the process of tying that currency to the Euro.  That implies a lengthy transition, a currency that sunders Scotland from what at the moment is its closest trading partner, and the question of what the constraints of the Eurozone might be in future.  From that point of view, an independent currency is the least unattractive option by some way – even if it seems riskiest to referendum voters, and proposing it now would indicate a significant reshaping of plans for independence at a late stage in the referendum campaign.

The third problem is how rejection of a currency union affects other options for ScotlandTalk of repudiating iScotland’s share of UK debt may be attractive (see also Alex Salmond quoted here) to SNP politicians, but is hot-headed nonsense.  It would create the very opposite of the ‘velvet divorce’ which underpins the Yes side’s strategy.  Indeed, it would amount to a unilateral declaration of independence, as well as creating a major ongoing dispute with rUK.  That would affect all plans for independence, not just currency; social union, an open border, co-operation in other matters will all be off the table.  It would create significant obstacles to any negotiations over EU membership, and an insuperable barrier to NATO membership, and make it very expensive for iScotland to borrow from international lenders if it could do so at all.  Reaching a deal on at least the main issues that underpin statehood with rUK would be vital for Scotland to become independent, and the asymmetry of interest means that rUK holds the whip hand in each strand of those negotiations.

The fourth problem is what this means for ‘independence lite’ as a wider project.  The idea that independence would widen the realm of autonomy in some areas (such as fiscal and social policy, and to some degree foreign policy) while retaining existing aspects of the Union such as currency or freedom of movement across the England-Scotland border may be attractive in Scotland.  But the reliance on rUK co-operation and goodwill has never made it a robust and achievable plan for independence, and that is what is starting to unravel for the Yes side.  Moreover, they are hoist to their own petard in two ways.  They have wanted to clarify the basis for independence before September’s poll; while the UK Government has rejected ‘pre-negotiation’ of independence, on currency it is clarifying its position in perhaps the most unhelpful way possible.  (The Electoral Commission also said that ‘the UK and Scottish Governments should clarify what process will follow the referendum in sufficient detail to inform people what will happen if most voters vote “Yes” and what will happen if most voters vote “No”‘ in its January 2013 report on the referendum question, so that request of the Electoral Commission has also been addressed.)

The Yes side also has (perhaps reluctantly) embraced the binary Yes/No approach to the referendum (and lost the possible ‘third option’ from the poll).  ‘Independence lite’ was a way of softening the impact of the choice of independence for swing voters and reinstating to a degree the middle ground that was otherwise excluded.  But the rejection of a currency union deprives the Yes side of that comfort as well.  As a result, the choice between independence and remaining part of the UK is becoming increasingly stark.

The challenge that now faces the SNP and the wider Yes campaign is whether to embrace a more radical approach to independence, which may be less attractive to key groups of swing voters (though not other parts of the Yes movement), but produce a more intellectually cogent model of independence, or stick to a middle course predicated on agreements with rUK that look increasingly hard to attain.  Nicola Sturgeon’s diary for the next few weeks included a lecture at UCL on Thursday (of which a report will follow) and she will give another in Cardiff on 24 March, so she will have plenty of opportunity to answer such questions.

None of this alters certain key facts, though.  The Scottish public still support an expanded form of devolution – not independence, but something that confers signficantly greater autonomy than the status quo.  Formulating that option is something that the Unionist parties need to do.  It is in their interests to make devolution work better, after all, as well as enable Scots to have the form of government they desire.  And putting such an option on the table will help people to regard voting No as a positive choice, not just a reaction to the uncertainties surrounding independence.  that also appears to be what voters want, and it is certainly necessary if the referendum is to resolve the wider question of Scotland’s place in the United Kingdom, rather that invite a ’round 2′ of the independence argument at some later date.

This is a slightly revised version of a post that also appears on Alan Trench’s blog Devolution Matters under the title ‘Scottish independence: does taking a sterling currency union off the table change the game?’