The Big Optimistic Case for the Union.

     Another review of the Barnett Formula.  Just what we need, as Scotland slips into a treble dip recession. I think that probably makes six reviews of Scottish spending since the Tory Scottish Secretary, Michael Forsyth, started publishing the GERS figures on spending in Scotland, which was supposed to resolve the matter once and for all.  It never did. 

    Alex Salmond seems to have ignored the call, just as he seems to have ignored the Treasury's demolition job on the Scottish Government's case for "repatriating" corporation tax.  Actually, I have some sympathy for Treasury Man in this particular row.  Cutting corporation tax would mean a the loss of a large chunk of an independent Scotland's revenues.  Unless you subscribe to the neo-liberal view that cutting taxes always increases revenues.  That might happen if the Scottish economy were to be galvanised into new business formation.  But there is no evidence that a simple cut in ACT would achieve this - even if Europe were to allow Scotland to go down the Irish route of 12% business taxes which is highly doubtful.  Many other EU countries resent the "fiscal dumping" implied by Ireland's tax policy.  

    Still.  This does not amount to a coherent case against independence, and nor does it answer the fundamental question of how Scotland can retain capital and investment against the relentless pull of London and the South East.  There need to be some oountervailing measures introduced, otherwise Britain's over centralisation will continue unchecked and Scotland will be reduced to a peasant economy based on tourism and whisky.  

  It was the week the union struck back.  After a war council  convened by the Prime Minister David Cameron in Downing St,, key ministers in the UK Coalition were sent north to take the fight to the Nationalist enemy.  The Scottish Secretary, Michael Moore, speaking to the David Hume institute, attacked the SNP’s “six unanswered questions” about independence:  EU membership, defence policy, currency, bank regulation, pensions and the cost of separation.   The Chief Secretary to the Treasury, Danny Alexander, then laid into Salmonomics at the CBI conference in Glasgow, declaring that an independent Scotland would be in debt to the tune of £65bn and that Scotland  would not have survived the 2008 financial crash had it not been for English gold bailing out our delinquent banks.  Plus, the oil’s running out - so there. 

   Westminster sources said that this was all part of a “big optimistic case for the UK”,  but it didn’t sound very optimistic.  It sounded like Gordon Brown’s desperately depressing case against separatism, which we heard loud and clear before the  four Scottish parliamentary elections and which has been rejected in the last two.  Arguably, this “big optimistic case” prepared the ground for the SNP landslide in May 2011. If you keep telling people they can’t stand on their own two feet, eventually they’ll try to prove you wrong. 

  If the unionist parties are going to save the UK, they’re going to have to do a lot better than this.   First,  EU membership is not a serious issue.  If the European Union can welcome countries like the Czech Republic and Slovakia as well as a host of eastern european states that used to be part of the USSR, there is zero prospect of them blocking an independent Scotland. The right to national self-determination is the foundation of the European project.  If a democratically independent Scotland wished to remain in the community, ways would be found to keep it there.   Actually, the real question might be whether England, or the “Residual United Kingdom”, would still deserve to wield its current clout in the European Council. 

    An independent Scotland would undoubtedly begin life with a deficit of several billions,  but given that the UK is running a deficit of £150bn, this is surely manageable.   £65bn seems a fairly modest slice of the UK National Debt, which is currently running at 75% of GDP, or £870bn, according to the Bank of England.   North Sea oil production may have peaked, but there is still around £1 trillion in reserves and Scotland has immense reserves  of renewable energy in wind and tides. The claim that Scotland would’ve been left to cope with the banking crisis on its own has been discredited by economists like Professor Andrew Hughes Hallett, who’ve pointed out that there are established conventions for handling cross-border bank implosions.  This stands to reason because most of the Royal Bank of Scotland’s branches, accounts and assets are located in England, mostly in NatWest.  This is not Iceland.  Any rescue would have had to be UK-wide, whether Scotland was independent or not, because the English banking system would’ve collapsed as ATMs closed and millions of English deposit holders staged a run on the banks.

   These are all old and very tired arguments.  The SNP has accepted that Scotland would remain in the sterling zone, and stay out of the euro, at least for the time being - which is also what Gordon Brown said when he was UK Chancellor.  Pension entitlement is a big problem for Scotland with an ageing population,  but it is just as big a problem for England. The Nationalists have largely abandoned the idea of having a separate army and diplomatic corps, though an independent Scotland would have its own defence force and would refuse to participate in illegal foreign wars. 

   There is vagueness certainly, about the SNP’s definitions of independence - but Moore’s are not killer questions.  I’m beginning to wonder if there is a positive case for the union at all.  Yes, Scotland does receive more per head in public expenditure than some areas of England - though not London, which receives more than Scotland.  But this is pretty poor compensation for the hundreds of billions that Scotland has donated in oil revenues to the UK exchequer over the last forty years. 

  Socialists used to argue that nationalism was a means by which the ruling class divided the workers of the world.  Well, no one talks like that any more, largely because the industrial working class largely has ceased to exist as a political force, and the Labour Party, under Gordon Brown, has became the party of City of London financiers.  We used to be told that the National Health Service was the glue that kept the UK together, along with secondary and higher education for all.  Well, the NHS is being privatised in England and had it not been for the SNP government, Scottish students would’ve been paying £9,000 a year tuition fees. Not much glue there. 

    

    Britain was at its greatest in the Second World war when Scotland and England united against fascism - but German militarism is a pretty remote threat today, unless you happen to read the Daily Mail.    What really kept Scotland and England together was the British Empire and the exploitation of the colonies, but little remains of that today apart from Her Majesty the Queen, and the SNP insist that they want her to remain head of state. The Nationalists also say that they wants to forge a new ‘social union’ with England, based on common social objectives and free movement of peoples. 

    I’m beginning to think that the Nationalists are better unionists than the Unionists.  At least Alex Salmond seems to have an idea about how the two nations of the union would coexist in a future relationship of equals. Certainly the old case for the union is lost, and unless a new and convincing one is found, the SNP might win the referendum by default.   Looking at the diminished and dependent state of Scotland in the current union, it’s hard not think that there must be a better way than living on handouts from the Barnett Formula.

   As a new political year begins, the political initiative remains with the SNP.  Labour is leaderless, the Tories are going nowhere, and the Scottish Liberal Democrats have been destroyed as a political force.  Things go on like this and it’ll be a question of:  ‘will the last party to leave the Union please turn out the lights’.