SCOTLAND: AYE OR NAW?

Scott Denkman

A wee independence referendum is poised to annul the Union with England Act 1707 (Scot)

Scotland is set to hold a referendum on Thursday to decide whether to secede from the United Kingdom. Tomorrow, the people of Scotland will be asked the question, ‘Should Scotland be an independent country?’ The referendum only allows for a simple ‘yes’ or ‘no’ answer. Polls are currently showing a dead heat between the ‘yes’ and ‘no’ campaigns, with each poll alternating at around 49% to 51% - well within the margin of error for each poll.

The enormous upwelling in support of the ‘yes’ campaign in the past three weeks has caught Westminster off guard, causing Prime Minister David Cameron to visit Scotland on Monday.

Cameron pleaded to the Scottish people to vote ‘no’. He argued that Scotland is better represented on the international stage by belonging to a world power, and stated that Scotland would not be able to attract sufficient political clout by itself. He also warned of dire consequences that he stated would inevitably follow a ‘yes’ vote, particularly economic instability and uncertainty over currency. Alex Salmond, First Minister of Scotland, rebuffed Cameron’s statements as scaremongering and a desperate attempt to plug a sinking ship.

First Minister Alex Salmond, who spearheads the ‘yes’ campaign for independence, is head of the Scottish Parliament and leader of the Scottish National Party (SNP). The Scottish Parliament was established in Edinburgh in 1999 based upon a referendum vote for greater local power. A similar referendum for more local control was also put to a vote in 1979 under Margaret Thatcher’s government. Although a majority of Scottish voters voted for devolution in that first referendum in 1979, it failed to reach the 60% threshold set for passage by the Thatcher government, and therefore Scotland received no devolved parliament until a second referendum was decided affirmitavely in 1997.

Coined ‘Holyrood’, the Scottish Parliament was tasked with the responsibility over an annual block grant fund from Westminster, which enables the parliament greater local control in resource allocation, but Holyrood has no power to raise revenue or to adjust tax rates in Scotland. The SNP, the lead party in Scottish Parliament, has for nearly a century campaigned for Scottish independence, and now that the SNP controls the devolved parliament, the party now has its first real opportunity to demand an independence referendum from the UK government. Cameron acceded to the SNP’s wishes – this time with a simple majority required for the vote to pass.

The SNP is not unique in advocating for a breakup of the union. There are other separatist parties operating in every devolved region of the UK: Plaid Cymru has proposed the independence of Wales for generations; Sinn Fein lead the struggle for Irish independence from the UK in 1922, and has championed the annulment of UK sovereignty in Northern Ireland since the partition of Ireland at independence. All three parties hold sizable power in their devolved administrations (General Assembly for Wales and Northern Ireland Assembly, respectively), and all three send elected MPs to Westminster (although Sinn Fein does not send its elected MPs to serve in the UK Parliament, because it has a boycott of Westminster in place, resisting the legitimisation of the Parliament over the affairs of the people of Northern Ireland). Despite the continued debate over independence in each of the Celtic nations, the SNP has been the first party to lead its nation to a referendum for independence.

This is not the first time that a devolved parliament has demanded independence, however – voters in Quebec narrowly defeated an independence referendum in 1999 to secede from Canada – yet independence borne from an absence of violence such as this one is rare. The last successful vote for independence was twenty years ago, when Palau voted to create an independent nation in ‘free association’ with the United States, its former sovereign. The Compact of Free Association with the US allowed Palau a path for a smooth transition into statehood, with the US agreeing to provide the new nation with US currency, military defence and social services indefinitely.

The UK government so far has not given an independent Scotland this option. The UK government insists that if Scotland were to vote for independence, the newly independent nation would not be entitled to keep the UK currency, nor could it rely on the UK for defence, nor even for the BBC.

Alistair Darling, Labour politician and leader of the ‘Better Together’ (or ‘no’) campaign on behalf of the Conservative, Labour and Liberal Democratic parties, has argued that if Scotland decides to go it alone, it would be well and truly alone. Salmond disputes Darling’s assertion that the remainder of the UK would have exclusive supremacy over whether Scotland can use the pound. Salmond has threatened that if the UK intervenes in an independent Scotland’s continuing use of the currency, then his government will write off Scotland’s debts to the UK, leaving Scotland without a pound (or euro) of responsibility towards its repayment.

There are many questions, but not many real answers regarding Scotland’s potential status in the European Union (EU). The EU has drafted a legal opinion stating that since Scotland will become a new nation upon independence, it must reapply for entry into the EU. However, if Scotland is required to reapply, it is certain not to be admitted: new entrants need unanimous approval from all member states, and Spain is not keen to grant Scotland any favours – it is petrified of the reality that if Scotland secedes, Spain’s separatist-leaning nation of Catalonia will not be far behind. Catalonia and Spain will be paying keen attention to what happens with Scotland’s referendum, because what happens in Scotland will likely repeat in Catalonia in hasty fashion.

Even though an independent Scotland may not be able to join the EU, it does not mean that it must stay out of the European Economic Area. Scotland could follow the example of Iceland and Norway in acceding to EU trade law outside of state membership, so it can continue to enjoy free movement of goods throughout the continent.

Indeed, if Scotland is allowed back into the EU, the UK argues that Scotland will be required, as new entrants, to adopt the euro currency and the Schengen agreement for the free movement of people, two notions that the UK opted out of upon entry, but over which Scotland would not have an option. On the surface, this would mean that the euro will need to be adopted as the Scottish currency, and that ‘border guards’ would be stationed between England and Scotland (as Ed Miliband, Leader of the Opposition, put it bluntly), since the English-Scottish border would then form the external border of the Schengen zone.

Miliband may have an interesting point, but it seems highly unlikely that the EU, a union which has as its most important facet the freedom of movement, would require new borders to hinder that movement that it is trying to promote. Furthermore, while it is likely that Scotland would be required to adopt the European Exchange Rate Mechanism (ERM II), which is the precursor to adoption of the euro currency, it is less likely that Scotland will then be obliged upon accession to ERM II to adopt the euro currency itself after entry into the mechanism. Under ERM II, Scotland would be required to adopt a ‘floating peg’ on its currency, whereby the value of the Scottish pound would fluctuate within a band which allows for deviation up to 15% greater or lesser than the value of the euro.  Denmark, loathe to part with its krone, has languished quite happily in ERM II for the past fifteen years, and it likely will keep the krone indefinitely, since there is little appetite to adopt the euro in Denmark. I see no reason why Scotland could not do the same.

A huge driver behind the movement for independence is the assertion that Scotland will be wealthier per capita outside the UK than it is currently inside the UK. Scotland possesses a hefty sum of oil in its North Sea waters around the Shetland Islands, some 200 km north of the mainland. Although the size of the remaining oil reserves is disputed, petroleum engineers generally agree that stocks are slowly dwindling. The UK, Scotland argues, has spent the royalties from the oil revenues poorly, especially compared to Norway, Scotland’s nearest neighbour outside of the islands of Britain and Ireland.

Norway claims an adjoining patch of seabed oil next to Scotland’s, but unlike the UK, it has not spent any of its substantial oil wealth at all over the past few decades. Instead, it has created a sovereign wealth fund with the royalties it receives from oil royalties, and invests the income in listed companies and funds across the globe. The principal and interest are reinvested – Norway allows itself none of the principal, a stipend of less than 5% of the interest earned on the investments each year. Due to its prudent investing and the accounting miracle of compound interest, Norway now holds more than 1% of the total of the entire global equity market, making Norway by far the nation most prepared to weather a rainy day.

Many in Scotland lament the diametric trajectories of sovereign wealth utilisation in what is essentially the same patch of oil – choices that have made Norway very rich, and Scotland decidedly less so. Unionist campaigners, however, argue that oil revenues are prone to extreme fluctuations, and besides, there is not much oil left, and therefore cannot be relied upon to prop up Scotland’s budget. Pro-independence campaigners point out that local control of a dwindling stock is better than no control, and that the benefit of the oil revenues will be more pronounced when spread across a population of 5.3 million in Scotland, instead of the revenue being thinly spread across the UK population of 63.2 million. This would increase Scotland’s oil revenue on a per capita basis by nearly twelve-fold.  

This economy of a smaller scale can be experienced by making a trip to the oil-rich Shetland Islands, which your correspondent had the pleasure of doing in January this year (a pleasure, despite being bombarded with pelting sleet and rain, relentless gales, and seemingly eternal winter darkness for the entire duration of the stay).

Shetland Islands Council does not receive a share of the UK’s oil revenue, but the council does exact fees on the oil companies for the use of the council’s sea harbour. So far, the council has managed to profit £1.7 billion (AUD $3 billion) from the oil companies through harbour fees and land leases alone. This revenue, spread across a council population of 23,000, means that Shetlanders have benefited to the tune of £73,900 (AUD $132,300) per capita merely in payments for rendered services to oil companies. The benefit of this wealth is apparent in Lerwick, the main island’s largest town – the locals have been gifted with top-notch social services, including everything that a council could think to provide: immaculately clean council-scrubbed streets, new council-built sporting facilities, council-run restaurants and community centres, and even amazingly effective council-funded building insulation.

This sort of treatment is what the pro-independence camp envisions for the rest of Scotland: a country blessed with 97% of the UK’s oil revenues and a third of its land, but only 8% of its population. It also hopes for a ‘fairer society’, with an SNP government that is more willing to redistribute wealth and services than the Tory-led UK government, propped up by access to a greater share of funding to facilitate the redistribution.

Just as the people of Scotland have formed and shared their opinions about the referendum, so too have Melbournians. One does not have to look very hard to find a Scottish UK citizen, even at Melbourne Law School.

Scott Colvin, a first year law student and emigrant of Scotland, is firmly in the ‘aye’ camp. He sees Scotland’s struggle for independence as political, ideological and symbolic. Colvin states that the two-year run-up to the referendum has been anything but tiring, and it has given the opportunity for the country to have a ‘great intake of breath’ about what it means to be Scottish. For him, the referendum is about autonomy, and allowing Scottish people having a say in their own affairs, instead of being ‘dictated by a party in London in which Scots would never vote for’.

When asked about his concerns over the referendum, the native Glaswegian lamented the impetus for sectarianism to dictate how one is expected to vote due to ‘a tendency of some to be enslaved to their backgrounds’. Colvin is hoping for a win for independence, even if nothing changes for him but the colour of his passport.

Law students, especially those keen in constitutional or international law, will be glued to screens to await the outcome of the referendum on Friday afternoon (Australia time). Try to get some sleep in before then, lads.