The referendum: there are better, more positive arguments on both sides

I’ve bemoaned the weakness of some of the arguments presented on both sides of the referendum debate.   There are sound arguments on both sides.  There are objections and problems, of course, but I think the stumbling blocks have been given too much air time.  I’m confining this note only to arguments that seem to me to be positive and strong.

The main positive arguments for independence are:

  • responsiveness.  One of the most fundamental arguments for devolution and decentralisation is that policies can be adapted to the needs and circumstances of the places where they are applied.
  • empowerment.  The argument for independence is fundamentally an argument for self-determination; that people and communities should be able, as far as possible,  to make their own decisions.
  • solidarity.  The argument for solidarity – mutual responsibility and support – is not confined to national boundaries.  There is a good case, however, that it is difficult to maintain solidarity in very large societies, and that if we want to pursue an idea of the ‘Common Weal’ it will most effectively be done in a smaller country.

The main positive arguments for the union are

  • social protection and security.  The argument here is that larger units are better able to protect and insure their populations, by pooling and sharing common risks.  The ability to cope with economic crisis is a major test.
  • capacity.  With common resources, it is possible to do more.
  • pragmatic change.  The third argument is essentially conservative: it is that the best, most effective way to manage change is slowly, carefully, and thoughtfully.

There are other arguments which can be made out with some conviction for either side:  they include identity, culture and  democratic authority.  My point here is not to review the arguments comprehensively.   It’s to emphasise that there is a serious, normative dimension to the debate that we are scarcely hearing.


George Osborne injects further silliness into the independence debate

I’ve commented before about the silliness of some of the arguments that have been made in the independence debate.  For the ‘yes’ campaign, we’ve been told that everyone beyond Scotland is only waiting for the opportunity and they will roll over and invite the Scottish Government to tickle their tummies.  For ‘no’,  we’ve been told that there will be border guards patrolling with dogs, that Scotland will offer open season to terrorists and that Scottish televisions won’t be able to view Doctor Who.  George Osborne, reported in the Scotsman,  has just come out with a staggeringly silly idea of his own: that if Scotland tries to use sterling it will run out of ready cash. Scottish pound notes “wouldn’t exist any more”.

… for every pound the Royal Bank of Scotland issues as a banknote, it would be like a kind of IOU against the pound they have kept in their bank vault.  … it would be a situation where you would wait for coins and notes to come across the Border, either people bringing them or through transfers of money electronically because of a business deal or something like that, and then you want to try to hold that money in the country or at least make sure you haven’t run out of it.

Money is a means of exchange, and Scottish money is no different. Most of these exchanges are based on trust; Scottish pound notes no more have to be backed up by a stock of English pounds than English pounds have to be backed up by the memory of gold held in the vaults; and  banks have a wide-ranging capacity to issue money as they think fit.  It seems, then, that the current Chancellor of the Exchequer doesn’t understand what money is or how banking works.  Come to think of it, that may not be so much of a surprise.

The UK government reflects on what independence might mean for benefits

The Coalition government has released a document examining how a vote for independence in Scotland would affect the benefits system in Scotland, entitled Scotland analysis: work and pensions.  Despite the length (nearly 90 pages, plus appendices) the report does not have very much to say; its purpose seems to have been taken to be as a panegyric to the government’s marvellous policies rather than a serious consideration of the allocation of costs and responsibilities. The strongest appeal that can be made for the Union is that it offers security and solidarity in an uncertain world.  Those are precisely the issues most at threat from the government’s assault on social protection and the welfare state.

What I think I can extract from the paper is that Scotland currently has proportionately more DWP officials than England does; that if the system was to continue in its present form, responsibilities would have to be reallocated both North and South of the border; and that some of the Scottish Government’s commitments would be more expensive than carrying through the proposed cuts.  I think we could have worked out that last bit for ourselves.  Scotland has an ageing population and pensions will become more expensive; also true but inconclusive (it’s one reason why Scotland needs more immigration to balance the population).

To my mind, it’s the minor wrinkles that are more interesting.  The documents points out in passing that Fraud Investigation is centred on Glasgow (England will need to move that), that 19,000 Child Maintenance cases are cross-border (now there’s a system worth scrapping) and that there will have to be complex agreements to cover pensions abroad.

The central point made in the paper seems to be that

The unpicking of a complex and integrated infrastructure to pay benefits and pensions would incur costs to develop and set up new systems, while running costs could increase given the loss of economies of scale.

That’s fair enough, but it doesn’t come over as much of an obstacle.

Expelling Scotland from the EU

I’ve just read an illuminating paper in an academic journal, considering the position of Scotland in the European Union in the event of a vote for independence.  Daniel Kenealy’s paper, How do you solve a problem like Scotland?, is in the Journal of European Integration (doi 10.1080/07036337.2014.902942), which unfortunately means it’s not freely available on the internet.    The Commission’s current position is that in the event of a vote for independence, Scotland would be expelled automatically from the EU and would then have to apply for membership as a new state.  Kenealy argues that this position is entirely based in international law rather than European law, and that it is not consistent with the treaties, which require any departure from the EU to be negotiated and agreed, and transitional arrangements to be put in place. As I understand it, the EU would have to undergo a negotiation before it could expel a country that does not want to be expelled – a position that is sustainable neither politically nor in EU law.  Kenealy argues that expulsion ‘would be entirely inconsistent with the general principles of the EU.’

On independence and conscious uncoupling

The Guardian’s April Fool story, suggesting that an independent Scotland will switch to driving on the right, has a hard time keeping up with the loopiness of some of the current arguments.  It’s been suggested that there’ll be soldiers with dogs patrolling the border, that Scottish viewers will be banned from watching Doctor Who,  that Scottish customers will not be able to pay for goods in pounds.  The most recent argument at the weekend suggested that after a ‘Yes’ vote the governments would start negotiating, exchanging currency union for leaving nuclear missiles at Faslane.    The idea that the horse-trading will focus on how to exchange livestock that’s already died in transit  is pretty daft.

I should perhaps begin with acknowledgment that the scenario is not likely; the polls have been fairly consistently showing a ‘no’ vote, although the gap is narrowing.  What a negotiation would have to focus on, of course, is the division of assets and liabilities: who gets the silverware, who gets the record collection, and who pays the mortgage.  The assets include fixed assets (land, sea, buildings, holdings abroad) and movable property (such as art collections, museums, military hardware, computer records and money – e.g. the National Insurance Fund).  The fixed assets are easiest to resolve by custom and practice, but the sea boundary would raise issues – how it’s drawn could have a large effect on oil holdings.  As so often in a divorce, it’s the small items which are likely to lead people to blows.  The most contentious part of the movable property is that many of these holdings are in the hands of quasi-independent institutions.  Scotland would lose out, but as Britain’s national wealth is so substantially held in London, it already does.

The liabilities include debt, and commitments to pay benefits – for example, over a million pensioners who live abroad.  The debt is the main reason why Scotland would have an effective claim on the assets – and the reason why a Scottish negotiating team would have to be prepared to walk away with neither.

Another scare story, this time about pensions

The Scotsman devotes this morning’s first two pages to concerns about private pensions after independence, under the title Scottish independence: EU deals pensions blow.  It’s prompted by an announcement from the EU that the rules on cross-border pensions will stay as they are.   Under EU rules, cross-border pension schemes have to be fully funded; many UK schemes (about 5000 out of 6300) are currently in deficit.

A scheme doesn’t become a cross-border scheme because it’s paid to someone abroad – many people live abroad now (for example, pensioners living in Ireland and Spain) and receive British pensions.   It’s a cross-border scheme if it is based and operated across boundaries, levying contributions from people in different countries.

There are some issues.  Some pensions firms will have to change the way they operate.   Schemes in deficit will have either to stop taking contributions from people situated abroad, or set up new, independent schemes for each country.  Some people will have to join new pensions schemes, as many people do now when they move jobs; and some of them will find, reflecting the current economic climate, that the terms are less favourable than their current scheme – typically the scheme will offer lower returns, it won’t be salary-related, and and the date of retirement will be later.   It’s a consideration, but it’s hardly decisive for the independence debate.



The referendum on independence and the economy

The debate on independence continues to disappoint.  While I was amused by Alistair Darling‘s cutting comments on the SNP’s position on the Eurovision Song Contest,  it’s hardly the stuff on which decisions are made.  Scotland’s Future, the White Paper, treats the independence debate as if it was a short-term election manifesto; the Better Together campaign has harped largely on issues that, even when the criticisms are justified, are largely capable of being settled in short order through minimal negotiation.  The strongest arguments for independence are arguments for self-determination, diversity and independent decision making;  but the principal advocates of independence, the Scottish Government, are radical centralisers, who have limited the financial powers of local authorities, unified police forces and fire service, and currently are legislating to centralise social care.  The strongest arguments for union – Gordon Brown made them last year – are arguments for solidarity and equal rights, but the UK government is firmly committed to neoliberal principles, and it has been working assiduously to discard both.

For several months, John Curtice has been arguing that people’s views on the Scottish economy are shaping their preference for independence.  An ICM poll this morning suggests that Yes Scotland is gaining ground, and that more people are likely to think that Scotland will benefit economically from independence.  I wonder whether the link runs in the direction that John assumes.  There’s a literature on ‘motivated reasoning’; people are as likely to find evidence to support their views as they are to form their views on the basis of evidence.  If someone is looking for a reason to support independence, saying that it will make the economy better sounds rather more reasonable than saying ‘I just feel that way’.  In other words, some people will be saying the economy will improve because they favour independence – not the other way round.

Scottish independence: five unions

The Scottish Government has been working hard so as not to startle the horses.  The White Paper reads less like a blueprint for independence, more like an election manifesto: policies are incremental and specific.  One of the big selling points, the provision of better child care, is widely seen as something that the Scottish Government could do now.   The approach of the White Paper may be a mistake.  The problem is not that the policies are bad; it is partly that the current government cannot bind an independent Scotland to follow its pledges, and partly that those policies have been shaped by existing policy in the UK.  A programme for independence has to consider powers, not a shopping list of policies.

First Minister Alex Salmond has promised the maintenance of five unions:  the currency, the monarchy, defence, Europe and the ‘social’ union.   And there is effectively a sixth union being considered: the union of benefits administration across boundaries, including a commitment to maintain existing pensions entitlements which will take the best part of a century to unravel, and to principles which mirror the distorted priorities of the Conservative/New Labour consensus on ‘welfare reform’.

The monarchy is (perhaps surprisingly) uncontroversial – several independent Commonwealth countries have the British Queen as their head of state, and the arrangement has the great merit of stopping local politicians from claiming the authority instead.   The negotiation of terms with Europe may be difficult, but as the White Paper says, a greater risk of being forced out of Europe is posed by the UK’s coming referendum.   The ‘social union’ is vague, but there are many ties and they are not going to disappear overnight.

The other unions are problematic.  The idea of a currency union is unsound; it would subject a supposedly independent Scotland to the economic direction of London.  (Several countries simply use other countries’ currencies.  I lean to the principle of free use of exchange currencies – the Euro, the pound or the dollar – coupled with an obligation on banks to hold accounts on the same terms for any exchange currency.)   The ‘defence union’ would have to be about more than NATO, but it seems to me that a Scottish Defence Force cannot sensibly be erected from the residuum of three distinct armed services – it has to be reformed in an appropriate administrative and operational structure.

The union of benefits administration also seems unwise.  Pickling the existing benefits system in its present form  has the advantage that people will not be worse off, but they will not be better off either; and in many ways, including coverage, stability, equity, information management, avoiding poverty and social protection, the present system is not performing well enough for people of working age.

Three objections to independence

In the reaction to the White Paper, I’ve seen three serious objections raised.  It can sometimes be difficult to spot the arguments that matter, because so many of the objections have been silly.  There are not going to be guards with dogs patrolling the border, people in Scotland can’t be stopped from using the pound any more than they can be stopped from using the dollar or the Euro if they choose, and there is no obvious reason why people in Scotland shouldn’t have the same ability to see Doctor Who that people in Belgium have at present.

The first serious objection comes from Alastair Darling.  It is that an independent Scotland will have to budget for a National Debt, and that even if the amount is currently indeterminate and subject to negotiation it has to be counted in the public finances.   Part of the point of becoming independent is that Scotland will be seeking to raise finance through its own bonds, and that too has to be budgeted for.

The second serious objection comes from the European Union.  Although I think their legal position is questionable, both the Commission and the government of Spain have now raised objections to easing Scotland’s entry.   This will have to be the subject of negotiations but there is an immediate cause of action to be considered by the European Court of Justice: it is whether European Citizens (for everyone in Scotland is a citizen of the European Union as well as of the United Kingdom) can legally be stripped of their citizenship, and the protections that implies.  That needs to be resolved by the Court as a matter of urgency.

The third objection has been expressed by economist Yanis Varoufakis.  He argues that the Scottish Government’s caution has led them astray.  Asking to be part of a monetary union means that Scotland will be subject to the disciplines imposed by the bodies that manage sterling without having any effective power to decide what those disciplines are – precisely the situation that Greece has found itself in, in the Euro zone.  This is the worst possible option for economic management.  The way out is for Scotland to have its own currency, or if it uses sterling, at least its own economic policy.

Scotland's Future

The White Paper on Independence was released at 10.00 this morning.  I was in the BBC Studio to read it, so that I could comment on the welfare provisions.  Benefits are identified as a large part of what independence offers.  Among the questions reviewed is, “what will independence deliver for me?”, and three of the six bullet points given in response are about social security or tax credits.

The Scottish Government has taken a very cautious approach.  Most of what they plan is a preservation of existing rights and benefits, and where there have been recent reforms going in the wrong direction – Universal Credit, PIP, the bedroom tax and slower uprating – they have said they’ll reverse them.  Beyond that, they also promise to protect the position of pensioners, and to respect all accrued rights under the UK system.

That last point prompts some concern.  Every promise to maintain benefits runs the risk of locking the Scottish Government into the existing system.  Unless new money comes in, it’s never possible to make someone better off without making someone else worse off.  The more commitments that are made to maintain the system, the less scope there is for independent action – and this document effectively commits itself to keeping pensions, housing benefit and disability benefits and tax credits, and uprating them with inflation.  That’s the vast majority of benefits paid now.    The commitment to protect accrued rights means that if someone aged 21 is contributing now, they may well be still entitled to benefits based on those contributions in seventy years’ time – and in 45 or 50 years’ time, the SG will still need access to records held in England to be able to do it.  (What the government could have done instead was to pledge that people would not be left worse off  as a result of changes, buying out rights where appropriate.)   The commitment in this document means either that they keep elements of the UK system for the best part of a century, or that ultimately they will have to renege on their promises.

Beyond that, there are also elements in what the SG is proposing that identifying them strongly with the current programme of welfare reform.  They want benefits to be “swift, streamlined and responsive” to individual circumstances.  They will ‘review’ conditionality, but they’ll keep it.  “Our overarching aim will be that benefits work hand in hand with programmes designed to help people find work.”  Oh, dear.   This has been the blight of the current UK system.  Most benefits have nothing whatever to do with helping to find work, and everything being done in this direction impairs the benefits system and muddies the water further.