White Papering Over the Cracks

Next week the Scottish nationalist government will publish their long awaited White Paper on which will set out their case for breaking up the United Kingdom. Expectations could scarcely be higher. Alex Salmond, in typically-understated style, predicted that this manifesto for breaking up the UK would "resonate down through the ages"... We will see.

Next week the Scottish nationalist government will publish their long awaited White Paper on which will set out their case for breaking up the United Kingdom. Expectations could scarcely be higher. Alex Salmond, in typically-understated style, predicted that this manifesto for breaking up the UK would "resonate down through the ages." His deputy, Nicola Sturgeon, used her conference speech last month to promise voters that "It will answer all your questions."

We will see. The nationalist White Paper certainly has a big job to do. We are now a year and a half into Alex Salmond's campaign and the most recent poll has support for leaving the UK at just 25%, well below the level of support throughout modern Scottish history. Voters feel uncomfortable forced into a false choice between being distinctively Scottish or having the security and opportunity of being part of one of the world's largest economies. We know that we can be proudly Scottish and part of something of something bigger. People in Scotland can see devolution inside the United Kingdom delivering for us.

In the face of satisfaction with devolution and widespread anxiety about the risks of separation nationalist strategists face a political challenge. Should they attempt to excite or to reassure voters? Will the White Paper be a credible, costed government document or will it be a political wish-list, thick with false promises? So far the SNP have chosen politics over credible economics. To regain credibility they must take a more serious approach to the tough fiscal and monetary policy questions they face.

It is important to remember what the nationalists can and cannot promise next week. The 1997 White Paper on devolution was endorsed in the referendum of that year giving a mandate for the detail it set out. This time things are very different. Alex Salmond can set out what he would like to achieve in independence negotiations, but a vote by Scots cannot mandate the rest of the UK, or the other 28 nations of the EU, who will rightly defend their own interests in such talks. Nor can we change our mind if we vote yes, for all the reassurances that may be offered, a yes vote will end in us leaving the UK.

This matters because so much of the nationalist proposition rests of the idea that Scotland can leave the United Kingdom but keep all the benefits of being part of the UK. In recent weeks we have been asked to believe that, after Scots leave the UK, UK taxpayers will continue to fund Scottish medical research, investment in Scottish green energy, naval shipbuilding on the Clyde, and to share administration of benefits and pensions. Nowhere is this 'everything will change but nothing will change' approach more obvious than on the question of what currency a separate Scotland would use.

The SNP assert that an independent Scotland would keep the pound as part of a new Eurozone style currency union. This position was always unsustainable as a deal to share a currency necessarily relies on a willing partner. However both the UK Chancellor and Shadow Chancellor say they can't see such a deal being struck. They were joined this week by the Welsh First Minister.

Faced with unwilling interlocutors, Alex Salmond now suggests that if the rest of the UK refuses a currency union Scotland would simply use the pound without agreement, in the way that Ecuador uses the Dollar or Montenegro uses the Euro. However this option is so irresponsible that even the SNP's own advisory Fiscal Commission ruled it out as a serious option.

The nationalists are now briefing that because such a situation would be so unstable and such a risk to both the Scottish and UK economies that the government of the rest of the UK would have no choice but to sign up to a currency union. Alternatively they argue that if a currency union was refused then an independent Scotland would default on our share of UK debt. The description of Edinburgh as the Athens of the North would take on a whole new meaning.

Such belligerence from Alex Salmond reveals the lack of confidence he has in his own currency policy. As former adviser to the First Minister, Professor John Kay has written, even if the rest of the UK was a willing partner for currency union after Scots left the Union, the fact that Scots negotiators would be entering talks without any alternative reduces the chances of getting terms that Scotland could sign up to.

Scotland's banking assets make up a bigger proportion of our GDP than those of Cyprus, Ireland or Iceland. Millions of us have mortgages, pensions and savings. Nearly two hundred thousand of us have jobs which depend on the financial service sector in Scotland. Given recent history, they know that suggesting Scotland could do without a lender-of-last-resort is simply not a credible position, yet the SNP refuse to plan for the establishment of a separate central bank and new currency, putting politics before the prosperity of Scotland.

A White Paper written on the premise of a currency union with the rest of the UK would be a fiction. However a White Paper based on sterlingisation would be a farce.

The SNP's fiscal analysis is no more plausible. In opposition their independence case rested on the idea that Scotland runs large fiscal surpluses created by oil revenues. While an opposition party can ignore official statistics, a party of government has to own them. The SNP's own private analysis, released under duress last month, admitted that "Scotland has run a net fiscal deficit in 20 of the past 21 years. There has only been one year since 1990 when tax receipts have exceeded total public spending."

Unable to face the consequences of their own numbers and unwilling to change their rhetoric they now hold ludicrous positions. Without Norwegian style surpluses they remain committed to a Norwegian-style oil fund and to borrowing to pay into it. This despite their own analysis warning them such a course of action would lose us money.

The nationalists consistently deny the fiscal facts-on-the-ground. A pre-White Paper pensions paper published by Scottish Ministers dangled the prospect of earlier state pensions, claiming that Scots workers were paying the price for England's ageing population. A rebuke from the official statistics authority followed alongside official demographic data showing that Scotland's dependency ration was more challenging than that of the UK.

In any official publication we should expect high standards of economic analysis. In a document which asks us to take an irreversible decision to dissolve a 300 year old union, we need detailed and credible economic analysis. The White Paper must credibly set out the costs of establishing an independent state, the costs of losing the financial stability and security of the UK economy, and the costs of the individual political promises made by Ministers. The long-term challenges and costs were set out in stark terms this week by a landmark IFS report. If it hasn't provoked a rapid redraft in St Andrew's House, it should have done.

The White Paper will be thick with supposed answers. Having waited 18 months for this publication we will spend every day until the 18 September examining whether the answers are credible. This is just the start of the debate.

The really big question they can never answer is why, with so much risk and uncertainty, Scots should be forced into this choice between being part of the UK or having our own distinctive voice. We know that devolution means we can have both. We can have the best things about being a small country making our own decisions and we can have the opportunity and security that comes with sharing risks, rewards and resources across the UK. The best of both worlds.


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