A UK Breakup – Not Likely

In the wake of the Brexit vote we have Nicola Sturgeon talking about another referendum on Scottish independence and even the Irish Taoiseach (Irish prime minister) Enda Kenny’s comments on a possible referendum on Irish unity a “border poll”. I suspect that although anything is possible if people want it bad enough, neither represents much in the way of economic reality nor likely the wishes of the majority.

Whilst there are strident voices both in SNP Scotland and Nationalist Ireland the simple truth is that in just economic terms, the UK is far more important to NI and Scotland than the EU will ever be. Plus that may also be true for Southern Ireland too and even so, there must be a really big question mark over whether the majority of Southern Irish citizens would actually welcome reunification of Ireland with all the problems that is likely to bring with it.

Gibraltar

The most interesting and possibly urgent outcome that results from the Brexit result of course concerns Gibraltar which voted overwhelmingly to Remain in the EU largely because of their local circumstances. They will have to think about the implications which may lead sooner rather than later to running a referendum asking whether they want to remain part of a post Brexit Britain or, would prefer the UK to cede sovereignty to Spain and thus they become part of Spain. In a sense this is the opposite of the NI and Scots positions in that whilst Gibraltar may wish to keep their unique “British” identity, local economics and family ties may dictate otherwise.

The SNP

For the SNP and because Scotland overall voted to “Remain”, they have a problem, in fact several truth to be told. As their aim is to have a fully independent Scotland sooner or later, then they must make lots of noise about “Scotland didn’t vote to leave…” and that therefore THEY the SNP will somehow “Preserve Scotland’s position within the EU”. Which rather ignores the fact that Scotland doesn’t have an EU position, the UK does and therefore as Scotland is part of the UK as far as Brussels is concerned, they will not entertain talking to Scotland in any seriousness. Kind words and smiles but that is about it.

The second problem for the SNP is that it emphasises the truth that no matter which way you slice it, all devolved assemblies or parliaments are wholly subservient to the Westminster UK Parliament which is where real political and economic power resides. In fact and unlike the sorry bunch of SNP MPs we currently have in Westminster, all Celts should be aiming to be a force at Westminster because as recent history demonstrates, being a Scot does not preclude you from being Prime Minister.

Now the above statement of fact would normally be seized upon by the SNP as further signs of “English insults to the Scottish people” and therefore act as a rallying cry for passionate pursuit of a fully independent Scotland and yet, I doubt that we shall hear too much of that firstly because it merely emphasises just how irrelevant Holyrood is in all honesty. More importantly though it also illustrates just how the basic structure of the United Kingdom is designed and operated which all hinges around Sterling (£) which is used as a conduit for the sharing of the ‘common wealth’ throughout the UK and regardless of devolved assemblies.

Funding

In simple terms, the UK Government draws all the cash in via taxation then pushes a lot of that money out to all parts of the UK via a bloc grant system based upon population but including funding for education and health because the expectation is that no matter where you live in the UK you should have access to the same standard of health care and education. It is central government that also provides the engine for delivery of welfare benefits so that direct payments and any attaching associated benefits are paid to those entitled regardless of geographical location. The other key element is that there is no central fund or pot of money from which all this is paid, today’s taxes pay today’s benefits.

The consequence of this is that whilst the devolved assemblies may decide exactly how they spend their budget , one may not charge residents university fees, another may not charge for prescriptions but however they prioritize, they may not exceed their budgets as set down by central government. The exception and enhanced through the new ‘Scotland Bill’ is that the Scottish Government may raise additional taxation locally to pay for programs that their electorate want implemented.

It is this system of the sharing of the ‘common wealth’ that an independent Scotland would have to replace and the primary reason why an independent Scotland should not want to continue using Sterling. An independent Scotland would have to create a new currency for itself because continuing to use Sterling and therefore being subject to continuing budgetary control from Westminster would make a mockery of the whole idea of independence.

Brave New World

That an independent Scotland could have a viable economy, of that there is no doubt however, it would not be the same economy because it will have cut itself off from the flow provided by the ‘common wealth’ of the UK and specifically England where over 80% of the UK population live and therefore where the tax base, economy and electoral power reside.

The idea in 2014 was that with oil at over $100 a barrel it wouldn’t matter but this very thing, the idea of “Scottish Oil” runs counter to the very concept behind the UK of there being a common and shared wealth. Oil or to be precise because the oil belongs to the companies that invest to exploit it, the tax revenues raised by landing oil or the selling of drilling rights, belongs to the UK Government just as the taxes raised by London being responsible for roughly 22% of total GDP do also.

Even when oil prices do start to recover, there is already a lot of spare capacity globally in places like Venezuela, Fracking in the US, Saudi Arabia, Russia and newly added capacity to the supply chain by Iran coming in from the cold. The point is that North Sea oil is expensive to recover and there is a finite capacity so even when prices increase, oil is not going to be the thing that makes the transition to an independent Scotland painless. It must be true that if a majority of the Scottish electorate are prepared to suffer the economic consequences in return for being independent then there is nothing to stop them going for it now because that is the only way that they could apply for EU membership in their own right.

Reality

The immediate above apart, going for an independent Scotland would need to be a 10-20 year plan where whilst still being sheltered within the UK, a viable ‘knowledge based’ economy could be built up which provided global trading links and job opportunities for younger people. If you look around London and the various statues that have been erected mainly to the people who built the British Empire, a good percentage of them are Scots and this tells a tale that applies to all the Celtic Nations of the British Isles.

England has always provided a gateway to bigger opportunities for those adventurous Celts and will no doubt continue to do so for many decades ahead. As the Irish Republic illustrates only too well, the problem is always that whilst in their middle years they may well return ‘home’, you stand the risk of a constant drain of your finest and most talented young which can stall the development of your own economy. This can only be countered by having a thriving and vibrant economy with multiple career paths and opportunities so that many/most stay at home to develop their own careers, along with the Scottish economy and pay their taxes along the way.

What is common between both NI and Scotland is one decision both would have to make right now if Scotland was to become independent and leaving aside the views of Unionists, NI was to reunite with the Republic, the current social security and welfare system would have to be largely abandoned. Scotland couldn’t afford to maintain it and the Republic couldn’t afford reunification if it had to pay the welfare levels currently available in NI.

Conclusion

Anything can happen but for all the huff and puff, a breakup of the UK is not the most likely outcome. Also as may well become increasingly apparent, BREXIT will probably turn out to be both a good and timely move for the UK as a whole and working together constructively there is the possibility of great success for all parts of the UK.

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