• Text size      
  • Send this article to a friend
  • Print this article

Danny Alexander, a musketeer with a strange strategy

Danny Alexander is a senior Liberal Democrat in a coalition government.

ONE FOR ALL: Danny Alexander, Chief Secretary to the Treasury, is one of the three Unionist musketeers alongside Chancellor George Osborne and shadow chancellor Ed Balls. Picture: Dan Kitwood/Getty Images
ONE FOR ALL: Danny Alexander, Chief Secretary to the Treasury, is one of the three Unionist musketeers alongside Chancellor George Osborne and shadow chancellor Ed Balls. Picture: Dan Kitwood/Getty Images

It goes without saying that his word is his bond. The Chief Secretary to the Treasury is also the MP for Inverness, Nairn, Badenoch and Strathspey. He has dual responsibilities.

In one of these, things aren't working out too well. Yesterday, the Financial Times reported that despite all the stringencies pursued by Mr Alexander and George Osborne, the United Kingdom can look forward to austerity until 2020. Fully a decade after the pair set about their work the UK economy will remain on the edge of one of those famous black holes. Yet when Scots are being addressed, strangely enough, this is called strength and security.

Contrary to any impression Ed Balls might like to give, meanwhile, a coalition problem is not good news for Labour. The shadow chancellor and Ed Miliband claim that, if elected, they will be running a budget surplus by the end of the next parliament. Chris Giles, the FT's economics editor, argues instead that no matter who is in power an austerity party will have to find at least £20 billion more than expected.

At Westminster, they have done their sums using the cyclically-adjusted deficit - effectively, an estimate of what the deficit would be if the economy ran "normally" - rather than the actual deficit. The former is expected to hit around £85bn this financial year, but as Mr Giles notes, the real thing comes in at £111bn for 2013-14.

If Mr Osborne is in charge, that means still more cuts in addition to the £25bn he has already planned. If anyone listens to Mr Alexander, some tax rises might go into the mix. But if Mr Balls intends to reach a budget surplus within a single parliament, using either or both of these means, things are liable to become uncomfortable for Labour, and for its supporters. You might think any one of the three men would find this worth mentioning.

Instead, the Chief Secretary came to Edinburgh yesterday to announce that, as an architect of the UK economic miracle, he would not countenance a currency union with an independent Scotland. According to Mr Alexander, this was no bluff. The Unionist musketeer spoke, one for all and all for one, on the subject. The decision agreed between himself, Mr Osborne and Mr Balls was "final".

Or as Mr Alexander said: "No ifs, no buts. No matter how much of a racket they [the Yes campaign] make, it isn't going to change". So even if Scots vote for independence, a remaining UK with an economy in a hole would trash its already distressed balance of payments rather than accept a partnership. Moreover, an economy still struggling a decade after Mr Alexander slipped into office, one liable to be still £20bn (at least) short of his target, would dismiss a contribution worth 10% of joint GDP.

It was brave talk from the Chief Secretary. In essence, it reiterated arguments made by Mr Osborne in his own recent speech in Edinburgh, but Mr Alexander's declaration had a very different sort of resonance. This was the MP for Inverness, Nairn, Badenoch and Strathspey, after all. He was declaring that his own country, after all his efforts at the Treasury, was not fit to be considered for a currency union. Mr Alexander could not and would not recommend Scotland as a partner.

In other contexts, the Chief Secretary might have been accused of talking the economy down. Addressing a conference of the National Association of Pension Funds, Mr Alexander did not find time, for example, to suggest that certain firms in the financial sector should stop threatening to do damage in the event of independence. But nor did he explore a paradox. Some of these companies have claimed that the referendum is causing them "uncertainty"; others are not in the least concerned. Why's that?

Mr Alexander's language was stern. "For hundreds of thousands of Scots, their pension pots are literally their life savings built up over decades of hard work. Their financial security in retirement depends on having a stable, strong and dependable pension system". This is true enough, even if you set aside the miserable record of the British pensions industry, a record that has few equals for failure - on the Chief Secretary's watch - in Europe.

But what of Mark Wilson, chief executive of Aviva? Asked about Scotland's independence by Sky News, he said: "We operate all around the world and we operate in many jurisdictions and in many places, so I really think that's not an issue for us to focus on." Someone, if not Mr Alexander, could have added that Aviva accounts for fully one-quarter of the UK annuities market. In pensions, as in insurance, it is the market leader in these islands.

The Chief Secretary, the Chancellor and the shadow chancellor have spurned a currency union with an independent Scotland pre-emptively because they claim "Scotland's banking sector" is too big a risk. They argue that in the event of another financial crisis the taxpayers of England, Wales and Northern Ireland would find themselves picking up the tab for debts in a foreign country, or have their central bank acting as lender of last resort to a profligate foreign government.

Of itself, currency union takes care of that second objection. Mark Carney, Governor of the Bank of England, described the necessary mechanisms in his own, wilfully misrepresented Edinburgh speech. Whether those who favour independence would really want to pool sovereignty with the likes of Messrs Osborne, Alexander and Balls, given their behaviour, is a separate question. Whether Scotland should be roped to a floundering rUK economy is another interesting issue. But restraints and limits would be part of any currency deal.

That leaves those "Scottish banks". In terms of control and ownership, they are no longer anything of the kind. RBS and Lloyds have both made noises lately about relocating their brass plates and their debts to the taxpayer if uncertainty increases. But if that happens, what risk remains, even on a theoretical level, to impede a currency union? The only losers in such a circumstance would be businesses and people on both sides of the Border. Such, it seems, is Mr Alexander's choice.

For now, he demands a "plan B", as usual, from Alex Salmond and the SNP, if not from the entire Yes movement. The Chief Secretary does not mean that he would grant his seal of approval to an alternative scheme, of course, or pledge to make it work, as a Scottish MP, in the event of independence. In fact, Mr Alexander has yet to say what service, if any, he would offer Scotland and his constituents in the event of a Yes vote. He has no real interest in constructive suggestions should the people's will go against him, or in any of the several alternative schemes for a currency.

Like the other strange musketeers, Mr Alexander has a single tactic he mistakes for a strategy: first create uncertainty, then complain about uncertainty. Then be sure, at every turn, to call your contribution "positive". Then remember to explain yourself to the voters back home.

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

217794