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

The man who disunited the kingdom

On February 13, 2014, many Scots were wondering whether they could be bothered buying Valentine cards again this year, when news broke that Chancellor George Osborne had arrived in Edinburgh on a flying visit.

What he said had a profound and enduring impact on the complex relationship between Scotland and England. He took the money.

Osborne told an invited audience there was "no legal reason" why the UK should share sterling with an independent Scotland. "The pound isn't an asset to be divided up between two countries after a break-up like a CD collection," he said. "If Scotland walks away from the UK, it walks away from the UK pound." Osborne then walked away himself, refusing to give any television interviews - and visibly angering STV's political editor, Bernard Ponsonby, who pursued the Chancellor all the way to his waiting people-carrier firing off questions.

It was a dramatic moment. The BBC's Scottish economics editor, Douglas Fraser, said: "The dominant parties at Westminster sought to avoid any pre-negotiation, but now they've broken their own rule. We now have one very important piece of pre-negotiation, by declaring no negotiation at all."

The Chancellor's move was not entirely unexpected. There had been much speculation about Westminster's attitude to the post-independence currency union since it had been proposed in the Scottish Government's independence White Paper two months previously. But the manner of this intervention, by one of the least popular Conservative politicians, shocked civic Scotland. It was intended to. This was the economic equivalent of shock and awe - designed to demonstrate to Scots the futility of seeking independence. Yet only seven days before the Chancellor's visit, Prime Minister David Cameron had adopted a rather more emollient approach. In an emotional speech at the Olympic Stadium in London, he had said: "I love this country. I love the United Kingdom and all it stands for and I will fight to keep us together." He had criticised the "shoulder-shruggers" in his own party who thought the "marriage of nations" had run its course.

In a speech which deployed the kitchen-sink approach to national identity, Cameron appealed to the spirit of the Olympics and Team GB; to the BBC and the Green Investment Bank; Nelson Mandela and Aung San Suu Kyi. He said Britain meant something in the world: "Lord Lovat on the beach at D-Day, the bagpipes playing as his brigade landed ashore. It's about HMS Sheffield, HMS Glasgow, HMS Antrim, HMS Glamorgan - grey ships ploughing through those grey seas for 8000 miles to the Falklands Islands." The Prime Minister's address was a smorgasbord of Unionist images designed to reawaken emotional attachment to Great Britain.

This had presumably been planned as a kind of good cop/bad cop routine, with the Prime Minister going for the heart one week, while the Chancellor went for the wallet the next. Actually, much of what the PM said was true. The United Kingdom had been a remarkably successful union and one of the most enduring in history, and Scots had been a very enthusiastic part of it. But the themes of the Olympic speech seemed curiously dated and the name-checks of liberal icons seemed forced.

Many found the speech from the leader of a party which had long ago lost the affection of Scots voters to be patronising and insincere. And many Scots, according to opinion polls, were unimpressed by his refusal to meet the SNP leader, Alex Salmond, face-to-face in debate in Scotland.

Looking back, it was a curious political strategy for the Unionists because the positive case delivered by the PM one week was undermined by the blunt and frankly threatening manner of the Chancellor the next. The SNP deputy leader, Nicola Sturgeon, said that "the PM had delivered a love bomb, the Chancellor a stink bomb".

Military metaphors rather than marital ones were very much in the ascendant throughout a month that could be termed "Fear February". One key Unionist figure reportedly described the UK Government's approach as "the Dambusters strategy" - a rather tasteless metaphor that implied that the Scots were somehow to be equated with an enemy in wartime.

In the days that followed the Chancellor's Declaration on the Pound, a succession of banks, energy companies, retailers and insurance companies delivered warnings to their shareholders about the "uncertainty" of monetary arrangements after independence. Standard Life, the Edinburgh-based insurance giant, said that it was already making contingency plans to shift its business to London. Royal Bank of Scotland suggested this also - though later it turned out that, in the eyes of the European Union, it was already effectively a London-based bank.

This uncertainty was something of a self-fulfilling prophecy, since it arose from the Chancellor's unilateral rejection of a currency union. It was a policy of economic isolation that was intended to encourage UK firms to issue warnings to their shareholders of the possibility of monetary chaos. Indeed, on February 3, as part of the lead-up to the Chancellor's visit to Edinburgh, a former governor of the Bank of England, Professor Brian Quinn, publicly called upon financial services firms in Scotland to "consider the possibility of moving their headquarters south of the Border". This appears a quite conscious strategy, devised by the Treasury and assisted by friendly UK companies, to create a climate of economic instability in Scotland which would discourage Scots from voting for independence.

The Scottish and UK press reacted to the intervention by calling for First Minister Alex Salmond to come up with a "plan B" for currency arrangements now that the pound had been taken off the table. When none was forthcoming - because the Scottish Government insisted that the currency union was the only option they were considering - the organs of Scottish opinion declared open season on the Yes campaign.

Throughout February, there was a rolling crisis as, day by day, firms including BP, Shell and Sainsbury delivered "independence warnings" which were reported on the front pages as "fresh blows for Salmond".

But despite all the headlines and threats from big business, support for the Yes Scotland campaign actually rose during February. In fact, it appeared as if George Osborne's threat about the pound might have backfired.

In their fury at Salmond's insouciance in the face of monetary exclusion, few Unionist commentators reflected on the impact of Osborne's unilateral declaration of monetary exclusion on the 300-year-old union between Scotland and England. Yet it was an episode of immense symbolic importance and has altered, possibly forever, Scotland's idea of what the UK was all about.

The 1707 Union between Scotland and England was not regarded by Scots as a takeover or annexation, but rather a partnership. Scotland was not defeated by England in battle; it voluntarily relinquished its parliament (which anyway was not a democratic body) in exchange for religious certainty, security from invasion and access to emerging imperial markets.

Scotland retained its national identity even as it lost what remained of its formal state - the elements that had not been taken south by James VI & I after the Union of the Crowns in 1603. Scotland did not cease to be a nation under the 1707 Act of Union, and its identity was entrenched through the institutions of kirk, education and legal system.

The pound was the most obvious economic manifestation of that union. What no-one ever considered in Scotland was the possibility that one partner in the union could claim the pound as its exclusive property. That would imply that Scotland had not been part of a voluntary union at all, but had been absorbed into another sovereign entity.

Perhaps Scotland had been deluding itself about its standing within the union, but the delusion was strongly held. Scotland never regarded itself as being, like Ireland, an internal colony, but as an active and functioning part of the British Empire. From the Seven Years War in the 1750s onwards, hundreds of thousands of Scots sacrificed their lives in the cause of Great Britain. However, after February 2014, this notion of a partnership of nations became very difficult to sustain.

Here was a UK Chancellor laying down the law, in the most provocative terms, saying that the pound was the sole possession of one side and could be taken away at will. From being a bond of union, the pound became, overnight, a bond of coercion. Scotland could not exercise its right to political self-determination without being cast as an economic enemy.

The Better Together campaign chairman, Alistair Darling, said in effect: "Well, it serves you right." By seeking independence the Scottish Government, and by implication the people who voted for it, had brought this upon themselves. If Scotland voted to leave the Union why should it expect the rest of the UK to make it easy for them?

Unionists argued that a currency union without political union would be unstable, and that the Bank of England could not be expected to be "lender of last resort" to Scotland's banks. "Why," asked Darling, "would taxpayers in England want to bail out the banks of what would be a foreign country?"

This characterisation of an independent Scotland as a "foreign country" was objectionable and constitutionally incorrect. An independent Scotland would clearly not be a foreign country, since it sought to retain the Queen as head of state, keep the pound and allow the Bank of England to set interest rates.

This is not mere semantics. A foreign country is a land that could potentially be regarded as an enemy power, as Ireland was regarded until 1949, when the Ireland Act established that the Republic "would not be a foreign country for the purposes of British law".

Nor would Scotland be such, at least not under the proposals of the Scottish Government - or under the terms of the Edinburgh Agreement, the deal struck by Cameron and Salmond in December 2012 to legitimise the referendum. This was an agreement to separate, not an act of secession. It may seem a pedantic distinction - until you realise it is the difference between the Velvet Divorce of Czechoslovakia and the Irish Civil War.

The Scottish Government is not a separatist movement and the independence referendum is not about creating a wholly separate Scottish state with no constitutional ties to the rest of the UK. If this had not been clear from Salmond's frequent calls for continuing union, it should have been clear from his response to the speech in Edinburgh on January 29 by the Governor of the Bank of England, Mark Carney.

Carney agreed that Scotland and England could be an optimal currency zone since they have the same levels of labour productivity, the same language and are major trading partners. Scotland would not be to England what Greece is to Germany. However, Carney insisted that, to remove risks of currency instability, a currency union between Scotland would be necessary and would require "some ceding of national sovereignty". He said a banking union would require "a fiscal backstop" and "pooling of fiscal resources".

His prospectus for monetary union implied at least as much fiscal unionism as is being proposed for the eurozone in the European Fiscal Compact, agreed by the European Union in March 2012, which introduced stricter caps on government spending and borrowing among the 25 member states, including automatic sanctions for countries breaching the rules.

Neither the Scottish Finance Secretary, John Swinney, nor Salmond took issue with Carney's strictures on ceding sovereignty. Both said they welcomed his intervention and said that many of his points had already been made by the Scottish Government's own Fiscal Commission the previous year. This benign reaction to a speech that appeared to rule out formal independence for Scotland surprised many. Yet most of the press continued to report the speech as if it were an attack on the Scottish Government's programme for independence, rather than something that could possibly be in accordance with it.

It was becoming increasingly clear that Westminster's idea of independence and the Scottish Government's were very different. The UK seems to believe that independence means, or should mean, total financial self-sufficiency, without common fiscal and monetary institutions - as European countries before the European Union. But that concept of the nation state has long been superseded, and is arguably an anachronism in the modern globalised economy.

The Nationalists argued that nations did not lose their independence just because they entered common monetary and even fiscal arrangements with other nations. The countries of the eurozone have not ceased to be independent countries through the pooling of sovereignty in the eurozone currency union (though many in the UK Conservative Party might argue differently).

Many accused Salmond of trying to have it both ways, and perhaps he has been doing that. Certainly, the SNP's concept of independence has shifted with the times, and seems to be more a reflection of what is politically possible than based on any fundamental principle.

But this should not have come as a surprise to anyone who had taken the trouble to read the Scottish Government's blueprint for independence, the White Paper Scotland's Future which had been published the previous November. This document carried the "neo-nationalism" of the Scottish National Party to an entirely new level and sought to lay to rest for all time the claim that the SNP was a separatist organisation.

Contextual targeting label: 
Local government

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.

232496