Law Society asks for answers from Scottish Government as Osborne prepares conditions for use of £GBP

It was revealed in the national media at the weekend that the Chancellor, George Osborne, is now preparing the conditions that would be required were an independent Scotland ask to remain in the Sterling zone.

The primary purpose of the conditions that will be set must be to protect the fiscal health and the economic recovery of the United Kingdom of England, Wales and Northern Ireland.

As we have said from the first emergence of the intention to keep the £GBP, this would necessarily involve the same level of ceding of sovereignty as would using the euro, if Scotland decided to pursue that route.

In either case there is a lender of last resort with a position to protect.

It is being made clear that if an independent Scotland wished to be a member of the Sterling zone, major authority for fiscal policy and economic policy would have to rest with the United Kingdom governement.

This would include the UK / Bank of England:

  • having full scrutiny of Scotland’s budget;
  • having a veto on certain types and perhaps levels of taxation;
  • having the authority to set borrowing limits.

With an independent Scotland facing the same conditions and constraints in being a member of the eurozone – whether that was an earlier or a later event after independence – the first question is which currency zone membership is the one most worth paying for in non-independence?

In 2011 Scotland’s exports [excluding oil and gas]  were worth a total of £69.4 billion, of which £45.5 million [65.56%] was to the rest of the UK, £10 billion [14.4%] to the EU and £13.9 million [20%] to the rest of the world. That picture tells a story we cannot ignore.

Scotland also imports more than it exports, substantially so in the case of imports from the rest of the UK; less so in the case of imports from the rest of the world. In the first quarter of 2013 – to 31st March, Scotland was the only one of the UK home nations to see a rise in imports. It also saw a fall in exports in that quarter, with England seeing less of a fall in exports than any other nation in the UK.

There is clearly food for thought in these export and import pictures [and in the two together] in the economic impact of Scotland being sited outside the Sterling zone. The figures indicate that the negatives here would not be compensated by the benefits of EU membership.

This raises the issue of an independent Scotland in the Sterling zone and seeking EU membership in its own right.

Given the exports picture, there would be a negative value in applying for or being forced to accept membership of the eurozone; so this would have to be a hoped-for membership without the requirement to join the eurozone. This is now virtually an imperative.

But let’s suppose that EU membership alone was agreed and that it was made possible almost immediately  following independence. This is highly improbable given the level of internal political concerns of member states with their own secessionist movements.

However – let’s suppose.

In this situation we would have a Scotland, nominally independent but in practice heavily constrained by the fiscal and economic policy authority of the UK; and, like the UK. an EU member outside the eurozone.

What would be different to any serious degree between that sort of ‘independence’  – achieved at massive cost in money, upheaval and sheer nuisance value – and the ‘independence’ we already have under devolution? A flag?

The Law Society of Scotland’s concerns and requests

With the logic of the Chancellor’s position on the conditions for access to the Sterling zone by a post-independence Scotland and with the realities beginning to be clearer to those putting the issues under objective scrutiny, the Law Society of Scotland has today, 5th August, taken up a powerful position.

Its members have expressed concern over the nature and calibre of information the electorate are being given to support their vote in the independence referendum in September 2014.

Rightly describing the independence referendum to come as an ‘exceptional’ circumstance,  the Law Society is asking for the Scottish Government to provide substantive and evidenced answers on key issues of wide concern and general impact.

Today’s national media overage has of course focused on the issue of Scotland’s EU membership – which may actually be the least important issue in economic terms. The major economic impact on Scotland is departure from the common market of the Sterling zone.

However, it has become the headline issue because the First Minister has previously been both untruthful and deceptive on the matter.

The Law Society’s President, Bruce Beveridge, says on this issue that: ‘People should have more information about an independent Scotland’s future membership of the EU and we think both the Scottish and UK Governments should publish law officer legal advice they have been given to provide clarity for voters’.

The Scottish Government is insisting that while EU membership would have to be applied for, it would be a straightforward ‘legacy’ issue, possibly even carrying the UK’s opt out from the eurozone.

Many experts do not agree, insisting in turn that Scotland would have to apply for membership through the normal process and timescale; and that a ‘No’ vote on approval from any member state would be enough to block its accession.

The Law Society has raised questions on the impact of protracted EU membership negotiations on an independent Scotland in the limbo between a ‘Yes’ vote in the 2014 referendum and Independence Day, slated by the First Minister for May 2016.

The Law Society is asking what would happen if such negotiations were to fail during that limbo and before Independence Day?

It is asking for the publication of the legal advice on EU membership the Scottish Government says again that it has now obtained – and is saying again that convention dictates it cannot publish.

The Law Society says it understands that reluctance but feels that there is a serious need for legal certainty in advance of the one-way-ticket vote and that this outweighs the convention of non-publication.

However, this is only one of the Law Society’s concerns and requests for answers.

It is asking for information:

  • on the Scottish Government’s Plan B should negotiations with the Bank of England on Sterling zone membership fail;
  • on the proposed solution to the problem of EU law forbidding cross-border pensions from being in deficit;
  • on the impact on Scottish charities of the loss of grants from UK bodies; [Ed: this should include the loss to specialist Scottish university research of substantial grants from UK bodies]
  • on the means of recovery of child support payments from parents located across the UK;
  • on customs and excise controls;
  • on the impact of the loss of the current subsidies from consumers across the UK on meeting green energy targets;
  • on the management of cross-border waterways;
  • on the projected size of the Scottish Parliament – which is currently larger than it was supposed to be and has never been adjusted but would need some form of higher scrutinishing chamber;
  • on the projected size of the Scottish civil service, which would have to grow at warp speed to meet its substantially expanded responsibilities;
  • on how long it would take to establish an independent tax regime;
  • on the impact of independence on consumer protection laws – an important issue given Scotland’s pattern of imports from the rest of the UK;
  • on the powers of a Supreme Court – a natural matter of interest to lawyers.

The Scottish Government is to publish a White Paper on Scottish Independence later this Autumn. This is being led by the Deputy First Minster, virtually alone. Ms Sturgeon’s fellow cabinet ministers are claiming to be too busy with their own departments to help. This is a difficult position to defend seeing that little is happening or will happen until after September 2014, whichever way that goes.

It does appear to provide confirmation that the Deputy First Minister is being left to survive on her own capability alone, with failure an issue in the post-Salmond manoeuvering that has been going on for some time. Ms Sturgeon however, is busily hiring international consultants to plug the gaps.

In the interests of strengthening the independence vote – and particularly now in the wske of the Law Society requests, this White Paper will need to be detailed, evidenced and convincing. It may opt for rhetoric and the poetry of the dream. If it does, the dream is dead. It’s time for the long overdue hard stuff.

SNP press release on Law Society paper

The following is the text of a press release issued by the SNP in response to the Law Society’s paper.

‘Welcoming today’s Law Society of Scotland report, the SNP challenged the No campaign to answer the many unanswered questions surrounding their proposals for further devolved powers in the event of a No vote.

‘Labour’s plans appear to be in disarray, with Labour MPs refusing to back Johann Lamont’s interim proposals. Meanwhile, Tory Leader Ruth Davidson washed away her ‘line in the sand’ by adopting her leadership rival Murdo Fraser’s proposals for more powers – but intervened to prevent a debate on ‘more powers’ taking place at the Scottish Conservative conference, a decision criticised by Tory MSPs.

‘The Law Society’s report comes after an interview with the Sunday Times yesterday where veteran Labour politician Tam Dalyell criticised the Better Together campaign, and says he thinks it is “fraudulent to give the impression that if there is a No vote Scotland will still get greater powers. The prospect of further powers is ridiculous.”

‘Meanwhile Gavin McCrone told BBC’s Good Morning Scotland that a No vote could lead to more powers proposals being forgotten about: “There is a danger that people in Whitehall will just put the files away and say ‘well, we don’t need to worry about that any more’. And if that’s the case I think it would result in quite a bit of disillusion and disappointment in Scotland”.

‘Challenging the No campaign to provide answers, SNP MSP Annabelle Ewing said: “Of course Scotland has a successful and independent legal system – no doubt if we didn’t, and it was suggested we develop one now, there would be the same denigration of that idea as ‘Project Fear’ direct at an independent Scotland.

“This intervention from the Law Society of Scotland is welcome. The Yes campaign is rightly answering people’s questions about what an independent Scotland will look like – and we are delighted to outline the gains that a Yes vote will bring next year – but many of these questions can equally be levelled at the No campaign, as this report indicates.

“We hear many empty promises about more powers in return for a No vote, but the No campaign promised Scots a ‘better form of devolution’ in return for a No vote in 1979, but all we got was 18 years of a Tory government which we didn’t vote for.

“Labour cannot even agree with each other about further devolution – never mind with the other anti-independence parties – as Labour MPs queued up to trash Johann Lamont’s Devolution Commission report before the ink was even dry.

“The No campaign cannot just duck these unanswered questions – instead of denigrating an independent Scotland, it’s time for them to provide answers.”

Commentary

This is a pretty infantile decoy response which fails to answer any one of the substantive issues raised by the Law Society.

Instead it hurls questions with no constitutional foundation back at the Better Together campaign which itself is in no constitutional position to answer them.

The referendum paper is to be a single question: ‘Should Scotland be an independent country?’

There is no second question on enhanced devolution; nor one on a choice between the two.

This means that voters must confront the single issue of independence – and rightly so since the enormity of that issue is one that ought not to distract from everyone’s full attention. There is no revolving door; there is no ‘maybe’; if we’re out, we’re out.

Scottish Labour and the Scottish Conservatives have no authority to make substantive proposals for anything. They are no more than the opposition in a devolved administration.

Only Westminster can make such proposals and, given the nature of the single question on the referendum paper, the UK Government has no constitutional foundation for making offers on enhanced devolution at this point.

It is actually a relief not to be besieged by two sets of Turkish carpet salesmen, offering hot apple tea, doing rhythmic gymnastics with carpets and dazzling with discounts. One set is enough.

If Scotland votes ‘Yes’ it will do so on a ‘regardless’ conviction. If it votes ‘No’ then the negotiations on a reinvigorating of the Union will start – and those must address:

  • the position of the largely disenfranchised England;
  • the arrangements for representation at the EU that best reflect an internally  devolved UK;
  • the nature of and appointments to the House of Lords;
  • the post-developed-devolution role and size of the House of Commons.

Note: We recommend a paper by Professor David Bell, an economics professor at Stirling University, published in late 2011 by Reform Scotland.

This is entitled: ‘Scots need to put some spark into the economy‘ – with a strap line: ‘Unless the government puts its house in order and stimulates growth, we could risk gaining control of our purse strings with dangerously unbalanced finances.’

The Bell paper is fairly short and is an objective evaluation of the nature of the Scottish economy and the challenges an independent Scotland would face.

Since Reform Scotland is a vigorously pro-independence body – but one that works to deliver objective analyses to support good decision taking towards successful independence – the paper should not be read as any exercise in scaremongering; nor should Professor Bell be accused of this.

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4 Responses to Law Society asks for answers from Scottish Government as Osborne prepares conditions for use of £GBP

  1. As a member of the Law Society my views have not been sought so how you can say the Law Society paper represents the views of its members I don’t know.

    I recall two years ago an almost embarrassing silence when I asked the Law Society officials if the Council had discussed Independence at Z fringe event at the SNP conference.

    Non lawyers often seem to think that the Law Society has some gravitas when it’s 11000 odd members have very diverse views just like society itself.

    The law is of no consequence when Scotland and the rUK’s future is decided.

    Politics and economics will dictate all.

    Just as the rUK is Scotland’s biggest customer so is Scotland the rUK’s biggest customer.

    The companies which will call the shots will be Tesco, Sainsbury, Morrisons, Asda and the Coop as they have most to lose if their Scottish Market is adversely effected by the rUK being protectionist and insular.

    These companies pull the strings of the Westminstr establishment because the fund the UK political parties and Scotland is a disproportionately high contributor to their profits.

    The Sterling agreement will happen for one very good reason: if Scotland did not support Sterling through it’s oil revenue surpluses the Pound will collapse on the international markets as the rUK’s credit rating will evaporate.

    Any sterling agreement will require both countries to meet certain financial criteria ; neither will be able to unilaterally play fast and loose; if one does then the deal collapses and the rUK with a mega balance of payments deficit will sink to junk status.

    Put simply the rUK’s economy will collapse the day Scots weans can’t get their Gregg’s dummy.

    Like or Dislike: Thumb up 2 Thumb down 0

    • It was the Law Society who presented their paper as being from the Law Society. Societies, like governments, operate by a sort of cabinet government on behalf of their members.
      Were you asked for your views on an independent Scotland retaining the Queen, before it was publicly announced that this would be the case?

      Like or Dislike: Thumb up 0 Thumb down 1

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