Scotland: The High Road to England or a Brave Step to Independence?

Loch Awe: the ruins of Kilchurn castle

Loch Awe: the ruins of Kilchurn castle

When the Emperor Hadrian ordered the building of a wall to divide the troublesome, blue-painted northern tribes from the more subdued southerners in the second century AD, he literally set in stone the concept of two distinct peoples in Britain.

Some say that Scotland’s identity has always been defined by its relationship to England. Indeed, there’s even a phrase for it – the Scottish Cringe, a sense of cultural inferiority which has, over the centuries, fostered resentment.

The bitterness which has simmered since the Act of Union in 1707 is about to boil again – thanks to Brexit. A majority of Scots (62 percent) voted to remain in the EU in the 2016 referendum. The fact that the UK left the bloc regardless of Scottish wishes has thrown fuel on the fires of nationalism.
There have been 20 opinion polls since Brexit, each showing that support for independence is now the majority attitude north of the border. If support for the Scottish Nationalist Party (SNP) continues to grow, demands for a new referendum on independence could be on the cards.

Even if a vote takes place, and independence becomes inevitable, there would still be a long and tortuous path to tread – more difficult, say some commentators, than the UK’s labyrinthine Brexit negotiations. But the question is now being asked: Could Scotland survive, and even prosper, as an independent state?

Those who yearn for independence point to countries of similar size – Ireland, Denmark, Norway, Finland – as examples of countries which perform well as sovereign states. Surely, they say, Scotland, with its wealth of resources, could perform equally well?

Scotland’s population of 5.4m is similar to that of a number of EU member states: Scotland would be 19th of 27 in terms of size. Scotland has oil and gas reserves – although their value has diminished since the boom years of the 1980s and ’90s. But even as the world turns its back on fossil fuels, Scotland finds itself blessed with an abundance of renewable energy opportunities.

Scotland gets a quarter of Europe’s offshore winds and tides. More wave and tidal power devices are being tested in Scottish waters than anywhere else in the world. The renewables sector already generates more than a third of the country’s energy needs.

Scotland suffered from the decline in manufacturing industry in the later decades of the 20th century, as traditional industries such as coal mining and ship-building were wiped out. Replacing lost jobs by developing the tech industry – “Silicon Glen” – seemed initially promising. But the sector was hit by a global collapse in the early 2000s, and jobs were lost as international firms withdrew.

But the idea is experiencing a revival. Greater diversity in the tech sector has paid dividends – Amazon recently set up a software development centre in Edinburgh, its first such development outside the US. Scotland also runs 18 percent of the UK’s space industry: Glasgow-based firms build more satellites than any other city in Europe. Plans for the UK’s first space centre, to be based in Scotland, are well-advanced.

Excluding oil and gas, the top five Scottish exports are mineral fuels (worth £10.2bn), machinery and transport (£7.2bn), beverages and tobacco (£4.3bn), chemicals (£2.5bn), and manufactured goods (£2bn).

But the country’s major export destination is the rest of the UK – a market which could be threatened by independence. Recent figures show Scotland exports £32.4bn to the UK nations, £17.6bn to the rest of the world, and £14.9bn to Europe. Trade is certain to be a major area of debate in any move towards independence.

In February 2021, a team of economists at the London School of Economics warned that Scotland’s economy could shrink by as much as £11bn a year as a result of the double whammy of Brexit and independence. The effects, said the report, would be lessened only slightly by Scotland re-joining the EU, but that alone wouldn’t make up for the potential loss of trade with the rest of the UK.

One of the report’s authors, Hanwei Huang, said: “This analysis shows that, at least from a trade perspective, independence would leave Scotland considerably poorer than staying in the United Kingdom.”

The report was greeted with scorn by Nationalists, who made the point that it covered only trading costs and didn’t include factors such as inward investment, cuts to public spending, tax changes, or immigration.

In response to the LSE report, Fiona Hyslop, the Scottish government’s economy secretary, pointed to the fact that EU membership had helped transform the Irish economy – and that the EU market was seven times larger than the UK’s.

“Independent Ireland has dramatically reduced its trade dependence on the UK, diversifying into Europe, and in the process its national income per capita has overtaken the UK’s,” she said. Scotland would be “very well-placed” to grow its economy in the same way, she said.

There is optimism among Nationalists that Scotland could hold its own, even without an open market with the rest of the UK. There are many trade opportunities to be exploited, putting Scotland on the world stage, they believe.

It is the world’s third-largest producer of salmon, for instance. Scotland lands 60 percent of the UK’s fish and supplies more than 25 percent of its beef. It is estimated that 40 bottles of Scotch whisky are exported every second.

Tourism annually contributes £10.5bn to Scotland’s economy. Until the pandemic, almost 16 million visitors came every year. The sector employs more than 218,000 people – eight percent of the total.

The Office for National Statistics reported in 2014 that the Scots were the best educated people in Europe, with 45 percent of those aged 25 to 64 having some kind of tertiary education. Independence campaigners believe this fact means the country would be well-placed to exploit new opportunities. However, the Programme for International Student Assessment reported in 2019 that young Scots were beginning to lag in maths and science.

Membership of the EU is seen by many as the key to future prosperity. And here, problems may lie. On the positive side, Brexit has changed the game as far as the EU is concerned.

At the time of the 2014 independence referendum, José Manuel Barosso, then president of the EU Commission, said it would be “extremely difficult, if not impossible” for Scotland to secure membership due to the EU’s reluctance to encourage secessionist movements.

But Herman van Rompuy, a former president of the European Council, believes the EU would now engage with Scotland on the subject independence. While the process would be complicated, an application would be “seriously considered”. The EU’s attitude has changed since Brexit. The UK is now a “third country” – there is no reason to oppose Scottish secession.

Van Rompuy was president of the European Policy Centre (EPC) think-tank which produced a report on Scottish independence in 2019. It concluded that while the EU should be positive towards Scotland, the country could not expect special treatment. An independent Scotland would have to accept all the obligations of membership, including an agreement to use the euro.

Another fly in the ointment was pointed out by Karel Lannoo, the head of the Centre for European Policy Studies. In a TV interview in December last year, he suggested that any referendum on an independent Scotland would be subject to a vote by all UK citizens.

Fabian Zuleeg, an economist and one of the authors of the EPC paper, also serves as an advisor to the Scottish government. He noted that Brexit had changed the case for Scotland’s future in Europe, and that it would now be inconceivable for the EU to reject an approach.

“EU countries recognise that Scotland has been taken out of the EU against its will, and there could well be a legitimate case to re-enter,” he said. It was vital, however, that any referendum was legally constituted. Pursuit of alternative routes to independence would create a dangerous legal precedent in the eyes of EU member states, especially those which have issues with secessionist movements, he said.

He also made the point that Scotland’s motives for wanting to join the EU would have to be studied. “The last thing the EU would want at this stage is a new ‘awkward’ partner,” he said. “The key is a strong and visible commitment to EU values and the rule of law, in step with the overall direction of European integration. If willing to commit to these values and accession conditions, it is highly likely that an independent Scotland would become a member of the European Union.”

There are other issues regarding EU membership. A sizeable portion of voters in Scotland also voted for Brexit. And even among the ranks of the SNP, a large number see no sense in swapping Westminster for Brussels, and would prefer to see a Scotland independent of both.

Equally, the Covid-19 pandemic has battered Scotland’s economic prospects – and it would have to show a rapid and robust recovery to satisfy the EU.

Kirsty Hughes, director of the think-tank Scottish Centre on European Relations, says: “Independence, if it happened in the coming years, will take place in a transformed post-Corona Europe and world. The EU is facing big challenges in continuing to tackle Covid-19 and its wide fall-out – on borders, the single market, on global geopolitics, on the Eurozone and, more broadly, on solidarity and strategy within the EU27. Where the EU will be in one or two years’ time is an open question.”

After an application to the EU, the commission would have to assess whether Scotland met the “Copenhagen criteria” on democracy, a functioning market economy, and an ability to take on the EU’s laws. Hughes predicts that the effects of the pandemic will have increased debt-to-deficit ratios all round – meaning that the bloc may be tougher on those wanting to join. Even if all the hurdles were successfully cleared, Scotland’s accession process would take at least four or five years after independence, which itself is likely to take at least three years.

The most pressing question facing an independent Scotland is that of currency. Many believe this issue derailed the Yes vote in the 2014 referendum. The canny Scot may be a stereotype, but there’s little doubt that economic fears swung the vote against independence.
The new nation would have a number of currency choices: to use sterling under a currency union agreement with the rest of the UK, to use sterling unilaterally, set up its own currency, or adopt the euro.

Hughes said: “The Scottish debate has always been tentative on joining the euro, and more focused on the domestic question of using the pound or creating a Scottish currency. And in terms of the deficit and debt criteria, it would seem an independent Scotland would not anyway be eligible to join the euro straight away.”

A 2020 YouGov poll revealed that only 18 percent of Scots favoured adopting the euro, with 43 percent favouring sterling.

Oliver Harvey, a strategist at Deutsche Bank, believes there are two obvious advantages to retaining sterling – it’s a trusted and stable currency, and creating a new Scottish currency could be problematic. It would be worth less than sterling, and there was a risk of deposit flight from Scotland to England, he believes.

Westminster has told the Scottish government that any sort of currency union is off the table, but the SNP believes Scotland could keep the currency, regardless of Westminster’s wishes. The matter may be taken out of the hands of politicians, though. Several major Scottish banks have already said they’d move headquarters south of the border in the event of no-currency arrangement.

“If they did that,” says Mr Harvey, “they’d continue to receive liquidity from the Bank of England, and they’d continue to benefit from the implicit fiscal guarantees. The banks themselves have decided it’s not worth the risk.

“Scotland could issue a new currency in parallel, with existing stock of sterling assets. That’s pretty risky, because you might find that lots of people in Scotland might not have much confidence in this new currency, and may not be willing to use it.

“I think a more likely outcome is to have some kind of currency union or ‘sterlingisation’. If the banks move south, it takes it out of Scotland’s and Westminster’s hands… Sterling continues to circulate in Scotland, but the Scottish government doesn’t have much control over monetary policy. Is it costly to have a currency union without a political union? Yes, it’s very costly. The bottom line of this debate is that there are really no good options for Scotland.”

A poll in The Scotsman newspaper, in the days leading up to the last referendum, revealed that half of those canvassed would vote for independence – if it made them better off. The romantic draw of a free Scotland ultimately fell on the sword of economic realism.

But as a post-Brexit independence momentum builds, it falls to Prime Minister Boris Johnson to try to hold the precarious 300-year-old Union together. The Conservative Party hasn’t been a significant force in Scotland since the 1950s. Despite this, Tory governments have regularly ruled Scotland from Westminster since then – adding to the Scottish sense of English disrespect and neglect.

Johnson appeared on the BBC in 2017 to praise his 18th Century namesake, the great English man of letters Samuel Johnson. “If I could claim kin with the great man, I certainly would,” quoth Boris.

Legendary lexicographer Samuel Johnson is better known north of the border for his acerbic observations of Scotland and the Scottish, including his often-quoted remark: “The noblest prospect which a Scotchman (sic) ever sees is the high road that leads him to England”.

Boris Johnson had no reason to disguise his admiration for a man who once described Scotland as “a worse England” – but now he may see that discretion is a wiser path to tread.

By Tony Lennox

Tags assigned to this article:

You may have an interest in also reading…

Reef of Contention: Spain Talks Tough on Gibraltar

The Spanish government is taking a cue from Argentina: Whenever beset by apparently insurmountable problems and tanking approval ratings, find

IMF: The Risk Side of Exceptionally Low Interest Rates

Several years of exceptionally low interest rates and bond buying by some advanced economy central banks have improved some indicators Meets the Vice President of Global Trust: Andreas Thanos

At a time when Greece was descending into the depths of a financial crisis without equal in the country’s history,