Scotland can do better than ‘tartanised’ neoliberalism

Craig Berry - Research Fellow at SPERI

I am of course breaking with academic convention by pinning my colours so vehemently to one side over another in this very political tussle.  Yet it is a view I have arrived at through cold-hearted analysis of Britain’s political economy.

The worst possible argument that non-Scots can make in favour of the union is that Scotland, by some ordained law of nature, is quintessentially and irrevocably a part of Britain and must remain so, for better or worse.  For all the rhetorical focus of the campaign on the economic costs and benefits, this, essentially, is the perspective of (small-c) conservatives, on both sides of the border.

I must admit, I find the idea of a Britain that includes Scotland, rather than a United Kingdom that does not, far more appealing – as a Northerner (in English terms), I identify more with Scotland than I do with Southern England.  Yet the imperialistic overtones of this argument have no place in a debate which is essentially about democracy.

But there is another very bad argument in favour of the union, espoused most often by those sympathetic to the Labour Party.  This is the view that, if Scotland departs, the political balance of the continuing UK will shift decisively to the right.  Firstly, this is not necessarily the case: for instance, Scottish seats are very rarely decisive in UK general elections.  Secondly, even if it were the case, it would be profoundly wrong for English progressives to seek to impose a national identity and system of rule on an unwilling people, simply to serve their own political agenda.

In practice, of course, there is no such imposition, because Scotland rightly has its referendum and can finally determine its own fate, deciding in the process how much it cares about England’s. However, by making this argument, progressives in England inevitably reinforce a view, held by many north of the border, that England always believes it knows best.  After all, Labour has had many chances, with majority support in Scotland, to challenge the UK’s uber-centralised political economy, but each time has failed to go far enough.

The much better argument against independence is that it would not actually challenge Scotland’s subservience to the UK’s London-centred economy.  My fear is that the Scottish National Party (SNP) does not want independence from London because it wants to profoundly transform Scotland’s political economy, but rather, because it wants the economic order to remain more or less as it is, albeit with Scotland grabbing a larger share of the spoils than it is able to do as a part of the UK.

This is somewhat understandable, given that (as detailed in an upcoming SPERI British Political Economy brief) in recent decades the Scottish economy has generally grown faster than the UK economy as a whole.  Yet, ultimately, the SNP’s economic vision amounts to little more than ‘tartanised’ neoliberalism.

Independence would of course come with some substantial changes in social and economic policy. The SNP, and generally the Scottish Labour Party too, are far more progressive than the Westminster parties on issues such as higher education funding, the state pension, healthcare privatisation and the minimum wage.

On the other hand, the SNP is also committed to a Celtic Tiger-style strategy of slashing corporation tax – hardly a progressive ideal. Jamie Maxwell has argued that Alex Salmond’s appraisal of Scotland’s apparent economic success under the SNP – as low-paid work proliferates – renders his message ‘Osborne-esque’. But the issue that is most revealing in terms of the SNP’s economic conservatism is its intention to retain sterling (which I have written about previously).

Although the rationale is rarely made explicit, or seriously interrogated by the media, the SNP wants to pursue a currency union with the continuing UK for three main reasons.  Firstly, it knows England will be, by some distance, Scotland’s most important trading partner – the Scottish economy would be severely damaged by even a small weakening of demand from English customers.  Secondly, it accepts that tourism will remain a vital aspect of the Scottish economy – both from England, and from overseas tourists visiting England in the same trip.  Thirdly, it wants the Scottish financial sector to remain highly integrated with the City of London.

If the SNP really wanted a new economic model for an independent Scotland, along the lines of the Scandinavian system typified by Sweden and Denmark (which are EU members but not part of the Eurozone), it would advocate an independent currency for Scotland, no matter what the short-term adjustment costs were, precisely because sterling in these circumstances would be a major impediment to autonomous monetary and fiscal policy.

Yet the ‘No’ campaign is also to blame for the farcical nature of the debate on currency union. Alex Salmond has been criticised for not having a ‘plan B’, should the continuing UK refuse to allow Scotland to retain sterling, with Ed Miliband, for instance, telling him to ‘come clean‘.   But the reality is that Scotland could use sterling without Westminster’s explicit consent – indeed, Salmond has suggested he is prepared to pursue this option, and the ‘three Plan Bs for the price of one’ he offered in his second debate with Alistair Darling were all variations on this theme. In practice, the difference between currency union and this ‘sterlingisation’ strategy on the making of Scotland’s economic policy would be quite minimal.

It also seems highly likely that the continuing UK would agree to currency union with an independent Scotland – for the sake of an informed debate, it is in fact the Westminster parties that should ‘come clean’.  Future UK governments will not want to erect any barriers to Scottish consumers spending their money in England, and they will want Scottish oil to be paid for in English pounds.

If there has been any dishonesty in the ‘Yes’ campaign, rather than simply reticence, it is in Salmond’s account of his capacity to strong-arm the continuing UK into a currency union.  According to Salmond, sterling is a shared asset and, if Scotland is denied its share, it will also refuse to take its share of the UK state’s liabilities, that is, the national debt.  However, sterling is not a financial asset in the way that debt is a financial liability.  It is instead, arguably, an economic asset – but even that view depends on the efficacy of the SNP’s economic strategy for an independent Scotland. The idea that sterling and the national debt are linked is therefore somewhat fanciful. In any case, the Treasury has already accepted that the continuing UK would shoulder ultimate responsibility for the entirety of the current UK’s liabilities.

Of course, none of this necessarily means that Scotland should stay. In a persuasive series of articles, Green Party activist Adam Ramsay has offered no less than 40 reasons to go, reflecting a broad-based independence movement that might begin, but certainly does not end, with Alex Salmond and the SNP. George Monbiot has also offered a succinct, but devastating nonetheless, account of the ailments of the UK  political economy. Yet in arguing that a ‘No’ vote would be akin to ‘self-harm’, he neglects to give any thought whatsoever to how, even in broad terms, independence would be so transformative for Scotland.

It is therefore vital to acknowledge that, on the terms being offered by the SNP, which would in all likelihood form an independent Scotland’s government for the foreseeable future, a ‘Yes’ vote does not mean fundamental economic change, and independence does not mean autonomy from England.  There would be far more work to do to bring about real economic and social change, and my view is that it would best be achieved in tandem with England’s subservient regions.