Cypriot counterintution part one: "It was a good thing"

Should we be cheering one of the first wealth taxes of this millennium?

As the Cyprus saga continues, the interesting counterintuitive takes are starting to bubble up. Obviously there's a tendency, when so many people agree on the broad strokes of the news – that Cyprus is in a crap position, that the tax is pretty stupid, and that there's not a whole amount of other options – to go against the grain for the sake of it, but each of these arguments have merit to them.

First up is Philip Inman in the Guardian, who argues that we should ignore the "hysterical reaction" to the tax, because "it is a wealth tax – and about time too." Inman writes:

A wealth tax on bank deposits, where most wealth is held, is consequently a practical solution that also fulfils a basic economic need, which is to shift taxes away from income to wealth. Poorer citizens need to feed themselves, and a tax on incomes, especially for those with no savings, is the worst outcome.

It mimics an argument that was going around Twitter yesterday, pointing out that "a 1 [percentage point] rise in Sales Tax would be way more regressive and not even raise an eyebrow." Of course, it's questionable whether that increase increase in sales tax could raise quite as much as the tax on deposits, but that's even more of an argument in favour of the deposit tax.

The real hope for all of this, in fact, is that the Cypriot government will struggle through the negotiations and come out the other side with a deposit tax which applies entirely to deposits over €100,000. As Ben Hammersley tweeted:

 

 

Given that many of the wealthier depositors in Cypriot banks are engaged in questionable financial practices – and even outright money laundering, it seems – it's not a terrible thing to ask that the entire weight of the bailout be put on their shoulders. Of course, even if they weren't, it still wouldn't be that bad an idea, because putting the greatest burden on the broadest shoulders is almost the definition of a progressive tax system.

Except, of course, for the fact that the Cypriot economy benefits from its status as a financial haven. A rebalancing of the economy may still be a good thing for poorer Cypriots, but it's not clear that the hit the country is taking to pay off the ECB is bigger than the hit it would take if it scared away its questionably legal golden goose.

Interestingly, it seems that Cyprus agrees. France has confirmed, and credible reports indicate Germany and Finland back it up, that the negotiations with the Cypriot government only required it to implement a tax on deposits over the insurance threshold of €100,000. Insured deposits were considered sacrosanct to the Troika, but not to the Cypriot government, which needed to "spread the pain".

But the big reason why Inman's counterintuitive take is likely to remain counterintuitive is that a bank run for deposits above €100,000 – or even a bank stroll – is still a bank run. Deposit insurance lessens the chance of people trying to take all their money out, but it still happens, and it does nothing for the money you have above that value.

The chance of contagion is looking slim – although it is still the case that if you're a Portuguese depositor you're likely to be sitting markedly less comfortably than you were last week – but the situation in Cyprus itself is by no means solved yet. If the trust in the country's banks and politicians isn't restored, there will be worse ahead.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Winning Scottish independence will be even harder than before - but it may be the only choice

Independence campaigners will have to find answers on borders, currency and more. 

The Brexit mutiny has taken not just the UK economy and its relationship with Europe into uncharted waters. it has also imperilled the union between Scotland and England. From Sir John Major to the First Minister, both Unionists and Nationalists had warned of it. The outcome, though, has made this certain. The Leave vote in England and Wales contrasted with an overwhelming Remain vote north of the border.

That every region in Scotland voted to stay In was quite remarkable. Historically, fishing and industrial communities have blamed the European Union for their woes. That antagonism was probably reflected in lower turnout - an abstention rather than a rejection. 

The talk now is of a second referendum on independence. This is understandable given the current mood. Opinion polls in the Sunday Times and Sunday Post showed a Yes vote now at 52 per cent and 59 per cent respectively. Moreover, anecdotal evidence suggests even arch No vote campaigners, from JK Rowling to the Daily Record, are considering the option.

The First Minister was therefore correct to say that a second referendum is now “back on the table”. Her core supporters expects no less. However, as with the economy and Europe, the constitutional relationship between Scotland and England is now in uncharted seas. Potential support for independence may be higher, but the challenges are arguably bigger than before. The difficulties are practical, political and geographic.

Of course the Little Englanders likely to take the helm may choose a velvet divorce. However, given their desire for the return of the Glories of Britannia that’s improbable. They’re as likely to wish to see Caledonia depart, as cede Gibraltar to Spain, even though that territory voted even more overwhelmingly In.

Ticking the legal boxes

Practically, there’s the obstacle of obtaining a legal and binding referendum. The past vote was based on the Edinburgh Agreement and legislation in Westminster and Holyrood. The First Minister has indicated the democratic arguments of the rights of the Scots. However, that’s unlikely to hold much sway. A right-wing centralist Spanish government has been willing to face down demands for autonomy in Catalonia. Would the newly-emboldened Great Britain be any different?

There are no doubt ways in which democratic public support can be sought. The Scottish Government may win backing in Holyrood from the Greens. However, consent for such action would need to be obtained from the Presiding Officer and the Lord Advocate, both of whom have a key role in legislation. These office holders have changed since the first referendum, where they were both more sympathetic and the legal basis clearer. 

Getting the EU on side

The political hurdles are, also, greater this time than before. Previously the arguments were over how and when Scotland could join the EU, although all accepted ultimately she could remain or become a member. This time the demand is that Scotland should remain and the rest of the UK can depart. But will that be possible? The political earthquake that erupted south of the Border has set tectonic plates shifting, not just in the British isles but across the European continent. The fear that a Brexit would empower dark forces in the EU may come to pass. Will the EU that the UK is about to leave be there for an independent Scotland to join? We cannot know, whatever European Commission President Jean-Claude Juncker may be saying at the moment. The First Minister is right to start engaging with Europe directly. But events such as elections in France and the Netherlands are outwith her control. 

Moreover, currency was the Achilles heel in the last referendum, and hasn’t yet been addressed. George Osborne was adamant in his rejection of a currency union. The options this time round, whether a separate Scottish currency or joining the euro, have yet to be properly explored. A worsened financial situation in the 27 remaining EU members hampers the latter and the former remains politically problematic. 

The problem of borders

Geography is also an obstacle  that will be even harder to address now than before. Scotland can change its constitution, but it cannot alter its location on a shared island. In 2014, the independence argument was simply about changing the political union. Other unions, whether monarchy or social, would remain untouched. The island would remain seamless, without border posts. An independent Scotland, whether in or out of the EU, would almost certainly have to face these issues. That is a significant change from before, and the effect on public opinion unknown.

The risk that's worth it

Ultimately, the bar for a Yes vote may be higher, but the Scots may still be prepared to jump it. As with Ireland in 1920, facing any risk may be better than remaining in the British realm. Boris Johnson as Prime Minister would certainly encourage that. 

David Cameron's lack of sensitivity after the independence referendum fuelled the Scottish National Party surge. But perhaps this time, the new Government will be magnanimous towards Scotland and move to federalism. The Nordic Union offers an example to be explored. Left-wing commentators have called for a progressive alliance to remove the Tories and offer a multi-option referendum on Scotland’s constitution. But that is dependent on SNP and Labour being prepared to work together, and win the debate in England and Wales.

So, Indy Ref The Sequel is on the table. It won’t be the same as the first, and it will be more challenging. But, if there is no plausible alternative, Scots may consider it the only option.

Kenny MacAskill served as a Scottish National MSP between 2007 and 2016, and as Cabinet Secretary for Justice between 2007 and 2014.