How Salmond is using EU uncertainty to boost Scottish independence

The Scottish First Minister is encouraged by a new poll showing that support for independence dramatically increases when the prospect of UK withdrawal from the EU is raised.

While Westminster has fixated on an EU referendum that may or may not take place in 2017, rather less attention has been paid to a referendum that is certain to happen, that on Scottish independence next year. 

With the Yes campaign behind in the polls, the SNP is attempting to regain the initiative by launching a new paper on the economic case for independence. Deputy First Minister Nicola Sturgeon has pointed to six areas in which she claims Westminster is "is hindering Scotland's potential". They are:

- The decision by the last two UK governments to cut capital spending, which would have supported an extra 19,000 jobs in Scotland. 

- Westminster's failure to store oil revenues in a sovereign wealth fund, comparable to that in Norway, now worth an estimated £450bn.

- The debt and credit boom presided over by the last Labour government. 

- The increase in income inequality witnessed under every government since Margaret Thatcher's. 

- The concentration of economy activity in London at the expense of the rest of the UK. 

- The coalition government's decision to pursue austerity, rather than a growth-led economic strategy. 

After seeing off Nigel Farage last week, Alex Salmond was in ebullient form on the Today programme this morning, rattling off statistics showing that over the last five years, an independent Scotland would have been £8bn better off and that over the last 30 years, Scotland had contributed more per head in taxation than the UK average. 

The First Minister went on to offer a clue to his improved mood when he cited a new poll showing that while the Yes campaign trails the No campaign by 44 to 36 points (a smaller gap than in some others), when the prospect of UK withdrawal from the EU is raised the two sides draw level on 44 points each. The poll showed that while the issue of EU withdrawal has little effect on those Scots who have already made up their mind, among undecided voters three times as many support independence as oppose it under those circumstances. "I would say it's all to play for," Salmond concluded. On that point, he is right. The biggest advantage that Salmond has is time. By September 2014, he hopes that the full force of the coalition's spending cuts, less than half of which have been introduced, will have persuaded Scotland that the time is right to go it alone.

Incidentally, on the EU, it's worth noting an important story in today's FT, which reports that Germany plans to avoid the full scale renegotiation that David Cameron hopes to use to repatriate powers from Brussels. It notes that while Merkel is sympathetic to Cameron's desire to improve Europe's economic competitiveness, "she is convinced that this can only be done by improving the process of European decision-making and not simply by repatriating powers to national capitals." So long as this remains the case, it will be difficult for Cameron to persuade his ever more eurosceptic party that is should vote to stay in. And that, as Salmond knows, plays into his hands. 

Scotland's First Minister and Scottish National Party leader, Alex Salmond, attends a Commonwealth Games event at Glasgow Airport. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).