George Osborne delivering his speech on Scotland and the pound at the Point Hotel on February 13, 2014 in Edinburgh. Photograph: Getty Images.
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The flaw in Osborne’s pre-emptive strike against a currency union

The Chancellor may think he is a realist playing hard politics. But these are tactics the Scottish government could also successfully employ.

Recently, misleading presumptions about what international law requires and seeming indifference to the necessity of negotiations following a possible pro-independence vote in Scotland on 18 September have framed the referendum debate.  Politicians can always craft arguments around faulty presumptions and then make a dire outcome sound eminently plausible.  But the fate of Scotland cannot be so easily disposed of by George Osborne.

The Chancellor’s 13 February speech in Edinburgh, in which he rejected any currency union between Scotland and the remainder of the United Kingdom (rUK) in the event that Scotland’s voters approve independence, was partly based on the presumption that the rUK would be the “continuator” state of the existing United Kingdom.  This means that the United Kingdom would continue as essentially the country it currently is (shorn of Scottish territory), oblivious to any equitable claims by Scotland and dictating that Scotland start from scratch, or with a “clean slate”, to establish a resurrected independent nation. 

The alternative to the antiquated continuator argument would be to view both Scotland and the rUK as two co-equal successor states (even though the rUK is obviously the larger of the two) whose fates are tied to an amicably negotiated transition from one nation to two nations following a “yes” vote on the referendum. International law recognises that possibility of a negotiated outcome, one that can be easily embraced by both Holyrood and Westminster if their mutual intent is to facilitate a smooth transition, rather than one seeking to sabotage it.

By laying down the gauntlet of rejecting any currency union with Scotland even before any referendum vote has taken place, and promising to “punish” the Scottish people if they vote for independence, Osborne overlooked an inconvenient truth.  His entire argument rests on the presumption that no workable currency union is plausibly negotiable between Scotland and the rUK in the aftermath of a vote for independence. He simply assumes nothing can or would be negotiated in terms of the character or functioning of a currency union that would work to the benefit of both the rUK and Scotland. 

Yet there will be negotiations following a pro-independence vote. Otherwise, the rUK would have far too much to lose on other fronts that also require negotiations, talks London will be keen to take up but which the Scottish government, if it follows Osborne’s punitive example, could refuse to negotiate about at all.  Scotland need not negotiate sharing the UK debt and could simply let Westminster shoulder the entire estimated UK debt of £1.6trn in 2016/17. That is certainly the logic of the rUK being a continuator state.  Nothing in international law requires Scotland to pay one sterling pound of UK debt if the rUK is deemed the continuator state.  Nonetheless, the Scottish government has already  offered to accept the liability of an estimated £100-£130bn as an independent Scotland’s share of the overall UK debt, but only as the end point of post-referendum negotiations. 

Dire warnings that Scotland’s credibility in the markets would somehow nosedive if this transfer of debt were to happen overlook two simple facts. First, the UK Treasury already has agreed to cover all UK gilts in the event of independence, a point Osborne made in his speech.  So there is no default on the horizon to panic investors. Second, Scotland would start afresh as a debt-free nation with the apparent agreement, indeed blessing, of the rUK.  Perhaps Westminster really has decided to absorb completely the UK debt and thus not negotiate, but rUK taxpayers may wonder about the wisdom of such folly, particularly by a Conservative government.  Creditors and investors might view the Scottish position – one of willing to pay, in good faith, its fair share of the UK debt but reluctantly avoiding that financial burden if London insists on being a continuator state and rejecting negotiations – as a sign of financial strength and political acume,  rather than weakness or naivety in Edinburgh. 

If Osborne’s pre-emptive rejection of a currency union stands, Scotland could sit back in the aftermath of a pro-independence vote and watch the rUK potentially lose a permanent seat on the UN Security Council, impose extremely onerous conditions on removal of the entire British nuclear submarine fleet from Faslane by Independence Day, force the rUK into a much more difficult relationship with the European Union that may accelerate British withdrawal, and, perhaps most importantly, refuse to negotiate a reasonable division of UK assets in a manner that would hurt the rUK more than Scotland.

None of this silly face-off has to happen. The logical outcome of a pro-independence vote is negotiations to facilitate a smooth transition with the goal of advancing the best interests of the citizens of each nation. Indeed that is exactly what was indicated in Clause 30 of the Edinburgh Agreement signed in October 2012 and which is internationally admired as a model of consensual deal-making. 

Instead, Osborne launched a pre-emptive strike to kill post-referendum negotiations.  He may think he is a realist playing hard politics to bring Scotland to heel, but these are tactics the Scottish government could also successfully employ but smartly has rejected - at least for now.

David Scheffer is a law professor and director of the Center for International Human Rights at Northwestern University School of Law in Chicago.

Photo: Getty Images
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Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.