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.

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.