Would Scotland really suffer if RBS moved after independence?

Any relocation would be largely symbolic but the Scottish economy desperately needs to be rebalanced.

Vince Cable became the latest UK government minister to warn (or imply, at any rate) that the financial crisis would have sunk an independent Scotland when he gave evidence to the Business, Innovation and Skills Committee at Westminster yesterday. In response to a question from Labour’s William Bain about the consequences of removing the Bank of England as lender of last resort to the Royal Bank of Scotland, Cable said: "I think if you were managing RBS you would almost certainly want to be in a domicile where your bank is protected against the risk of collapse. I think they already have a substantial amount of their management in London and I would have thought that, inevitably, they would become a London bank, which would be symbolically quite important."

You can see the Business Secretary’s point. RBS, which is headquartered at Gogarburn, just outside Edinburgh, has a balance sheet roughly ten times the size of Scotland’s entire economic output. Had Scotland been independent in 2008, when the bank imploded under the weight of its own reckless lending and acquisition practices, the Scottish Treasury would have gone bust trying to keep it afloat and the Scots, like the Irish, been forced to seek a hefty EU/IMF rescue package.

But the problem with Cable’s argument – an argument which has featured heavily in unionist rhetoric over the last five or six years – is that RBS is a British bank, not an exclusively Scottish one. At the time of the crash, RBS had more customers and employees in the rest of the United Kingdom than it did in Scotland, as well as a majority of its capital assets in the City of London. Today, as it edges back into private ownership, it still has 24 million customers across the UK and, as Cable acknowledges, "substantial" management in the British capital.

On what grounds, then, would the rest of the UK have insisted that Scotland take responsibility for the full cost of the £45bn RBS bail-out?  Moreover, what obligation would an independent Scotland have had – or currently have – to guarantee the deposits of RBS customers south of the border? That was – and would remain were Scotland to leave the UK – the role of the British government.

Cable’s position is further undermined by experiences elsewhere. Not long after the near collapse of Britain’s financial sector, the Netherlands, Belgium and Luxembourg joined forces to salvage Fortis, a major European bank. Bail-out costs were divided according to the proportion of Fortis’s operations in each of those countries. National boundaries, it seems, matter little to financial institutions capable of straddling continents.

Yet Cable has, however unwittingly, raised one interesting question. To what extent would Scotland suffer if RBS did move its headquarters from Edinburgh to London after independence? RBS employs about 12,000 people in Scotland, while the financial sector as a whole employs roughly 85,000 people and accounts for between 7 or 8 per cent of Scottish GDP. Only a small number of these jobs – most likely those at Gogarburn – would be at risk were RBS to relocate down south. It’s difficult to imagine what reasons the bank would have to further reduce its Scottish operations. Indeed, Cable himself concedes any such relocation would be little more than "symbolic".

And what would that symbolism amount to? Finance capitalism, particularly of the sort practiced by RBS in recent years, is predatory, monopolistic and crisis-prone. It’s hardly a coincidence that those countries, such as the UK, Ireland and the US, which allowed their economies to become heavily leveraged on financial services in the run-up to 2008 also suffered the longest and most severe post-crash downturns in the developed world.

The Scottish economy desperately needs to be rebalanced. It currently exports more in financial goods and services than it does in manufacturing (the underlying weakness of its trade balance is disguised by strong oil and whisky exports). Were its banks to run into more trouble, it would lack a robust manufacturing base to fall back on. RBS won’t flee an independent Scotland. But if it did, the long term effects would probably be beneficial. 

A general view of RBS's company headquarters at Gogarburn on December 12, 2011 in Edinburgh. Photograph: Getty Images.

James Maxwell is a Scottish political journalist. He is based between Scotland and London.

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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