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Scot independence vote puts UK on edge

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Breaking up is hard to do, especially after 307 years. The entire United Kingdom will find out just how hard if Scotland chooses independence in Thursday’s vote.

A Yes vote will trigger 18 months of negotiations between Scottish leaders and London-based politicians on how the two countries will separate their institutions ahead of Scotland’s planned Independence Day of March 24, 2016. The issues range from whether Scotland will use the pound as its currency to how much U.K. debt it should take on to how the military will be split up – and the results will affect all of the U.K.’s 64 million people, not just the 5.3 million in Scotland. A Yes vote will also ripple across the 28-nation European Union and NATO and boost independence movements around the world, including in Spain’s Catalonia region or Flanders in Belgium.

The parliaments of Scotland and England passed the Acts of Union that led to the creation of Great Britain in 1707 after centuries of conflict, which saw the rise of Scottish heroes like William “Braveheart” Wallace and Robert the Bruce. The union grew to become a great empire in which Scots took a leading role as inventors, artists, doctors, missionaries, engineers and intellectuals – producing luminaires such as economist Adam Smith, author Sir Walter Scott and poet Robert Burns. The global empire thrived on shipbuilding and manufacturing but fell apart after World War II as nations outside the British Isles demanded independence. Scotland has had its own parliament since 1999, although the U.K. government retains control of issues such as foreign policy, defense, immigration, trade and industry.

Now, after 307 years of union, voters are being asked the following question: Should Scotland be an independent country? Only Scottish residents are eligible to vote but people in England, Wales and Northern Ireland will find that the outcome changes their lives as well. It could alter the balance of power in British politics, weaken the nation’s economy and ultimately trigger a separate vote on whether the U.K. should leave the European Union.

Britain’s political leaders have promised Scotland’s government more powers if voters opt to stay. As opinion polls tightened in recent days, the leaders of the three main political parties in Westminster issued a statement guaranteeing “extensive new powers” to the Scottish parliament, promising to share the nation’s resources “equitably,” and pledging that Scottish leaders would control funding for the National Health Service in Scotland.

One of the most contentious issues has been whether an independent Scotland would retain the pound as its currency. U.K. leaders have said there will be no currency union. Independence leader Alex Salmond argues this is simply a campaign tactic and that politicians in Westminster will eventually agree to a currency union because it is best for both countries.

Major employers such as Standard Life and the Royal Bank of Scotland have said they will move their headquarters to England if independence passes because of economic concerns. Howard Archer, chief UK and European economist for IHS Global Insight, said there’s likely to be a major market reaction either way: “A vote for independence is likely to result in a further appreciable sterling sell-off; a vote for Scotland to remain in the UK is likely to lead to a significant relief rally for the pound.”

Critics have called for Prime Minister David Cameron’s head if the U.K. loses Scotland – but Britain’s left-leaning Labour Party would also pay a high price. Scottish voters elected 41 Labour members of Parliament in the 2010 election and only one Conservative. Eliminating those Scottish votes would give the Conservatives a 37-seat majority in Parliament and allow them to form the next government without a coalition. In the long term, the loss of Scotland would make it more difficult for Labour to win future elections, potentially ushering in an era of conservative, pro-business government in Britain.

A Conservative victory in 2015 would also drag Britain into yet another high-stakes vote. Cameron has promised a referendum on EU membership to appease voters who are concerned about immigration and meddling by bureaucrats in Brussels. Scotland has been very pro-EU, so losing those votes would weaken the camp that wants Britain to stay. Any British exit from the EU would have huge consequences for its economy. The EU guarantees freedom of movement for people, goods and money, making it simpler to do business across the bloc and its 500 million people.

Salmond, the independence leader, has argued that Scotland should receive as much as 94 percent of the tax revenue generated by North Sea oil and gas production, which would help fund day-to-day government spending, with any surplus going to a fund for future generations. The independence campaign estimates that there are more than 21 billion barrels of oil equivalent in its portion of the North Sea with a market value of almost 1.3 trillion pounds.

But the windfall may not be as great as independence advocates hope, according to analysis by the National Institute of Economic and Social Research. While Scotland’s share of North Sea revenue would have been as much as 7.4 billion pounds in recent years, an independent Scotland would lose 7.1 billion pounds a year in transfer payments it gets from the rest of the U.K., according to NIESR. In addition, North Sea revenues are likely to decline in coming years as production slows, meaning Scotland may receive as little as 2.8 billion pounds in 2016-17.

The independence campaign supports continued membership in the North Atlantic Treaty Organization, provided it isn’t required to base nuclear weapons in Scotland. The country’s strategic location would make it a “key partner in NATO’s air and naval policing arrangements for northern Europe,” independence advocates say. Still, if Scotland is nuclear-free, the U.K. would have to move its Trident nuclear missiles away from Faslane in western Scotland. SAPA

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