Teaching Comparative Government and Politics

Tuesday, February 28, 2012

Ultimate devolution

What if devolution in Scotland led to independence? Should it? How about separate maintenance? Who gets the Royal property?

A disunited kingdom: The promise and perils of Scottish independence

It is already turning into the ugliest custody hearing in history. As in every acrimonious divorce, all is up for grabs: the house, the money, the debts and the nuclear-armed submarines…

At the heart of Scotland’s separatist premier Alex Salmond’s bid for a “Yes” vote is his claim that Scots will be able to keep most of their favourite British institutions: the pound, the BBC, and the Queen. Mr. Salmond insists that the Queen would remain the head of state in an independent Scotland.

This would be possible, but not certain. Her Majesty has not commented on her role in a separate Caledonia, and likely won’t. There has not been an instance of a Commonwealth nation splitting up and keeping the Queen (Pakistan held onto the monarchy briefly after Partition)…

But that may not be quite so simple. George Osborne, Britain’s Chancellor of the Exchequer, strongly hinted last week that Britain will not allow Scotland to remain a formal part of the currency…

Indeed, the National Institute of Economic and Social Research notes in a report that it is “doubtful” that the Bank of England would want to become a formal part of an independent Scotland by extending lender-of-last-resort facilities to Scottish institutions. The Scottish economy, the report notes, will face a high risk of default because of its debt, its political instability and its singular reliance on petroleum…

Mr. Salmond’s core case for an independent Scotland has always been the North Sea oil fields: “It’s Scotland’s Oil” has long been a slogan of his Scottish National Party.

Indeed, it is fairly clear that a sovereign Scotland would have access to the 80 per cent of British oil and gas that are within its territory – although severing the contracts with international oil companies could involving tricky and time-consuming negotiations…

And the oil will not last forever. Mr. Salmond claims he’ll be able to set up a Norwegian-style oil fund to save for the future – he’d put aside 10 per cent of revenues (Norway saves more than 90 per cent). But that dream may be dissolved by the caustic reality of Scotland’s debt.

Scotland would certainly have to take on its share of Britain’s substantial national debt. Given that Scotland has a tenth of Britain’s population, and a similar share of the economy, it might be expected to take £140-billion of debt in 2014.

That would burden the new Scotland, whose government expenditures, at current levels, would still cost more than the revenues it would receive from North Sea oil and from taxation…

But it could be worse. What if Scotland is made to assume the toxic assets from Britain’s rescue of the Royal Bank of Scotland, which total £187-billion?…