Why breaking up Britain could tear apart the EU, too
While recent opinion polls have swung slightly back toward the “no” camp, there remains a distinct possibility that Thursday’s Scottish referendum will trigger a previously unthinkable breakup of Britain.
If this were to happen, the biggest risks for global businesses and investors do not lie in the economic problems created by Scotland’s choice of currency or the inevitable arguments about sharing North Sea oil revenue and the British national debt. These are crucial challenges for Scotland and have been much discussed in financial institutions and think tanks. But the crucial issue for the world economy and financial markets is about the resulting impact on the European Union — and especially on Britain, which would remain the world’s sixth largest economy even if Scotland departs.
These political risks, which I discussed here last week, can be broken down into four questions: What would Scottish independence, if it happens, mean for British politics and economic management over the nine months, until the May 2015 general election? What effect would it have on the election results? How would all this turmoil affect Britain’s fraught relationship with Europe? Would Scottish independence act as an inspiration for secessionist movements in other European countries?
Starting with the issue of other European independence movements, the answer is obvious. If Scotland votes for independence, it would become extremely difficult for the Spanish government to continue denying a similar democratic right to the Catalans and Basques. Beyond that, Flemish separatists would intensify pressure in Belgium, and the Northern League in Italy could get a new lease on life.
Focusing back on Britain, the political implications become more complex. If Britain breaks up after Thursday’s vote, Prime Minister David Cameron would have to take responsibility for promoting the referendum on needlessly risky conditions that in hindsight look downright reckless.
It was Cameron who decided to offer the Scots a simple choice between staying in the union or breaking it — instead of taking up the Scottish National Party’s proposal for a third option of increasing self-government within Britain. Cameron also allowed preserving the union to be presented as a negative option in the phrasing of the referendum question and accepted the National Party’s controversial decision to lower the voting age from 18 to 16.
For all these reasons, plus his unpopularity in the Conservative Party’s powerful anti-European wing, Cameron would likely face huge pressure to resign if the referendum passes.
The Conservative Party has a history of turning suddenly and ruthlessly against its leaders. In September 1990, nobody imagined that Prime Minister Margaret Thatcher was even remotely vulnerable. Less than three months later she was gone.
Whether or not Cameron is ousted after the vote, the British government would be reduced to lame-duck status until the May election. The only issues on the political agenda would be the terms of Scottish separation and the Cameron government’s astonishing complacency about presiding over national breakup.
This complacency, which voters, investors and businesses have only just started to notice, was exemplified on Monday when Sir Jeremy Heywood, head of the British Civil Service, calmly told a shocked parliamentary committee that government departments were doing absolutely nothing to prepare for the possibility of Scottish independence.
“The government has made it clear,” Heywood said, “that it does not wish to do any contingency planning and that applies to the Civil Service. When we are given a clear instruction by ministers, we obey it.”
What would all this mean for the 2015 election and subsequent policy, especially on Europe? With the government stumbling and consumed by recriminations between now and May, it is hard to imagine the current coalition winning re-election — especially given the sense of shock and national failure implied by Scotland turning its back on Britain.
The probability of a Labor-led government taking charge next year would rise to something like 70 percent or 80 percent. That prospect could be quite alarming to international investors in Britain and sterling, since Labor would likely campaign on a platform of higher taxes, shrinking the City of London’s financial activities and abolishing the concessions to foreign residents that now make Britain one of the world’s top tax havens.
To make matters worse, a Labor-led government would lack proper political legitimacy to enact its manifesto promises — much less negotiate the terms of separation from Scotland. For its majority would depend on Scottish members of Parliament due for expulsion in 2016 should Scotland leave Britain.
A constitutional crisis therefore seems almost inevitable. Labor would likely have to respond by promising another general election after Scotland’s secession in March 2016. This would mean two years of unprecedented political turmoil and economic policy uncertainty for businesses and investors in Britain, leading up to a second election in mid-2016. Labor would almost certainly lose that election to a Conservative Party that, by that time, would be strongly committed to exiting the European Union.
Which brings us to the European question. If Scotland leaves Britain, many Conservatives would consider their hold on power in Westminster as virtually guaranteed because of the removal of Scotland’s 59 members of Parliament — only one of whom is a Conservative. So the party would surely move further toward the Europhobia of its most vocal grass-roots activists.
The Tories have already promised to renegotiate Britain’s EU membership and hold an “In or Out” referendum in 2017. Whether they are returned to power in 2016, or manage to win re-election in May, the Tories would probably be emboldened by their “natural” majority in a Britain without Scotland to demand conditions for maintaining EU membership that Brussels, Paris and even Berlin would reject.
Thus if Scotland breaks Britain next week, a chain of events would begin that is likely to end with Britain breaking the Europe Union.
PHOTO (TOP): A bunch of ‘Yes’ balloons are seen as Scotland’s First Minister Alex Salmond campaigns in Edinburgh, Scotland, September 10, 2014. REUTERS/Paul Hackett
PHOTO (INSERT 1): British Prime Minister David Cameron gestures as he speaks during a visit to the Scottish Widows building in Edinburgh, Scotland, September 10, 2014. REUTERS/Andrew Milligan/pool
PHOTO (INSERT 2): ‘No Thanks’ badges are displayed during campaigning by Alistair Darling, the leader of the campaign to keep Scotland part of Britain, in Edinburgh, Scotland, September 8, 2014. REUTERS/Russell Cheyne