Scotland: Independence

Lord McFall of Alcluith Excerpts

Thursday 5th December 2013 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it is a privilege to reply to this debate from the Opposition Front Bench, and I congratulate the noble Lord, Lord Forsyth, on introducing it, as my noble friend Lord Foulkes said, in a witty and elegant way. I also appreciate the contributions made by all Members today. Their range and profound quality has been impressive, and the points made regarding a Joint Committee are very important; it is something that we need to take up.

The White Paper is almost 700 pages long. I am always suspicious when I am given a long document. Why is it so long? It is to allow the SNP to duck the questions, not to answer them, so we must see the paper as an elaborate ruse to duck them. When President Barroso and Mariano Rajoy, in responding to the Economic Affairs Committee of which I am a member, state that Scotland must reapply for EU membership, which will need the unanimous approval of the 28 member states, what that indicates is not that Scotland will not get into the EU some day but that the negotiations ahead may be protracted.

The ground chosen by the First Minister is the economic one. He has said clearly that the Scots will be better off if they are not part of the union, so the most important economic decision of the referendum is the currency one. Jim Sillars, the former deputy leader of the SNP, has talked about,

“the mistaken policy of using sterling in a currency union”.

with the rest of the UK. He went on:

“That will require a treaty between two countries, ours and theirs, and just as it takes two to tango, so it takes two to make a treaty. If SNP policy is seen as damaging to”,

the rest of the United Kingdom’s,

“state interests, and that of its allies, why should they sign a treaty giving us seats on their central bank, and a say in monetary policy? Alex Salmond says Osborne cannot stop us using sterling. True, but there is a world of difference between using it as one’s currency, and being in a currency union”.

On Mr Sillars’s point there I say: precisely.

We could have dollarisation along the same lines as Montenegro without RUK consent, but that would not be a viable option because we have large Scottish financial services firms that rely on access to UK central bank services. The Economic Affairs Committee took evidence from Standard Life, which told us that 94% of its products are sold on the other side of the border and 6% to Scotland. What will it do if there is an independent Scotland and it wants recourse to a central bank? It is obvious: Standard Life will move its headquarters. John Swinney said in his evidence to the committee that he wanted a,

“formal monetary union … with the Bank of England operating as the central bank for sterling”.

But we cannot have a monetary union if we do not have a fiscal union, and therefore the implications for tax and spending policies are enormous. As Gavin McCrone, the former respected chief economist at the Scottish Office, said, monetary union will only work if there are broadly similar inflation rates. If the SNP persists with the sterling option, it will require Bank of England approval.

I suggest that it would be foolish for a central bank, after the RBS and HBOS debacles, to extend central bank services or be the lender of last resort to a foreign country over which it does not have any control or exert any real influence on tax and spending policies. On the proposal to exert influence over the Bank of England, let alone the rest of the UK Exchequer, the EAC said clearly in its report that that is devoid of precedent and entirely fanciful. Nowhere in the White Paper are these difficulties and uncertainties addressed.

Whether we are talking about the EU, NATO, pensions and benefits or the future of the Scottish financial industry, they all have to be examined very carefully. We also need to examine whether independence will deprive Scots of the benefits of pooling resources and bringing down real costs. John Kay, an eminent economist at the Financial Times and an adviser to Alex Salmond, has said:

“For the degree of economic independence a small European country can enjoy in a global marketplace is inevitably limited. Nothing that happens in Scotland in September 2014 will change that reality”.

Let us make a decision on independence only after a proper debate. The 670 pages of the SNP’s White Paper is its very own brand of poetry. It has taken 19 months for Scotland to reorganise the Scottish police forces into one force, but the White Paper envisages an independent Scotland being up and running in less time than it took to reorganise the police. What a fantasy that is. It illustrates the fanciful nature of the proposition. It is an insult to the seriousness of the Scottish question which people will have to address in September 2014. It is a wish list with no price list, and this House needs to examine it further and forensically. We need a Joint Committee and further debate because if we do not do so, all of us—the rest of the United Kingdom and Scotland itself—will be losers, and we cannot afford that.