Scotland: Independence Referendum

Lord Lang of Monkton Excerpts

Thursday 30th January 2014 Lords Chamber

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[Lord Lang of Monkton]

That this House takes note of the implications for the United Kingdom of the forthcoming Scottish independence referendum.

[Lord Lang of Monkton (Con)]

My Lords, I am honoured and delighted to be able to introduce this debate on the implications for the United Kingdom of the Scottish independence referendum. I feel strongly that the question of independence for Scotland raises issues that should involve the whole United Kingdom. I welcome the number and range of interests across the House, and from across the nation, that the debate has attracted, in particular the participation, with her maiden speech, of my noble friend Lady Goldie. The House will look forward to what she has to say.

Although the referendum is now less than eight months away, I hope that today’s debate may cast a broader and more illuminating light on what has thus far been a deeply introspective debate within Scotland. Alas, PG Wodehouse gave us the English view:

“It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine”.

We Scots have to work on that.

Scotland, for all its capacity for complaint has, over the centuries, been a full—indeed, more than full—partner in the magnificent success story of our partnership of nations and, I believe, has many friends among the other partners. With Northern Ireland and Wales, there is a kind of fellow feeling against the might of England, yet over 800,000 expatriate Scots live in England and 400,000 English people live in Scotland. It is a source of great regret that so many expatriate Scots are disenfranchised in this referendum. They may think of themselves as British and take pride in that and in their Scottish antecedents, yet north and south of the border, within two generations, countless numbers of Britons could become foreigners to their kith and kin.

For generations, Scots and English have lived alongside each other, sharing a British heritage. They fought shoulder to shoulder in the battles of the past three centuries and still serve together today; we all take pride in that. Together, they built and administered the empire before turning it into the Commonwealth, with Scots very much to the fore. Both countries are woven into the fabric of the United Kingdom. Must they now, both Scotland and England, disavow that shared history? Would that not dishonour the sacrifices, made in common cause, of those who died for the United Kingdom, a nation now to be cut in two if the present generation of Scottish nationalists have their way? I earnestly hope not.

There is nothing positive about an independence campaign that would destroy so much. However deep-rooted the fellow feeling and the sometimes grudging respect with which Scotland has jogged along within the UK, I believe that it would evaporate rapidly after a yes vote. Notwithstanding the rose-tinted spectacles of its present Government, Scotland would become a competitor of England, not a compatriot. The Governments of the remaining UK and its devolved Administrations would be obliged, regardless of sentiment or blood ties, to fight their own corners, fiercely if necessary, in the ensuing relationship. It would risk becoming like an increasingly hostile divorce, in which the parties continued to live next door to each other afterwards.

Where would that leave Wales and Northern Ireland? No wonder we hear that they feel worried and unsettled. If Scotland leaves, the population of the non-English part of the United Kingdom would be reduced by over half. The Principality and the Province would begin to look like mere add-ons to an overweening England. Surely no one would want to send vibrations from Scotland that might reopen old wounds elsewhere, but the trauma of a broken union would shake all its parts. The once-united kingdom would shrink, not just physically, but in the eyes of the world. Others would see it as diminished: diminished in size, diminished in population, diminished in strength and diminished in authority. The mother of parliaments would be viewed as unable to hold itself together. An historic partnership of peoples would seem to be crumbling and Britain’s international prestige and influence would crumble with it. Our standing in the Commonwealth would change, our standing in Europe, in NATO, the UN, the World Bank and the World Trade Organisation—one could go on. These are just some of the arguments why Scotland’s departure would be so negative and so bad for the UK.

Many specific issues have emerged in Scotland thus far, during many months of debate. I wish that I had time now to address them all in detail, but I am confident that other noble Lords will do so during the debate. Much detailed work has been done, both by the United Kingdom government departments and by many respected independent bodies. However, almost none has been offered by the nationalist Administration in Scotland. A much-heralded White Paper was published by them. We had been told that it would answer all our questions. However, at some 650 pages, it has used its very length to obscure its emptiness. It is a wish list. In reality, the governing party that wants to take Scotland out of the UK has no answers to any of the challenges that a separate Scotland would face. On almost all of them a separate Scotland would be a supplicant, based on blind optimism and reliant on concessions from others for its viability.

Take the vital issue of the currency, on which the Governor of the Bank of England was so lucid in his warnings yesterday. The SNP White Paper asserts that the pound belongs to Scotland as much as it does to England, but that is not so. It belongs not to Scotland or to England but to the United Kingdom, which the SNP wants to leave. If a separate Scotland were to use the pound as its currency, with or without the United Kingdom’s consent, it would find that its fiscal and monetary policy would ultimately reside with the nation that it had abandoned. Scotland would not have a viable central bank. It would not be able to print money in a crisis and it could not be a lender of last resort. In effect its status would have changed from that of partner to that of dependency.

On the economy, the SNP takes pride on the one hand in Scotland’s wealth, while on the other it claims that, liberated from the United Kingdom, Scotland would become one of the world’s wealthiest nations. Yet that is what Scotland is already and that wealth has been achieved as part of the United Kingdom, not just overnight but built up over three centuries. Only last month, the Centre for Economics and Business Research forecast that the United Kingdom, currently number six in the world’s GDP table, would overtake France within five years and possibly even Germany later. Who would a separate Scotland overtake and how? We should be told that. The SNP’s answer is a vague reference to growth, yet at present throughout the western world only America is growing faster than the United Kingdom, and by only a fraction. Oil is, of course, the great panacea, but as we all know it is a commodity of volatile value, which is decided by world markets, not by Finance Ministers. No responsible Government could possibly base a national budget on oil.

At present the Scottish economy has strengths, but it also has vulnerabilities. For a start, it has too high a preponderance of public sector jobs and too low a proportion of wealth creators. Scotland does not have many large companies and more than 80% of those companies that employ over 250 people are owned outside Scotland. Of the large Scottish companies such as Standard Life, the Royal Bank of Scotland and Scottish and Southern Energy, most of their business is conducted outside Scotland. For such companies the inescapable introduction of another tax regime, separate regulators and administrative structures and the need to redesign their pension schemes would almost certainly drive some of them south.

Consider the banks in particular. We are told by the Treasury that the assets of Scotland’s banking sector are equal to over 12 times Scotland’s GDP—an astonishing figure. That would not attract the confidence of the outside world or indeed of the bank’s own directors. They need an established lender of last resort, stability and long-term security, but there would be no stability and no safety net in a Scotland in which any new financial crisis emerged. As fast as the new country established a separate financial jurisdiction, its banks would be scuttling across the border to find a lender of last resort. Already the UK Treasury has had to step in to underwrite, for a nervous world, some of the potential debt liabilities of a separate Scotland.

However, one of the present strengths of the Scottish economy—and that of England—is the extent of economic integration that exists between the two countries. Around 30,000 people travel in and out of Scotland every day to work. The postal, telephone and e-mail services hum with transactions every day between the two countries and the roads and rail services are kept busy. Those are the arteries of a united economy. Cut them and both countries would bleed.

A paper published by the Department for Business shows that in 2011 Scotland’s trade with the rest of the UK represented almost 30% of Scottish GDP. Indeed, in 2011 Scotland sold twice as much in goods and services to the rest of the United Kingdom as it did to the whole of the rest of the world. Perhaps more surprisingly, Scotland is the second biggest market in the world for goods and services from the rest of the United Kingdom; only the United States takes more. So it seems clear that, at present, the United Kingdom forms a highly efficient single market, an ever closer union of peoples that has actually worked. The OECD has recognised it as the most market-oriented, economic and regulatory environment among its membership. No wonder the United Kingdom has among the highest employment rates in the world. Why put all that at risk?

Membership of the European Union offers no escape. It seems clear that the Scottish Administration’s plans to gain quick re-entry via Article 48 have already been rejected and that no special treatment can be gained under Article 49. It might take years, if it happened at all. What is more, the new Scotland would not take with it any entitlement to a budget rebate on entry but would have to start contributing to the remaining United Kingdom’s budget rebate. It seems probable that it would have to join the euro eventually and to join the Schengen group, which would therefore mean that Scotland could not belong to the United Kingdom’s and Ireland’s common travel area. That in turn would lead inexorably to the rest of the UK having to set up barriers and customs posts across the 95-mile border between Scotland and England, with all the hold-up and disincentive to trade that that would entail.

All this would add up to a new country with big problems, but England would surely prefer to see its neighbour as rich and successful, rather than have its second biggest customer in decline. For the first time in 300 years, England would have an undefended northern land border; it would have a country to its north that wanted to join NATO but refused to pay the nuclear entry fee. The implications for the UK’s defence are immense. I have no doubt that other noble Lords may wish to expand on that important matter and on many others.

I would like to spend a few moments in addressing what I believe could happen after the referendum if, as I passionately hope, the outcome is that the Scottish electorate vote no. The very fact of the referendum shines a light on our now complicated constitutional arrangements. I welcome the Prime Minister’s firm commitment not to discuss any further constitutional change ahead of the referendum, because that would only cloud the issue of separation—just what the separatists want. It is absolutely right that we should address the referendum question head-on, with no distraction. The question of whether or not to walk away from the rest of the United Kingdom will be one for the people who live and vote in Scotland, but what happens afterwards will not be. More devolution, or less, is a quite different matter. It is a matter for the whole United Kingdom, and that includes Wales and Northern Ireland as well as England. As others have pointed out, to resign from a club is for the individual member; to change the rules of the club is for all the members.

There seems to be an extraordinary mood among many in the Scottish political parties who oppose separation, who believe that they can simply agree on a shopping list of further powers for their Parliament and that such powers will be granted as of right. Scotland is going to have to abandon this mood and, I say gently, get real. Devolution is not just about Scotland; it affects everyone. A power devolved to one part of the United Kingdom creates imbalances elsewhere. Devolving a power is not about favours, still less about demands. It is the quality of government that matters, rather than the quantity. It is about responsibility and accountability, not just power. The present arrangements give the Scottish Government power to spend 60% of all government expenditure in Scotland—that is comparable with the German Länder and more than the Australian states and the Canadian provinces—but the responsibility is to raise only 20%. Such is the lack of accountability that has developed.

Scotland had for years devolved to it a 3p in the pound discretionary power to raise or lower income tax. It was not used. The SNP Administration even allowed it to lapse. Now there is a new Scotland Act, the 2012 Act, on the statute book for two years. It contains the biggest fiscal transfer in British history, which will soon give the Scottish Parliament the responsibility to raise 10p in the pound of its revenue locally with a corresponding cut in its block grant, and to raise more than that or less than that if it so chooses. Except on borrowing for capital expenditure, there is no upper limit to the use of that power. The Act even grants the power to invent and impose new taxes with the consent of the United Kingdom’s Parliament, but why did it give that power if it did not intend to allow it to be used? Therefore, Scotland now has the power to raise and spend what it needs to implement the policies that it judges necessary. It does not need to wrench the country out of the United Kingdom to achieve that. I find it very strange that that Scotland Act, and the authority that it brings to Edinburgh, has gone entirely unmentioned in the referendum debate so far.

However, all these changes bring anomalies elsewhere. In particular, I believe that the position of England needs to be considered. Already one can see the beginnings of a kind of identity crisis developing there. Two of the serious flaws of the Scotland Act 1998 can surely no longer be allowed to fester—namely, the West Lothian question and the Scottish spending block, in particular the Barnett surplus. You cannot solve the West Lothian question just by ignoring it. One option to solve it that I have suggested in the past is by setting up not a separate English Parliament but an English Grand Committee within the Westminster Parliament. It is not a perfect answer, I know, but it was made to work for Scotland for 100 years before devolution and, with a little imagination and possible adaptation, it could be made to work for England. There is also the work of the McKay commission, which offers a means of diminishing the democratically offensive aberrations of the present position. It is almost a year since the commission’s report appeared and I hope that my noble and learned friend will indicate when the Government intend to respond to it. On the Barnett surplus, everyone knows that the basis of the present distribution of funds is out of date. We know that that, too, created an imbalance that can be put right. A fair-minded Scotland would agree. We need an up-to-date measurement of relative need in Scotland and elsewhere in the United Kingdom.

The United Kingdom will never settle down again, comfortable in its own skin, unless these anomalies are ironed out. They need to be addressed in a positive and broadminded way. We need to look at them not from the point of view of the outstretched hands of devolved Administrations but from the point of view of the United Kingdom as a whole, and in its overall interests as well as those of all its parts, all of which should have a say.

I believe that we need a new approach. We need to refresh our understanding of what the United Kingdom is, its strengths and its core values. We need renewal. In short, what we need is a new unionism—a unionism that unites us, binds us and brings us together again and brings constitutional stability to the whole United Kingdom. We need to demonstrate its virtues and its fairness, not through ad hoc disbursements here or there but through a thorough and open reappraisal of our nation’s central strengths and how devolution fits into that. Above all, it is time to put the politics of grievance behind us. Others have suggested that a Joint Committee of both Houses should be set up after the referendum with broad terms of reference. I support that as one option, but we need the commitment of all the major political parties to work together in the national interest. We can turn the challenge of separation into the opportunity for reinvigoration. The break-up of Britain proposed in the referendum—this destructive, negative and irreversible process—does not need to happen. There is a positive alternative for Scotland and all of us within the United Kingdom. I beg to move.

--- Later in debate ---

[Lord Lang of Monkton]

My Lords, happily it is not my task to sum up the large number of fascinating speeches that we have heard today. That was the task of my noble and learned friend Lord Wallace of Tankerness, and he has just done that brilliantly. His courtesy and attention to detail was a masterly example of how it should be done. I thank him and the noble Lord, Lord McAvoy, for sitting throughout our debate and listening very closely to what has been discussed.

In all the years I have spent in this House, I cannot remember a debate that was so engrossing from beginning to end, nor can I remember such a consistently high standard of speeches throughout. Indeed, it is hard to think of a more profoundly important subject than the one we have debated today—the survival of the United Kingdom of Great Britain and Northern Ireland.

I congratulate my noble friend Lady Goldie of Bishopton on a superb maiden speech which was very well judged and welcomed by many here today. I say to the noble Baroness, Lady Quin, that she should keep submitting her name to the ballot. There is room for more debates between now and 18 September. Many aspects of this debate, although touched on today, could be expanded in future debates, and I very much hope that they will be.

The Scottish National Party defies the relevance, or even the existence, of this House—it ignores it—but, happily, the British public do not. I very much hope that what has been said today will reach out to a wider public. For me this has been an amazing debate. We have had six former Secretaries of State taking part, five from Scotland and one from Wales; one Scottish former Chancellor of the Exchequer; one Scottish former Chief Secretary to the Treasury; two very distinguished Scottish judges; a chancellor and a vice-chancellor of two great Scottish universities; a clutch of former First Ministers, a Presiding Officer and current and former Members of all the devolved Administrations of the United Kingdom, Scotland, Wales and Northern Ireland; one Scottish former ambassador to the European Union and head of the Foreign Office; one former Secretary-General of NATO; and one former head of the British Olympic Association. We have had more than 40 Lords a-leaping, and I dare say that if we had a pear tree in the Chamber there might be a partridge in it—and it would be singing a unionist song.

More importantly, we have had a lot of brilliant and highly articulate voices from all parts of the United Kingdom, and that underlines what the debate is about and the value that we all attach to the United Kingdom. I hope that the debate has helped to advance that cause. My privilege has simply been to act as convener for the event, and I thank all noble Lords who have taken part. I hope that we have done something to restore to the rest of the United Kingdom a strong conviction of the value of our United Kingdom.

Motion agreed.