I was watching the BBC News Channel this morning, in the wake of the weekend’s YouGov poll bombshell. Suddenly, everyone was talking about it – ‘serious concern’ was being reported at Westminster. David Cameron had had to make a flying visit to Balmoral to update the Queen, with different newspapers reporting that she was either concerned, or determined to leave it up to the people of Scotland to decide.
But the most interesting was the business news. There was a 1% drop in the value of Sterling next to the US Dollar and the Euro, which was being directly linked to the announcement of the ‘Yes’ lead in the YouGov poll late on Saturday night. All well and good – this showed most of all a lack of confidence in the value of that currency if Scotland leaves, taking its oil revenues with it – a welcome rebuff of the notion that we are ‘subsidy junkies’ whose departure will be nothing but a plus for the UK exchequer. But it’s hard to know what to do in such a situation, from a Westminster perspective, if that trend continues. In January, Westminster supposedly made the statement that it would take on all responsibility for debt (which it had, in essence, already done by taking on that debt in the first place), in response to supposed ‘market jitters’ that Scotland were not going to offer to contribute to that burden, as a consequence of being denied currency union with Sterling.
So how far would things have to go this time around, for Westminster to intervene again? It is a difficult decision: if you offer to calm market fears before the Referendum date – perhaps by making reassuring noises about currency union, for example, as the swiftest way to restore market confidence – then you discredit your previous position since February of ‘no CU whatsoever’, demonstrate that Alex Salmond was absolutely right on the money from the start when he said it was a bluff, which might well be Referendum suicide for Westminster as part of the ‘No’ campaign.
Conversely, you could say ‘well, there are only ten days to go – let’s weather the storm until the Referendum, then move very swiftly to calm the markets immediately afterwards’. That probably makes the most sense – after all, as equity trader Alpesh Patel noted on the BBC News Channel this morning, the fall in Sterling is a trend that has been occurring since July – it is just that this poll result has accelerated the drop.
So, I guess, if I was Westminster, then rather than handing the Referendum straight to ‘Yes’ before the (non postal) votes are cast, by admitting that you were not being ‘entirely honest’ in saying that there would never be a currency union with an independent Scotland, it probably makes the most sense to try to continue onwards on the set course of action of ‘no currency union’. But keep it really quiet – don’t draw so much attention to it anymore.
And, of course, that means, that if I was ‘Yes’, I would be getting Alex Salmond to talk about it at every opportunity, to draw more market attention to it. This is the consequence of Westminster trying to pull a fast one by ‘prenegotiating’ on this issue – so let them dig their way out of their own hole. Hell mend them, as they say – with a bit of luck, they would be forced into conceding a currency union before the voting day to restore market confidence, as a suitable penance for their posturing on this issue.
Because the thing is, Westminster has always needed the reserves of Scotland to keep its balance of payments deficit even moderately under control. Otherwise the UK deficit gets horribly close to 100% of GDP…and that is not a good place to be.
So you can sort of see why that drop in Sterling has been happening…and it makes me reflect on how actively the ‘No’ campaign have promoted – and, indeed, created – the commodity of ‘uncertainty’ which they have then tried to exploit. For example, only Westminster as the government of the member state of the European Union that is the UK, can ask the European Commission for a ruling on the legal status of Scotland as a continuing member of the EU. The Commission has made it clear that they will make a statement following such a request. The UK government have deliberately refused to make such a request…thus creating ‘uncertainty’…which they then present as being manufactured by the Referendum itself. Perhaps it also suits their purposes in another way – because they have a fair idea that the answer that they would get back from the EC would not fit their strategy to keep Scotland within the UK.
In this context, it seems highly appropriate that a campaign that has tried to sow so much false uncertainty in order to win the vote, is now having the uncertainty that they created come back and bite them.
Is that ‘Schadenfreude’?
“There’s certainly no sign of investors being deterred from coming to Scotland; if anything, the reverse appears to be true.” (Ernst & Young’s 2013 UK attractiveness survey – Scotland)