Brexit Brings Back Old Dilemmas for Scots Seeking Independence

  • Questions remain over currency, budget deficit and EU trade
  • Nationalists start again to build the case to leave the U.K.

Nicola Sturgeon.

Photographer: Andy Couldridge-Pool/Getty Images

The U.K. may have entered a new political era with its unexpected decision to leave the European Union, but in Scotland some old dilemmas are resurfacing.

Scottish National Party leader Nicola Sturgeon is kicking off another attempt to win public support to create Europe’s newest independent state two years after Scots voted to stay in the U.K. Sturgeon, who runs the semi-autonomous government in Edinburgh, all but promised a second try as a way of keeping Scotland in the EU. Since then, emotions have given way to some harsh economic realities.

On the face of it, her job has been made easier by political upheaval in London because of Brexit, which Scottish voters overwhelmingly opposed. In the background, there are lingering questions over a future currency, falling oil revenue and a budget deficit that now exceeds that of Greece.

“It’s bit more unclear now,” said Craig McAngus, lecturer in politics at the University of Aberdeen, the center of the North Sea oil industry. “Brexit has now morphed into background noise. The issues that came to the fore in 2014 over the economic viability of Scotland are even a lot worse and haven’t been resolved at all.”

A couple of polls shortly after the Brexit vote suggested a majority of Scots might vote for going it alone, though since the immediate shock of the result subsided, no surveys have shown the sustained surge in popular backing that Sturgeon needs before she can have the confidence to call a second independence referendum.

The goal is to win over enough of the 55 percent of people who voted against leaving the three-centuries-old U.K. in September 2014 to guarantee victory. She’s been avoiding using the word “referendum” in public statements, talking of “exploring all options” instead.

For analysis of Scotland’s independence drive, click here

At an SNP event in Stirling on Friday, Sturgeon is kicking off a national debate to build the case for breaking away from the U.K., having delayed the summer initiative because of the fallout from the Brexit decision and as the governing Conservatives changed leader.

The Scottish Parliament reconvenes next week and Sturgeon will then set out her program for the year. She said previously she’d asked ministers to work on a new referendum bill that can be put before lawmakers should it be needed.

Different Times

“The debate now is whether we should go forward, protecting our place as a European nation or go backwards, under a Tory government with very different priorities,” Sturgeon will say, according to a preview of her speech. “And while we will pursue all options to protect our interests, the debate must include an examination of independence in what are profoundly changed circumstances.”

Sturgeon is treading a fine line: The challenge for her is also to mollify SNP supporters who want to seize the moment regardless of the risk of losing again because of concerns among the electorate over Scotland’s finances.

England, Wales and Northern Ireland account for about 65 percent of Scotland’s exports, while the rest of the EU makes up only about 15 percent, so fighting to remain in the bloc without the rest of Britain has its dangers.

The U.K. government in London is only just starting to try and figure out what a future deal with the EU might look like amid warnings of an imminent slump, with the Bank of England cutting interest rates and pumping more money into the economy. The Scottish government expects to get a role in the Brexit negotiations -- though U.K. Prime Minister Theresa May made it clear on Wednesday her administration would have the final say.

Then there are the recurring issues of whether Scotland should keep the pound and the hole in its budget.

An independent Scotland’s deficit would have been 9.5 percent of economic output in the 2015-16 tax year, according to figures released last month by the U.K. government. That was mainly because the Scottish share of North Sea oil revenue was a mere 76 million pounds ($101 million) versus 2.25 billion pounds the previous year and almost 11 billion pounds in 2011-12.

As part of the U.K., the negative balance is offset by transfers from the Treasury in London. Scotland’s nationalists argue that they would be able to cope with economic pressures better if they had complete control over taxation and spending.

Harder Challenge

At a news conference in Edinburgh before publication of the figures, Sturgeon said there would be no surprises. “With the low oil price, Scotland faces a challenge to diversify and grow our onshore economy,” she said. “What has changed is the context, the fact that we now face the prospect of being taken out of the European Union. If we were removed, that challenge gets harder.”

When it comes to the currency, both Sturgeon and her predecessor, Alex Salmond, have said the pound belongs as much to Scotland as it does the rest of the U.K. In the run-up to the first independence referendum, the leaders of all the U.K.’s main political parties warned voters there was no guarantee the Scots would be able to keep sterling, though they also said it was Scottish independence rather than any future Brexit referendum that would jeopardize its place in the EU.

Insisting on a currency union isn’t necessarily the best course of action, according to Joseph Stiglitz, the Nobel prize-winning economist who is part of Sturgeon’s council of economic advisers and played a similar role in 2014. Instead, Scotland should start its own currency as a transitional arrangement, he says.

Currency Mistake

“In hindsight that may have been a mistake,” Stiglitz told BBC Scotland radio. “It would be a mistake to join the euro, by the way, so what they would have needed to do is perhaps to resurrect the Scottish pound, and let it float.”

Sturgeon, though, is in an enviable political position to galvanize support, whatever route the SNP decides.

The party won a third term in government in May, albeit short of a another majority in the Scottish legislature. That was a year after the party took all but three of Scotland’s 59 seats in the U.K. Parliament at Westminster, making it the largest opposition group after the Labour Party.

“People who support independence are pragmatic,” said McAngus in Aberdeen. “They don’t want to have another referendum and lose, or the dream will die.”

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