Scotland Needs to Decide on Independence Once and for All: View

Feb. 1 (Bloomberg) -- Within three years Scotland may decide to break up the United Kingdom. Many Scots think that their centuries-old union with England -- one of history’s most successful marriages of nations -- has run its course, and their leaders have set a timetable for divorce.

If the two nations separate, it won’t be with a bang but with years of tortuous wrangling. The leader of Scotland’s devolved government, Alex Salmond, has started the process with his call for a referendum in 2014. It will ask the Scots: “Do you agree that Scotland should be an independent country?” If they answer yes, protracted negotiations over the terms of the split will begin.

It is, of course, up to Scots to decide whether to leave the union, although we see more benefits to their staying than leaving. What matters is that regardless of the outcome, the question of Scotland’s independence should be closed for the long term and not just the next 10 or 20 years.

The great danger in reviving this debate -- an elected Scottish parliament with substantial devolved powers was established after a previous referendum in 1997 -- is that it will make more likely a split that neither side now really wants. Endless inflammation of grievances and talk of possible separation can poison the happiest of relationships.

Grievances Remain

We understand that blood was spilled in centuries past and that Scots have grievances to nurse. The agreement to unify in the 1707 Acts of Union was driven more by Scotland’s financial need than by any love of the English. But however rocky the start, the union of Scotland and England has been remarkably productive for both nations. Distinctive cultural and political traditions have merged without being subsumed. Scots were some of the most intrepid and prominent proponents of the British Empire and have often played a leading role in the U.K.’s government.

Gains of that kind are impossible to quantify. Predictably, the hard fiscal costs and benefits of independence are driving the debate and causing tempers to fray.

The figures on cross-border flows of taxes and public spending are disputed and far from conclusive. An independent Scotland would gain most of the U.K.’s oil revenue -- which is past its peak. Any net gain for Scotland would be marginal, as independence would halt the other fiscal transfers that now flow strongly in Scotland’s direction. The U.K.’s public debts would have to be apportioned and various assets haggled over. Estimates vary, but Scotland’s fiscal advantage in going alone, if any, is dwindling.

By contrast, the union does bring two clear benefits. The first is the guarantee of mutual support. Risk-sharing is especially valuable for Scotland, the smaller nation -- its 5.2 million population is one-tenth the size of England’s. As an integrated part of a bigger and more diversified economy, Scotland has some cushion from the ups and downs of particular industries. Salmond’s Scottish National Party says the City of London has grown too big for the good of the U.K. and Scotland would gain by shedding that bias. It has a point, but even so it’s likely that Scotland’s economy would be more volatile outside the union than inside it.

The second benefit is the force of unrestricted commerce: material, cultural and intellectual. The Scots and the English have reaped the gains of trade, writ large, for centuries. Separation, even as members of a European Union that guarantees freedom of movement for goods, services and people, would impede that flow. To picture the implications, think of how commerce between the U.S. and Canada would probably increase if Canada were to become a 51st state. In a divorce between England and Scotland, something immensely valuable, though impossible to measure, would be lost to both.

Culture Endures

That could be a price worth paying, if Scots felt their distinctive character and culture to be dissolving under English dominance. True, only a few thousand Scots now speak Gaelic, a loss under way for centuries. But overall, the miracle of the union has been that Scotland’s culture and identity have endured and flourished, to both nations’ benefit. Recent opinion polls suggest most Scots agree that when it comes to the union of England and Scotland, the whole is greater than the sum of its parts.

Fighters for Scottish independence are shrewd, however. Why, for instance, did they want three years’ preparation for the vote? Because 2014 marks the 700th anniversary of the Battle of Bannockburn, a notable Scottish victory over the English. Expect a surge of nationalist sentiment. Meanwhile, the referendum question has been framed to pose the breakup of the U.K. as the default option.

Regardless of Bannockburn, Salmond can expect to lose a vote on full independence. But he aims to keep asking until Scots give the right answer. With this in mind, despite the objections of the Westminster government, the referendum might offer a third choice alongside independence and the status quo: a “devo max” option, referring to devolution, which would give Scotland the fiscal powers of an independent nation but not full sovereignty.

That would be an unstable settlement, by design. Under this dispensation, would the U.K. government guarantee Scottish debts? If it did, Westminster would have to keep oversight of Scotland’s public borrowing, a denial of the promised fiscal sovereignty. If not, as the crisis in the EU has shown, Scotland would need its own central bank and currency. One destabilizing step leads to the next.

Current arrangements are themselves an awkward compromise and carry the seeds of a constitutional crisis. Scotland has its own parliament with wide domestic powers. Yet Scottish MPs still sit in the U.K. parliament at Westminster, where they can vote on English-only matters. This was the result of the previous debate on Scottish devolution and highlights the dangers of endless constitutional tinkering.

If Scots decide in 2014 that they want to split, so be it. But if they decide to stay, Salmond’s Scottish National Party should get a new name and a new purpose. The matter should be closed not for a few more years, but perhaps for the next 700.

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