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Scottish Independence Vote Gets Ugly

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Scotland's referendum on whether to split from the U.K. is a bit more than six weeks away. The battle for the hearts, minds and votes of the undecided, sufficiently numerous to be decisive, is being fought with a mixture of payola and scaremongering unbecoming of such a momentous decision.

A televised debate this evening pits Alex Salmond, leader of the Scottish National Party and the architect of the referendum, against Alastair Darling, the former U.K. chancellor of the exchequer charged with overseeing the "Better Together" campaign.

So today, with a bribe blatant enough to make a Mafia don buying the local garbage-collection contract blush, the leaders of Westminster's three main political parties signed a pledge to give the Scottish parliament more tax-collecting powers if the country votes to remain part of the U.K.

While the sentiment is laudable -- London should be devolving many more powers to the regions of Britain -- the timing is tacky. It also suggests that Prime Minister David Cameron and his cohorts might just be a bit more worried about the outcome of the Sept. 18 decision than they've let on.

QuickTake Independence

Polls have consistently shown a majority in agreement with the status quo. A Survationpoll published in the Mail on Sunday newspaper found 46 percent would vote against independence, with 40 percent in favor of going it alone. The Don't-Know camp was worth 14 percent, and the margin of error for the online survey was 3.1 percentage points.

For those living in Scotland who haven't made their minds up, the world of finance seems relentlessly bearish on the nation's prospects as a standalone. There isn't enough oil revenue to make the country wealthy, for one thing; the U.K. is likely to saddle Scotland with debts and chunks of the bailed out Royal Bank of Scotland, for another. A research firm called Fathom Consulting had the scariest line, comparing Scotland's likely financial prospects with those of Greece:

There is only one path to a viable, fiscally independent Scotland: Scotland gets almost all the oil and virtually none of the bank assets. Any other settlement after a yes vote with respect to the distribution of oil revenues or bank assets, could make it impossible for Scotland to borrow, forcing the government into a severe tightening of fiscal policy and Scotland into recession. Scotland would face a situation worse than the one that has been facing Greece for the last few years.

Britain also gets hurt in a split. Citigroup said on July 14 that investors were likely to shun the pound in the weeks leading up to the referendum. Morgan Stanley, in a report a few weeks ago, put the chances of Scottish independence as high as 25 percent, and said the possible consequences would include a 10 percent slump in the pound's value, a greater chance of the remainder of Britain quitting the European Union, and a delay in any Bank of England rate increases.

The relationship between Scotland and the rest of the U.K. increasingly resembles a bad marriage; one partner is perennially unhappy, counseling hasn't worked, and while divorce would be painful and messy, the heart may overrule the head and ignore the financial repercussions. The worst of all possible outcomes in September would be a split decision, with enough "yes" votes to keep Salmond's dream of ruling his own country alive and sufficient "no" votes to stop it from happening just yet. But the shabby business of trying to game the voters should end now.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net