Sunday, March 11, 2012

The Independence Referendum: How “Constitutional Uncertainty” Can Pay Off

According to the Scotsman newspaper, “the decision to make Edinburgh the headquarters of the £3 billion UK Green Investment Bank was made in part to strengthen the case against Scotland breaking away from the UK”. They also reveal that the letters UK were added to the name of the bank “to emphasise Scotland’s place in the Union”.

Of course, reading further down the article it soon becomes apparent that the bulk of the jobs will actually be based in London, England. However, according to the Scotsman, the aim is that board meetings will take place in Edinburgh and eventually half the jobs will be in the city”.

So they’ll aim to have board meetings in Edinburgh? In other words, they’ll try when they can, but the reality is that a good many will take place in London where the real work is going on. Furthermore, we’re told that eventually half the jobs will be in Edinburgh. Eventually? Half the jobs? It really doesn’t sound like this bank is being based in Edinburgh at all.

Of course, in reality, this is little more than a bribe to keep Scotland in the union: stay with us and there may be more like this to come. The bribe is, however, something of a double-edged sword: leave the Union and the bank may go too. Yet, to some, it may seem strange for the UK government to base the headquarters of a newly-created bank in a part of the United Kingdom which, in a few years, may well secede. Indeed, given the whole emphasis on responsible banking these days, it seems a highly risky strategy. Of course, Whitehall knows this and it also knows fine well that the bank could easily operate in an independent Scotland. Take the case, for example, of the HSBC, or The Hong Kong and Shanghai Banking Corporation, to give its full title. This is a bank that was founded in the former British colony of Hong Kong. Yet despite the handover of Hong Kong to China in 1997, the HSBC retains its headquarters in London. There’s also the case of a British institution like the Abbey National bank which has since been taken over and re-branded by the Spanish bank Santander. Indeed, since we moved away from the gold standard in the 20th Century, banking and finance has truly become a global industry, unconstrained by national borders. The City of London, for example, is not the financial hub that it is because it only serves the United Kingdom.

If all of this were not convincing enough, then it would be worth reiterating the fact that an independent Scotland would retain Sterling as its currency. The simple truth is that whether Scotland remains a part of the United Kingdom or not, it really will have little bearing in its effectiveness to provide a base for the headquarters of the Green Investment Bank, or indeed any bank. In essence, the message we should be telling Whitehall is: thanks for the bank but it doesn’t in any way tie us to the United Kingdom.

Yet, even if this bank is being offered to Scotland as a bribe and regardless of the fact that the Edinburgh headquarters of this bank may be little more than a “brass plate” address (as the Scotsman puts it) for what is, in reality, a London-operated bank, the fact that Edinburgh was chosen at all can, at least in part, be attributed to what has been described as the current “constitutional uncertainty” as regards Scotland’s future. In essence, if there wasn’t a serious possibility that Scotland may leave the United Kingdom, would this bank have had its headquarters offered to Scotland? Likewise, if the prospect of independence was not a reality, would David Cameron have recently promised to “consider” more powers for Scotland?

The irony of all of this is that, rather than suffering from this “constitutional uncertainty”, as Keith Cochrane the chairman of the Weir Group warned recently, Scotland, if anything, seems to be benefiting. Of course, there will always be the likes of Michelle Mone who will threaten to leave Scotland if it becomes independent (perish the thought). Yet this seems somewhat reminiscent of when Paul Daniels, Frank Bruno and Jim Davidson threatened to leave Britain if Labour got into power in 1997 - all of whom, when push came to shove, chose to stay.

Yet for those who genuinely fear constitutional uncertainty, the only way that it will truly come to an end, is if we vote “yes” in the upcoming referendum. This is because, even if there is a “no” vote, as the successive referendums in Quebec have proven, this will not be the end of the matter, because the feeling of unsettled business will remain. 

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