Theresa May faces a Catch 22 decision

Theresa May faces a Catch 22 decision

by Ewen Stewart
article from Thursday 9, March, 2017

ONCE IN A GENERATION may become once every few years. It seems increasingly likely that Nicola Sturgeon is gearing up to demand a Second Referendum with the probable announcement being made at the SNP conference on 17th-18th March. Sturgeon is normally credited with being a fairly cautious politician, unlike her somewhat more gung-ho predecessor, Alex Salmond. Indeed, she has already blinked a couple of times. Firstly arguing that BREXIT would result in a referendum, then leaving the Single Market would cause a similar outcome.

Now she is demanding a separate EU deal for Scotland, something the UK Cabinet is very unlikely to grant even were it possible. The First Minister has clearly boxed herself into a corner as she faces her Spring party conference – offering up a springboard for demands to be given the powers from Westminster to hold a second referendum at will.

Unfortunately for Sturgeon there has been no post EU referendum bounce with, if opinion polls are to be believed, a narrow, but stable majority, against independence.

The SNP may indeed calculate that while she is behind this is her best chance, for if Prime Minster May denies the referendum it could stoke further demands and unrest. This is becoming a complex game of bluff with very high political stakes and significant economic consequences.

Constitutional matters are, however, reserved to Westminster. There can be no second referendum without the UK Houses of Parliament giving express permission. The chances of a legal challenge to this from the Scottish Government are remote, for its recent case arguing for a binding Scottish Parliamentary vote to ratify leaving the EU was thrown out by the Supreme Court. It is most unlikely that the Supreme Court would side with the Scottish Government over demands for a second referendum if Westminster refused it.

With the help of the Greens, who have already announced their support for the measure, Sturgeon will have a majority to pass legislation for a referendum, but Westminster can simply refuse it. Without Westminster’s authority any attempt to hold a referendum would be unconstitutional and carry no legal weight.

While that is the legal position there is, however, realpolitik to consider.  Sturgeon’s case for a referendum is based on the constitutional change engendered by the UK leaving the EU, arguing that Scotland voted remain and thus any move to take Scotland out of the EU is of such importance that a second referendum is a moral imperative.

While this may be tenuous – as the EU vote was UK-wide and it was also clear at the time of the Scottish Independence Referendum that the question of UK membership of the EU was an open question – it remains the basis of the case she has made. The Scottish public does not appear convinced; they have not become overly fixated on the EU issue, especially as the early evidence is that the impact on the UK economy has been minimal.

Nonetheless Sturgeon’s request does create a dilemma for May. Grant a referendum and risk a damaging split in the UK during perilous EU negotiations, or deny it and risk stoking further grievance claims. The classic Catch 22.

2016 was not a great year for the SNP. Its results, in the May Scottish Parliamentary elections, suggested the ‘high water-marks’ of 2011 and 2015 has passed. While it remains the overwhelmingly dominant force in Scottish politics, the 2016 election saw the SNP poll less than the magic 50% achieved in the 2015 General Election and lose a net 6 seats at Holyrood, forcing the now minority administration into informal coalition with the Greens for major votes.

That said, in a UK context the major parties would die for the kind of dominance the SNP enjoys in Scotland and it remains the case that while the Conservatives have recovered strongly the centre left Unionist Parties of Labour and the Liberal Democrats have collapsed. This vacuum on the left is a significant threat to the UK Union.

Secondly the SNP hoped that a UK vote for leaving the EU against a 62-38 remain vote in Scotland would strengthen support for independence. So far this has not been the case, with indications that a similar result to 2014 would occur again. However with current polling indicating a 47-43 (10% undecided) in favour of the Union the outcome remains too close to call and there is no room for complacency amongst Unionists.

Thirdly, while the economic case for independence was weak in 2014, it is now precipitously so. Scotland has a very large state sector with expenditure per head of £12,800 against £10,000 of tax revenues leaving a fiscal deficit of £14.8bn or 9.5% of GDP (UK 3.8% GDP) making it the worst deficit in the EU, even worse than that of Greece (£11.4bn / 7.2% GDP) and all 36 OECD countries.

Oil revenues have dried up, and in any case were never more than marginally significant and the relatively small private sector is dependent on finance and agriculture, two sectors that could be negatively impacted by separation. Further, Sturgeon makes much of the economic impact of leaving the EU’s single market – which is at odds with the reality of Scottish trade where for 63.4% (£49.8bn) of all exports are to the rest of the UK, with 21% (£16.4bn) to the rest of the world ex EU and just 15.6% (£12.3) to the EU.

Fourth, the shine has started to come off SNP Government after ten years. The economy continues to underperform the rest of the UK in GDP growth and unemployment; education, long seen as a strong point has now been shown by reputable international studies to be lagging England, Poland and Estonia amongst others; while centralisation of services, like the police, and legislation for so-called State Guardians, have not been popular.

Fifth, the EU has not been very welcoming to Scottish overtures of membership given the precedent it could set and the problems a break-up could cause to Spain, for example. Scotland has been told she would not inherit UK membership but would need to apply as a third party nation accepting the Euro and the full body of EU law.

Considering the foregoing, logic would say Scots will stick with the UK, however, as recent history has shown, people vote over a range of emotions – and culture and identity clearly remain significant influences. It would be a mistake to assume just because the economics ‘aren’t very good’ it couldn’t happen.

The most likely outcome in the medium term is Theresa May will refuse permission for a second referendum until after the UK has left the EU. There are a number of reasons to suggest this. Firstly, opinion polls suggest the mood of the electorate has not substantively changed since the last referendum and more importantly demand for a second referendum persistently appears low. There seems to be referendum weariness.

Second, she could argue that until BREXIT is complete Scots do not know the structure they would be voting on. Further, from a practical perspective, fighting a war on two fronts – Brussels and Edinburgh – would complicate matters materially and could undermine the Brexit negotiations by strengthening the EU’s hand.

Third, even if a referendum is granted, it is very unlikely to be on a similar basis to last time, where David Cameron effectively wrote the SNP a blank cheque allowing them to choose the timing, the question and the franchise and did not stipulate a time bar on holding a repeat event.

We should expect the UK prime Minister to keep the door ajar, not refusing a referendum as a point of principle, simply refusing it before the BREXIT position is clear and agreed. This in itself creates some uncertainty, as the risk of a referendum hangs over Scotland and the UK until potentially 2020/21. But by 2020 there will have been a further election in Westminster followed by another in 2021 for Holyrood, thus buying time and allowing everyone to see what Brexit means.

Apparently there is a dissenting group in cabinet who seem to argue ‘bring it on.’ The rational here is to lance the boil of uncertainty, together with the belief that as the economic case for Scottish independence has moved from bad to worse the Union will win –which polls back up.

While there is some merit in this approach, on balance it is overly cavalier as a split in the UK during difficult BREXIT negotiations could be very damaging indeed. Only the reckless put all their money on black.

Thus it looks like Sturgeon will demand permission later this month and May will deny it. Cat and mouse will continue with the likelihood that the majority of the population are relieved that such a divisive event is kicked into the medium grass.

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