Peter Jones: Head-first into independence battle

TWO political forces, one pro-Union, the other pro-independence, have been warily circling each other for months. Now the first noisy clash in an 18-month campaign has taken place. But while the generals in charge might be able to see their battlegrounds and strategies more clearly once the smoke has cleared, it is dubious whether the voters are much the wiser.

Alex Salmond’s troops were first into action with the deployment of the 1st heavy Fiscal Commission battalion of his economic argument division. One Nobel prize winner, one former Scottish Enterprise boss and three professors make up some serious firepower in anybody’s tactics book.

Minutes later, David Cameron sent his men into action, deploying the 1st EU law squadron of his armoured legal regiment. Two constitutional law professors, both of whom have practised in the International Court of Justice, cannot be regarded as lightweight.

The strategies deployed were politically interesting. This independence debate is an argument of the heart and the head, as David Cameron said in his weekend article on the subject. Mr Salmond chose to address the head side first, the Commission being solely focused on economic matters.

That is a natural choice, for he knows that heart side – those people who believe that Scotland should be independent for no other reason than that they believe an ancient nation should be a sovereign country – are with him anyway, but there are not enough of them to give him victory.

It is winning over voters who make their political judgments with their heads that is crucial. He has to convince people that they will be better off, that there will be more jobs and better public services, and that standards of living will be better with independence.

Mr Cameron claimed to be advancing on both the head and heart fronts simultaneously. But the legal shells fired yesterday at the SNP claims for an easy entry into the EU were aimed at the head. Moreover, the barrage was directed at a nationalist target which has already been seriously weakened by mortaring from EU Commission president Jose Manuel Barroso.

The weight of the two lawyers, James Crawford, of Cambridge University, and Alan Boyle of Edinburgh University, both newcomers to this discussion who have some practical experience in court of international legal arguments, means their view that an independent Scotland faces a lengthy struggle to get into the EU cannot be easily dismissed.

All this does, however, is create uncertainty because no-one will know the truth of the argument until some part of some EU member state successfully declares independence and embarks on becoming a new member state. Until a pioneer tests the route and the obstacles, no-one will know for sure how long/short or hard/easy the path really is.

The Commission argument is about the macro-economic framework within which an independent Scotland would operate. It says that retention of sterling, rather than adoption of the euro or even creating a new Scottish currency, would work best for both Scotland and the UK.

Well, yes, that’s been pretty obvious for some time. While the Scottish Government has been recently championing record export figures to foreign countries from Scotland, exports to the rest of the UK are about 140 per cent bigger than overseas sales. It makes no sense to put a currency barrier up to hamper that UK trade.

And from the UK perspective, its sales into Scotland are the equivalent of about ten per cent of total UK exports. Again, it makes no sense for that trade to be made any more difficult.

This, however, is not the question because UK Treasury ministers have not been saying that Scotland would be banned from using the pound. What they have been saying is that the lesson of the eurozone is that there would have to be a pretty restrictive agreement constraining an independent Scotland’s ability to change its tax regime.

The Commission’s argument is that as long as there is an overall envelope which sets broad parameters for volumes of tax revenues and borrowing, that still leaves plenty of room to manoeuvre around rates of corporation and other taxes to create advantageous conditions for business in Scotland that will grow the economy.

This is a case which has still to be proven. The Commission’s arguments are complex and will need some dissecting time. But the economic literature suggests that, while high corporate taxes, for example, are economically damaging, the difference made by cutting already relatively low taxes by a few percentage points is pretty limited.

Though UK ministers won’t be pointing this out, the current government has started a programme of cutting corporate taxes to the lowest levels in the G7. So far as I know, nobody has yet detected that this is proving to be a major boost to the UK economy. And the Irish example of setting very low rates shows that you can achieve a major economic boost in the short and medium-term, but you also create long-term problems that can be disastrous.

Tax incentives are often argued to be a useful tool to promote particular industries. But recent media exposure of some pretty unscrupulous manipulation of these schemes by clever-dick accountants acting for rich people also suggests that abuse of incentives loses as much tax revenue as is created by growth in the targeted sectors.

These matters aside, yesterday’s salvos reveal weaknesses in both the pro and anti-union camps. The SNP has been portraying the Union as a dying and decaying husk which has the potentially vibrant Scotland trapped inside it. The heart-type arguments which Mr Cameron promised would counter this did not appear, allowing the SNP to claim that this was yet more negativity, playing into their dead-and-dying Union case.

On the anti-Union side, the Commission case boils down to an argument for continuity, reducing uncertainty which ought to make independence more attractive, or at least less threatening, to those more interested in the head-type arguments.

But it may also have the effect of reducing the appeal of independence to nationalists of the heart. I was much struck by a letter to another newspaper written last December by a small businessman with nationalist sympathies. He wrote: “On every issue raised, from Nato membership, to currency, to Europe, the SNP closes down discussion by saying nothing will change. A vote for independence seems to me to resemble a vote for a Little Britain. What is the point of that?”

Political battling can be just as foggy as military war.