Bill Jamieson: A serious case of referendum fatigue

Even if you're turned off by talk of indref2, at least there's a new honesty about the austerity it may involve, says Bill Jamieson

Nicola Sturgeon came away from last weeks meeting with Theresa May wrongly thinking she had a veto on Brexit. Picture: Steven Scott Taylor

Strolling through the centre of Stirling last Saturday, I noticed a street stall attracting much interest. Fresh farm produce? Yet more electronic gadgetry? A large placard explained the bustle: a petition for NO MORE REFERENDUMS.

After months of Brexit battles and with our own 2014 referendum still a raucous memory, little wonder there was a queue to sign. Voter exhaustion has set in.

After Theresa May’s visit to Scotland last week, many were taken aback by First Minister Nicola Sturgeon’s remarks that a second independence referendum could be held as soon as the first half of next year. Could she really be serious?

Several explanations apply. One is a misunderstanding of the conversation she had with the Theresa May, giving rise to a belief that she had some lock on the UK’s activation of Article 50 of the EU constitution that would launch the process of Brexit. An early second referendum would stymie such a move.

The PM’s aides have denied this interpretation, saying her wish was for the UK to move together on Brexit. It is not uncommon for heads of government to talk past one another. It happens.

Another explanation is that it is a bluff. The First Minister’s aim is to keep the pot boiling on independence. Everything is rendered secondary to this.

The third explanation is that the First Minister really means it. She is determined to frustrate any move on Article 50 until the distinct and separate position of Scotland is recognised. Scotland voted to remain, and as First Minister she is obliged to assert and pursue this recognition. The option of an early referendum is one, she will argue, that fully serves Scotland’s desire to remain a member of the EU.

The Brexit vote has exposed growing differences between Scotland and the rest of the UK. For Westminster to proceed as if Scotland will simply have to tag along risks widening these fissures even further.

Little wonder that in recent weeks calls have resurfaced for the UK to move towards a federal constitution – one that would see a separate English parliament, the House of Lords abolished and replaced by elected representatives of the different nations and regions to deliberate on matters such as foreign policy, defence, social security, pensions and currency questions.

A federal UK would go a long way to meeting the SNP’s ambitions for more powers and for greater recognition of the separateness of Scotland as a political entity. But it could portend a profound split within the SNP. Many would see it as the most workmanlike and least disruptive solution for Scottish business and for the maintenance of the “Social Union”, so frequently invoked in the 2014 campaign.

But others would view it as a sell-out, insisting that, to recoin a phrase, “independence means independence”. How it would affect the immediate issue of EU membership is unclear. How practical would it be for Scotland to be in a federal UK but with a separate currency and EU membership while England and Wales retain the pound and are outside the EU? And how many years – and more referendums – would it take for such a federal constitution to be established?

Meanwhile, preparations for a second independence vote are starting to appear. My former Scotsman colleague George Kerevan has written this week of the need for “fiscal consolidation”. This is the high-falutin term for spending cuts and/or tax rises that would be required for Scotland to maintain a separate currency in which overseas investors would have confidence and commit with credibility to full EU membership terms including in due course the single currency. This is the same single currency that has condemned Greece and Spain, Italy, Portugal and France to divisive and highly unpopular austerity measures to bear down on their budget deficits. The EU would also be anxious to secure Scotland as a net contributor to its budget.

How brave of George – but how absolutely right – to raise “fiscal consolidation”. Scotland’s North Sea oil revenues have plunged from almost £10 billion in 2011-12 to zero in 2015-16. The Scottish Government’s latest North Sea tax projections posit future annual revenues ranging up to £2.8 billion by 2019-20. However, this figure assumes an oil price of $100 a barrel. It’s $46.77 now.

Moving to “fiscal consolidation” would hurt. Each 1p rise in Scottish Income Tax could raise around £500 million in 2018-19. The economist John McLaren calculates that 3p on the basic rate, with perhaps 5p on higher rates, should be able to raise well over £1.5 billion – assuming no-one shifts domicile. If existing VAT exemptions (and reductions) were removed, tax receipts could grow by more than 25 per cent – a policy backed by many economists, including James Mirrlees of the Scottish Government’s Council of Economic Advisers. The hit on lower income households could be offset by redistribution of some of the money raised. Other options include a new whisky tax that could raise up to an additional £1 billion a year.

Of course, extra revenue could come from better than forecast economic growth. But there was no growth at all in the Scottish economy in the first quarter of 2016. And Scotland has been growing more slowly than the UK. “One would have expected the economy,” Mr McLaren observes, “to dominate the political discourse but instead politicians have been consumed by two referendums and two elections.”

Indifference to such concerns is unlikely to change in the aftermath of the Brexit campaign. This has left a legacy of deep voter distrust and cynicism over economic forecasts and predictions of tough times ahead, particularly when disguised in the dissemblage of “fiscal consolidation”.

In any event, a second independence referendum is more likely to be about issues of identity and belonging. And whenever it comes – whether the first half of next year, 2017 or beyond – the ranks of unionist supporters will have been thinned by sheer exhaustion.