It may be the most important date in the last 300 years of British history. A bit like the 4th of July in the United States, 18 September 2014 risks being remembered by the Scots as Independence Day. It will all depend on today's referendum, which asks 4,3 million people a simple question: are you in favor of secession from Great Britain?
97% of those eligible to vote have registered at local polling stations and a turnout is expected to exceed 85%. A record, considering that the average in British general elections is 7%. Polling stations will be open from 7 am (8 am in Italy) until 22 pm local time (23 pm in Italy).
As for the initial results, exit polls are illegal in the UK, but the Yes committee does not rule out the possibility of small polling companies carrying out local surveys. You don't need to be of age to vote, you just need to be 16 years old. In fact, you don't even need to be Scottish: English, Welsh, Northern Irish, all EU citizens and citizens originating from the 52 Commonwealth countries can also vote, provided they live and pay taxes in Scotland.
The final result is still uncertain. Three polls published in the night between Tuesday and Wednesday by the Daily Telegraph, Daily Mail and Scotsman gave a gap of 4% in favor of No: unionists would be 52%, against 48% of secessionists. The margin is not the most reassuring for the London government, also because - in addition to the statistical margin of error - it should be remembered that between August and September the Yes faction almost completely filled a gap that seemed irrecoverable, greater than 20 percentage points.
But if the comeback were successful, what would happen? In the event of secession, unforeseen and unpredictable economic and political scenarios would open up. Starting with the future that awaits her Majesty coin.
THE STERLING
The British government has repeatedly announced that independent Scotland will be banned from using the pound if they win the Yes vote. But according to Alex Salmond, prime minister in the Edinburgh Parliament and leader of the splinter party SNP (Scottish National Party), London is just an electoral bluff and the old pound will continue to circulate in the new state.
How this can happen, however, is still unclear. There are two possible paths: the creation of a sort of "Sterling Area" in imitation of the Eurozone, or the adoption of the British currency informally, on a par with what happens in Kosovo with the euro and in Panama with the dollar.
However, there would be two obstacles to overcome: in the first case, London's opposition to the common currency area, in the second case, the foreseeable flight of Scottish credit institutions, which would move to English soil to continue exploiting the Bank of England as a lender of last resort. In this case Scotland would find itself without banks and without power over the currency.
On the other hand, the alternatives are not endless. The first is the adoption of the euro, not disdained by the SNP, which however would imply a much more invasive control system than the English one and would first of all require entry into the EU, far from immediate; the second is the creation of a Scottish central bank to issue a new currency. It would certainly be a very weak currency and subject to speculation, unless pegged to the pound. Furthermore, the "Scottish pound" would help revive ailing Scottish exports, but it would damage purchasing power and public finances.
PUBLIC ACCOUNTS
Perhaps even more complex than the currency chapter is precisely that which concerns the budget of any new State. The central issue is the distribution of public debt. According to calculations by the English National Institute of Economic and Social Research (Niesr), the Scottish debt, on a census basis, would fluctuate between 121 and 143 billion pounds, equal to a percentage between 73 and 86% of GDP. Moreover, after the division, the rest of the United Kingdom would see its debt-to-GDP ratio rise from the current 90,6% to between 94 and 101%.
Even on this front, however, litigation would be inevitable. The SNP has already threatened the central government: if there is no monetary union, Edinburgh will refuse to take on its share of the debt (the British Treasury, to reassure the markets, has pledged to guarantee the entire debt in the phase transition to independence). Furthermore, during the negotiations, London could recall how in the past Scotland has received transfers from the central state which have contributed not a little to increasing the British debt. Edinburgh, for its part, could demand that its share of the debt be deducted from the taxes that the United Kingdom has collected on the extraction of Scottish oil.
NORTH SEA OIL
Thus we arrive at one of the most sensitive points of the eventual secession: the ownership of the oil fields in the North Sea. Still according to the calculations of the Niesr, independent Scotland should be entitled to about 91% of the turnover produced by the sale of oil, because most of the resources are found in its territorial waters. On the other hand, once again the question would give way to endless negotiations, if only because so far most of the investments in wells and platforms have come from the British government or from the giant British Petroleum.
It is also necessary to bear in mind the problem of profitability: in recent years, in fact, the trend in the price of black gold and some unforeseen closures have caused the revenues produced by Scottish oil to sink. From 12,4 billion pounds in 2008-2009, it went to 6,5 billion in 2012-2013. A figure destined to fall further: in the most optimistic of forecasts, according to the Office of Budget Responsibility, in 2017-18 the turnover should settle at 3,5 billion pounds, or less than half of the 7,3 expected by the SNP for the same period.
PENSIONS AND HEALTHCARE
Nor can we overlook the two problems that according to The Economist would be at the top of the list of issues to be resolved for an Edinburgh separate from London: pensions and health care. The social security front is the most worrying, since – by virtue of the constant flow of young Scots who emigrate to England to find work – in the next few years the ratio between active and retired people will decrease in Scotland, while it will increase in England. As for health, a study published by the OECD places the Scottish quality of life among the bottom three in Europe, just think that in cities like Glasgow the average life expectancy does not exceed 69 years.
For health care and pensions, so far, most of the Scottish bill has been paid from London. Where will the money come from in the event of secession? Salmond talks about setting up a sovereign wealth fund which – fueled by oil revenues – invests in the financial markets, taking the Norwegian experience as a model. The secessionists also argue that Scotland can still extract oil and gas for 1.500 billion pounds and that the tax revenues linked to the black gold will guarantee 57 billion between now and 2018. Numbers which, however, according to some expertswould be grossly overestimated.
In general terms, several economists point out that Scottish public spending today exceeds the tax revenues produced. The new independent government should therefore begin the history of the new country with two unwelcome measures: cuts in public spending and tax increases.
WHAT THE UNITED KINGDOM RISKS
In the event of secession, the rest of the United Kingdom - in addition to losing a third of its territory and a tenth of its inhabitants - will pay a more political than economic price. The eventual loss of Scotland would risk questioning the British seat in the G7 as well as that in the UN Security Council. Without Scottish voters, moreover, it is possible that al 2017 referendum on remaining in the European Union the separatists will win. Meanwhile, Wales and Northern Ireland can be expected to try to follow in Edinburgh's footsteps.
THE REACTION OF THE MARKETS
As for the markets, so far, the prospect of Scottish secession has not caused real collapses on share prices. Instead, the pound ended up in the sights of investors, which weakened significantly. For Kevin Daly, economist at Goldman Sachs and author of a report on the Scottish case, "a positive vote in favor of independence remains improbable, but in the event that we witness the surprise victory of the Yes vote, the short-term consequences for the Scotland's economy, and that of the UK more generally, could be disastrous." The fears revolve above all around a possible monetary union between independent Scotland and the rest of the country, which could lead to a "sell-off of Scottish assets". The union of the pound "could lead to a European-style monetary crisis within the United Kingdom", the consequences of which would be "incalculable", concludes Daly.
According to Credit Suisse analysts, the probability that the Yes vote will win in the referendum does not exceed 25%. The Swiss broker's economists believe that, in the event of secession, Scottish export companies (such as Diageo and Pernod Ricard) could have some advantages, while banks such as Rbs, Lloyds and Tsb would be penalised.
Attachments: goWare eBook: “Scottish Scenery”
