The most significant message of George Osborne’s much-trailed speech in Edinburgh today wasn’t actually in the speech at all. The text itself was drivel, founded largely on arguments discredited literally years ago – chiefly that an independent Scotland would have to bear all the costs were one of its banks to go bust again.
(Yes, the same banks we’re told would in fact have relocated to England. Sigh.)
When he finally got down to the brass tacks, even his actual threat – that he would be “unable to recommend” a currency union in the event of Scottish independence, and that therefore “it is not going to happen” – was essentially completely meaningless. It was nothing more than politicking, a threat which could and would be easily reversed in the event of an actual Yes vote.
The real menace behind the speech lay elsewhere.
Osborne took what he called the “exceptional step of publishing the internal advice I have received from the Permanent Secretary to the Treasury” alongside his speech, and in doing so revealed the actual threat he was making – one which has nothing to do with a currency union, and would have caused uproar had he made it the focus.
Because currency union, in truth, isn’t a big deal. As has been extensively discussed in the last 24 hours, Scotland has many perfectly workable alternatives available to it. The Adam Smith Institute, for example – no frothing cybernats they – suggested that Scotland using Sterling “unofficially” would actually be a better option, as have others.
A Scottish pound pegged to Sterling is also a perfectly workable plan, and has been suggested as the best choice for Scotland by Deutsche Bank, who as far as we know are also not puppets of Alex Salmond. All the possibilities, including a currency union, have their advantages and drawbacks.
The UK government knows this, and also knows the disaster that refusing a currency union would be for the UK – it was notable that Osborne, when directly asked at the press conference, refused to put a price on it. In essence, refusing a currency union is no threat at all, particularly when compared to the economic consequences for the UK of Scotland declining to take on a share of UK debt.
The HM Treasury advice was that the Scottish Government was bluffing on that point. Osborne’s speech has been compared to that of a poker player, but he wasn’t making a bluff, he was calling one. And the Treasury, in the last sentence in the image above, gave him a half-decent card to back up his call with: if the Scots leave us with the debt, we won’t co-operate with the independence process.
It doesn’t take a genius to interpret the meaning. Osborne’s speech was certainly a threat, but not about a currency union. By releasing the advice, he made as clear as possible that if Scotland votes Yes, the rUK will obstruct its membership of the European Union and other international bodies.
(In blatant contravention of the terms of the Edinburgh Agreement, s.30 p.8.)
As unanimous approval is required to admit new EU members, that would be a very serious matter indeed. But to openly say so in those terms would be a blackmail too crude even for the Unionist media to ignore or endorse. So instead Osborne concealed it, in the best possible place to hide something – plain sight.
You’ll read thousands and thousands of words today about the speech, and we’ll wager that few or none of them will address its true meaning. The UK wants Scots to vote with a gun to their heads – the threat of expulsion from the EU, no matter how much the rest of the EU wants to admit Scotland, via a UK veto.
(Of course, a No vote might well lead to the same outcome anyway in 2017.)
As it happens, we were out at a local poker game ourselves last night. (Quadrupled our money, thanks for asking.) There’s a name in poker for what Osborne’s speech did: representing. It’s not strictly a bluff – he has a hand with some “showdown value”, but he doesn’t want to show it, because it’s not what he wants us to think it is. He wants us to fold our strong hand in fear, rather than take it all the way.
Because while certainly theoretically possible, it’s debateable whether the rUK could in practice make good on its threats. Putting up trade barriers and borders would, as we’ve previously examined in some detail, be economic insanity for the rUK – more so than even the worst possible outcome of a currency union – making it politically hard to defend, and it would also bring the rUK under huge pressure from the rest of Europe, which wants Scotland in. Blocking membership of NATO, meanwhile, would meet with the strongest possible opposition from the USA.
Osborne knows that a faithful media will collude in disguising his play for him. He also knows that the Scottish Government will understand it perfectly. In those terms it’s not a bad move, and certainly a more cunning one than some would credit him with.
But what was actually revealed by the speech is that the UK government is absolutely terrified of Scotland refusing a share of debt. And as such, the truth is that Scotland holds the strongest hand at the table. So long as it plays it properly, let there be no doubt about it: Osborne will fold first.