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Is Scotland on Verge of Independence?

By Ian Bremmer

On May 1, England and Scotland will mark the 300th anniversary of the treaty that wedded the two within the United Kingdom. The festivities won't last long. Two days later, Scottish voters are expected to hand dominance of Scotland's parliament to the separatist Scottish National Party, which has called for a popular referendum to force a divorce.

Prospects for Scottish independence are far from certain. Even if the SNP finishes first on May 3, it's not at all clear it can win enough seats to bring independence to a vote in 2010. Even if it does, Scots may not be ready to cut all ties with England. But nationalist control of Scotland's parliament, with or without a vote on independence, poses plenty of risks -- for the UK, for Scotland and perhaps for unity in other European countries.

To ease tensions within the marriage eight years ago, Tony Blair's Labour government launched a plan to create a Scottish parliament and provided it with authority over local affairs in hopes that devolution of power would slow momentum toward independence. Since then, Blair has become increasingly unpopular in Scotland. In particular, his support for the U.S.-led war in Iraq has antagonized many Scots and handed the once-marginalized SNP a winning political issue.

As Scotland's own Labour Party loses political ground, the SNP's appeal has grown. The nationalist party currently holds 25 seats in Scotland's 129-seat parliament. Polling suggests it will likely increase that number to between 45 and 50 on May 3, largely at Labour's expense.

Yet, a referendum is hardly a sure thing. Even if these projections prove accurate, the nationalists will lack the 65 seats needed for a majority, forcing them to seek a governing partner. They will probably have to tap the Liberal Democrats, who oppose a referendum. Even if a vote on independence were held, opinion polls cast doubt on the outcome.

Depending on how the referendum question is phrased, support for a full break from the United Kingdom receives as little as 30 percent support. As a result, the party may temporarily settle for a transfer of new powers from the British government, helping it claim progress toward full independence without losing support from some who oppose the referendum.

Scotland's Liberal Democrats will support that option. Unlike the nationalists, they are part of a Britain-wide political party and oppose a clean break from London, but they would gladly claim credit for winning new powers for Scotland's parliament.

Together, the two parties would likely demand that Westminster grant the Scottish parliament new powers on local issues -- for example, on immigration, taxation and civil-service reform plans. Dominance of parliament will also offer the SNP a megaphone with which to demand that Scotland profit more directly from the United Kingdom's North Sea oil and gas reserves.

On the other hand, prospects for a Scottish republic may not be as remote as some think. If the SNP unexpectedly wins 50 or more seats, it may ally instead with independents and Greens to grab majority control of parliament. SNP chief Alex Salmond could then keep his promise to schedule the referendum.

If so, the three-year pre-referendum campaign is certain to be contentious. British officials will warn that an independent Scotland will be isolated and poorer. Salmond will counter that the new country can rightly claim up to 90 percent of the UK's North Sea energy reserves and that the proceeds would finance Scandinavian-level prosperity.

In addition, polls that now suggest limited support for independence may not tell the final story. This current polling hardly indicates how Scots will vote in 2010. After all, surveys from three years ago did not reveal the now obvious rise of the SNP. Further, Britain may well have a conservative-led government by then. If so, left-leaning Scotland is much more likely to vote for divorce.

Plus, polling already suggests that the SNP-designed phrasing of the referendum question might well win majority support. Scots were asked in November 2006 how they would respond to the question the SNP intends to place on the ballot: "Do you agree that the Scottish Parliament should negotiate a new settlement with the British government so that Scotland becomes a sovereign and independent state?" Fifty-two percent said yes. If global oil prices remain high or climb higher over the next three years, the separatist case will be an easier one to make.

Even if an SNP government lacks the votes to schedule the referendum, tensions between England and Scotland will grow. The Scottish parliament will seek (and likely receive) new concessions from Westminster, provoking resentment in England. Many English officials argue it is inherently unfair that Scottish members of Britain's parliament now vote on health and education issues affecting English voters, while English lawmakers have virtually no say in Scottish affairs.

In addition, as part of the original devolution plan, British subsidies provide Scottish students with free university tuition and elderly Scots with free long-term health care, benefits the English must pay for. Scottish voters counter that these subsidies are financed with revenue from North Sea oil and gas, much of it extracted from "Scotland's waters." Yet, polls suggest that many English voters are now content to see Scotland fend for itself.

This is a particularly awkward problem for the member representing the Scots of Kirkcaldy and Cowdenbeath, British Labour's prime minister-in-waiting Gordon Brown. If his countrymen vote to bolt from the United Kingdom, those who ask "who lost Scotland?" will surely point toward Brown -- especially since the original devolution of powers was Labour's idea.

Yet, an SNP-led government also poses risks for Scotland's economy. If Britain grants the Scottish parliament powers to set local tax rates, Scotland's business climate could quickly cloud over. Scotland is home to a significant financial services industry. Two of Europe's top 10 banks are headquartered in Edinburgh, as is a substantial part of the British insurance industry. These commercial leaders trust Britain's "new Labour" government more than they do Scotland's left-wing nationalists.

Anticipating this, the SNP has pledged to reduce the level of regulation for the financial services sector and lower corporate taxes from 28 percent to 20 percent following independence.

Market skepticism will not be so easily appeased. Financial services firms fear the uncertainty that would follow an SNP triumph, and a three-year pre-referendum campaign would generate plenty.

The implications of a nationalist-led Scottish parliament, with or without an independence referendum, could extend well beyond the borders of the UK. An SNP victory and talk of the break-up of the United Kingdom could embolden separatists among the Catalans and Basques of Spain, Flemish-speakers in Belgium, and even those in northern Italy who favor a break from that country's less prosperous south. These movements have developed over many years under different historical circumstances. But progress toward Scottish independence could help generate separatist momentum within any of these states.

An immediate European domino effect following Scotland's elections is extremely unlikely. But large-scale political movements -- toward democratization, decolonization, socialism, free-market capitalism or nationalism, for example -- tend to develop in waves. Break-up of the United Kingdom, a prosperous liberal democracy, would send shockwaves across European borders -- and might one day create new ones.

Ian Bremmer is president of Eurasia Group, a political-risk consultancy and the author of "The J Curve: A New Way to Understand Why Nations Rise and Fall,". He can be reached via e-mail at research@eurasiagroup.net.

© 2007 Tribune Media Services, Inc.


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