There is a chill on Glenrothes high street, where pre-Christmas sales
underline a deepening sense of gloom among traders desperate for custom.
“I’m very worried about the economic situation,” said Elaine McKendrick, 39,
the manager of a local fishmonger. “A couple of neighbouring shops have
closed in the last two weeks so it’s not looking good. Every trader I speak
to says they’re struggling.”
The global economic crisis has not only left people unsure about their future,
but also how to vote in a by-election which only a matter of weeks ago
looked like it might seal the fate of Gordon Brown’s premiership.
“I’ve always voted Labour but I decided I’d had enough of them,” says Cindy
Fulton, 45, a store manager. “The SNP seemed the only alternative. However,
given what’s happened in Iceland with the collapse of the banks, I’m no
longer sure. I think I will end up voting Labour even if Gordon Brown is
partly to blame for the financial state the country is in.”
Last month, this was a constituency where the SNP could do no wrong and Labour
no right. Labour’s own private polling predicted that the Nationalists would
overturn its 10,500 majority at the by-election next month and finish 5,000
votes ahead. Now, even the most optimistic nationalists aren’t so sure of
themselves as the credit crunch threatens to claim its latest victim: the
credibility of Scottish independence.
The global downturn has changed everything and left the SNP battling for
relevance among voters mesmerised by plunging share prices, the crash of
financial institutions and the fate of the small, independent nations that
Salmond so frequently lauded.
Brown’s bailout scheme for Scotland’s banks made anything an independent
Scotland could have done look paltry by comparison, as he prepared to write
HBOS a cheque for £10 billion.
At a stroke of the pen it gave Brown, a prime minister usually left
floundering by the more fleet of foot SNP leader, a persuasive example of
how Scots’ economic future may be best safeguarded within the United
Kingdom.
New figures suggest a separate Scotland would be saddled with debt on the back
of tumbling oil prices, and one of Salmond’s own economic advisers now warns
that independence would be “dire”: could recession succeed where devolution
failed and, in the words of George Robertson, the former Labour shadow
Scottish secretary, kill Scottish nationalism “stone dead”?
THIS week at the SNP conference in Perth Salmond was putting on a brave face.
On the face of it his party has never been in better condition.
Companies such as Coca-Cola, trade unions and media groups which once ignored
the annual gathering jockeyed for prominence with exhibitions and
advertisements in a conference guide now weightier than a telephone
directory.
Membership and donations are still on the rise. Glamorous young SNP staff
wearing mini-kilts in the party’s stylish new official tartan and an on-site
concert from Sandi Thom oozed Caledonian cool.
However, even the high-tech capabilities of the modern Perth concert hall
struggled to cast in a favourable light the scale of the challenge facing
the SNP over the next two years, the most important in its history.
In recent days Ireland, Iceland and Norway, usually hailed at these events as
forming an “arc of prosperity” in which Scots must claim their rightful
place, have been ridiculed as belonging to an arc of insolvency. Some
members of Salmond’s own council of economic advisers agree.
Among them is John Kay, visiting professor at the London School of Economics
and one of Britain’s best-known economists. “It's much easier for small
countries to mess up in times of economic instability,” he says. “Take
Iceland for example. It is the best poster-child for small countries that
can’t go it alone. What’s been going on in the Icelandic banking system is a
strange and murky story and something we may well never know.
“But the truth is, if Iceland had been part of a Scandinavian monetary union,
with a stronger central bank and more resources, this problem’s unlikely to
have arisen.”
Kay says the case for a separate Scotland is weaker than before. “If Scotland
declared itself an independent country tomorrow its finances would look
pretty dire.” He believes it would have a budget deficit and, as an
independent country, could not have to bailed out HBOS or RBS.
Andrew Hughes Hallett, professor of economics and public policy at George
Mason University in Virginia who also advises Salmond, agrees the financial
crisis has made it more difficult to mount a convincing case for
independence.
“I guess it has. It’s difficult to argue that you can work more effectively
(as an independent nation) when so much has suddenly been sucked
southwards,” he said. The extent of Scotland’s likely annual deficit, based
on Treasury oil revenue forecasts and official spending figures, using a
model devised by leading city accountants Grant Thornton is £800 million.
It is a far cry from the £4.4 billion surplus projected by Grant Thornton in
May, when oil prices were soaring, which aides of the first minister were
still citing last week as evidence of their case. Then, as now, the
calculation assumed that an independent Scotland would receive an 82.5%
share of North Sea oil revenues.
On the worst reading, if Scotland was only awarded 70% of oil revenues the
deficit would be £1.8 billion. On the most optimistic reading, based on
Salmond securing the 95% share he wants from the UK government, it would
have a small surplus of £200m.
The declining fortunes of the small independent nations is reflected in the
mood of some of Salmond’s loyal foot soldiers, who have felt close in recent
months to realising their dream.
“Iceland facing bankruptcy has not exactly been helpful,” said one senior SNP
strategist. “It has affected the morale of some of the activists. There’s a
sense right now that people are looking for a safe port in a storm and
aren’t looking to change things.”
BY contrast, something of a spring has returned to the step of weary Labour
activists, led by a prime minister whose world-leading economic rescue plans
look to have transformed him from a bumbling Clark Kent into Superman.
“We’re having a lovely war,” said one Labour activist. “Iceland’s pain is our
gain. We’ll see how long it lasts but right now people are looking to the
devil they know to steer us to safety and he’s been playing a great game.”
Labour has dusted down its old arguments, discarded at the last Holyrood
election, that Scotland is too small to succeed on its own. The claims,
viewed by many Scots during happier economic times as patronising and
anti-Scottish, now appear to have found some resonance.
The economic crisis and the near collapse of Scotland’s banks have battered
national confidence. Salmond knows that when national confidence is low the
politics of fear favoured by unionist politicians are at their most potent
and constitutional change becomes a more remote prospect.
Many nationalists still blame the hangover from Scotland’s disastrous 1978
World Cup campaign by Ally MacLeod’s tartan army for the failure the
following year to secure a convincing “Yes” vote in the referendum on a
Scottish assembly, instead of a narrow majority.
While Scots are preoccupied with whether they are still going to be in work
and able to pay their mortgages in a year’s time, persuading them to take a
leap of faith will require skills of persuasion that even Salmond does not
possess.
“Salmond has been caught out by this crisis. I don’t think he is without
arguments, but the SNP faces a real problem convincing people to vote for
independence in 2010,” says John Curtice, professor of politics at
Strathclyde University.
“If the SNP is ever to win a referendum it needs to persuade the public that
they’d be better off under independence. Recent events have probably made
that task more difficult.”
It was already difficult enough. The last YouGov poll for the Sunday Times put
support for independence at just 34%, with 50% of voters opposing separatism
— although more are likely to back it if the Tories win the next general
election.
Curtice warns against writing off Salmond just yet. “Yes, Salmond may have
been affected by recent events but just remember how popular he is and how
good he is at playing the game.
“One of Salmond’s strengths is the perpetual ability to find confidence.”
Salmond’s fightback has begun, countering Labour’s attacks by claiming smaller
nations reacted more quickly and effectively to the economic crisis while
Brown was caught napping — and that the credit crunch started, after all, in
the largest economy in the world.
If Scotland were independent, it too could amass a fund from the proceeds of
North Sea oil to shelter the country, as has Norway which is sitting on
reserves of £200 billion, Salmond says.
Ireland and the nordic nations will recover, even if for now they appear far
less attractive examples for Scots to emulate, he contends.
“All countries, large and small, are affected by this,” Salmond said
yesterday.
“The prime minister keeps saying it originated in the United States. Seventeen
financial institutions have failed in the United States, the largest economy
in the world. For unionists to say this is something just affecting small
countries is daft.
“And to besmirch the reputation of Norway and Ireland to try and get a point
against the SNP . . . it used to be that unionists only ran down Scotland,
but now they are busy running down other countries as well.”
Iceland, said Salmond, had “very particular problems” and a population only
half the size of Glasgow, while Norway was among the best-placed countries
in Europe to get through these turbulent times, and Ireland was moving into
recession at a point where it was 40% more prosperous per head than the UK,
and would probably emerge with a similar margin.
Finland, Denmark and Norway were all forecast to avoid recession, while
Ireland had taken early action to stabilise its banking sector.
“By my reckoning that gives us three countries that will do better than the
UK, one which has very similar problems to the UK and Ireland, and Iceland
which is a particular example of a country very badly affected.”
Marc Coleman, an Irish-based former economist at the European Central Bank,
agreed that Labour’s claim that the Celtic tiger's recession was a bad
advertisement for Scottish nationalists was wide of the mark.
“After 15 years of record-busting growth, some froth is being blown off the
Guinness. But the glass remains very much almost full,” he said.
“Ireland’s economy grew by almost 90% in the past 10 years, four times faster
than the EU and three times faster than countries in the Organisation for
Economic Co-operation and Development.”
Salmond believes the worst of the downturn may well be over by November 30,
2010, the date on which he intends to hold an independence referendum.
Whether his bouncy optimism is misplaced remains to be seen.
However, after an extraordinarily long honeymoon it is now clear that he no
longer walks on water. His government is losing votes in Holyrood, taking
hits on class sizes and councils struggling to fund free school meals, and
facing a revolt over local income tax and raising the age for buying
alcohol.
After more than a year in office, it is facing the challenge of being the
incumbent and by St Andrew’s Day 2010 it will have been in power for more
than three years.
Before then, Salmond is praying that the chill autumn winds of recession will
not blow his party off course in Glenrothes on November 6.
A month ago, aides say, he thought the SNP would “scoosh it”. Now, while he
still expects to win, he believes the margin will be much narrower.
Salmond believes Labour’s “Superman” will be grounded within weeks when he
gets the blame for government-backed banks laying off workers, foreclosing
on mortgages and repossessing properties, charging excessive interest or
refusing people loans.
While Brown pins his hopes on his economic rescue plan proving to be his
“Falklands moment” which could transform the party’s fortunes, Salmond
believes the debate may quickly shift back to the so-called “real economy” —
such as the effect of high food and fuel costs. Once minds focus again on
that, he says, voters will pin the blame on the prime minister.
HOWEVER, while Salmond will claim that a win in Fife offers further evidence
that the tide has turned in Scottish politics, it may prove a Pyrrhic
victory.
If the views of Karen Greenhall, a 41-year-old flower shop owner in the town
are anything to go by the SNP should be worried.
“I’ve always voted SNP but I won’t be voting at all this time,” she says as
passers-by peer into her shop window without stopping.
“I have had this shop for eight years but I’m planning to close it next
autumn. Business has been quiet for months and now I’m being told a
supermarket will be opening up next door. The entire country is in a mess
and independence won’t help things.”
Glenrothes views
William McGirr, 68, a retired joiner: “I’ve always voted Labour but this time
the SNP appeals to me more. Having said that, I think Labour will win the
seat.
“Brown’s performance over the last few days has reminded me of Maggie Thatcher
just after the Falklands war broke out. I think Glenrothes could be Brown’s
Falklands war.”
Senga Robertson, 47, an art store owner: “Gordon Brown has impressed me
recently but not enough to vote Labour. I will definitely vote SNP. I think
Scotland could handle being independent. It would be a good thing for
everyone.”
Paul Jardine, 39, unemployed: “Brown is a strong prime minister and I have
total faith in him and the Labour party. The SNP is not a viable alternative
and the Iceland situation shows what could have happened had we been
independent.”
