Scottish independence: Who has put the Union in jeopardy?

The minister who said that an independent Scotland would keep the pound has given a propaganda victory to the SNP

By Iain Martin

Alistair Carmichael was settling down for what should have been a relaxing, convivial dinner on Friday evening. The Secretary of State for Scotland, the Westminster government’s main man north of the border, was attending the Scottish Liberal Democrats conference in Aberdeen and preparing to tuck in alongside about 30 journalists, press officers and Lib Dem parliamentarians gathered in an Italian restaurant, Aperitivo, in the city centre.

Before the drinks had even been poured, journalists asked whether he had heard about the story just breaking. The Guardian was carrying a report on its front page that claimed that a “government minister at the heart of the pro-union campaign” – someone “who would play a central role in negotiations after a Yes vote” – had said that Scotland could keep the pound if the country votes for independence in the referendum taking place in September.

It was news to the Cabinet minister Mr Carmichael, who, according to one of those present, looked “flummoxed and frustrated” as it was explained. Did he know who the minister was? Within minutes, after conferring with aides, Mr Carmichael was answering questions about a range of potential suspects and trying to quash a story that has infuriated those fighting to keep Scotland in the United Kingdom and gifted a gleeful Alex Salmond and the Scottish National Party a propaganda victory.

The mystery minister was quoted as saying: “Of course there would be a currency union.”

He or she also suggested that Whitehall was ready for a trade-off in the event of independence, allowing Scotland to stay in a sterling union in return for Trident, the UK’s nuclear deterrent, remaining in Scotland. “There would be a highly complex set of negotiations after a Yes vote, with many moving pieces. The UK wants to keep Trident nuclear weapons at Faslane, and the Scottish government wants a currency union – you can see the outlines of a deal.”

What makes the intervention important, and what elevates it above the standard squabbling of Scottish politicians, is that it damages the central plank of the pro-Union Better Together operation just at the moment when the campaign is already under intense pressure from Mr Salmond. Some on the pro-Union side are starting to fear that the race – which could lead to the break-up of the United Kingdom – could be tighter than they once thought. And it enables those running the Yes campaign to tell voters that anti-nationalist warnings are bogus.

Indeed, the view expressed by the off-message minister is directly contrary to what the Prime Minister, the Chancellor, the Labour leader of the Opposition, the shadow chancellor and the Liberal Democrat Chief Secretary to the Treasury have all claimed in recent months. Citing the learned opinions of the Governor of the Bank of England and the top civil servant in the Treasury, they have been quite clear that if Scotland votes Yes to independence, there is no deal to be done on the pound.

The pro-Union campaign rests, to a large extent, on explaining to Scots that if they vote to leave the UK there will not be a cosy deal on offer afterwards from London, as Mr Salmond claims in tones designed to be reassuring. The Unionists want the electorate north of the border to know that voting for Scottish independence means Scottish independence.

It was to that end that Better Together earlier this year staked its credibility on a cross-party attack on the SNP’s currency policy. Although Mr Salmond had originally wanted an independent Scotland to join the euro, the crisis in the eurozone prompted him to rethink. He now seeks to soothe voters’ concerns by advocating Scotland sticking with the pound instead, even if he manages to win the referendum. This would involve voters in the rest of the United Kingdom – England, Wales and Northern Ireland – agreeing to underpin an independent Scottish government’s finances and agreeing to bail out the Scottish banking system if any of Scotland’s banks get into trouble again.

In response, in February, Mr Osborne told Scottish voters that such an arrangement “simply isn’t going to happen”. The Chancellor claimed that the rest of the UK would not want to expose itself to unnecessary risks in terms of economic stability, a message echoed by the other parties.

Now, in last week’s briefing, here comes someone in the UK government saying they are all lying. A hand grenade has been rolled under the front door of the pro-Union campaign.

As the story started to spread on Friday evening, texts containing speculation about the identity of the minister were whizzing about the ether and landing in the in-boxes of Cabinet ministers and their aides. There was no attempt made to deny the veracity of the report.

Members of the Chancellor’s team were particularly annoyed. A senior source in the Treasury said there was fury that months of preparation on making the economic case against independence has been jeopardised by loose talk: “I am livid. The amount of work that has gone into that.”

There was also fury in the upper echelons of Labour, with blame directed at the Conservatives. A senior Labour MP said yesterday that he and his colleagues had been “busting a gut” to try to save the Union: “This is a first-order piece of strategic self-harm. The Tories need to sort it out. Too many people see themselves as commentators on the progress of the campaign rather than participants. People need to be in the trenches firing outwards.”

Another senior Labour figure, closely involved in the running of the pro-Union campaign, also said the Tory leadership in London must take action. “Without being too melodramatic, they have a duty to find this person, explain that they don’t speak for the Government, and then put them up against a wall and shoot them.”

In an effort to regain the initiative, the Chancellor and Lib Dem Danny Alexander, Chief Secretary to the Treasury, issued a joint statement yesterday restating their opposition to a post-independence currency union. Speaking in Aberdeen, Mr Alexander said: “People should not take any notice of unnamed sources who are not part of this debate when you have the Chancellor of the Exchequer, the shadow chancellor and myself for the Liberal Democrats making clear that a currency union is not something that would be in the interest of the United Kingdom.”

His Cabinet colleague Mr Carmichael also predicted that it would be forgotten: “It’s an irritation and it’s not helpful but frankly I think this time next week everybody will have forgotten about it.”

The persistence of the SNP and its campaigners suggests that north of the border this may be wishful thinking.

Behind the scenes on Friday evening and yesterday, No 11 and No 10 were also desperately trying to identify the mystery minister, with several Cabinet ministers asked if they were responsible for the briefing. They denied it. No 10 also explicitly denied rumours that it was Oliver Letwin, the Cabinet Office minister who went into hiding during the 2001 election when he briefed the Financial Times about £20 billion of proposed Tory spending cuts and blew an additional hole in then Tory leader William Hague’s campaign.

Initially, Tories thought last week’s briefing might have been a Liberal Democrat Coalition colleague, but as the Lib Dems are generally opposed to the renewal of Trident it is highly unlikely that one of their number would speculate on making its retention the centre of a post-referendum deal with Mr Salmond. “It sounds like an English Tory who doesn’t understand very much about Scotland,” said a member of the board of Better Together.

Fingers were then pointed at more junior Tory members of the Government who might have indulged in self-aggrandising behaviour, perhaps overstating their role in the campaign in an effort to impress a journalist.

Either way, the nationalists were not worrying about such nuances yesterday. They jubilantly claimed vindication. Nicola Sturgeon, Scotland’s Deputy First Minister, said: “This quote from a UK minister confirms the fact that the Treasury, the UK government, the No campaign, is bluffing when it comes to a currency union.”

There was some awkwardness for the nationalists, however. The potential “deal” floated by the minister involved Scotland agreeing to continue to host Trident, an idea to which SNP members are opposed. Even if such a deal was on offer – which both Mr Osborne and the shadow chancellor Ed Balls deny – the SNP would not be able to sign up to it.

Better Together was also taking comfort in its extensive polling, which it says shows that the crucial group of voters who may decide the result in September are most worried by the prospect of economic uncertainty. “Once this has played itself out, currency union is not going to happen and the arguments do not stack up for the nationalists,” said a strategist yesterday.

Still, the row has come at a particularly difficult moment for the Better Together campaign. With less than six months to go until polling day, the SNP is asserting that it is closing the gap in the opinion polls. A YouGov poll published last week had Yes on 37 per cent (+2) and No on 52 per cent (-1), with a 42/58 split once the “don’t knows” and “won’t says” were removed. But another poll last week, by TNS BMRB, had Yes on 28 per cent (-1) and No 42 per cent (no change), with 30 per cent don’t knows.

While the polls have not narrowed by as much as the nationalists like to boast, by dint of vigorous campaigning they have managed to create the impression that they have the momentum.

In recent weeks it has led to soul-searching in Better Together in Edinburgh and London, with some prominent figures from the pro-Union side – including former Liberal and Lib Dem leaders Lord Steel and Charles Kennedy – demanding that Alistair Darling, the chairman of Better Together, pursue a more positive approach emphasising the advantages of the United Kingdom, placing less reliance on negative campaigning.

A senior figure in Better Together said yesterday that while the campaign would present a powerful positive case for Scotland staying in the UK, there would be no let-up in pointing out what it sees as the weaknesses in the SNP’s economic argument.

“We’re not complacent. But nothing would please the Nats more than us dumping negative campaigning, because they know it works. They want to push us on to the emotional argument because it is where they are stronger.”

On such difficult decisions hang the future of a Union that has lasted 307 years. If the pro-Union side make many more foolish mistakes like last week’s, it could be gone for ever in six months.