John Stevens: Higher interest rates. Uncertainty for Ulster. Anglo-French defence - the vast implications of an independent Scotland

John Stevens is a former Conservative Member of European Parliament who stood at the last general election as an independent candidate

The victory of the SNP in the Edinburgh Parliament elections has obviously put the prospect of Scottish independence firmly on the agenda of British politics. What is perhaps less obvious is its possible impact upon European politics, both with regard to the UK’s relationship with the EU and more generally. The principal challenges which a break-up of the United Kingdom pose for the Cameron government all have clear European dimensions.

In ascending order of abrasion, first. there is the parallel which might be drawn between the uncertainty it is likely to increasingly create in the gilt market, and the present travails of the sovereign debt of Greece, Portugal and Ireland. A significant portion of our debt is owned by foreign investors, for whom the political stability of the UK has been axiomatic. Leaving aside the vexed question of Scotland’s present and projected significance as an energy producer, both fossil and renewable, and thus where the economic advantages might or might not reside, the mere onset of uncertainty about the entity which would be re-paying the present liabilities of the British government is certainly going to complicate the urgent task of sustaining our fiscal credibility and cutting our massively excessive levels of debt.

For example, one of the major advantages which we have hitherto enjoyed compared to other crisis-hit member states both within and outside the Eurozone - the maturity profile of our borrowing averages well over ten years, so that we are not faced with immediate re-financing pressures - becomes potentially problematic, because it could significantly raise long-term interest rates.

Then there is the question of what sort of monetary regime an independent Scotland would be likely to follow. Despite the ongoing difficulties of resolving a more rigorous and sustainable governance for the Euro, I think the over-whelming probability must be that the new member state would adopt it and ditch sterling. Indeed, this is likely to be part of any deal for the Scots joining (or rather remaining in) the EU.

Such would also, I believe, be the most sensible strategy, from a Scottish point of view. What the impact of this would be upon an English government pledged never to join the single currency can only be surmised. At the very least, as these possibilities become aired in the run-up to the referendum on Scottish indepen-dence, the debate south of the border about membership of the euro will be re-ignited - with all this implies, in particular, for the Conservative Party.

However, much will also plainly depend on the out-come of Ireland’s financial crisis and how its membership of the Eurozone has fared.  Mentioning Ireland raises the most overtly dangerous aspect of an independent Scotland: that were it to come about, it is inconceivable English public opinion would long tolerate a continued unique responsibility for Ulster. The still sadly superficial and brittle nature of Blair’s Stormont settlement could be sharply and brutally ex-posed. This is especially so because of the scale of political disillusionment which the economic debacle has brought to the Republic. The need to create some effective “Council of the Isles”, acting in unison with regard to the EU and towards other international institutions, along the lines of the confederations recently suggested in various quarters for the states of Scandinavia, and (rather more discreetly) for Iberia, might then become the only way of preventing a collapse of peace, as well as of prosperity.

It might also be necessary in order to maintain our credibility as a significant military power. It must be hoped that the current strongly neutralist approach of the SNP - which mirrors, of course, the traditions of the Republic - and which would deprive England (and the United States) of Holy Loch and Faslane, as well as of some of the finest units in the British army, could be modified. But this would probably require us realising the promise of the Anglo-French Defence Treaty, notably with regard to sharing some aspects of our nuclear deterrent with the French, such as the joint development of a new generation of sea-launched strategic missile, and co-ordinating patrols and thus of a proper integrated European pillar for NATO.  Only such a structure can plausibly ensure the more equal burden sharing across the Atlantic that will be necessary to persuade the Americans to stay committed to the Alliance, and the co-operative culture necessary to persuade the re-maining (or as in the case of Scotland, potential), neutral states in Europe, to join.

The Prime Minister is completely committed to the Union of Great Britain, in the classic, mainstream, Conservative tradition. He has shown a great sense of history, as well as of practical politics, in his response to the Bloody Sunday Enquiry, his financial support for the Irish banks and his promotion of the Royal visit to Ireland. He is also pragmatically committed to Great Britain remaining in the European Union. His keeping the UK fully part of the European regulatory regime for financial services, for all the potential difficulties this might involve, recognises the realities of preserving the City’s international business. His signing of the Anglo-French Defence Treaty could mark a fresh start in the architecture of European integration - pioneering as it does a clearly inter-governmental, sovereign-state-to-sovereign-state approach, that bye-passes the Commission.

At the same time, he knows that those in the Conservative Party who are most committed to withdrawal from the European Union are sometimes the most relaxed about the prospect of Scottish independence. He knows that such views are not just motivated by low electoral calculations of the extreme difficulties which the Labour Party would encounter in trying to achieve a Westminster majority without Scotland. On the contrary, a re-invigorated English nationalism does have a fierce logic in also wanting an “ourselves alone” detachment from Continental Europe - though it is, perhaps, harder to combine with the Anglosphere vision favoured by many Eurosceptics. In short, he faces a complicated, difficult and probably protracted debate which goes to the very heart of the meaning of Conservatism itself.

But the return of patriotism as a central issue all across Europe, and not just on the right, could constitute a major opportunity for the British government. It may well be that if he is able to preserve the British Union, Cameron may also have found the way to save the European Union as well.