The Scottish Play: A binary election choice

What’s done cannot be undone. William Shakespeare, Macbeth.

Here in Scotland, the British general election is a referendum on whether there should be a second referendum on independence. Increasingly, it is a binary choice between the Scottish Nationalists and the Tories. What will be the impact of the election on the Scottish economy? And what is the outlook for Scottish business given the outcome I foresee?

Light drizzle in Selkirk

So fair and foul a day I have not seen…

I have spent this last week on the campaign trail with John Lamont, Conservative Parliamentary Candidate for the beautiful, rolling Borders constituency of Berwickshire, Roxburgh & Selkirk (which even locals call “BRS” for brevity). John is standing for this Westminster seat for the fourth time. Two years ago he lost out to the Scottish National Party’s Calum Kerr by just 328 votes. This seat ranks highest on the Tories’ list of winnable parliamentary seats in Scotland.

John is campaigning alongside Rachel Hamilton, who is fighting a by-election for the Holyrood Parliament seat that John has just vacated. Their joint campaign leaflet features a photo of both of them, alongside charismatic Scottish Conservative Leader Ruth Davidson. They are dressed up in the orange oil skins and life jackets of the St. Abbs’ lifeboat crew. Theresa May doesn’t get a mention, let alone a photo.

The Nationalists are still rampant, as elsewhere in Scotland; but the word on the ground here is that the Liberal Democrat and Labour votes have collapsed – UKIP was never really a player in these parts. It might surprise metropolitan London types that the Tory vote here is coming, not just from posh English retirees, but also from gruff-voiced, no-nonsense working class Scots who know John well from his 10 years in the Scottish Parliament.

In the campaign headquarters in St. Boswells, beneath a huge photo of a beaming Mrs May, a party activist explains to me that the political ground is moving under our very feet. The surge of nationalism, I am told, is losing momentum. Since the “Naw” vote in September 2014, the appetite for independence has attenuated. Of course, after the independence referendum, the SNP benefited from a backflow of success: they won 56 out of 59 Westminster seats in the May 2015 general election and romped home as the largest party in the May 2016 Holyrood election. But we are now post-peak nationalism – or so the Tories hope.

Activists report that even some people who voted “Yes” in 2014 are now, post-Brexit, looking to the future and wondering whether Ms Sturgeon is a one-trick pony. Most Scots don’t particularly like Mrs May (though the vicar’s daughter narrative resonates in a country where most of the great and the good are sons and daughters of the manse). But many are ready to support her because they believe that a minority UK government led by Mr Corbyn, charged with the minutiae of the Brexit negotiations, could lead to disaster for us all.

The return of Punch and Judy

O, full of scorpions is my mind!

And they told us just a few short years ago that the two-party system was dead. Smaller niche parties were eating the established parties’ lunch. UKIP took four million votes in 2015 – most of them from the Tories. The Lib Dems polled 6.8 million votes in 2010 – less than two million fewer than Labour.

But in 2017 we are back to a two-party system. Only it’s a different two-party system as between England and Scotland. In England it’s Labour chasing the Tories. In Scotland, it’s the Tories chasing the Scottish National Party. The Tories will tell you that that makes them the only truly UK-wide national party. And if you are a unionist in Scotland, that is compelling.

No to Independence, but Yes to Remain – the Brexit factor

I am in blood steeped so far that I should wade no more…

There are now two fault lines which transect Scottish politics. And they intersect in a most interesting way. The independence (I prefer to call it separatist since Scotland is already self-governing) unionist fault line. And then there is the Remain-Leave fault line vis à vis the EU. While Scots voted 62-38 percent in favour of Remain on 23 June last year, about one third of SNP supporters voted Leave. These nationalist Brexiteers are now – while still patriotic Scots – much more open to the Tory narrative that Brexit can only be achieved by strong and stable government in London.

Remember that, for many years, the SNP was a kind of UKIP-in-a-kilt – socially conservative and opposed to the EU and to the NATO alliance. They were anti-globalisation and pro-twill. Under Alex Salmond and now Nicola Sturgeon, the SNP has transmogrified into a kind of left-of-centre European Christian Socialist party with a passion for tartan.

And immigration was never the salient issue amongst working class voters in Scotland that it was in England because there has been so little immigration outside Glasgow and Edinburgh (except for the English that is). I have met only one person of Eastern European heritage – a Romanian – over this last week in the Borders.

The SNP, at their election launch on 30 May, demanded that Scotland will have to “have a seat” at the Brexit negotiations and it made clear that it would insist that Scotland remain in the EU Single Market. Their strategy will be to undermine the expected new Tory government’s Brexit game-plan in any way they can.

An unimpressive record

Is this a dagger which I see before me…?

It is extraordinary that the SNP has held sway in Scotland for ten years but have been subject to a much scanter level of scrutiny than the government in Westminster. And since the general election of May 2015, the litany of SNP Westminster MPs who have been caught out is remarkable.

Natalie McGarry (Glasgow East) was charged with fraud and resigned the SNP whip. Five SNP MPs had their House of Commons credit cards suspended for misuse in the last parliament. Stewart Hosie (Dundee East) had to step down as deputy in Westminster. Michelle Thompson (Edinburgh West) was investigated by Scottish prosecutors into allegations of mortgage fraud; while Tasmina Ahmed-Sheikh (Ochill and South Perthshire) was declared bankrupt.

Meanwhile, back in Edinburgh, Scottish Transport Minister Humza Yousaf was found to be driving without insurance last year – but refused to resign. (It’s not as if he’s had much luck with Scotland’s trains, either). Not to mention that Scotland’s schools are falling in the international league tables and the country is teetering on the verge of technical recession.

The Corbyn factor

Look like the innocent flower/ But be the serpent under it…

In his excruciating interrogation by the steroidal Mr Paxman last Monday, Mr Corbyn left the door open to IndyRef2. He said that he would “listen very carefully” to the Scottish Parliament, which is dominated by the SNP. Of course, what he really wants is to retain the option to offer the imprimatur for a new independence referendum to Ms Sturgeon in exchange for the support of the SNP cohort in in the new House of Commons for a minority Labour government.

Whether the supporters of Scottish independence would win that second referendum is highly questionable. I have met numerous SNP supporters this last week who are openly hostile to IndyRef2. They rightly think that it would add an additional veil of uncertainty over the already uncertain outcome of Brexit. How could Scottish businesses possibly prepare for separation from the UK while not knowing if an independent Scotland would be in the EU or not, and whether there would be a hard border with the UK?

You can call Mr Corbyn’s tactic cynical. But it’s actually much worse than that. It is founded on the bizarre but deep-seated belief in the Labour elite that the United Kingdom itself is an illegitimate state. A Guardian journalist recently explained to me that there is an element within the Labour Islington elite which regards Scottish independence as a progressive policy – a sort of last gasp in the dismantling of the British Empire. Remember that Messrs Corbyn and McDonnell, not to mention Ms Abbott, are on record as describing Britain’s presence in Northern Ireland in the 1980s as a military occupation.

And they are not just prepared to trade Scotland for their own short-term political advantage. There would be a garage sale of British territories under Mr Corbyn. They will cede a reluctant Gibraltar to Spain; Northern Ireland would be handed on a platter to Sinn Fein; and the Falkland Islands would be fed to Argentina like a python snacking on a live mouse.

And yet, Mr Corbyn has had a remarkably assured campaign in England – apart from a recent gaff on Woman’s Hour on BBC R4 where he did a Dianne Abbott over the cost of not means testing childcare for 1.3 million people. In Scotland, however, Labour is staring into the abyss. Here, if you support independence you vote SNP; and if you support the union you vote Tory.

Memories of Mrs T

Double, double, toil and trouble/ Fire burn, and cauldron bubble…

A lorry driver told me that he was given a new lease of life when, then a coal miner, he was made redundant under Mrs Thatcher. With his redundancy payoff he bought a van, set up his own business – and never looked back.

But I am not predicting that statues of Lady Thatcher will soon be erected in the genteel squares of those ancient abbey-towns of Selkirk, Jedburgh, Melrose and Kelso. For many Scots, Lady Thatcher was a wrecker who dismantled Scottish manufacturing and rendered the Tory brand completely radioactive for evermore.

When you look at the economic geography of this lovely region, you realise that the narrative of Thatcherite destruction is overdone. Selkirk, Hawick, Galashiels and Kelso were textile hubs, benefiting from the coincidence of quality wool and plentiful water power on the rivers Tweed and Teviot.

Mrs Thatcher didn’t close the mills – that was the first phase of globalisation in the 1950s – the trend to import cheaper, lower quality foreign clothes. What’s more, no one uses water power today for manufacturing (though surely the eco-engineers should be looking into this). There is no branch of Primark in Hawick, once hailed as the capital of cashmere. But the charity shops are abundant.

Scotland the brand

I bear a charmed life…

Scots are well aware that their national brand is world-famous – and overwhelmingly admired – and they trade on that. And Scottish hospitality is – in my view – unrivalled across the British Isles. Yet there are relatively few exclusively Scottish companies quoted on the FTSE-250. It is doubtful that even Royal Bank of Scotland (LON:RBS) is indeed a Scottish bank, headquartered as it is in London (effectively); and with a toxic reputation (something very un-Scottish). But I am still interested in investment opportunities which rejoice in their Scottish pedigree.

In the 19^th Century, Scots, notoriously a canny people, crossed (indeed forged) the British Empire: and they set up spectacularly successful trading houses across the globe – of which Inchcape (LON:INCH) and Jardine Matheson (LON:JMAT) still prosper. And don’t underestimate Edinburgh as a leading global asset management hub. Amongst the outstanding fund managers headquartered in the Athens of the North, I like Rathbone Brothers PLC (LON:RAT).

Inchcape, founded by James Lyle Mackay, first Earl of Inchcape, is a case study in corporate evolution in a changing environment which should be studied hard by left-of-centre Scottish politicians. Once a trading company focusing on the Far East, it is now a marketing and distribution company for the automotive sector. It is a dealer for leading brands including Subaru (TYO:7270), Toyota (TYO:7203), Mazda (TYO:7261), Jaguar-Land Rover (owned by India’s Tata Motors (BOM:500570)), Mercedes (FRA:DAI) and Volkswagen (FRA:VOW) in many countries. Only 15 percent of Inchcape’s profits now come from its UK activities.

Skyscanner is a rare Scottish unicorn. It is the Glasgow-based online travel agency with global reach that sold out to China’s Ctrip (NASDAQ:CTRP) last November for a reported US$1.75 billion. Scotland can do digital.

Meanwhile: Pound under pressure

Confusion now hath made his masterpiece…

Reports of Mr Corbyn’s advances have been greeted this week with profound consternation in North America – though the Europeans are currently diverted by another round of the Greek jitters. The Pound has been losing ground all week. Given the probability that Mrs May’s majority will not be the thumping one we first expected, it is likely that we shall ask ourselves one week hence precisely what this election was for. It has provided precious little elucidation of the Brexit negotiations – except that they will succeed or fail on the say-so of Mrs May and her clique.

Scottish politics after 08 June

When the hurly burly’s done/ When the battle’s lost and won…

The Tories are tipped to win between six and twelve Westminster seats in Scotland this time; and Labour and the Lib Dems between them will pick up smattering. But the SNP will still have an overwhelming 30 to 45 seats out of the total of 59. That will be enough to sustain Ms Sturgeon’s sombre dirge for IndyRef2 – even if most Scots are entirely fed up with it.

Whoever is UK Prime Minister on 09 June will get an earful from Edinburgh. And there is no sign that the Scottish government under Ms Sturgeon will implement more pro-business policies. Scotland’s economy will continue to grow more slowly than the rest of the UK.

I’ll be up all night next Thursday – and will pen for you my thoughts and prognoses on the Friday morning. If Mr Corbyn were to come out on top next week then that will be the end of Britain as we have known it. We would recall Macbeth’s final mournful lines: that political life is a tale/ Told by an idiot, full of sound and fury/ Signifying nothing.