Negotiating prior to an Independence Referendum-Mike Hedges AM

We have a novel way of dealing with constitutional matters, where we have the referendum first and then we set about negotiating the terms afterwards. Although the withdrawal from the European Union made it necessary to have a referendum before a mandate to start negotiating withdrawal and implementing article 50, it is possible to negotiate before any future Scottish or Welsh independence referenda, so that those voting know what they are voting for.

For Scottish or Welsh independence, there are a number of key areas where agreement is necessary for independence. The below is just a flavour as opposed to a definitive list.

Firstly, the currency that each country will use. The pound sterling will become obsolete, so a Scottish pound or Welsh pound, alongside the remaining British pound, will need to be created. An example of an amicable split was the break-up of Czechoslovakia. Following the split, the two countries created new currencies, but prior to that, both implemented capital controls and all cross-border money transfers were halted to avoid any speculative flows. Stamps were glued onto 150 million federal banknotes which were then taken around the country with the help of the police and the army.

The exchange for notes stamped by Czech or Slovak stamps, at a 1:1 rate, was completed in four days. Following this, the stamped notes were  replaced by new ones. People could turn a maximum of 4,000 crowns, contemporaneously  approximately 87 pounds, into cash. The rest had to be deposited and the old money ceased to be legal tender. Whilst the initial rate was 1:1, this did not hold; the Slovak currency devalued by 10 percent in mid-1993 and remained weaker than the Czech crown until Slovakia’s entry into the euro in 2009.

Secondly, every Country needs a Central bank that can act both as a lender of last resort and also set interest rates. Currently the Bank of England fulfils these rose, but if there is a split, new central banks will need to be formed and the assets and liabilities of the Bank of England transferred, according to an agreed formula.

Thirdly, there are also a number of government agencies, such as the DVLA and National Insurance, that cover the whole of Britain. What will become of them: will they be split or will each country allow, what will become a foreign country, to carry out these functions.

Fourthly, share of national debt would need to be agreed, either on a population basis or on some other agreed formula, and again arbitration could be used if agreement could not be reached.

Next, how and at what rate will pension and social security payments be paid. People across the UK will build up National Insurance contributions, but who would be responsible for current pensioners following independence? Will it be where they live now or where they lived prior to retirement? National insurance rates will have to be set and collected in each country, as will corporation tax. The same goes for VAT rates and duties on petrol and tobacco, with the danger of substantial cross border movement if rates diverge significantly.

Further, in terms of the Armed forces it will be important that armed forces personnel are allocated to the correct country and based in their own country. The sea border would need to be defined and agreed either by negotiations or via arbitration. A hard or soft land border will depend on a number of issues: membership or non membership of the EU and different rates of duty and VAT. Will there be a free trade agreement between the countries and free movement of people; if so, that needs negotiating. A police protocol will be needed for cross border investigations and either separate national security and special branch staff or an agreement to jointly fund and share.

As the leaving date needs to be shortly after the vote, the above needs to be negotiated prior to the vote. Of course, if the above are agreed, then people will be voting on what the future looks like rather than taking a leap of faith into the unknown.

As stated at the beginning, this is not a definitive list, just a flavour of what needs to be negotiated, I believe, before not after, an independence referendum.