Monday, 27 June 2016

Number 10 has a Plan


It is not the case that Number 10 do not have a plan. They have a very clear plan. David Cameron let the cat out of the bag in the House of Commons today. He told Angus Robertson, Leader of the SNP group, that Scotland should want to stay inside two single-markets: the British one and the European one.

Similar, "helpful" questions came from Ken Clarke, who pushed fairly overtly for Parliament's preference (for which read, the least Brexit-like) and Pat McFadden, who asked him if he knew of any country which was admitted to the single market but which did not have to accept free movement of workers (the answer obviously being "no, none").

The Plan

The United Kingdom is going to negotiate to become a member of the European Economic Area, or the EEA. The so-called "Norway" option. There will be some quibbles over the specifics and there may be some variation, but it is what is happening.

The Government is holding-off invoking Article 50 for a very good reason. This is a Brexit Prime Minister's button to push, and the longer it isn't pushed, the less room there is for them to save face without agreeing to a terrible deal. Cameron worked this out when he made his resignation statement on Friday Morning. The only person who can successfully lead the UK out of the EU, in the absence of an EEA offering, is a Tory Prime Minister with a substantial (50+) seat majority. With an EEA offering, the coalition of compromise is there across the parties.

Perhaps most importantly, Cameron has essentially decided that the political price for this decision should be that the Brexit Tories should be the ones to be very clearly and publicly responsible for the reneging on promises about immigration, financial contributions to the single market, and economic instability. Put plainer still, PM Boris Johnson will be the one that is blamed for a generation, by Remainers for taking us out of the EU, and by Leavers for the lies and a settlement that undermines the core of the democratic choice he persuaded them to take.

What would it mean

The ironic thing about the EEA is that it is the solution that does Britain the least economic damage and causes the least disruption, yet it is also the one choice that does the polar opposite of "taking back control". We will find ourselves bound by the vast majority of the legislation passed and promulgated by the Commission, Council and Parliament, but will have zero democratic input into those decisions.

It is true that the UK would regain some control over the fisheries and agriculture policies, but we would probably pay roughly the same membership fee as we do now (per capita, Norway pays more!) and we have to protect most, but not all of the treaty rights to free movement of workers.

What about Scotland?

This is important for Scotland for several reasons.

The UK is leaving the EU

It is now extremely unlikely that the UK will remain in the EU. There is no intention among those who matter to try and outright reverse this result. The priority of those who will be in government has swung firmly behind damage limitation.

Reverse Greenland won't happen

That means that any hopes of Scotland staying in the EU proper, while remaining in the United Kingdom, is unlikely. The only circumstances in which that could happen is if some kind of "reverse Greenland" proposal is agreed, to try to ring-fence membership for the UK that only has territorial application to Scotland, as part of the transition to the EEA.

This is a nice, seductive and attractive idea on the surface, but it's totally unworkable. In reality, it involves either the break-up of the British single market into EU and non-EU zones, or else there is very little that can be offered for Scotland that the EEA doesn't provide already. Differential free movement workers rights within a state would also be a nightmare to get right, albeit the actual border enforcement would not itself be radically different from the Norway/Sweden arrangement.

It also faces considerable political obstacles. The EU will not want to set a precedent whereby states can effectively "opt-out" parts of their state from the most onerous parts of EU membership. To do so would undermine the core objectives of the EU. It would be difficult to reconcile the "rights" of these "within a member-state" member-states in the European Council and its Parliament, and difficult to establish lines of accountability for Treaty obligations. The EU is, first and foremost, a Union of sovereign states, and any suggestion that something different would be arrived at would represent such a fundamental change in its nature as an institution as to justify far wider treaty change.

This is completely against the interests of especially the Eurozone. They seek, if anything, greater flexibility to allow for aggressive integration of its member-states. That is not something that can be done while creating different tiers and types of European Union membership. It is also not something that is likely to be entertained by any other state in the EU with a secession movement, lest differential membership terms be seen as a stepping-stone towards outright independence.

Scotland has to Choose

Given this, Scotland will soon have to make a choice. They will have, in all likelihood, the opportunity to choose between three outcomes:

1. Accept being part of the UK, which is itself a member of the EEA
2. Become an independent state, securing its own EEA membership immediately or almost immediately as an intermediary step to full EU membership; or
3. Negotiating as part of the UK's EEA settlement that Scotland receives accelerated EU membership if it chooses to vote to leave the UK in a second referendum

My Preference

As I have indicated elsewhere, it is now (tentatively) my belief that the third option is the most desirable of those three, but it will be the most complicated to achieve. I also believe that this option has its fewest drawbacks if it transpires that the rest of the UK would be in the EEA rather than a looser arrangement with the rest of Europe. We would still, in those circumstances, functionally retain a single market with the rest of the UK, and would be able to trade with them without any serious impediment. The same, incidentally, would be true of the second of these three options as we'd both have the same relationship with the European single-market.

In many respects, therefore, very little in terms of the economic relationships between Scotland and the rest of the United Kingdom would stand to change if we seceded. The key impediments to Scottish independence would actually be fundamentally the same as they were in 2014. On the currency, the pound has weakened, albeit it may strengthen in the coming months. Back in 2014 I always said that a separate Scottish currency, initially pegged to either the pound or the Euro, was preferable to a currency union.

I always thought that problem was overblown. It is a necessary challenge that comes with independence, but in the medium term the answer is obvious and it is not clear that it would significantly impede trade. There will be very little pressure for Scotland immediately to join the Euro, not least because of its own current challenges and the pragmatic interests of both Europe and Scotland in finding a responsible way to address Scotland's deficits, which substantially exceed the Exchange Rate Mechanism's minimum requirements.

The fiscal situation is definitely more acute. I am not going to deny that; indeed I have argued at length about it. But that is the case not because of Brexit but those underlying economic conditions. If anything, the effect of our withdrawal from the EU may well affect the balance of tax generated and public spending committed within the United Kingdom substantially. If Scotland makes clear that it intends to be a full member of the EU, rather than just an EEA member, it may stand to benefit from some of the jobs and business, especially in the financial sector, that the UK currently has in London, thus far seen as a "gateway" to the European Union.

Settling the Mandate

What is clear, though, is that Scotland very clearly indicated a preference to be involved in the political institutions of the European Union, rather than just the single market. I think it is necessary, once we know the tenor of the UK's new relationship with the EU, that Scotland should be given a clear opportunity to choose between the two Unions, and the two relationships that come with them.

If it is the view of the people of Scotland that this fiscal transfers enjoyed by Scotland, the stability of a common currency with the rest of the UK, and the new likely control of fisheries and agriculture, are are better option than seeking outright European Union membership, there would in the event of a referendum be a clear choice for those people. You can still vote No. That would provide clarity as to the conflicting two mandates Scotland has issued in the 2014 and 2016 referendums. This is not a vote British Unionists should fear. There would also still be a clear base for all Liberals, keen to keep all of the UK in the EU, the opportunity to make the case for reintegration of each of the respective two states in decades to come, should the EEA prove an unsatisfactory deal.

Uncertainty

People have absolutely nothing to fear from another Scottish independence referendum, given the very substantial uncertainty that now afflicts both what it means to persevere with the British Union or to depart from it in favour of the European one. What is different is that we need to know what the depth of feeling of the Scottish people was at, apparently, wishing for a diametrically opposite conclusion to those of the English and Welsh people in relation to the European family. The only way we can resolve that democratic deficit is another referendum.

If the difference between the EEA and the EU really is so shallow that the Scottish people really do not mind, I suspect that the British Union, with its pooling and sharing of resources, would in the minds of the Scottish people outweigh that of Europe. In those circumstances, those who prefer or see their primary loyalty to that Union have absolutely nothing to fear from another plebiscite.

Indeed they may be able to kill Scottish independence for a generation with a second No vote in quick succession. I cannot see what they stand to lose, if they are also passionate Europeans, in those circumstances. For if the Scottish people see the EU as so fundamental that we should leave, then leaving demonstrably would advance those interests and values and that is something we should enable them to do.

Conclusions

The fact that we are negotiating Britain's future in Europe, with a conclusive end-point, in many respects actually removes some of the uncertainty of a future referendum for Scotland. The fact that the UK is having to clarify its terms of departure from the EU makes it much easier for the EU to consider the hypotheticals for Scotland, without hitting opposition from other states. Countries like Spain will be far more willing to entertain "pre-negotiation" for Scotland when they know it only sets a precedent where the parent state is leaving the EU already, because Spain has no intention of leaving the EU.

Imaginative thinking doesn't have to mean delusional thinking in the aftermath of this referendum result. The bottom line is that, once we know what the UK is likely to get as a relationship with the rest of the EU, Scotland must clarify its own trajectory. Not to maintain this is, I'm afraid, simply anti-democratic, and actually will turn Scotland's politics back away from real bread and butter issues.

If you want a neverendum, constitutional uncertainty, and economic insecurity, by all means fight Brexit at a UK level. You will make the job harder to secure an EEA agreement, meaning the rest of the UK will diverge more harshly from the EU, and you will make the break-up of the United Kingdom more likely. You will give the SNP an easy narrative for the next 5 years to avoid accountability on its domestic agenda. And the Scottish people will harbour an unresolved grievance, on both sides of the divide.

I don't want that. I suspect in their heart of hearts, most Unionists don't either.

We can't have both

Sometimes the Scottish Liberal Democrats needs a bucket of ice water dropped on its head.

There was a members meeting on Sunday in Edinburgh in which we were to discuss the way forward. Chatham House rules mean I am restricted in what I can say but I think it's fair for me to outline the broad nature of the challenges that face the party. It is to Willie Rennie's credit that the meeting was called at all, but there was a real feeling among many at that meeting that the party just isn't facing up to the reality of the new constitutional situation that we occupy.

There were arguments that we should continue to fight for the UK to remain in the EU. Effusive praise was lavished on Tim Farron for taking on the mantle of the 48. Surely to goodness followers of Scottish politics of all places should feel uncomfortable with the imagery of that. But the strategy, whilst a good rallying call for the party and its values in England, is a total waste of time in terms of getting something done. Tim Farron is not going to be the next Prime Minister and even if he is he is not going to be able to use a General Election mandate just to "cancel" Brexit without riots in the streets of Northern English cities. The people have spoken.

Not wanting to choose between two uncertainties is a natural human instinct. But you don't always get to decide what decisions you're asked to make. And Scottish Liberals are closer than ever to being forced to choose between a British Union and a European one.

We have to be ready for that eventuality. Putting off deciding is cowardice. And we absolutely have to back a Scottish independence referendum if, and this is the key point, all avenues to keep Scotland in the EU are exhausted.

Willie was very keen after Spring conference to insist that the party had said two contradictory things when it asked to lift a moratorium on fracking while endorsing tougher carbon limits. So he clearly knows that politics is sometimes about making decisions between things that turn out to be incompatible.

A sizeable proportion of the people at Sunday's meeting tried to make that clear: unless the EU comes up with some sort of "reverse Greenland" (almost certainly legally and practically impossible because of both the politics of other member states and because it would rip apart the British single market) all that is left is for Scots to choose between Unions.

That isn't turning to Scottish nationalism or buying into a trap. That's just the choice we have. It is the competing of two different internationalisms, which have more in common with each other than the nascent English nationalism that put us into this sorry mess without so much as a care in the world for how it would affect Scotland.

The unavoidable reality is that we are approaching a situation where the mandate Scotland gave on Thursday is incompatible with the mandate it gave in September 2014 and the mandate England and Wales gave on Thursday. The core premises upon which that 2014 mandate was undertaken are now void. Hundreds of thousands of the 2 million people who vote No were materially influenced by the fact that a No vote would secure Scotland's place in the EU. The EU is constitutionally significant in a way literally not one single other international organisation is. It lives and breathes through our laws, our politics, our constitutional politics, and the nature of what it means for Britain to be a common endeavour. The No vote was not a vote to endorse the British project as it existed in 1970, or even 1707. It was to endorse it, with its fundamentals, as at 2014.

The only solution, the only way to reconcile those mandates, if staying in the UK means Scotland is not in the EU, is another independence referendum.

I know it's not reasonable to expect people who feel a close emotional attachment to the UK to campaign against it. But to be against even making the choice is an even more terrible stance for a democratic and European party to take. Opposing a referendum in any circumstances makes it absolutely certain that we are anti-Europe unless the UK does a volte-face. That is simply unacceptable to me and to hundreds of other members and I suspect thousands of supporters.

The Parliamentary party are terrified they'll lose trust in the electorate if they break a manifesto promise not to support another referendum. They ignore the fact that the vast majority of the electorate didn't vote for them anyway. In times of constitutional crisis, all bets are off.

They are taking the wrong lesson from the tuition fees debacle. The crime was not breaking the pledge; it was making a pledge that in the circumstances it was designed to be relevant for was totally unsustainable. It's time we level with the public that we made an error on May. Because we did.

At the very least the Scottish Lib Dems have to support another independence referendum. My judgment now is that liberalism is best served by Scotland seeking an undertaking for accelerated admission as an independent member into the EU, or even in the worst case scenario applying as a new member. I understand that on that aspect many liberals will vigorously disagree, and understandably. That is why we need a Special Conference, both to establish whether and what the official party position should be in a future referendum, and to make it clear in any motion that members and Parliamentarians are free to campaign as their conscience dictates.

To oppose the choice is itself to choose however. And it's the wrong choice. At the very least Scotland needs the chance to decide which internationalism it prioritises. And if that is internationalism with the other nations of the British Isles so be it.

Those turning to independence were implicitly accused at points that they were showing a lack of imagination, buying into Scottish nationalist narratives. Frankly I think the opposite is true: holding steadfast to the two Unions position isn't a display of imagination but of delusion. Imagination needs to have practical import and we are the only ones at the moment willing to imagine where this crisis is actually heading.

I didn't say it at the meeting because I spoke early in the day and I wanted to be constructive, but if this party fights against a second referendum even when that referendum is in the interest of liberalism and Scotland, I am leaving it. I've given it several last chances to show courage on the constitution, and it has disappointed me time and time again.

Thursday, 2 June 2016

Would the First Minister please grow-up?

The purpose of First Minister's Questions is to allow the Scottish Parliament to scrutinise the policy decisions and implementation of the Scottish Government. This is vital in representative democracy. Governments, even those with the support of the majority of members of Parliament or even, dare I say it, the majority of the electorate, still are not perfect, and their judgment and their competence has to be kept under constant scrutiny. That is why a Parliament exists at all, rather than that we just let the government pass legislation uninhibited for a five-year term.

Just because you've won one, or two, or three elections, does not mean that you can or should just do whatever you like. Nor does it mean that everyone who voted for you agrees with everything, or even most, of what your platform for government entailed. Of course you are entitled to attempt to implement as much of that as possible, but popular support is not, in and of itself, a justification for making any policy decision whatsoever. Being popular does not mean that your judgment is good, or that your ideas are good, or that the way you put them into practice is good. And it is no defence to the accusation that your record or decisions are bad to say "but your decisions are worse".

To this end, the First Minister, Nicola Sturgeon, has continued into this Parliament one of the most nauseating and childish tendencies of Scottish politics. Whenever she was questioned about her record in the last Parliament, her response was often to boast "we won the election" or "your party is a mess as we beat you". As several commentators observed in the election itself, she said she was happy to be judged on her record in government precisely because she knew that those planning to vote for her mostly would do so regardless or in spite of it.

"My manifesto" is not an answer

Today in Parliament, Patrick Harvie drew attention to a report on poverty, the findings of which the First Minister had agreed to implement. It stated, in relation to local taxation, that the council tax was "no longer fit for purpose" and was hugely regressive. This was a position the SNP had actually held for some time, and in the past Nicola Sturgeon herself had said that the council tax should be replaced with something fairer. However, the SNP government, after 9 years in charge, chose only marginally to tinker with council tax, making it slightly less unfair instead of replacing it outright.

He asked her why she wouldn't take the opportunity to be bolder, in light of that report, and abolish council tax in favour of a more radical alternative. This was Nicola Sturgeon's response:

"We put forward our plans, plans that I believe were bold. Patrick Harvie put forward his plans, and the electorate cast their votes. I'm standing here as First Minister with a mandate to take forward the proposals that we were elected on."

This is not an answer to Patrick Harvie's question. She provided no substantive argument as to why a more radical alternative would be a worse policy. There is no point in First Ministers Questions if the response we are going to get to substantive criticisms of her government's platform is "I was elected to implement my government's platform and we won." Just because you have an electoral mandate to do something, doesn't mean you should do it. Bad ideas are bad ideas regardless of how many people support them. The mantra of Keynes that when the facts change so should your mind is important.

Governments are supposed to be responsive to evidence and criticism and to explain why they are doing what they are doing and just as importantly why they are not doing what they are not doing. No one is questioning Nicola Sturgeon's authority simply to tinker with council tax. Harvie was questioning why that's what she wants to do. Just because she won the election doesn't mean that Parliament, and the people, are not entitled to an answer to that question. And she has, or at least gave, no answer.

"Your point is invalid because I have more votes than you"

Similarly, Willie Rennie asked the First Minister about a Memorandum of Understanding entered into between Nicola Sturgeon and two Chinese companies for £10 billion of unspecified infrastructure projects in Scotland. Those companies were SinoFortone group and the China Railway No 3 Engineering Group. The parent company of the latter has been implicated in corruption charges and human rights abuses in various projects, including a number in the Democratic Republic of Congo. Rennie sought assurances that no government contracts would be awarded to this company, which has been heavily criticised by other countries, and was in fact blacklisted by the Norwegian state oil fund. He also drew attention to Amnesty International's criticisms of the company and the reasons they gave why economic cooperation with CRG was bad for human rights.

Sturgeon's response?

"Hold the front page. First Minister of Scotland seeks to explore opportunities for investment and jobs into Scotland. SHOCK HORROR. That is part of the job of First Minister of this country and the fact that Willie Rennie doesn't recognise that is a core responsibility of the First Minister is probably part of the reason why he will never stand here as First Minister of this country."
The only people impressed with a response like that must be those that unthinkingly clap their seal-like flippers for hands to absolutely anything she says. Literally no one that criticises a trade deal on the grounds of its human rights implications doesn't think it's the responsibility of a government to attract inward investment. What the question asked was about was the kind of compromises the First Minister was prepared to make in order to procure that investment, or the lack of due diligence undertaken before signing the Memorandum of Understanding. Instead, we get a response that basically amounts to "I got more votes than you so you can't criticise me ne-ne-ne ne-ne-ne". It's risible.

Just not good enough

This represents a hubristic tendency in the SNP leadership that basically thinks it does not need to accept or respond to the substance of criticism because 41.7% of the electorate voted for them.

One could just about understand the logic of "I hear what you're saying but I don't care, we have a mandate and we will implement it anyway" when the SNP held a majority of the seats at Holyrood. It's a crap argument, but at least in a technical sense, they could do what they liked under the terms of our representative democracy. It is easy to forget that if you're playing the top-trumps "the people agree" card, more than 50% of those who voted did not support an SNP candidate. The people do not completely and unconditionally agree with them.

But especially now that they have lost their majority, the SNP do not have a mandate to implement all of their proposals. They have a mandate to try, but a minority government has not just a functional, but a moral imperative to listen to criticism on the substance of what they are doing and why they are doing it, and not simply to waive away criticism with "we won you lost".

The Scottish Parliament was supposed to herald a new politics. A break from the yah-booh childishness of Westminster. Yet our First Minister approaches her responsibility to account for her policies and decisions in Parliament with the mentality of a four-year-old child in the playground. For the sake of Scotland, it's time she grew up and dealt with criticisms of her government maturely instead of adopting an unwarranted indignance at the audacity of opposition parties to criticise decisions taken under her watch.

Tuesday, 31 May 2016

Constitutional Futures and Fudges

For some months now the focus of my PhD thesis has looked at the secession movements in Quebec, Catalonia and Scotland. I'm especially interested in how each of the Canadian, Spanish and British constitutional orders have gone about responding to desires both for a referendum on secession or independence, and what role the courts have in clarifying the parameters of and enforcing duties owed between the relevant parties in delivering referendums and in responding to their results.

I don't want to get too deep into the nuances of what I've been writing about, though that is for another time. I do think, however, it would be interesting and (I hope) useful to explain a couple of recent developments in the Quebec and Catalan disputes.

Canada and Quebec - Brief Context

Quebec's National Assembly drafted legislation for the holding of a referendum on secession from Canada in 1995, known as the Sovereignty Bill, which led to a razor-thin majority of voters supporting the province's continued place in Canada. There was a legal challenge made by a Canadian citizen to the competence of the provincial government to organise that referendum, in a case called Bertrand v Attorney General and the legislation was found to be unconstitutional, but the provincial judge declined to order the provincial government to cease and desist with holding the referendum pursuant to it. The federal government had been reluctant to get involved in that litigation, lest it be seen to be acting anti-democratically, a perception which could help the Quebecois secessionists' cause.

Nevertheless, in the aftermath of that referendum, the federal government referred a number of hypothetical questions to the Canadian Supreme Court. In the Reference Re Secession of Quebec, the Canadian Supreme Court concluded that there was no constitutional route, otherwise than the amendment procedures provided in the Canadian Constitution itself, by which Quebec could secede from Canada. This ruled-out "unilateral declaration of independence", a right asserted by the Parti Quebecois and Bloc Quebecois, as being potentially legal. This position is adopted either implicitly or explicitly by most country's constitutions, whether or not codified.

What was more controversial in that judgment was that it did say that, under the confluence of the core constitutional principles of Canada, including federalism, democracy, the rule of law and protection of minorities, there would be a "duty" on the part of the federal government to "enter negotiations" to "respond to" a clearly expressed desire to secede from Canada. In my current work, I have explored at length what the substance and effect of these duties would be, and how if at all they can be enforced (my conclusion is that, in reality, they can't). This section of the judgment was important, however, because it gave rise to two pieces of legislation in Canada: one federal; one provincial. Each represented what the federal government and the provincial government respectively believed would constitute a "clear majority" on a "clear question" expressing the desire to secede, and in each case spelled-out the implications of this.

The Legislation

Both pieces of legislation have their faults. The Clarity Act, for example, takes a very narrow interpretation of the Supreme Court's ruling and in many respects, despite its name, does not in fact provide "clarity" as to the circumstances in which Quebec may secede. It does not provide a definition of a "clear majority" and leaves that open to interpretation: for the House of Commons to decide, in the aftermath of the actual holding of a referendum. Canadian politicians have also been less than completely clear or honest as to what aspects of the Clarity Act affirm what the Supreme Court said, and what parts go beyond it, merely drawing their preferred constitutional inferences from it.

In the Macleans Election Debate, current Prime Minister Justin Trudeau claimed that the 9 Supreme Court justices said that a simple majority of support was not sufficient for Quebec to secede from Canada. The Supreme Court did not in fact state that even unanimity of the Quebecois was, in and of itself, enough to give rise to a right to secede, though the context in which they said the threshold imposed may be higher than a simple majority was in relation to this "duty to respond" and not with respect to a right to secede. They were merely saying that the Canadian government could constitutionally insist on a higher threshold; not that they should. Trudeau's position was therefore based on the Clarity Act itself, and was not itself a defence of it remaining in place as compared to an alternative piece of legislation, the like of which was proposed by Tom Mulcair's party the NDP.

However, the "mirror" law passed by the Quebec National Assembly, known as Bill 99, was equally contentious. It attempted explicitly to define a clear majority as 50% plus 1 of those who voted in a future referendum. It also made some pretty broad-brush rhetorical claims about sovereignty that went explicitly at odds with what the Supreme Court had said.

Catalan Parallels

Bill 99 has a lot of similarity with both the Declaration of Sovereignty and subsequent resolutions of the Catalan Parliament when it comes to proclaiming sovereignty and the right to secede. The critical difference, so far, has been that the Canadian federal government had been happy just to leave Bill 99 on the statute book, so as not to inflame tensions in Quebec, especially given there had been no imminent threat of another referendum. Parti Quebecois had weakened at a provincial level and Bloc Quebecois had lost many of its seats in the Canadian House of Commons, first to NDP candidates and then to the resurgent Liberal Party.

In Catalonia, the Spanish Government has been unrelenting in its determination to prevent the holding of a constitutional referendum. They believe that, as the Spanish Constitution states sovereignty rests in the Spanish nation, any plebiscite should take place throughout Spain and not in Catalonia alone on the question of secession. It is also arguably the case that for a referendum only of Catalans to be held, the Spanish Constitutional amendment procedure would itself require a referendum of the whole of Spain. On no fewer than five occasions has the Tribunal Constitucional declared aspects of the secession project to be illegal, and Artur Mas, former Catalan President, was impeached for his role in holding the "non-referendum popular consultation" in November 2014. The Catalan situation has reached something of an impasse, not helped by the inconclusive nature both of the most recent Catalan and Spanish elections.

Bill 99

Despite having left Bill 99 alone, probably hoping it would remain hypothetical and that its inconsistencies with the Clarity Act and the Constitution would never really matter, the federal government could not prevent private litigants from challenging it. In a similar vein to the way that Guy Bertrand had challenged the Sovereignty Bill back in 1995, an English language-rights party in Quebec, the Equality Party, had sought standing to challenge its provisions as unconstitutional. In 2007 the Quebec Court of Appeal granted permission for this challenge to take place, but the litigation had been incredibly slow.

In 2013, then Canadian Prime Minister Stephen Harper asked his Attorney General to intervene in that case and make direct representations as to the legality of Bill 99. There is an excellent piece by Paul Wells, formerly of Macleans, which shows the nature of the challenge and explains some of the context behind it. Progress in this case has been slow, but having contacted Mark Walters, prominent Canadian public law academic who wrote a seminal piece some years ago on the Secession Reference, I understand that this case will be heard by the Quebec Superior Court some time in September this year. As an aside, Mark is currently a Professor at Queen's University in Kingston, but will shortly be taking up the FR Scott Chair at McGill. His help on the Canadian aspects of my thesis has been hugely appreciated.

Why should we care?

The implications of Bill 99 potentially being struck down are significant, as it may agitate Quebecois secessionists, contrary to the wishes of the ardently pro-federalist Liberal government, which continued with the case initiated by Harper's Conservatives. I was prompted to draw attention to these ongoing developments in light of an article I saw in the Canadian media this afternoon. Le Devoir, a French language news outlet, has drawn attention to the calls of a number of Parti Quebecois representatives for the holding of another referendum to try to "break the liberal monopoly and resolve the national question once and for all". The PQ deputies want Quebec to be given a choice between independence and a "new" federal settlement.

The Canadian Supreme Court, Clarity Act and Bill 99 were not just concerned with what constituted a clear majority in favour of secession. They were also anxious that any referendum should ask a question "free from ambiguity". The inclusion of a "new federalism" settlement would very obviously fall foul of the Clarity Act and at least arguably would be unconstitutional in the terms described by the Supreme Court in the Secession Reference. The problem with these proposals, just as with the undefined "sovereignty association" suggestion in the 1995 Quebec referendum, is that they can both skew the result on the principal question and entail their own aspects of constitutional unfairness.

Unless voters are completely clear about what the "developed" or "new" alternative to secession or the status quo is, and what major specific changes it makes to the existing settlement they are being asked to provide a mandate that is simultaneously all things to all people and nothing to anyone. There is also a really basic principle of democracy which is an obstacle in these situations. It's quite right or at least a strong case to argue that democracy can be invoked to decide whether a people want to be part of a club or association of nations or states that make decisions about how they govern themselves. It is quite another to say that a state, nation or country, having decided to be a member of such an association, can then unilaterally set their own terms of membership or impose a broader set of rules for governance that affect all of the other parts of that state. The comparisons to the European Union referendum the UK is currently engaged in is an important one here: trying to set the rules of the game at the same time as trying to play the game to find a winner, in the constitutional context, is messy.

The Scottish Dimension

These developments produce an interesting parallel for Scottish observers, because in the first and second SNP administrations at Holyrood, minority then majority, the prospect of a "two-question" referendum was heavily mooted. I argued at the time that my own political party, the Scottish Liberal Democrats, should have worked with the SNP to develop a "third way". I wanted them very clearly to spell-out an alternative basket of powers and responsibilities Holyrood should have and then to use a political mandate from a referendum to try to encourage the rest of the UK to move towards a more overtly federal structure. Such an approach clearly does come with risks, and if done recklessly could be considered to be constitutionally improper.

But if referendums are to become the principal method by which constitutional change is demanded (the new "gold standard" if you will) constitutional orders need to find ways simultaneously both to make secession disputes much more constitutionally clear-cut, and also to find ways of making internal constitutional reform more flexible and responsive to the structural challenges secessionist movements pose.

Hopefully I'll have a working solution for you before my stipend runs out!

Thursday, 26 May 2016

Wildfire Myths, Student Finance and Social Media - Again!

Social media has seen a complaint about the English student finance system go viral. Simon Crowther, a recent civil engineering graduate from Nottingham, was shocked when, on receiving statements from the Student Loan Company, it transpired his student finance arrangement was not what he thought it was.

He accused the Government of having "misled" him and other students when it came to the student loans system. He took-out a student loan in 2012 under the scheme introduced under the Coalition Government, which overhauled completely the way Universities and student maintenance was funded by government.

What changed in 2012

The key changes to the system included the raising of tuition fees to a maximum of £9kpa, a significant up-rating of the "repayment threshold" above which graduates have to begin to repay their loans, a substantial expansion of the maximum maintenance payment for which a student was eligible (especially those from disadvantaged backgrounds), the imposition of a 30-year rule wereby unpaid balances of a student loan are written-off after that period, and a move away from charging RPI inflation on the balance of a student loan, to something resembling more closely, but still well below, a commercial borrowing rate.

All of this information was extensively made available and was able to be read about on both the Student Loan Company's website, the Department for Business Skills and Innovation website, was discussed at length in government information campaigns about the new system, was disclosed in all the paperwork made available to students applying for a student loan, and was spoken about almost non-stop by people like Martin Lewis on his MoneySavingExpert website and in television interviews. At the time many of us were frustrated that the mainstream media, including the BBC, and the opposition political parties, were focused obsessively only on the £9k fees, ignoring the other changes to the system that, in fact, cut the contributions made by low-earning graduates, both at the beginning of their careers and across their earning lifetime.

What's the problem?

The news coverage of Crowther's letter has perpetuated or accepted several myths and pieces of misinformation about the new scheme. The letter makes the false claim that the government has "sold our loans to a private company which has caused the interest rate to skyrocket". This is wrong on two levels.

"THEY SOLD OUR LOANS!" No. No they didn't.

Firstly, it is not true that the government has sold-off the right to receive loan repayments to a private company, at least not with respect to people like Simon. His loan is disbursed and administered by the Student Loans Company, which is wholly owned by government actors in the UK (85% by the Department for Business, Skills and Innovation, responsible for support of tertiary education in England and 5% each by the devolved administrations). The government has owned and run student finance through the SLC for almost three decades. This is nothing new. Nothing has changed here.

It is true that some legacy loans were sold-off by the Student Loans Company in 2013. These related to what were "mortgage-style" borrowing arrangements that existed to meet tertiary education/living costs between the formation of the SLC in 1989-90 and 1998. One of the reasons for the decision to sell-off these loans is that they individually had very low outstanding balances, and those that didn't were becoming a lot more expensive to collect. This was a consequence of difficulties tracking-down graduates that had long since disappeared off the radar of the SLC. The effect of this is to divert time and other resources available to the SLC from focusing on ensuring that more recent loans are paid back promptly. Even though the "book value" of these loans was about £890 million, the actual amount the government would stand to realise from enforcing these debts themselves would likely have been much lower. This explains why a £160 million lump sum, paid by the successful bidder, is not the terrible or outrageous sham its critics say it is.

It is also true that, since the Conservatives acquired a majority in May 2015, there has been renewed consideration given to whether the loans incurred between 1998 and 2012 should be sold-off. Vince Cable, as Secretary of State for Business Innovation and Skills, had been strongly opposed to this move, and blocked some efforts to take this idea further than exploratory stages. However, it should be noted that in the last budget this idea was put back on the back-burner and a recent OBR report suggested the plan was not advancing in the near future.

"THIS CAUSED INTEREST RATES TO SKYROCKET!" No. No it didn't.

The second problem with Crowther's open letter is that he has seriously misunderstood how interest works in student loans. It is not the case, even among the loans that the Student Loans Company has sold-off, that the new beneficiaries have the right to change the terms and conditions, like the rate of interest the lender can charge on the remaining balance of the principal debt. That would be a breach of contract and those taking out loans between 1990 and 1998 could contest it.

But it's not even true that interest rates have rocketed on student loans under the new system, which remember hasn't been privatised. Part of the new scheme did, it is true, change the system that previously charged RPI inflation as the rate of interest on the accrued student loan balance. It changed it to RPI + 3% when you are studying, then RPI inflation on graduation if you earn less than the repayment threshold (£21kpa) and then a variable rate of interest between RPI and RPI + 3% until a student earns over £41kpa. These terms were made completely clear at the time and were readily available on the Student Loans Company website.

At the moment RPI inflation is about 0.9%, meaning the maximum rate of interest on the loan is 3.9%. This is actually lower than the rate charged on loans in the two years immediate preceding the introduction of the new system, because RPI inflation was itself higher than 3.9% in those years! It is also lower than most mortgage rates at the moment and much lower than most unsecured credit arrangements. It is straight-up fiction on his part when he claims that, when he took out the loan "the loan was at a very low interest, and at the time was around 0.5%."

This is, admittedly, one of the most complicated aspects of the system. Crowther has clearly misunderstood how this works. The impression his letter gives is that the 3% above inflation rate is charged on all graduates, and that therefore, as he claims, he would need to be earning over £41kpa to begin to repay the principal debt over and above the interest.

How it actually works

This is wrong for two reasons. Firstly, someone earning, say, £27kpa, the national median household wage, will only be paying interest of 1.8% on the principal. The purpose of having a sliding scale of interest levied on graduates is actually to prevent higher-earning graduates from getting an unfair advantage in saved interest with respect to saving money by paying-off their debt earlier than those earning less than them. It isn't a perfect way of doing it, but, assuming we are talking about those who do in fact pay off the whole principal of their student loan, this isn't unfair and only hits graduates earning almost double the middle income of someone living in the UK. Instead, these people would, just like anyone else, have to make a conscious overpayment if they wanted to extinguish the debt early, though why they'd want to given the generous terms of repayment I cannot for the life of me understand.

The second reason it is wrong is because it completely ignores the fact that interest, for many graduates, will function as a hypothetical accounting exercise and for most will only slightly increase the total amount for which they are liable. The fact that student loans are written-off after 30 years means that, regardless of how much you've paid, you don't have to pay any more. If you are paying 9% of all your earnings over the threshold for 30 years, and the total of that contribution is less than the original loan amount you took out, the government is effectively writing off both the amount of the principal you didn't pay, and every single penny of the interest you accrued.

Even if you would have just and no-more paid off the principal but for interest charged, then the amount of interest you are effectively charged is still only the difference between your total repayments and the original sum you took out; not the whole amount of interest nominally charged to your account.

The only people actually affected by high rates of interest are those who are paying off their student loan with several years to spare.

The frustrating thing

If Crowther is right about one thing, it's about just how much of a gap there is between how the student finance system actually works, and how many people think it works. The problem is that how he now thinks it works, having had this "veil of secrecy lifted", is in fact... not how it works. What we are seeing is a culmination of media dumbing down of the system, to such an extent that it seems clear that bright, generally mathematically literate, students, secondary school teachers and politicians alike do not understand the mechanics of it all, despite the information being readily available and easy to communicate to those taking out those loans.

It is also clear that headline grabbing about "selling loans to the private sector" and "commercial rate interest" and the like are being used as dumbed-down signals to suggest that education is being marketised in some sort of free market frenzy. This makes the debate turn into one of ideological criticism of what the political extremes think the system is motivated by, rather than an evidence-based approach that properly considers how the scheme works compared to others.

It also distracts from the ability genuinely to criticise changes made by the government that actually are unfair and retrospective. When the new scheme was introduced, it was understood that the £21kpa repayment threshold was supposed to rise in-line with inflation. This would mean that, as the cost of living went up, graduates were not left with less real disposable income in the years to come. Alas, in George Osborne's Autumn Statement, he left in the fine-print the fact that this was no longer going to be the case.

The effect of this was a bit like cutting the personal allowance for taxpayers: more of a graduate's income would be subject to the 9% deduction from their pay-packet than if it had held with inflation. In terms of the impact on real disposable income, this most affects those whose debt repayments are least contingent on the size of their principal debt. Put more simply, it affects those earning between about £21k and £40k the most. Those earning much more than that don't suffer as much from a lower threshold as they end-up repaying their debt in full, and do it earlier than they otherwise would. The effect of that is... that they don't accrue as much interest on the debt as they otherwise would have so pay less for their University education!

Martin Lewis has been very vocal about this change, and it is one people should be angry about. That really is a case of going back on an implied undertaking or changing the rules of the game after the fact.

Wider context

This debate also takes place, from the perspective of observers like me in Scotland, against the backdrop of a vastly oversimplified public debate about the full state-funding of tuition fees in Scotland. This is a policy that benefits those who frankly don't need the state to underwrite their education for them. The evidence shows that this policy has done nothing to widen access to Scottish Universities when it comes to admitting those from deprived backgrounds. While the gap is closing in fee-ridden England, it is stubborn and static in Scotland.

We are also seeing Scottish Universities increasingly dependent on international and rUK students being admitted in order to meet their costs of operating and providing a diverse range of courses and subjects. This need to admit those bringing external sources of funding is holding back admissions levels for Scottish students, which disproportionately hits those from disadvantaged and minority backgrounds.

The dangers of misinformation in public debate allow governments to advocate things that are symbolically powerful, but ultimately terrible policies. And in the age of social media, the myth can travel half-way across the world before the truth has so much as got its boots on. We need to demand better.