As Pip Diddy noted in his weekly recap, the pound has two major risk events this week:
Scottish Parliamentary vote to back another Scottish referendum
Triggering Article 50 of the TEU to formally start the Brexit process
And yesterday, the Scottish Parliament voted 69-59 in favor of having another Scottish referendum between Autumn 2018 and Spring 2019. So, that’s one risk event down and one more to go.
And in case you missed this risk event and need a quick recap, or maybe you just want the most important details, then today’s write-up is just for you.
Scottish independence referendum?
For the newbies out there, this is not the first time that Scotland had an independence referendum since there was one back in 2014. The first independence referendum was due to the Scottish National Party’s (SNP) landslide victory during the 2011 Scottish Parliamentary election.
You see, one of the SNP’s major aims is to gain independence for Scotland. And given the landslide victory and control of 69 seats in the Scottish Parliament, the SNP had both the mandate and the political firepower to call for a Scottish independence referendum. And so the SNP did. And obviously, the Scots voted against independence back then.
Anyhow, calls for another Scottish independence referendum were put on the back-burner for a while. That is, until the June 2016 EU referendum. You see, the U.K. voted in favor of a Brexit. However, Scotland did not, since 62.0% of Scottish voters were against Brexit while only 38% were in favor. And given that the SNP’s 2016 manifesto included its belief that Scotland should have another independence referendum if Scotland is forced out of the EU, Nicola Sturgeon, First Minister of Scotland, had the pretext to call for another Scottish independence referendum.
And since “the UK government has not moved even an inch in pursuit of compromise and agreement” with Scotland, Sturgeon decided to ask the Scottish Parliament to back another independence referendum. And the Scottish Parliament did, which is where we now stand.
So are the Scots set for another referendum?
Not yet. You see, the Scottish Parliament voted on backing the Scottish independence referendum, but the Scottish Parliament does not have the power to call for one, since that power resides with the U.K. Parliament in Westminster.
That’s where Section 30 of the Scotland Act 1998 comes in. Basically, a Section 30 order temporarily transfers power from the U.K. Parliament to the Scottish Parliament. And granting Sturgeon the legal authority to invoke section 30 was actually what the Scottish Parliament voted on.
And Sturgeon promised that she will write to Theresa May “later this week” in order to ask for a Section 30 order.
So what happens now?
Well, nothing much for now. You see, Theresa May has expressed in the recent past that “now is not the time” for another independence referendum. Also, Theresa May’s Conservative Party has majority control of the House of Commons.
As such, even if Sturgeon does formally ask for a Section 30 order, chances are that Sturgeon’s request would get blocked. In fact, a spokesperson for Theresa May has already hinted at blocking Sturgeon’s plans until after an actual Brexit:
“It would be unfair to the people of Scotland to ask them to make a crucial decision without the necessary information about our future relationship with Europe, or what an independent Scotland would look like.”
The spokesperson also reiterated Theresa May’s earlier statement:
“The Prime Minister has been clear that now is not the time for an independence referendum, and we will not be entering into negotiations on the Scottish Government’s proposal … At this point, all our focus should be on our negotiations with the European Union, making sure we get the right deal for the whole of the U.K.”
In response, Sturgeon said that (emphasis mine):
“I hope the UK government will respect the will of this Parliament. If it does so, I will enter discussion in good faith and with a willingness to compromise. However, if it chooses not to do so I will return to the Parliament following the Easter recess to set out the steps that the Scottish government will take to progress the will of Parliament.”
Look like we have more drama (and pound volatility) to look forward to.
What do Scots think?
According to a YouGov poll conducted between August 2016 to December 2016, only 39% of Scots would likely vote in favor of independence while 46% of Scots are against it.
A more recent poll conducted on March 17 by whatscotlandthinks.org shows that voting sentiment is still against independence, with only 42% in favor of independence and 53% against.
How did the pound react?
Well, the GBP obviously didn’t like the news that the Scottish Parliament voted to back another independence referendum, since it got slapped lower across the board.