Demanding Supplies – Supplying Demand

“There will be no downside to Brexit, only a considerable upside” – David Davis, October 2016

“Qu’ils mangent de la brioche” – Apocrypha, commonly attributed to Marie Antoinette

I hesitated to write this article. Why, shall become clear in the reading but the short version of it is that this is not just a sensitive topic but the mere act of talking or writing about it may provoke the negative effects discussed.

The artifact warehouse from Raiders of the Lost Ark.

I am talking about the recent stories that as we enter the “kinetic phase” of Brexit, beyond which any meaningful control of the course can be made, it is looking increasingly likely that the negotiations will conclude without a deal. The UK’s own red lines are insurmountable and are themselves incompatible with the EU’s red lines.

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“I think it would be a good idea” – Apocrypha attributed to M. Gandhi on his being asked what he thought of Western civilisation.

The UK Government’s handling of Brexit continues to be veer somewhere between being a shambles and a criminally negligent disaster.

From its position on customs which remains something like “We have no idea what we want and we’re damn sure we’re not going to lift a finger to plan for it.”

Through its tearing away from anything even remotely connected to the EU – including Euratom (which means good luck running a nuclear power plant or obtaining a medical radiological), the Gallileo satellite system (to which the British response was a petulant “We’ll build our own…somehow”) and fundamental human rights which protect us all from the whims of governments that act a bit like the current UK one does.

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Trumped Up Trade Talk

“Sooner or later every war of trade becomes a war of blood.” – Eugene V Debs

This past week has been an interesting one in terms of international trade news. President Trump announced, via a Tweet, that he was slapping import tariffs on Chinese steel and that “trade wars are good, and easy to win“.

The ripples of this announcement are still spreading but already countries and trading blocs like Canada and the EU are considering retaliatory tariffs.

The thing is, China isn’t even a particularly major player in US steel imports. It barely factors on any of the top fives by specific products.

US Steel

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Precautionary Principles

“Cut the EU red tape choking Britain after Brexit to set the country free” – The Telegraph

The EU (Withdrawal) Bill is currently moving through Parliament. The purpose of this bill is to transfer the laws currently governed by the EU into UK law so that there are no breaks or holes in legal competence once Brexit happens. Of course, there are also opportunities to make changes, big and small, to the laws being transfered as they come in and when something of this size comes through there is precious little time for detailed oversight of the process and the opportunity for some of these changes to fit ideological ends can become irresistible.

For example, last night Labour put up an amendment which would have ensured that the EU’s “precautionary principle” over environmental legislation would be protected and the Tories voted is down 313-297.

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This represents the clearest sign yet that the Tories are planning a post-Brexit regulatory slash-and-burn.

It’s important to consider just what the precautionary principle is and why it is important.

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Affording It

“Britain is not Great. Britain is Weird”

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The Usher Hall voting >90% in favour of Scotland adopting its own independent currency.

On the 4th of November I spoke at the Scottish Independence Convention’s Building Bridges to Independence conference. As with my SIC talk in January, it fell to me to be the one with the graphs and statistics – this time on the topic of public finances and the impact of independence on Scotland’s budget.

The livestream of my talk can be viewed thanks to Independence Live and is the first talk in this segment.

Below the fold are copies of my slides with comments drawn from my talk and references to the points made. The slides can also be downloaded here.

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A Government For All Of Us

“It’s a Common Weal program for government.” – In an email sent to Common Weal today.

Today saw the return of the Scottish Parliament for the 2017/18 session and the opening speech by the First Minster introducing her program for government. You can watch the full speech below.

After far too long of what seemed like the political doldrums of a couple of fairly drab elections and the ever endless string of intentionally depressing political headlines, this speech was a remarkably refreshing change of pace with some fairly strong statements of intent in several areas.

Notably, Common Weal appears to be finally having a significant influence on the political direction of government with several of our policies now being talked about openly or outright adopted as policy.

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We Need To Talk About: GERS (2016-17 Edition)

“The GERS figures are not meant to be anything other than a way of showing the current position under the present arrangements.” – The BBC 

The annual Government Expenditure and Revenue report is out and, as with previous years, I’ve written an analysis of the report and what it means for Scotland. The GERS report itself can be downloaded here.

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A more detailed analysis I have prepared for Common Weal can also be read here.

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The UK is a deeply unequal union and London continues to capture a greater and greater proportion of the wealth of the state to the detriment of everywhere else. This single fact has to frame everything we think and say about the finances of Scotland.

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Democracy Repealed

“I can give an absolute guarantee that after the United Kingdom leaves the EU, the Scottish Parliament and Scottish Ministers will have more powers than they have today” – David Mundell, 1st March, 2017.

The UK Government published the Great Repeal Bill European Union (WIthdrawal) Bill 2017-19 yesterday and I’ll let you guess how long that “absolute guarantee” lasted.

mundell(Poster: Colin Dunn)

I’m going to have a look at the Repeal Bill (as I shall refer to it for the rest of this article) but I would heartily encourage folk to read the reactions of Ian Dunt and Andrew Tickell first. They are wise, know much and I can merely summarise for them.

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The Return of the Sick Man

“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” – Dickens, David Copperfield

The shape of the next UK economic crisis has become apparent. It may have already begun and it’s not at all clear how it can be avoided or mitigated.

On the 23rd June 2016, the United Kingdom, for a variety of reasons, voted to leave the European Union. The immediate impact of this was an almost unprecedented drop in the value of the pound with respect to its major trading partner currencies.

Currency fall

Not much of a problem, the defenders said, as a weakened currency has its merits as well as demerits. Exports should become cheaper, which would boost foreign trade.

This may have been true in times gone by but economies have grown vastly more complex than this. Many products manufactured in the UK consist of sub-components drawn from multiple countries and globalised supply chains have grown STAGGERINGLY complex.

What this has meant is that even the goods that Britain manufactures here have seen their “input prices” increase, which has pushed up the price of goods even despite the fall in currency strength. Add to that, the fact that the UK imports far more than it exports – it has one of the largest trade deficits as %GDP in the OECD –  and it becomes clear why prices have started rising again in Britain. After five years of declining inflation rates and almost a year of zero price increases, inflation has returned with a vengeance.

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But this needn’t be a terrible thing. In fact, inflation can often be quite useful as it erodes the value of debts (which is why creditors and asset holders hate it so much). So long as wages keep up with the rising prices then for those who don’t depend on the rising value of assets or debts it can be manageable. So how are we doing on that point?

Oh…

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We’re not doing so well.

So inflation is rising and wages are declining, so we’re in the situation where meeting our needs and maintain a decent standard of living is becoming more and more difficult. But even this could be mitigated or reversed if the government were to step in and support the economy by investing or by otherwise injecting money into it.

So how’s the UK dealing with things? Well…

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And so this is the root of the coming crisis. Prices are rising, wages are stagnating, savings have been drained, credit cards have been maxed out, and the government is pulling out of the business of providing government and public services so you need to spend even more to replace it. We no longer have enough money to meet our basic needs, never mind the disposable income to buy the widgets we need to consume to keep the wheels of the economy turning.

Up here in Scotland, there are signs that the crisis is already upon us. The Fraser of Allander Institute published a report today warning about the precarious nature of the Scottish economy saying that it was stagnating with relation to the UK economy as a whole. Some will almost certainly be quick to blame this on the Scottish government (the phrase “uncertainty of a divisive second independence referendum” comes to mind). There are certainly some things that the Scottish Government could do to help – a National Investment Bank should be high on the list and a good shake up of the domestic agenda would be welcome – but the ultimate cause of this slow-down does not originate in Scotland nor will its solution come from here (at least until the levers of power are returned to the country upon independence).

The problem, ultimately, is that Britain isn’t Great. Britain is Weird. Britain is a deeply unequal country on a scale which, compared to its neighbours, is utterly baffling.

In many countries, the capital city will be the richest region of the nation. This is normal –  Money wants to be close to power – but the UK’s disparity really needs to be seen to be believed. Here is the GDP/capita for each of the EU28 and EFTA countries broken down by region. Spot the odd one out.

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(Note that the UK has two capital dots. The lower one is London as a whole. The upper one is just Inner London)

Whenever statistics about Scotland are produced, they’re often given with reference to the “UK average” or the “UK as a whole” but the extreme disparity of Britain masks the picture. Detailed analysis by Prof Mike Danson of Heriott-Watt University has shown that Scotland’s GDP per capita is the third highest region of the UK (after London and the South-East) and, if we were an independent state, we’d be the 9th highest in Europe. In fact, we can disaggregate out the Scottish data from the chart above and catch a glimpse what we’d look like as an independent country.

EU28 plus Scotland GDPcapita

(Edinburgh data estimated from 2011 NUTS 3 database)

Taken on this view, Scotland no longer looks like a “below average” region of the UK but a fairly normal Western European country. Far more like Finland or Denmark than, say, Greece.

As Prof Danson says, the obsession with comparing Scotland to misleading “UK average” figures leads to commentators ending up unable to take a step back and ask what is happening across and within the UK and where the problems really are. Until this happens, Scotland will continue to stagnate within the UK as the overinvestment of London continues (and is likely to get worse through the Brexit process in a desperate attempt to prop up the financial sector there).

As said earlier, there is a way out of the coming credit crisis but it’s going to involve not more Austerity but a whole lot less. Economists are increasingly coming around to the realisation that the Government’s debt is your surplus and that governments can take on that debt almost without limit (unlike you who have hard limits on credit and the ability to repay it) and – if they have their own currency – can print money in order to provide services (unlike, again, you who would go to jail if you tried that).

Once again, there is a certain amount that the Scottish government can – and should – do at the moment to help but it will always be stymied by the very tight rules of devolution. There’s little to no hope of the UK changing course any time soon (even Corbyn’s Labour is solidly committed to “balancing the budget“)  and the hard Brexit the Tories and Labour are both pursuing is being increasingly differentiated by the amount of damage the plans will cause rather than any attempt to prevent it. The Sick Man of Europe seems destined to return to the UK. I only hope that Scotland doesn’t catch its cold.

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If Brexiteers Did Indy

“For now we see through a glass, darkly” – The Bible, 1 Corr 13:12

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Yesterday was the first meeting between the UK Brexit delegation and the EU delegation and, by many accounts, it has fallen far short of the UK’s expectations. David Davis spent months drumming up the “Strong and Stable” approach which would see both the divorce deal and the subsequent post-Brexit trade deal negotiated simultaneously. He was told on every front that this wouldn’t happen and simply brushed off the warnings. And then, when push came to shove…he finally accepted that he’s have to negotiate the divorce deal first. This is just the latest in a long string of failures and ineptitudes over the course of the UK’s handling of the whole farcical process and it got me thinking. If Scotland had voted Yes in 2014, what would it have looked like if the Scottish Government had handled that vote the way the UK has managed Brexit.

What if the hardcore Brexiteers did Indy?

Somewhere. In Another Scotland.

Spring 2013

The SNP have been ascendant. Under First Minister Alex Salmond, the party is now in the second year of its majority government. Salmond, who had always been known as a gradualist, had been reluctant to offer something as drastic as an independence referendum. He was far more interested in focusing on domestic policy such as his infamous Tunnocks Tax but after a couple of defections of MSPs to the fringe party Siol na h-Alba in 2010 it was inevitable that independence would have to be an option on the table.

TUNNOCK'S ALEX SALMOND

Salmond tried to soften the blow by concocting a plan by which he would take a package of offers to the UK Government and ask for a series of “more powers”. Only then would he present the case to Scotland to either accept his deal or to demand independence. The date of the referendum was set. 18th of September 2014.

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Winter 2013

The talks with the UK Government has not gone as well as hoped. The general impression in Westminster is, at best, one of “this again?” and whilst they eventually agreed to hand over a few concessions – Scotland would gain the ability to adjust income tax by a couple of pence in the pound and some obscure regulatory powers that no-one could really describe well would be shifted – but the overall impact was clearly going to be negligible. Salmond, of course, plays the whole thing as a glorious success. The Scottish Conservatives are no friends of independence but welcome the successful deal with Westminster and pledge to endorse and support it.

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Spring 2014

The Independence Campaign is taking shape. Salmond would head up the Scottish Government’s “official” Remain campaign under the banner “Not Yet”. He’d play up the economic benefits of the close ties with the rest of the UK whilst emphasising the autonomy that Scotland had and would get in the future. In Salmond’s vision Scotland would take the path of Australia. A slow, decades long decoupling from the rest of the UK by which independence would eventually be achieved but…“not yet”.

This, of course, wasn’t going to be soon enough for some. In a shocking move, senior Scottish Government cabinet members Nicola Sturgeon and John Swinney break with the “official” position and declare themselves for Leave. They take with them a substantial enough bloc of the SNP to form a rival campaign under the banner “Scotland Now”. The majority of activists from opposition parties such as the Greens, Socialists as well as a minority of members from Labour and the Lib Dems flock to their call for an independent Scotland within Europe.

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Meanwhile, Siol na h-Alba launches their Leave campaign from their constituencies of Brigadoon and Dunroamin pledging “Scotland for the Scots” and the complete severing of all ties with the rest of the UK as soon as possible. Harking back to Scotland’s past as a trading nation and playing up sentiments of traditional “warrior spirit” they are determined to court the most fringe elements of Scottish society to their cause. Though careful to avoid any direct accusations of racism, SnA leaders busily work with their pliant media contacts to insert dog-whistle phrases into their puff pieces. Media attention on the group has never been higher despite them still only having two MSPs (neither of whom were elected under the Siol na h-Alba ticket).

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Both Leave campaigns declare themselves to be the “official” voice of independence and register their interest as such to the Electoral Commission. There is a lot at stake as the official campaign would gain an increased campaign spending limit as well as direct government funding and representation on political broadcasts. After weeks of debate, the Commission eventually rules in favour of Sturgeon and Swinney’s Scotland Now.

Summer 2014

The campaigning is now fierce but cracks are beginning to show. Much of the debate has centred around things like the economy and immigration but the arguments are beginning to sound increasingly vacuous. Few debaters are willing to lay down solid plans or proposals of their own, preferring instead to attack the opposition whenever they mention something, anything. The same soundbites are repeated on the evening pundit shows. Shows like Question Time become dominated by debates about domestic policy and rarely do any clear answers emerge.

Scotland Now comes under increased scrutiny as it emerges that they have little idea about what, precisely, they wish to do with independence. Calls for an Independence White Paper begin to gain traction and the few media interviewers with the nuance to do so begin to ask about procedural questions such as how the Scottish Government would begin negotiations to disengage from the UK. The UK’s constitution, being an “unwritten” document is particularly vague on the subject and the previous examples of disengagement – Ireland and decolonisation – are not altogether helpful in the modern age. Questions, too, about the border, currency and other issues are answered only with platitudes and soundbites.

Not that the other Leave campaign is any better. Asked on what currency Scotland would use, Siol na h-Alba’s leader Niall McFergus simply said “No the Inglis yin!” and refused further questions.

With the date of the referendum fast approaching, public opinion begins to crystalise into two camps. Folk who are leaning towards Remain tend to say that they are concerned about the economy and are either supportive of more immigration to Scotland or are, at least, not bothered either way about it. Folk who are leaning towards Leave tend to say that they are worried about the levels of immigration to Scotland but are either less concerned about the economy or are convinced that it will thrive once the “shackles of Westminster regulation” are cut. The solid majority for Remain has begun to ebb slightly in the polls but little momentum is gained in either direction.

Autumn 2014

Scotland Now finally releases its Independence White Paper. A dismally short piece containing no real information whatsoever, it is ignored entirely by the now rabidly pro-Leave media and is noticed at all only by a few bloggers on social media.

The Not Yet campaign still appears to be on track for a solid victory, albeit not quite as large as once they hoped. Salmond remains as confident as ever behind the podium but, privately, whispers have emerged of apathy within his campaign. Activists are thin on the ground even in potentially target areas. There is little enthusiasm even among political wonks for his message of “the same but a little better”.

Siol na h-Alba releases an extremely divisive political attack advert showing expies of Sturgeon and Salmond personally welcoming crowds of people coming across the border at Gretna. Police Scotland warns of increased tension in communities but McFergus denies any racial connotations in the advert saying that no particular group was represented. They withdraw the ad later that day under the intense negative pressure but the message is sent and lands home with its intended target.

September 2014 – The Week of the Referendum

Siol na h-Alba kick the referendum off with a week of political stunts by organising a “Fête of Scottish Naval Might” by inviting “all patriotic trading vessels” to journey up the Clyde. The reception is…rather less than anticipated.

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McFergus blames media bias for only running photos of “empty stretches of river between gaps in the flotilla”. No photos of more crowded sections are forthcoming officially or otherwise.

Salmond is near invisible on the political scene although his press corps still doggedly assures a solid victory for Remain. The polls have been a statistical tie for weeks and Leave is still nudging upwards…

Brexiteer Indy Poll

Sturgeon and Swinney are seemingly never off the television at this point but a disastrous interview by Swinney on the final Sunday before the polls in which he struggles to outline any solid numbers about immigration figures is widely ridiculed although he does promise that in the event of a victory for Leave, his team will be ready to start negotiations “the following Monday”.

The Results

With a 65% turnout and margin of 51.89% for Leave versus a 48.11% for Remain, Scotland votes to Leave the United Kingdom. It is a result which sends shockwaves throughout the islands. Early in the morning of the 19th of September Alex Salmond resigns with immediate effect saying “The Scottish people have voted and their will must be respected“.

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It is widely expected that the victorious Scotland Now team will take control of the Scottish Government and begin to implement their (still unpublished) plan to remove Scotland from the United Kingdom. In a shock move, however, the press conference which follows the First Minister’s shows the downcast figures of Sturgeon and Swinney apologising, equivocating and, ultimately, also both resigning their positions in the cabinet. The Scottish Government is now in turmoil with fragmented factions of Not Yet and Scotland Now both accusing each other of failing to come up with a proper plan for leaving. The SNP  hastily organise a leadership contest to replace Salmond whilst assuring that they still have the confidence of the Parliament thus can remain in government.

To cap an already historic day, Niall McFergus also resigns as leader of Siol na h-Alba saying “The job’s done. I’m away tae Nova Scotia”.

Obviously, the Scottish Government is in no condition to start talks on Monday 22nd September. The UK Government says that it will wait till everyone is ready…but that its patience is not unlimited.

October 2014

The SNP leadership contest is marked more by who rules themselves out than by who rules themselves in. All of the prominent pro-Leave faces either beat a hasty retreat for the back door out spend their time outright poisoning the attempts of their colleagues to push themselves forward. In the end, the only person left standing is former Justice minister Kenny MacAskill, who had been a prominent activist for Not Yet. Immediately, his tenure is under question both for his role in the former campaign, the fact that he was “not elected” to the position and also due to questions raised during his time as minister. Nonetheless, a government is formed and the SNP’s majority sees it pass its first vote of confidence. The new government vows to take charge of the “mandate given to the by the people” to leave the UK but says that time will be required to formulate a plan. A deal is struck with the UK Government. Once the Scottish Government is ready to begin negotiations it will notify Westminster via the Scotland Office which will then trigger a process by which Scotland will leave the Union two years later.

March 2015

There is still no plan. The Article SO trigger (as it has become known in the press) has still not been pulled. Patience is wearing thin on all sides. The economy is starting to feel the strain of the uncertainty and many are starting to wonder if independence will happen at all. PM MacAskill announces that he has put together his negotiating team but is immediately criticised for it consisting solely of SNP members from the Central Belt. Parties which supported Leave feel betrayed and locked out. Parties which voted Remain demand that the negotiations take into account the whole of the country and not just the SNP’s fiefdoms. Places like Orkney and Shetland, which voted strongly Remain, demand a distinct “place at the table” to ensure their specific interests. They even produce a detailed and extensive White Paper (at least, extensive in comparison to the still non-existent paper from the Scottish Government) detailing their concerns and offering various compromise solutions. The demand for a place at the table is denied and the White Paper is simply dismissed by MacAskill and the Scottish Government. Even a bill demanding such representation which passed jointly by the councils of the islands goes without formal response.

By the middle of the month there is, at last, some movement. MacAskill announces the publication of a Leave White Paper and announces that Article SO will be triggered by the end of the month. Scotland will leave the UK by the 29th of March 2017.

April 2015

MacAskill sends further shockwaves through an already the Scottish political world by announcing a snap election. Claiming that he had an epiphany whilst hillwalking, he claims that it would increase the Government’s mandate to carry through independence and, he hopes, would neutralise the still lingering claims about the means by which he became First Minister. The election is widely regarded as a rubber-stamp exercise given the still-vast lead the SNP enjoy in the polls. The election is set for June 8th but some warn that the Article SO timer is still ticking…

 

June 2015

The results of the general election come in and it is not to the Scottish Government’s liking. An unexpectedly blistering campaign by Labour’s Jim Murphy – who had been widely derided as “completely unelectable” even by members of his own party – utterly smashed through all that was placed before it. From the day of the announcement of the snap election to the day of the poll there was a rapid rise in support for Labour right across the country.

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From hopes of a crushing majority, the SNP fell to one seat short of being able to form a government at all. Scotland was, by now, the laughing stock of the British Isles but MacAskill vows to cling on and see independence through. He turns to Siol na h-Alba – who lost their new leader Tam McGlashan in Dunroamin but scraped a victory (by two votes) in Brigadoon – to prop up his administration. Soon, the media is full of tales of the worst of Siol na h-Alba’s misdeeds. McGlashan resigns and a new leadership contest is run but by this point, no-one particularly cares about the party which started this whole sorry story.

MacAskill remains determined to progress with Independence talks with the UK Government and sets the date of 19th June to hold the first talk. However, coalition talks with Siol na h-Alba are not going well and the first vote of confidence on the new government is delayed amid bizarre excuses such as “the ink needs time to dry on the paper“. A new date for the vote of confidence is set for June 21st – two days after the first of those discussions with Westminster. The Scottish Government seems as if it will progress without a mandate and without even having a secure and stable government.

The First Meeting

Team Scotland arrives in London to meet the UK delegation. The six man (and it is six men, the lack of other genders is noted) team consists solely of SNP members with all other parties locked out completely. It will be the test by which the rest of the negotiations are measured. MacAskill steps into the room. Full of bluster. Empty of any actual documents. Across the table, David Cameron is waiting…

Back to (our) Reality

From the outset, the UK’s handling of Brexit has been one of the most appalling adventures in modern UK politics. It cannot be ignored that for all the weaknesses of the last independence campaign and for all we can argue about where it could have done better, the old accusation that Scotland would have been walked over by Westminster in negotiations simply no longer stands. The UK really has become a joke in the world and this should not be forgotten when the time comes to plan our own negotiations. Although, at the same time, we should not assume that they won’t learn the lessons of the Brexit disaster. I’m just saying that we should learn them first and make sure that our case is absolutely the best it possibly can be.

I hope you’ve enjoyed this little bit of allegorical fiction. Maybe, if the UK continues as it has been, there’ll be another chapter someday.

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