UK structural changes could have unexpected impact on Ireland

George Osborne was let off the hook on Thursday by figures showing the UK economy grew by 0.3 per cent in the first quarter of this year. Had they been even marginally minus he would stand accused of presiding over a treble-dip recession, in a political graveyard of increasingly discredited European austerity politics.

It is instructive to compare his political fate with others throughout Europe, since the performance of the UK economy seems set to determine the outcome of the next general election there, and before that how the Conservatives perform in next year's European Parliament elections and then how Scots vote in their referendum on independence three months later.

If the economy can plausibly be seen to be growing again and providing employment the Conservatives are likely to do better, while Scots will have to decide whether prosperity is better secured in or out of the union. If the current stagnation continues or disimproves technically into a third recession, identity politics will loom larger in these contests vis-a-vis both Brussels and Westminster rule, benefitting the United Kingdom Independence Party and the Scottish Nationalists.

Britain faces a dual constitutional problem of simultaneous pressures to devolve power downwards within the UK and to share it with other states in the European Union. The solution to the debate about the EU depends on finding a solution to the debate about the UK itself. The two processes are closely interlinked and will coincide repeatedly over the term of the next parliament.

Osborne was in Scotland this week to warn voters there they would be worse off if they voted for independence. They could not then depend on keeping the pound sterling, as the SNP now wants to do, if they chose the very different tax-and-spend policies from Westminster’s they prefer. The coincidence of the euro zone crisis with Scotland’s referendum is unfortunate for the SNP, since it cannot make a convincing case to join the common currency, even though it wants to join the EU.

But would Brussels give Scotland an opt-out from a deepening euro zone, piling such a precedent on the large one already set for other breakaway states should they become a member state? Or would an alternative independent currency provide sufficient protection and guarantee of prosperity to justify the risks of independence?

Political identities are defined in relation to others. The growing English nationalism affecting the Conservatives and the buoyant Eurosceptic Ukip competing with it are defined against Europe. But this reinforces Scottish (and Welsh) identities, which accept a multiple and supplementary European component, unlike Little Englandism. Such dynamics will play out next year and beyond it, especially if growth remains elusive.

In Ireland we know from the historical experience of home rule that these questions do not go away even if they are ostensibly resolved. Should Scotland vote No next year, rejecting independence, there will be a negotiation on deepening devolution. And should the Conservatives win the 2015 general election they are committed to holding a referendum on remaining in or out of a renegotiated relationship with the EU in 2017.

That will reopen the independence debate, since the result could pit an English majority to leave the EU against a Scottish one to stay in. Many believe Labour could not resist an EU referendum if it won power in 2015, with much the same effect. Either way the EU's attraction to Scots as a source of pluralised power and an alternative to the UK unitary state persists.

The internal vision of the UK as “an ever looser union” matched by an external one of its membership of “an ever looser EU” which currently informs much British thinking is difficult to deliver because it underestimates existing UK centralism and the urge to secure the euro by deeper integration. But some way must be found to govern relations between those in the harder core of the euro zone and the softer one of the single market.

Ireland has a major interest in the outcome of this dual process. Officially it wants to remain close to both the EU and the UK but has to manage the difficult transition optimally, in which conceivably the two states will end up in very different positions and with greater barriers between them.

Structural change in the UK’s internal and external arrangements could also dramatically reconfigure Ireland north and south by putting unification on the agenda in quite unexpected and at present officially undesired ways.

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