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UK stays intact; focus shifts to power devolution

Pound and London stocks rally before easing on uncertainties ahead; Alex Salmond resigns


FOLLOWING an impressive 85 per cent turnout in the peaceful referendum on independence for Scotland, British Prime Minister David Cameron has promised devolutionary constitutional change for other regions and cities in the United Kingdom.

Scottish nationalist Alex Salmond resigned as leader of his party and will quit as First Minister of his country after losing the referendum. "For me as leader my time is nearly over but for Scotland the campaign continues and the dream will never die," Mr Salmond told reporters in Edinburgh.

And, showing that individuals, businesses and markets were relieved that Scotland is to remain in the UK, the pound sterling and the London stock market rallied sharply, then slipped back because of uncertainties ahead - and there are a number: the timing of the promise for more fiscal freedom to the devolved Scottish Parliament, demands for greater devolution from the people in England, the left-leaning Labour Party's fight for power in the May 2015 UK general election and the promised referendum on UK's membership in the European Union in 2017.

Neil Woodford, the investment head at Woodfund Funds, said: "This creates a new dynamic of complexity and uncertainty, which is already reflected in a weaker pound.

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"Inevitably, the uncertainty will have a dampening effect on consumer sentiment, business confidence and investment intentions."

After sliding from a mid-summer peak of US$1.724 to US$1.605 in the final weeks of campaign, the sterling began a rally, and in early-morning trading on Friday, rose over US$1.65, then slid back to US$1.6380.

The FTSE index, which had also begun to recover in the days ahead of the vote, jumped 1.5 per cent to just under 6,900 points, then fell back to 6,860. Steep initial rises of Scottish- sensitive companies - Royal Bank of Scotland, Lloyds Banking Group, Aberdeen Asset Management, power group SSE and engineering companies Weir and Babcock - were followed by declines later in the day.

The final referendum vote was 55 per cent for the two million resident Scots who chose the Union, and 45 per cent or 1.625 million who wanted Scotland to break away and become independent. Though the gap was only 10 percentage points, the vote is regarded as decisive, given that only four out of 32 Scottish councils voted for separation.

Significantly, the poorer cities of Glasgow and Dundee chose independence, illustrating the view that the referendum reflected a "working-class revolution"; those who want out of the Union are disenchanted with the Westminster political clique. Along with other less-advantaged people in the UK, they believe the economic and monetary policies that rocketed London property and share prices up have widened the gap between the rich and the poor, and that the policies have not improved job and other prospects sufficiently for the youth and middle and lower classes. In their campaign for independence, party leaders said a million Scots were living in relative poverty.

In his speech accepting defeat, Mr Salmond said Scottish voters expected the UK's main political parties to deliver on their pledge to quickly introduce new powers for the Scottish Parliament.

Referring to the package of new powers promised several times by Mr Cameron, Liberal Democrat leader Nick Clegg and Labour leader Ed Miliband, Mr Salmond said repeatedly that these pledges should be honoured: "The unionist parties made vows late in the campaign to devolve more powers. Scotland will expect these to be honoured in rapid form."

Among the promises is that for a Scotland Bill containing new tax and welfare powers, due for a second reading by March 27, 2015.

"Not just the 1.6 million Scots who voted for independence will demand that the timetable will be followed, but all Scots who participated in this referendum will demand that that timetable is followed," he added.

Some political commentators and business people fear that Westminister may not deliver swift devolution, and that this failure could lead to divisive disruption in Scotland and, potentially, in northern England, Wales and other poor areas.

In his speech, Prime Minister Cameron urged political leaders on all sides of the debate to work together constructively "to advance the interests of people in Scotland, as well as those in England, Wales and Northern Ireland".

"The three pro-union parties have made commitments - clear commitments - on further powers for the Scottish Parliament. We will ensure that they are honoured in full."

The Scottish people could well be discontent, however, as he disclosed that the promised devolution would take place only following the formation of a new parliament after May 2015.

Indicating that this would be a long-drawn-out process, he said that Lord Smith of Kelvin, who led Glasgow's Commonwealth Games, would oversee the devolution of powers over tax, spending and welfare for all the main regions.

"Just as Scotland will vote separately in the Scottish Parliament on their issues of tax, spending and welfare, so too England, as well as Wales and Northern Ireland, should be able to vote on these issues," said the premier.

Former foreign secretary and leader of the House of Commons William Hague is to draw up these plans.

Mr Cameron also promised to set up a Cabinet committee rightaway to come up with proposals to empower cities with more control over their own affairs.

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