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U.K. Races to Grant Powers to Scots to Blunt Independence

The U.K. government raced to put together a package of more powers for Scotland in a bid to persuade voters to reject independence in a referendum next week in favor of the promise of more autonomy within the union.

Photographer: Jeff J Mitchell/Getty Images

Shocked into action by a poll showing the Yes campaign ahead for the first time this year, all three main U.K. parties said they would cede more control over the levers of policy making to the Scottish Parliament in Edinburgh. Scots nationalist leader Alex Salmonddismissed the move yesterday as a “bribe” that wouldn’t sway voters in the Sept. 18 ballot.

The rush to hand over power reflects mounting political and investor concern that the splintering of the U.K. after more than three centuries has moved into the realms of reality. Having attacked the Yes camp’s assertions on an independent Scotland’s currency, economic viability and European Union membership, polls suggest the Better Together campaign has still failed to arrest the drift toward independence.

“We had expected the polls to tighten in the final few weeks of the campaign,” said Rob Wood, chief U.K. economist at Berenberg Bank in London, adding that he still projects a No vote. “But the recent movements have been further and faster than we had anticipated. It raises the risks of the U.K. breaking up.”

Pound Volatility

Financial markets woke up to the risks last week when a poll showed the No campaign’s lead had plunged to six percentage points from 14 points in little more than two weeks after Salmond was judged to have won a televised debate with Alistair Darling, the former Labour Chancellor of the Exchequer who leads the No campaign. That prompted the pound to weaken as a gauge of volatility surged.

The latest touchstone was a YouGov Plc survey for yesterday’s Sunday Times showing support for Yes had increased to 51 percent from 47 percent, while the No side dropped to 49 percent from 53 percent when undecided voters were excluded. YouGov polled 1,084 voters on Sept. 2-6. No margin of error was given.

The shift to an outright lead for Yes supporters confounds Prime Minister David Cameron’s Conservatives, their Liberal Democrat coalition partners and the main opposition Labour Party, all of which are campaigning against independence.

The poll suggests that Salmond, who heads the Scottish government in Edinburgh, has successfully presented the Yes campaign as a bulwark against London domination and has “neutralized the fear factor” by lessening the risks of independence in voters’ minds, YouGov President Peter Kellner said in a commentary on the company’s website.

Yes ‘Blitzkrieg’

Added to his “more impressive team,” the result is that “in the past four weeks support for the union has drained away at an astonishing rate,” Kellner said. “The Yes campaign has not just invaded No territory; it has launched a blitzkrieg.”

Chancellor of the Exchequer George Osborne, responding to questions on the poll in a BBC Television interview yesterday, said that a program will be announced in the “next few days” to hand more control over taxes, public spending and social policy to the Scottish Parliament -- on the condition that Scots vote No. Talks are still ongoing on the detail of the proposal, his office said.

“It’s clear that Scotland wants more control over the decisions that affect Scotland,” Osborne said. “The timetable for delivering that will be put into effect the moment there is a ‘No’ vote in the referendum. Then Scotland will have the best of both worlds. They will both avoid the risks of separation but have more control over their own destiny, which is where I think many Scots want to be.”

Campaign ‘Panic’

Salmond dismissed the announcement of a planned transfer of more powers, a system known as devolution, as evidence of panic in the Better Together ranks. Scots can only gain control of their own destiny and get the government they vote for by backing independence, he said.

“We’re encouraged by the clear panic in the ‘no’ campaign,” he said in a BBC television interview. “They’ve failed to scare the Scots, now they’re trying to bribe us. That won’t work either. We’ve got them on the run.”

The pound may trade lower as markets absorb the poll and start to price in a higher probability of a Yes win, said Sebastien Galy, a senior currency strategist at Societe Generale SA in New York. “The market has been very relaxed regarding this risk and may now take a sharper interest,” he said.

Bond investors, meanwhile, are underestimating the chances of Scotland going it alone, an outcome that may hurt the fixed-income market in a way similar to a reduction of the U.K.’s credit rating, BNP Paribas SA said last week.

Women Shift

With campaigning in its final days, the opposition Labour Party is trying to keep its supporters onside in Scotland, a traditional heartland. Former Prime Minister Gordon Brown, still a Labour lawmaker, will tour the country making the case for the union.

The YouGov poll suggested that growing numbers of Labour supporters were planning to defy the party line and back independence, with 35 percent saying they’ll vote Yes compared with 18 percent four weeks ago. Other demographic groups are shifting too, with 60 percent of under-40s saying they’ll vote Yes, up from 39 percent, and 47 percent of women, after 33 percent last month.

Salmond, who leads the Scottish National Party that runs the devolved government in Edinburgh, is luring wavering voters by arguing that self-governing Scots are better equipped to protect the health service and preserve social justice.

The pro-independence campaign umbrella group, Yes Scotland, hailed the YouGov poll as a breakthrough that proved the momentum was with the nationalists. At the same time, the group published its own polling, conducted by Panelbase, that showed its campaign still needed to overcome a four-point deficit to triumph.

‘Wake-Up Call’

The polling underlines that nothing can be taken for granted, saidDarling, the head of the Better Together campaign.

“These polls can and must now serve as a wake-up call to anyone who thought the referendum result was a foregone conclusion,” Darling said in a statement to the Press Association. “It never was. It will go down to the wire. Now is the time to speak up and speak out.”

Before last week, YouGov had shown the No camp further ahead than other pollsters. In early August, it put the anti-independence lead at as much as 22 percentage points.

The Panelbase survey for the Yes camp on Sept. 2-4 found support for leaving the U.K. was at 48 percent, while backing for the status quo was at 52. Including undecided voters, the poll found 44 percent of respondents favored independence versus 48 percent against, with 8 percent still to make up their minds.

Rupert Murdoch, in Twitter postings yesterday, referred to “Salmond’s private polls” that he said predict a lead of 54 percent to 46 percent for Yes.

“Now southern parties all promising much new autonomy if vote is No. Problem for them now is credibility. Also too late,” he said. “Desperate last ten days ahead for both sides.”