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Dominic Lawson: Scottish pride and English money

Brutal financial calculation remains an essential solvent in the glue that holds the two nations together

When couples are considering divorce, money always seems to be the cause of the greatest friction, especially in any negotiations. Nations are not so very different from people in this respect, as witness the proposed separation of England and Scotland – or more properly, Scotland from the Union.

The latest domestic spat in this gradually dissolving partnership is about who pays for the children. Last week the Scottish National Party government in Edinburgh declared that while the youth of Scotland would continue to receive free university tuition, its institutions of learning would now be charging annual fees of up to £9,000 to English students. Hitherto the students from south of the border were paying £1,820 a year; but the Scottish authorities feared a tidal wave of Sassenachs applying to its fine universities following the decision of the Westminster parliament to allow English colleges of higher education to charge up to £9,000 a year for tuition.

What has especially angered both English politicians and students is that under European Union regulations, member states must give the same educational opportunities to other EU residents as to their own citizens. Thus the Scottish administration will still be offering free university education to any students from other EU member states. However, EU law does not prevent discriminatory charging against individuals within the same nation – a loophole that perhaps stems from the fact that it never occurred to the framers of this legislation that such a thing would happen.

As a result, the Conservative chairman of the House of Commons Education Committee, Graham Stuart, has said that he will push for "equality legislation" to be amended to extend from Westminster to the devolved assemblies, which would in effect make illegal what Edinburgh has just promulgated. He was backed by Sir Malcolm Rifkind, the former Foreign Secretary – and a Scot – who told the Sunday Times that the new policy was "grossly unfair ... and is not the way the United Kingdom should operate".

Indeed it is not the way; but the policy is that of a Scottish nationalist administration which explicitly rejects the idea of being part of the United Kingdom. The SNP, if not its ultimate objective of outright independence, received a resounding local mandate at the last election, which undeniably gives it the right to act as it has, however infuriating that may be to the English.

According to that spiky Conservative thinker, John Redwood, this might be exactly the purpose of the Scottish First Minister, Alex Salmond: "He is trying to radicalise the English against the Union. I think it is part of the agenda." If so, Mr Salmond still has quite a bit of radicalising to do, if the English are to be stirred up into the necessary rage. A ComRes poll for the BBC published yesterday found that only 36 per cent of the English supported the idea of Scottish independence.

Intriguingly, this was almost exactly the proportion of Scots who said they backed independence, in the most recent opinion poll on the matter north of the border. The chairman of ComRes, Andrew Hawkins, concluded that this "adds weight to the argument that 'Scottishness' itself is specious, that Scots are simply those people who live in the northernmost part of Great Britain".

That the most vexatious nationalism can motivate peoples whose ethnic and cultural differences are minimal (and invisible to outsiders) was outlined with typical insight by Sigmund Freud, who invented the term "the narcissism of minor differences" to describe " the phenomenon that is precisely communities with adjoining territories, and related to each other in other ways as well, who are engaged in constant feuds and ridiculing each other". Freud specifically mentioned what he called "The English and the Scotch" as an example of "such sensitiveness... to just these details of differentiation".

With the Scottish nationalists there is the particular discontent that they had been an independent nation, albeit with a common monarch, before the Act of Union of 1707. For Greeks who face a dramatic loss of fiscal sovereignty in order to persuade the rest of the EU to rescue them from an unsupportable national debt, this is a history lesson of some relevance. The reason why Scotland acceded to the loss of its own political independence in 1707 was because it had bankrupted itself, and the English agreed to bail out its northerly neighbours only if they accepted rule from Westminster.

Scottish investors had subscribed almost £400,000 – amounting to about half the nation's available capital – to a disastrous scheme (The Darien Adventure) of establishing a Scottish colony in Central America. The scale of its collapse – and the price of the English rescue – is precisely reflected in some of the paragraphs of the Treaty of Union 1707: "Whereas Scotland will become liable to customs and excise duties which will be applicable to the payment of England's existing National Debt ... Scotland is to receive as an Equivalent a lump sum of £398,085 and 10 shillings ... The Equivalent is to be devoted to ... payment of the capital (with interest) advanced for the Company of Scotland (which is to be dissolved), [and] the payments of the public debts of the Scottish Crown."

It is to this brutally clear financial motive – a sort of forced marriage based on a cold-blooded assessment of the choice between poverty and pride – that Robert Burns was referring: "Fareweel to a' our Scottish fame/Fareweel our ancient glory... We're bought and sold for English gold/Such a parcel of rogues in a nation!"

Yet brutal financial calculation remains an essential solvent in the glue that holds the two nations together. It is not just that the Scots get favourable treatment from the so-called Barnett Formula, which governs the scale of the allocation of block grants to the regions from the Treasury in London. When two Scottish-domiciled banks, RBS and HBOS, expanded with Darien-like improvidence into an attempted global role, it was the London Treasury which had to bail them out after they were rendered insolvent in the 2008 credit crunch. It is no accident that the support for independence, measured by opinion polls north of the border, showed a marked slump in the wake of that shattering check to the confidence of the Scottish-based financial sector.

Of course, Alex Salmond continually asserts that Scotland's North Sea oil assets mean that it would have a budget surplus were it an independent nation. Yet last month the Centre for Public Policy for Regions (CPPR) at Glasgow University said that with the inclusion of existing levels of public expenditure, an independent Scotland, even with all that oil to itself, would have had continual deficits over the past five years, roughly similar in proportion to those applying to the UK as a whole.

Such facts may seem ingloriously banal when set against the rousing arguments of national pride. Yet just as a couple might decide to stay together, however tetchily, because they can't face the financial implications of divorce, so we can expect the compelling clarity of the balance sheet to continue to determine the politics of the Anglo-Scottish relationship. After all, that is why they got married in the first place.