UK to offer Scotland more sops ahead of close-run referendum

Shaken by polls showing the momentum shifting toward independence for Scotland, Chancellor of the Exchequer George Osborne said on Sunday the British government will offer proposals for greater political and fiscal autonomy if Scots vote for remaining within the United Kingdom in the referendum on 18 September.

Pre-referendum polls show a narrowing gap, causing considerable anxiety among politicians and business leaders, driving down the value of the pound and raising questions among investors about the stability of the economy and the fate of the current British government.

The vote, which could bring an end to the 307-year union between Scotland and England, is also regarded as important to the future of Prime Minister David Cameron. Already facing internal divisions over Britain's membership in the European Union, he may not survive politically if Scotland votes to break away from the UK in a referendum he negotiated with the Scottish National Party and its leader, Alex Salmond.

On Sunday, Osborne, a close ally of Cameron, responded to the tightening race by promising more powers to Scotland if it votes 'no'.

''More tax-raising powers, much greater fiscal autonomy,'' Osborne told the BBC. ''More control over public expenditure, more control over welfare rates and a host of other changes.''

The plan will be revealed ''in the next few days'' after the government gets agreement from all three major parties in the British Parliament, including the Labour Party and the Liberal Democrats, Osborne said.

''Then Scotland will have the best of both worlds,'' he said. ''They will avoid the risks of separation but have more control over their own destiny, which is where I think many Scots want to be.''

That position is sometimes known as ''devo max,'' or maximum devolution, an alternative that Cameron did not allow Salmond to put on the ballot. Instead, Cameron insisted on a simple yes or no vote for independence. In return, he allowed Salmond, Scotland's First Minister, to extend the vote to people aged 16 and over, but limit it to those who are registered in Scotland, which excludes many Scots living and working elsewhere in Britain.

Salmond dismissed Osborne's proposals on Sunday as ''a panic measure''. His deputy, Nicola Sturgeon, calling the new polls a ''very significant moment'' in the campaign, said the offer of new powers had come very late.

Alistair Darling, the former Labour cabinet minister who leads the 'no' campaign, known as ''Better Together,'' said that the polls showed the referendum would ''go down to the wire'' but that his side would win.

 ''We relish this battle,'' he said. ''It is not the Battle of Britain. It is the battle for Scotland, for Scotland's children and grandchildren and the generations to come.''

The anxiety in Westminster has been building, and even Queen Elizabeth II, who is also queen of Scotland, was said by The Sunday Times of London to be worried about preserving the union of the two crowns, which dates back to 1603, a century before the political union.

Salmond has said she would remain monarch of an independent Scotland, but the Queen - whose public stance is one of strict neutrality - was also reported to be concerned about what independence could mean for the self-governing Church of Scotland.

End of pound has business worried
Business leaders are also taking the prospect of dissolution more seriously, especially given the statement by all three main British parties that an independent Scotland would not be able to use the British pound.

Salmond has said Scotland could use the currency regardless of the result, much as Panama uses the American dollar, and has vowed to renege on Scotland's share of British debt if it is not allowed to share in the pound.

But if the British parties follow through, Scotland will have no say in the Bank of England and in monetary policy governing the pound, undermining independence. Even Scottish banks would almost surely have to move their headquarters south, because only the Bank of England could serve as a true central bank and lender of last resort.

There are also serious questions about how Scotland would finance itself, given its dependence on royalties from the flow of North Sea oil and gas, which has been declining. A vote for independence would also mean tense negotiations with London on issues like fishing rights and the future of Britain's nuclear submarine base in Scotland.

Questions like these are what the ''no'' campaign is counting on - that Scots will not want to leap into such an uncertain future, especially with the promise of maximum devolution should they stay. But many Scots see the referendum as their best and perhaps last chance to reclaim independence.

Scotland tends to vote more left-wing than England and favours a larger, more centralised, Scandinavian-style state, with free university education and health care.

The political divide from Westminster is sharp. Only one Conservative Party member of the British Parliament is from Scotland, so Scots feel that the Conservative-Liberal Democrat coalition led by Cameron does not really represent them.

At the same time, the British Labour Party, which wins many seats in Scotland, wants to preserve the union, fearing that without Scotland, it would have a much harder time winning a majority in Westminster.

So the Labour leader, Ed Miliband, was also said to be preparing a late effort to persuade Scots to stay within the kingdom, promising them that if Labour wins the next election in May, Scotland will get a better deal and a more sympathetic hearing.

If Scotland votes to leave the United Kingdom, independence will not occur before March 2016, leaving lots of time for bitter negotiations that will further preoccupy a Britain that is questioning even its own membership in the European Union and its place in the world.