Britain's Decision

126
Britain’s Decision Facts and Impartial Analysis for the EU referendum on 23 June 2016

Transcript of Britain's Decision

Page 1: Britain's Decision

Britain’s Decision Facts and Impartial Analysis

for the EU referendum on 23 June 2016

Page 2: Britain's Decision

2

Britain’s Decision Facts and Impartial Analysis

for the EU referendum on 23 June 2016

The David Hume Institute Centre on Constitutional Change

The Hunter Foundation

Edited by Charlie Jeffery and Ray Perman

Foreword by Sir Tom Hunter

Page 3: Britain's Decision

3

eBookeditionpublishedin2016byTheDavidHumeInstitute

26ForthStreetEdinburghEH13LH

www.davidhumeinstitute.com

ForewordCopyright©SirTomHunter2016IntroductionCopyright©CharlieJefferyandRayPerman2016

Copyright©ofindividualchaptersisheldbythenamedauthors2016.CoverimageCopyright©TommyPerman

ThemoralrightofCharlieJefferyandRayPermantobeidentifiedastheeditorsofthisworkhasbeenassertedbytheminaccordancewiththe

Copyright,DesignsandPatentsAct1988

Provideditisinitsoriginalform,completeandunedited,thispublicationmaybereproduced,storedortransmittedwithouttheexpresswrittenpermission

ofthepublisher.

eBookISBN978-0-9932780-1-3

BritishLibraryCataloguing-in-PublicationDataAcataloguerecordforthisbookisavailablefromtheBritishLibrary

Page 4: Britain's Decision

4

CONTENTSForeword SirTomHunter 6HowtousethisbookCharlieJefferyandRayPerman 7SECTION1:THECONTEXTChapter1 Howdidwegethere?BriefhistoryofBritain’smembershipoftheEU–DanielKenealy 12Chapter2 ScotlandinEurope:howdoweinteractwiththeEU?Whatarethebenefitsanddrawbacksofbeinga‘region’andpartofamemberstate?–DrewScott 17Chapter3 Theeconomy:howcloselyisoureconomyalignedwiththeEU?Whatdowegetoutofit?–Howmuchdowepay?Howmuchdowereceive?–DavidBell 22Chapter4 WhatdovotersthinkabouttheEUandthereferendumquestion?HowdoesthisvaryacrosstheUK?–CharlieJeffery 31SECTION2:THEARGUMENTS Chapter5 Cameron’snegotiation:Whathasbeenagreed?Whatdifferencewillitmake?Whatwillchangeina‘reformed’Europe?–LauraCram 38Chapter6 OPINION:Thecaseforstayingin:WhywouldtheUKbebetteroffinEurope–AndrewWilsonandKevinPringle 43Chapter7 OPINION:ThecaseforBrexit–BrianMonteith 48Chapter8 WhatarethealternativestoEUMembership?–MichaelKeating 53SECTION3:HOWEUROPEAFFECTSUS:WHATREMAINMEANS,WHATLEAVEMEANS 58Chapter9 Legislation:whomakesourlaws–Brussels,WestminsterorHolyrood?–TobiasLock 59

Page 5: Britain's Decision

5

Chapter10 HumanRights:wouldourrightsbebetterprotectedinoroutofEurope?–AileenMcHarg 64Chapter11 Howwouldourindustriesbeaffected?FinancialServices–OwenKelly 69Chapter12 Howwouldourindustriesbeaffected?Tourism–JohnLennon 74Chapter13 HowmightinwardinvestmenttobeaffectedbyBrexit?–DavidEiser 81Chapter14 Howwouldourindustriesbeaffected?Agricultureandfisheries–CaitríonaCarterandAndySmith 85Chapter15 Howwillourindustriesbeaffected?Trade–DavidComerford 90Chapter16 EnergyandClimateChange:HowimportantistheEUforaddressingtheclimatechallenge?–AndyKerr 95Chapter17 Welfare:Theproposedrestrictionstobenefitsformigrants andthereferendumdebate–DanielClegg 100Chapter18 Migration:wouldlimitingthefreemovementoflabourbegoodorbad?–ChristinaBoswell 105Chapter19 Defenceandsecurity:continuityordiscontinuity,orderordisorder?–WilliamWalker 111Chapter20 Foreignaffairs:wouldtheUKhavemorecloutintheworld–orless?–JulietKaarbo 116SECTION4:THESCOTTISHQUESTION Chapter21 HowdoestheEUreferendumaffectthedebateoverScotland’sconstitutionalfuture?–NicolaMcEwen 122

Page 6: Britain's Decision

6

Foreword

On June 23rd UK citizens, not politicians,will take a critical decision for theUK’sfuture–whetherwemaintainaforty-one-year-oldrelationshipwiththeEUorleaveit.Re-engagementordivorce–whichwaydowego?

This decision is far too important to be left to the politicians alone toinform us. For the voter it’s almost – at least it is for me – impossible todetermine the facts and fallacies fromboth theRemain andLeave camps inordertounderstandtheissuesathand.

That’s why, with the David Hume Institute and the Centre onConstitutional Change, we commissioned impartial, factual analysis aroundthekeyquestionsfacingvotersinmakingtheirownmindsupontheEUvote.

Withtheexceptionofthetwochapters(6and7)whichareclearlylabelled‘Opinion’andgivetheargumentsforandagainsttheUKremainingintheEU,the academics commissioned by us to look at the individual aspects of thedecision hold no side in the debate. They analyse the facts and the relativemerits or demerits therein to help voters – me included – to make theirdecision.Where an academic expresses an opinion, not a fact, that ismadeveryclearthroughoutthisdocument.

ThisanalysisassessesBritain’spositionwithinEuropeandaportionofittakesaScottishperspectiveonarangeofissues,notleastthepotentialimpactofanEUexitonthecompositionoftheUK.

Hopefully‘Britain’sDecision–FactsandImpartialAnalysis’willplayasmallpart in removing some of the obfuscation, hyperbole and bluster from thisdebateandenableaninformed,constructiveoverviewofthecriticalissuesathandforUKvoters.

ThisisamajordecisionforustheUKvotersanditsimportantthedebateleadingtothevoteisinformedwiththerelevantfactsandanalysis–Ihopeinsomesmallway‘Britain’sDecision’willhelp.

Goodluck.SirTomHunterChairmanTheHunterFoundation

Page 7: Britain's Decision

7

HowtousethisbookCharlieJefferyandRayPermanAs Sir Tom Hunter has pointed out in his Foreword, the UK faces amomentous decision on 23 June – one which could have profoundconsequences for the country and its citizens for decades to come. Despitebeingastraightchoicebetweentwoalternatives–toRemainamemberoftheEuropean Union or to Leave – it is also a complex decision. The Unioninfluencesnotonlyoureconomy,throughtradeanddevelopment,butthewaywearegoverned,thewayourrightsareprotectedandmanyotheraspectsofourdailylife.

BritainhasbeenpartoftheEU,oritspredecessortheEuropeanEconomicCommunity, for over 40 years. During that time the Union has evolved tobecome bigger, geographically and in terms of the population within itsborders, and deeper, moving into policy areas such as foreign affairs anddefence,aswellasitstraditionalindustrialconcerns.

Already at the time of publication (April 2016) the two sides in thereferendum campaign are making detailed claims about what continuedmembershipor‘Brexit’wouldmeanfortheUK.Someoftheseclaimsarequitedramatic–thatwewouldfaceeconomicdislocationandyearsofsetbackwerewe to leave, or alternatively that, freed from the constraints of EUmembership,wewouldenteranewageofopportunityandprosperity.

How do wemake sense of these arguments and choose between them?Precedentisnotaguide.NostatehaseverlefttheEU,sowedonothavetheexperienceofotherstoleadus.And,asMichaelKeatingpointsoutinChapter8,whereheconsidersalternativestocontinuedEUmembership,wecan’tputtheclockbacktobefore1973:theworldhaschangedsincethen.

Wehaveproducedthisbooktohelpvotersnavigatetheirwaythroughthedebate. We have tried to make it as accessible as possible, but we cannotpretend it is easy reading. Someof the issues and relationships aredry andcomplicated anddemand concentration in order to understand.Nor canweclaim it is a definitive guide: often the authors point to uncertaintieswhichpreventthemfromcomingdownunequivocallyononesideortheother.Wecan’t,alas,provideaneasychecklist–aseriesofboxestotickwhichbytheendofthebookwouldenablereaderstoaddupascorewhichwouldtellthemwhichwaytovote.

Whatwehopetodoisprovideareference,sothatwhenaclaimismadeyoucangototheappropriatechapterto learnsomethingof thebackgroundandtheunderlyingfacts–iftheycanbesimplystated.Sometimestheauthorwillbeabletogiveanimpartialexpertopinion.Sometimesthecircumstancesare not clear enough to make that judgement. Here are some of the keychallenges:

Page 8: Britain's Decision

8

Cameron’snegotiation:ThechoiceisnotbetweenthestatusquoandleavingtheUnion,becausethePrimeMinisterhasnegotiatedasetofreformstotherelationshipbetweenBritainandtheEU.TheconcessionsheobtainedenablehimtocampaigninfavourofBritainremainingamember,buthowimportantare they? What difference will they make and how enforceable andsustainableare they? InChapter5LauraCramdescribes theoutcomeof thenegotiations and in Chapter 17 Daniel Clegg looks particularly at welfare,whichwasoneofDavidCameron’sprincipalconcerns.

Sovereignty: For many people the question of membership of the EU is aquestionofsovereignty–whomakesourlawsandtherulesbywhichwehavetoliveandwork?AretheycurrentlydecidedmostlyinBrusselsorintheUK,atWestminsterorinthedevolvedparliaments?InChapter9TobiasLocktriestoassessboththequantityandqualityofthelegislationmadeatbothEUandnational level. InChapter10AileenMcHarg assesseshowourhuman rightsare impacted by the EU and the Council of Europe, an older and a widerorganisationwhichBritainjoinedtwentyyearsbeforewejoinedtheEU.

The economy: As David Bell points out in Chapter 3, the UK is deeplyintegrated into theEU, both in termsof its trade and its labourmarket.Wecontribute to the EU budget, but we receive back a rebate and benefits inpaymentstoagricultureandfishing,supportforotherindustriesorareasandresearchfunding.ThereisanetcosttotheUK,althoughitisunevenlyspread,withEnglandpayingmostandWalesbeinganetbeneficiary.Couldweescapethis payment by leaving the EU? What do the experience of Norway andSwitzerlandtellusaboutlifeoutsidetheEU?

Jobsandprosperity:Howwouldourkey industries fareoutsidetheEU?InChapters 11-15 we try to answer that question. It is not easy and woulddependonmanycircumstances,someofwhicharebiggerthantheEUissue–thefuturegrowthoftheworldeconomy,orthecourseofcurrencyexchangerates.• Financial services is one of our most important sectors. Owen Kelly

believes it is probably better inside theEU, butwould certainly survivewereBritaintoleave.

• Tourism might suffer from fewer EU citizens coming to the UK andhighercosts,but,thinksJohnLennon,thismightbeoffsetbyvisitorsfromelsewhere,or‘staycationers’fromtheUK.

• Inwardinvestment:DavidEiserarguesthatitseemshardtodisputethatEUmembershipisapartofwhatmakestheUKandScotlandattractivetoinwardinvestment.Butcouldwenegotiatecontinuedaccesstothesingle

Page 9: Britain's Decision

9

market and preserve our attractiveness as the destination of choice forinternationalinvestment?

• Agriculture depends heavily on EU subsidies and a Britain outside theUnion would probably have to replace those payments, say CaitrionaCarter and Andy Smith. Fishing interests, on the other hand, might becontenttobeoutsidetheUnion,butclosingourterritorialwaterstoboatsfromothercountriesmightnotbeeasy.

• Trade:Tocontinuetotradefreelywewouldhavetoreplicatethemyriadagreements that the EU has negotiated on our behalf, says DavidComerford.

Environment:ByleavingtheEUcouldweescapeenvironmentalcontrolsandlegislation,assomeBrexitcampaignersclaim?InChapter16AndyKerrlooksatthepossibilitiesandBritain’swiderobligationsundertheParisAgreement.

Immigration: High levels of net migration into the UK are seen by manypeople as a problem. Would leaving the Union free us from allowing EUnationals free access to the UK to look for work and claim benefits? AsChristinaBoswellpointsout inChapter18, itmaynotbethatsimple. Inanycase theEU isnot theonly sourceof immigrants. Shepredicts thatwithinafew years we will see lower levels of EU immigration, but increasedimmigrationfromnon-EUcountries.

Welfare and benefits: Does the UK’s relatively generous benefits systemattractworkers from theEU?DanielClegg inChapter17pointsout thatEUmigrantsaccountforaround10%oftotalexpenditureonin-worktaxcreditsand housing support despite representing only 6% of the workforce.However, the introduction ofUniversal Credit is soon to sharply reduce thevalueofall in-workbenefits,andthereforealsothesavingsfromexcludingasectionoftheworkingpopulationfromreceivingthem.

Defence and foreign affairs: External relations are relatively newresponsibilities of the EU. How important is the Union in our security andinfluenceintheworld?InChapter19WilliamWalkerlooksatdefence,whileinChapter20JulietKaarboexamineswhethertheUKwouldhavemorecloutintheworldorless,werewetoleavetheEU.

TheScottishQuestion: Howmuch do opinions differ across the nations ofthe UK? In Chapter 4 Charlie Jeffery looks at the opinion polls and thepossibility that the EU referendum might have implications for the UKconstitution. In Chapter 21NicolaMcEwan examines the chances of the EUreferendumleadingtoasecondreferendumonScottishindependence.

Page 10: Britain's Decision

10

Toconclude:Itisforeachofustodrawourownconclusions,howeverwhatis clear from the analysis is that neither of the two campaigns can rely onabsolute facts tomake their case.On the ‘Remain’ sidewe have only quasi-certainty of what will happen if we stay in – the reality is that the EU haschanged andwill continue to change in response to the needs of its newermembers and the demands of those states which would like to becomemembers. David Cameron may have secured a British opt-out from ‘evercloserunion,’butthatprocesswillinevitablychangetheEU.

OntheotheranexitfromtheEUwillundoubtedlyleadtoprotractedandcomplexnegotiationsonmultiplelevelsaboutourfuturerelationshipwiththeEUandwiththerestoftheworld.The‘Leave’campaigncanoffernocertaintyonthat.

Thecomplexityofanalysingthisasasinglevoterisnomeanfeat;wehopeinsomesmallwaythisbookaidsthatanalysis.

CharlieJefferyisProfessorofPoliticsandSeniorVice-PrincipalattheUniversityofEdinburgh.RayPermanisDirectoroftheDavidHumeInstitute.

Page 11: Britain's Decision

11

Section1

TheContext

Page 12: Britain's Decision

12

Chapter1Howdidwegethere?

DanielKenealy

Howdid theUKenduphaving a referendumon itsmembershipof theEU?Answering that question requires both a short-term and a long-termperspective. This chapter will recount our awkward relationship withEuropean integrationbefore considering the short-termdynamics that havetriggeredthisreferendum.

TheLongTerm:BritainasanAwkwardEuropeanPartner?In the aftermath of World War II the US took a strategic foreign policydecision to underwrite the security of Western Europe. They did this as aresultofanalteredbalanceofpower.Putsimply,thewartransformedEuropefromthecentreofglobalpolitics toacomponent inanewbalanceofpowerbetweentheUSandtheSovietUnion.

WithinEurope,Francedecided, in theearly1950s, tomakeaboldmove.ForeignMinisterRobertSchumanproposedanew institution: theEuropeanCoal and Steel Community (ECSC), which would place the coal and steelindustries of Germany, France and several other European countries underinternational control. The aim was to take what were then consideredindustriesessentialtowarfareandplacethembeyondthecontrolofanyonecountry. The underpinning idea was to make it less likely that any majorEuropeancountrycouldeverwagewaragainstanother.

Whilst Italy, Belgium, theNetherlands, and Luxembourgwere content tojoin the ECSC, the UK opted to stay out. Within the British government acombination of factors came together to determine that outcome. In elitecircles therewasastrongbelief thatBritainremained,afterWorldWar II,aglobalpowerofthefirstrank,astatusthatwouldbecompromisedbyjoiningnew European institutions. This was coupled with a belief that Britain’srightfulrolewastoserveasabridgebetweenEuropeandtheUS,andEuropeand the Commonwealth, a role that it could only play if it stood aside fromEuropean integration. In addition, given that the ECSC did not permit thenationalisation of itsmembers’ coal and steel industries, and given that thepost-warLabourGovernmentwas committed to suchnationalisation, itwaspoliticallydifficultforBritaintojoin.

BritainthusstoodonthesidelinesassixEuropeancountriestookthefirststeptowardsintegration.Afewyearslater,between1955-57,thosesamesixcountries decided to establish the European Economic Community (EEC),whichwasacommitmenttocreatingasinglemarketinwhichgoods,services,

Page 13: Britain's Decision

13

people,andcapitalmovedfreely.ThiswasthestartofwhattodaywecalltheEuropean Union. It was driven by a desire to boost trade and economicgrowth. Once again Britain stood aside in 1957, driven largely by anunderstandingof itsrole intheworldthatdidnotallowit totie its fortunestoocloselytotheContinent.

KnockingontheDoorBy theearly1960sBritain’seconomicgrowthand foreigndirect investmentwasdisappointingcomparedtotheEECsix.AsitbecameclearthatwewerelaggingbehindourContinentalneighboursthegovernmentchangedtackandattemptedtojointhem.Governmentsledbybothparties–HaroldMacmillan’sConservatives and Harold Wilson’s Labour – tried in vain to securemembership throughout the 1960s. The obstacle was French presidentCharlesDeGaullewho,inanattempttofurtherhisgeopoliticalaimofFrenchleadership of a larger European bloc in global politics, twice said ‘Non’ toBritishmembershipin1961and1967.

EventuallyBritain’spersistentknockingonthedooroftheEECpaidoff.DeGaulle had departed the scene and, with the European balance of powershifting clearly and decisively in favour ofWest Germany, French presidentGeorges Pompidou lifted his country’s opposition to British membership.Membership was secured on 1 January 1973 under the ConservativeGovernmentofEdwardHeath.ButHeathlostpowerthefollowingyearandin1975,shortlyafterjoining,BritainhelditsfirstEuropereferendumtodecidewhetherornotitshouldstayintheEEC.TheresultrevealeddeepsplitsintheLabour party – then in government under Harold Wilson – but, with theleadership of all main political parties (even Margaret Thatcher’sConservatives),andallnationalnewspapersbackingmembership,67%votedinfavour.Thevotelookeddecisive,butintheeventdidnothingtosettle‘theEuropeQuestion’inBritishpolitics.

Almost from the outset Britain was an awkward member of the EEC.Immediately upon joining it sought to renegotiate the amount of money itpaidtotheEECandtosecuremarketaccessforNewZealanddairyproducts.Inthe1980sthenPrimeMinisterThatcherbegananongoingbattlewiththeEEC about Britain’s budget contribution, securing the infamous ‘rebate’ tocompensateforBritain’sdisproportionatelylowbenefitfromEECagriculturalsubsidies.

EuropeandPartyPoliticsDespite these ‘battles’ the Conservative party were broadly in favour ofBritain’smembershipthroughoutthe1980s.TherewassomeEuroscepticismwithinthepartybutMrsThatcherwasinstrumentalintheEEC’sbiggestleapforward since 1957, the Single European Act of 1986. The Act, which

Page 14: Britain's Decision

14

promised to construct a true single market in goods, services, people, andcapitalby1992appealedtothemarket-basedinstinctsoftheConservatives.

ThedivisionswithintheLabourpartyoverEECmembershipbecamemorepronouncedduring the later1970s.During theseyears itwas the leftof theLabour party – led by figures such as Tony Benn and Michael Foot – thatvoicedtheloudestoppositiontotheEEC.In1983,LabourenteredtheGeneralElection with a campaign commitment to withdrawing. However, once NeilKinnockhadreplacedMichaelFootasleaderLabourbecamemoremoderate,leading to a party political role reversal by the 1990s as the Conservativeparty grewmore Eurosceptic in contrast to their position in the late 1970sand1980s.

Thatcher quickly turned against the EEC after the passage of the SingleEuropean Act. Disturbed by what she saw as a direction of travel towardssome form of European super state – with a single currency and a morefederalstructure–shefamousdeclared‘No,No,No’intheHouseofCommonstoplansforfurtheranddeeperintegration.Herbêtenoireduringtheseyearswas theEECCommissionpresident JacquesDelorswhobecameasymbolofpower-grabbingEuropeanofficials.TheSun,inNovember1990,famouslyrantheheadline‘UpYoursDelors’.

Just a few weeks later Thatcher had left office in large part because ofmajor divisions in her party on Europe. John Major, who was moresympathetictotheEECthanshehadbecomebythelate1980s,replacedher.The ‘Europe Question’ would dog his seven-year premiership and he evenresignedandputhimselfupforre-electionasConservativepartyleaderinanattempttosilencetheissue.Althoughhewonthatcontestin1995itrevealeda pronounced divisionwithin the Conservative party, a division thatwouldgrow once the party moved into opposition in 1997. During Major’spremiership Europemade big strides forward and Britain suffered amajorhumiliationwith the forced exit from theExchangeRateMechanism (ERM).With the1992MaastrichtTreaty theEUwasborn.AlthoughBritainsecuredopt-outs from the single currency (the euro) and on some social policylegislation,theEUmovedforwardtowardspoliticalunion.

AmoresympathetictoneTheyearsofLabourgovernmentunderTonyBlairandGordonBrownsawavery different tone. Both were far more sympathetic to the EU than theirConservativepredecessors.BlairsignedBritainupforthesocialpoliciesfromwhichMajor hadwon an opt-out and, alongwith French president JacquesChirac, launched the European Security and Defence Policy. Blair was evenhappy to consider membership of the Euro, but Gordon Brown remainedopposed.Thesewere,generally,speakingyearsoffriendlierUK-EUrelations,with the UK championing the enlargement of the EU to the former Sovietstates. During thirteen years of Labour Government the party political

Page 15: Britain's Decision

15

positions became more concrete. Labour was the major party most firmlycommitted to Britain’s EU membership. Although most successiveConservativepartyleaderscontinuedtofavourBritain’smembership(atleastinpublic), thepartythattheyledgrewmoreandmoreEurosceptic,creatingtremendouspressureonthoseleaders.

TheShortTerm:APrimeMinisterlosingcontrol?ThisgrowingEuroscepticismwithintheConservativepartyisperhapsthekeyshort termtrigger for thepresentreferendum.Uponbecoming leaderof thepartyin2005,DavidCameronmovedtowithdrawhisparty’sMembersoftheEuropean Parliament from the mainstream centre-right party politicalgroupinginBrussels.ThiswastowinfavouramongsttheEuroscepticwingoftheparty.OverthenextdecadeCameronfacedpressurefromthreesources:from within his party, from the British electorate, and from developmentswithintheEUitself.AllthreepushedhiminamoreEuroscepticdirectionandtowardshiscommitmenttoareferendum.

First, the Conservative party – both at the grassroots level and also intermsof itselectedMPs–grewmoreEurosceptic.EventhosewhowerenotoverwhelminglycommittedtogettingBritainouttheEUwerekeentoseethepowers of the EU reduced and the Brussels-based institutions dramaticallyreformed. Second,withinBritishpolitics anewelectoral force emerged thatposedaclearandpresentdangertotheConservativeparty.UKIP, ledbythecharismatic Nigel Farage, began to gain electoral success with its intenselyEurosceptic message. Farage managed to link fears about immigration andsocietal change to Britain’s EU membership in a highly effective way. Thiscreated a pressure for Cameron to take on, and try to settle, the EuropeQuestion.

Third, the EU itselfwas hit very hard by the global economic crisis thatbrokeoutinlate2008.TheresultwasbailoutsforseveralcountriesthatusedtheEuro, newEU laws and institutions in the areas of banking and finance,andthepossibilityoffardeeperintegrationamongstthoseEUmembersintheEurozone. Calls to ensure that the City of London was protected from EUoverreach and that Britain – and other non-Euro countries – could not begangeduponandoutvotedbyEurocountriesgrewlouder.

Those three factors – amongst others – pushed Cameron towards hiscommitment to renegotiate the terms of Britain’s EU membership, and tonegotiate changes to the way the EU works, before holding an ‘in or out’referendum.

Sincebecomingparty leader in2005,Cameronhasbeen ledbyhispartyon theEUquestionmuchmore thanhehas ledhis party.Hehas adopted a‘kick-the-can-down-the-road’ strategy, seeking to postpone the issue for aslongaspossible.

Page 16: Britain's Decision

16

Havingwon a surprisingmajority in the 2015General Election he coulddelay nomore. He had staked his political legacy onwinning a referendumthathedidnotespeciallywanttohave.ConclusionBritain’s EU referendum is the product of long and short term historicalfactors.TheUKhasneverbeenacomfortablememberoftheEU.Britainstoodaside during the early years of European integration, driven by afundamentally different history to its continental partners, a differentexperienceduringWorldWarII,andadifferent ideaof itsrole intheworld.These differences created national stories, which entrenched thosedifferencesinwhatwemightcallthenationalmind-set.EvenafterjoiningtheEUin1973Britainhasbeenanawkwardpartner,usuallyfoundopting-outofmany key developments such as the Euro currency, the Schengen passportfreearea,andmanypoliciesintheareaofjusticeandhomeaffairs.Suchalongtermhistorymayhavemadethisreferenduminsomesenseinevitable.

However, in the short term it is the internal politics of the ConservativepartythathavedrivenBritaintothispoint.ArisingEuroscepticismwithintheparty, coupled with the rise of UKIP, and developments within the EU thathavepushedBritainintoadoptingaseriesofdefensivepositions,combinedtopressure David Cameron into his strategy of ‘renegotiate and referendum’.Whatever the result on 23 June Britain’s long and complicated relationshipwith thecontinentofEurope looksset tocontinue.ThereferendumwillnotsettleBritain’sEuropeQuestion.

DanielKenealyisLecturerinPublicPolicyandDeputyDirector,AcademyofGovernment,attheUniversityofEdinburg.

Page 17: Britain's Decision

17

Chapter2ScotlandinEurope:howdoweinteractwiththeEU?Whatarethebenefitsanddrawbacksofbeinga‘region’andpartofamemberstate?DrewScottWhatistheIssue?InEUparlanceScotland isdefinedasa ‘region’while theUK is thememberstate.IndeedamoreaccuratedescriptionofScotlandwouldbeasoneoftheEU’s ‘legislative regions’ – that is a regional tier of government that has thecompetencetoenact lawsoverarangeofpolicieswithin itownjurisdiction.That is, of course, precisely what the Scottish Parliament does. Under the1998 ScotlandAct legislative competence over awide range of policieswasdevolved to the Scottish Parliament including economic development,economic assistance to industry, environmental policy, agriculture andfisheriesandjusticeandhomeaffairs.

As is well known, devolution was intended to enable the ScottishParliament todesignpolicies thatbetter suited theneedsandaspirationsofScotland’seconomyandsociety than thoseemanating fromWestminster.Atthe same time, however, the exercise of legislative competence across therangeofdevolvedcompetenceswas,andremains,subjecttocompliancewithEUlaw.UndertheEUTreatieseachofthepolicyareasabove, inwholeor inpart,fallswithinthelegislativescopeoftheEUlevelofgovernance.CruciallybecausedomesticlawcannotconflictwithEUlaw,EUmembershipeffectivelyconstrainstheexerciseofpowersassignedtoregionallegislaturesacrosstheEU– includingScotland– inexactly thesameway thatnationalparliamentsarealsobound (this is theso-called ‘supremacy’or ‘primacy’doctrineofEUlaw).

At the UK level the issue of the overriding authority of EU law vis-à-visnationallawisrepresentedinthe‘sovereignty’segmentoftheBrexitdebate.But, as implied above, there is also a ‘sovereignty’ dimension to the debatehereinScotland.IftheUKwastoleavetheEU,thenjustasagreaterdegreeofconstitutional sovereignty formally will return to Westminster, so too willgreater ‘sovereignty’ in the formof increasedpowersoverdevolvedmattersflowtotheScottishParliament.

WhyisthisimportantandwhatrelevancedoesithaveforScotland?TheEUlegislativeprocessdoesnotinvolvetheEU’sregionsdirectly.WhileaCommittee of the Regions was established at EU level in 1993 under theMaastricht Treaty, it has a purely consultative role. Instead under theOrdinary Legislative Procedure (OLP) EU laws are enacted jointly by the

Page 18: Britain's Decision

18

directly elected European Parliament (comprising 750 MEPs with six fromScotland) and theCouncil ofMinisters of theEUwhich comprisesMinistersfromtheEUmemberstates.It iscommonplaceforcriticsoftheEUtodepictthisasaremoteandunresponsivelegislativearrangement.Atatimewhentheelectorate is seeking greater accountability and responsiveness from theirpoliticians,theideaofpowerbeingexercisedclosertothecitizenisonethathasconsiderableappeal.ThereforeaclaimthatBrexitwillendtheobligationforUKandScottishcitizenstoadheretoEUlawandrestorethesovereigntyofthenationalor‘regional’(inthecaseofScotland)parliamentsispotentiallyapowerfulone.Assuchitisaclaimthatdeservestheclosestscrutiny.

It is worth considering how the Scottish Government and Parliamentrepresent Scotland’s interests in EU legislative proposalswithin the currentsystembeforeconsideringalternativescenarios.Thiscanbedividedintotwoavenues–representationtoUKGovernmentandParliamentontheonehand,anddirectrepresentationatEUlevelontheotherhand.

InterestsofdevolvedadministrationsIn thewakeof devolution itwas agreedby theUKGovernment to establishprocedures to ensure that the interests of each of the devolvedadministrationswouldbe taken intoaccountwhen theUKGovernmentwasformulatingitspositiononEUlegislativeproposalsthatimpactedondevolvedcompetences.Thatcommitmentandtherelevantprocedureswereformalisedinanoverarching inter-governmentalMemorandumofUnderstandingandarange of policy-specific Concordats that together formed a set of rules andconventionsbindinguponthedevolvedandcentralgovernmentsrespectively.At the centre of this system would be a Joint Ministerial Committee (JMC)which would be used to resolve conflicting positions of the respectivegovernments if necessary. Nonetheless ultimate authority over UK policytowardstheEUinallmatterswouldremainwiththeUKGovernment.

At the same time the Scottish Parliament established the European andExternalRelationsCommitteewhoseremitincludedscrutinyofEUlegislativeproposals that impacted upon devolved competences. And while thatcommittee mimicked in some ways the work of the House of CommonsEuropeanScrutinyCommittee,itdidnothavethepowerof‘scrutinyreserve’of the Commons committee that theoretically prevents the UK GovernmentfromrepresentingaUKpositioninBrusselsuntilthatCommitteehasreachedaviewonthematter.TherearetwofurtheravenuesofinfluencethatmaybeusedbythedevolvedadministrationregardingEUlegislation.FirstunderEUrules it is permitted for a Minister from a ‘regional’ government to attendmeetingsoftheCouncilofMinistersandrepresentthememberstateprovidedthatMinisterhastheauthoritytomakedecisionsthatbindthememberstateasawhole. Secondunder theevolvingEU ‘principleof subsidiarity’ –whichwill be strengthened under the agreement reached between PrimeMinister

Page 19: Britain's Decision

19

CameronandtheotherEUmemberstatesiftheUKvotestoremainintheEU– domestic parliaments (and this includes the Scottish Parliament) have apowertorequiretheEuropeanCommissiontoreviewEUlegislativeproposalswhere these parliaments consider EU law to be unnecessary to achieve theaimsbeingsought.

ThesecondavenueusedbytheScottishGovernmenttoinfluenceEUlawsandpoliciesisdirectrepresentationtotheEUInstitutionsinBrussels.In1999the Scottish Government established an office in Brussels that wouldrepresent its interests in the law-making process. Formally the ScottishGovernment’sEUofficeispartofthebroaderUKPermanentRepresentation,althoughinpracticeitsroleistofocusonEUpolicyissuesofdirectrelevanceto Scotland and provide advice to the Scottish Government about EUlegislative and policy developments that impact on devolved competences.This advice forms a key element in the formulation of the ScottishGovernment’sinputtotheWhitehallEUpolicyprocess.

Thissystemdescribedhasoperatedfor17yearsandappearstohavedonesoreasonablyeffectively.ThisisunsurprisinginsofarasformostofthattimeandovermostoftheEUlegislativeproposalsimpactingondevolvedpolicies,theScottishandUKgovernmentshaveadoptedbroadlysimilarpositions.Thisisnottosuggesttherearenodivisiveissues.SuccessiveScottishGovernmentshavesoughtagreaterdegreeofinfluenceofUKpolicytowardstheEUbeyonddevolvedmatters–includingtherecentlyconcludedre-negotiationsovertheUK’stermsofEUmembership;negotiationsthatdidnotallowanysignificantinputby thedevolvedadministrations.Equally theScottishGovernmenthasexpressed its dissatisfaction over the UK Government insistence thatMinistersfromthedevolvedadministrationscanonlyattendmeetingsoftheCouncilofMinisterswithitsexpresspermission.

IftheUKremainswithintheEUitisunlikelythattherole‘regions’playinthe EU legislative and policy processes will change significantly. CertainlythereisnoappetitetocreateamorepowerfulregionallevelofgovernanceintheEUsystem.Asaresultthe‘voice’thatregionshaveinEUgovernancewillcontinuetodepend, inlargemeasure,ontheinfluencetheyareabletoexertover their national government – influence that varies from country tocountryaccordingtothedomesticconstitutionsofeach.

Whataretheargumentsputforwardbythe‘Leave’campaigners?Akeyproposition of the ‘Leave’ campaign is thatBrexitwill lead to greaterpowers being assigned to the Scottish Parliament thereby increasing itscapacity to enact laws better suited (than are EU laws) to the needs ofScotland’s economy and society. Moreover Brexit would allow Scotland’suniversitiestolevytuitionfeesonEUstudents(EUlawpreventsthisalthoughdoespermit tuition feestobe leviedonstudents fromelsewhere intheUK),andmayprovideafinancialwindfalltotheScottishbudgetwiththecessation

Page 20: Britain's Decision

20

of theUKcontributiontotheEUbudget(although itwouldnotbe large,seeChapter3).

It certainly is the case thatBrexitwould increase the legislative scopeofthe Scottish Parliament, although as we explain below the extent to whichthese increased powers could be exercised would depend crucially on theoutcome of the Brexit negotiations between the UK Government theremaining 27 EUmember states. As already noted, the Scottish Parliamentcannotenactdomestic lawsoverdevolvedpolicieswhere thiswouldviolateexistingEUlaw.IftheobligationtoadheretoEUlawisremoveduponBrexit(and that is the key question), the Scottish Parliament would no longer berestrictedbyEUlawinformulatingandenactingdomesticlawswhereithadcompetence so to do. This would be particularly true with regard toagriculturalpolicy,fisheriespolicyandenvironmentalpolicy–allofwhicharedevolvedunderthe1998legislation.

But this would also raise the question of how these extended policycompetenceswouldbedesignedand/orfinanced.Takeagriculturalpolicyasan example. Presently Scotland’s farmers are supported almost exclusivelythrough the EU Common Agricultural Policy (CAP) – financial support thatamountstoapproximately€4billionovertheperiod2014-20.IftheUKexitsthe EU that support will end, and it will fall to the Scottish Parliament todesignandimplementanewpolicyofsupportforScotland’sfarmers.Inturnthis will require a new funding settlement between the Scottish and UKgovernmentstoensurethisnewagriculturalpolicycanbefinanced.SimilarlyBrexit would result in fisheries policy being devolved to the ScottishParliament. However it is unlikely the UK Governmentwould regard policyover Scotland’s fishing grounds as an issue solely for the devolvedadministration. Instead this is likely to be seen byWhitehall as an issue ofinternational policy and, as such, reserved to theUKGovernment. PreciselyhowtheseconsequencesofBrexitwouldberesolvedisunclear.

Whataretheargumentsputforwardbythe‘Remain’campaigners?While not necessarily contesting that a consequence of Brexit would be toincrease the scope of devolved powers, the ‘remain’ camp is likely to arguethatthelikelytermsofa futuredealbetweentheUKoutsidetheEUandtheremainingEUmemberstateswouldineffectmeanthesepowerscouldnotbeexercised.ThisisbecauseiftheUKistoretainaccesstotheEUsinglemarket– and advocates of Brexit concede this is important from an economicperspective – then, the argument goes, the UK (including the devolvedadministrations)willbecompelledto(continueto)adheretoawiderangeofEU laws and policies governing that single market. Moreover as a non-memberoftheEU,theUKnolongerwillhaveanyinfluenceoverthenatureoftheseEUlawsandpolicies–likeNorwayorSwitzerland,bothofwhomhave

Page 21: Britain's Decision

21

accesstotheEUsinglemarket,theUKwillbeobligedtoimplementEUlawswithoutquestion.

Theimplicationofthatargument,anditisapowerfulone,isthatthedrivefor increased legislative sovereignty either at UK or Scottish Parliamentarylevelsislargelyillusory.IndeedonewayofexplainingthisisthatwhileBrexitwillresultinanincreaseinabsoluteconstitutionalsovereigntyoverthelawsthatgovernthecountry, ifaccesstothesingleEUmarketistoberetaineditwill be accompanied by an erosion of relative effective sovereignty over arangeofEUlawsandpolicieswherecomplianceisrequired.

AssessmentofthebalanceofargumentsAssuming that the UK Governmentwould seek to secure a post-Brexit dealwiththeremainingEUmemberstatesthatguaranteedaccessofBritishgoodsand services to the single EUmarket on terms identical to those prevailingtoday, the evidence suggests that policy ‘gains’ from Brexit to Scotland arelargely illusory. If we examine the type of agreements that exist at presentbetween the EU and non-EU countries that enjoy unrestricted access to thesingle market, which most commentators agree the UK would seek toreplicate,theseinvolveacombinationofadherencetoEUlawandpercapitacontributionstotheEUbudgetthatarenotsignificantlydifferentfromthosetheUKisrequiredtoacceptasanEUmemberstate.ThesignificantdifferenceofcourseisthatasamemberstatetheUKisabletoexertlegislativeinfluenceoverthesesameEUlawsandpolicies.Moreoverthereisconcernthatshouldthe UK exit the EU, that EU policieswould be less likely to reflect the UK’sunderlying economic philosophy and objectives and make the EU a morerules-bound,andpossiblylowergrowth,marketinwhichtodobusiness.

In that scenario a loss of influence over EU policies would also beexperienced inScotlandandwithregardtodistinctiveScottish issues.Whileone may criticise the existing channels through which the ScottishGovernment and Scottish stakeholders presently are able to influence EUpolicies – both via the UK Government and directly in Brussels – bothchannelsdoexistandmaybeaccessedeffectively.

Iwould therefore conclude that Brexitwould be unlikely to significantlychange the legislative parameters within which the Scottish Parliamentpresentlyoperatesoverarangeofpolicyareas–assumingtheUKcontinuedtoseekunfetteredaccesstothesingleEUmarket.Theprincipalexceptionstothisgeneralcommentareagriculturalpolicyandfisheriespolicy.Inbothcaseshowever new challengeswould emerge, the outcome ofwhich is uncertain.Moreover that influence presently exercised by Scotland over EU laws andpoliceswouldeffectivelyceasetoexist.

DrewScottisProfessorofEuropeanUnionStudiesandCo-DirectoroftheEuropaInstituteattheUniversityofEdinburgh.

Page 22: Britain's Decision

22

Chapter3Theeconomy:howcloselyisoureconomyalignedwiththeEU?Whatdowegetoutofit?–Howmuchdowepay?Howmuchdowereceive?DavidBellThis chapter analyses the economic position of the UK – and particularlyScotland–withintheEU. Itsgeographicposition isclearlyontheperiphery.But at least on one important economic measure, it is right in the centre.Scotland’sGDPperheadisexactlyequaltotheEUaverage.ThatoftheUKasawholeisalittlehigher,at109(EU=100).WecanseethisfromFigure1whichshowsanindexofGDPperheadadjustedfordifferencesinpurchasingpowerforanumberofEUcountriesandregions. It includesnotonlyScotlandasawhole,butalsosomeofitsregions(usingtheEUNUTS2classification.)Figure1:GDPperheadin2013(adjustedforpurchasingpower)IndexEU=100

Source:Eurostat

MuchofnorthernEuropehashigherGDPperheadthanScotland,whilemuchofsouthernEuropeandthecountriesthatrecentlyjoinedtheEUfromEasternEuropehavelowerincomeperhead.WithintheUK,ScotlandisalsoclosetothemiddleoftheGDPperheadscale,higherthanWales,NorthernIrelandandtheNorth-EastofEngland,but lower than theSouthofEngland,particularly

0 50 100 150 200

ROMANIALATVIAPOLANDWales

NorthEast(England)NorthernIreland

Highlands&IslandsSouthWesternScotland

SPAINITALYEU28

ScotlandEasternScotland

FRANCEUNITEDKINGDOM

FINLANDGERMANYDENMARKIRELAND

NorthEasternScotlandLondon

Page 23: Britain's Decision

23

London.WithinScotlandthere isalsoawidedistributionof income,rangingfromthenorth-eastwhich isalmostonaparwithLondon, to theHighlandsand Islandswhose income isbarelyabove80%of theEUaverage.BasedonGDPperhead,ScotlandoccupiesacentralpositionbothwithintheUKandintheEUasawhole.InEUterms,theScottisheconomyisneitheranunqualifiedsuccessnoranunqualifiedfailure.

Itslabourmarketoutcomesare,however,significantlybetterthanthoseinmostothercomparableareasoftheEU.Figure2showsunemploymentratesforallofthesubnationalareas(knownasNUTS1regions)thatcomprisethe28memberstatesduring2014,withthelevelsforScotlandandfortheEUasawholehighlighted.Withanunemploymentrateof5.2%,Scotlandclearlyhasone of the lower unemployment rates among these regions. This relativestrengthismirroredinotherlabourmarketindicators.

Figure2:UnemploymentRatesbyNUTS1Regions2014

However, showing howwell or how badly the Scottish or the UK economyperforms relative to other parts of the EU does not shed any light on theirintegrationintotheEU‘singlemarket’.Marketintegrationwouldbereflectedin high levels of trade and bymovements of capital and of labour betweenScotland or theUK and the EU.Data on Scottish exports have to be treatedwith some care, but the ScottishGovernment statisticiansmake an effort tomaketheseasaccurateaspossible.

Figure3showsthevalueanddestinationofScottishexportsbetween2002and2014.Thepossibledestinationsare therestof theUK(rUK), therestoftheEUandtherestoftheworld.ItisimmediatelyclearthatrUKisthemajor

0

5

10

15

20

25

30

35

40

Une

mploymen

tRate

Page 24: Britain's Decision

24

marketforScottishexportsandthatithasgrownsignificantlyovertheperiod.Exports to the rest of theworld started from amuch lower base, but havealmostdoubledbetween2002and2014. IncontrasttothegrowingvalueofexportsbothtorUKandtotherestoftheworld,exportsfromScotlandtotheEUhavestagnated.ThispatternofweakeningexportstoEuropeandrapidlygrowing exports to the rest of theworld has also occurred for the UK as awhole.

ItisstrikingthateventhoughScotlandispartoftheEUsinglemarket,theUSisScotland’stopinternationalexportdestination.Theweaknessofexportsto the EU may reflect the overall weakness of the European economy, thestrength of the pound and competition from other markets. Even thoughforeigndirectinvestmentinScotlandisreasonablybuoyant(seechapter13),it does not seem that such investment is being used to make Scotland aplatformforaccessingEUmarketsinthesamewaythat, forexample,occursinIreland.

The export data do not capture the tourism market which was wortharound£9.7billiontoScotlandin2014:1.1millioninternationalvisitorscametoScotlandinthefirsthalfof2015.EventhoughexportstotheEUhavebeenflat, increased visitor numbers from Europe have been driving increasedtouristspendinginScotlandwhich,likemanufacturedexports,addtoforeigncurrencyearnings.

Figure3:ScottishExportsbyDestination2002–2014

Source:ScottishGovernmenthttp://www.gov.scot/Topics/Statistics/Browse/Economy/Exports/ESSPublication/ESSExcel

£6,000m

£11,000m

£16,000m

£21,000m

£26,000m

£31,000m

£36,000m

£41,000m

£46,000m

£51,000m

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EuropeanUnion28 RestofWorld rUKExports

Page 25: Britain's Decision

25

IsScotlandintegratedintotheEUlabourmarket?LiketherestoftheUKandIreland,ScotlandreceivedaninfluxofEUmigrantsstartingin2004followingthe accession of a number of former Soviet bloc countries. These migrantsboostedScotland’spopulation,whichhasnowreached5.3million,itshighestlevelsincerecordsbegan.

Theyalsohadasignificantimpactontheeconomy:mostofthesubstantialeconomicresearchontheirimpactontheUKasawholesuggestthatthey:

• boosteconomicgrowth;• make a substantial contribution to public services through the taxes

theypay;• arelesslikelythannativestobesupportedbythewelfaresystemand• have had only modest effects on the employment and conditions of

native-bornworkers.HasScotlandexperiencedthesameincrease inEUworkersasotherpartsoftheBritishIsles?Table1belowshowsthepopulationoftheUK’smajorcitiesandthebreakdownbetweennationals,foreignersfromtherestoftheEUandforeigners from the rest of the world. For comparative purposes, it alsoincludes the same data for London and Dublin. While it is clear that EUforeignersmake up a significant proportion of the population in Scotland’smore prosperous cities, Aberdeen and Edinburgh, their share is stillsignificantly lower than that in London and in Dublin. This may reflectScotland’saccessibilityandperhapsalsothedominanceofLondonwithintheUKeconomy.TheLondoneffectislessrelevanttoDublin,whichcantosomeextentdifferentiateitseconomicenvironmentfromthatoftheUK.

Weakerlabourmarketsattractfewermigrants:theshareofEUforeignersinthepopulationsofGlasgowandDundeeisaroundhalfthatinAberdeenandEdinburgh.Interestingly,withtheexceptionofGlasgow,allofthecitieshaveapproximatelythesameproportionofnon-EUforeignersasEUforeignersinthe population. Glasgow is the exception in having a significantly greaterproportionofnon-EUforeigners,perhapsaresultofithavingalargershareofmigrantsfromtheCommonwealth.

Edinburgh andAberdeenhave a higher share of EUmigrants thanmanylargeEnglishcitiesoutsideLondon,suggestingperhapsthattheyhaveamorecosmopolitan flavour? Nevertheless, their shares are less than cities wherehigher education plays an important part in the economy (Oxford,Cambridge). Higher education can make a significant contribution to theexchangeofbothpeople, ideasand technology.Anotherexception isBelfast,wherelinkageswiththeIrishRepublicandabsenceofcontrolsonmovementare likely to influence the very high proportion of EU foreigners present. IfScotland was independent, the rest of the UK remained in the EU and thelabour market continued as before, the proportion of EU foreigners inScotland would increase by 14% in Edinburgh and 9% in Aberdeen – thesharesoftheirrespectivepopulationsbornintherestoftheUK.

Page 26: Britain's Decision

26

Table1:Nationals,ForeignersandProportionofForeigners(EUandNon-EU)MajorCities

Nationals EUForeignersNon-EU

Foreigners 000s 000s % 000s %

London 6,407 914 11.2 853 10.4GreaterManchester 2,497 90 3.4 94 3.5

Dublin 1,030 118 9.4 113 9.0Birmingham 958 49 4.6 65 6.1Leeds 700 24 3.2 26 3.5

Glasgow 542 19 3.1 32 5.4Leicester(greatercity) 421 25 5.2 33 6.9Edinburgh 420 29 6.0 29 6.0Bristol 388 23 5.4 16 3.7Cardiff 317 12 3.5 15 4.4Newcastle-upon-Tyne 254 8 2.9 17 6.1Belfast 203 71 25.4 5 1.8Aberdeen 195 14 6.3 14 6.4Dundee 138 5 3.1 5 3.3Oxford 121 15 9.9 15 9.9Cambridge 96 14 11.4 13 10.6Source:Eurostat

To complete the picture, it would be good to comment on the extent ofScotland’s imports from the EU and on the outflows of Scots working andliving in the rest of the EU. Unfortunately, the data arewanting.While it ispossible to analyse the UK’s trade balance with the EU (the UK had a £97billion trade deficit with the EU in 2015) and the number of UK nationalslivingintheEU(around1.8million),nocomparablefiguresareavailableforScotland.

However,itispossibletoestimateScotland’sbalancesheetwiththeEU–whatScotscontribute to theEUbudgetandhowmuch theygetback. In thepast,ScotlandwasanetbeneficiaryofEUlargesse.Thisisnolongerthecaseforanumberofreasons:• growthintheEUbudgethasbeenbroughttoahalt,partlythroughBritish

pressure.In2015,theEUbudgetwassetat€141.2billion(£110billion).

Page 27: Britain's Decision

27

This covers expenditure in all 28 member states. For comparison, the2015-16 UK budget is £776 billion. The UK budget covers healthcare,education,welfare,pensionsetcetera.IncomparisontheEUbudgethasamuchnarrower remit. It focusesonsupporting: (1)activitiespromotinggrowth including research and development, (2) supporting fisheries,farming and the environment, (3) security and citizenship, (4)internationalaidandforeignpolicy

• EU regional aid has switched to the former Soviet bloc states followingtheiraccession.Thisisbecausecurrentrulesonlyallowforsuchaidtobegiven to new regions where GDP per head is below 75% of the EUaverage. In the UK only parts ofWestWales, the Valleys and Cornwallqualify as ‘less developed regions.’ None of the constituent parts ofScotlandcurrentlyqualifyunderthatrule,whileFigure4showshowfarthe relatively modest budget on regional aid (€51.1 billion) has to bespread across large swathes of southern and eastern Europe. Only theHighlands and Islands, Northern Ireland and a few regions of Englandqualify as a ‘transition region’ for very limited regional support. Muchmore significant to Scotland are the payments of around £600 millionfrom the Common Agricultural Policy (CAP). In addition, Scottishuniversities and companies benefit from a small flow of research anddevelopment funding channelled through the Horizon 2020 fundingstream.Estimates of EU spending in the UK nations weremade recently by the

CentreforEuropeanReform.AlthoughCAPisworthmorethan£2.2billioninEngland,spendingperhead,at£32,islessthanathirdofthatinScotland.ThisreflectsthegreaterimportanceofagricultureintheScottisheconomy.WalesisinasimilarpositiontoScotland,butCAPsupportisevenhigherinNorthernIreland,at£145perhead.StructuralfundspendingperheadinScotlandonlynarrowly exceeds that in England. It is much higher in Wales where WestWales and the Valleys fall below the 75% criterion for full structural fundeligibility(seeFigure4).

Table2:SpendingonCAPandonStructuralFunds(perYear2014-20) England Northern

IrelandScotland Wales

CAPtotalspending(£m) 2,184 317 614 353

CAPspendingpercapita(£) 31 145 96 96

Structuralfundstotalspending(£m)

735 54 95 255

Structuralfundsspendingpercapita(£)

13 30 18 83

Source:CentreforEuropeanReform

Page 28: Britain's Decision

28

TheCentreforEuropeanReformalsoprovidesestimatesofthefiscaldeficitorsurplusassociatedwithEUtransactions.TheseareshowninTable3,againforeach of the UK’s nations. For the period 2014-20, the UK will pay around£16.9billionintotheEUbudgeteachyear.Almostaquarterofthiswillcome

Figure4:EligibilityforStructuralFundsSupport2014-20

Source:http://ec.europa.eu/esf/main.jsp?catId=525&langId=en

Page 29: Britain's Decision

29

back through the rebate system originally negotiated by Mrs Thatcher’sgovernment.Afurther£5billioncomesbackthroughtheCAP,structuralfundpaymentsandvarioussmallerfundsincludingthosesupportingscientificandtechnologicalresearch.This leaves theUKwithanetcontributionofaround£8billionperyearwhichequatesto£15millionperweekor£2.25perpersonperweek.Suchfiguresareoftenusedtocreatealarm,butarerelativelyminorinrelationtothetradeflowsbetweenBritainandEurope.

Usingdataontaxreceiptsfromtheconstituentnations,itisclearthatthelargest contribution both in overall size and per capita is coming fromEngland. In contrast, Wales is receiving more from the EU than it iscontributing in tax receipts – around £503 million per year. And Scotlandmakesasmallnetcontributionof£337millionperannum,whichequatesto£64 per person per year net contribution. This is tiny in comparison toScotland’s fiscal deficit with the rest of the UK, which was most recentlyestimatedat£14.9billion.

Table3:NetAnnualContributiontotheEUBudgetUKNations2014–20 UK England Northern

IrelandScotland Wales

Grosspayments(£m) 16,907 14,582 567 1,417 340

LessUKrebate(£m) -3,844 -3,270 -102 -298 -172Lesspublic-sectorreceipts(£m) -5,078 -3,217 -409 -781 -670Netcontribution(£m) 7,985 8,094 -56 337 -503Netcontributionpercapita(£) 117 140 31 64 -164Source:CentreforEuropeanReformItisalsoworthnotingthatNorwayandSwitzerland,whicharebothnominallyoutsidetheEU,makeanetcontributiontotheEUbudgetaspartoftheirdealsto be part of a free trade area with the EU. According to the House ofCommonsLibrary,Norwaycontributedaround£106percapitain2011,whileSwitzerlandcontributesaround£53percapita.ThenetcontributionofeachUKcitizentotheEUbudgetwasthereforenotmuchhigherthanthatofpeopleinNorway,despitethefactthattheyarenotmembersoftheEU.ConclusionSowhatdoesthisallmean?

TheeconomyoftheUKandScotlandisrelativelyclosetotheEUaverageinterms of income per head: it, andmost other regions of the UK, other thanLondonandtheSouth-east,arewellshortofanyyardstickthatwouldclassify

Page 30: Britain's Decision

30

themassomeamongthemoreaffluentEUregions.Nevertheless,theirlabourmarkets are performing relativelywell. Scotland’s goods and labourmarketarenotasheavilyintegratedwiththeEUastherestoftheUKanditsexportstotheEUhaveflatlined.Itnolongerqualifiesfortheregionalassistancethatwasavailableinthepast,thoughScottishagriculturestillreceivesasignificantlevel of support from Europe. Finally, Scotland’s ‘account’ with the EU isbroadlyinbalanceandisrelativelysmallinrelationtobothitsdeficitwiththerestoftheUKandthesizeofthetradeflowsbetweenScotlandandEurope.

DavidBellisProfessorofEconomicsattheUniversityofStirlingandaFellowoftheESRCCentreonConstitutionalChange.

Page 31: Britain's Decision

31

Chapter4WhatdovotersthinkabouttheEUandthereferendumquestion?HowdoesthisvaryacrosstheUK?CharlieJefferyScotland has long had a reputation for being less sceptical about Europeanintegrationthantherestof theUK,and inparticularEngland.At the levelofpolitical leadership that is obviously enough the case. Since the late 1980swhen the Labour Party and the Scottish National Party each becameunambiguously pro-EU parties, Scotland has lacked credible voices inmainstream politics prepared to pursue a Eurosceptical approach. That inparthastodowiththeweaknesssincethenofthemainforumtheUKhashadfor airing opposition to the EU: the Conservative Party. Just as theConservativesunderJohnMajorweretearingthemselvesapartoverEurope,Scotland turned its back on the party, returning no MPs in Scotland in the1997UKelection, and justoneat everyUKelection since.TheConservativeParty in theScottishParliamenthasnotmadeabig issueoutofEuropeandmorerecentlyitsleader,RuthDavidson,hastakenaclearlypro-EUposition.

With Nicola Sturgeon, First Minister and leader of the SNP, and KeziaDugdale, Scottish Labour leader, also clear in their support for EUmembership (along with the minor parties in the Scottish Parliament, theLiberalDemocratsandtheGreens)Euroscepticismiscasttothemargins. Itsmost prominent advocates are David Coburn, UKIP’s one Member of theEuropeanParliamentinScotland,JimSillars,theveterananti-EUfigureintheSNP, andoneor twoonceprominent, formerLabourMPs like IanDavidsonandNigelGriffiths.ThecontrastofthesewiththevigourofSturgeon,Dugdaleand Ruth Davidson is striking. The mainstream in Scotland’s politicalleadershipisapro-EUone.

ImplicationsfortheUK’sinternalconstitutionaldebateBut therehasalwaysbeensomedoubtas towhetherordinaryScots sharedthis pro-EU position. It was long thought that ordinary Scotswere not thatdifferent in their views on the EU than people elsewhere in the UK. As weshow below, they are. Scots are now significantly more positive about EUmembership than people in England and Wales (though not, it seems,Northern Ireland). Thesedifferencesmatternot just for their impact on theEU referendum outcome on 23 June 2016, but also for their possibleimplicationsfortheUK’sinternalconstitutionaldebate.

TheBrexitandScottishindependencedebateshavebecomefirmlylinked.NicolaSturgeon,madethispointshortlyaftertheScottishreferendumwhen

Page 32: Britain's Decision

32

shearguedthatany ‘Leave’outcome inanEUreferendumwouldneedtobeendorsedineachpartoftheUK,effectivelyclaimingaScottishvetooveraUKdecisiontoleave.Sturgeonhasmadethesamepointonanumberofoccasionssince, and has gone further by tying the EU referendum outcome to thequestion of Scotland’s continuing membership of the UK. Before the UKgeneral election inMay 2015 she said a second Scottish referendumwouldonlybe called if therewere ‘material change’ in the conditionsof Scotland’srelationshipwiththerestoftheUK.InaBrusselsspeechinJune,shortlyaftertheSNP’sastonishingsuccessinthatelection,shemadeclearthataUKvotetoleave theEUoverridingaScottishpreference tostay ‘couldbeonescenario’producing such material change. And at the SNP conference last October,directing remarks at David Cameron, she made clear that ‘in thosecircumstances,youmaywellfindthatthedemandforasecondindependencereferendumisunstoppable’.Shehasmadeasimilarpointonseveraloccasionssince, most clearly perhaps in a TV interview in February 2016: a secondScottishreferendumwould‘almostcertainly’betriggeredifScotlandvotestostaywithintheEUbuttheUKvotesto leave.AsNicolaMcEwendiscussesinthe final chapter of this book there might in fact be a little more nuanceunderlyingSturgeon’swords.Butundeniablythestakeshavebeenraised.

WhatScotland(andEngland,WalesandNorthernIreland)thinkThatisallthemorethecasegiventhatpeopleindifferentpartsoftheUKnowhaveverydifferentviewsontheEU.Table1belowpresentsdatafromopinionpolls conducted from September 2015 (when the referendum questionwording: ‘Should the United Kingdom remain a member of the EuropeanUnion or leave the European Union?’ was confirmed) to March 2016. Thetable sets out the headline findings of ten polls with all-England findings,fifteenScottishpolls,fourfromWalesandtwofromNorthernIreland.Allhadsample sizes of at least 1,000 respondents and all were conducted byreputablepollingcompanies.‘Don’tknow’and‘wouldn’tvote’responseshavebeenexcludedtoprovideasimpleremain/leavesplit.

The table needs to be read with some caution. These are polls done indifferentplacesondifferentdaysbydifferentcompanies.OnlyinScotlandandEngland has there been regular polling. Polling is especially patchy inNorthernIreland.Thissaid,thereismuchtonote.ThefourUKnationsdivideintotwopairs.EnglandandWalesappearsplitdownthemiddle.BycontrastScotlandandNorthernIrelandarefirmlyinthe ‘remain’camp.Onlyonepollhasrecorded(just) lessthana60%majority inScotlandforremaining,withan average of Remain vote across all polls of over 65%. Northern Ireland(though with only two bunched polls) appears even more committed toremain.

Page 33: Britain's Decision

33

Table1:OpinionpollsconductedfromSeptember2015 England Scotland Wales NorthernIreland Remain

%Leave%

Remain%

Leave%

Remain%

Leave%

Remain%

Leave%

2015 10Sept 64 36 16Sept 48 52 24Sept 53 47 27Sept 65 35 30Sept 72 38 13Oct 62 38 16Oct 81 1921Oct 67 331Nov 54 46 8Nov 55 45 11Nov 46 54 15Nov 52 48 16Nov 75 25 17Nov 49 51 4Dec 49 51 9Dec 61 39 2016 13Dec 49 51 12Jan 66 34 14Jan 64 36 4Feb 66 34 7Feb 70 30 11Feb 45 55 16Feb 66 34 29Feb 49 51 64 36 6Mar 48 52 7Mar 59 41 9Mar 61 39 13Mar 51 49 17Mar 65 35 18Mar 53 47 Average 50.1 49.9 65.3 34.7 50.0 50.0 74.0 26.0

Thismix of two ambivalent and two clearly pro-EUnations looks especiallystriking when compared with the outcome of the 1975 referendum onmembershipofthethenEuropeanEconomicCommunity(EEC)(Table2).TherankorderofYes/Remainisupended.Englandin1975wasmoreenthusiasticaboutmembershipof theEEC thanScotland isaboutmembershipof theEUnow. And ifwe compare the 1975 outcomewith the average polling scoresfromTable1therehavebeenmarkedswingsinopinioninallfourpartsoftheUK(as setout in the final columnofTable2).England,WalesandNorthernIrelandhaveexperiencedDamasceneconversions,withScotlandalsoshiftingsubstantially.Andbyfarthemostsignificantoftheseswingswhenweighted

Page 34: Britain's Decision

34

bysizeofpopulationisthatinEngland.Weightedbyitscurrent83.9%shareof the UK’s population, the 18.6% swing from Yes/Remain to No/Leave inEnglandequatestoa15.6%swingacrosstheUKasawhole.TheUK-wideYesvotein1975was67.2%.ThenowverydifferentpatternofopinioninEnglandmakestheUKasawholeanEUreferendummarginal.

Table2:1975andNow 1975Referendum 2015-16

PollAverageChange1975-2015-16

Yes%

No%

Remain%

Leave%

NominusLeave

England 68.7 31.3 50.1 49.9 -18.6Wales 64.8 35.2 50.0 50.0 -14.8Scotland 58.4 41.6 65.3 34.7 +6.9NorthernIreland

52.1 47.9 74.0 26.0 +21.9

Doesidentitymatter?Thereisafurtherdimensiontothispatternofopinionwhichshouldbenoted.Data fromthe2014FutureofEngland survey,aperiodicacademic testingofpublic attitudes in England, but also conducted that year alongside parallelsurveys in Scotland and Wales, suggests that national identity plays asignificant role in shaping opinion on the EU in England. The 2014 surveyusedtheso-calledMorenoidentityscale,whichaskedsurveyrespondentsinEnglandtoplacethemselvesonafive-pointscalewith‘onlyBritish’atoneendand‘onlyEnglish’attheother,withintermediatepointsof‘moreBritishthanEnglish’, ‘equally British and English’ and ‘more English than British’ (thesame scale was used for Scotland, substituting ‘English’ with ‘Scottish’, andsimilarlyinWales).Table3showshowresponsestotheremain/leaveoptionsinanEUreferendumdifferedacrossrespondentsindifferentpositionsontheMorenoidentityscale(‘X’referstoEnglishidentityinEngland,WelshidentityinWalesandScottishidentityinScotland).

The first column of figures shows the overall responses, so 37% choseremain,and40%leaveinEngland(therestsayingtheydidnotknoworthattheywouldnotvote).Walesleanttheotherwaywitha39:35balancejustinfavourofremaining.Scottishrespondentswhogaveaviewdidsobytheclearmargin of 48:32. The other columns look at the impact of identity. In theWelshandScottishcasesnational identity(eitherBritishorScottish/Welsh)does not appear in any consistent way to structure attitudes on EUmembership.ButinEnglandthereisaverydifferentpicture.Strikingly,inthelast four columns of Table 5 there is a clear, broadly linear relationship inEngland in which opposition to EU membership increases the more

Page 35: Britain's Decision

35

English/lessBritishtherespondentfeels.ThemoreEnglishrespondentsfelt,the more likely they were to want to leave the EU; those feeling onlyWelsh/ScottishinWales/Scotlandwereclosetotheaveragelevelofsupportfor leaving the EU. So even though in absolute terms English attitudes onEuropeareclosetothoseinWales(butnotScotland–seeTable1),theyaredistinguishedinEnglandfromthoseinbothScotlandandWalesbytheirclearassociationwithEnglishnationalidentity.

Table3:NationalIdentityandEUMembership Total

%Britishonly%

MoreBritishthanX%

EquallyBritishandX%

MoreXthanBritish%

Xonly%

Vote‘Remain’inareferendum

England 37 52 56 39 29 20Wales 39 45 40 42 34 38Scotland 48 43 51 47 53 47

Vote‘Leave’inareferendum

England 40 33 27 37 51 63Wales 35 34 44 32 34 38Scotland 32 33 38 38 25 35

Source:FutureofEnglandSurvey2014.

Whose‘materialchange’mightwebetalkingabouton24June?AtthispointwecanreturntothedomesticimplicationsoftheEUreferendum.Wenotedat the start of the chapterhow the referendumcould reignite theScottish independence debate. For example, if England were to votesomething like 54% to leave – as in the 11 November poll in Table 1 – anoverall‘leave’outcomewouldbelikelyevenifScotlandandNorthernIrelandwerestronglyinfavourofremaining,simplybyEnglishweightofnumbers.SointhatscenarioNicolaSturgeonmightwellbetalkingofmaterialchangeandasecondScottishreferendum.

ButequallyaslimmerEnglishmajority–anumberofpollsinTable1putthe figure at 51-52% – could be outweighed by the clear preference inScotland and Northern Ireland to stay. In that scenario we could expect anumber of prominent voices complaining of England being kept in the EUagainst its will, and perhaps challenging the legitimacy of the result in a‘reverse-Sturgeon’, calling for an English veto over the choices of thoseoutsideEngland.TheincipientstirringsofanEnglishnationalism,nurturedbytheConservativesinthe2015UKgeneralelectioncampaignand–asTable3suggests – with a strong of dimension of Euroscepticism as a component,could well find a more robust platform, perhaps identifying a ‘materialchange’ in England’s relationshipwith other parts of theUK and seeking toredefine that relationship. Scotland may not be the only driver of changewithintheUK.

Page 36: Britain's Decision

36

Ofcourse,ifeveryonevotedinlinewiththeaverageofthepollsofthelastmonths the UKwould just about remain in the EU, with no part of the UKopposingthatdecision,perhapsclosingthe issuedownforageneration.Butdon’tcountonit.

CharlieJefferyisProfessorofPoliticsandSeniorVice-PrincipalattheUniversityofEdinburgh.

Page 37: Britain's Decision

37

Section2

TheArguments

Page 38: Britain's Decision

38

Chapter5Cameron’snegotiation:Whathasbeenagreed?Whatdifferencewillitmake?Whatwillchangeina‘reformed’Europe?

LauraCramA‘newsettlement’betweentheUKandtheEU,wasagreedatameetingoftheEuropeanCouncilon18-19February2016.ThissettlementformsthebasisonwhichtheUKpublicwillvoteonthefutureoftheUK’smembershipoftheEUon 23 June. The settlement addressed the issues of economic governance,competitiveness,sovereigntyandimmigration.

Whyisthisimportant?TheUKhas traditionallybeenknownasan ‘awkwardpartner’ in relation totheEU.This is the secondreferendumonUKmembershipof theEU to takeplace.Thefirstreferendum,heldin1975,resultedina67/33voteinfavourofremaining in but also shaped relations between theUK and its partners formany years subsequently. That referendum reinforced the UK’s awkwardpartner status. The current referendum on UK membership of the EU isimportantatthreedifferentlevels.

First,atabroadUK-leveltherelationshipwiththeEUhasbeenagrowingconcern.TheEUasanissuehastraditionallydividedmostpoliticalparties.Inrecent years, however, it has been a particularly divisive issue within thegoverningConservativeParty.PressurefrompartiessuchasUKIP,whichhaveaparticularlystrongpositiononEUmembershipandhavelinkedthispositionstronglywithconcernsaboutfreedomofmovementofpeopleswithintheEU,havealsoplayedasignificantroleinpushingtheissueofEUmembershipupthepoliticalagenda.

PrimeMinisterDavidCameron’sBloombergspeech in January2013was,in largepart,aresponsetothesepressures. InhisspeechhehighlightedthebroaderchallengesfacingtheEUandputforwardavisionforanewEuropeanUnion. This vision was based on five key principles: competitiveness;flexibility; a two-way flow of power; democratic accountability and fairnessfor non-Eurozonemembers. The Conservative PartyManifesto for the 2015UKGeneral Election underlined the importance of this issue and included acommitment to an in-out referendum on EUmembership before the end of2017. The election of the Conservative Government in 2015 set in train aseriesofnegotiationswith theUK’sEUpartners in relation to thenatureoftheUK’smembershipoftheEU.ItisonthebasisofthisrenegotiatedpositionthatUKcitizenswillvoteinthereferendumon23June2016.

Page 39: Britain's Decision

39

Second,withintheUKthereisnotasharedviewoftheEUandthebenefitsorotherwiseofmembership.Thereisalsolittlesensethatdevolvedagendaswere at the heart of the UK Government’s renegotiation agenda nor ofdecisions taken about the referendum process. Leaders of the devolvedadministrations, for example, requested a pushing back of the referendumdatebeyondJune23.ThiswastoallowagapbetweenthedevolvedelectionsinMay and the EU referendum, and to avoid the confusion of agendas andissuesaroundthetwovotes.Therequestwasnotaccepted.

The different territorial positions on EUmembership within the UK areparticularlymanifestinScotland.MembershipoftheEUplayedanimportantrole in the debate throughout the Scottish independence referendumcampaign in2014.While itwouldbeanover-statement todescribeScottishvoters as Europhiles or Euro-enthusiasts, it is fair to say that levels ofEuroscepticismareconsiderably lower inScotland(andtoa lesserextent inWales)thaninEngland.OpinionpollsconsistentlyshowahigherpreferenceamongstScottishvoters,comparedwithvotersfromotherpartsoftheUK,toremainintheEUthantoleave(seeChapter4).

Theofficial ScottishGovernmentpositionwas from theoutset that itdidnot support the PrimeMinister’s In/Out referendum. The preference of theSNPistoremainintheEUandtocontinuetoimproveandreformtheEUfromwithin,bymakingEU lawandpoliciesmore relevant toScottishpeopleandbusinesses.Nomajorpoliticalparty in Scotlandactively advocates voting toleave the EU in the forthcoming referendum. It is notable too that verydifferent discourses on issues such as immigration (which is one of the keypointsof renegotiationwith theEU)prevail in thedifferentpartsof theUK.Thisdisparityofopinionandofpolicypositionisparticularlyimportantgiventhedelicate constitutional position in theUK.Muchdiscussionhas revolvedaroundthepotentialforasecondreferendumonScottishmembershipoftheUK should a vote to leave the EU result on June 23, most particularly ifScottishvotershaveoptedtoremain(seeChapter21).

Third, whatever the outcome of the referendum, this process hasimportantongoing implications for therelationshipbetweentheUKandtherest of the EU member states. There has been considerable movementamongstfellowEUmemberstatestoaccommodatethenewsettlementfortheUK.Thishasnotbeencostfree.IthasimplicationsforfuturecoalitionsintheEUandfurtherconfirmsthepositionoftheUKasaperipheral,ratherthanacoremember,oftheEU.Forsomememberstates,forexampleDenmark,theUK pressure on issues like immigration has not been unwelcome. Likewise,othernon-Eurozonecountrieswerenotopposedtoclarifyingthepositionofsuch states on important decisions. More abstract issues such as the UK’sdesiretooptoutof‘evercloserunion’,forthemostpartgotafreepass.

However, there was an overwhelming sense from the UK’s EU partnersthat renegotiationwas an unwelcomedistraction at a time of extraordinary

Page 40: Britain's Decision

40

challengeintheEU.WhilememberstateswantedtheUKtoremain,agrowingsense emerged that thismembershipwas not to come ‘at any cost’. Recentreports reveal thatmore than 40% of the French public thinks that the UKshould leave the EU. In an organisation that relies on consensus andcooperation,thefullimplicationsoftheUK’srenegotiationprocessforfuturerelationswithEUmemberstates,assumingtheUKremainsamember,areyettounfold.IntheeventofBrexit,ofcourse,relationswiththeEUwillcontinueto be of vital importance and new norms and relationship will have to beforgedinthenewcontextofBrexitandasanexternalnegotiator.

Whathasbeenagreed?TheUK’snegotiatingpositionwasspelledoutbyPrimeMinisterCameroninaletter to Donald Tusk, President of the European Council, on 10 November2015.Fourareasofconcernwereidentified:• economicgovernance(protectingnon-Eurozonestatesfrom

discrimination);• competitiveness(betterregulationandreductionofadministrative

burdenandcompliancecosts);• sovereignty(exemptionfromtheprincipleof‘evercloserunion’andan

increasedrolefornationalparliaments)and• immigration(socialbenefitsandfreemovement).These areas are specifically addressed in the new settlement announced bythe European Council, after lengthy negotiations, in February. The newsettlementincludesarangeofcommitmentsduetoenterintoforcefollowingnotificationthattheUKpublichasvotedfortheUKtoremainamemberoftheEU. This commitment is generally considered to be legally binding. WhilesomeelementsoftheEUlegislativeprocesscannotbeguaranteedahead,thecommitmentisgenerallyacceptedtohavebeenmadeingoodfaithbytheEUleaders and is expected to be implemented accordingly by the various EUinstitutions.

EconomicGovernanceThesettlementprovidesatwo-waycommitment.Ontheonehanditguaranteesthatasanon-EurozonecountrytheUK(andothernon-Eurozone countries) cannot be discriminated against or excluded fromimportant decision processes. Nor can these countries be expected to facefinancial penalties related to Eurozone ‘bail-outs’. On the other hand thesenon-Eurozone countries may not impede further progress in the Eurozone.ThepositionoftheBankofEnglandassupervisoroffinancialstabilityintheUKisassured.

Competitiveness The commitment of the EU and its member states toenhance competitiveness and to complete the single market is reiterated.Specifically a commitment to decreasing the regulatory burden andcompliancecostsforbusinessesandtorepealinganyunnecessarylegislationismade.TheEUcommitstopursueanactiveandambitioustradepolicy.An

Page 41: Britain's Decision

41

annualreviewof theexistingbodyofEU legislation is to takeplace,withaneye to concerns for subsidiarity (that decisions are taken at the lowestpossible level) and proportionality (that interventions are limited to theextentthattheyarestrictlyrequired).Nationalparliamentsandstakeholderswillbeinvolvedinthisprocess.

SovereigntyThecommitmentto‘evercloserunion’willnotincludetheUKandmaynotbeallowedtojustifymovestofurtherpoliticalintegrationintheEU.TheexistingUKarrangementstoopt-outortoopt-intoEUlevelmeasuresin theareasofpolicing, immigrationandasylumcontinue tostand.Nationalsecurity remains the responsibility only of the UK government. A so-called‘redcard’procedurewillbe introduced.ThiswillallownationalparliamentstohaltdiscussionofEUlegislativeproposalsintheCounciliftheprincipleofsubsidiarity is believed, by 55% of national parliaments, to have beenbreached.

ImmigrationThesettlementaddresses issuesofaccesstofreemovement,particularly prevention of abuse or fraud and the assessment of potentialthreat.Inrelationtosocialbenefits,an‘emergencybrake’,allowinglimitationof full access to in-work benefits for new EUworkers,may be instituted incases in which a Member State is experiencing an ‘exceptional situation’(currentlythisincludestheUK).MemberStatesmayalsoindexchildbenefitstothecircumstancesofthecountrytowhichtheyarebeingexported.

Whatdifferencewillitmake?The various ‘Remain’ and ‘Leave’ campaigns, have interpreted the newsettlementthroughthelenseswemightexpect.FormanyofthoseinsupportoftheUKremainingamemberoftheEU,thesettlementresultingfromDavidCameron’srenegotiationshasresultedinalegallybinding‘specialstatus’thatallowsforarenewedandprotectedpositionfortheUKintheEU,consonantwithcurrentUKGovernmentpriorities.

For those in favour of the UK’s exit from the EU, or Brexit, the specialstatus isunconvincing, representinga temporarycompromiseunlikely tobesustainableastheEuropeanintegrationprocesscontinuestomoveaheadandpresents new challenges to the UK’s ability to control its own affairs. Anadditional voice is also emerging – from those who broadly favour UKmembership of the EU but feel that the renegotiations, focused oncompetition, deregulation andbenefit restrictions formigrants, havemovedtheEUfurtherawayfromthetypeofUnionthattheywanttobepartof.Itiscertainly the case that the binary in/out nature of the referendum and therenegotiations,conductedastheywereonlyonthecurrentUKGovernment’spriorities,leftlittleroomforreflectionaboutthenatureoftheEU.

The question of what type of EU people in the UK as a whole or itsconstituentpartswant, ordonotwant, tobepartofhasnot seriouslybeenaddressed in this process. In practice, the renegotiations will have little

Page 42: Britain's Decision

42

impactonthevoteonJune23.Indeed,thedetailsofthepackagearealreadylargely forgotten and the wider debate swiftly moved on to broader geo-politicalsecurityissuesthatdidnotfeaturesignificantlyintherenegotiationsand to the usual campaign hyperbole, threat and counter threat, from bothcamps. The renegotiation package and the new settlement were, however,essentialtoallowDavidCamerontocampaignfortheUKtostayintheEU.

The referendum is unlikely to be the end of the issue, whatever theoutcome. The UK’s relationshipwith the EU has not been properly debatedand will not be resolved by a referendum. Both the UK and the EU areconstantlychanging,areferendumwillprovideasnap-shotofpublicopinion,a static image unsuited to capturing two moving targets. Indeed, therepercussions of the referendum may further exacerbate shifts in internalrelationshipswithintheUKandatEUlevel.

LauraCramisProfessorofEuropeanPoliticsattheUniversityofEdinburghandSeniorFellowonTheUKinaChangingEuropeprogramme.

Page 43: Britain's Decision

43

Chapter6OPINION

Thecaseforstayingin:WhywouldtheUKbebetteroffinEurope?AndrewWilsonandKevinPringle

With the energy of Scotland’s independence referendum still reverberatingacrossthecountry,wegotothepollsonceagainonafundamentalissue–dowe remain in the EuropeanUnion or leave? This truly is an age of politicalengagement and reform. In fact, an era of institutional challenge stretchingwellbeyondconventionalpolitics.

DuringtheScottishdevolutionreferendumin1997,thePrincessofWaleswas tragically killed in a car crash in Paris, and the public response to theRoyalfamily’sconductshooktheinstitutionofBritishmonarchytoitscore.Itcamethroughthatcrisisandreneweditselfinthelifeofthecountry–asithasdonesooften.

Many others have faced the same existential crisis of purpose andperformanceinaworldwheretransparencyis increasinglydemandedbyanever more informed population. Westminster, the BBC, newspapers, banks,tennis, football and athletics have all faced into the storm, and have yet toemergefullyreformed.It isaneraofchangeacrossalloftheinstitutionswerely on to govern ourselves and live our lives. Navigating an epic period ofreform,changeandrenewalisamajorchallengeforleadersandforusall.

It is inthiscontextthattheScottishreferendumwasset.AswithEurope,thebinarychoicesuggestedafargreaterdistancebetweentheoutcomesthanpragmaticrealitywouldactuallyhavemeant.

Havingyourcakeandeatingitor‘thebestofbothworlds?’What the ‘Yes’ campaignwas trying, but failing to articulatewas a renewedrelationshipwiththerestoftheUK,Europeandtheinternationalcommunityon a more equal basis. That, it was argued, would have better equippedScotlandtonavigatethechoppywatersthatallcountriesface,andmakingthemostofourmanyopportunities.

Criticsmayhavecalleditwantingtohaveourcakeandeatit,butwhatitconsisted of was a rational balance between retaining mutually-beneficiallinkswiththerestoftheUK,andmaximisingself-governmentandfreedomofmanoeuvre for Scotland. So the ‘Yes’ side advocated retainingmany sharedassets and institutions, while also proposing far greater autonomy thanwehave any prospect of in current constitutional circumstances. Put anotherway,havingyourcakeandeatingit is justanotherwayofsaying‘thebestof

Page 44: Britain's Decision

44

bothworlds’–which, ironically,waspresentedbythe ‘No’sideasapositivereasontostickwithaunitarystate.

A similar approach could be argued of the ‘Leave’ campaign on theEuropeanquestion.Theyclaimthat theUKwouldretain thebenefitsof freeaccesstothesingleEuropeanmarket,whileriddingthecountryofthehassleandcostsofcontributingtoitsgovernanceandprocessesthatunquestionablylookremotetomanyofitscitizens.The‘Remaincampaign’arguethatitisalluncertain,thatthecostsaretoogreatandthatharmwouldbevisiteduponus.

MichaelHoward,prominent‘Leaver’andcloseconfidantandmentorofthePrimeMinister,hasevengonesofarastosuggestthathewantsa‘Leave’votetostrengthenthenegotiatinghandonthetermsforstayingin.

Inreality,ofcourse,thefutureisunknowable.Asprivatecitizens,wemustrelyour judgement, instinctsandasmuchofasenseof likelihoodaswecangarner fromamedia andpublic discourse that can generatemuchheat andentertainment, but all too often far too little information.But then again, aswithScotland,someoftheoutcomeswillalwaysbeunknowable.Thequestionthenis:isanyofitworththeriskandthebother?

Weboth feltandstillbelieve that forScotland itmost certainlywas,andthatthebalanceofpossibilityandriskwasinfavourof‘Yes.’Avastnumberofour fellow citizens agreed – more than 1.6 million – and the vote was farcloser thanmanyanticipated.Whythenwouldwe takewhat,onacosmetic,levelcouldseemacontradictorypositiononthisissue:wantingtoremainintheEUwhenwewantedtoleavetheUK?

TheriskshugelyoutweighthoseScotlandfacedinrelationtoindependenceWe think it is a balanced argument and issue, and that good people candisagree about it for the best of reasons and from the most positivemotivations.WealsothinkthattheUKcouldsurviveoutsideoftheEU.Thatisnotandneverhasbeentheissue.Butoncoreprinciple,weareagainstleavingand feel strongly that the risks hugely outweigh those Scotland faced inrelationtoindependence,andforaprizethatismuchlesscertainorreal.

For a start, we are talking about two entirely different constitutionalconstructs.TheUK is aunitary state, albeitwith a growingmeasureof self-government for Scotland, Wales and Northern Ireland and devolutionelsewhere.Bycontrast,theEuropeanUnionisamembershiporganisationforindependent countries. It affects only some, albeit important, aspects of itsmembers’ national policies – the nation states have equal rights and status,retainingtheirsovereigntyandpoolingitonanagreedbasis

In simple illustrative terms, George Osborne’s macroeconomic policyappliesmore or less equally to Scotland, regardless of the fact that there isonly one Conservative MP in Scotland. There is no Chancellor of the

Page 45: Britain's Decision

45

ExchequerofaEuropeangovernment,imposingeconomicpolicyontheUKonthesamebasis.

Intermsofeffect,Scotland’sgrowthperformance–expectedtobearound1.8%thisyear,comparedto2.2%fortheUK–isprimarilydeterminedbytheprevailing policy agenda of the Government atWestminster, as of course isthecaseforBritainasawhole.

Withoutminimisinganyofitsrecentdifficulties,growthintheRepublicofIreland was 7.8% in 2015, topping that of all EU member states and evenIndiaandChina.What that indicates is theabilityofnationstates topursuedifferent policies and achieve dramatically different outcomes, even withinthe constraints of EU membership. Our point is that such constraints willalwaysbefarlessthanthosewhichcomefrombeingpartofthesameunitarystate.

As civic nationalists, we want power to reside nearest to the people aspossible.Democraticaccountabilityshouldbefeltasclosetowhereitcanbeeffectivelyandpracticallyadministered.Butweallknowthattheworldfacesahugenumberofcolossalproblems–economic,socialandenvironmental–thatarefarbiggerthananyonecountry.Thus,weneedtosharesovereigntytoretainit.Practicalsubstancemattersfarmorethansymbolism.Onthis,thecasefortheEUremainscompelling–carbunclesandall.

Historically, the concept of ‘Europe’ developed gradually – it wasmentionedbyGreekhistorianHerodotus in a geographical sense, andmuchlater applied to a cultural definition of Latin Christendom around the 8thcentury. For over a thousand years, Europe had regularly been atwarwithitself in many forms of the most murderous kind, until the post-1945rebuilding effort required a fundamental attempt to end that carnage. TheEuropeanUnion’s greatest success has been the peace thatwe all too oftentakeforgranted.

WeworryaboutthedominoeffectoftheUKleavingNo-oneissayingthatEuropewoulddescendintowarintheabsenceoftheEU.Butwe are saying that there is nothing in the history of Europe to indicatethat peace is its natural state of affairs – quite the opposite – and thattherefore the lasting peace we have enjoyed cannot be divorced from thepoliticalstructuresput inplaceafterWorldWarTwo, firstandforemosttheEuropeanUnion.

Inanyevent,westill live inaworldof conflictwhichcomesclose to theEU’sborders,andterroristactswhichoccurwithinthem.WebelievethatwearebestservedbybeingabletospeakandacttogetherthroughtheEuropeanUnion,againstthreatsbothinternalandexternal.

We worry about the domino effect of the UK leaving, and the forces itwouldencourageelsewhere.ThefactthatMrPutininRussiaistheonlyworldleaderhopingforaUK‘Leave’voteistelling.

Page 46: Britain's Decision

46

On a practical level, bodies such as Europol andits justice equivalent,Eurojust,coordinateintelligencesharingandprosecutionsacrosstheEU.TheEuropean ArrestWarrant brings terroristsand other criminals back to facejustice across EU boundaries – including one of the 21/7 bombing gang inLondonin2005,whohadfledtoItaly.AndtheSchengenInformationSystem,whichtheUKhasnowsignedupto,enablesthesharingofinformationaboutsome40,000wantedcriminalsandmissingpersonsintheEU.

In termsof theeconomy,wealsoknowthataccess toEuropeanmarketsandtheongoingattempttoeliminatebarrierstotradehasimprovedthelivesofmillions. There are general benefits of EUmembership – such as the factthat for every £1 we put into the EU, we get almost £10 back throughincreasedtrade,investment,jobs,growthandlowerprices.Andthereareveryspecific benefits – being in Europe means that we get lower prices in theshops,becauseit’scheapertotradeandthereismorecompetitionandchoice.EUactionismakingitcheapertouseyourmobilephoneabroad–abolishingroamingcharges–anddrivingdownthecostofflights.

TheissueistheextenttowhichwealthissharedfairlyacrosssocietyWe also advocate greater focus on more EU social and environmentalinitiativesintheyearsahead–whichhavealreadydeliveredeverythingfrompaid holiday rights and maternity and paternity leave, to safer products,cleanerdrinkingwaterandcleaned-upbeaches.

Europe is aboutqualityof life aswell as theeconomy– though, in truth,strengtheningbothgotogether.

What is provable fromhistory is that the removal of barriers to the freemovementofpeople,moneyandgoodsandservicescoincideswithperiodsofgreater overall prosperity andwelfare. The opposite produces the opposite.Contrast the economic protectionism of the 1930s with the moves to freetradeafterthewar.Theissueistheextenttowhichthewealthissharedfairlyacross society – and that remains a matter for nation states (back to our‘friend’, George Osborne) to a far greater extent than supranational bodiessuchastheEU,giventherelativelylimitedroleandpowerstheyhave.

Such is the fear abroadatpresent on the various security andmigrationchallenges,aswellasasenseofpolicypowerlessnesspostthefinancialcrash,that retreating behind national barriers for insular reasons can soundappealing, rather than using sovereignty to help project the common good.Butitwouldberuinousfortheverypeoplewhowouldhurtthemost.

The arguments on migration are demonstrably bogus, given that theimmigrationratesinSwitzerlandandNorway(outsidetheEU)arefarhigherthanthatoftheUK.

And the potential costs of leaving in terms of goods and exportmarketscouldbevast,asitissimplynotcredibletoarguethatthetermsofaccesstothesingleEuropeanmarketfora ‘Brexited’UKwouldorcouldbeasgoodas

Page 47: Britain's Decision

47

thoseobtainedfrombeing‘In’.ThatisonereasonwhywewouldwanttoseeafutureindependentScotlandandtherestoftheUKbothfirmlyinEurope.

TheSNPisourparty,andithaschangeditsviewsaboutEuropeovertheyears. Some of its prominent members have gyrated their perspective, andstilldo.Wedon’tthinkthatisabadthing.‘Groupthink’canbedamaging,andon questions like these the intellectual challenge of different views canproducebetteroutcomes.

Europe’sfaultsdon’tthreatentheindependenceofanynationWithouttheindependencereferendumtherewouldbenofurtherdevolutiontoScotland,orthehistoricfiscalframework.Thatchallengemakesthesystemreformandimprove.Mistakeswillalwaysbemadewhenreformishappening,buttherisksofdoingnothingarefargreater.

GarretFitzgerald,acleverandwilyTaoiseachofIreland,saidin1989thathehad‘cometotheparadoxicalconclusionthatitisintheprocessofmergingitssovereigntywithotherMemberStates intheCommunitythatIrelandhasfound theclearest ‘expost facto’ justification for its longstruggle toachieveindependence from the United Kingdom.’ He did so because Europe hadprovided the greater economic and political stage that enabled Ireland tomoderniseand find itsplace in theworldasasmall,popularandultimatelysuccessfulcountry.Thisistheperspectivewecomefromonthisquestion.

WeknowEurope’sfaults,buttheydon’tthreatentheindependence,nevermind the existence, of any nation. Do the French, the Poles or the Swedesregard themselves as anything other than effective nation states? Do thedozen countries who joined the EU as they emerged from behind the ironcurtain believe they have thrown away their hardwon freedom? Of coursenot.

ThecaseforEuropeisabouttheobligationswehavebeyondourborders,andthegainswederivefromworkingtogether.Itisaboutcommonsenseandavisionforthefuture.WebelievethatthepeopleofScotlandhaveenoughofbothtochoosetherightwayforward.

AndrewWilsonisaformerSNPMSPandisaFoundingPartnerofCharlotteStreetPartners.KevinPringlewasaseniorspecialadvisertothethenFirstMinisterofScotland,AlexSalmond,andwasstrategiccommunicationsdirectorfortheSNPfromSeptember2012.HeisnowaPartnerinCharlotteStreetPartners.

Page 48: Britain's Decision

48

Chapter7OPINION

ThecaseforBrexit BrianMonteith Imagineacountrywherefoodpricesare17%cheaper,whereaverageannualenergybillsareover£100lower,whereouronce-famedfishingcommunitiesare revived and prosperous,where our politicians are able to help Scottishindustries by awarding contracts locally or providing financial support.Imagine a Scotland that can benefit from new trade deals with lucrativemarkets that want our products but are currently difficult to penetrate.Imagine a Scotland that enjoys a democratic process where our electedrepresentativeshavethelastwordindecidingourlaws.

That is justsomeof thebenefits thatScotlandcouldhave if itweretobeoutsidetheEuropeanUnion(EU).Somesay it is toodifficultorcomplicated,too risky and would cost jobs and lost investment. Having endured theScottish independence referendum I smell the distinct bitterness of doom-ladenscaremongeringbuiltuponunsafesuppositionsandfalseassumptions.

ThereisnogoodreasonwhyScotland’sparticipationintheEU,throughitsmembership of the UK, should be considered as too complicated or toodifficulttochange.Theissueisarelativelystraightforwardone.Attheheartofthematter is the question ‘towhat extent does Scotlandwish to control itsowndestiny – to control its own laws, its own taxes, its own economic andsocialpolicies?’

Thetwounions–theEUandtheUK–arenotthesameIfScotsaregenuinelyinterestedinwantingtoreturnmorecontroltothelocallevel at Holyrood,whether as a sovereign or devolved Parliament, then theonlychoiceistovotetoleavetheEU.

BeforeIgofurtherletmeexplainthatthetwounions–theEUandtheUK– are not the same, and thus it is possible to be against the former whilesupportingthelatter.

TherecenthistoryoftheUK’sdemocraticgovernanceisforitsinstitutionsto become more devolved with authority passing out from the centre toEdinburgh,CardiffandBelfast.ThishasgonesofarinScotlandthatHolyroodwillsoonhavesubstantialpowersover taxationandwelfare.Bycomparisonthe recent history of the EU is formore control, oversight and power to bedeterminedatthecentreandfortheEuropeanCourtofJusticetobecomethesupremecourtacross theEU.Laws thatWestminsterhasbeenwilling tobedetermined by the Scottish Parliament in Edinburgh, such as minimum

Page 49: Britain's Decision

49

pricingofalcohol,canbestruckdownnotbypoliticiansorjudgesinLondonbutbyjusticesinLuxembourg.

AnyonewishingtohavegreaterautonomyforScotland,andagreaterlocaldetermination of Scotland’s laws and affairsmust, on the evidence of whatwould happen if the UK left the EU, accept that the optimum level of selfgovernment will be achieved if Scotland also lies outside the EU. This caseholds for Scotland whether or not it leaves the UK. The reason for this issimple enough, under the terms of the ScotlandActs thosematters that arenot reserved toWestminsterwillautomaticallybecome theresponsibilityoftheScottishParliament.

Thismeansthatunderdevolution,orfullindependenceofScotlandfromaUKthathadlefttheEU,considerablenewpowerswouldtransfertoHolyrood.Withthesenewpowerswouldalsocomefinancialresponsibilitiesthatwouldrequire fresh inter-governmental negotiations about redistribution to theScottishexchequerofUKspending fromthe fundsthatwould formerlyhavebeensentbytheUKtotheEUforitemssuchasfisheriesandfarmingsupport.

Scotlandwouldsuddenlyhavetheability toadoptdifferentpolicies fromnotonlytheEUbuttheUKthatmightbeconsideredmoreappropriatetoitslocalcircumstancesincompetenciessuchastheenvironment,aspectsoftradeandindustry,farmingandfisheries.

IhaveyettohearfromanyScottishpolitician,nationalistorunionist,whyhavingthosepoliciesgiventotheScottishParliamentwouldbeanythingbutagoodthing.

FishingandfarmingsupportwouldundoubtedlycontinueUnder devolved arrangements Holyrood could prepare and introduce newregulations andmanagement schemes for fisheries and farming that suitedourtopographyandourenvironmentalneeds–ratherthanapplythelowestcommondenominatoracrossthewholeofEurope.Scotlandwouldbeabletorevive its fishing communities and improve the fishing grounds byintroducing amanagement scheme similar to those enjoyedbyNorway andIceland.Whyshouldour fishingcommunitiescontinue tobeat themercyofvoracious EU fishing fleets that plunder our seas with industrial-scaletrawling?

If there is a concern about the current investment made by the EU infisheries and farming support or in the awardof structural fundsbeing lostfollowing a Brexit it has to be understood that the EU does not have anymoney of its own, it only has the funds that national parliaments give it.Fishingand farmingsupportwouldundoubtedlycontinueat leastatcurrentlevelsas itwouldbepoliticallydamaging foranypartyofgovernment todootherwise. Indeed a Scottish government could consider improving certaingrants – and one thingwould be clear – the responsibility formanagementanddeliveryofsupportwouldbeginandendwithHolyroodpoliticians.There

Page 50: Britain's Decision

50

would be no disagreements over who attends EU negotiations and therewould be nopassing the buck on to theEU formismanagement or delay offarmingsupport.Itcouldevenbepaidinadvancemoreregularlyifwanted.

Similarly, the regional financial support that is provided to Scotlandthrough structural and cohesion funds costs the nation far more than isreceivedback.

Research by Open Europe established that in the period 2007-13 in theHighlandsandIslandsa£203millioncontributiontotheEUbroughtin£188million in grants; in the South West £1.1 billion bought £401 million, inEasternScotland£996millionbrought£338millionandintheNorthEastofScotland £256million delivered £89million. A total of £2.53 billion elicitedonly £1.01 billion. In no part of Scotland were the receipts larger than thecontribution. Indeedof37regionsintheUKonlytwowerenetbeneficiarieswith35beingnetcontributors.

Patently, the funding of existing projects could be afforded and thuscontinueafterleavingtheEU,whilemoneycouldstillbesavedforinvestmentinnew infrastructureprojects.Allduringaperiodwhere theEUbudgetwillcontinue to retreat from spending in Scotland as the number of poorermember countries expand and take up a larger share of grants. Anotheroptionwouldbe to reduce the taxes that takemoneyaway fromproductiveeconomicactivitytogothroughtheEUforstructuralandcohesionfunds.

Other reforms could be considered: the Water Framework Directive,designed for the parched earths of Southern European states but appliedequallyinrain-drenchedScotland,couldbeamended,reducingmanufacturerscostsandrevivinglocalindustrieswithoutimpactingontradewiththeEU.

AllofthesechangeswouldbefortheScottishParliamenttodecideandbedemocraticallyaccountabletothepeopleforthosedecisions.

DirectionoftravelfortheEUistowardsgreatercommoncontrolAlternatively, if forwhatever reasonScotlandwere subsequently tobecomeindependent, itwould enjoy all these samebenefits and arguablymore.Butwere an independent Scotland to then apply to the European Union formembership andbe accepted itwouldbe expected that those competenciesrecentlygainedwouldthenrevertbacktothepreviousEUarrangementsfromwhencetheycame.ThelikelihoodoffurtherEUdemandsonScotland,relatedtomembershipof theEurozone, theSchengenTreatyandamoreexpensivemembershippaymentcannotbediscounted.

With the direction of travel for the EU being towards greater commoncontrol of fiscal management, police and armed forces command, foreignrelationsandwelfarepoliciesScotlandwouldhaveleftonedevolvingunion–wherepowersarebeinggained–only toenter intoaneven lessdemocraticandunaccountable centralisingunionwhere itwouldhave little clout. If the

Page 51: Britain's Decision

51

UKcanlose72outof72votesthatithascontestedattheEuropeanCounciltopreventevercloserunionthenwhatwouldScotland’schancesbe?

WhetheraspartoftheUKorasasovereignindependentnation,Scotlandwould gain in its democratic responsibility and accountability from leavingtheEU.

It is said that there is great risk in leaving the EU, that Scotland’s tradewiththeEUsupportsnearly350,000jobs–buttheScottishParliament’sowninformation centre (SPICE) studied the evidence and established the figurewascloserto81,000jobsdirectlyrelatedandafurther69,000jobsindirectlyassociated.Thesearestilllargenumbersbuttheydonottakeaccountoftwoconsiderations, the first is thecost toexistingScottishandBritish jobs frombeingamemberoftheEU,andthesecondisthatnoaccountistakenofnewjobsthatcanbegeneratedbynewtrade.

EstablishFreeTradeAgreementswithcountriesaroundtheworldIn the scaremongering that is presentedover jobs and economic activity noallowance ismade for the damage to business from higher energy costs onindustrial processes (such as steel production) or EU rules that can limiteconomicactivity.NoconsiderationisgiventohowafinancialtransactiontaxwouldnotjusthittheCitybutimpactfinancialservicesinAberdeen,Dundee,EdinburghandGlasgow.

Estimates of the regulatory burden placed on all British businesses –whether they export or not – by the UK Treasury and economists such asprofessorsTimCongdonandPatrickMinfordhaveshownadragonGDPinarange between 4%-12% which translates into jobs not being created andeconomicprosperitybeingheldbackinScotlandaswellastherestoftheUK.

Likewise,opportunities fornew jobsare ignored.For instance India, likemuchofAsia,isalucrativemarketforScotchWhisky,despitethehightariffof150% that is placed on the import of blends and single malts. The EUnegotiationswithIndiatoestablishafreetradeagreementthatcouldreducethatandothertariffshasbeenindeadlockfornearlysevenyearsandshowsno sign of progressing. Were the UK to leave the EU it would have everyincentive to establish Free Trade Agreements with countries around theworld,not least theemergingmarkets like India, and todo soquickly.Withthetariffsonwhiskyandotherproductsreducedthepossibilitytogrowthoseexports would become highly attractive and the opportunities to expandproductionandcreatemorejobsindistilling,bottlingandpackagingcouldberealised. Similar new trade dealswith countries like China and the US, thathave not yet been concluded because the EU insists in turning suchagreements into regulatory processes rather than trade deals would offersimilarpotential.

Page 52: Britain's Decision

52

ForsomeunioniststhereisanotherargumentagainstBrexit,namelythataBritishvote to leave theEUwill result in thebreakupof theUK if Scotlandvotes to remain. The argument goes that such will be the Scottish public’sgrievance about being taken outside the EU that it will demand a secondreferendumonindependenceandthenvoteto leavetheUKsothatScotlandcanrejointheEU.

SupportersofEUmembershippeddlethisscenariofromtheirProjectFearplaybook to discourage unionist EU-sceptics and doubters from voting toleavebecausetheybelievetheywouldnotdareputtheunionofScotlandandEngland at risk. Paradoxically, themore Scots unionists that vote for Brexitthe closer themarginbetween leaveand remainwillbe.Withpollingat thetimeofwritingbreakingthroughthe40%barrierforScottishsupporttoleavethe EU as the arguments are better heard, the likelihood of a secondreferendumreducesasthefacilityforagrievancemeltsaway.

EuropeisnottheEUFinally, Europe is not the EU. Many of the benefits that are alleged to beavailable only through EU membership, such as the Erasmus studentexchangeprogramme,scientificresearchgrantsandeveninterrailtravel,areinfactenjoyedbyothercountriesthatarenotEUmembersandwouldremainopentotheUKandthusScotland.

There isnoneed foraWhitePaperonwhat lifeoutside theEUwill looklike.Thekeyisthatwewillbeabletodecideforourselvesandwehaveyettochoose how we use the benefits of taking control of our destiny. NeitherNorway,SwitzerlandorCanadaareperfectmodels,foronethingtheyarenotas important to the EU trading partners as theUK, but they showwhat theminimumpotentialis.

True solidarity is born of sovereignty and to achieve such positiverelationshipsScotlandshouldbeoutsidetheEU.

Whether it is security, jobs and trade, scienceandeducation, fishingandfarming,energyor theenvironment thegreaterrisk is staying in theEU.Noone canpredictwithany certaintywhat the costs andexistential challengeswill be as the EU lurches from one crisis to another of its own makingcomparedto leavingandbeingableagaintomakedecisionsforourselves inpartnershipwithourneighbours.

BrianMonteithisaformermemberoftheScottishParliament1999-2007,andinternationalpublicrelationsconsultant.HeiscurrentlysecondedbyGlobalBritaintoserveasHeadofPressatLeave.EU

Page 53: Britain's Decision

53

Chapter8WhatarethealternativestoEUMembership?MichaelKeatingUK withdrawal from the European Union would not automatically put theclockback to1973because theworldhas changed since then. InternationaltradeissubjecttoregulationundertheWorldTradeOrganisation(WTO)andregional trading blocks. It would therefore be necessary to decide on thecountry’s participation in the global trading order. There are severalalternatives to UKmembership of the EU but choosing among themwoulddependonwhatonedislikesabout theEUandwhat thereasons for leavingare.

TheEU is a free trade area,withno tariffs on goods. Yet it ismore thanthis.Itisasinglemarket,inwhichthereisfreemovementofgoods,butalsoofservices,capitaland labour.Productstandardsareharmonisedorsubject tomutualrecognition,underwhichifaproductisrecognisedinonestateitcanbemarketed in all the others. Public procurement tendersmust be open tofirms in all member states. There is a common external tariff and the EUnegotiates international trade agreements on behalf of all itsmembers. TheEUhasalsoexpandeditscompetencesintootherareassuchasenvironmentaland labourmarket policy,which expand on and support the singlemarket;these are called ‘flanking policies’. Competition policy, enforced by theEuropean Commission and the European Court of Justice, sustains marketorder.

The EU has also extended its competences into security cooperation,justice and home affairs, research and territorial cohesion. There areprogrammes for cooperation in social policy matters, providing a ‘socialdimension’ alongside the market vision of Europe. Some countries haveadopted the Euro, which entails the loss of control over monetary andexchange rate policy. All except the UK and Ireland are committed to theSchengenareaofpassport-freetravel.

Finally, theEUisapoliticalunion,withcommoninstitutions,whose lawsare binding within member states, thus constraining national sovereignty.Membershave toaccept theacquiscommunautaire, theexistingbodyof lawandpolicies,althoughtheUKhassecuredsomeopt-outsfromnewpolicies.

Opponents of membership object to different aspects of this. Some areconcerned with restoring full sovereignty to the UK. In the modern world,formalsovereigntymaynotbethesameaseffectivesovereignty,meaningtheabilityeffectively torunourownaffairsunconstrained.Someareconcernedwiththeeconomicissues,arguingthattheEUisadecliningblocandthatthe

Page 54: Britain's Decision

54

UK is paying too much for it. Others want to do away with Europeanregulations on business or in social matters like employment and labourmarket regulation; Others again want to limit immigration and the freemovementoflabour.

AlternativestoEUmembershipcanbeseenundertwoheadings.Thefirstis to ‘go it alone’, with no privileged partnership with the EU. The secondseeks a special arrangement to retain the European single market whileeliminatingtheotheraspectsoftheEUandrestoringnationalsovereignty.

GoitAloneSomeadvocatesofgoitalonearguethattheWTOprovidessufficientrulesforworldtrade,preventingunfaircompetitionorprotection.ThiswouldrestoresovereigntyandallowtheUKtocontrolthemovementoflabour.Therewouldbesometariffbarriersand,althoughthesewouldgenerallybelow,theycouldaffect vehicle exports to theEU.Non-tariff barrierswould remain and therewouldbenomutualrecognitionofproductstandards.

Therewouldbeno free trade in services; so financial services providersmight opt to set up subsidiaries in EU countries in order to remain in thesinglemarket.

At present the UK does not negotiate trade deals, within the WTO orbilaterallywithother countriesoutside it; that isdoneby theEU.As anon-membertheUKwouldbeabletorepresentitselfinnegotiationsandpressitsownpriorities but could have lessweight than theEU in facing up to otherglobaleconomicgiants.Inrecentyears,worldtradenegotiationshavestalledafterthebreakdownoftheDoharoundin2008andtheemphasishasmovedtowards regional trading blocs such as the North Atlantic Free TradeAgreement(NAFTA),Mercosur(inSouthAmerica)andtheEUitself.

AFreeTradeAgreementwiththeEUAsanon-member,theUKcouldsignafreetradeagreementwiththeEUandso retain free access to European markets. There would be no commoninstitutionsorpoliciesandtheUKwouldbefreetomakeitsownlawsinmostfields. Free trade agreements, however, do not usually include free trade inagricultureandservices(aparticularconcernfortheUK)orfreemovementoflabour.Non-tariffbarrierstotradewouldremain.EUcountrieswouldhaveastrong incentive to sign a free trade agreement with the UK, as it is animportantexportmarket,buttheywouldnotwanttheUKtounderminetheircompetitiveness.

So it is likely that they would insist on the social and environmentalregulations that currently exist. If the UKwanted to keep full access to thesingle market (which has been a priority for successive governments), itwould have to make a deeper arrangement of the kind provided by theEuropeanEconomicAreaorthedealwithSwitzerland.

Page 55: Britain's Decision

55

TheEEAorNorwegianoptionThe European Economic Area (EEA) is based on the European Free TradeArea (EFTA), founded by the UK in 1960 as an alternative to the EuropeanEconomicCommunity(EEC,nowtheEU).Withintwoyears,theUKitselfhaddecidedtojointheEECandwaseventuallyfollowedbyallEFTAstatesexceptNorway,Iceland,SwitzerlandandLichtenstein.TheEEAwassetupin1994,tolinkNorway, Iceland,LichtensteinandtheEU(Switzerlandvotedagainst). Itis a free trade area but excludes external relations, agriculture, fisheries,transport,generalbudgetcontributions,regionalpolicyandmonetarypolicy.ItdoesprovideforfreemovementoflabouronthesametermsastheEU.

NorwayistheprincipalEFTA/EEAcountry,havingtwicevotedagainstEUmembership.Norway’sagreementwiththeEEAdoesnotallowforEUlawtobedirectlyapplicable, incontrast to thesituation inEUmemberstates.Thisformal sovereignty is, however, constrained in practice. EEA countries onaccession have to accept thewhole body of relevant EU law, accounting formuchoftheacquiscommunautaire.Technically,theyarenotobligedtoacceptfuture EU laws but the scope for opting out is limited and they then riskexclusion from thewhole relevant field. There is provision for consultationwithEEAbeforeEUlawsareadopted,thereissomeparticipationinworkinggroupsandthereisanEEAJointCommittee.

Non-EUstates,howeverhavenovoteontheadoptionofEUlaws.AnEFTASurveillance Authority polices EEA rules and the arrangement is updatedannuallytotakeaccountofnewEUlaws.ThereisanEFTACourtbutittendsto followthedecisionsof theEuropeanCourtof Justice (ECJ).EUregulatoryagenciesinterprettherulesandapplythemacrosstheEEA,whichhascausedproblems and delays in EEA countries, for example in relation to financialservices. It is estimated that some three quarters of EU regulations areapplicabletoNorway.

NorwayhaschosentojointheSchengenfreetravelarea,whichallowedittokeepits freetravelareawiththeotherNordiccountries. ItparticipatesinEuropean foreign and security policy and the Dublin agreements on policeand asylum, again without a say in the making of policy. As part of itsassociationwiththeEUitcontributestoprogrammesforsocialandeconomiccohesionacross theEUbutdoesnotreceive fundingback inreturn.NorwayalsohasasetofbilateralagreementswiththeEU.

TheEEA optionwould thus restore formal sovereignty to theUK, but inpractice it would have to follow EU rules without having a vote on theiradoption.ItisinanycasenotclearthattheUKwouldbeallowedtojoinEFTAandtherebygetintotheEEA.InnegotiationswiththeEU,EFTAhastospeakwithasinglevoiceand,atpresent,Norwayisthedominantmember.TheUK,however,wouldbemanytimeslargerthantheotherthreetogetherandcouldoverwhelm them.UKmembership of EFTA/EEA could also causeproblems

Page 56: Britain's Decision

56

for theEU, as theUKwouldbe amore significantplayer. It could also set aprecedent forotherEUmemberstatesseekinga looserrelationshipwithoutall the obligation of membership. Membership of EEA would require theagreementofallEEAmemberstates,includingtheremaining27EUmembers.

TheSwissoptionSwitzerland decided, by referendum, not to join the EEA but has a bilateralrelationship giving it access to EU markets. Altogether, 120 treaties weresigned in2000and2004but furtheragreementshavenot followedbecausetheEUseesthemcumbersomeandtime-consumingandprefersover-archingarrangementsliketheEEA.

The agreements include free trade in goods but not in services oragricultureandare lessextensivethantheEEAon ‘flankingpolicies’suchassocial provisions, environmental and consumer and employment matters.There are no requirements for a financial contribution to cohesion, butSwitzerland doesmake payments to the newmember states of eastern andcentralEurope.

The Swiss arrangement lacks the common structures of EEA andconsultationonthedevelopmentofEUpoliciesislessintense.Therearejointcommitteesbuttheir functionsaremore limitedthaninthecaseoftheEEA.The agreements apply only to existing EU policies so that, unlike Norway,Switzerland is not bound to future EU decisions. The various Swissagreementsarelinkedsothat,ifonesiderenegesononeagreement,theotherside can suspend others. Switzerland, unlike Norway, does not have totransposeEUlawsbutdoeshavetohaveitsownlegislationtothesameeffect;the easiest way often just to transpose EU law anyway. Switzerland is notformally bound by decisions of the European Court of Justice (ECJ) but inpractice,itsJointCommitteewiththeEUincorporatesECJrulings.

LikeNorway, Switzerland has to accept freemovement of labour and toadopt policies on labour regulation such as the Working Time Directive. Areferendum in 2014 narrowly decided to restrict free movement, whichtriggered a crisis as the EU refused its request to give legal effect to thereferendum.TheimmediateconsequencewasSwitzerland’ssuspensionfromtheEUresearchprogramme(Horizon2020).Switzerlandwas laterpartiallyre-admitted,buttheissueremainsunresolved.

BalancingtheoptionsIt is difficult toquantify the economic loss or gainof the variousoptions asthatcoulddependonthedetails,onfuturedevelopmentsinworldtradeandondecisionsthatUKgovernmentsmighttakeinthefuture.Concernhasbeenexpressed that any outcome that leaves the UK out of the single Europeanmarket would harm trade and investment. Others have argued that, freedfromapreferentialrelationshipwithEurope,theUKcouldmoresuccessfully

Page 57: Britain's Decision

57

compete in global markets. Some have argued that, free of the EU, the UKcould pursue amarket-based strategy of competition founded on low taxesandlessregulation,butthatisessentiallyapoliticalchoice.

TheNorway/EEAandSwissoptionswouldrestoreformalUKsovereigntybut leave it subject to European decisions. It would not be subject to thecommonagricultureor fisheriespoliciesbutwouldbeobligedtoaccept freemovementoflabour.TheEEAwouldprovideforfreetradeinservices,whiletheSwissoptionwouldnot.

The ‘Go it Alone’ options would restore more of UK sovereignty but itwouldloseaccesstothesingleEuropeanmarketandwouldhavetonegotiateinternationaltradeagreementsonitsown.

NoneoftheoptionswouldleavetheUKasacompletelyfreeactor,sinceitwill always be subject to international trading rules of one sort or another.Thatisaninevitablefactaboutthemodern,interdependentworld.

MichaelKeatingisProfessorofPolitics,UniversityofAberdeenandDirectoroftheESRCCentreonConstitutionalChange.

Page 58: Britain's Decision

58

Section3

HowEuropeaffectsus:whatRemainmeans,whatLeavemeans

Page 59: Britain's Decision

59

Chapter9Legislation:whomakesourlaws–Brussels,WestminsterorHolyrood?

TobiasLockArgumentsaroundsovereigntyareattheheartofthedebateonwhethertheUKshould leavetheEU.Thoseadvocatinga ‘Leave’voteon23JunecontendthatmanylawsapplicableinBritainarenotmadebydirectlyelectedandfullyaccountableMPsandMSPs,butbyunelectedandunaccountablebureaucratsinBrussels. Leaving theEUwould in their eyes enableBritons to take backcontroloftheirowndestiny.Bycontrast,thosearguingtostayintheEU,pointout that Britain has not lost sovereignty, but instead shares it with otherMember States. They also highlight the necessity to have some commonregulation inacommonmarketandhighlight theroleplayedbythedirectlyelectedEuropeanParliamentandbyaccountablenationalministersvotingonlawsintheCounciloftheEU.

So,whomakesour laws–Brussels,WestminsterorHolyrood?Theshortansweristhattheyalldo.Inwhatprecisefieldsandtowhatextentdependsuponthecompetencethateachentity–Scotland,theUKandtheEU–has.

ParliamentarysovereigntyasastartingpointIt isbest tostartwith theparliamentatWestminster,which issovereign. InthewordsofthefamousVictorianconstitutionallawyerA.V.Diceythismeansthat Parliament has ‘the right to make or unmake any law whatever’. Thismeans that in theory Westminster can legislate on any matter and inwhichever way it pleases. However, Parliament decided to limit its ownpowers in twoways: first, by passing the European Communities Act 1972and thus allowing for EU law to be applicable in the United Kingdom; andsecond,bydevolvingcertainpowerstoScotland,Wales,andNorthernIreland.

Parliamentary sovereigntymeans thatParliament can take thesepowersbackwheneveritsochooses.However,theremaybealegalandpoliticalpricetopay:repealingtheEuropeanCommunitiesAct1972wouldbeinbreachofthe UK’s obligations under the EU Treaties (as long as the UK remains amemberof theEU);andrepealingdevolution legislationmightbepoliticallyextremely unpopular in the devolved parts of the UK. It might well lead torenewedcallsforindependence,particularlyinScotland.

Whodoeswhat?The EU is governed by the principle of ‘conferral’. This means that it canlegislate only on those questions that the Member States gave it power tolegislate on. The EU’s powers are therefore based on an exhaustive list of

Page 60: Britain's Decision

60

competences. Some of these are exclusive, which means that the MemberStates are prevented from legislating on a specific point. Examples are therules on customs tariffs; the common commercial policy, i.e. tradewith theoutside world; and competition law. Most EU competences, however, areshared with the Member States. This means that the Member States maylegislateas longas theEUhasnot legislated.Assoonas(andforas longas)Union legislationhas come into existence, theMember States canno longerlegislate.

FortheEUtobeallowedtolegislatebasedonasharedcompetence,theEUmust comply with the principle of ‘subsidiarity’. It needs to show that theobjectives of the legislation cannot be achieved by the Member Statesindividually;andthattheycanbebetterachievedbywayofEUlegislation.Anexample would be rules on product standards: for products to be tradedfreely in the single market, it is often necessary that there is a commonproduct standard.Otherwise theremight be differing rules in eachMemberState. This shows that 28pieces ofMember State legislation cannot achievetheaimofcreatingasinglemarket;andthatonepieceofEUlegislationcandothis better. The vast majority of EU legislation is based on sharedcompetences; examples include environmental law; the internal market;agricultureandfisheries;consumerprotection;andenergy.

Under theEU’sordinary legislativeprocedure,EU legislation isproposedbytheEuropeanCommissionandthenvotedonbytheEuropeanParliamentand theCouncilof theEuropeanUnion.TheEuropeanParliament isdirectlyelected by the citizens of the EUMember States. Each Member State has aspecifiednumber ofMEPs,whichproportionately decreaseswith aMemberState’ssize.

TheUKhas73MEPs,sixofwhomrepresentScotland.TheCouncilof theEUcomprisesaministerfromeachMemberState;thevotesintheCouncilareweighted to take account of the differences in population between theMember States. The Council usually adopts legislation with a qualifiedmajority.ThismeansthataMemberStatecanbeoutvotedandlegislationcanbe adopted against its will. However, in some cases the Council must voteunanimously(e.g.whenmakinganti-discriminationlaw);andsometimestheconsent of theEuropeanParliament is not needed, but it is sufficient if it isconsulted (e.g. when laying down the rules on EU citizens’ right to vote inmunicipalelections).

ThepowersofHolyroodaredefinedbytheScotlandAct1998,whichhasdevolvedcertainpowerstoScotland.TheScottishParliamentmaylegislateinanyareathathasnotbeen ‘reserved’byWestminster. Importantpowers forthe Scottish Parliament include Scots law (criminal and civil, but also courtprocedures); health; and education.Westminster can, in theory, legislate intheseareasaswell,butthisisnotnormallydone.

Page 61: Britain's Decision

61

WhatshapeandeffectdoesEUlawhave?EUlawappearsindifferentguises.TherearetheEUTreaties(e.g.theLisbonTreaty),whichhavebeenagreedby theMemberStatesandratifiedby theirparliaments.TheycontainsomeofthebasicrulesoftheEU,suchasrulesonthefreemovementofgoods,services,people,andcapital.Individualscanrelyon these rules directly, e.g. a company based in Edinburgh can provideservicesinSpainonthatverybasis,andviceversa.

Then there is EU legislation, which can take two different forms: first,regulations,whicharedirectlyapplicable.Theireffectisthereforecomparabletothatofnationallaw.Forinstancetheregulationonairpassengerrightscanbe directly relied upon by individuals to claim compensation if a flight hasbeen cancelled without good reason. Second, there are directives. EUdirectives are not directly applicable, but must be implemented by theMemberStates throughnational legislation. In theUK,directives aremostlyimplemented by way of secondary legislation, i.e. so-called statutoryinstruments made by government ministers and not parliament. Directivesneedimplementationbecausetheytypicallyspellouttheaimofwhatneedstobe achieved, but leave the question onhow this is achieved to theMemberState.ThisallowsMemberStatestoupdateandadaptexistinglegislationandthusintegrateEUlawintotheirlegalsystem.Forinstance,theWorkingTimeDirective was implemented into UK law by way of the Working TimeRegulations.OtherDirectiveshavebeenincorporatedintoActsofParliament.An example are the EU’s anti-discrimination Directives that have beenincorporatedintotheEqualityAct2010.

InhowfardoesEUlawconstrainWestminsterandHolyrood?EU law takesprimacyover conflictingnational law.Thismeans thatneitherWestminster nor Holyrood are allowed to legislate contrary to EuropeanUnionlaw.ForHolyroodthisisexpresslylaiddownintheScotlandAct,whichstipulates that anActof theScottishParliament isultravires (and thereforenot law) if it isnotcompliantwithEU law.ForWestminster, it follows fromthe case law of the European Court of Justice and of theUK’s highest court(formerly the House of Lords; now the Supreme Court) that so long as theEuropean Communities Act 1972 is in force, Acts of Parliament must notcontradict EU law. If they do, they are deemed inapplicable in so far as thecontradictiongoes.

Itfollowsfromthis,thatbothHolyroodandWestminsterarebestadvisednottolegislateinawaythatiscontrarytoEUlaw.Inthissense,theinfluenceofEUlawgoesfurtherthanthedivisionofcompetenceswouldsuggest.Evenwhere Westminster or Holyrood have legislative competence, thatcompetencemust be exercisedwithin certain limits set (mainly) by the EUTreaties. For instance,Holyroodwouldnot be allowed topass legislation inthe education sector that discriminates against EU nationals. As a

Page 62: Britain's Decision

62

consequence, people from other EU Member States studying at Scottishuniversities cannot be chargedhigheruniversity fees than Scottish studentsasthiswoulddiscriminateagainstthemonthebasisoftheirnationality.Thiswould be clearly prohibited by EU law. Another example would beWestminster legislating on stricter standards for animal welfare thanrequiredbyEUlegislation.Stricterstandardsareallowed,buttheymustnotbe used to preventmeat thatwas produced in accordancewith (lower) EUstandards from being imported into the UK. If Westminster legislationprevented such imports, itwould contravene EU law andwould have to bedis-appliedasfarasproducersfromoutsidetheUKareconcerned.Itcouldbeapplied,however,toBritishproducers.

WhatproportionofourlawsaremadeinBrussels?Having established that some of our laws are made in Brussels, some inWestminster, and some in Holyrood, an important question remains: howmuch of our law ismade by the EU? It has proven difficult to put an exactnumber on this. The (politically independent) House of Commons Librarysuggeststhatintheperiodfrom1997to20096.8%ofactsofParliamentand14.1% of statutory instruments had a role in implementing EU law. Thesenumbersdonotpresent a completepicture, however.On theone side, theysay very little about the extent to which these pieces of legislation aredetermined by EU law: for instance, an Act of Parliamentmight be used toimplementanEUdirective,butitmightadditionallydealwithalargenumberofissuesthathavenothingtodowithEUlaw;orastatutoryinstrumentmightdonothingbut‘copyandpaste’anobligationunderEUlawintoUKlaw.SotheinfluenceofEUlawonBritishlawmightbelessthanthenumberssuggest.

On the other side, however, these numbers do not take into accountdirectly applicable EU law at all. There are thousands of EU regulations inforceandtheEUTreatiesthemselvescreatesomedirectlyeffectivelaw.Atthesametime,notallEUregulationsinforceaffecttheUK,e.g.EUrulesonolivefarmingarenotrelevanthere.Moreover,thesenumberssaynothingabouttheextenttowhichthelegislatorsinWestminsterandHolyroodareconstrainedbyEUlaw.

Inaddition,while these figuresmaygiveusan ideaof thequantityofEUlawsinplace,theysayverylittleaboutthequalitativeimpacttheserulesmayhave on sovereignty. Many of them are purely administrative or technicalrules, e.g. on the exact conditions under which farming subsidies are paid.Thisconsiderationstronglysuggeststhatnotalllawsareofequalimportance.Arguably criminal lawor tax lawaremore important topeople’s daily livesthanrulesconcerningtheinteroperabilityofrailsystems.IftheUKwerenotamember of the EU, such rules would most likely be made by WhitehallministriesortheScottishgovernmentinsteadofBrussels.

Page 63: Britain's Decision

63

Assessment:qualityismoreimportantthanquantityHence it is difficult to saywithprecision towhat extent theUKhashandedsovereignty over to the EU. One indication of the importance of legislationmightbepeople’sresponsestowhattheyconsider‘themostimportantissues’facingtheUK.InFebruary2016–thetimeofwritingofthiscontribution–thetop ten according to an Ipsos/MORI poll were immigration, healthcare, theeconomy, Europe, housing, education, unemployment, defence/foreignaffairs/terrorism, inequality, and crime (in this order). Apart fromimmigration – where European law makes it almost impossible to deny aworker fromanotherEUMemberState to takeupa job in theUK–and theobvious ‘Europe’, noneof these issues aredirectly related toEuropean law-making.

The EU has very little or no legislative competence in the fields ofhealthcare, economic policy, housing, education, unemployment, defence orforeign affairs, and crime. Admittedly, EU law may constrain national law-making in these fields, but does not replace it. Of course, EU law may berelevant indirectly. For instance, the EU has powers to pass anti-discrimination legislation, which might help to alleviate inequality. On theother hand, proponents of the campaign to leave the EU would argue forinstance that high levels of immigration lead to housing shortages and arethuscloselyconnected.TheymightalsoarguethatEUrulesnegativelyaffectthe economy.But lookingat thequality rather than thequantityofEU lawsand how they affect day-to-day life in Britain, it is perhaps fair to concludethatlawsmadeinBrusselshavesomeimpactintheUK,butthattheUK(andScotland)havebynomeans completely surrenderedall law-makingpowerstotheEU.

TobiasLockisLecturerinEULawandCo-DirectoroftheEuropaInstituteattheUniversityofEdinburgh.

Page 64: Britain's Decision

64

Chapter10

HumanRights:wouldourrightsbebetterprotectedinoroutofEurope?AileenMcHarg

TounderstandtheimplicationsofBrexitforfundamentalrightsprotection,itis important to distinguish between two legal Europes. The primary humanrightsregimeinEuropeistheEuropeanConventiononHumanRights(ECHR)–atreatydrawnupbytheCouncilofEurope,whichisanolderorganisationthan the EU with a much wider membership. The UK ratified the ECHR in1951, and since 1966, UK citizens have been able to take cases allegingbreaches of Convention rights to the European Court of Human Rights(ECtHR)inStrasbourg.In1998,theECHRwasincorporatedintotheUK’slegalsystemsbytheHumanRightsAct(HRA)andthedevolutionstatutes,therebyenablingConventionrightstobeenforcedinUKcourtsaswell.

There is an unfortunate tendency in the media and political debates toconflatetheECHRandtheEU.Forinstance,theVote ‘Leave’campaignonitswebsite claims that “EU judges have … overruled UK laws on issues like …whetherprisonersshouldbeallowedtovote.”Itwas,however,theECtHR,nottheEuropeanCourtofJustice(ECJ)whichruled,in2005,thattheUK’sblanketbanonprisonervotingwascontrarytotheConvention–andthebanactuallyremainsinplace.

IftheUKwithdrawsfromtheEU,thiswillnothaveanydirecteffectonourobligations under the ECHR or domestic human rights statutes. People willstillbeabletorelyonConventionrightsbeforetheUKandStrasbourgcourts.Nevertheless, EU membership does have implications for human rightsprotection in theUK.Although it is primarily an economic organisation, theEU does have a human rights dimension, and in recent years, EU law hasbecome increasingly important as a supplementary source of human rightsprotection – in some circumstances providing stronger protection than theECHR.

TheroleoffundamentalrightsinEUlawFundamental rightswere first recognised by the ECJ as forming an integralpart of EU law in the 1970s. The court drew upon Member States’constitutions, and international human rights instruments like the ECHR, toidentifyrightsformingpartofthe‘generalprinciples’ofEUlaw.Theaimwasto reassureMember States – concerned that the supremacy of EU law overnationallawswouldweakenconstitutionalprotectionsforrights–thattheEUwould itself respect rights. Thus, the court gave effect to human rightsstandards when interpreting EU law and when reviewing the validity of

Page 65: Britain's Decision

65

decisions and legislationmade by the EU institutions.However, the generalprinciples are also relevantwhen determining the compatibility ofMemberStateactionswithEUlaw,andareenforceableinthenationalcourtsaswellasthe ECJ. Rights recognised in EU law could therefore be used wheninterpretingnational laws,andtochallengethevalidityofnational lawsandpolicies,whereMemberStateswereimplementing,oractingwithinthescopeof,EUlaw.

In2000, theEUtooka further importantstepto increasethevisibilityofhumanrightsbyadoptingitsownCharterofFundamentalRights.Initially,theCharterwasdeclaratoryonly,butin2009theLisbonTreatygaveitequallegalstatuswith theEUTreaties.Thismeans that, like thegeneralprinciples, theCharter is binding on both EU institutions andMember States when actingwithinthescopeofEUlaw,althoughitdoesnotextendthecompetenceoftheEUtoadoptlegislation.ThecontentoftheCharteroverlapswith,butismuchbroader than, the ECHR, recognising 50 rights in six categories: dignity;freedoms; equality; solidarity; citizens’ rights; and justice. In particular, itincludes various social and economic rights which are not included in theECHR,anditgivesmuchstrongerprotectiontoequalityrights.However,notall rights recognised by the Charter are directly enforceable. Some caninfluencetheinterpretationoflegislation,butcannotbeusedtoinvalidateEUordomesticmeasures,anditisforthecourtstodetermineonacase-by-casebasiswhatlegaleffectparticularCharterprovisionsmayhave.

Respect forhumanrights isalsorecognisedmoregenerallyasoneof theEU’s founding values. Applicant states must therefore demonstrate a highstandardofhumanrightsprotection,whichinpracticemeansthattheymustbesignatoriestotheECHR.Inaddition, thevotingrightsofexistingMemberStates may be suspended in the event of serious and persistent breach ofhuman rights. While there is no explicit requirement on existing MemberStatestoremainpartiestotheECHR,withdrawalfromitcouldraiseconcernsabout their compliance with the founding values. The EU has also its ownFundamentalRightsAgency,establishedin2007,whichprovidesinformationon fundamental rights protection within the EU, and the Lisbon Treatyprovided for the EU itself to become a signatory to the ECHR, in order tofurtherentrenchhumanrightsprotectionsandallowtheEUinstitutionstobechallengedbeforetheECtHR.However,thishasnotyetbeenachieved.

CriticismofEUFundamentalLawThemajorfocusforcriticismofEUfundamentalrightslawintheUKhasbeenthe EU Charter. In fact, the UK, alongwith Poland, negotiated an additionalProtocoltotheLisbonTreatydeclaringthattheCharterdidnotextendjudges’ability to strike down their national laws or administrative decisions forincompatibilitywith fundamental rights,and inparticular that theeconomicandsocialrightscontainedintheCharterwouldnotbelegallyenforceablein

Page 66: Britain's Decision

66

relation to them. At the time, this was described as an “opt-out” from theCharter.However, it isclearthat that itdoesnotpreventtheCharterhavinglegaleffectintheUK.In2011,theECJreliedupontheChartertopreventtheUK returning an Afghan asylum seeker to Greece, where his asylum claimshould have been dealt with under EU law, because failures in the Greekasylumsystemmeantthattherewasariskofhimbeingsubjectedtoinhumananddegradingtreatment.

More recently, the UK courts have struck down provisions in two UKstatutes(theStateImmunityAct1978andtheDataProtectionAct1998)forincompatibilitywithCharterrights. Inbothcases, therightswhichhadbeenbreached were also protected by the ECHR. However, EU law gave theapplicantsmuchstrongerremedies.UndertheHRA,ifacourtfindsthatanActoftheUKParliament is incompatiblewithConventionrights, themost itcandoistoissuea‘declarationofincompatibility’.Thisdoesnotaffectthevalidityof the statute and effectively leaves it up to the UK Parliament to decidewhether to amend the law to bring it into linewith the ECHR. By contrast,becauseEU lawhassupremacyoverdomestic laws, theeffectofabreachoftheCharter is to invalidatetheoffendingstatute.Thecourts,ratherthantheUKParliament,thereforehavethelastwordindecidinghowfarrightsshouldbeprotected.

TheCharterhasbeencriticisedbyConservativepoliticiansonbothsidesoftheBrexitdebate.For instance, the JusticeSecretary,MichaelGove, includedamongsthisreasonsforwishingtoleavetheEUthefactthattheUKissubjectto“anunaccountable EuropeanCourt in Luxembourgwhich is extending itsreach every week, increasingly using the Charter of Fundamental Rightswhich inmanywaysgives theEUmorepowerand reach thaneverbefore.”ThePrimeMinister,DavidCameron,alsoexpressedconcernabouttheuseofthe Charter in his November 2015 Chatham House speech, in which hepromised to “make it explicit to our courts that they cannot use the EUCharter as thebasis for anynew legal challenge citing spuriousnewhumanrightsgrounds.”

Asyet,noproposalshavebeenpublishedto implementthispromise,butinanycase, focuson theCharter is tosomeextentmisdirected. It isalreadyclear that it does not itself create new rights; rather its legal effect derivesfrom the ECJ’s pre-existing commitment to rights protection as part of thegeneral principles of EU law – something which the UK cannot changeunilaterally. Instead, the significance of the Charter has been to raise theprofile of EU fundamental rights law, thereby encouraging litigants to bringcases allegingbreaches of human rights, and judges to bemore assertive infindingsuchbreaches.

TherealobjectionstotheeffectofEUfundamentalrightslawintheUKaretwofold.First,itraisesconcernsaboutthetransferofsovereigntyfromtheUKtotheEU,andaboutlossofdemocraticaccountabilityinthetransferofpower

Page 67: Britain's Decision

67

tomakedecisions about rights frompoliticians to judges.Whereas theHRAwas carefully crafted to strike a balance between increased protection forfundamental rights and preservation of the ultimate sovereignty of the UKParliament in relation to questions about rights, the ability to bring rightsclaimsunderEUlawdisturbsthatconstitutionalequilibrium.EUfundamentalrights law also intensifies concerns about loss of sovereignty because it ismuch more difficult for the UK to influence the development of judicially-protected rights than to influence EU legislation. More generally, theprotection of human rights underlines the political rather than purelyeconomiccharacteroftheEU.AsasourceofrightsenjoyedbyEUcitizens,ithasmoreof thecharacteristicsofasupranationalstate,ratherthanpurelyaforumforinter-governmentalco-operation.

The second objection to EU fundamental rights law is more technical,namely that it confuses the protection of human rights at national level.Different human rights regimes apply depending upon whether issues aregovernedbyEUlaworpurelybydomesticlaw,whichcanleadtoanomalousresults.Furthercomplicationsarisebecause,asalreadynoted,itisnotalwaysclearwhen rights recognised in EU lawwill be legally enforceable, nor is italwayseasytodeterminewhetheranissuefallswithinthescopeofEUlaw.Inaddition, evenwhen the same rights are protected by both EU law and theECHR,theyarenotalwaysinterpretedinthesameway.

SafeguardsforhumanrightsintheUKDefendersofEUfundamentalrightslaw,bycontrast,arguethatitprovidesavaluableadditionalsafeguardforhumanrightsintheUK,andpointoutthatitalsoservesasan importantcheckonabuseofpowerby theEU institutions.Indeed,theECJhasbeenincreasinglywillingtostrikedownEUdecisionsandlegislationonfundamentalrightsgrounds,aswellastoreviewMemberStateactions.Nevertheless,defendersalsoarguethatthecourthasbeenrelativelycautious in its development and application of fundamental rights,particularly inrelationtothesocialandeconomicrightswhichhavebeenofmostconcerntotheUK.

So what would be the implications of Brexit for fundamental rightsprotection in the UK? It would undoubtedly reduce the opportunities forchallenging government decisions and legislation on human rights groundsandtheremediesavailableforrightsbreaches.Thiswouldbelesssignificantinrelationtothedevolvedlegislatures,whicharemoretightlyboundbytheECHR than the UK Parliament. But at both UK and devolved level, it wouldreducetherangeofrightswhichmaybereliedupon, thereby increasingthefreedomof both sets of institutions todetermine for themselveswhich, andhowbest,rightsshouldbeprotected.BrexitcouldalsohaveanindirecteffectonrightsprotectionundertheECHR.Itwouldremoveonepotentialobstacleto withdrawal from the ECHR, and might embolden human rights-sceptics

Page 68: Britain's Decision

68

withintheUKgovernmenttopressaheadwithplanstoreplacetheHRAwithaBritishBillofRights.

Whetherthiswouldleadtobetterorworseprotectionforhumanrightsisa matter of judgment. All human rights regimes necessarily involve valuechoiceswhicharesometimescontroversial.Forinstance,whilepeopleontheRighttendtocriticisetheEUforexcessiveprotectionofsocialrights,thoseonthe Left often argue that it gives too much weight to economic interests.Ultimately the question comes down to who one trusts to make betterdecisionsaboutrightsmostofthetime:EUorUKcourts;judgesorpoliticians?

AileenMcHargisProfessorofPublicLawintheUniversityofStrathclyde.

Page 69: Britain's Decision

69

Chapter11Howwouldourindustriesbeaffected?FinancialServices

OwenKelly

Whyisthisimportant?The UK is unusually good, as a country, at financial services. The industryemploys over2.1millionpeople,many inhigh-value,well-paid jobs. That isover7%oftheUKworkforce,producingnearly12%oftotaleconomicoutput,contributing£66billionintaxesandgeneratingatradesurplusof£67billion.Mostof the jobs intheUKfinancialservices industryareoutsideLondon,sowhiletheCityofLondonis the flagship, it isbynomeansthewholepicture.LargenumbersofpeopleworkinfinancialservicesinEdinburgh,Glasgowandmanyotherplaces.SotheindustryisabigpartoftheUKeconomy,providingmanyservicesthatareessentialtoanymodernsociety.Notonlybanking,forexample,butalsopensions,savingsandinsurance,allofwhicharefeaturesofeverydaylifeformostpeople.

AndtheseservicesareasessentialtotheeconomiesofotherEUcountriesas theyare toours.TheUK isavery largeexporterof financialservicesandtheEU,takenasawhole,isourbiggestsingleexportmarket.ItisreasonabletotakeitasawholebecauseaccesstothemarketisanimportantissueintheBrexitdebateanditiscontrolledatEU,ratherthannational,level.

Thatsinglemarketisunderpinnedbyacommonframeworkforregulation,althoughdifferencesintaxationandlegalsystemsmeanthatthemarketsformost retail financial services are national rather than EU-wide. That is themain reason that people in one EU country do not, as a rule, open bankaccounts or take out insurance with companies based in another.Compensation schemes to protect savings, for example, operate at nationallevel, under an EU framework. But in many important ways, the EU hascreated a single market for financial services, particularly in relation toinvestmentandcommercialfinance.Ithasalsoappliedcommonstandardsofregulation across the EU and this facilitates intra-EU business as well ascreatingan internationalstandardtocompetewithother largetradingblocsliketheUSandChina.

Acentralfeatureofthesinglemarket,whichmayormaynotcontinuefortheUKoutsidetheEU,iswhatareknownas'passportingrights'.Putsimply,theseallowaprovideroffinancialservicestooperatethroughouttheEUfromasinglebase.So,forexample,acompanycanbebasedinScotlandbutsellitsproductsandservicesthroughouttheEU,withoutsettingupoffices ineverycountry.IftheUKnegotiatesanewrelationshipthatretainstheserights,theimpact of leaving the EU could be diminished. The agreement with the

Page 70: Britain's Decision

70

EuropeanEconomicAreameansthatsomenon-EUstateshavetheserights,aspart of the overall package; and Switzerland has secured some of these'passportingrights'bybilateralnegotiation.

WhatspecialrelevancedoestheissuehaveforScotland?Scotland, like the UK, has a large and successful financial services industry.The industry employs about 100,000 people directly, and another 100,000indirectly.Itcontributesabout7%ofScotland'sGDPandisamajorexporter.SothereasonswhytheissuemattersatUKlevelapplyequallyinScotland.

Scotland isparticularlysuccessful inpensions, insuranceand investmentmanagement.Theseservicesare,indifferentways,subjecttothepassportingarrangements outlined above and they could be affected if theUK loses therelevantrights.Itisnoteasytopredictwhattheimpactwouldbeintermsofjobs.SettingupasubsidiaryinanotherEUcountryandservingEUcustomersfrom there might not, in some cases, be too difficult. After all, non-EUcompaniesdoitasamatterofcourse,iftheywanttoservetheEUmarket.Butthebigpurchasersofinvestmentmanagementservices,suchaspensionfundsandthewealthfundsofsovereigncountries,haveagreatmanychoicesastowhere to put their money and a low tolerance of regulatory uncertainty,whichwouldbeinevitablewhilethetermsoftheUK'snewrelationshipwiththeEUarenegotiated.

Scotland, and theUKaswhole, are alsowell-placed to take advantageofthe next big step towards a singlemarket for financial services, the CapitalMarketsUnion.Thisisaplantocreateasinglemarketforcapitalinvestment,so that businesses can attract investment, directly, from savers and otherinvestorsthroughouttheEU.OutsidetheEU,theUKcouldnotbepartofthisunless it negotiates some involvement and it certainly would not shape itsrules.

Whataretheargumentsputforwardby‘Remaincampaigners?The key arguments, relating to financial services, put forward by those infavourofremaininginintheEUare:• it is theonlywayofensuringtheUK’scontinuedparticipation intheEU

singlemarket;• a vote to leave will initiate a period of uncertainty, duration unknown,

abouttheUK’srelationshipwiththeEUandwithothertradingpartners.Customers will take their business elsewhere, if they can, until theuncertaintyisresolved.Nobodycanexpectthemtoputtheirinterestsatrisk while the UK sorts itself out. They may never come back andestablishingtheUKasacompetitivejurisdictionoutsidetheEUwilltaketime;

• the passporting rules allow non-EU companies to sell their servicesthroughouttheEUfromasinglebase.IftheUKisnotamemberoftheEU

Page 71: Britain's Decision

71

anddoesnotnegotiateparticipationinthesinglemarketfromoutside(inwhich case it would have to comply with the rules but with no say inmaking them), non-EU companieswill not be able to use it as an entrypointtotheEUmarket.Companieswhodosoalready(andtherearequitea few) will move elsewhere; and no new ones will arrive in the UK infuture;

• businessesintheEUwouldfinditmorecostlyandcomplicatedtosecurefunding and other services if London becomes less accessible and thesamewouldapply forUKbusinesses ifbarriers to the singlemarket forcorporatefinancialservicesareintroduced;

• the UK financial services industry benefits disproportionately from thetradedealsnegotiatedbytheEUasit islargerthanthatofanyotherEUmember state. Without EU clout, the UK could not get the samepreferentialterms.TheUShasalreadysaidasmuch;

• a vote to leave the EUwill create financial instability and diminish thevalue of sterling.While some providers of financial services, like hedgefundsandinvestmentbanks,canmakemoneyfromsuchsituations,itwillbebadforsavers,mortgageholdersandusersofotherfinancialservices.

Whataretheargumentsputforwardby‘Leave’campaigners?Therearerelatively fewargumentsspecific to financialservicesput forwardbythoseinfavourofBrexit,whotendtorestonargumentsofprincipleabouttrade in general. However, the key arguments put forward at the time ofwritingare:• theUKcanbecomemoreinternationallycompetitiveoutsidetheEUand

couldthereforetrademorewithcountrieslikeChinaandIndia.ThiscouldbecoupledwithabilateralagreementwiththeEUinordertoensurethatfinancialservicesintheUKcanaccessthesinglemarket;

• a significant amount of financial services regulation originates from theEUwhichhasadisproportionateeffecton theUK,whichhas the largestfinancialservicesindustryintheEU;

• regulatory diversity is good. Competition between jurisdictions leads tobetteroutcomesforeconomiesandcustomers.Sorevertingtoapositionwhere the UK is an independent, stand-alone jurisdiction, gives morechoicetointernationalinvestors;

• the UK could cut better trade deals on its own. It would have anindependentvoiceattheWorldTradeOrganisation,forexample;

• theEUisshrinkingasaproportionoftheglobaleconomyandgrowthinfinancial services will come from Asia and other places in the comingyears.LeavingtheEUwillallowtheUKtoofferservicestocustomersinthose places without the constraints of EU regulation on operationalmatters;

Page 72: Britain's Decision

72

• theskillsandcapacitiesoftheUKinfinancialserviceswouldstillattractbusiness,whetherintheEUorout.Moreover,theadvantagesoftimezone(which allows the working day in the UK to overlap with financialmarketsinAsiaandtheUS)andEnglishlaw(thelegalsystemfrequentlyusedinfinancialservices)willbeunaffected.

Whatismyimpartialassessmentofthebalanceofthearguments?The consensuswithin the UK financial services industry is, all the evidenceshows,thatleavingtheEUwillbecostly,disruptiveanddamaging.Butsomewillaccusetheindustryoflookingonlytoitsowninterests,andpointtoothermatters they see asmore important, such as sovereignty or national pride;andotherswillsaytheconsensuswithintheindustryisjustplainwrongandthat the opportunities presented by leaving are greater than the risks. Intrying to reach a balanced view, let us consider these two criticisms of theindustryconsensus,ratherthantakeitatfacevalue.

For all its well-documented failings, the international financial servicesindustry is built on the widely-accepted belief that some sort of truth isdescribableandmeasurablebyreference tonumbersandobjectiveanalysis.Theremaybeanelementof self-interest in someof theviewsexpressedbytheindustryanditsrepresentatives.Butfinancialmarketsarehard-nosedandthosewhoparticipate in themhave tomake judgements based on evidencethatisasobjectiveasitcanbe.Iftheyfailtodothat,andbringtobearinsteadpolitical or metaphysical concepts such as sovereignty or national destiny,theywilllosetheircredibilitywith(equallyhard-nosed)investorsandclients.Sowhile the interestsof the financialservices industryarebynomeans thesame as those of any single country, there are reasons to takewhat it saysseriously.

Thecriticismthattheindustryis justplainwrongishardtojustifyintheshort-termbutmoreplausibleinthelong-term.Itisascertainasanythinginthisdebatethat theUKfinancialservices industrywouldsuffer in theshort-term from the uncertainty thatwould follow a vote to leave the EU and bychanges in its relationshipswith customers in the EU and elsewhere. Somecompanies could make profits from these things, but they would be hedgefunds and other operators on the financial markets in a position to takeadvantageofvolatility,notmainstreamprovidersofservicestonon-financialcustomers. It would be reasonable to expect fewer jobs in the UK financialservicesindustryintheyearsfollowingaBrexit.

Theoutlookbeyond the early years following aBrexit is less certain.Ontheonehand,theCapitalMarketsUnioncouldcomeintobeingandboosttheEUfinancialservicesindustry,coincidingwitharecoveryintheEurozoneandthesethings,together,couldcreateasuccessfulandopenmarketthattheUKsimplyhastobepartof,atwhatevercosttoanoutsidernegotiatingentry(as

Page 73: Britain's Decision

73

it would then be). This would leave the UK having to comply with EUregulationandotherrequirementsbuthavingnosayintheirdrafting.

On the other hand, it is theoretically possible that theUK could create aregulatoryjurisdictionthatwouldbemoreattractivetointernationalfinancialservicesthancompetitors,includinganEUstilllabouringtostabilisetheEuro.Muchwoulddepend, inthatcase,onthekindofarrangementsthatcouldbemade with other large markets for financial services, such as the US andChina.Thereis,however,acontradictionintheargumentthattheUKshouldleavetheEUinordertocreateaseparatejurisdiction,moreattractivetonon-EUcountries,butnonethelesscomplywithEUregulationinordertoremaininthesinglemarket.

All things considered, if onewerevotingpurely in in the interestsof thefinancial services industry and its employees (and few peoplewill be), onewouldvotetoremainintheEUandthen,catharticallyinvigorated,deploytheUK'sunequalledexpertise in financial services in shaping theEUmarket forthebetter.Thatseemstoofferthebestprospectforthecontinuedsuccessoftheindustry.OwenKellyisaformerChiefExecutiveofScottishFinancialEnterprise.

Page 74: Britain's Decision

74

Chapter12Howwouldourindustriesbeaffected?TourismJohnLennon

Tourism is an important industry for Scotlandandavital employer.Touristvisitor expenditure accounted for £9.7 billion in 2014 – £4.7 billion fromovernightvisitorsand£5.0billionbydaytrippers.Economicallythesectorisresponsibleforapproximately5%oftotalScottishGrossDomesticProduct.Itis an industry that creates employment in our cities, rural areas, coasts,highlands and islands. It is vital to the survival of many communitiesaccountingforabout7.7%oftotalemploymentinScotlandorapproximately196,000jobs.

Thechartbelow indicates theoriginsof themainvisitors toScotland forthemostrecentyearofcompletestatistics.

Scotland42%

England36%

Wales3%

NIreland2%

Overseas17%

WheredoScottishtouristscomefrom?

Page 75: Britain's Decision

75

Source:MainOriginsofvisitorstoScotland(2014)

Clearly, the importance of domestic tourism (primarily originating fromEngland and Scotland) is evident in terms of visits and spending. However,overseas visitors,whilst a relatively smaller proportion of the total, tend tostay longerandhavearelativelyhigh levelofexpenditure.Visitors fromtheEUaccountforjustover54%ofvisitsjustunder42%ofexpenditureand(seechartbelow).

ContinuedmembershipoftheEUorexitwillimpactontourism,however,thiswillbeaffectedbyarangeoffactorsandinfluences–notleasttherelativestrength of sterling against the Euro and other major currencies. A strongpoundmakesScotlandlessattractivetovisitorsfromkeymarketssuchastheEU and US. But it alsomakes overseas holidaysmore attractive to Scottishresidents,whoseetheirspendingpowerincreaseasaconsequence.However,exchange rates apart, factors as diverse as safety / security, effectivemarketingandcost/easeofaccessall impacton travelbehaviour.Scotlandhaslongexperiencedatourismbalanceofpaymentsdeficit(i.e.moreScottishresidentswillspendmoneyoverseasthantouristscomingtoScotlandspendhere). Therefore, the impacts of membership or exit merit furtherconsiderationforScotlandasadestinationaswellasforScotsasenthusiasticinternationalholidaypurchasers.

Scotland,£1,170

England,£1,608Wales,£93

NIreland,£106

Overseas,£1,840

Whospendsmost?(£m)

Page 76: Britain's Decision

76

Source:OriginsofInternationalVisitorstoScotland(2014)TourismimpactsofcontinuedEUMembershipEUmembershiphas certainly benefitted ease of travel, both into andout oftheUK.TherelativecostofairtravelparticularlyhasdecreasedsincetheUKentered the EU. The removal of restrictive air service agreements and thedevelopmentofanOpenSkiespolicy in theEUhas increasedcompetition inairrouteshelpingtodrivedownprices.Thisisimportantsincesome87%ofinternationalvisitortraveltoScotlandbyair;astatisticthatcontinuestorise.ThereisnodoubtthatthesingleaviationareahasgivenairlinesthefreedomtoflyacrossEuropeandincreasedestinations,openingScotlandtoagreaternumberofpotentialmarkets.

From a security perspective airlines and other elements of tourismundoubtedlybenefitfromclosercooperationacrossEUboundaries.Similarly,inareassuchascompensationfordelayedflights,Scottishconsumersbenefitfrom EU directives and legislation improving consumers rights tocompensation.Intermsofhealthcare,accesstofreeservicesacrossmuchoftheEUalsobenefitsoutboundtravellersandScottishholidaymakers.Itshouldbe noted however that European Health Insurance scheme giving touristsaccess to state healthcare in participating countrieswas an initiative of the

539

1,718

1,465

441£524

£919

£771

£403

0

200

400

600

800

1000

1200

1400

1600

1800

2000

NAmerica Europe EUonly OtherCountries

Overseasvisitors

Visits(m) Expenditure(£m)

Page 77: Britain's Decision

77

European Economic Area rather than the EU. However some degree ofrenegotiation would be inevitable following a Brexit. EU membership alsoprovidesthosewithsecondorholidayhomesabroadwithlevelsofprotection,althoughownershiprightsandtaxationaredeterminedatnationallevels.

At amacro level the UK (and Scotland) benefits from tariff-less trade insomeareas–not least foodandbeverageswhichconstituteessential touristpurchases.TheselowermaterialcostscanbepassedontotouristsimprovingthevalueofferinacountrywithrelativelyhighlevelsofVAT,whichapplytothemajorityof tourismpurchases(e.g.accommodation, food,retailetc.)andsignificant levels of air passenger duty (APD). Such costs are fundamentalelements inholidaypricingandare increasingly transparent internationally.Indeed, discussions of typical tourist charges are ubiquitous in media andonlinereviewsaboutdestinations.

In the EU, caps on mobile telephone roaming fees (due for completeabolition in June 2017) benefit tourists to Scotland as well as outboundScottish travellers. This cost advantage is important since the EU is thefavoured destination for 76% of UK holidaymakers with the Balearics andSpain remaining the most popular destinations, whilst the EU is the mostsignificant destination for business trips, accounting for some 68% ofbusinesstravel.

AtanenvironmentlevelEUregulationofmanyareasbutnotleast;bathingwater quality and the reduction in sewage pollution around the UK andScottish coast has been a positive benefit enjoyed by residents and visitorsalike.

TourismImpactsofendingEUMembershipTheuncertaintysurroundingUKexitandthearrangementsinrespectofpostexit transition would almost certainly impact on the value of Sterling. Aweakerpoundhas adirect impact on spendingpoweroverseas,making thecostofvisitingorholidayingabroadintheEUandelsewheremoreexpensiveforScots.

International travel to Scotland is dominated by air, 87% access thecountry in this way thus cost and frequencies are important factors inmaintainingabuoyant inboundvisitormarket.TheUKbeganpromoting the‘openskies’argumentbeforemanyothermembersoftheEUandoriginalairaccess agreements were signed with Ireland and Holland in the 1980s.However, if Scotland were no longer a member of the EU new serviceagreements would have to be negotiated for a range of destinations andvisitor-generatingmarketswithintheEU.

Competitionwouldreduceandairfarescouldriseagain,makingScotlanda more expensive destination to access. On the positive side, this maygenerate increased domestic (Scottish and English) demand for ScottishholidaysasEUdestinationsbecome lesseasyandmoreexpensive toaccess.

Page 78: Britain's Decision

78

Theprospectof leaving theEUhasgeneratedsignificantresistanceamongstthe air travel sector. The Chief Executives of Ryanair, Easyjet, Quantas andHeathrowandStanstedairportshavealldrawnattentiontotherelativecostsofaUKexit.Similarly,touroperatorThomasCook, identifiedarangeofcostand related advantages of continued EU membership. The continuedavailabilityofaffordableairtravelwoulddependupontheextenttowhichapost-EUUKcouldreplicateitsexitingaccesstotheEUsingleaviationmarket.Whilstthisispossible,thedelayrequiredbyrenegotiation(withupto27EUmember states) could be considerable. Of course, the UK would seek tomaintainopenskies,butwithsuchaccess toEU treatiescomeEUrules thathavetobeobeyedandpaymentsthathavetobemade.

Scotlandpost-EUwould losemanyof the travelbenefitsenshrined inEUlaw and directives. These would include compensation for delayed orcancelled flights and entitlement to care and assistance such as subsistenceandaccommodationintheeventofseveredelays.Currently,ScottishcitizensenjoythebenefitsoffreeorreducedcosttreatmentinotherEUcountriesasaresult of European Health Insurance. In the event of an EU exit suchagreementswouldhave tobe renegotiated and there isno guaranteeof thesamecooperationacrossboundaries.Scottishholidaymakerswillbenefitfromtheabolitionofmobiletelephoneroamingchargesfromnextyear,howeverinthe advent of an EU exit it is likely the mobile operators would seek toincreasecharges.

ThearrangementsforfinancialprotectionofpackageholidaysinrespectofthecollapseofatouroperatororholidaycompanypredateEUmembership;butconsumerprotectionhasbeenenhancedwithpressurefromBrussels.TheUKcommitment toprotection isunlikely tobe ignored,however companieswillpossiblyfinditeasiertolobbygovernmentforarulesrelaxation.Indeed,Scottishholidaymakersinapost-EUenvironmentwouldnotbenefitfromthePackage Travel Directive which is due to be implemented in 2018. Thatprovides substantial rights in respect of the majority of travel purchases,notably in respect of increasingly popular ‘DIY Holiday’ products. ScottishownersofholidayhomeswithintheEUcouldbesubjecttohostnationallevelrenegotiationofassetprotectionandtaxation(whichwouldundoubtedlybedifferentasnonEUnationals)thuschangeofsomesortwouldbeprobable.

VacationemploymentandrightstoworkintheEUfollowingBrexit,wouldbemoredifficultforScotsasnewregulationswouldhavetobecreatedanditislikelythatnewworkoptionswillbemorerestrictiveandbureaucratic.Forsome,thiswouldbecompensatedbythemuchdiscussedrevivalofdutyfreebuyingwhichwas lost in1999.Thereintroductionofreducedtariff tobacco,wineandspiritsisseenbysomeasatangiblebenefitofBrexit.However,wewould lose the legal right to purchase virtually unlimited amounts of dutypaidgoodsfromEUcountriesonreturntotheUK/Scotland.

Page 79: Britain's Decision

79

In terms of the environment and specifically bathing water purity andsewage control (an area that has seen significant improvement during theperiodofEUmembershiptodate),itwouldbeinterestingtoseeiftheUKorScottishgovernmentwouldhave thedetermination tokeep thepressureonwaterandothercompaniestomaintainstandards.

Theperiodof transition following exit from theEUwould impact on thevalue of sterling and potentially offer in-bound tourists’ better value formoney as sterlingwould potentially decline against othermajor currencies.This could partially dilute other tax burdens on tourists such as; VAT onaccommodation,food,beverageetc.andairpassengerduty(APD).However,itis accepted that reduction in APD is an intention of the current ScottishGovernment. Conversely, the loss of relatively cheaper food and beverageimportsfromtheEUtotheUKwouldbepassedontotouristsintheformoffood and drink costs. Thus the relative price of a Scottish holiday wouldappearlesscompetitiveinanalreadycrowdeddestinationmarketplace.

Uncertainty, which is not good for exchange rates, is also not good forbusinessandbusiness locations. IfBrexitcatalysedarelocationofcorporateheadquartersitisprobablethatbusinessandconferencetraffictotheUK(andScotland)woulddiminish.

The uncertainty following a majority vote for exit from the EU, wouldimpact on the value of sterling and the value of Scottish tourists’ spendingmoneyinoverseasdestinations.Thisbydefaultcouldmake‘staycations’moreattractive for Scots and English visitors. Furthermore, there are some thatargueadistinctstandaloneand identifiably independentUKwouldservetoattract more international visitors. However, the rich heritage andiconography of Scotland is already established and has served to attractvisitorsduringthecurrentperiodofEUmembership.AfurtherclaimmadebythoseintourismfavouringexitisthatwewouldbenefitfromtouristsfromtheCommonwealth(Australia,Canada,NewZealand,IndiaandPakistanarecitedin particular). This has to be seen against the earlier analysis of overseasvisitorstoScotlandandtherelativelylimitedsignificanceofthesenations.Itistenuous to suggest that non-EU status alone would catalyse significantinboundtourismfromsuchnations.ConclusionTourism to Scotland is impacted by a wide range of factors as the nationattempts to build profile and appeal in a highly competitive marketplace.Business and markets dislike uncertainty and tourism is no different. ThetourismgeneratingmarketoftheEUistooimportanttocompromiseandandthepotentialprice impactsofanexit fromtheEUmake it the lessattractiveoption.Scottishoutboundholidaymakerswouldfacecostrisesandtheperiodof transition and renegotiation following potential exit would createuncertainty.Thelossoftheregulatoryframeworksandlegislationimpacting

Page 80: Britain's Decision

80

on a range of products from beachwater to package holidays undoubtedlyprotect our tourism environment and consumers and their loss would besubstantial.JohnLennon,isAssistantVice-PrincipalandDirectoroftheMoffatCentreforTravelandTourismBusinessDevelopment,atGlasgowCaledonianUniversity.

Page 81: Britain's Decision

81

Chapter13HowmightinwardinvestmenttobeaffectedbyBrexit?DavidEiserWhatisinwardinvestment?Inward investment (sometimes called inward Foreign Direct Investment)refers to the overseas operations of amultinational. Inward investment caninclude the establishment of foreign branches and subsidiaries, and theacquisitionofforeignfirms.

Inwardinvestmentisoftenseenasagoodthing.Mostobviously,itcreates(orsometimessafeguards)jobsandraisesincomesintherecipientcountry.Itmay also raise productivity in the recipient country, by introducing newtechnologiesandworkingpractices.But sometimes, inward investmentmayhave more limited benefits. Acquisitions may result in profits beingexpatriatedoverseas.Andtherehaverecentlybeensomehighprofilecasesofinward investing companies which make fairly minimal corporate taxcontributionstothegovernmentsofthecountriesthattheyinvestin.

HowimportantisinwardinvestmenttotheUKandScotland?The UK has consistently been one of the world’s top recipient countries ofinward investment. According to data from both the OECD and EY’s GlobalInvestment Monitor, the UK has been the largest recipient of inwardinvestmentintheEUsincetheestablishmentofthesinglemarketin1993.

In fact, there are a number of different sources of data on inwardinvestment globally, and a number of different ways of measuring inwardinvestment.ButallmajorindependentsourcesconfirmtheUKastheNumberOnedestinationinEuropeforFDIin2014acrossthethreemainmeasuresofsuccess: the number of inward investment projects; the financial value oftheseprojects;andthevalueofaccumulatedstockofinwardinvestment.

Scotlandis themostsuccessfulUKregionoutsideofLondonatattractinginward investment. Between 2005-14, inward investment generated 37,000jobsinScotlandaccordingtoEY’sGlobalInvestmentMonitor;morethaninanyregion outside London. Data provided to us by Scottish DevelopmentInternational (SDI), Scotland’s inward investment agency, indicates thatScotlandreceivedsome208inwardinvestmentprojectsbetweenMarch2014and March 2016. These projects created or safeguarded 17,000 jobs andsecured£10billionofinvestment.

BusinessservicesandITaccountedforalargeproportionoftheseprojectsandjobscreated.Butthemajorityofthecapitalinvestmentwasaccountedforby investments intheenergysector–boththerenewableenergysectorand

Page 82: Britain's Decision

82

oilandgas.Andaround2,600jobswerecreatedinmanufacturingasaresultofinwardinvestment.

TheUShas consistentlybeen the top source country for investment intoScotland,bothintermsofthenumberofprojectsandjobscreated.InrecentyearsNorwayhasalsobeenamajor investor inScotland,particularly in theenergysector.InwardinvestmentfromFrance,GermanyandtheNetherlandshascreatedalmost2,000jobsinScotlandinthepasttwoyears.ScotlandhasalsoattractedinvestmentfromIreland,AustraliaandCanada,butrecentlyhashad little success in attracting investment from emerging markets such asChinaandIndia,whichhaveinvestedheavilyinotherpartsoftheUK.

HowimportantisEUmembershipingeneratinginwardinvestmentfortheUKandforScotland?WhatmakestheUKsosuccessfulinattractinginwardinvestment?Someofitsadvantages have little to do with the EU. That English is the language ofinternationalcommerceisclearlyanadvantage.TheUK’slegalandregulatorysystem makes it relatively easy for foreign investors to own or start-upbusinesses. TheUKhas relativelywell developed capitalmarkets,making iteasier for businesses to raise funding. And perhaps too the UK’s relativelyflexibleemploymentlawisalsoanattractiontoinwardinvestors.

ButtheUK’smembershipoftheEUsinglemarketisanotherbigadvantage.Many firms investing in theUK fromoutside theEUareseekingaEuropeanbase fromwhich todistributeproductswithout thebarriers they facewhenconducting trade from their home markets. Membership of the EU singlemarketeffectivelyexpandsthesizeoftheUKmarket.

SomeevidencefortheimportanceofEUmembershiponlevelsof inwardinvestment to the UK can be drawn from surveys. EY’s 2015 ‘UKattractivenesssurvey‘suggeststhataround72%ofinvestorsconsideraccessto the European singlemarket as important to the UK’s attractiveness as adestination for foreign direct investment. fDi Markets, the Financial Times’databaseofinwardinvestmentprojectssuggeststhataround2,500of11,500inward investment projects to the UK since 2003 specified Europe (or aparticularpartofEurope)asbeingtheend-marketfortheirinvestment.

Thereisanecdotalevidenceaswell.Forexample,theSecretaryGeneralofthe Indian Chambers of Commerce was quoted in the Financial Times assayingthat ‘IndiancompaniesviewedtheUKasagatewaytotheEUmarketandthusBrexit“wouldcreateconsiderableuncertaintyforIndianbusinessesengaged with the UK and would possibly have an adverse impact oninvestmentandmovementofprofessionalstotheUK”’.

ButquantifyingthepreciseeffectofEUmembershiponinwardinvestmentintheUKisdifficult.SomestudieshavefoundevidencethattheestablishmentofacommonmarketintheEUhadattractedinwardinvestmentfromtheUSto the UK that might otherwise have been located in other European

Page 83: Britain's Decision

83

countries. But other studies have found more difficulty in estimating themagnitudeofthis‘EUeffect’oninwardinvestmenttotheUK.

For Scotland specifically, we have no data on the importance of EUmembership in influencing the attraction of inward investment. Of the 208inward investment projects in Scotland between 2014-2016, 47 providedinformation to SDI on their motivations for investing in Scotland. While alargenumberof thesemention the importanceof proximity tomarkets andcustomers generally, none mention Europe or EU membership specifically(workforce skills and domestic market growth potential are also seen asimportantfactorsininfluencingthedecisiontoinvest).

WhatmightbetheeffectsofBrexitoninwardinvestmenttoScotland?TheimpactofBrexitoninwardinvestmenttoScotlandwilldependinpartonwhatsortoftradedealtheUKGovernmentmanagestonegotiatewiththeEU.Many people have argued that Brexit is unlikely to result in the suddenimposition of new tariffs on exports from the UK, and thus Britain’sattractivenessforcompaniestargetingtheEUmarketwillnotbedented.

Thisisprobablytruetoanextent.Inthelongertermhowever,itwouldbein Britain’s (and Scotland’s) interest to push for further reductions in thebarrierstotradewiththeEU,particularlyinservices,whichhasaccountedfora large proportion of inward investment in Scotland in recent years. Butoutside the EU it would clearly be difficult, if not impossible, for the UK topushforwardthesenegotiations.

Brexitmight also diminish the attractiveness of theUK and Scotland forinward investment in other ways too. Inward investing firms rely on anadequate supply of skilled labour. Around 100,000 EU nationals are nowemployed in Scotland, equating to 4% of all those employed. Some sectors,especiallyfoodanddrinkandtourism,areparticularlyreliantonEUmigrantsasasourceof labour. IfBrexitwereto leadtoareducedlaboursupplyfromEUnationals,thismaydiminishtheattractivenessofScotlandasalocationforinwardinvestment,regardlessofthefinaldestinationofanyoutput.

TheargumentmadebysomeBrexit supporters thatBrexitwouldenablethe UK to negotiate more favourable trade terms with non-EU countriesseemsfairlyoptimistic.Suchdealswouldhavetobenegotiatedonacase-by-case basis, and there are few examples of countries making bilateral tradedeals of anything like the scope thatEUmember states share. Furthermore,following Brexit the UK would not inherit the EU’s existing bilateral tradedealswithnon-EUstates,so itwouldhavetostart fromscratch. It thereforeseems unlikely that any such trade reorientationwould stimulate sufficientadditionalinwardinvestmenttocompensateforthatlostasaresultofBrexit.

Mightanyexisting inward investmentprojects inScotlandbeatriskasaresultofBrexit?Oneargument is thatmanufacturingactivitiesarerelativelyeasier to relocate than service activities. Manufacturing is capital intensive,

Page 84: Britain's Decision

84

and machinery can be moved relatively easily across borders. A trainedworkforce inaservice industryhowevermightbemoredifficult to relocate.Thisargumentisundoubtedlytoosimplistic.Butinrecentyears,muchoftheemploymentcreatedby inward investment toScotlandhasbeen inbusinessservices and IT (heavily reliant on a skilled workforce), while most of thecapital investment has been in the renewable energy and offshore energysectors (whereScotland’sgeographicadvantageswillnotbeunderminedbyBrexit).

ConcludingpointsInward investment has been one of Scotland’s economic success stories inrecentyears.ThepotentialeffectofBrexiton levelsof inwardinvestmenttoScotland ishighlyuncertain for at least two reasons.Wedon’t reallyhaveavery clear idea how important Britain’s EU membership is in influencingexisting levelsof inward investment toScotland.Andwedon’tknowexactlywhatsortofdealtheUKGovernmentwouldbeabletonegotiatewiththeEU(onthemovementofgoods,servicesandpeople)followingBrexit.

ButitseemshardtodisputethatEUmembershipisapartofwhatmakesScotlandattractive to inward investment.Brexitwouldalmostcertainly leadto a temporary slowingof inward investment flows to Scotland, as theUK’sposition with the EU (and perhaps Scotland’s position with the UK) arerenegotiated.IftheUKwasabletonegotiatefavourabletradetermswiththeEUthenBrexitmightnothaveamajorimpact.ButoutsidetheEU,itwouldbemuch harder for the UK Government to influence the terms under whichfuturetradenegotiationsaretakenforward.

DavidEiserisResearchFellowinEconomicsattheUniversityofStirling.

Page 85: Britain's Decision

85

Chapter14Howwouldourindustriesbeaffected?Agricultureandfisheries

CaitríonaCarterandAndySmithFarmingandfishingarefrequentlyassociatedwithtimelessimagesofBritain,itsruralidyll,anditsreputedindividualism.Indeed,manyoftheseimagesof‘Britishness’are frequently invokedbythosewantingto leavetheEU.Aswerecountbelow,however,agricultureandfisheriesinScotlandandtheUKarealsomodern industries thathavebeenstructuredbypublicpolicies,notablythoseoftheEU.Indeed,comparisonoftheseindustriesisstimulatingbecausealthoughnearlyallthekeyactorswithinBritishagriculturefavourremainingintheEU,thispositionismuchlessevidentforfisheries.

Agriculture:ACAPthatfitsIn the UK, the Common Agricultural Policy (CAP) is regularly derided byopponentsoftheEUasbeingineffective,expensive,bureaucraticandbadforthe environment. Althoughmany spokespersons from theworld of farmingalsocriticisecertainaspectsofthispolicy,thevastmajorityunderlinethatithasplayedavitalroleinthedevelopmentofBritishagriculture.

Throughoutitshistory,theCAP’saimhasbeentogeneratesufficientfarmproducewithin theEU, but also to ensure that farmers stay on the land forreasons which extend beyond production concerns. This policy initiallyclashedwith thatof theUKbecause, except forduring the twoWorldWars,BritishagriculturehadalwaysbeengovernedbyaliberalismthatencouragedimportsofcheaperfoodstuffsandleftBritishfarmersexposedtothewhimsofworld markets. Fuelled by the Empire and subsequently by theCommonwealth,thisforeignprovisionoffoodpromptedadeclineindomesticproduction.Bycontrast, theCAPand its initialemphasisuponpricesupportmechanismsplayedamajorroleinintensifyingBritishagriculturetosuchanextent that the country is now 62% self-sufficient. Specifically, the UK nowimports £40 billion of foodstuffs (of which 70% from other EU states) andexports£20billion,62%ofwhicharedestinedfortherestoftheEU.Indeed,thisinterdependenceisevengreaterinsomesectorse.g.38%ofBritishlambissoldontheContinent.

Nevertheless, today’sCAP intervenes lessdirectly inagriculturalmarketsthan it once did. Since the early 1990s, price support has been largelyreplaced by annual ‘single farm payments’made to farmers on the basis offarm size, land quality or livestock numbers. Amounting tomore than £2.5billion per annum, these payments continue to structure the British

Page 86: Britain's Decision

86

agricultural industry and, according to most experts, provide it with thestabilitythatareturntoafreemarketapproachwouldnotprovide.

What is lessoften flagged is that theCAP is also, andalwayshasbeen, asocial policy. From this angle it has consistently aided farmers in hill areasand‘marginallands’,andtherebythebeefandsheepindustries.Moreover,ithas subsidised the set-up costs of young farmers, training, research anddiversificationintofarmtourismorfoodprocessing.Inaddition,sincethelate1980s such farming-specific measures have been supplemented by ruraldevelopmentinitiativesthroughouttheUKwhich,fortheperiod2014-20,willbefinancedbytheEUtothetuneof£4.1billion.Inanutshell,contemporaryBritish agriculture is deeplydependentupon theCAPand,moreprofoundlystill, public intervention. Indeed, it is highly unlikely that a UK governmentoutside the EU could support its farming financially any less than the CAPcurrentlydoes.

Ofcourse,thisdoesnotmeanthattheCAPisnotcriticised,andthisfromtwo angles in particular. The first concerns its ‘efficiency’. Critics argue thatEU support to farming comes at the cost of bureaucracy and negativeoutcomes. Form-filling and delays are often ascribed to the EU, and thisdespite UK/Scottish governments being responsible for much of the CAP’simplementation. But, proponents of remaining in the EU argue that tradingfromoutsidetheEUwould inevitablymeanmorebureaucracy,controlsand,above all, the reintroduction of tariffs. Moreover, they add, to continue toexportto‘Europe’,awholeseriesofEUfoodqualityandsafetynormswouldstill have to be respected, and this without British stakeholders having anopportunitytoinfluencethem‘upstream’.

AnevendeepercriticismoftheCAPisthatithaschieflyfinancedlargeandwealthyfarmerswhohave‘gotfatter’onthispublicmoney.Thelatterchargeisoftenalso linkedto thenegativeenvironmentalconsequencesof intensiveagriculture. These were plain for all to see as of the 1980s: ripping out ofhedgerows,deteriorationofsoilquality,threatstofoodsafety(e.g.‘madcow’disease). Supporters of EU agricultural policy counter that since the late1980s, it has increasingly contained a strong environmental protectionelement.

Notwithstanding these two areas of controversy which extend beyondagricultureperse,theCAPasawholehasclearlybecomeaninstitutionalisedpartofScottishandUKindustry.NotonlydokeyrepresentativesoftheUK’sfarming organisations (the National Farmers’ Union of England and Wales(NFU), the NFU of Scotland, the Farmers’ Union of Wales and the UlsterFarmers’Union)unanimouslysupportthe‘Remain’camptoavoiduncertaintyandprotecttheirshort-terminterests,theyclearlybelieveinthelegitimacyofEU scale policieswhose content they have shaped considerably. Aswith somanyBritishstakeholders,thissupportfortheEUhasoftenbeenundercutbysniping criticisms of their ‘Continental’ counterparts. Nevertheless, most

Page 87: Britain's Decision

87

Britishfarmerswouldbereluctanttosuddenlyhavetolivewithoutthemandfend for themselves inapurelyBritishpolity they fearwouldbeevenmorehostiletofarming.

Fisheries:jumpingship?AshasbeenpointedoutbyoneofScotland’smain fishingorganisations, theScottishFishermen’sFederation(SFF),thefishingindustriesinbothScotlandandtheUKareacutelyaffectedbyEUmembership.Thisisbecauseundertherules of the Common Fisheries Policy (CFP), the territorial waters of theMemberStatesaresharedandtreatedas‘European’forfishingpurposes.TheCFP has therefore had overall responsibility for managing all Europeanfisheries,includingaddressingproblemsofcollapsingfishstocks,over-fishing,fishdiscards andmarket organisation. For a long time, theCFPwasheavilycriticised for failingtomeet itsresponsibilities. Indeed, ithasprobablybeenoneofthemostdenouncedEUpolicies,andthisbyarangeofdifferentpublicofficials and stakeholders, including politicians, fishermen, environmentalsocialmovementsandscientistsalike.

However, thiscriticismhasmorerecentlydecreasedas theCFPhasbeenreformed and moved away from a ‘command and control’ top-downmanagementstylebytheEuropeanCommission,towardsmoreparticipatoryregional approaches. In 2004, newRegional Advisory Councils (RACs)werecreated for different sea regions, e.g. the North Sea RAC. These were soonbeing applauded by their members as successful arenas where fishers,scientists, environmental groups and other community-based organisationscouldtacklepressingfisheries’problemstogether.Inparticular,RACscreatednew opportunities for exchange over how to balance ecological goals ofprotectingmarineecosystemsandfishstockswitheconomicandsocialgoalsof protecting the fishing industry. Additionally, new long term conservationplanswere put in place to help recover key stocks – like the Cod RecoveryPlan.Itisnowgenerallyagreed,evenbyopponentsoftheCFP,thatthesenewapproachesarebeginningtoworkasstocksslowlyrecover,alongsidetheUKindustry’sgrossprofits.

This being said, unlike their farming counterparts, the main UK andScottishfishingorganisationshavebeenreticenttoadoptformalpositionsonthe referendum vote. Instead, it has been environmental social movementswho have expressly spoken in favour of remaining in the EU to continuebuildingmomentumtowardsconsolidatingsustainablefisheriesmanagementin all European waters, including those of the UK. The arguments forremainingintheCFParethatmarineissuestranscendbordersandthattheirsuccessful management depends upon international cooperation and clearrules.

Page 88: Britain's Decision

88

Evenifthispolicyhasmanyproblems,itneverthelessprovidesacoherentframework for improving ecosystem management which can and mustcontinue to be worked upon in a direction favourable also to UK fishinginterests. Proponents of ‘Remain’ argue further that the reformed CFPEuropeanMaritimeandFisheriesFundhasabudgetof£190milliontowhichUKbusinessesandlocalcommunitiescanapply,e.g.,toaddvaluetoproducts.Similarly, they point to the vital role of EU markets for the export of UKseafood, in particular high value products such as prawns, lobster or crab.Imposition of new trade barriers following a Brexit would, they argue,seriously disrupt markets at a critical point when stocks and sales arerecovering after years of collective efforts by many in the industry andbeyond.

Bycontrast,thoseinfavourof‘Leave’blametheCFPforfailingtoaddressfundamentalproblemsfacingtheindustry.Fromthisviewpoint, theCFPwillalwaysbeabureaucraticandcentralistpolicythathasbeenpoorlymanagedin thepast and continues tobe so.RACshavenotbeengiven thenecessarypowerstotakekeydecisionsforhandlingamixedfishery.Farbetter,theysay,to set up a genuinely regional system of co-management of UK fisheries,accompanied by UK R&D funding, facilitating the technological and socialinnovation necessary for creating a genuine sustainable industry. A coreargument made by these CFP critics is that Brexit would allow the UK toregainitslostcontroloveritsterritorialwaters,includingitsnorthernfishinggrounds.A reassertionofUKauthorityover thesegrounds through regionalmanagementstructureswould, it isargued,providethebestopportunity fortheUKindustrytogrowandadapt.

Several uncertainties facing the fishing industry’s future in a Brexitscenariohavebeenmentionedbybothproponentsandopponentsalike.EventhoughtheUKmayassumeitsformalresponsibilityformanagingtheseasupto 200 nautical-miles fromUK coasts, it is not at all certain that thiswouldresult in a ban of non-UK vessels from thesewaters as suggested by some.Actually,itisfarmorelikelythatitwouldnot,fortheprosaicreasonthatthefishareunawareofBritishmarineterritorialborders:keystocksfished,suchascod,mackerelandherringarehighlymobilespecies–andconsequentlysoarefishers.AcentralfeatureofUKfishers’practiceistofishbothinsideandoutsideBritishwaters.Approximately20%of landingsbyUKvessels are inports outside the UK. Additionally numerous non-UK vessels have long-standinghistoricrightsofaccessintoBritishwaterswhichwouldhavetoberespected,bothfromalegalpointofview,butalsofromapracticalone.

If the UK government restricts access, it risks a reciprocal response.Findingthemselveslimitedtofishingintheirownwaters–andhencefishingreduced resources –UK fishersmight be encouraged to over-fish immaturestocksormakeargumentsinfavourofhigherquotas.Themismatchbetweenthe scales of fishing behaviour and the scales ofmanagement are therefore

Page 89: Britain's Decision

89

not resolved by a Brexit. On the contrary, as now, negotiation would benecessarytoagreequotasforfishingvesselssharingresources.IfoutsidetheCFP, thiswould likelybebi-lateralor tri-lateralnegotiationbetweentheUK,theEUandothernon-EUcountries,suchasNorway.Thisformofnegotiationhasalreadybeencriticised,evenbyCFPopponents.Theriskisthatquotasareinitiallyagreed,but thatstatesdecideafterwards tosetahigherquota, thusthreateningacollapseofstocksforall.

Inshort,theveryideaofsustainablefisheriesandecosystemmanagementofsharedmarineresourcesreliesoninternationalcooperationbetweenstates–andthiswouldnotchangeweretheUKtoexittheEUorindeedtheCFP.

ConclusionCurrent problems and challenges facing both the farming and fishingindustriesintheUKwillnotautomaticallyberesolvedbyaUKexitfromtheEU.Rather, the interdependentnatureof these industriesand theirmarketsmeans that policy solutions would still require to be negotiatedwith otherEuropean countries and the EU. Whereas most farm leaders prefer tonegotiatewithintheEU,theircounterpartsinfisheriesareeitherambivalentorundecided.CaitríonaCarterisResearchProfessorinPoliticalScienceatIrstea,Bordeaux.AndySmithisResearchProfessorattheCentreEmileDurkheim,UniversityofBordeaux.

Page 90: Britain's Decision

90

Chapter15Howwillourindustriesbeaffected?TradeDavidComerfordAlargepartofthepurposeoftheEUistheSingleMarketandCustomsUnion.This is essentially a free trade area in Europe, with no internal tariffs, andwith common standards and regulations that serve to minimise non-tariffbarriers to trade. Non-tariff barriers are practices and rules like restrictivegovernmentprocurementprocedures,stateaid,productstandards,consumerprotectionrules,health&safetyrules,andotheradministrativerequirements.Although thesepracticesand rules couldbemotivatedbyavalidneed, theyarebarriers to tradebecausetheyhavetheeffectofexcludingnon-domesticfirms from a particular market. The EU’s Customs Union involves theapplication of a common external tariff on all goods entering the Europeanmarket. The EU is itself amember of theWorld Trade Organisation (WTO)andas theEU isasinglecustomsunionwithasingle tradepolicyandtariff,theEuropeanCommissionspeaksforallEUmemberStatesatalmostallWTOmeetings.

Iceland, Norway and Liechtenstein, together with the EU, form theEuropeanEconomicArea(EEA),andparticipateintheEU’ssinglemarket(butnot in the customs union). Likewise, Switzerland participates in the EU’ssinglemarketthroughbilateraltreaties.TheEEAagreementandtheEU-Swisstreatieshaveexceptions,forexampleonagricultureandfisheries.Inordertoaccess the singlemarket, EEAmembers have to adopt some of EU law andcontributefinanciallytothecostsofthesinglemarket.Andwhilethesecostsarenot the fullcostsof fullEUmembership,asnon-EUcountries, theseEEAmembers do not receive any of this funding back via EU policies ordevelopmentfunds.

The EU’s internalmarket also formalises restrictions on production, likethe protected geographical indication (PGI). These restrictions are used topromote and protect the names of traditional agricultural products andfoodstuffs. For example, Stornoway Black Pudding was granted protectedstatusin2013.OneofthemostimportantofsuchprotectionsforScotlandisthatofScotchWhisky,andunderatradeagreementbetweentheEUandtheUSA in the early 1990s, the US agreed not to use the description ‘Scotch’exceptforwhiskyfromScotland,whiletheEUreciprocatedbyagreeingnottousethedescription‘Bourbon’exceptforAmericanproducedwhiskeys.

To summarise, theEUaims to facilitate tradewithinEurope.Economiststypically agree that trade enhances the economic output and economicwellbeing of a nation, by allowing specialisation and enhancing product

Page 91: Britain's Decision

91

variety. Therefore, this issue is important because, ifmembership of theEUdoes successfully facilitate trade between its constituent nations, and if aBrexitwoulddamagethistradefortheUK,thenwecanexpecteconomiccostsduetothelossofthistrade.

Whataretheargumentsputforwardby‘Leave’campaigners?CampaignerstoleavetheEUdonotdisputetheargumentthatalossoftradecould be economically costly. Indeed the Vote Leave campaign in their ‘OurCase’ document, explicitly states that “the EU and its SingleMarket processhavebroughtsomegains”.Rather,theargumentof‘Leave’campaignersisthatleaving theEUwouldnotdamage trade.This isbecause theyargue that thesinglemarketdoesnotworkaswellasitshould,“thesystemisrigid,veryslow,hardtofixwhenitgoeswrong,andverycostly”; that the EU’s common tradepolicyrestrictstheUK’sabilitytotradewiththerestoftheworld“WeregainourseatsoninternationalinstitutionsliketheWorldTradeOrganisationsoweareamoreinfluentialforceforfreetradeandinternationalcooperation.…EUinstitutions should stop blocking Britain from making trade deals outsideEurope”;andthataUK-EUfreetradedeal,perhapsviaEEAmembershiporviabilateraldealslikeSwitzerland,wouldbestraightforward“WenegotiateanewUK-EUdealbasedonfreetradeandfriendlycooperation”.

Whataretheargumentsputforwardby‘Remain’campaigners?Campaigners to remain in theEU respond to these claims in twoways. Thefirstistosaythat,yes,damagesassociatedwithBrexitcouldbeavoidediftheUK did a trade deal with the EUwhich replicated the costs and benefits ofcurrent EU membership. For example the “benign outcome would … bedependent onministers signing a trade dealwith the bloc that severely limitstheUK’sabilitytomakeitsownbilateraltradedealswithothernon-Europeancountries.BritainwouldalsohavetocontinuetomakecontributionstotheEU’sbudget. … benign scenarios involve retaining aspects of EU membership:continuedhighimmigration,restrictionsonourabilitytomaketradedealswithnon-EUcountriesandcontinuingtopaymoneytoBrussels”.

ThesecondresponsethatremaincampaignersmakeisthatleavingtheEUwould be a disaster, such as “Brexit could cost £100 billion and nearly onemillion jobs”. These estimates of large costs (£100 billion is around 5% ofGDP) arebasedon analysiswhere adisruptiveBrexit leads to a scenario inwhichaUK-EUfreetradedealcannotbeagreed,tariffsandnon-tariffbarriersareerected,andinwhichlargefallsinUK-EUtradeareseen.

ThebalanceoftheargumentsIt is easy to dismiss some aspects of the above two characterisations of the‘Remain’ arguments. The first argument, even under its own assumptions,comesdowntoapoliticalchoice–perhapstherearemanywhowouldliketo

Page 92: Britain's Decision

92

leave theEUeven if thebilateralarrangementswhichreplace it replicateallitscostsandbenefits.Andthesecondargumentseemshyperbolic–certainlyin themedium to long term.The level of tradeneither createsnordestroysjobs: if Brexitwere to lead to a large fall in theUK’s external trade, thenofcourseemploymentwoulddecreaseintheUK’sexportindustries;butitisnotonlyexports thatwould fall– importswouldalso fall,anddomesticdemandfor goods that were previously imported would take up the slack inemploymentasthesewouldthenneedtobeproduceddomestically.

The arguments that trade promotes efficiency and welfare follow fromeconomictheoriesthathaveproducedmodelsthatallowvariousscenariostobequantified.AndresearchersattheCentreforEconomicPerformance(CEP)attheLondonSchoolofEconomicshavestudiedtheeffectsofBrexitontradeand hence upon economic efficiency andwelfare in suchmodels. They findthat, even when countries have comprehensive trade deals such as EEAmembership,theirtradewiththeEUisstilllessthanitwouldbeunderfullEUmembership. This is due to, in particular, non-tariff barriers that arehigherthanunder fullEUmembership.Andminimisingnon-tariffbarriersareveryimportant for the UK given the pattern of its trade, since they weighparticularly heavily upon trade in services. The UK is a net exporter ofservices,especiallyfinancialservices,totheEU,andanetimporterofgoods,which(bythenatureofgoodsversusservices)areproportionallylessaffectedbynon-tariffbarriers,fromtheEU.TheneteffectestimatedintheCEPstudyforBrexitunderafavourableEEAtypeUK-EUtradedeal, isacostofaround1%ofGDP.

TheauthorsthengoontodescribehowthisestimateislikelyalowerlimitforthecostofBrexit,forvariousreasonse.g.dynamiceffectsfromtradeupongrowth; and the likelihood of such a favourable deal being negotiated(especially since the current internal tensions within the EU provide anincentive for no ‘sweet’ deals to be given –pourencouragerlesautres). It isconsistently found that, by reducing trade, Brexit would lower UK livingstandards.

WhatspecialrelevancedoestheissuehaveforScotland?Scotland’s exports to European Union countries made up 42% of itsinternational exports in 2014,which is similar to the figure for theUK as awhole.Wewould thereforeexpectScotland-EU trade tobeaffectedbyaUKexitfromtheEUinasimilarmannertotheUK-EUtradepreviouslydiscussed.Furtherwewouldexpectthemacroeconomicimplicationsofthisimpactupontrade to also be similar in Scotland as in theUK as awhole. So doesBrexithaveanyspecialrelevanceforScotland?

ItdoesifweviewScotlandasacountryratherthanasaregionoftheUK.The small countries of northern and western Europe are among the mostprosperous regions on theplanet. This is a prosperity that is based (among

Page 93: Britain's Decision

93

many other factors) upon an openness to trade. And in trade terms thesecountrieslookverydifferentfromScotland.

Scotland’s trade with the rest of the UK dwarfs its international trade.Scotland’s total trade (exports and imports) in the latest (2012) figures is66%withtherestoftheUK,andonly34%withtherestoftheworld.Toseehowconcentratedthisis,considerthreesmallnorth-westEuropeancountrieswhich could be compared to Scotland: Ireland, Norway and Denmark. ThelargesttradingpartnerofbothIrelandandNorwayistheUK,buttheirtradewiththeUKonlyaccountsfor21%and16%respectivelyoftheirtotaltrade.Denmark’s largest trading partner is Germany, but its trade with Germanyonly accounts for 18% of total trade. Scotland’s trade is anomalouslyconcentrated with its largest partner. Its high performing internationalcomparatorshavemuchmorediversifiedtrade.

BrexitisestimatedtoreducetradewiththeEU,andsomeofthistradewillbe diverted internally as well as to the rest of the world beyond the EU.ThereforewecanexpectBrexittoincreasetheshareofScotland’stradethatisconducted with the rest of the UK, further increasing the concentration ofScotland’s trade with its largest trading partner, and causing furtherdivergence between the trade diversity exhibited by Scotland and thatexhibited by other north-west European countries. So on this onemeasure,BrexitwouldseemtobeharmfultothegoalofmatchingScotland’seconomicperformancewithitsnaturalcomparators.

Economistshavedevelopedaframeworkforthinkingaboutsmallcountryregionsinaglobalisingeconomythatfitsthechangingnumberofcountriesinthe world over the past two centuries. In the early stages of globalisation,once it is technologically possible to engage in high levels of internationaltrade, but when national borders are still a strong impediment, theselocationsprefertobeperipheralregionsinalargecountryorempire,becausethis is the way to achieve high levels of trade and the economic gains thatfollow.HoweveroncemultilateralinstitutionsliketheEU,whichenabletradeintegrationbyinternationalagreement,areinplace,thennationalbordersarelessofanimpedimentandtheselocationscanprosperassmallcountries.Thisframework can be used to explain the generally high levels of support forremaining in the EU from supporters of Scottish independence:multilateralinstitutionsliketheEUarethebasisforsmallcountryprosperity.

If Brexit is the start of an unravelling of the process that has built themultilateral international institutional architectureof globalisation since theendofWorldWarII, thenits implicationsforScotlandarestark.Wemaybemovingfromaworldinwhichmultilateralinternationalinstitutionsensuredthatthetradinginterestsofsmallcountrieswereprotected;towardsaworldmoreakintotheageofempires inwhichlargecountriesaccumulatedafreetradezonewhichtheycoulddominate,andtradeoutsidethiszonewasverydifficult. In the multilateral globalised world, independence may be an

Page 94: Britain's Decision

94

economicallyrationalpolicyforScotland,sinceitcouldbeasmallcountryinamultilateral organisation like theEU.But in theempiresworld,withnoEU-style multilateral organisations, Scottish independence would likely beextremelycostlyeconomically,andtheoptimalchoiceismorelikelytobeasaperipheralregioninanewBritishempire.

DavidComerfordisLecturerinEconomicsattheUniversityofStirling.

Page 95: Britain's Decision

95

Chapter16EnergyandClimateChange:HowimportantistheEUforaddressingtheclimatechallenge?AndyKerrThe UK’s Secretary of State for Energy and Climate Change, Amber Rudd,recentlyarguedthatenergybillsintheUKwouldsoarby£500millionayeariftheUKlefttheEU.Thisfigurewasstronglydisputedbyleavecampaigners,amongst whom is her Minister of State at the Department for Energy andClimateChange,AndreaLeadsom.

At theheart of thisdispute about energy costs is the collective responseovermanyyearsby theEU to improve thequalityof theenvironment,withparticular focus on the challenge posed by human-induced climate change,andtoshapeenergypolicy.Thishas involvedextensive interventionsbytheEU with Member States with the aim of helping them develop a system ofclean, efficient energy to provide power, to heat and cool homes andbusinesses,andformobility.

TheseinterventionsmeanthatUKenergyandclimatechangepoliciesareclosely entwined with EU-wide regulations. The recent dispute by the UKMinisters is whether these regulations are adding unnecessary costs to UKhouseholds and businesses: whether directly, through taxes; or indirectly,throughtheadditionalregulatoryburdenonbusinessesandthepublicsector.

This chapter explores these claims and counterclaimsby the ‘Leave’ and‘Remain’ campaigners. It seeks to answer thequestionofwhether theEU isimportant for addressing the challenge of climate change, which isdetermined largely by national and international energy (and land use)policies;andtheextenttowhichthisimposesaburdenontheUKthatcouldbeavoidedbytheUKleavingtheEU.

WhatistheIssue?EUDirectives,transposedbytheUKGovernmentintoUKlegislation,affectallaspects of the way in which we produce and use energy, from the UK’sbuildingregulationstoairqualitystandardsforpowerstations.Thisoutcomestems from the key underpinning treaties of the EU to which the UK hassigned up, such as the Maastricht (Treaty of European Union) and Rome(TreatyoftheFunctioningoftheEuropeanUnion)TreatiesasamendedbytheLisbon Treaty. Article 3 of the Treaty of the European Union states theobjectivesoftheEUanddefinestheprincipleforsustainabledevelopmentforEurope“…basedoneconomicgrowthandpricestability,acompetitivesocial

Page 96: Britain's Decision

96

market economy aiming at full employment and social progress, andahighlevelofprotectionandimprovementofthequalityoftheenvironment”.

TheTreatyfortheFunctionoftheEuropeanUniongoesfurtherandstatesthat the Union has an objective “to deal with regional or worldwideenvironmental problems, and in particular combating climate change”. ItrequirestheEUtopreserveandimprovetheenvironment.ThisTreatyalsosetsouttheframeworkforEUenergypolicy,whichisframedexplicitlyaroundtheneedtointegratetheseenvironmentalconsiderations.ThespecificobjectivesfortheEUenergypolicyareto:ensurethefunctioningoftheenergymarket;ensure security of energy supply in the Union; promote energy networkinterconnection; and “promote energy efficiency and energy saving and thedevelopmentofnewandrenewableformsofenergy”.Inotherwords,theEUco-developspolicyonenergyandclimatechangewithMemberStates.

However, apart fromcertain specific circumstances, theEUcannotadoptanymeasure thataffectsaMemberState’sright todeterminetheconditionsfor exploiting its energy resources; its choice between different energysources;orthegeneralstructureofaMemberState’senergysupply.

Whyisthisimportant?These entwined treaties mean that UK energy policy is set within a widerframework that aims to support European objectives for delivering a clean,efficient energy system. At the heart of this framework is an obligation toimprove the environment – whether involving considerations of local airqualityorworldwideclimatechange.

ThiswiderEUframeworkhasdrivenextensivechanges intheUKenergysystem.Forexample,themostpollutingpowerstationshavebeenforcedtofitpollution abatement measures to reduce their local air pollution or facemandatoryclosure.Thishasdriventheclosureofmanyoldcoal-firedpowerstationsinrecentyears,includingCockenziePowerStationinEastLothian.

RenewableenergytargetsforMemberStateshavedriventheexpansionofrenewableenergy in theUK.TheUKagreedwith theEU tomeeta targetof15%of total energyneeds (including electricity, heat and transport energy)fromrenewablesourcesby2020.Untilthispoint,theUKhadbeenalaggardin theEU indevelopingrenewablesourcesofenergy.This targethasdriventheextensivedevelopmentofregulatoryframeworksintheUKtoincreasetheroleofrenewables,withsomesuccess–particularlyinrenewableelectricity–butatthecostofsubstantialpublicsubsidiespaidthroughconsumerbills.

Meanwhile, EU rules on vehicle efficiencies have driven global vehiclemanufacturerstomeetsuccessivelyenhancedefficiencystandards forpetroland diesel engine vehicles, whilst also encouraging the use of sustainablebiofuels. And EU frameworks have driven improvement in efficiencies of“whitegoods”–domesticappliancessuchaswashingmachinesandfridges–

Page 97: Britain's Decision

97

byforcingconsistentenergylabelstobeusedacrosstheEU.Thisiscalculatedtosavehouseholdsover400Eurosperyear.

WhatspecialrelevancedoesthisissuehaveforScotland?Sincedevolution,ScotlandhasembracedchangeintheproductionanduseofitsenergybybuildingontheUKregulatoryframeworksthatemergedtomeetEUclimateandenergyobligations.Scotlandhasexpandedrenewablesourcesof electricity from around 10% to over 50% of its electricity consumptionover thepast15years,with theaimofmeeting100%of itsnetdemandby2020.At thesame time,housingacrossScotlandhasbeenmademuchmoreefficient through targeted application of energy efficiencymeasures such asinsulation. This has only been possible because of the UK renewableelectricity and energy efficiency targets, with associated public subsidies,whichsupportScottishambitions.

Scotland aims to be a world-leader in meeting the challenge of climatechangebydevelopingaclean,efficientenergysystem.ItsClimateChangeAct(2009) sets a framework for radical changes in the production and use ofenergy(andland)overthenext35years.

When this Scottish ambition aligned closely with that of the UKGovernment, Scotland could use the UK frameworks and financial supportmechanisms to support its ambitions. However, over the past year, thecurrentUKGovernmenthasundertakenan‘energypolicyreset’.Thishasputthe focus on the short-term affordability of energy over environmental orefficiency considerations, coupled with a desire to use gas and nuclear forelectricityproductionandgasforheating.Thisenergyresethashitbusinessand investor confidence in the UK’s commitment to clean energy. It alsomakes itmuchmoredifficult forScotland todeliver itsownambitions foraclean, efficient energy system. In this situation, the role of the EU in co-developing energy and climate policy with Member States provides apowerfulcounterweighttotheUKGovernment’scurrentapproachtoenergypolicy.

Whataretheargumentsputforwardbythe‘Remain’campaigners?Thekeyargumentsputforwardbythepro-EUcampaignersrevolvearound:• The importanceof theemergingEU-wideenergymarketwhich, through

trade liberalisation and competition, is expected to bring down energypricesforconsumers.

• The power exerted by the EU bloc of countries on global consumerproduct manufacturers – whether of white goods or vehicles – andassociatedenergyefficiencymeasuresinEurope,suchasenergylabeling,which leads to substantial lifetime cost savings to vehicle owners andhouseholders.

Page 98: Britain's Decision

98

• The role of the EU in ensuring energy security for all Member States,throughthecollectiveresponsetoenergysuppliers,suchasRussia,whichseekstouseandpriceitssupplyofgasformaximumpoliticalimpact.

• The key role of the EU in driving theUK to clean up its energy system,fromforcingairpollutingpowerstationstoclose,todevelopinganarrayofrenewableenergysourcesforelectricity,heatingandtransport.

Whataretheargumentsputforwardbythe‘Leave’campaigners?Thekeyargumentsputforwardbytheanti-EUcampaignersregardingenergyandclimatechangeissuesrevolvearound:• The additional cost imposed by the various energy regulations co-

developedbytheEU,suchasrequiringtheUKtoincreasethepenetrationof renewable sources of energy, which requires public subsidies; orimposing energy efficiency regulations such as energy labeling, whichtheyargueshouldbeleftuptothemarket.

• ThemisplacedfocusbytheEUonclimatechangeandtheenvironmentasa key factor in government policy on energy (or indeed in other policyareas): for example, various ‘Leave’ campaigners have suggested weshouldresorttothe‘cheapestformofenergy,whichiscoal’.

• Thelossofsovereigntyassociatedwithhavingenergyandclimatepolicyco-developed by the EU, thereby taking it out of sole UK jurisdiction todetermineourownenergyfuture.

Whatisthebalanceofarguments?There is little doubt that the EU has played a key role over the last twodecades in the development of energy and climate policy in the UK.Renewables targets, coupledwith air quality standards for fossil fuel powerstations,setatEUlevelhavedrivenmajorchangesintheUK’spowersector.Airpollutionandgreenhousegasemissionstargets, throughforexampletheEU-wide Emissions Trading Scheme, have forced environmentalconsiderations onto company boards of industrial facilities across the UK.Products from vehicles to white goods have become dramatically moreefficientasaresultofEUregulations.Andenergysystems,fromelectricitytogasnetworks,arebecomingmoreinterconnectedbetweenMemberStates.

Whether these changes in the UK’s energy system are seen as positive,whichwillgenerallybethecasefor‘Remain’campaigners,ornegative,whichwillgenerallybethecaseof ‘Leave’campaigners,typicallydependsonwiderpolitical views about the relative importance of climate change and theenvironment as a priority for government action; and the extent to whichgovernmentsshould interveneorallowthefreemarkettooperate. Inotherwords, ‘Leave’campaignersaremorelikelytoviewgovernmentinterventionnegatively,becausetheybelieveit imposesunnecessarycostsonhouseholds

Page 99: Britain's Decision

99

andbusinessestodeliveroutcomesthatafunctioningmarketsystemshoulddeliver; and to see climate change and environmental improvement as oflesserimportancecomparedwitheconomicfactors.

Akeyassumptionofthe ‘Leave’campaignersappearstobethatiftheUKleavestheEuropeanUnionthenalltheUK’sobligationstorenewableenergyandenergyefficiencystandardswillberedundant.However,theUKhasalsosigned up to United Nations commitments under the UN FrameworkConventiononClimateChange(UNFCCC),mostrecentlybysigningtheParisAgreementinDecember2015.MeetingtheobligationsofthisAgreementwillrequire the UK to develop a clean, efficient energy system by around mid-century,regardlessofwhethertheUKispartoftheEUornot.

TheParisAgreementismoreonerousthantheenergyandclimate-relatedobligations by the EU on the UK. In other words, the UK will also need torevoketheseglobalclimateagreementstowhichithassignedupinordertoavoid imposing radical changes in its energy systemover thenext35years.And,shouldtheUKbothleavetheEUandrenegeonitsUNcommitments,butstill wish for preferential access to the EU single market through an EFTAagreement,itwillstillneedtoabidebytheEUacquiscommunautaire:theUKwill still need to abide by rules and regulations governing the single EUmarket, including many environmental and energy rules, but with lessinfluenceovertheircontent.

Inconclusion, theEUhasplayedakeyroleover thepast twodecades inhelpingtheUKtoaddressenvironmentalissuesandefficiencyofenergyuse,ranging from local air pollution to climate change.However, leaving the EUwillnotallowtheUKtounpickthesechangeswithoutalsorenegingonglobalUN agreements. And the UK will still need to abide by many energy andenvironmental regulations to enable preferential access to the EU singlemarket.AndyKerrisExecutiveDirectoroftheEdinburghCentreforCarbonInnovationattheUniversityofEdinburgh.

Page 100: Britain's Decision

100

Chapter17Welfare:TheproposedrestrictionstobenefitsformigrantsandthereferendumdebateDanielCleggAccess to welfare payments for those coming from elsewhere in Europe towork in the UK has been central to recent debates on Britain’s EUmembership. In 2014 the Prime Minister claimed that welfare is a ‘bigfinancial incentive’ forworkers tomigrate to theUK,particularly if theyarelowskilled.AndhecommittedtomakingrestrictionsonaccesstoUKbenefitsforotherUnioncitizens–andforthosefromotherEuropeanEconomicArea(EEA)countriesandSwitzerland,towhomthesamerulesapply–oneofthemainplanksoffuturerenegotiationofBritain’srelationshipwiththeEU.

BythetimeofthelettertoDonaldTusk,PresidentoftheEuropeanCouncil,setting out the UK’s negotiating demands the Government had two mainobjectivesonwelfare:• requiringthatworkers fromotherEuropeancountries livehere for four

yearsbeforehavingaccesstoin-workbenefitsandsocialhousing,and• ending the possibility for Union citizens to receive child benefits for

childrenwholiveinanothermemberstate.These were easily the most controversial of the UK’s demands, vigorouslyopposed both by governments of countrieswith large numbers of nationalscurrentlyintheUKandbydefendersofcoresinglemarketprinciples.

DespitegoinglessfarthantheUKGovernmenthoped,thefinaldealopensthe way for substantial changes to the status quo on access to welfare forpeople moving across borders for work within the single market. The dealprovidesforchildbenefitsinfuturebeingindexedonthecostoflivinginthechild’s country of residence, somigrantworkerswith families remaining inpoorer member states will receive less support. On in-work benefits,compromisewasreachedonthecreationofan‘emergencybrake’mechanismexempting member states experiencing inward migration pressures fromsome of their equal treatment obligations for a period of seven years.Withthis brake ‘pulled’ entitlements to in-work benefits for migrants wouldincrease progressively from the date of their first employment and attainparitywithnationalsonlyafteraperiodoffouryears.Whyarebenefitsformigrantsbeingrestricted?The political importance of these agreements is clear. Opinion pollingconsistentlyfindsthatthebenefitsEuropeanmigrantscanclaimisseenintheUKasthesinglemostimportantareaforchangeinthehowtheEUfunctions,

Page 101: Britain's Decision

101

crucial for some two-thirds of the population. This is why the Governmentmadetheissuethecentrepieceoftherenegotiation,andwhytheprincipleofrestrictionsissupportedbytheothermainpoliticalpartiesinWestminster.

Proponentsofrestrictionsalsofrequentlycitetwomainpolicyobjectives.The first, implied by Cameron’s 2014 speech, is to reduce the financialinducements tomove to the UK forwork and help lower netmigration, anexplicitobjectiveofgovernmentpolicysince2010.Thesecondistoincreasefairness relative to the existing situation, where EU migrants becomepotentially eligible for some benefits as soon as they enter the UK labourmarket.Lessopenlydiscussed,butstronglysuggestedbyrepeatedreferencesto the proportion of total UK benefit expenditure on EEA nationals, is thatthese restrictions will limit the perceived fiscal burden arising from someEuropeanmigrationtotheUK.

An almost entirely neglected dimension of the proposed restrictions istheirimpactonpovertyanddeprivation.ForallthetalkofBritain’s‘universal’welfaresystembeingadraw,in-workbenefitsareinfacttargetedatworkinghouseholdswiththelowestincomes.AndlimitingtheaccessofnewlyarrivedEUmigrants to these benefitswill only aggravate the frequently precariousnature of their living conditions, often characterised by unsatisfactoryaccommodation in theprivate rented sector, high levels of housingmobilityandinterruptedschoolingforchildren.IspolicyinScotlanddifferent?TherestrictionstowelfarebenefitsforEUmigrantsappeartobequitesharplyat oddswith the general thrust of current public policy in Scotland border.The Scottish Government has in recent years articulated a distinctive pro-immigrationstance,arguingthatScotland’seconomicanddemographicneedsare ill-served by the restrictive policy pursued by the WestminsterGovernment.Theneedforincreasednumbersofmigrantsofworkingagehasparticularly been emphasised. If limiting access to some benefits wassuccessful inreducing levelsofmigration, itwouldruncountertothestatedaimsofScottishpolicy.

Evenwithnoeffectonmigrantnumbers,therestrictionswouldunderminecurrent Scottish policy priorities in other ways. The Scottish Governmentpromotes an inclusive model of citizenship, projecting Scotland as awelcoming country at ease with a highly multinational and multiculturalpopulation.Thisposturewouldbehard to squarewith abenefit policy thatexplicitly discriminates on grounds of nationality. The Scottish Governmenthasalsomadefightingpovertyandinequalityoneofitscentralaspirations.Itseesimprovingthevalueandtake-upofwelfarebenefits–whichitpreferstoframe as social security – as key instruments in that goal. By disentitling asection of the population living on low income, restrictions on access to

Page 102: Britain's Decision

102

benefits for EU migrants would undercut the Scottish Government’s socialpolicy.

TheScottishParliamentiscurrentlygainingnewpowersonwelfareundertheScotlandAct2016.Amongthesewillbethepossibilitytotopupaspectsofsome benefits which remain formally reserved toWestminster, such as taxcredits and the future Universal Credit. But it remains unclear if a Scottishgovernmentwould have power to reverse or relax restrictivemeasures formigrantsresultingfromrevisedEUlegislationfollowingthereferendum.Andeven if they could, this would depend in practice on the Scottish and UKgovernments surmounting formidable political and governance obstacles toeffectivelysharingpowersinareaswheretheirfundamentalpolicyobjectivesdiverge.Whatdothe‘Remain’and‘Leave’campaignssay?Disagreementbetween the ‘Remain’ and ‘Leave’ campaignsover thewelfarerestrictionstheUKGovernmenthasnegotiatedhascrystallisedaroundthreeissues;themagnitudeofthechangesthatareforeseen,howbindingtheywillprove to be and their likely impact, especially on the scale of EuropeanmigrationtotheUK.

The ‘Remain’ camp has understandably talked up the ‘tough newrestrictions’onaccesstotheUKwelfaresystem.Itarguesthatastheprospectforanydealonlimitingaccesstoin-workbenefitswaswidelyquestioned,theGovernment has scored a major diplomatic victory. The ‘Leave’ campsuggests,bycontrast,thatthewelfaredemandsweremodesttostartwithandhave only been agreed by other European governments after being heavilywatered-down.WhileonesidepresentsthewelfaredealasproofofBritain’sability to defend its interests from within the EU, the other holds it up asevidenceforthefundamentalimpossibilityofdoingso.

The ‘Leave’ campaign further argues that the welfare restrictions mightnot make it unscathed into EU legislation, and complain that importantaspectsoftheirimplementation–likeauthorisationforuseoftheemergencybrake – are subordinated to future decisions by European institutions. ThespectreofthearrangementsbeingdeclaredunlawfulbytheCourtofJusticeoftheEuropeanUnion(CJEU)isalsoraised.The‘Remain’campaigninsiststhatthedealas ithasbeennegotiated is legallybindingandcannotbeunpickedwithouttheUK’sconsent.

Thepotential impactofthechangesonfuturemigrantnumbershasbeenthe source of considerable dispute. While some on the ‘Remain’ side areopenlysceptical,DavidCameronhasarguedthattherestrictionswill‘makeadifference’ to migration to the UK. Open Europe, the think tank that takescreditforinspiringthegovernment’snegotiatingdemandsinthisarea,arguesthatthechangeswillespeciallydissuadelow-skilledmigrantsfromcomingtothe country towork. The ‘Leave’ campaign counters – somewhat ironically,

Page 103: Britain's Decision

103

consideringhowfixatedEuroscepticshavetraditionallybeenonthedangersof ‘welfare tourism’ in the EU – that benefits play little role in migrationdecisions,and thatplanned increases to theUKminimumwagewillanywaynegateanyeffectofbenefitrestrictions.TheyarguethatleavingtheEUistheonlysurewayto‘regaincontrolofourborders’.

Sowhichsideisright?Eachsideistosomeextentrighttoaboutthewelfaremeasures.The‘Remain’camp is correct that Cameron haswonmajor concessions, especially on in-work benefits. While EU rules have long allowed migrants to be treateddifferently from nationals when unemployed or economically inactive, forworkerstheprincipleofnon-discriminationhasalwaysbeeninviolable.Iftheemergency brake mechanism is adopted, this will change. But preciselybecausethiswouldclearlyconflictwithprinciplesenshrinedintheEuropeantreaties this part of the deal is legally very insecure, as the ‘Leave’ campmaintain.TheCJEU, inparticular, isnotboundbyapoliticaldealnegotiatedbetween governments, and if a challenge to the legality of the emergencybrakewasbroughtbeforeitthereiseverychancethatitwouldbeupheld.

Bycontrast,eachsideislargelywrongonwhetherthebenefitchangesor‘Brexit’ can help to limit migration. Against some claims from within the‘Remain’camp,thereisnohardevidencesuggestingthatmigrationdecisionsarebasedontheaccessibilityandvalueofsocialbenefits,withfactorsliketheavailability of jobs and language playing a much greater role. But, equally,thereislittleprospectthatleavingtheEUwouldgivetheUK‘fullcontrol’ofitsborders,asthe‘Leave’campasserts.Allmeaningfulprecedentsoftradedealsconcludedbetweennon-memberEuropeanstatesandtheEUhavedependedon these countries accepting free movement of labour, and there is littlereasontothinkthatanyEU-UKtradeagreementgivingfullaccesstothesinglemarketwouldbefundamentallydifferent.

WhatoftheobjectiveoflimitingtheperceivedcostsofEuropeanmigrationto the UK? If the benefit restrictions were adopted and migration levelsremainedstabletherewouldindeedbeafiscalbenefitforthegovernment;EUmigrantswouldpay the same tax andnational insurancebut receive less inbenefits. The scale of this windfall would likely be trivial, though. Firstly,numbersofchildsupportclaimsforchildrenresidentabroadarevanishinglysmall,lessthanhalfof1%forChildBenefitandevenlessforChildTaxCredit.

Secondly,whileEUmigrantsaccountforaround10%oftotalexpenditureon in-worktaxcreditsandhousingsupportdespiterepresentingonly6%ofthe workforce, the assertion that a large proportion of spending goes torecentlyarrivedmigrants–whowouldbeaffectedbytheemergencybrake–has not been backed up by reliable statistical evidence and is widelycontested. Finally, the introduction of Universal Credit is soon to sharplyreduce thevalueofall in-workbenefits,and thereforealso thesavings from

Page 104: Britain's Decision

104

excludingasectionof theworkingpopulationfromreceivingthem.Sowhiletheymayinflictconsiderablehardshiponfamiliestheydohit,thechangeswillaffectfewpeopleandsaveverylittlemoneyoverall.

This leaves thequestionof fairness.Taxcreditsandhousing supportarenon-contributory, means-tested benefits, requiring that claimantsdemonstrate need rather than a specific record of employment or nationalinsurance payments. Poor British people can receive in-work benefitsirrespectiveofwhethertheyhaveworkedbefore,orindeedoftheirabilitytoprove any level of past ‘contribution to the country’. Should this really bedifferent forpoormigrantworkers legallyresidentandpayingtax in theUKsimplyon thegroundsof theirnationality?Differentpeoplewouldnodoubtgivedifferentanswers,suggestingthefairnessissuesareratherlessclear-cutthantheirpresentationbytheGovernmenthasoftenimplied.

Conclusion:whatwillchange?For all the political heat they have generated, the proposed restrictions onaccess towelfarebenefitswouldprobablydo little to fundamentally changethose aspects of Britain’s relationship to the EU that most exercise Britishvoters. But it is far from clear that ‘Brexit’ would either. The ScottishGovernmentarticulatesdifferentpolicypriorities inthisarea,buttheoptionthatisbestalignedwiththeseisthestatusquo–andthatoptionisnotonthetable.DanielClegg,isSeniorLecturerinSocialPolicyattheUniversityofEdinburgh.

Page 105: Britain's Decision

105

Chapter18Migration:wouldlimitingthefreemovementoflabourbegoodorbad?ChristinaBoswellImmigration consistently features as one of the major concerns of Britishvoters.AccordingtoIPSOS-Mori,44%ofthepopulationconsiderimmigrationtobethemostimportantissuefacingBritaintoday,makingitthetopconcern.Othersurveyssuggestthatoverthree-quartersofUKresidentswanttoseeareduction in immigration. Public apprehensions tend to revolve around theperceivedburdenofimmigrantsonpublicservices;theeffectsofimmigrationon unemployment and wages; and concerns about the social and culturalimpactsoflarge-scaleimmigration.

Overthepastdecade,concernsaboutimmigrationhavebeenincreasinglylinked to the UK’smembership of the European Union. EU law enshrines aprincipleof‘freemovement’,meaningthatnationalsofEUmemberstatesareentitled toseeka jobandwork inanyothermembercountry.Theyarealsoentitled toequality inaccess toemployment,wagesandsocialsecurity.Thisrightislimitedtothosewhomoveforworkpurposes–itdoesnotextendtothosewhorelocatetotakeadvantageofunemploymentbenefits.Inthecaseofcountries newly joining the EU, member states may impose a temporaryrestrictionontheiraccesstothelabourmarket,lastinguptosevenyears.

In the early decades of the UK’smembership, EU immigration remainedrelativelylow,indeedmoreBritonswenttoliveandworkinEuropethanEUnationals came to the UK. However, in 2004 when eight central and eastEuropeancountries(theA-8)joinedtheEU,theUKtogetherwithIrelandandSweden decided to allow immediate labour market access for the newlyacceding countries. The decision was made on the grounds that labourmigrantswouldbenefit theUKeconomyatatimeofnearly fullemploymentandeconomicgrowth;moreover, itwasprojected that levelsof immigrationfromtheA-8wouldremainrelativelylow.

However, the A-8 accession prompted a substantial increase in EUimmigration. Figures from the Office of National Statistics suggest that A-8immigration rose from around 45,000 in 2004 to over 100,000 by 2007/8.Currently,A-8immigrationisbackdowntojustover60,000.However,otherflowsfromtheEUhavebecomemoresignificant.OverhalfofEUimmigration(120,000) is now composed of nationals of the ‘old’ EU member states,primarily those from southern European countries hit by recession. At thesame time, there has been a small but steady increase in immigration fromBulgaria and Romania (currently around 50,000 per year),whose nationalswerepermittedaccesstotheUKlabourmarketin2014.

Page 106: Britain's Decision

106

Overall,EUimmigrationcurrentlynowstandsataround250,000peryear.IfwesubtractthenumberofEUnationalsleavingtheUK,wereachafigurefornetmigrationofalmost180,000peryear.Thisaccountsforalmosthalfofallnetmigration to theUK.These figureshavebecomeespeciallyprominent inthe context of the Conservative Party’s netmigration target. In 2010,DavidCameron pledged to reduce net migration to the UK from the hundreds ofthousandstothetensofthousands.TheGovernmenthasconsistentlyfailedtohit this target, with current netmigration standing at over 300,000, higherthanthepeakof2007/8.Indeed,levelsofnetmigrationarehigherthanatanytimerecorded.

NetmigrationintotheUK:1970-2014

Source:OfficeofNationalStatistics.

The situation in Scotland is somewhatdifferent to that of the rest of theUK.BothSNPandLabour-LibDemgovernmentshaveaspiredtoraise,ratherthanreduce,thelevelofnetmigrationtoScotland.This ismainlybecauseofdemographic considerations. Sustaining netmigration at around24,000peryear(includingnetmigrationfromtherestoftheUK)isseenasanimportantwayofoffsettingpopulationageingandreversingpopulationdecline.Infact,netmigrationtoScotlandsince2004hascontributedtoasteady increase inthe overall population, with the highest increase consisting of Polishimmigration. Census figures show that between 2001-2011, the number ofPolish residents rose from around 2,500 to over 50,000, now overtakingIndiannationalsasthelargestforeign-borngroupinScotland.

Page 107: Britain's Decision

107

This pro-immigration position is not necessarily consistent with publicopinion in Scotland. Surveys suggest that themajority of Scottish residentsfavour a reduction in immigration. However, the level of anti-immigrantsentimentinScotlandislesspronouncedthantheaverageUK,andtheissueislesspoliticallysensitive.Thismaybepartlybecause–despitethesubstantialincrease in immigration in the late 2000s – levels of immigration remainrelatively lowcompared tootherpartsof theUK.The2011censusrevealedthat Scotland’s foreign-born population stands at around 7% of thepopulation,comparedto13.8%inEngland.Thelackofpoliticalvisibilitymayalso be because immigration is not a devolved competence: Scottishgovernmentsarenotheldtoaccountforimmigrationpolicy,andtheissueisnotamajortopicofpartypoliticaldebatebetweenthemainScottishparties.

WheredoUKimmigrantscomefrom?

Source:OfficeofNationalStatistics.

At theUK level, the concern to limit immigrationhas becomeone of themain argumentsmarshalled to justifyBrexit. Pro-‘Leave’ campaigners arguethat EU membership impedes the UK from meeting its immigration policygoals.EUrulesonfreemovementundermineBritishsovereigntybyobligingtheUKgovernment toaccepthigh levelsofEUmigrantsseekingwork.Theyargue that the UKwill only be able to regain control of immigration policyoutside of the EU. Once Britain has left, it will be able to pursue a moreselective immigration policy, for example only admitting those with muchneededskills.UKIPhasevensuggestedthatleavingtheEUwouldenabletheUKtomeetamuchmoreambitiousnetmigrationtargetof30,000.

Page 108: Britain's Decision

108

Pro-‘Leave’ campaigners have also suggested that the UK would regainsovereignty in other areas of immigration policy. For example, it is oftenclaimed that the UK would be able to implement more effective bordercontrol, becomingmore effective in stopping irregular flows fromCalais, orinflowsofsuspectedterrorists.Weshouldnote,however,thattheUKisnotamemberoftheSchengenagreementonpassport-lesstravel,andsocurrentlyhasfullcontrolofitsborders.AnotherargumentisthattheUKwillbeexemptfroma seriesofEUDirectiveson immigrationandasylum.Hereweneed toobservethattheUKhasnoobligationtoparticipateinanycommonmeasureson immigrationandasylum: indeed, thegovernmentcanchooseunilaterallywhethertooptintolegislationonacase-by-casebasis.

Those in favourof theUKremaining in theEUfall intotwomaingroups.The first of these accepts the need to reduce immigration, but argues thatBrexit is not an effective route for achieving this goal. They agree that EUimmigration is too high, but disagree that Brexit can fix the problem. OnereasontheygiveisthedifficultyofnegotiatingaccesstothecommonmarketwithoutacceptingEUrulesonthefreemovementofworkers.Othercountriesbenefitingfromfreetradeingoodsandservices– includingNorway,IcelandandSwitzerland–havebeenobligedtoacceptEUrulesonthefreemovementofpersons,which isseenasacorollaryof theother ‘freedoms’ (seeChapter8).

Moreover,pro-EUcampaignershavesuggestedthat theUKmight lose itsinfluenceoverother importantaspectsofEuropean immigrationpolicy.TheUKhasvoluntarilyoptedintoanumberofinstrumentsthatareconsideredtobe in the national interest, such as the Dublin Convention for determiningwhichmemberstateisresponsibleforassessingasylumapplications,andtheEURODACdatabaseofasylumapplicants.TheLabourGovernmentoptedintoEUDirectivesonminimumstandardsforasylumproceduresandreceptionofasylumseekers,aswellasthedefinitionofwhoqualifiesforasylum(althoughtheConservativeGovernmentislesskeenonparticipatinginthesemeasures).The UK has also actively participated in measures to combat irregularmigration, including Directives on carrier and employer sanctions, anti-traffickingmeasures, readmission agreementswithnon-EU countries, and ithasparticipatedinjointnavalpatrolsintheMediterranean.

Furthermore, pro-‘Remain’ proponents suggests that should the UKrestrictEUimmigration,UKnationalslivinginotherEUcountriesmightfaceretaliatorymeasures. If the UK puts a quota on EU immigration to the UK,British pensioners retiring to Southern Spain, orUK engineers relocating toGermany,arelikelytosuffersimilarlyrestrictivemeasures.

Instead,thiscampclaimsthatothermeasuresshortofBrexitwillbemoreeffective in reducing EU immigration. Themost prominent alternative is toreduce welfare benefits for immigrants. The assumption here is that EUimmigrants are attracted to the UK because of generous social andwelfare

Page 109: Britain's Decision

109

system.Reducingtheirentitlementstobenefitswillthusleadtoareductionininflows.TheConservativeGovernmenthasalreadyreducedaccesstoout-of-work benefits – and this has been relatively uncontroversial from theperspectiveofEU law, given that freemovementprovisionsaredesigned topromotethemobilityofworkers.However,theGovernmenthassoughttogofurther, pressing for a ban on EU immigrants accessing in-work tax credits,and limiting their ability to export childbenefit to children livingoutsideoftheUK.

OriginofEUcitizenscomingintotheUK

Source:OfficeofNationalStatistics.

PrimeMinisterDavidCameronwasabletonegotiateadealalongtheselinesattheEuropeanCouncilmeetinginFebruary2016.EUmemberstatesagreedthatacountrycouldimposean‘emergencybreak’lastinguptosevenyearsonEUimmigrantsaccessingin-workcreditsintheirfirstfouryearsofresidence.Theagreementalsopermitsmemberstatestoindexexportedchildbenefittotheratesofthecountryofresidence.Itshouldbenoted,however,thatthereislimitedevidencethatthesebenefitsactasamagnetforEUimmigrants.Thusmanycriticshavesuggestedthattheconcessionsarelargelysymbolic.

The second group in the ‘Remain’ camp rejects the notion that EUimmigration should be reduced. EU immigrants, they argue, have made animportantcontribution to theUKeconomy.Theyarenetcontributors to thewelfare state, they augment GDP, and they fill important shortages in the

Page 110: Britain's Decision

110

labour market. In the case of Scotland, EU immigration also plays andimportant role in offsetting declining and ageing populations.Moreover, EUimmigrantsfilljobsthatUKnationalsareeitherunwillingorunabletotakeup–becausetheydon’thavetherequiredskills,liveinthewrongarea,orareputoffbypoorconditionsandwages.Indeed,ONSstatisticssuggestthat58%ofEUnationalscomingtotheUKtoworkalreadyhaveajobofferbeforetheygethere. This begs the question ofwhat effect a ban on EU immigrationmighthave on the economy. If EU nationals are filling so many jobs, then asignificant restrictionof immigrationwouldcreate serious labour shortages,with damaging effects for those sectors most reliant on foreign labour:manufacturing, food and drink processing, cleaning, food preparation andhospitality,andhealth.

What this all suggests is that the focus onEUmembership as the key toresolvingtheimmigrationproblemsmaybemisplaced.First,becausetheUKisunlikely to secureadeal that combines full access to thecommonmarketwithanexemptiontorulesonfreemovement.Second,becauseeveniftheUKcouldnegotiatesuchadeal,thedemandforforeignlabourislikelytoremainunchanged,pacingpressureonanygovernmenttoensureanadequateinflowof labour immigration.The current government’sdifficulty in reducingevennon-EU immigration demonstrates how difficult it is for pro-businessadministrationstoreduceeconomicallybeneficialformsofimmigration.

Asafinalthought,itisquitelikelythatlevelsofEUimmigrationwillinanycasedeclineover thecomingdecade.Aswesaw, thehighest flowsare fromsouthernEuropeancountriesaffectedbythefinancialcrisis.Theseflowsarelikelytorecedeastheireconomiespickup.Polishimmigrationisalreadyonthe decline, and Romanian and Bulgarian immigration remains relativelymodest. Instead,myprediction is thatwithin a fewyearswewill see lowerlevelsofEU immigration,but increased immigration fromnon-EUcountries.Concerns about immigration will not go away; but the furore over EU freemovementwillrecede.

ChristinaBoswellisProfessorofPoliticsandDirectorofResearch,SchoolofSocialandPoliticalScience,UniversityofEdinburgh.

Page 111: Britain's Decision

111

Chapter19Defenceandsecurity:continuityordiscontinuity,orderordisorder?WilliamWalkerUKsecurity:istheEUrelevantorirrelevant?On23November2015,DavidCameronpresentedtotheHouseofCommonstheNationalSecurityStrategyandStrategicDefenceReview(SDSR) thathisGovernmenthadpreparedsincetakingoffice.TheReviewspokeofmanyanddiverse threats in a turbulent world. It highlighted ‘the increasing threatposedbyterrorism,extremismandinstability…theresurgenceofstate-basedthreats…theimpactoftechnology,especiallycyberthreats…andtheerosionof the rules-based international order’. This profusion of threats required a‘full-spectrum approach’, drawing upon all of the UK’s resources andinternationaltiestoprotectthecountryandsustainitsinfluenceabroad.

The SDSR was completed before Cameron had decided on the EUreferendum’sdateandthestancethatheandhisGovernmentwouldadoptinthe coming debate. The desire to sit on the fence was understandable.Nevertheless, the SDSR’s authors went to remarkable lengths, underministerial instruction, to keep theEUout of thedocument. It containednoreference to the European Union’s role in pacifying the Continent andhandling the Cold War’s aftermath. Nor was there reference to its varioussecurity instruments including the Common Defence and Security Policy inwhosedevelopment–andconstraint–theUKhadplayedapart. Itwasas ifinvolvementintheEU,andtheEUitself,wereirrelevanttotheUK’sdefenceandsecurityinterests.

ToBrexit’sadvocates,theSDSR’somissionsaccuratelyreflectapreference,and a reality, acknowledged by all British governments. The EU’s chiefpurposeiseconomic.NATO,thespecialrelationshipwiththeUS,cooperationin intelligence gathering, the nuclear deterrent and a competitive defenceindustryare thebedrockof theUK’s security.The country’sdeparture fromtheEUwouldhavelittleeffectonitssecurityandthemeansofitsattainment.Furthermore, allies would damage their own interests if access to the UK’sextensivecapabilitiesandexperiencewerereduced.

It follows, they argue, that there would be continuity in the nation’sdefenceandsecurityrelationsfollowingadecisiontoleavetheEU.Buttherewould be discontinuity, of a positive kind, when freed from the EU’sconstraints. Above all, the UK could assert full control over immigration,therebyreducingvulnerabilitytointernationalterrorism.

Page 112: Britain's Decision

112

AfterMrCameronhadopenedhiscampaigntokeepBritaininsidetheEU,hisgovernmentabandonedtheSDSR’sneutraltoneandbegantalkingupthesecuritybenefitsofEUmembership.TheDefenceSecretary spokeofBritainbeing safer inside the EU than outside, of the EU’s ability to ‘do things thatNATO cannot’, including in the field of counter-terrorism, and of theimportanceofbeinginvolvedin‘thesebigpartnerships’.Themilitary’sdesireto stay with the EU was also made plain in a letter to TheDailyTelegraphsignedby thirteenretiredseniorofficers, including four formerchiefsof thedefence staff. ‘NATO is themost important alliance formaintainingBritain’snationalsecurity.Buttheother,increasinglyimportantpillarofoursecurityistheEU’.Theycited theEU’scollective impositionofeconomicsanctions thathad helped to halt Iran’s nuclear weapon programme and ensured that‘VladimirPutinwouldpayapriceforhisaggressionintheUkraine’.

Ashocktotheinternationalsecuritysystem?TheseexpressionsofconcernaboutBrexitdonotadequatelyexplainwhytheprospect of the UK’s leaving the EU is regarded abroad with such dismay.Neighbours and allies are looking upon Brexit as a form of secession withgraver consequences than the secession entailed by Scotland’s bid forindependence.Inthatcase,asmallnationwasbiddingtoleavealargestate,acircumstancethathaddirectconsequencesforonlyahandfulofotherstates,Spainprominentamongthem.

Incontrast,Brexitwouldinvolvealargeandinfluentialstateleavingoneofthe post-warworld’s primary international institutions – an institution thatforall itsshortcomingsembodied liberaldemocracy, theruleof lawand theambitiontoeliminatewaronacontinentthathadsufferedsogrievouslyfromit. Furthermore, Brexit would be occurring when the EU was fragile andstrugglingtocontainforcesofxenophobicnationalism.UnlikeintheScottishcase,theinterestsofeverygovernment,andeveryestablishedpoliticalparty,wouldbeaffectediftheUKlefttheEUandemboldenedpoliticiansseekingasimilaroutcome.

Atitsmostapocalyptic,IhaveheardtalkoftheUK’sdeparturefromtheEUdelivering a geo-strategic shock to the West, sapping confidence when itspurpose and influence were being challenged by Russia, China and otherpowers, and when its central player – the US – was afflicted by internaldivisionanderratic leadership.TheWest’sprincipalmilitaryalliance,NATO,wouldnotbe immune. In aBBC interviewon15March, theHeadof theUSArmyinEuropeemphasisedtheneedforNATOandtheEUtoremainstrongand‘showsolidarity’.

The standard riposte fromBrexit’s supporters is that such claimsdonotreflectrealitiesandarepartoftheGovernment’s ‘project fear’.Furthermore,the EU’s problems are self-inflicted, arising from an ill-conceivedmonetaryunion, failure to control borders, bureaucratic centralism and a lack of

Page 113: Britain's Decision

113

democraticaccountability.TheUKwillbebetterabletolookafteritsinterestsoutsidethisdysfunctionalinstitution,andshouldnotawaititsdemise.Thesearguments may chime at home, but they are unlikely to dispel anxiety inforeigncapitals.

CompoundingtheshockThecaseforcontinuityofdefenceandsecuritypoliciesalsorestsonthegrandassumption that the UK’s exit from the EU would not destabilise the UK.Especiallyifnarrow,avoteforleavingtheEUwouldbefollowedbyaperiodof introspection, even crisis, in government that could last for months andpossiblyyears.Itmightalsoencouragefragmentation.

Political leaders inScotlandandWaleshavealreadysaidthattheywouldchallenge the right of the UK Parliament, driven by the Englishmajority, toremove their nations from the EU. Although the Scottish Government iscurrentlywary of holding another referendum, fearing its loss, Brexit couldhasten the day when Scotland leaves the UK. In Ireland there are graveconcerns, north and south of the border, that the Good Friday Agreementmight be jeopardised, bringing fresh division and violence to the island. AformerNorthern IrelandSecretary,PeterMandelson,hasspokenof theEU’s‘fundamentallystabilisingpresenceinIreland’srecenthistory’.

More thanBrexit, theUK’sbreak-upwouldhavedirect consequences forits defence and security. NATO would be affected especially if Scotlandbecame a sovereign state with its own foreign and defence policies andcarriedout the threat toremovenuclearweapons fromthebasesatFaslaneand Coulport. Various other issues that surfaced during the Scottishreferendumdebate, includingtheapportionmentofmilitaryassets,accesstotest ranges, and Scotland’s participation in NATO, would also have to beaddressed.

Indeed,adoubleshockcouldbedeliveredifBrexitwerefollowed,possiblywithin as little as a decade, by the UK’s own demise. Governments abroadwouldface,ineffect,adoublesecession–theUKleavingtheEUandScotlandleaving the UK – begging questions about the stability of states and theirinternational moorings, and about capacities to maintain institutionalloyaltiesandbalancesofpowerinsideandoutsideEurope.

Furthermore, itmight thenbedifficult to fendoffachallenge to theUK’sright tokeep itspermanentmembershipof theUNSecurityCouncilwith itsattendant veto powers, a right that could no longer be assumed if the UK’sboundaries andpersonalityhad changed. It is easy to imagineRussia,ChinaandemergingpowersseizingtheopportunitytochangetheSecurityCouncil’spermanentmembership,partlytoreducetheWest’srepresentationwithinit.

Page 114: Britain's Decision

114

Defence,securityandtheeconomyThe Prime Minister’s foreword to the SDSR opens with these words. ‘Ournational security depends on our economic security, and vice versa. So thefirst step inourNational SecurityStrategy is to ensureoureconomy is, andremains, strong.’ A few months earlier, he had succumbed to AmericanpressuretoholdtotheNATOtargetof2%ofGDPfordefencespendingwhenits reduction had been planned in the drive to reduce the financial deficit.Launchedwhen the Treasury’s forecasts for UK economic growthwere stilloptimistic, the SDSR encompassed an ambitious programme involvingTrident’s renewal, expansion of capabilities across the Armed Services,increased investment in intelligence gathering and cyber-security, and anenlarged expeditionary force to strengthen the UK’s abilities to ‘disruptthreatsinthemostchallengingoperatingenvironmentsworldwide’.

The SDSR does not hide the Treasury’s anxiety over the Government’sabilitytomeettheseobjectiveseveningoodeconomictimes.Itwouldbecomeacute if, as the CBI has warned, Brexit delivered ‘a serious shock to theeconomy’ resulting in a reduction of GDP and loss of tax revenues. If thishappened,lastNovember’sSDSRwouldhavetoberewritten.SomeshrinkageoftheUK’sdefenceandsecuritycapabilitieswouldbeunavoidable.

ImplicationsforScotlandDefence is a reservedmatter under the Scotland Act. After a vote to leave,negotiationswith theEUand itsmember statesondefence issueswouldberunfromLondon.Foreigngovernments,fortheirpart,wouldregardtheUK’sgovernment and military institutions as their main interlocutors. Like it ornot, the Scottish government would find itself on the periphery of thesenegotiations.

Scotland would, however, be involved where it possessed devolvedpowers,asonpolicing, thatarerelevanttothe fightagainstorganisedcrimeand terrorism.Future relationswithEuropol, throughwhichmember statescooperate in combatting these scourges, would be a particular concern. AllgovernmentswouldbekeentoensurethatScotlandanditscitieswereaswellprotectedasanywhereelseagainstthekindsofattackwitnessedinParisandBrussels. On security issues where there are devolved powers, however,Londonwillstillexpect,andbeexpectedabroad,totakethelead.

ItishardtoworkoutwhatthisallmeansforScotland’srelationshipwiththe restof theUK.What is certain is that, evenwithoutBrexit, thepolitical,security and economic landscape facing the country in another bid forindependence would bemarkedly different, and probably less encouraging,thanwasimaginedin2014.SubstantialpartsofScotland’sFuture,theScottishGovernment’smanifestoforindependence,wouldhavetoberewritten.Onallsides and at all levels, the advantages and disadvantages of independencewould have to be reassessed, especially if theUKhad left the EU and if the

Page 115: Britain's Decision

115

EU’sinternalturmoilhadintensified.AnindependentScotland’sprospectsforjoining the EU, NATO and other international organisations would also beaffected,inwhicheverdirection.

EncouragingdisorderBrexit’s advocates claim that there would be more continuity thandiscontinuityinUKdefenceandsecuritypolicies,andinrelationswiththeUSand other allies, following the UK’s departure from the EU. They may becorrect, in the short runat least.However, theprimaryquestion iswhetherBrexitwould bring greater political order or disorder to Europe andwithintheUK.

FuturescanbeimaginedinwhichBrexitwouldresultinastronger,moreunited UK and stimulate a collective effort, led by France and Germany, toreformtheEUtopreventfurtherdisaffection.Theyareimplausible.Itismorelikely thatBrexitwouldweaken theUK, increasegovernmentaldiscord,andintensify strains in relations between its nations and its regions. Abroad, itwould strengthen the forces of dissolution that already threaten the EU’ssurvival,riskingareturntoconflictandviolence.

Over the centuries, disorder on theEuropeanContinent has exposed theBritish state and people to the greatest danger. Isolation has never broughtprotection and war has often followed. Brexit’s supporters need to explainhowtheBritishstatecanfosterstabilityinEuropefromapositionoutsidetheEU.WilliamWalkerisProfessorEmeritusofInternationalRelations,UniversityofStAndrews.

Page 116: Britain's Decision

116

Chapter20Foreignaffairs:wouldtheUKhavemorecloutintheworld–orless?JulietKaarboWhatistheissue?If theUK leaves theEU,whatwouldbe the consequences for theUKon theworld’s stage? Would being out of the EU diminish the UK’s internationalstature and influence or would it make little difference, beyond the UK’schanged relationship with the EU? What would be the international andforeignpolicyconsequencesfortheScotlandifthereisaBrexit?

Whyisthisimportant?Given globalisation, no country is an island in world politics (even if it isactuallyanislandlikeGreatBritainandgeographicallyseparatedfromothers)becausetheworldisinterconnected–economically,culturally,andintermsofsecurity – a country’s relationships with other international actors havesignificantconsequences for thecountryand itscitizens.TheUK’seconomicandsecurityinterestsdependontheinfluenceithasoverothers.UKforeignpolicy is also about values. If UK citizenswant to promote equality, humanrights,andjusticeintheworld,theUKmusthavethecapabilitiesandstaturetopursue those goals.Whether or notBrexitwill affect theUK’s role in theworld is therefore an important question for voters’ consideration. Thisquestion is related to but goes beyond the effects of a Brexit on the UKeconomy,tradingrelationships,immigrationandsecurity(issuesaddressedinotherchapters).

WhatspecialrelevancedoestheissuehaveforScotland?The outcome of the Brexit referendum could have significant consequencesfor ScotlandandScottish residents in termsof international relations. If theUK leaves the EU, the chance for another Scottish referendum onindependence increases. And the debate over independence would bechangedbyaBrexit.The2014choicewasbetweenstaying inaUKthatwaspartof theEUversusgoing it aloneand risking the lossofEUmembership.Thisuncertainlyandtheprospectofbeingasmallstatewithoutinfluencewasakeypartofthe ‘No’side’sargument.Inafuturepost-BrexitreferendumonScottishindependence,the‘Yes’sidewouldproposeEUmembershipasakeybenefitforanindependentScotland.AndEUmembershipforScotlandmaybemore likelyunder aBrexitplus independence scenario. IfBrexit leads to anindependent Scotland, then Scotland’s standing in the world would change

Page 117: Britain's Decision

117

significantly – it would be a sovereign state, with all the challenges andopportunitiesthatcomewithindependence.

The international relations aspect of the Brexit debate looks somewhatsimilar to debate over Scottish independence. Those against ScottishindependencearguedthatScotlandwouldbetoosmalltohaveinfluenceandthatitwouldsetadangerousprecedent.ThoseagainstBrexitarealsomakingclaims about size and precedence with regard to the impact on the UK’sinfluenceintheworld.

The‘Remain’campaignargumentsOnekeythemefortheremaincampaignisthatEUmembershipamplifiestheUK’s capabilities and its potential to have influence in the world. Thisargument is aboutboth size and collective effort. In theEU, theUKbenefitsfromtheEU’scombinedmilitaryandeconomicstrength.Withthiscombinedsize, the argument goes, comes influence and the ability to talk with othermajor powers, such as the US and China, on a more equal basis. A largemilitary force can be useful in deterring aggression; a large economy cansupportmilitarymightandcanbetterutiliseeconomicsanctionsandforeignaidastoolsofinfluence.TheEU’ssizealsogivesittheabilitytoshapeothers’preferences and influence others’ actions through non-coercive means. Theremain campaign argues that leaving theEUwould render theUK amiddlepower,atbest.ItssizewouldbeafractionoftheEUanditwouldbewithoutthe combined economic, military, and normative weight to secure andpromote its interests and values in theworld.Middle powersmay bemorevulnerabletothepreferencesoflargerpowersandmayneedtocompromisemorebecauseoftheirdependenceonbiggerstates.

In addition to the issue of size, the remain campaign argues thatcoordinatedactionfrominsidetheEUmakesitsinternationalinfluencemoreeffective.IftheEUagreesonsanctions,forexample,allitsmember-statesareonboard,providingno loopholes. If theUKalonewants tosanctionanotherstate and the EU is not part of this, EU states can undermine UK effortsthrough continued tradewith the target of theUK’s sanctions. Coordinationmeans that the UK can share economic and human costs with other EUcountries, reduce risks, and increased the likelihood of operational success.Pressure to bring errant countries into line can also bemore effective frommanystatesspeakingwithonevoice.The‘Remain’campaignarguesthatthiscoordination is not a restriction of sovereignty; norms of consensus for EUexternal actions mean that the UK does not have to act against its ownpreferences. Thus, the remain campaign argues EU membership providesbenefitsfrombothsizeandcoordinatedeffort.Itevenenjoysasortofdoublerepresentationaspartof theEU,sinceUK interestsarerepresentedbyboththe UK foreign secretary and the EU High Representative at internationalsummits.

Page 118: Britain's Decision

118

AnothermajorthemearoundtheUK’scloutintheworldconcernsthetype

of world that Brexit might create, and how this world would affect UKinterests andvalues. Someon the ‘Remain’ side argue thatBrexitmay set adangerous precedent for further disintegration in the EU. If the UK leaves,othersmight follow, putting the ‘Europeanproject’ itself at risk. ThiswouldnotbegoodfortheUK,theremainersbelieve.TheEUandthepost-WorldWarII unification of Europewas in the UK’s economic and security interests allalong, arguably bringing peace and prosperity to a regionwith a history ofconflict.AbandoningthiseffortmightleadtoaworldthatisnotfavorabletotheUK.

Brexitmight alsoweaken theEU’s growing international role, risking itsability to address issues such as human rights violations, terrorism, andmigration crises – issues that affect theUK.More generally, aweakenedEUmaychangethebroaderinternationalorderandglobaldistributionofpower.A frailerEUmightweakenNATO, shifting evenmorepower toChina, India,andotheremergingpowers.Thisfutureglobalsystemcouldbeverydifferentfrom the past, bringing more conflict and be disadvantages to the UK, theremainsideargues.

For these reasons the UK’s most important strategic allies (e.g. the US,Australia, Canada, and NATO leaders) oppose Brexit. Others’ perceptions oftheUKcanaffecttheUK’sreputationandstatusandtheremainsidewarnsofthe risks for future cooperationwithkey strategicpartners. Somehavealsoargued that Brexit might be seen as a sign of weakness by states such asRussia,NorthKorea,andSyria,thusunderminingUKattemptsatinfluencingthosestates.

The‘Leave’campaignargumentsThe‘Leave’campaignhasnotfocusedmuchonforeignpolicyimplicationsofBrexit, beyond the benefits it sees for immigration and trade. ‘Leave’supporters have, however, argued that a UK out of the EU would enjoysovereign independence to pursue its own foreign policy, unconstrained bytheEU.TheyarguethattherewouldbelittledifferenceintheUK’spositioninthe world. The UK would continue to be a member of key internationalorganisations,suchastheUnitedNationsandtheWorldTradeOrganisation.The UK would remain in NATO, which the ‘Leave’ campaign sees as moreimportant and less problematic than the EU as a coordinating body for UKsecuritypolicies.TheUKwouldstillenjoyits‘specialrelationship’withtheUS,whichthe leavecampaignseesasacornerstoneofUKforeignrelations.TheUK could still cooperatewith the EU in collective action, but it would havemorefreedomforhowandwhenitwouldpursuecommonpolicies.

Page 119: Britain's Decision

119

Being out of the EU, the ‘Leave’ side argues, would not render the UKisolatedandwithout capabilities for influence. It hasmany foreign relationsassets including its extensive diplomatic corps and intelligence service,networksof relationsprovidedby theCommonwealth, andhealthybilateralrelationships with major powers and rising powers. In addition, the UKmaintains one of the largest andmost effectivemilitaries,whichwould notchange with Brexit. Any collective response to terrorist threats orhumanitariancrises,forexample,couldstillbenefitfromUKparticipationandevenleadership.EvenifotherstatesarecurrentlyagainstBrexit,itwillbeintheir interests to cooperate with a UK outside the EU. The distribution ofpowerintheworldisalreadychangingandtheUK’sstatusinoroutoftheEUwillnotlikelyaltertheriseofemergingpowersorthepivotofpowertowardAsia.TheleavecampaignarguestheUKwillbebetterabletodealwiththeseshifts in global politics with the independence of action that Brexit wouldprovide.

The leave campaign also believes that UK interests and values will bebetter served outside the EU because of the difficulties the EU itself has inpursuing coordinatedefforts. It is inadequate in responding to internationalcrises, according to the leave campaign. That NATO had to intervene in themigrant crisis, they argue, demonstrates theEU’s inability to address globalproblemseffectively.Othersgofurther,arguingthattheEUproducesconflictsrather than preventing them. Its pursuit of a relationshipwith Ukraine, forexample,draggedtheEUintotheCrimeancrisis,accordingtothe‘Leave’side.They also suggest that plans to build a European army are endangeringrelationships with NATO. The more isolationist tendencies in the ‘Leave’campaign propose that the EU’s economic andmigration problems create adrainonUKforeignrelations.Bydistancingitselffromtheseproblems,theUKcanbetterprotectitsinterestsandvalues.

AssessingtheargumentsA country’s influence in the world is shaped by many factors. The size ofeconomic and military capabilities is important for a state’s internationalclout,butcapabilitiesdonotrigidlydetermineinfluence.InoroutoftheEU,the UK would be able to influence others and would remain an importantEuropeanactor.

Astate’s international influence isalsoaproductof its identity,domesticpolitics,and leadership.ComparedtootherEUmember-states, theUKneverhadastrongEuropeanidentity,andthusleavingtheEUwillnotcreatemuchdissonance. Yet a Brexit will make the development of a more Europeanidentitylesslikely.TheUK’sotheridentity,asafaithfulallytotheUS,isnotasstrongasitwasinthepast,giventheUS’sattentiontowardAsiaandconcernsintheUKpublicoverrecentUSforeignpolicy.HowtheUKseesitselfvis-à-visothersislikelytobedebatedoverthecomingyearsanyway,butBrexitwould

Page 120: Britain's Decision

120

accelerate this process.How aBrexitwill shape domestic politics, includingpublicopinionandpartypolitics,isanotherimportantfactorthatwouldaffectfuture UK foreign policy. EU membership has long been an issue that hasdivided theConservative party, but it is unclear if consensuswould emergeafterBrexitorifanotherforeignpolicyissuewouldreplaceit.DivisionswithinmostpoliticalpartiesandwithinthepublicovertheUKuseofforcehavebeengrowing in recent years and may become more significant if the UK ischoosingmilitaryforceoutsideoftheEU.Leadersareimportantplayersthatmanageall these changing internal andexternal landscapesandUK leaders’orientationsto foreignaffairsandskill in internationalnegotiationswillalsoshapetheUK’sinfluenceintheworld.

As Prime Minister David Cameron has argued, sovereignty does notnecessarilymeanpowerandinfluence.Butneitherdoescapabilityonitsown.UK foreign policy faces critical challenges in the coming years andinternationalcloutisbynomeansguaranteed.InoroutoftheEU,theUKwillneedtoworkwithotherstomeetthesechallenges.ThechoiceforUKvotersintheBrexitreferendumisaboutthecontextinwhichtheywantthecountrytotrytoexercise influence,notaboutwhethermoreinfluencewillbehadinoroutoftheEU.JulietKaarboisSeniorLecturerintheDepartmentofPoliticsandInternationalRelationsattheUniversityofEdinburgh.

Page 121: Britain's Decision

121

Section4

TheScottishQuestion

Page 122: Britain's Decision

122

Chapter21HowdoestheEUreferendumaffectthedebateoverScotland’sconstitutionalfuture? NicolaMcEwen In September 2014, Scots voted by a clear majority to remain within theUnitedKingdom.Lessthantwoyearson,mightavotefortheUKtoleavetheEuropeanUniontriggerasecondindependencereferendumandthepotentialbreak-upoftheUK?

Campaigners for the UK to remain in the EU have pointed to such aprospect as an element of their Brexit nightmare scenario. Former PrimeMinister John Major warned that ‘no-oneshould ignore the threat that if theUK-wide vote is to leave, Scotland may demand another referendum onindependence.TheUKoutoftheEUandScotlandoutoftheUKwouldbeatrulyawful outcome’ (Telegraph, 19 March 2016). His successor in office, TonyBlair, was even more unequivocal in asserting his opinion: “if the UnitedKingdomvotestoleaveEurope,ScotlandwillvotetoleavetheUnitedKingdom".

First Minister, Nicola Sturgeon, also raised the stakes, suggesting that itwould be a ‘democraticoutrage’ if Scotlandwere to be ‘takenoutofEuropeagainst our will’. Without committing herself or her government, shesuggested that it would be ‘almost inevitable’ that such a scenario wouldgenerate an overwhelming demand for a second independence referendum.Likewise,theSNP’sEuropespokesman,StephenGethinsMP,suggestedthatasituation in which Scotland is taken out of the EU against its will wouldrepresent‘afundamentalbreakdowninwhatshouldbeapartnershipofnationsand it is highly likely that this would trigger an overwhelming demand for asecondScottishindependencereferendum’(BBC,26January2016).

For some, the prospect of Brexit triggering a second independencereferendumisathreat;forothers,itmaybeanopportunity,oranecessity.Toevaluate the credibility of the claim, we need to break it down into itscomponentparts.WouldBrexitchangethenatureoftheUniontowhichScotsgave their consent in 2014? Would it generate demand for a secondindependence referendum?Would Brexit increase the prospects of Scottishindependence?

WouldBrexitchangethenatureoftheUniondeal?Nicola Sturgeonhaspreviouslynoted that, asFirstMinisterof Scotland, shewould only seek a second referendum if there was a ‘material change’ incircumstances or public opinion. There is a strong case tomake that Brexitwould change the terms of the deal endorsed in the 2014 independence

Page 123: Britain's Decision

123

referendum. The UK’s EU membership was not an explicit element of theindependence referendum campaign. The dominant EU-related issue waswhetherScotlandwouldhavetoreapply,andonwhatterms.Nonetheless,theUK towhich Scots gave their consent was an EUmember state, and its EUmembershipwas part of the bigger picture. TheUKGovernment’s ‘ScotlandAnalysis’paperontheEUandInternationalIssues,presentedintherun-uptothereferendumtwoyearsago,arguedthatScotlandbenefitedfromtheUK’svoting strength and influencewithin the European Union, generating directbenefits for Scotland with respect to budget contributions, fisheries,agriculturalsubsidiesandtheStructuralFunds,aswellasaccesstothesinglemarket.TheimpactofaBrexitontheUK’srelationshipwithandinfluencevis-à-vis the rest of Europe and thewiderworld is difficult to predict. But thenature of these relationshipswould be altered in some form by Brexit, andwould arguably represent a material change of circumstances sinceSeptember2014.

WouldBrexittriggerdemandsforasecondindependencereferendum?Suchamaterialchangewasonlyoneofthepossiblepreconditionssuggestedby the FirstMinister as leading to a second independence referendum. Theotherwasamaterial change inpublicopinion– inotherwords, evidenceofsustainedpopulardemandforindependence,measuredinconsistentmajoritysupportinopinionpollsand/ormassmobilisationforchange.

Innationswithinstates,wecanoftenretrospectivelypinpointthecatalystthat provoked a strengthening in their demand for independence.Thatmaybe a single event, or a series of events, that contributed to a grievanceundermining the legitimacy of the constitutional status quo, and helping tomobilise demand for change. The patriation of the Canadian constitution in1982, in the face of the unanimous opposition of the Quebec NationalAssembly to itsprovisions, representeda clear catalyst in the resurgenceoftheQuebecsovereigntymovement.InCatalonia,therejectionbytheSpanishConstitutionalCourtofsubstantialsectionsoftheCatalanstatuteofautonomygave rise to a radicalisation of attitudes within Catalonia towardsindependence.TheScottishindependencereferendumin2014wasunusualinlargelytakingplaceintheabsenceofagrievanceagainsttheUnion.

It is difficult to identify such catalysts in advance, but there are someindications to suggest that Brexit could mobilise more Scots behind theindependencecause.At timeofwriting,everyopinionpollconductedwithinScotlandhassuggestedthatScotswillvotetoremainintheEUbyasizeablemargin(seeChapter4).Indeed,thereappearstobemarkedlymoresupportinfavouroftheEuropeanUnionthantheAnglo-ScottishUnion.Table1,drawingon a survey by Panelbase carried out in January 2016, reveals both theopportunity,andtheconstraint.ThedemographicprofileofsupportersoftheEU, at least with respect to their occupational class, is different from the

Page 124: Britain's Decision

124

profile of independence supporters. Whereas the latter weredisproportionately working class, the former are disproportionately inmanagerialorprofessionalmiddleclassoccupations.IftheUKweretovotetoleavetheEU,itcouldopenupanewconstituencyofsupportforindependenceamongmiddleclassScots.

Consistentwithotherpolls, thePanelbasedatasuggestthatScotsremaindividedon the issueof independence,with a slightmajority still inclined tovoteagainst.ButwhenconfrontedwiththeprospectofBrexit, thereissomeevidence of increased demand for a second referendum.Moreover, supportfor independence increases by around 5 percentage points – enough toproduceasmallmajorityforindependenceintheeventofBrexit.Buttheshiftisnotdramatic.Just20%ofthosewhovotedNoin2014wouldfavouranewindependencereferendumintheeventofBrexit,andjust14%wouldchangetheirvote,while86%remainfirmintheiroppositiontoindependence.Evenwhen confronted with the prospect of UK withdrawal from the EU, a classdivide in support for independence remains evident. For most middle andupper class Scots, support for the Anglo-Scottish Union seems to trumpsupportfortheEU. Table1:ReferendumVotes SocialClass 2014Referendum

VoteIndependenceReferendum(iftomorrow)

ABC1 C2DE IvotedYes

IvotedNo

Yes 47 38 54 92 7No 53 62 46 8 93EUReferendum(iftomorrow)

Remain 65 74 56 72 60Leave 35 26 44 28 40IfBrexit,supportanotherreferendumonScottishindependence?

Yes 47 42 51 82 20No 40 46 34 8 66Don’tknow 13 12 14 11 14IfBrexit,supportScottishindependence?

Yes 52 44 58 91 14No 48 56 42 9 86Source:Panelbase/SundayTimes,Jan2016(Exc.don’tknows/undecided)

Page 125: Britain's Decision

125

WouldBrexitincreasetheprospectsofScottishindependence?Opinion polls are useful for painting a picture, butwe should be extremelycautious in reading too much into attitudes and declared voting intentionunder hypothetical scenarios. This is especially so when trying to identifywhat consequences a vote to leave the EU could have for the UK’sconstitutional future.Contestedconstitutionalchangeisalwaysuncertain,aswasevidentinthe2014indyref,butatleastthentherewasanindependenceprospectusthatcouldbedebated.Astheforthcomingreferendumisavotetoendorse the UK’s EU membership, we know little or nothing about what arejectionof thatmembershipwouldentail.Avote to leavecould see theUKembroiled in fractious or protracted negotiations that lead to a totalwithdrawalfromboththeEUandtheinternalmarket.OritcouldseetheUKsuccessfullyandsmoothlynegotiateanewpartnershipwiththerestoftheEU,with continued unfettered access to European markets but without theperceived disadvantages of ever closer union. Social attitudes and politicalbehaviourareshapedbyevents,nothypotheticals.

If there has been little attention given to what the alternative to Brexitwould look like, there has been even less attention given to whatindependencewouldlooklikewereScotlandtobeamemberoftheEUwhiletherestoftheUKwasnot.Thiswould,ofcourse,besubjecttomultiplesetsofnegotiations–betweentheUKandtheEU;betweenScotlandandtherestofthe UK; and between Scotland and the EU – but it is unlikely that theindependence prospectus presented in advance of the 2014 referendumwould be a viable option. Then, the White Paper, Scotland’s Future, hadenvisaged a form of independence that maintained a range of institutional,economic, cultural and inter-governmental connections with the rest of theUK.Theproposedcurrencyunionreceivedmostattention,buttheplansalsoincluded a common travel area and labour market, a strategic energypartnership, defence and security co-operation, a common research area,cooperation in some aspects of public service delivery, cross-borderfunctional bodies, continuation of the ‘National’ Lottery and a joint venturebetweentheBBCandanewScottishbroadcastingcorporation.Howeveroneregarded the feasibility of these arrangements in 2014, it is unlikely that apartnershipofthisnaturewouldbecompatiblewithScottishEUmembershipiftherestoftheUKwithdraws.Scotland’slikelypositionwithintheEUwouldalsocomeunderscrutiny.AfutureScottishGovernmentseekingtonegotiateEUmembershipwithin the contextofongoingor recentnegotiationson theUK’swithdrawalmayfacestricterterms,forexample,inrelationtothesinglecurrency,thebudgetorcompliancewithfiscalrules.

NoneofthisistosuggestthatthedecisionontheUK’sfuturevis-à-vistheEUiswithoutconsequenceforScotland’sfuturewithintheUK.Withoutdoubt,adecisiontoLeavecouldhaveallsortsofunintendedconsequences,notleastwithrespecttotheterritorialcompositionandfutureofalloftheBritishIsles

Page 126: Britain's Decision

126

(theimpactontheislandofIrelandmaybeevenmorepressing).Theeffectofthese consequences for Scotland’s constitutional future is far fromstraightforward.Itmayrepresentamaterialchangeofcircumstancesandmayeven generate increased demand sufficient to justify initiating a secondindependencereferendum.Butitwouldforcethearchitectsofindependenceto confront some complex and difficult issues over the kind of independentScotlandtheycoulddeliver. NicolaMcEwenisProfessorofTerritorialPoliticsattheUniversityofEdinburghandAssociateDirectoroftheCentreonConstitutionalChange