3 Conditions of membership
47. In the White Paper, Scotland's
Future, the Scottish Government states that its negotiating
position on the terms of its membership of the EU would be
based on the EU Treaty obligations and provisions that currently
apply to Scotland under its present status as part of the UK.
The Scottish Government further asserts that its membership of
the EU would cause no detriment to other Member States.[55]
This belief, that Scotland would simply "inherit the position
that the UK has",[56]
masks the complex negotiations that would be required for Scotland
to become a Member State of the EU. Jim Currie, former Director
General at the EU, told the Scottish Parliament's European and
External Relations Committee:
I do not think that you can assert
before any treaty negotiation on the terms of new membership what
would happen automatically. I think that the negotiations will
be tough.[57]
48. While it is reasonable to assume,
given Scotland's present situation within the EU, negotiations
about each of the 80,000 pages of acquis would not be required,[58]
nevertheless careful consideration of each page would be necessary
because, as noted earlier in this Report, Scotland is not exercising
the same competencies under devolution as it would be exercising
were it to become a separate state. Certain key aspects of Scotland's
proposed terms of membership would almost certainly be subject
to detailed consideration (irrespective of the chosen route to
membership). Such conditions include the opt-outs that Scotland
currently enjoys by being part of the UK, in particular opt-outs
from the Eurozone, Schengen and Justice and Home Affairs measures,
as well as the complicated matter of the UK rebate.[59]
We consider these key terms of a separate Scotland's membership
of the EU below. It should also not be forgotten that negotiations
on the terms of Scotland's membership would be contingent upon
the outcome of the necessary internal negotiations on Scotland's
separation from the UK.[60]
Opt-outs
49. The Scottish Government has stated
that a separate Scotland would seek to retain the opt-outs it
currently benefits from by being part of the UK. While there is
no legal reason why Scotland should not, or could not, seek to
negotiate membership on these terms, the Scottish Government has
not set out the potential problems that stand in the way of securing
such a favourable outcome. A fundamental challenge, as the Minister
for Europe told us, is that the EU is institutionally resistant
to the principle of opt-outs.[61]
Only Ireland, the United Kingdom, Denmark (all of whom acceded
in 1973) and Poland (acceded in 2004) have been able to secure
major exemptions for the long-term. On a more practical level,
all new Member States are obliged to sign up to the acquis
communautairethe core body of EU lawwhich, for
example, includes a commitment to join both the Euro and the Schengen
zone.[62] The UK Government
has opt-outs from both of these areas.
50. In addition, the UK Government,
who would be likely to lead negotiations with the EU under an
Article 48 process, could not be expected to negotiate certain
special terms and opt-outs on Scotland's behalf if it felt they
would be disadvantageous to its interests as the successor state.
Most significantly, however, regardless of whether an Article
48 or 49 route is pursued, all Member States must agree
to the terms of Scottish membership before it can join, including
any favourable terms or opt-outs Scotland wishes to be granted.
This would mean other Member States agreeing to opt-outs for Scotland
that they themselves do not possess.
THE EURO
51. The Scottish Government has made
clear its intention not to join the European single currency:
While the Scottish Government recognises
the political and economic objectives of the Eurozone, an independent
Scotland will not seek, nor will we qualify for, membership of
the Eurozone. Scotland's participation in the Sterling Area will
not conflict with wider obligations under the EU treaties.[63]
As part of the acquis, all new
Member States must make a binding commitment to join the Euro.[64]
It is not clear whether in not seeking membership of the Eurozone
the Scottish Government intends a separate Scotland to seek a
formal opt-out. Only the UK and Denmark, both members of the community
since 1973, have secured such an opt-out.[65]
The Minister for Europe pointed to the experience of recent EU
accessions:
If you look at those member states
who have come into the European Union since the Euro was created,
all of them as part of their accession negotiations and accession
treaty had to accept a binding obligation to join the Euronot
immediately, because they have to commit themselves to reaching
the economic criteria necessary for joining the single currency,
but they have to accept a binding treaty commitment, binding in
international law, to join the Euro.[66]
No other Member State has sought an
opt-out from the Euro, which would make the Scottish case unique
if it were to pursue such a course.[67]
Furthermore, it is difficult to see how Scotland could negotiate
an opt-out from the Euro before having negotiated its preferred
currency optionthe retention of Sterling in a formal currency
unionwith the rest of the UK. In this regard, it is pertinent
to note that both coalition parties in the UK Government, and
the Labour Party, have already ruled out the possibility of a
separate Scotland sharing the pound.[68]
Any commitment to join the Eurozone, even if it was in the long
term, would undermine the basis of any formal currency union as
markets would not think the arrangement permanent. The lack of
clarity over a separate Scotland's economic future would almost
certainly delay Scotland's bid to become a Member State.
52. In reality, the EU could not force
a separate Scotland to join the Euro. Before becoming a member
of the Eurozone, a separate Scotland would first have to join
the exchange rate mechanism, such a step is voluntary. Dr Fabian
Zuleeg, Chief Executive of the European Policy Centre, told the
European and External Relations Committee of the Scottish Parliament
that "there is nothing in the legal framework of the European
Union that could force a country to join the exchange rate mechanism
so, although there might be pressure on a country to join the
exchange rate mechanism, that condition cannot be enforced by
law."[69] A separate
Scotland cannot be forced to adopt the Euro, but Member States
might well insist on a commitment to do so in the future.
53. In the event that Scotland was able
to obtain an opt-out from the Eurozone, it would still have to
comply with other EU economic and fiscal recommendations. Failure
to do so could lead to the suspension of budget payments under
what is known as macro-conditionality. The UK has an opt-out from
these arrangements.[70]
In addition, EU Member States have to comply with the Stability
and Growth Pact (SGP) which sets limits for Government debt and
deficit. Under the SGP Member States' debt-to-GDP ratio must be
less than 60% or, if above, be clearly declining to less than
60%. Member States that fail to comply with this obligation face
economic sanction.
54. A separate Scotland's debt-to-GDP
ratio is predicted to be in the region of 86%.[71]
According to the National Institute for Economic and Social Research
(NIESR) this means that, "an independent Scotland is likely
to require a more restrictive fiscal stance than proposed by the
Coalition government for many years."[72]
On joining the EU, the government of a separate Scotland would
have to commit to meeting the EU target of getting national debt
down to 60% of GDP within 10 years. To achieve this the Scottish
Government would have to impose additional spending cuts to those
planned by the UK Government or raise taxes higher, or both. We
will give further consideration to fiscal limitations imposed
by the EU in our future work.
SCHENGEN
55. Another major feature of the EU
acquis the Scottish Government wishes to opt-out of is
the Schengen travel area.[73]
The Scottish Government instead prioritises membership of the
Common Travel Area (CTA) that currently exists across the UK,
Ireland, Isle of Man and Channel Islands:
There are no circumstances in which
the Scottish Government would countenance any measure being taken
that jeopardized the ability of citizens across the rest of the
UK and Ireland to move freely across our borders as they are presently
able to do. It is for this reason that following independence
Scotland will remain part of the Common Travel Area (CTA), which
dates back to the 1920s.[74]
The Scottish Government states that,
"there are absolutely no grounds to believe that the EU would
challenge Scotland remaining part of the CTA rather than joining
the Schengen area."[75]
This assertion is completely without foundation, since all new
Member States are required to commit to joining the Schengen area,
an obligation that has been in place since 1999.[76]
Once again, an opt-out would be required for a separate Scotland
to remain outside the Schengen zone in the long-term, something
only long-standing Member States of the EUIreland and the
UK have been able to negotiate.[77]
No new Member State has sought an opt-out from Schengen, so Scotland's
attempt to do so would be unprecedented.[78]
56. Negotiations over the Common Travel
Area would have to take place between Scotland and the UK, before
Scotland could begin negotiations over an opt-out with the EU.
One potential flash-point for dispute between Scotland and the
UK is immigration. The CTA operates on the basis that members
have broadly similar immigration policies (as the UK and Ireland
presently do) but, it is the stated aim of the Scottish Government
to promote greater immigration into Scotland as a post-separation
policy. In his evidence to the Committee, Minister for Immigration
and Security, James Brokenshire MP stated that it would be "wide
of the mark" for a separate Scotland to run a markedly different
immigration policy from the continuing UK and expect there to
be no implications regarding a common travel area.[79]
57. In the event of the Scottish Government
being unable to negotiate an opt-out and having to participate
in Schengen as part of its terms of accession, the Minister for
Immigration and Security described how the current regime of free
and uninterrupted travel between Scotland and the rest of the
UK could change:
If Scotland were part of the EU
and part of Schengen, in those circumstances it would be under
an obligation to secure the external Schengen border. Therefore,
it could itself be under obligations to put in place border checks,
border controls and everything that that brings with it.[80]
The need to complete negotiations
with the UK on key issues before Scotland can negotiate with the
EU is not mentioned by the Scottish Government in the White Paper,
but it is further reason to doubt the plausibility of the Scottish
Government's 18-month timetable for negotiation and ratification
of a separate Scotland's membership of the EU.
58. The Scottish Government seems
to believe that opting out of joining the Eurozone and Schengen
would be a formality, but Member States have no reason to give
in to Scotland's demands, and they each enjoy a right of veto
over a separate Scotland's potential membership. The case made
by the Scottish Government in the White Paper that, in the event
of separation, it could and should continue to receive the opt-outs
and derogations negotiated by the UK appears to us based on wishful
thinking rather than legal and historical precedent.
JUSTICE AND HOME AFFAIRS
59. The UK has negotiated flexibility
to opt in to EU measures relating to Justice and Home Affairs
(JHA), in light of what it considers to be within its national
interests. The UK Government's Scotland Analysis paper
on EU and international issues gives the following example:
The UK has used this power to protect
the nation from measures that it does not wish to take part in,
such as those that would require changes to UK immigration law,
while participating where it is in UK interests to do so; for
example, the UK participates in measures against human trafficking.[81]
60. Scotland benefits from this provision
of UK EU membership and the Scottish Government is consulted on
all decisions on whether or not to participate in specific JHA
measures.[82]
61. It is the stated aim of the Scottish
Government to seek to retain this current flexibility in the event
of negotiations to seek separate EU membership.[83]
Only the UK, Ireland and Denmarkall members for over 40
yearshave managed to negotiate flexibility in the area
of Justice and Home Affairs.[84]
The Scotland Analysis paper suggests that failure to negotiate
an opt-out would mean Scotland having to adopt the JHA portion
of the acquis in full, requiring "major changes to
its legal system."[85]
However the paper does not provide detail on the exact nature
of these changes. No new Member State has negotiated an opt-out
from JHA measures and it is questionable that Member States would
grant Scotland a greater flexibility than they themselves are
able to exercise. The UK Government claims that a failure to negotiate
an opt-out from EU Justice and Home Affairs measures would have
major implications for a separate Scotland's legal system. This
is an important matter which requires further clarification.
VAT
62. The rates at which Member States
can charge VAT is dictated by the European Union's VAT legislation
(Directive 2006/112). The Directive sets out the basic framework
within which Members States are afforded a degree of flexibility.
However, the Directive stipulates that Member States must have
a standard rate of at least 15% while allowing for some reduced
rates of not less than 5%. Some Member States, such as Malta,
Ireland and the UK, have been able to negotiate the ability to
charge a zero-rate of VAT and out of those the UK makes the most
use of this ability, with 54 items listed by HMRC as attracting
zero-rates of VAT. Items range from food, children's clothes,
books and newspapers and equipment for the disabled, to parts
of the shipbuilding and aircraft repair sectors.[86]
63. In the event of a vote in favour
of separation, the Scottish Government would have to negotiate
derogations from the VAT Directive if it wished to continue to
benefit from zero-rates of VAT. However much the Scottish Government
repeats the mantra of 'continuity' and claims that a smooth transition
would benefit everybody, there remains no guarantee that other
Member States would agree to grant a separate Scotland flexibilities
that they are not able to exercise themselves. Furthermore, the
granting of a derogation to Scotland would go against the objective
of the VAT Directive of simplification and rationalisation. From
1 January 2013 Croatia replaced its zero-rate of VAT by a minimum
rate of 5% ahead of its becoming an EU Member State six months
later.
64. A Scottish EU Member State would
be bound by EU legislation on VAT. There is no guarantee that
the Scottish Government would negotiate the opt-outs that would
be required to continue zero-rates of VAT on items such as children's
clothes, food and books. Failure to secure an opt-out would see
costs of these basic items increase by a minimum of 5%. Like other
risks surrounding separation, this threat to the pockets of Scottish
families is overlooked by the Scottish Government. The uncertainty
over zero-rates of VAT does not exist if Scotland remains part
of the UK.
Student fees
65. In the White Paper, Scotland's
Future, the Scottish Government sets out plans to maintain
the current arrangements on university tuition fees.[87]
Article 18 of the Treaty on the Functioning of the European Union,
which forbids discrimination against other EU citizens on the
grounds of nationality, provides that the Scottish Government's
present policy of free access to higher education for citizens
domiciled in Scotland must also apply to students from all EU
Member States, as they must be treated the same as students of
the host country. The regulations governing discrimination between
Member States do not apply to students from Wales, England and
Northern Ireland, as, at present, they are within the same
Member State. Scotland's higher education institutions are therefore
free to - and do - charge students from the rest of the UK up
to £9,000 per year in tuition fees.
66. In the event of separation and membership
of the EU, plans to continue to charge tuition fees to students
from the rest of the UK would clearly be contrary to Article 18
as Scotland would be overtly discriminating against students from
another EU Member State. The Scottish Government's position is
that it would seek a derogation from this fundamental part of
EU law. As we discussed in our Report The Referendum on Separation
for Scotland: the impact on higher education, research and tuition
fees it is unlikely that the European Court of Justice would
accept Scotland's position; the possibility of the Scottish Government
achieving such a derogation is therefore remote. [88]
67. Unlike other areas from which Scotland
would be seeking an opt-out, such as Schengen, in the case of
student tuition fees the UK has a direct interest in making sure
Scotland does not secure special dispensation. The Minister for
Europe was forthright on this point:
I cannot see it as probable that
any UK Government would accept that students in Scotland from
the UK should be disadvantaged in that way, and should lose out
on a right that they would have under European law.[89]
68. It is appropriate to consider what
this stance might mean for Scottish negotiations on terms of EU
membership. If an Article 48 route to membership were pursued,
it seems highly unlikely the UK Government would seek to negotiate
a position on behalf of Scotland that would see thousands of its
own students disadvantaged. Under an Article 49 accession, while
Scotland would be arguing its own case, it would still have to
persuade the other Member States, including the UK. On this basis,
it is surely time for the Scottish Government to admit that its
hopes of discriminating against students from the rest of the
UK on the charging of tuition fees are dead; alternative plans
must now be made.
69. If a separate Scotland's universities
were unable to charge tuition fees to students from the continuing
UK there would be a £150 million funding black hole in the
higher education budget. The Scottish Government has failed to
say how, or even if, that gap in funding would be filled.
55 Scottish Government White Paper, Scotland's Future:
your guide to an independent Scotland, November 2013, p220,
Speech made by the First Minister at the College of Europe in
Bruges, 28 April 2014 Back
56
Evidence taken before the European and External Relations Committee
of the Scottish Parliament, 3 April 2014, p1958 Back
57
Evidence taken before the European and External Relations Committee
of the Scottish Parliament, 20 February 2014, p1813 Back
58
Evidence taken before the European and External Relations Committee
of the Scottish Parliament, 23 January 2014, p1739 Back
59
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, p222 Back
60
Q5242 Back
61
Q5191 Back
62
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, p65 Back
63
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, p222 Back
64
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, pp68-69. Back
65
Sweden has still not adopted the Euro, despite having joined the
EU in 1995 and having made a binding commitment to do so. See
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, p68. Back
66
Q5189 Back
67
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, p63 Back
68
Scottish independence: 'Yes vote' means leaving pound, says
Osborne, BBC News Online, 13 February 2014, Back
69
Evidence taken before the European and External Relations Committee
of the Scottish Parliament, 20 February 2014, p1829 Back
70
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, pp69-70. Back
71
Independent Scotland would face immediate £23bn debt - thinktank,
Guardian, 8 April 2014; NIESR, Public sector debt, borrowing,
taxation and fiscal rules: evidence presented to the Scottish
Parliament's Finance Committee, 25 April 2014 Back
72
Independent Scotland would face immediate £23bn debt - thinktank,
Guardian, 8 April 2014 Back
73
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, p223 Back
74
Ibid. Back
75
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, p224 Back
76
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, pp70-71 Back
77
The UK has chosen to opt-in to police co-operation aspects of
Schengen but has the right to opt-out of measures building on
this, See HM Government, Scotland analysis: EU and international
issues, January 2014, Cm 8765 Back
78
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, p63. Both Rt Hon David Lidington MP and
James Brokenshire MP indicated in their oral evidence to the Committee
that the continuing UK would be supportive of Scotland seeking
an opt-out from Schengen, however, as Mr Lidington pointed out,
"I do not think it is the UK that the Scottish Government
in those circumstances would have to worry about."[Q5253] Back
79
Q5276 Back
80
Q5267 Back
81
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765 Back
82
Ibid., p71 Back
83
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, p224 Back
84
Q5189 Back
85
HM Government, Scotland analysis: EU and international issues,
January 2014, Cm 8765, p71 Back
86
European Commission, VAT Rates Applied in the Member States of
the European Union, 13 January 2014 Back
87
Scottish Government White Paper, Scotland's Future: your guide
to an independent Scotland, November 2013, pp197-200 Back
88
Scottish Affairs Committee, Seventh Report of Session 2013-14,
The Referendum on the Separation of Scotland: the impact in
Higher Education, Research and Tuition Fees, HC1144 Back
89
Q5235 Back
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