Chapter 6: Scottish independence and
defence: the economic impact
122. We do not set out to make recommendations
about the defence policy of an independent Scotland or of the
rest of the UK. Instead we try to tease out the economic implications
in the defence field of Scottish independence.
123. A "Yes" vote in the referendum
on Scottish independence would raise complex defence-related questions.
In the view of Professor Iain McLean currency issues and
nuclear weapons are "the two issues that are likely to be
the most crucial in post-referendum negotiations".[145]
But Professor Jim Gallagher thought:
"The biggest defence question by far, however,
is not the economic effect of Faslane and Coulport but the defence
effect. What can we do with this kit? Is it at all possible to
move it? Would it be possible to negotiate its retention? If one
accepts the view of the present devolved Scottish Government,
it is clear that that would be unacceptable to them. It might
well be something in the process of negotiation on independence,
were that to take place, where the UK would come to the table
saying, 'You want things from us. Well, actually, we have something
that we want from you.'"[146]
After a "Yes" vote defence and currency-related
issues would be main strands in negotiations between Scotland
and the rest of the UK on the terms of Scotland's secession. The
outcome could have significant economic implications for the rest
of the UK as well as Scotland. Some of
the main issues which we think would arise are set out below.
Because MoD Ministers declined to give oral evidence to our inquiry
we were unable to question them directly.
Trident
124. The four Vanguard class strategic nuclear
missile submarines (SSBNs), which with their Trident missiles
constitute the UK's nuclear deterrent, are based on the Clyde
at Faslane and Coulport. The Government also plans to base the
successor generation of SSBNs there. The SNP's commitment to removing
nuclear weapons from Scottish territory is incompatible with retaining
a nuclear base on the Clyde. If an independent Scottish government
insisted on its removal, how would the rest of the UK maintain
its nuclear deterrent force? Is there an alternative base outside
Scotland? If so, what might it cost?
Other UK defence installations
in Scotland
125. There are many other UK defence installations
in Scotland, ranging from air defence bases to military and Royal
Marine barracks to training grounds, some of which offer facilities
to NATO allies. Their continued use by the armed forces of the
rest of the UK would be in doubt. How would this uncertainty be
resolved? What would be the costs of removal to the rest of the
UK? What would be the job implications in Scotland?
UK armed forces personnel
126. As well as Scottish regiments in the British
Army, there are Scottish personnel in other Army units and in
the Royal Navy and RAF. Independence for Scotland would raise
questions over how many would remain in the armed forces of the
rest of the UK and how the rest of the UK's forces would make
up the shortfall. Would there be an impact on the UK's commitments
to NATO?
Armed forces' equipment
127. After a "Yes" vote on independence,
Scotland would claim a share of equipment such as ships, planes,
vehicles and weapons. What would be the impact of reduced inventory
on the operational efficiency of the rest of the UK's armed forces?
What would be the budgetary implications for the rest of the UK
of replacing equipment ceded to an independent Scotland?
Defence procurement
128. Many suppliers of defence equipment to the
UK's armed forces are in Scotland, including the warship yards
on the Clyde. Would the rest of the UK still buy equipment from
an independent Scotland? If not, what are the alternatives and
would they imply extra costs?
The rest of the UK's defence
posture post-Scottish independence
129. If Scotland became independent, the present
United Kingdom would lose about one third of its territory, rather
less than one tenth of its population and a similar share of its
GDP (a fuller comparison is in Appendix 5). The rest of the UK's
size and standing would be diminished accordingly. Would defence
spending in the rest of the UK be reduced in proportion? Or would
the rest of the UK keep armed forces with the same scale, reach
and capabilities as now? What would be the costs and the economic
implications for the rest of the UK?
130. A "Yes" vote in the referendum
on Scottish independence would raise many complex issues of defence
policy for the rest of the UK. We believe the Government and Ministry
of Defence should be assessing the implications, economic as well
as strategic, and planning in the event that Scotland becomes
independent, and communicating these implications to Scottish
voters and to the rest of the UK as clearly as national security
considerations permit.
Engaging with the Ministry of
Defence
131. We looked forward to questioning Defence
Ministers about the challenges a "Yes" vote in Scotland
would pose. We invited Defence Ministers repeatedly to attend
one of our hearings and answer our questions. They declined on
the grounds that they would have little to add to statements already
made by Defence Ministers:
The Secretary of State for Defence said on 4 July
2012:
"The UK Government position is clear: Scotland
benefits from being part of the UK and the UK benefits from having
Scotland within it. The UK Government are not making plans for
independence as we are confident that people in Scotland will
continue to support Scotland remaining within the UK in any referendum.
"In the run-up to the referendum the UK
Government will produce detailed evidence and analysis to assess
the benefits that Scotland gains from being part of the UK and
the contribution that Scotland makes to the UK. As one of the
major reserved areas, Defence will feature significantly in this
work …
"No work has been undertaken to estimate
the cost of replicating the facilities at Faslane and Coulport
at another site in the UK. It is clear from first principles,
however, that the cost of relocating such facilities from Scotland
would be extremely high.
"I am withholding information relating to
contingency planning arrangements should Her Majesty's Naval Base
(HMNB) Clyde become inoperable for the purpose of safeguarding
national security."[147]
The then Minister of State for the Armed Forces
also told the Scottish Affairs Committee of the House of Commons
that replicating the Clyde facilities elsewhere in the UK would
"cost a gargantuan sum of money" dwarfing the £3.5bn
spent on upgrading the Clyde base.[148]
The Secretary of State for Defence, writing later
to reaffirm his unwillingness to give us oral evidence, added:
"Any alternative solution would come at huge cost …
Any replication of … facilities would cost at least that
much and probably more [than the recent £3.5 bn investment
programme at HMNB Clyde in 2011-12]."[149]
The MoD later wrote to the Scottish Affairs Committee:
"As the UK Government has no plans to unilaterally disarm,
there would inevitably be time and cost implications if an independent
Scottish Government demanded the withdrawal of the UK deterrent.
The UK Government will not pre-negotiate the departure of Scotland
from the UK. Therefore scenarios mentioned in the [Scottish Affairs]
Committee's report under which the UK may negotiate a basing agreement
for the deterrent with an independent Scottish Government will
not be discussed prior to the outcome of the referendum."[150]
132. We were disappointed by Defence Ministers'
refusal to attend a hearing and answer our questions. In defence,
as in other areas, facts are lacking to help Scottish voters make
an informed decision, and the rest of the UK to understand the
implications. The Government should take every chance to make
things clearer. Its acknowledgment of time and cost implications
if an independent Scotland demanded the withdrawal of the UK deterrent
is a step in the right direction. But there is a long way to go.
133. We welcome the Government's intention
that defence should feature significantly in the evidence and
analysis it plans to produce of the benefits of maintaining the
United Kingdom. The Government should be much more active in making
the whole UK aware of the defence-related economic implications
of next year's referendum in Scotland.
Other views of the defence issues
for the rest of the UK and their economic implications
134. We sought the views of other knowledgeable
witnesses on the issues about which we would have wished to question
Defence Ministers.
Nuclear Planning
135. We asked Lord West of Spithead, a former
Chief of the Naval Staff, about the Defence Secretary's position
that the UK Government is not planning for Scottish independence.
Lord West said:
"I am also concerned … that our Government
say they are not doing any contingency planning, because they
say separation will not happen. If that is really so—that
they are not doing any—I think it is a dereliction of duty.
There are huge implications for the United Kingdom. … were
I the First Sea Lord today, I would turn a Nelsonic blind eye
to such instructions from the Secretary of State for Defence and
I would set up a black team to work out all of the options and
possibilities for, for example, our nuclear deterrent. These are
issues that are much too important, I believe, to suddenly do
at the last moment on the back of a cigarette packet."[151]
136. Mr Francis Tusa, editor of "Defence
Analysis", agreed:
"Practically any other … navy …
would be setting up a risk committee to run through every single
aspect of this problem, to make sure that they did not have just
plan B, but plan C and plan D."[152]
He added: "If people are not planning now, it will be a nightmare,
and it will become an expensive nightmare … if you have an
independence vote and that results in being told 'You must move
these from Scotland', waving hands in the air and saying it is
too difficult is not an option."[153]
He later stated: "All the comments from the Navy are about
the total lack of contingency planning."[154]
137. We note the MoD's unwillingness for national
security reasons to disclose contingency planning arrangements
in relation to the Clyde naval base. But we would welcome assurances
that plans are in place in case the outcome of next year's referendum
results in the UK's nuclear deterrent force no longer being based
in Scotland.
138. Given the SNP's firm commitment to removal
of nuclear weapons from an independent Scotland, it is clear that
a "Yes" vote in the referendum would raise a major issue
for the Government of the rest of the UK to consider in order
to find a workable and affordable solution. We urge the Ministry
of Defence, building on its response to the report on Trident
of the Scottish Affairs Committee of the House of Commons, and
without compromising national security, to release more information
about the cost and employment implications of a decision by an
independent Scotland to require their removal.
Non-nuclear defence implications
for the rest of the UK
139. Post-referendum negotiations between a prospectively-independent
Scotland and the rest of the UK could be expected to include sharing
of defence assets including bases, personnel and equipment. Since
bases cannot be moved, a newly independent Scotland would naturally
acquire those on its territory. Lord West estimated that Scotland
might seek some Type 23 frigates and other naval vessels as well
as some helicopters and fast jets. As a result, "there would
be a diminution in our defence capability greater than just the
fact that Scotland had withdrawn".[155]
Lord West also doubted that Scottish regiments or Scottish personnel
in other units would all wish to join new Scottish forces. He
said: "A lot of Scottish military people would prefer to
be in a military that … had scope for doing proper sailoring
and soldiering and airmanship than in something that was rather
less."[156] We
invite the Ministry of Defence to publish its estimates of the
overall cost implications for the rest of the UK of a division
of conventional military assets with Scotland on the lines suggested
by Lord West.
The employment implications in
the defence field for Scotland of independence
140. Mr Paul Ingram of the British-American
Security Information Council (BASIC) estimated that there are
12,000 service personnel based in Scotland and 6,000 civilian
jobs as well as 12,500 jobs in the defence industry.[157]
Rt Hon Michael Moore MP, Secretary of State for Scotland,
put forward comparable figures of 15,000 MoD personnel in Scotland
plus 3,000 volunteer reserves and 17,000 cadets as well as 12,000
people in the defence equipment industry.[158]
141. Witnesses expected Scotland to lose defence
jobs on independence as former UK defence installations were run
down, UK procurement orders were switched away from Scotland and
defence manufacturers shifted their activities elsewhere. Lord
West said: "We would be talking 20,000 or 25,000 jobs gone."[159]
This would be just under one in a hundred of all jobs in Scotland.[160]
He also found it "inconceivable that the United Kingdom,
separate from Scotland, would have its warships built in a Scottish
yard".[161] Councillor
Gordon Matheson, Leader of Glasgow City Council, feared that 4,000
jobs in Glasgow shipyards reliant on MoD contracts would be lost.[162]
Mr John Swinney MSP pointed out that many factors affected
the number of defence jobs in Scotland besides independence. He
said MoD civilian jobs had already fallen 28% in Scotland from
2000-2011.[163] Mr Tusa
said:
"If you have a like-for-like Scottish defence
procurement budget of somewhere … between £300million
and £500million and the equivalent British defence [procurement]
budget of £6billion … to £7billion, where do you
site your factories?"[164]
142. On the other hand, Mr Swinney argued:
"If you look at the marketplace now in defence
orders, you see an increasing pattern of defence procurement being
undertaken cross-border. There are numerous examples of that now
taking their course. I would be confident that the strength and
the capability of Scottish yards would be able to operate in that
context … There has been an example of a case in South Korea
where the MoD has named Daewoo as the preferred bidder on a £452
million contract for refuelling tankers for the Royal Navy fleet."[165]
143. Job losses in Scotland might be offset to
some extent by employment in an independent Scotland's armed forces
and defence installations. We have not seen much evidence about
an independent Scotland's defence budget or the scale and capabilities
of its armed forces. But Lord West gave us an estimate of the
defence equipment newly-independent Scotland might acquire, and
"probably end up with about 10,000 regular service troops".[166]
Answering questions about how he would respond to any defence
job losses Mr Swinney said: "We are developing as part
of our wider economic strategy investments in new industries,
whether that is in renewables, the development of life sciences
activity or whatever the sectors happen to be. We see an active
role for government in taking forward such an approach to ensure
that, where there is a negative economic impact on the country,
we can take steps to remedy it."[167]
144. Lord West suggested to us that defence-related
job losses in an independent Scotland could range up to 25,000.
If they were realised, they would represent an unwelcome transitional
effect of independence.
NATO and Scotland's defence
145. Within the United Kingdom Scotland is part
of the North Atlantic alliance and benefits from its mutual defence
guarantee and the commitment of British armed forces to NATO's
integrated military structure, designed to enable the alliance
to meet its mutual defence obligations effectively. It was until
recently SNP policy that an independent Scotland should withdraw
from NATO. This long-standing policy was controversially changed
at the SNP's conference in 2012, although the commitment to removing
nuclear weapons was maintained. In Mr Tusa's view, the SNP,
"in return for a vote in favour of joining NATO … had
gone slightly even more hard line on the nuclear issue".[168]
In Mr Paul Ingram's view, the SNP's policy that an independent
Scotland in NATO would not take part in out-of-area operations
without UN endorsement is a valid position within NATO rules.[169]
146. An independent Scotland would be responsible
for its own defence. It would need to devise a new national defence
policy, making its own assessment of possible threats to national
security and setting defence priorities. As well as negotiating
with the rest of the UK a division of assets and liabilities in
defence as in other areas, it would need to decide whether to
apply to join NATO and what resources in money, personnel and
equipment to devote to defence. In addition to their strategic
importance, these decisions would make a significant impact on
employment and on the wider economy in Scotland.
147. Professor Gallagher told us:
"An independent Scotland would have a different
set of defence requirements from those of the rest of the UK.
You could be very unkind and say that those would be very small—that
there would be a kind of Home Guard approach. Or you could say
that they might more resemble those of Ireland than, say, Denmark,
to take two slightly contrasting examples. Whatever they were,
they could not conceivably be an attempt to project power on a
scale or at the distance that the rest of the UK currently does."[170]
148. Professor Malcolm Chalmers, Research
Director at the Royal United Services Institute, wrote:
"An independent Scotland's annual defence
budget … seems unlikely to exceed 1.4% of GDP, or around
£2 billion (at 2011/12 prices). It may even be significantly
less, were Scotland to follow the low-spending route followed
by Ireland, which is similarly protected by geography from external
military threats, or newly-created states (such as Lithuania and
Latvia) which have sought to create armed forces from scratch.
These three countries spend, respectively, 0.6%, 0.8% and 1.0%
of their GDP on defence." [171]
149. Professor Chalmers also wrote:
"If … the rest of the UK were to seek
to maintain a defence capability comparable to that of the UK,
it would be likely to want significantly more than the 91.6% of
total assets which strict population share would suggest. It would,
moreover, want to keep almost all existing inventory of major
high-value equipment … If Scotland were to take only 5% of
total MoD net assets, it could argue that it was entitled to financial
compensation (amounting to some £3.6 billion) in return for
receiving less than its population share. Demands for such compensation
would have to be part of a wider, and complex, negotiation on
the division of UK assets and liabilities. Scotland's reduced
share in defence assets could, for example, provide it with a
bargaining chip if it decided to seek a reduction in its share
of the inherited national debt.
"The rest of the UK could argue, for its
part, that it would be entitled to compensation for any additional
defence spending which it had to incur as a result of a separation
that it did not seek … If Scotland were to insist on these
units [submarines and military aircraft still part of the rest
of the UK's armed forces] being relocated to the rest of the UK,
the rest of the UK could argue that the costs of such a move should
be funded by Scotland …
"By contrast, if most Royal Navy and RAF
units based in Scotland were to remain there under the rest of
the UK control, the rest of the UK could not reasonably claim
compensation. Were their bases now to become the property of the
Scottish Government, the latter might feel entitled to charge
an economic rent for the property being used. Alternatively, the
two parties might prefer to keep these facilities (including the
infrastructure at Faslane and Coulport that supports the UK nuclear
force) under the rest of the UK ownership. Were this to be the
arrangement, Scotland's compensation might instead be subsumed
within the wider calculus of how UK assets and liabilities are
divided."[172]
150. Professor Chalmers also provided an
illustrative table:
TABLE 2
Possible outcome of Separation on Defence
Budgets and Assets
(based on 2011/12 levels)
| 2011/12
| Actual UK
| Notional Scotland
| Notional the rest of the UK
|
| Defence Spending: Population share
| £38 billion | £3.2 billion
| £34.8 billion |
| Defence Spending: Estimated Defence Requirements[173]
| £38 billion | £2 billion
| £38 billion |
| Defence Assets: Population Share[174]
| £107 billion |
£8.9 billion | £98.1 billion
|
| Defence Assets: Estimated Defence Requirements[175]
| £107 billion |
£5.3 billion | £101.7 billion
|
Source: Professor Chalmers written evidence
- There is not enough information about the
defence policy of an independent Scotland to enable Scottish voters
to make an informed judgment in next year's referendum. We recommend
that the Scottish Government should make a sustained effort to
clarify the issues before the vote, giving an indication of its
expected defence budget, military establishment, scale of procurement
and impact on Scotland's workforce skills base, as well as indicating
the terms of Scotland's application to join NATO. This would help
Scottish voters assess the employment and economic as well the
security implications of an independent defence policy.
145 Q 447 Back
146
Q 632 Back
147
Hansard, 4 July 2012, cols. 680W-681W Back
148
Scottish Affairs Committee: The Referendum on Separation for
Scotland: Session 2012-13, oral and written evidence (HC Paper
139-I), Q 326 Back
149
Letter of 22 November 2012 to Lord Tugendhat from Rt Hon Philip
Hammond MP Back
150
The Referendum on Separation for Scotland: Terminating Trident
- Days or Decades?: Government Response, published 9 January
2013 (HC Paper 861) Back
151
Q 844 Back
152
Q 728 Back
153
Q 734 Back
154
Q 754 Back
155
Q 857 Back
156
Q 861 Back
157
Q 435 Back
158
Q 914 Back
159
Q 850 Back
160
Calculated from data in ONS, JOBS05: Workforce jobs by region
and industry, 12 December 2012 Back
161
Q 852 Back
162
Q 713/Q 718 Back
163
Q 879 Back
164
Q 743 Back
165
Q 880 Back
166
Q 855 Back
167
Q 879 Back
168
Q 738 Back
169
Q 446 Back
170
Q 632 Back
171
Malcolm Chalmers, RUSI Back
172
Malcolm Chalmers, RUSI Back
173
This assumes that the rest of the UK seeks to maintain the current
UK level of defence spending, and that Scotland spends around
the same proportion of GDP on defence as Denmark and Norway. Under
this scenario, the total amount spent on defence in the two states
therefore exceeds the amount that would have been spent if the
UK had remained as a single state. Back
174
Assets as of 31 March 2011. UK Ministry of Defence Annual Report
and Accounts 2010-11, July 2011, p. 105 Back
175
Assets divided in proportion to post-separation defence budgets Back
|
