Chapter 5: Scotland
The political context
144.At the 23 June 2016 referendum, 62% of votes cast in Scotland were for remain, the highest percentage of any of the nations of the UK. There was a broadly consistent picture across Scotland, with a majority for remain in each of the counting areas though this was on a relatively low turnout of 67.2%—lower than the turnout in England and Wales, and over 17 percentage points lower than the turnout for the 2014 Scottish independence referendum. The Scottish Government and all the main political parties in Scotland were pro-remain, as were a majority of Members of the Scottish Parliament (MSPs).
145.The morning after the referendum, the First Minister of Scotland, Rt Hon Nicola Sturgeon MSP, announced her intention “to take all possible steps and explore all options to give effect to how people in Scotland voted—in other words, to secure our continuing place in the EU and in the single market in particular”. She also announced that a second referendum on Scottish independence was “on the table” because of “a significant and material change in the circumstances that prevailed in 2014”.143
146.In December 2016, the Scottish Government published a paper entitled Scotland’s Place in Europe, setting out its view of the importance of continued European Single Market membership for Scotland, and arguing that this was also the best outcome for the UK as a whole. The Scottish Government’s preferred option was for an independent Scotland to remain an EU Member State, but failing this, it argued that the UK as a whole should remain within the European Single Market—as part of the European Economic Area (EEA)—and within the EU customs union. The paper then set out how, if that were not possible, Scotland could remain a member of the EU Single Market and retain some key benefits of EU membership even if the rest of the UK were to leave.144
147.The Prime Minister’s Lancaster House speech (and the subsequent UK Government White Paper) ruled out UK membership of the Single Market. She stated that the Scottish Government’s paper would “be considered as part of this important process”,145 but on 13 March the First Minister accused the UK Government of having ruled out UK membership of the Single Market without any prior consultation with the Scottish Government and other devolved administrations. Ms Sturgeon announced her intention to seek a second independence referendum: “To make sure that Scotland will have a choice at the end of this process—a choice of whether to follow the UK to a hard Brexit, or to become an independent country able to secure a real partnership of equals with the rest of the UK and our own relationship with Europe.”146
148.On 28 March, the Scottish Parliament voted in favour of mandating the Scottish Government to open formal talks with the UK Government on the details of a ‘Section 30 order’,147 to enable an independence referendum to take place.
149.In response to the First Minister’s announcement, the Prime Minister stated that “now is not the time” for a second referendum:
“Just at this point, all our energies should be focused on our negotiations with the European Union about our future relationship. To be talking about an independence referendum will make it more difficult for us to be able to get the right deal for Scotland, and the right deal for the UK. And more than that, I think it wouldn’t be fair to the people of Scotland because they’re being asked to make a crucial decision without all the necessary information—without knowing what the future partnership would be, or what the alternative of an independent Scotland would look like.”148
150.Following the general election on 8 June, when the SNP lost 21 seats, the First Minister conceded that “the issue of an independence referendum was a factor in this election result”, and stated that she would “reflect” on this, leading to speculation that she would shelve her proposal for a second independence referendum.149 In the wake of the indecisive result across the UK, she also called for UK membership of the Single Market and of the customs union to be reconsidered as post-Brexit options.150
151.Subsequently, on 27 June, the First Minister announced the Scottish Government’s intention to “reset” its plan, by not seeking to introduce the legislation for an independence referendum immediately, but rather to seek to “influence the Brexit talks in a way that protects Scotland’s interests”, and to build support for the proposals set out in its Scotland’s Place in Europe paper. She added:
“At the end of the period of negotiation with the EU, which is likely to be around next autumn, when the terms of Brexit will be clearer, we will come back to Parliament to set out our judgment on the best way forward at that time, including our view on the precise timescale for offering people a choice over the country’s future.”151
Scottish independence and EU membership
152.The Scottish Government’s preferred option is thus for Scotland to retain EU membership as an independent state. This raises important questions of EU law: during the 2014 Scottish independence referendum campaign, the then Commission President, José Manuel Barroso, stated (in what has become known as the ‘Barroso Doctrine’) that an independent Scotland would become a “third country with respect to the EU”, and would therefore need to apply for EU membership.152 Although the circumstances have now changed (in that an independent Scotland, rather than becoming the 29th EU Member State, would be seeking to remain within the EU while the rest of the UK left), statements from the Commission since the 2016 referendum have suggested that the Barroso doctrine still applies.153
153.The question of how an independent Scotland could secure membership of the EU is beyond the scope of this inquiry. Nevertheless, we note the observation of the former First Minister of Scotland, Lord McConnell of Glenscorrodale, that any decisions on the status of a newly independent Scotland would be political as well as legal:
“You cannot completely avoid the rules. If there were an independent Scotland or if it voted to be independent, the rules are that you do not just become a successor state. That, to me, is pretty clear, but you also cannot avoid the political reality. If Scotland were an independent country and wanted to be a member of the European Union, I think the European Union would find a way of dealing with that pretty quickly. There are rules and there is political reality. Both would come into play, but a decade from now we would look back and say, ‘That was sorted’.”154
The Scottish Government’s proposal for “a differentiated solution for Scotland”
154.The central proposal in the Scottish Government’s paper on Scotland’s Place in Europe was that, in the event that the UK as a whole did not remain in the Single Market, a “differentiated solution for Scotland”, through Scottish membership of the European Economic Area (EEA) and European Free Trade Association (EFTA), should be adopted. The paper envisaged:
“An integrated solution for Scotland which ensures continued membership of the European Single Market, and collaboration with EU partners on key aspects of policy and participation in EU programmes such as Horizon 2020 … Beyond the common aspects of these relationships (which relate to the implementation of the European Single Market), Scotland would also seek the opportunity to collaborate in a wider range of policy areas such as energy and justice, which would add to our ability to work with European partners beyond a relationship based solely on free trade. Other differentiated options would also be open to Scotland … whereby Scotland could seek to remain part of particular EU policies and initiatives (i.e. Horizon 2020, Erasmus, Europol).”155
155.The paper recognised that there would be “significant practical challenges” with this model, but argued that “there is already a range of asymmetric and differentiated arrangements within the EU and single market framework”.156 It stated that flexible arrangements would be required for Northern Ireland and Gibraltar, and should also be considered for Scotland. The Scottish Government stressed that its proposal sought “to secure the benefits of the European Single Market for Scotland in addition to—not instead of—free trade across the UK”.157
156.The Scottish Government Minister for UK Negotiations on Scotland’s Place in Europe, Michael Russell MSP, gave evidence to us in February 2017. He stressed that the Scottish Government was seeking to reach a compromise with the UK Government. He acknowledged that the Scottish Government’s proposal for Scotland to remain in the Single Market by means of the EFTA/EEA option was “not easy”, but insisted that it was “viable”.158 He said that this would in turn require the devolution of powers in relation to employment law and health and safety legislation.159 Mr Russell acknowledged the political challenges, but argued that it was “a matter of political will to achieve it”.160
157.Mr Russell said that there were three reasons to justify a differential arrangement for Scotland:
- A democratic argument based on the referendum vote: “Scotland as a distinct unit voted 62% to 38% … There is a view that Scotland should remain in the EU.”
- The strengthened democratic mandate given to the Scottish Government, both by the referendum and by the fact that the Scottish Parliament had twice voted strongly in favour of remaining in the Single Market.
- The profound economic challenges that Brexit presented to Scotland: “Substantial economic damage will be done if we are … not members of the single market.”161
The UK Government’s response
158.On 29 March 2017 (the day that Article 50 was triggered), the Secretary of State for Exiting the EU, Rt Hon David Davis MP, wrote to the Scottish Government setting out the UK Government’s response to its proposals. He stated:
“There are clear barriers to making your proposals a reality. Scotland’s accession to EFTA, and then the EEA, would not be deliverable and, importantly, would require the consent of all EFTA and EU member states. Any divergence between EU and UK law—as a result, perhaps, of new EU regulation—could lead to the creation of new barriers to trade within our Union, which could take the form of additional controls and checks on trade within the United Kingdom. Given that trade with the rest of the UK is worth four times trade with the EU, I do not believe that such significant disruption to the internal UK market is in Scotland’s—or the UK’s—best interests. And Scotland’s businesses could face a confusing mix of regulatory regimes.”
159.He argued that the “better way to achieve the objectives we have in common” was the Prime Minister’s intention to seek “a new, bold and ambitious free trade agreement, which may take in elements of existing Single Market arrangements, where it is in our interests to do so”.162
Scotland and the Single Market
160.Prior to publication of the UK Government’s response, we sought the views of our witnesses on the Scottish Government’s proposals, and in particular on whether Scotland, in isolation, could remain in the Single Market as proposed.
161.Professor Tomkins told us that while the Scottish Conservatives were calling for the fullest possible access to the Single Market, seeking to retain membership of the Single Market would fail to respect the result of the referendum.163 He was sceptical that the Scottish Government’s proposal was either practically possible or economically desirable, saying that the Scottish Government had been “unable to identify even a single discretely Scottish national interest that would require a differentiated deal for Scotland and other parts of the UK”. He also argued that the interests of farmers, manufacturers, the financial services industry and universities in Scotland were the same as for their counterparts elsewhere in the UK.164
162.Professor Tomkins also noted that the value of Scotland’s trade within the UK was four times greater to the Scottish economy than the value of Scottish exports to the EU, and argued that a differentiated deal involving Single Market membership would jeopardise the coherence, stability and value to the Scottish economy of the UK’s domestic market. Neither did he think it practicable to propose Scottish membership of the EEA, as this would require Scotland to be an independent state.165
163.Former Secretary of State for Scotland, Lord Forsyth of Drumlean, also stressed that the referendum was a UK-wide vote. He thought it “absurd” to argue that Scotland “should have some kind of opt-out and be in the single market while the rest of the UK was not … There is no provision in EU law for this kind of arrangement.”166
164.Lord Forsyth told us that the Scottish Government’s proposals would inevitably result in trade and regulatory divergence between Scotland and the rest of the UK.167 He also argued that Single Market membership was not in Scotland’s economic interest, given that only 5% of its businesses were exporters. He suggested that the proposal was part of the Scottish Government’s desire to “pick a fight and find a grievance”, in order to make the case for Scottish independence.168
165.The former Deputy First Minister of Scotland, Lord Wallace of Tankerness QC, agreed that the UK-wide result needed to be respected. He doubted the practicability of the Scottish Government’s proposals, which he too believed had been “put up to be knocked down and to stoke up resentment when it does not happen”. Lord Wallace also commented on the Scottish Government’s proposal for Scotland to become a member of EFTA/EEA:
“There will be huge potential political and legal difficulties. … If Scotland was part of the single market and had to observe all its rules without any locus in determining those rules, how would we have trade within the United Kingdom? … If England and Wales … outwith the single market decided that they would have regulations that were less onerous than those that Scottish manufacturers and service providers had to adhere to, how would Scottish manufacturers get on in trying to export to England, where there might be a lower ceiling and cheaper manufacturing? It could not work.”169
166.Lord McConnell of Glenscorrodale also thought that the Scottish Government’s proposal for Scottish membership of the Single Market was neither politically nor legally possible.170
167.Professor Christina Boswell, Director of Research, School of Social and Political Science, University of Edinburgh, described seeking to retain Single Market membership for Scotland alone as “very implausible legally and politically”.171 Professor Jim Gallagher, Visiting Professor, University of Glasgow, and former Cabinet Office Director-General for Devolution, agreed that the proposals were “utterly implausible”:
“There would be a market barrier at the border. It would not be a customs barrier necessarily, but one set of trade rules and one set of product rules would apply north of the border and another would apply south of the border. That is exactly the problem of leaving the single market for the EU. You would create a single market problem between Scotland and England.”172
168.Josh Hardie, CBI Deputy Director-General for Policy and Campaigns, also argued for a whole-UK approach: “Because the economy is so intertwined—sectors work with each other and regions work with each other—if you start to break it up at the very beginning, it becomes harder to get the best possible deal.” Given that 60% of Scotland’s exports were to the rest of the UK, the key was to ensure that there was not a detrimental effect on the UK single market.173 United Against Separation also expressed strong opposition to any attempt to keep Scotland within the EU Single Market, arguing that it would be unworkable and would undermine the status of the UK. They told us that “the whole United Kingdom must leave the EU together on the same terms, negotiated by the British Government.”174
169.Dr Lock, on the other hand, argued that the Scottish Government’s proposal was legally deliverable, though acknowledging that it was politically very difficult:
“It would lead almost to quasi-independence, because you would have to split up the internal market of the UK … If you want to join EFTA, you have to sign up to all EFTA trade deals. If you do that, unless the UK does the same thing, you cannot be in a proper customs union with the UK because you will have different customs tariffs as regards third countries.”
170.Dr Lock added that, while customs checks at the English/Scottish border would not be required if there was agreement on zero tariffs, at least some rules of origin declarations would need to be made for goods crossing the border. While he thought the EFTA countries might be able to show more flexibility than the EU, this would amount to “asking them not only to admit Scotland as a non-independent state but to waive the requirement for Scotland to sign up to all those agreements, which is a requirement in the foundational treaty”.175
171.Professor Nicola McEwen, Professor of Territorial Politics and Associate Director, Centre on Constitutional Change, University of Edinburgh, also believed that the Scottish Government’s model of a differentiated solution would be “complex and extremely difficult, and probably unlikely”. Nevertheless, it was not implausible, she told us, if there was political will to work through the complexities.176
172.Professor Sionaidh Douglas-Scott, Co-Director of the Centre for Law and Society in a Global Context, Queen Mary University of London, argued that Scotland could have “some sort of differentiated relationship” that included Single Market membership, but was clear that this would require treaty-making powers, a legal personality (for which see below, paragraph 193), and the devolution of competences in relation to the free movement of goods, persons, services and capital. She acknowledged the need to address tariffs and regulatory barriers within the UK, but noted the precedents of Liechtenstein and Switzerland, which are both part of the EU customs union, even though one is in the EEA and one is not.177 In her view, the most difficult aspect of the Scottish Government’s proposals was the potential for different trade deals to be struck on either side of the border.178
173.Professor (now Sir) Anton Muscatelli, Principal, University of Glasgow, led the Standing Council of experts appointed by the Scottish Government to advise it on the implications of Brexit. He believed it was technically feasible to have a differentiated solution, given that “Europe is full of variable geometries”. He conceded that the Scottish Government’s proposals were challenging on a number of grounds, including how to maintain two parallel single markets and the impact on competition law, but maintained that keeping UK regulations around markets and products tethered to the Single Market through Scotland could be advantageous. Whether it was politically feasible was another matter.179
174.The British Academy and the Royal Society of Edinburgh identified the following issues attaching to the Scottish Government’s proposals:
- The need for different rules governing the treatment of goods entering the UK from EU Member States, depending on whether they were destined for Scotland or for England and Wales.
- The need for certification at the final point of sale of such goods.
- The need for rules of origin if intermediate goods were passing through England and Wales en route for Scotland.
- The likely existence of a virtual border in services to the degree that EU and UK rules diverged after Brexit.
- The need for controls to ensure that EU workers did not come into Scotland and then cross the border to work in England.
- The need for provision to define a Scottish worker, for the purposes of rights to work in Member States of the EEA.180
The case for different arrangements
175.While the weight of evidence cast doubt on the practicality and deliverability of the Scottish Government’s proposal for Scotland alone to remain within the Single Market, several witnesses argued that more modest differentiation for Scotland in the Brexit negotiations might be both possible and desirable.
176.Lord McConnell of Glenscorrodale put the disagreement between the UK and Scottish Governments into political context:
“Every time Prime Ministers and other senior figures in the UK Government have talked about Scotland in the last 15 years, they have been reacting defensively to a situation that they have seen emerging and felt was potentially getting out of control. They need instead to embrace the diversity of the UK and find positive solutions rather than trying to be defensive and trying to find some ‘one nation’ that no longer exists …
“In Scotland there was a clear political expression, not just in the public vote but across the five main political parties in Scotland, that we had a closer relationship with Europe, and with some of the ideals of the European Union, than was perhaps the case elsewhere in the UK. The British Government would be very wise to find ways of accommodating that, not in a defensive, negative or fearful sense but in a positive sense that celebrates the diversity of the shared sovereignty of the UK. It is possible to do it. It just needs effort and good will.”181
177.Lord Wallace of Tankerness also said that the differences between the nations of the UK could not be ignored, and that imaginative thinking was needed.182 Professor Gallagher saw scope for a differentiated approach to Scotland (as well as Wales and Northern Ireland), albeit not on the model proposed by the Scottish Government,183 while Professor Douglas-Scott argued for a differentiated arrangement, given that 62% of voters in Scotland voted to remain.184
Access to EU labour
178.The issue most frequently cited by our witnesses as a case for a differentiated approach was access to EU labour. Mr Russell stressed the particular importance to Scotland of freedom of movement in the context of the demographic challenge facing parts of Scotland of a declining population. He also stressed its importance to areas of the Scottish economy and national life. He noted that as many as 24% of workers in cutting-edge research in the NHS in Scotland came from other EU countries. He concluded: “There is a view in Scotland that this has been a good thing; we regard migration as positive for us.”185
179.Academic evidence underlined the demographic challenges facing Scotland. Professor Boswell told us that “EU immigration since 2000 is estimated to have contributed 50% of net population growth in Scotland, which is a more significant contribution compared with the rest of the UK”. EU nationals were also a higher proportion of foreign nationals (61%) than the UK average (56%). Dr Graeme Roy, Senior Lecturer in EU Law, University of Strathclyde, agreed that “We have an ageing population and the working age population is expected to fall”.186
180.Professor Boswell was therefore concerned that a “UK-wide system might not necessarily cater for the particular benefits of EU immigration under a framework of free movement that has particularly benefited Scotland”, and concluded: “It would be desirable to have a regionalised decentralised approach to immigration.”187
181.Lord Wallace of Tankerness noted that there was already a separate list of job specifications for Scotland with regard to Tier 2 visas for skilled workers from non-EU countries. He also cited the ‘Fresh Talent—Working in Scotland Scheme’, which until its replacement by Tier 1 in 2008 granted foreign student graduates of Scottish universities visas for two years to enable them to work or set up a business. Nevertheless, he acknowledged that it would be difficult to have a separate immigration policy in Scotland, largely because of the complexity of monitoring movement between Scotland and England—though he also suggested that employers could have responsibility for checking employment status, “by national insurance number or something to do with HMRC, so that someone who turned up in England who had been given their number in Scotland would be spotted immediately because that number would be known”.188
182.Lord McConnell of Glenscorrodale also noted that there were different criteria in Scotland for (non-EU) immigration, partly reflecting the different demographics and economic challenges facing Scotland, and suggested that this could be extended.189 On the other hand, Lord Forsyth of Drumlean thought that different immigration rules within the UK could place undue burdens on employers.190
183.Professor Gallagher thought that in-country control of migration could be devolved, if it were managed by point control (involving work permits, capacity to take up jobs, capacity to claim benefits and registering for public services) rather than the right to enter a territory. In his view, “There are good arguments for differential migration controls in a part of the UK whose issue is reducing population—or relatively reducing population—and those areas where there is pressure.”191 He also suggested this model should be applied in Northern Ireland.192
184.Professor Boswell cited the Canadian immigration system (in particular in the Province of Québec, which has its own points-based system) as a potential model for Scotland. This could include criteria based on particular occupational or sectoral shortages. One of the conditions for such a system, which Scotland could fulfil, was that “there are sufficiently robust and mature political decision-making institutions and mechanisms so that decision-makers are accountable and there is effective deliberation”.193
185.Professor Boswell also pointed out that the Canadian model was designed to attract people to settle in regions that were often sparsely populated and did not attract much immigration. This reflected the position in parts of Scotland, but would require migration figures to be disaggregated. In addition, issues around retention and onward movement of migrants would need to be addressed.194
186.A paper co-authored by Professor Boswell was published in June 2017, setting out various models for a differentiated approach to immigration. The report found that the schemes best suited to address Scotland’s economic and demographic needs—such as the points-based system used in Australia and Canada—are potentially the most difficult to sell politically. While these offer a flexible tool for selecting immigrants, and foster integration through allowing generous access to permanent residence, they would require a substantial shift in public perceptions and in the position of the UK Government, which favours reducing immigration. The report concluded that more politically feasible options include making smaller adjustments to the current immigration system to meet skills and labour shortages. Options include adjusting current Tier 2 schemes to allow lower skills or salary thresholds for Scottish employers, or reintroducing a post-study work scheme. The report warns against regulating lower-skilled immigration through temporary and seasonal schemes that offer limited rights and protection for workers. It is in lower-skilled jobs—the part of the economy that employs most EEA nationals—where labour gaps are most likely to appear post-Brexit.195
187.Several witnesses focused on particular sectors. Dr Roy noted that the Scottish food and drink and hospitality sectors were heavily reliant on EU migrants, and proposed a solution that would give Scotland access to higher levels of skilled migration from the EU or elsewhere.196 Councillor David O’Neill, President, Convention of Scottish Local Authorities (COSLA), noted that the Scottish healthcare and social care sectors were reliant on EU labour: “We can see some sectors being absolutely decimated and suffering to the extent that they may actually suffer critical failure if they do not have these individuals here.”197
188.The National Farmers Union Scotland focused on the Scottish farming and food processing industry, noting that the seasonal nature of the work made it difficult to employ local people. They estimated that between 5,000 and 15,000 seasonal workers from the EU were employed in the Scottish agricultural sector at any one time, and warned that no Scottish fruit farms could operate without access to overseas workers. They cited the Scottish Association of Meat Wholesalers’ estimate that 50% of the workforce of some Scottish abattoirs and meat processing plants were from outside the UK. They called for a visa or work permit solution to allow the movement of skilled and unskilled labour for permanent positions within the sector.198
The Scottish agricultural sector
189.As well as highlighting labour mobility, Scott Walker, Chief Executive Officer, National Farmers Union Scotland, argued for a differentiated approach in the field of agriculture more broadly. He stressed the importance to the Scottish agri-food sector of exports to the EU, and the threat posed by a reversion to WTO rules. Echoing witnesses from Wales, he noted that 85% of land in Scotland was designated by the EU as Less Favoured Area land, compared to only 15% in England. Areas such as Orkney, Shetland, and Dumfries and Galloway were particularly dependent on agriculture, and the potential impact of Brexit on these areas, as on Scotland as a whole, was profound.199
190.The National Farmers Union Scotland noted that, during the current Multiannual Financial Framework, lasting from 2014 to 2020, Scotland was scheduled to receive €4.6 billion of CAP funding, accounting for around two-thirds of total net farm income in Scotland. Again echoing witnesses from Wales, they noted that, if the Barnett Formula were applied to farming support post-Brexit, Scotland’s share of support would be cut from some 16% of the overall UK total to 8 or 9%. They warned, however, that significantly divergent agricultural policies across the UK were not desirable at this stage, and could lead to distortion across the UK.200
191.The National Farmers Union Scotland also noted that Scottish food and drink exports to the EU were valued at £1,900 million in 2015 (approximately 39% of the total of Scotland’s overseas food and drink exports), while food exports were £724 million in 2015 (69% of Scotland’s overseas food exports). They stated that access to the EU market without barriers and any new obstacles remained a priority.201
Other issues
192.Witnesses cited a range of other issues where specific Scottish interests needed to be accommodated or where differentiated arrangements might be possible.
193.Michael Russell MSP suggested that the UK Government might not in future be able to negotiate fishing quotas on behalf of Scotland. He acknowledged that a necessary pre-condition, for Scotland to negotiate its own international agreements, would be “to allow Scotland to have legal personality”.202 Professor Douglas-Scott also argued that creating a legal personality would be necessary if Scotland were to negotiate trade deals, but described this as “quite a big ask … Scotland being part of a trade deal would give rise to problems with the rest of the UK … From my perspective, that is perhaps the most difficult issue to reconcile”.203
194.The Scottish legal system, in contrast, has its own distinct history and identity. Professor Douglas-Scott highlighted the desirability of continuing cooperation between Scotland and the EU on justice, “in relation both to criminal matters, such as the European Arrest Warrant, and to civil and family law matters.”204 Former Advocate General for Scotland Lord Wallace of Tankerness asked rhetorically: “Is it beyond the wit of man or woman that Scotland could have an arrangement with the European Union countries with regard to the arrest warrant?”205 Lord McConnell of Glenscorrodale also stressed the significant implications of Brexit for Scottish criminal and civil law, including cross-border adoptions, wills and contracts.206 In contrast, Lord Forsyth of Drumlean argued that continued participation in the European Arrest Warrant should be on a UK-wide basis.207
195.Lord Wallace further suggested that Scotland could reach its own arrangement with EU countries in relation to education policy, including the Erasmus+ student exchange programme, and the Horizon 2020 research funding—areas which he said would “not detract from the fundamental position of leaving the European Union”.208 Dr Roy also cited access to EU research funding as a Scottish priority.209
196.In respect of research, one option post-Brexit is that research funding should be provided from central UK sources, in line with the Chancellor’s guarantee that any EU funding agreed prior to the point at which the UK leaves the EU, up until 2020, will be matched from central UK funds.210 Such an approach could eventually lead to the UK Government setting priorities, thereby limiting the ability of the devolved governments to operate an autonomous education policy. Another option would be to seek an agreement with the EU allowing universities across the whole of the UK to continue to bid for EU funds. Professor Tomkins, though, raised the possibility that the Scottish Government could negotiate such agreements independently: “Would it be possible as a matter of UK law or EU law to negotiate access to those programmes for Glasgow, Edinburgh, St Andrews and the other institutions in Scotland? Yes, it would.”211
197. As for other areas, Professor Gallagher gave workers’ rights, working hours and continued reciprocal rights to healthcare as examples of areas where a differentiated approach could be adopted.212 Commenting on the European Health Insurance Card, Lord Wallace of Tankerness suggested that the Scottish Government, exercising its devolved powers in respect of health, could independently seek “reciprocal health rights” with the EU.213 Dr Roy cited access to EU structural funds.214
198.Professor Tomkins suggested elements of differentiation might be possible in relation to fisheries.215 Although we did not receive detailed evidence on this issue during this inquiry, we refer to the analysis of the specific characteristics of the Scottish fishing industry in our report on Brexit: fisheries, and our conclusion that these would need to be accommodated both in the Brexit negotiations and in future trade negotiations.216
199.Lord McConnell of Glenscorrodale also argued that the Scottish Government should be fully involved in negotiating trade agreements where the Scottish interest was particularly strong, such as whisky exports.217 Such involvement would be quite distinct from the Scottish Government’s proposal that Scotland should be granted legal personality, with a view to negotiating its own trade agreements separately from the rest of the UK.
200.It remains to be seen how the result of the recent general election, in which the Conservative Party won 13 seats in Scotland (12 more than in 2015), will affect the UK Government’s approach to differentiated arrangements for Scotland.
Conclusions
201.We note the Scottish Government’s earlier stated aim that a newly independent Scotland should remain an EU Member State. We also note the First Minister’s announcement on 27 June that any independence referendum would be delayed until after UK withdrawal in 2019. It is not for this Committee to comment substantively on the Scottish Government’s policy, but we note the European Commission’s consistent view that, under EU law, an independent Scotland would be treated as a third country, and would have to apply for accession to the EU.
202.We also note the Scottish Government’s preference, should Scotland remain part of the UK, for the whole UK to continue within the EU Single Market as part of the European Economic Area. This option was ruled out by the previous Government, and it is now for the new Government, and Parliament, to decide whether this remains the position.
203.We conclude, on the basis of the weight of evidence submitted to this inquiry, that the Scottish Government’s further proposal, for continued Scottish membership of the Single Market, through the European Economic Area, while the rest of the UK leaves the Single Market, is politically impracticable, legally highly complex and economically potentially disruptive to the functioning of the UK single market.
204.Nevertheless, we urge the Government to respect the particular circumstances in Scotland. While we acknowledge that the referendum was a UK-wide vote, giving a UK-wide result, the Government needs to recognise the fact that the vote to remain in Scotland, at 62%, was the largest and most decisive (either in favour of remaining or leaving) in any nation of the UK.
205.We therefore consider that, in the event that the UK Government does not secure a UK-wide agreement that adequately reflects Scotland’s specific needs, there is a strong political and economic case for making differentiated arrangements for Scotland.
206.The Scottish economy has particularly pressing needs, including its reliance on access to EU labour, which is acute in sectors such as health and social care, agriculture, food and drink, and hospitality. We also note Scotland’s demographic needs, and its reliance upon EU migration to enable its population (and in particular, that of working age) to grow. Scotland’s more sparsely populated regions are disproportionately reliant both on EU migration and EU funding. Many of our witnesses argued that the most pressing case, in view of Scotland’s economic and demographic circumstances, would be for a standalone approach to immigration policy. We address this issue in the next chapter.
207.Our witnesses have also suggested that differentiated arrangements could be reached in fields such as energy policy, justice and home affairs cooperation, participation in Europol, access to EU structural or research funds, participation in such programmes as Horizon 2020 or Erasmus, reciprocal healthcare provision, workers’ rights and working hours, and agriculture and fisheries.
208.The uncertainty over the outcome of the Brexit negotiations means that it is not possible at this stage to reach definitive conclusions about the feasibility or desirability of achieving differentiated arrangements across all these various policy areas. Many (for instance, continuing cooperation on justice and home affairs) raise difficult issues of EU law, which we have addressed in separate reports. Moreover, we note that several of these policy areas are already devolved competences, while others are reserved.
209.We note further that achieving differentiated arrangements in some of these areas would depend upon the Scottish Government securing legal personality for Scotland, thus enabling Scotland to negotiate its own agreements with the EU or with third countries in areas of devolved competence. We agree with evidence suggesting that such a development would have profound and unpredictable constitutional and political consequences.
210.Finally, we reiterate that maintenance of the integrity and efficient operation of the UK single market must be an over-arching objective for the whole United Kingdom. But that objective does not preclude differentiated arrangements for Scotland in some areas, and nor does it justify excluding the Scottish Government from the Brexit process. Close cooperation between the UK and Scottish Governments is paramount: it is incumbent on both Governments to set aside their differences and work constructively together to protect the interests of the citizens of Scotland in the final Brexit deal.
143 BBC, ‘Brexit vote: Nicola Sturgeon statement in full’ (24 June 2016): http://www.bbc.co.uk/news/uk-scotland-36620375 [accessed 20 June 2017]
144 Scottish Government, Scotland’s Place in Europe (December 2016): http://www.gov.scot/Resource/0051/00512073.pdf [accessed 20 June 2017]
145 Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU’, 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 20 June 2017]
146 Scottish Government, Scotland must have choice over future (13 March 2017): https://news.gov.scot/news/scotland-must-have-choice-over-future [accessed 20 June 2017]
147 An Order in Council made under Section 30 of the Scotland Act 1998, by which power would be conferred upon the Scottish Parliament to legislate for an independence referendum.
148 ITV, ‘”Now is not the time”: May rules out Sturgeon’s call for IndyRef2 (16 March 2017): http://www.itv.com/news/2017–03-16/may-rules-out-sturgeons-call-for-second-scottish-referendum-saying-now-is-not-the-time/ [accessed 20 June 2017]
149 BBC, ‘General election 2017: Sturgeon says Indyref2 ‘a factor’ in SNP losses’ (9 June 2017): http://www.bbc.co.uk/news/uk-scotland-scotland-politics-40216748 [accessed 20 June 2017]
150 BBC, ‘Nicola Sturgeon says hard Brexit “dead in the water”’ (12 June 2017): http://www.bbc.co.uk/news/uk-scotland-scotland-politics-40245650?intlink_from_url=http://www.bbc.co.uk/news/live/election-2017–40231623&link_location=live-reporting-story [accessed 20 June 2017]
151 Scottish Parliament Official Report, 27 June 2017: http://www.parliament.scot/parliamentarybusiness/report.aspx?r=11035 [accessed 10 July 2017]
152 Letter from José Manuel Barroso to Lord Tugendhat, dated 10 December 2012: https://www.parliament.uk/documents/lords-committees/economic-affairs/ScottishIndependence/EA68_Scotland_and_the_EU_Barroso%27s_reply_to_Lord_Tugendhat_101212.pdf [accessed 12 July 2017]
153 Statement by Commission spokesperson Margaritis Schinas, widely reported on 13 March 2017. See for instance http://www.independent.co.uk/news/uk/politics/scottish-eu-independence-referendum-scotland-join-queue-membership-apply-a7627201.html [accessed 15 June 2017]
155 Scottish Government, Scotland’s Place in Europe (December 2016): http://www.gov.scot/Resource/0051/00512073.pdf [accessed 20 June 2017]
156 David Martin MEP and Alyn Smith MEP, Variable Geometry Within the EU: https://d3n8a8pro7vhmx.cloudfront.net/alynsmith/pages/1200/attachments/original/1486730001/Variable_Geometry.pdf [accessed 10 July 2017].
157 Scottish Government, Scotland’s Place in Europe (December 2016): http://www.gov.scot/Resource/0051/00512073.pdf [accessed 20 June 2017]
162 Letter from Michael Russell MSP, Minister for UK Negotiations on Scotland’s Place in Europe, dated 27 April 2017 to Joan McAlpine MSP, Convener, European and External Relations Committee: http://www.parliament.scot/S5_European/General%20Documents/CTEER_Minister_M.Russell_2017.04.27.pdf [accessed 10 July 2017]
165 Ibid.
167 Ibid.
168 QQ 103–104; written evidence from Lord Forsyth of Drumlean (DEV0019)
180 Written evidence from the British Academy, the Royal Society of Edinburgh and the Learned Society of Wales (DEV0020)
192 Ibid.
195 Christina Boswell, Sarah Kyambi and Saskia Smellie, Scottish and UK Immigration Policy after Brexit: Evaluating Options for a Differentiated Approach, June 2017: https://www.scer.scot/wp-content/uploads/SCER-Policy-Note-2.pdf [accessed 10 July 2017]
201 Ibid.
208 Ibid.
210 HM Treasury and Department for Exiting the European Union, ‘Further certainty on EU funding for hundreds of British project’ (3 October 2016): https://www.gov.uk/government/news/further-certainty-on-eu-funding-for-hundreds-of-british-projects [accessed 20 June 2017]
216 See European Union Committee, Brexit: fisheries (8th Report, Session 2016–17, HL Paper 78), paras 71–83