First Minister Nicola Sturgeon with the President of the European Commission, Jean-Claude Juncker. Flickr/First Minister of Scotland. Some rights reserved.
On July 8, former Permanent UK Treasury Secretary Sir Nicholas Macpherson wrote an article in the Financial Times titled “The case for Scottish independence looks stronger post-Brexit.” The ex- civil servant, who advised Scots to vote ‘No’ in 2014, joins growing numbers of Scottish voters whose support for independence appears to be growing in the aftermath of the EU referendum.
“The United Kingdom is on its last legs”, says LSE’s Keith Hart. “Scotland will surely go it alone even if the EU is reluctant to accept a new separatist member.” Although it is not certain that Scotland will “go it alone”, a second independence referendum is probably inevitable. In this event, a “Yes” vote will be a “Yes” to EU membership.
Therefore, supporters of independence will have to confront some serious questions. As a member of the EU, would Scotland be able to break the “cosy consensus” on austerity, in the way that Nicola Sturgeon has argued for? Would the European Commission tolerate Scotland’s budget deficit, which already amounts to nearly 10% of its GDP? Even if Scotland is able to join the EU without adopting the Euro, how much control will its democratically elected government – whether SNP or another party/coalition – have over its economy?
“We are not Greece or Italy”
In 2014, the Yes movement was right to point out that Scotland’s economic strengths go beyond oil. These include significant renewable energy potential which is already providing nearly half of Scotland’s electricity; a strong fishing industry with close trading links to Europe; and high-quality universities.
Nicola Sturgeon has emphasised this point. During a March interview, when the BBC’s Andrew Neil likened Scotland’s fiscal situation to Greece and Italy, the first minister retorted that it was “completely incredible” to “compare Scotland, with all of the strengths of the Scottish economy, to countries like Greece and Italy.”
On the question of budget deficits, the comparison isn’t as “incredible” as it seems. In 2015, Greece’s deficit amounted to less than 8% of GDP; Italy’s less than 4%. Spain and Portugal, moreover, with deficits far smaller than Scotland’s – at 4.4% and 5.1% of GDP respectively – are under severe pressure from the European Commission. As both countries faced the prospect last month of heavy fines for breaking fiscal rules (which mandate deficits of less than 3% of GDP), my Portuguese colleague was astounded: “How can they fine us? They wrote our budget!”
In the end, the Commission did not levy the fines. Nonetheless, Spain and Portugal, despite cutting their deficits significantly over the past few years, remain on the naughty list, and may yet have some of their EU structural funds withheld in 2017 if they fail to meet their fiscal targets. Italy, meanwhile, may have won some “flexibility” from the Commission, but still needs to “implement a deficit reduction programme worth at least 0.5 per cent in 2017 and 2018 to meet its targets.”
It is important to acknowledge that the Commission can only use these powers against Eurozone countries. Does this mean that Scotland has nothing to worry about if it does not adopt the Euro? That depends on whether the EU will be happy to welcome a member that says no to their currency, no to their central bank, no to the fiscal rules that all member states are supposed to accept and no to the concept of “budgetary discipline” promoted by the German government, the European Commission, the European Central Bank and the Treaty of Lisbon. Will Scotland get special treatment from the EU simply because it voted remain? This, I suspect, is wishful thinking.
Public ownership and labour laws
There are other areas where Scotland’s independence will be compromised. Many ‘Yes’ campaigners have shown anger with the way in which public assets have been sold off by the British government and have pledged that an independent Scotland should reverse this trend. The Common Weal, for example, has advocated re-nationalising ScotRail and taking electricity generation into public ownership.
Public ownership is popular not only in Scotland but across the UK. It is less popular with British political leaders and the European Union. The EU’s fourth Railway Package, for example, “aims to remove the remaining barriers to the creation of a single European rail area.” “By liberalising the European rail industry, the fourth rail package is continuing a longstanding EU objective,” writes Nicole Badstuber, a researcher on urban transport governance at the LSE. “The EU appears to share the British ideological mindset of the 1990s that led to a fragmented rail network and privatisation. It is arguing for this under the mantra that competition will bring better and cheaper services for passengers.”
“The EU package may not strictly require privatisation”, she continues, “but it is definitely designed to create an environment conducive to this.” The package “rules out reinstating mainland Britain’s old state monopoly, British Rail” and “categorically seeks to dismantle incumbent state monopolies in other EU countries.”
Oliver Huitson has also pointed out how the EU’s Postal Service Directive “played a key role in Royal Mail’s privatisation” and would prevent the UK from bringing it back into public hands. “The EU is not a barrier to privatisation,” he concludes. “It is one of the main drivers.”
Not all supporters of Scottish independence would advocate public ownership. The SNP is certainly not an economic nationalist or socialist party. Nevertheless, if Scotland does elect such a party in the future – or any party which is clearly opposed to privatisation – it is likely to quickly find itself at odds with the European Union.
If a post-independence government also wants to create stronger collective bargaining arrangements – as Jeremy Corbyn is proposing for the UK – this too will create tensions with the EU. Despite the recognition of labour rights in the EU Charter of Fundamental Rights, the European Commission’s annual recommendations to member states increasingly include concerns about “rigid” labour laws. As the Corporate Europe Observatory demonstrates in a detailed recent report, the Commission has played a significant role in pushing France to adopt its highly unpopular labour reforms, expressing repeated concerns about the inability of French employers to “negotiate downward wage adjustment.”
Again, the extent to which the Commission can influence Scotland is likely to depend on whether or not it adopts the Euro. But even without joining the single currency, Scotland will be leaving one political union devoted to privatisation, austerity and “wage flexibility” only to lock itself more fully into another one.
I supported Scottish independence in 2014 with the expectation that Scotland would probably not remain in the EU, but continue to trade and cooperate with it. Katrin Oddsdóttir, the legal expert who is leading the re-drafting of Iceland’s constitution is currently suggesting something similar. “I still think the people of Scotland could do quite well as independent nation outside of the EU” she says. “Scotland could be very progressive and say we will follow the path of Iceland and Norway, which are countries that trade with the EU but are not part of the Brussels camp.” “The EU”, for Oddsdóttir, is a “bullying association” and “in a cul de sac in a way as it facilitates global capitalism which is destroying everything.”
Oddsdóttir’s view – that “the Scots have nothing to fear being outside the EU” – sounds nice enough. The problem, of course, is that 62% of Scots clearly disagree. In a second independence referendum, “an independent nation outside of the EU” will not be on the ballot paper. Scotland will be choosing between a declining United Kingdom and a fracturing European Union. It will have to decide which is worse.
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