Economics of Independence Scotland & the EU

The European Union: Independence and the other referendum

EU_flag-001European Union membership is an issue that can be quite divisive between North and South in the UK particularly between Scotland and the South East.

Scotland receives substantial EU grants as do the Northern English regions. It could be argued that the economies of Northern Ireland and Wales are dependent on them. London and the South East, on the other hand, with annual wages in excess of 70% above the UK average, pay more tax and so feel that they pay most of the cost of EU membership. Being so wealthy London and the South East don’t get the grant support that the rest of the UK does.

The EU is therefore redistributing wealth from the richer parts of the UK to those areas which require the most development and in doing this they are actually making up for the lack of investment in these regions by Westminster. However, the size of the population in London and the South East is large enough to win an EU in/out referendum for the ‘No’ vote, even though the rest of the UK gets a better deal from the EU and, after the campaigns make this clear, may vote to stay in.

Polls are snapshots of how people are feeling ‘now’ rather than how they will vote after all the arguments have been made. In the case of the EU poll, the Prime Minister has announced this will take place in 2016, after the Scottish independence referendum and the UK general election – so a lot could change in the meantime.

However, those caveats aside, the latest YouGov poll on EU membership makes for interesting reading:

UK 36 in, 42 out,
Scotland 44 in 36 out.

A 14-point difference between Scots who want to stay in the EU and the rest of the UK.

During any EU referendum campaign the cold hard cash argument will come to the fore in Scotland and for our friends in the English regions, highlighting that the motorway extensions, new bridges, broadband infrastructure, council grants, training support schemes run by councils, Regional Selective Assistance grants, innovation grants and even the grants for the graduate interns are all EU funded. It should also come to the fore during the debate on Scotland’s future because right now the only way of ensuring Scotland’s continued membership of the European Union is with a yes vote in 2014.

Uncertainty

David Cameron claimed last year that the Scottish independence referendum was causing economic uncertainty, despite an Ernst and Young report showing Scotland performing better than any other part of the UK in attracting foreign direct investment. However, if the UK looks like it will leave the EU, then there must be even more uncertainty about jobs coming to the UK – a massive own goal by the Westminster Government. If an American company is looking to build a plant that will trade in the EU the plant’s host country obviously has to be in the EU. Whether Scotland remains in the UK is not the concern. Instead, the issue is our continued membership of the common market across this continent. Scotland as an independent country would still be in the EU, but now there is a realistic chance that the whole of the UK (what’s left of it anyway) will leave in 2016.

It is all politics

So what is Cameron up to and will we still get a referendum if the Conservatives lose the next general election?

By announcing an EU referendum, Cameron is trying to cut off the flow of Tory voters to Ukip (stage one in the “how to win the next election” playbook). If Labour don’t also offer an EU referendum than Cameron will take vital votes back from Ukip in the last few weeks of the campaign and might even get a majority. He may, however, struggle to win the EU referendum that follows. Short-term gain, long-term trouble.   The Liberal vote last time benefited from being a safe haven for undecided voters but most political commentators agree they will suffer badly at the next UK general election in 2015. Cameron’s political challenge is to gain as many of those votes as possible. Meantime, however, Scotland’s place in the European Union is threatened and we face much more uncertainty from Westminster policies than we do from the opportunity to decide our own constitutional future in Scotland.

Will there be an EU referendum if Labour win?

In my view, Labour will also have to offer the EU referendum or they will lose the General election and massive Eurosceptic vote in England, the Eurosceptics are not just right wing supporters they are often New Labour supporters. Going into the next election telling a Eurosceptic English electorate that they are not going to offer them a democratic choice on the EU is tantamount to political suicide. Mid-term in the parliamentary term, Labour’s lead over the Conservatives in the polls is way behind where it should be if they are to win next time around. Let’s see where the polls and EU referendum policies are next Autumn.

Conclusion

The UK or by then rUK is getting an EU referendum one way or another, the Tories may well win the next general election outright, the mid-term Labour lead is nowhere near where it needs to be .  It all depends on the economy turning the corner, and, in part, the political impact at Westminster if Scotland votes ‘Yes’ to independence.

Interestingly, when asked how they would vote in a the Yes/No referendum if they thought the Conservatives would win again – 52% of Scots said YES.  The ‘No’ campaign describes Scotland’s growing wish for self determination and self governance as isolation and separatist, but it appears that the people of Scotland want to be more international – part of Europe and the EU. With Westminster taking the devo max option off the table, and adding an in/out referendum on EU membership, the UK model looks less like a vehicle for delivering what the Scottish people want by the day.

 

Further Reading:

Scotland deserves debate on Europe – Newsnet Scotland

Common sense’ dictates independent Scotland will remain in EU – Yes Scotland

Scotland and the EU – The polling evidence – Newsnet Scotland

 

Support Business for Scotland, as we convince the business community of the benefits of voting Yes in 2014 – Read More

 

About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

4 Comments

  • I’ve just noticed there is a section in the GERS spreadsheet titled; “Scotland’s Estimated Notional Net Contributions to the EU”

    http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS/GERS2013xls

    It indicates that our Net contribution to the EU budget (if I’m reading it correctly) was about £400 million in 2011/12

    It seems to me that being part of the EU results in some of our money coming back from the UK at the moment (via the EU). If we remained in the UK and the UK was out of the EU, we would not see that money!

    So it makes sense for Scots to be pro EU while being stuck in the UK but when we are independent, well that’s a whole new debate about the merits of the EU.

    • Not really In or out you need access tot he EU trade area and that also costs only you don’t get to vote!

      From the Guardian

      > Norway enjoys full access to the EU’s internal market because it is part of the European Economic Area, which was created in 1992. In return, Norway is obliged to implement all the EU’s laws relating to the internal market.

      Because Norway is not a member of the EU, it has no representation in any of its institutions and no right to participate in its decisions (except regarding the Schengen border-free area, of which Norway is a signatory). Norway has had to implement about three-quarters of all EU legislation, including the working time directive.

      Not only does Norway suffer the indignity of implementing whatever regulation or directive comes off the fax machine, but it also pays around €340m a year into the EU budget. Under similar circumstances, the UK, given its size, would probably pay £2.5bn-£4bn a year, which is close to half of our current net contribution. But imagine being told what to do by a body over which we had no influence.<< Effectively not being in the EU means you have to pay but you don't get EU grants back, so you pay less but have no say and get no structural funding for your poorer areas and you still have to implement EU trade regulations or you cant trade with them.

  • “Scotland receives substantial EU grants as do the Northern English regions”

    Is it possible to calculate how much we received for 2011/12?

    I’ve been assuming that since Scotland subsidises the rest of the UK we are also a net contributor to the EU.

    The EU budget for 2011 ( http://archive.is/zzKGJ ) indicates that the UK contributed 12.8 Billion Euros

    I calculate that Scotland’s contribution in 2011 was 12.8 * 9.6% = 1.229 Billion Euros. (The 9.6% comes from GERS 2011).

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