Scotland - on the eve of independence?
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Scotland
– on the eve of independence?
Name: Anne Bundgaard
Student no.: AB93647
International Business Communication in English and French
Aarhus University Business and Social Sciences
Supervisor: Annemarie Backmann
May 2014
Number of Characters exclusive of blanks: 54,714Aarhus University BSS AB93647
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Abstract
In a few months on 18 September 2014 the people in Scotland will vote on whether Scotland should
become an independent state or remain a part of the United Kingdom. This union has existed for
around 300 years and what started as a practical union is now more a social union with cross-border
ties.
The purpose of this paper is to compare the scenarios outlined by the Scottish and the UK
governments in case of a vote for independence and to review the implications for both Scotland
and the rest of the UK in case of a ‘yes’ and a ‘no’ vote. The method used in this paper is
information search.
Firstly, the paper examines the political development since the 1960s with focus on the rise of
nationalism and the success of the Scottish Nationalist Party, the SNP, and it reviews the outcomes
and the difference of the two referendums on devolution in 1979 and 1997. The 1979 referendum
did not lead to devolution despite a majority of 52 per cent voting in favour. However, it was
required that at least 40 per cent of the electorate should vote in favour and since the turnout was 64
per cent there was only a majority of 33 per cent voting ‘yes’. In the 1997 referendum 74 per cent
voted for devolution and it lead to the creation of a Scottish parliament. The difference in the
outcomes of the two referendums can be explained by the Scottish middle class who opposed
devolution in 1979. However, during Margaret Thatcher’s reign powers were centralised at
Westminster and civil institutions were removed in Scotland which caused the Scottish middle class
to want change and more influence on decisions regarding Scotland.
For the SNP independence has almost always been on the agenda and after devolution in 1997 they
promised the Scots a referendum on independence within the first few years of a Scottish
parliament. However, they needed to be in the Scottish government in order to fulfil this promise
and moreover, they needed a legislative majority which they obtained in the 2011 election. The last
obstacle was to get an agreement with Westminster since the devolved Scottish government does
not have the legislative powers needed in the case of a referendum. With the Edinburgh Agreement
from 2012 there were no more barriers left for the referendum to take place and the next step for the
Scots is the vote on independence on 18 September 2014.
Secondly, a comparative analysis is made of the white papers published by the Scottish and the UK
governments which outline how an independent Scotland might look like in case of independence.
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With independence the Scottish government seeks a modern partnership with the rest of the UK and
also, they want for Scotland to be a member of the European Union while keeping the British opt-
outs, e.g. be exempted from adopting the euro and participating in the Schengen travel area.
However, the UK government argues that this can be difficult since many of the British opt-outs are
mandatory for new member states. According to the UK government Scotland would have to apply
as a new member since it would be a new state. Furthermore, regarding the currency the Scottish
government wants an independent Scotland to maintain the pound and form a currency union with
the UK. However, at the moment this is rejected by the UK government which argues it will be
unfavourably for the UK to participate in a monetary union without all financial policies shared.
In both the case of a ‘yes’ and a ‘no’ vote there will be implications for Scotland, though the
implications in case of independence will be bigger. In case of a vote against independence it is
highly probable that Scotland will get more devolved powers. ‘Devo max’ is further devolution in
the view of the SNP and it involves devolution of taxes e.g., income tax, but some powers are still
reserved to Westminster with the minor difference that Scotland should play a greater role in
domestic decisions e.g., national security. ’Devo plus’ is promoted by one of the Liberal Democrats
in the Scottish parliament and it also involves that income tax is devolved to Scotland.
Also, there will be implications for the remaining parts of the UK, but these are difficult to predict
e.g., the impact on other nationalist movements in the UK in case of a ‘yes’ vote. However, some
believe that UK’s global influence will be affected by losing one of its nations and the UK
government itself stresses that the union is stronger with Scotland as a part of it.
Consequently, there is a wish for change in Scotland and on 18 September 2014 the people of
Scotland will decide whether this change should involve independence or it should involve change
within the frame of the UK.
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Table of contents
Abstract ................................................................................................................................................ 2
1. Introduction ...................................................................................................................................... 5
2. Method ............................................................................................................................................. 6
3. The road to referendum on independence ........................................................................................ 8
3.1. Referendums on devolution ...................................................................................................... 8
3.2. The Scottish National Party .................................................................................................... 10
3.3. Referendum on independence ................................................................................................. 11
4. A comparison of the white papers by the Scottish and the UK governments ................................ 13
4.1. The EU .................................................................................................................................... 13
4.1.1. The British opt-outs and rebate ........................................................................................ 15
4.1.2. The Schengen area ........................................................................................................... 17
4.1.3. The euro ........................................................................................................................... 19
4.2. The currency ........................................................................................................................... 21
5. Implications for the future of Scotland and the UK ....................................................................... 23
5.1. In the event of a ‘yes’ vote ...................................................................................................... 23
5.2. In the event of a ‘no’ vote ....................................................................................................... 26
6. Conclusion ..................................................................................................................................... 29
7. Bibliography................................................................................................................................... 31
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1. Introduction
Since 1707 Scotland has been in a political union, first with Great Britain i.e., England and Wales
and later on with Northern Ireland. The union is commonly known as the United Kingdom
(Oakland 2011: 83). After around 300 years of union the Scots are about to decide whether they will
continue to belong to a union with the rest of the UK or they will be an independent state. The
future for the Scots and the union will be determined on 18 September 2014 when the people living
in Scotland will vote in a referendum on Scottish independence (The Scottish Government 2013: i).
Even though it is the first time the Scots are going to vote on independence, there has been a
referendum on devolution twice. Devolution is a term used in British politics and it defines when
political powers are delegated to local organisations from the government, e.g., from the UK
government to Scottish political organisations (Mayor 2009: 464). The first referendum on
devolution was held in 1979 and it resulted in a ‘no’ despite a majority voting in favour, but the
turnout was fairly low and the ‘yes’ vote did not reach the required 40 per cent of the registered
voters (Brown et al. 1996: 21). However, in 1997 the demand for constitutional change was higher
and more Scots voted in favour of devolution leading to the creation of the Scottish parliament,
Holyrood (McCrone 2007: 29). Today the Scottish parliament decides over issues like education,
housing and health and social services (The Scottish Parliament 2014). The Scottish National Party,
the SNP, has held a majority in the Scottish parliament since 2011, which means they are the
government party, and Alex Salmond is the current Scottish First Minister. The SNP has pursued
independence since the 1940s. In 1999 they promised the Scots a referendum within four years, but
because they were not a part of the government until 2007 and from 2007 to 2011 formed a
minority government, they had to wait until they had a legislative majority which they achieved in
2011 (Cairney and McGarvey 2013: 242, 248).
Firstly, this paper will take a close look at the events leading up to the referendum on independence
focusing on the political development since the 1960s. In addition, the paper will address the issue
of a people rejecting devolved powers and home rule 35 years ago now being ready to vote on
independence. As a part of this examination it is necessary to look at the success of the SNP in the
context of the rise of Scottish nationalism. However, it is beyond the scope of this paper to review
Scottish nationalism in detail since much has been written about this issue both alone and in
connection with constitutional changes. I have chosen to review the referendum from a political and
nationalist angle, since I find it relevant to look at both as neither can explain the context of the
referendum on its own.
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Secondly, this paper will make a comparison of the white papers published by the Scottish and the
UK governments respectively in regard to a possible future independent Scotland. The white papers
cover a wide range of issues; yet for reasons of scope this paper will focus on the two issues which
are most present in the media; the currency and membership of the EU. Pension is another issue
which takes up some space in the media, but it is only relevant for a part of the Scottish people
whereas decisions regarding the currency and the EU affect the whole population.
Thirdly, this paper will look at the implications for the future of both Scotland and the UK in case
of a ‘yes’ and a ‘no’ vote. Again for reasons of scope, the impact on Scotland will be in focus, since
it is the people in Scotland who are to vote on independence and thus, the implications for Scotland
are more in focus in the public debate than the implications for the rest of the UK.
Thus, the purpose of this paper is to compare the two scenarios of a future independent Scotland
outlined by the Scottish and the UK governments, and examine the implications for the future of
Scotland and the remaining part of the UK in the event of a ‘yes’ vote and a ‘no’ vote respectively.
2. Method
For this paper I have used the method of literature and information search. The foundation for this
method is that you are searching for something which you do not have knowledge about (Kastberg
et al. 2011: 83). In the process of searching for literature I primarily used the search words Scotland,
referendum and independence. However, despite leading me to many useful books the focus
quickly became Scottish nationalism. Several of the books and articles dealing with nationalism are
either written by or with contributions from David McCrone. He is a former professor of Sociology
at the University of Edinburgh and is the author behind several books on Scottish nationalism.
Moreover, he has coordinated research programmes on national identity (The University of
Edinburgh 2013). To obtain a more political angle on the referendum on independence, my
attention was pointed to the author Vernon Bogdanor. He is a former professor of Politics and
Government at Oxford University and he has written a number of books about the British
Constitution. Some of his areas of expertise are national and local government in the UK and
devolution (University of Oxford 2012).
I used two search strategies, author search and topic search, under the approach berry-picking which
basically transfers the metaphor of all the good berries not being clustered at the same place on the
bush into information search. While searching and reading I was inspired to read other sources or
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follow another direction. I made an author search on Vernon Bogdanor and to specify the results I
combined topic and author in a search (Kastberg et al. 2011: 96-99).
Furthermore, I have used articles from the journal, the Political Quarterly, to obtain a more
academic view on the future of the union after the referendum. Lastly, I have followed the news at
British news sites, e.g., the Guardian and the BBC to see what issues of the referendum are most
discussed in the public; in addition, the news gives an updated angle of the two governments’
respective views since white papers take time to publish.
My main sources for the comparison of the Scottish and the UK governments’ views on an
independent Scotland are the white papers published by the current Scottish government and by the
Scotland Office, a department of the UK government. However, it is important to be aware of the
fact that neither of the white papers are objective. They both represent a particular political view
and both have an underlying motive – the Scottish government is campaigning for independence
and the UK Government is campaigning for retaining the union (Scotland Office 2013a: 5; The
Scottish Government 2013: i). Nevertheless, the white papers are still the best data in which the
views can be seen.
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3. The road to referendum on independence
In 1707 Scotland joined the union Great Britain which consisted of England and Wales. In 1800 the
union was extended to include Ireland and it was called the United Kingdom of Great Britain and
Ireland. In 1921 Ireland was divided into Ireland and Northern Ireland where Northern Ireland
stayed in the union and Ireland became an independent state. Thus, today Scotland is part of the
union formally called the United Kingdom of Great Britain and Northern Ireland (Bogdanor 1999:
4).
There were several reasons for Scotland to join a political union with Great Britain in 1707;
however, the main reason was due to practicalities. The Union of the Crowns from 1603 created a
dynastic union between the two countries since James VI of Scotland became James I of England
(Bogdanor 1999: 8). In 1689 the king, William III, became more closely involved with the English
parliament and became responsible to it as well. The king could not be responsible to both the
English and the Scottish parliaments due to their different policies. Thus, the parliaments either had
to join in a political union or dissolve the dynastic union. The parliaments choose to form a political
union with a single parliament located in Westminster (op.cit.: 8-13). Also, there were advantages
for Scotland in joining a political union with England and Wales. England had great access to many
markets due to its colonies; there would be peace between Scotland and England and by preserving
the Kirk i.e., the Scottish church, in the political agreement the Scots could keep their national
identity while sharing a parliament with England (op.cit.: 9).
However, after living peacefully in a union for more than 300 years, the Scots are now to vote on
independence. A referendum on independence after many years of union does not come out of the
blue and in the following the paper will examine the events which can help explain the political
development since the end of the 1960s.
3.1. Referendums on devolution
Twice the Scots have voted in a referendum on devolution i.e. “when a national government gives
power to a group or organization at a lower or more local level” (Mayor 2009: 464). The first
referendum held in 1979 did not lead to devolution despite a majority of 52 per cent voting in
favour; the turnout was 64 per cent, and thereby the 33 per cent of the registered voters who voted
‘yes’ was not sufficient to get the required majority of 40 per cent (Pittock 2008: 69; Brown et al.
1996: 21).
Two events in particular during the 1970s can help explain the outcome of the 1979 referendum on
devolution. First, the discovery of oil in the North Sea made it possible for Scotland to be
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economically independent from the UK (Bogdanor 1999: 125). According to the Scottish
Government (2013: 31) more than 90 per cent of the oil and gas are from Scottish waters. Second,
in 1973 the UK became a member of the European Community and this created some disadvantages
for staying in the union. Scotland was already controlled by a government far away in Westminster
and with some areas of decision-making being transferred to Brussels, Scotland would get even
further out in the periphery. However, an independent Scotland would benefit from being a member
of the European Community, because the Scots would still have access to a duty-free market. The
duty-free market had been one of the main arguments for remaining a part of the UK, since it could
impose a tariff on goods from an independent Scotland (Bogdanor 1999: 125-127). Even though
these events made a future for an independent Scotland seem both realistic and desirable, Pittock
(2008: 63) cites a Nationalist commentator who said that “I have yet to meet an independista who
switched from being a unionist because of Scotland’s oil”. Thus, the reasons for a majority voting in
favour cannot be found solely in these arguments, but must be seen in the context of the success of
the Scottish National Party (see section 3.2.).
A key factor of the outcome of the 1979 referendum is the turnout. Firstly, the low turnout can be
explained by the fact that the legislative process was drawn out and the proposition seemed more as
a Westminster product and “a compromise with inadequate powers” (Pittock 2008: 69). Secondly,
the Scottish middle class had a neutral or negative opinion on devolution and a majority of them
voted against devolution in 1979 (McCrone 2007: 29). Thirdly, the creation of regional and district
councils made devolved powers seem like a centralisation of powers. In addition to this, some
people from the north and east regions feared that devolution would only be an extension of the
Strathclyde Region, where half of the Scots lived at the time, and they did not want to be governed
by the west which would be inevitable due to the British electorate system i.e. first past the post
system (Pittock 2008: 68-69). Lastly, even though the union started out to be constitutional and
political, over the time it has turned into a love match due to the many cross-border families (op.cit.:
64).
Despite the opposition and the low turnout in the 1979 referendum, a majority of the registered
voters still voted yes. In the referendum in 1997 the turnout was in fact lower i.e., 60 per cent, but a
bigger majority voted in favour i.e., 74 per cent voted in favour (Pittock 2008: 81). During the
eighteen years between the referendums several factors led to a higher demand for change and as
Labour argued “only devolution could keep Scotland within the United Kingdom” (Bogdanor 1999:
143). One of the most important factors is the change of government party and Prime Minister at
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Westminster. Margaret Thatcher was Prime Minister from 1979 to 1990 for the Conservative Party
and she was an opponent of devolution (op.cit.: 137). The consecutive Thatcher governments
destroyed Scottish civil institutions and centralised powers in Westminster in the process of creating
a strong state (McCrone 2007: 29). Furthermore, the poll tax is an example of something which
made the relation between Westminster and Scotland worse. The poll tax was introduced a year
earlier in Scotland than in the rest of the UK and it was highly unpopular in Scotland. The poll tax
meant that “everyone was theoretically liable at the same level in lieu of the old property tax of
rates, which had charged progressively on the basis of property values” (Pittock 2008: 75). Thus,
the two main factors for the decline of support for the Conservatives in Scotland were the poll tax
and their opposition to devolution. Those were also some of the main reasons for the Scottish
middle class to vote in favour of devolution in the 1997 referendum (McCrone 2007: 29).
Furthermore, one of the differences between the referendums was that in 1979 the powers to be
devolved were listed in contrast to the Scotland Act 1998 which outlined the powers reserved to
Westminster (Pittock 2008: 80).
3.2. The Scottish National Party
To explain the Scots’ opinion on devolution and independence it is necessary to look at the success
of the Scottish National Party, the SNP, and thereby the rise of Scottish nationalism. The SNP was
founded in 1934 and the first leader, John MacCormick, wished for Home Rule i.e., he wanted a
Scottish parliament while staying in the UK instead of independence. During the 1960s the SNP
had electoral success and due to the 1968 municipal elections in particular the party “became a
major force in local government” (Bogdanor 1999: 121). After the election in October 1974 the
SNP became the second largest party in Scotland after the Labour Party (op.cit.: 121-122).
The party’s success during the 1960s was not easy to explain at the time, but some events can help
elucidate this popularity. At first the votes for the SNP were seen as ‘protest votes’ due to
discontent with the government and the two major parties, the Conservative Party and the Labour
Party. In the late 1940s Labour inaugurated some centralising policies and the Conservatives in
Scotland supported these. The Conservative Party was seen as a Scottish patriotic party, but with its
support for the centralising policies the Scots turned away and looked for a new patriotic party.
Many of the former supporters of the Conservatives turned to the SNP, and thereby the party broke
the two-party system. However, the SNP’s popularity continued during the following years, and this
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explanation fell apart due to the fact that the support for other ‘protest vote’ parties e.g., the support
for the Welsh party Plaid Cymru started to decrease (Bogdanor 1999: 122-123: Pittock 2008: 64).
Furthermore, the success of the SNP came shortly after the decolonisation period. The British
Empire declined and one of the main advantages for Scotland to be in a union with the UK vanished
with the Empire. Scotland had benefitted from the access to a huge market due to the colonies
(Pittock 2008: 15-16). However, in the aftermath of the imperial decline more powers were
centralised e.g., there was a unification of the economic and social policies, and Scotland had less
influence on these areas (op.cit.: 16-17). With the decline of influence and less self-determination
the desire for a more independent future paved the way for the rise in nationalism. Moreover,
Scotland was degraded from a partner to a region in the United Kingdom, and thereby lost status in
several areas (op.cit.: 64). It is important to note that the party’s success cannot be explained with
the discovery of oil in the North Sea since this discovery was made in the 1970s after the party’s
first electoral success. In addition, several researchers (Bogdanor 1999: 126; Pittock 2008: 63)
agree on the fact that oil did neither create nationalism nor the support for the SNP, oil was only a
reinforcing factor.
Thus, the political changes described by Pittock (2008) did according to Bogdanor (1999: 124) lead
to a “strong sense of Scottish identity which provided the basis for the electoral success of the
SNP”.
3.3. Referendum on independence
Only seventeen years after the Scots voted in favour of devolution, they are to vote on
independence. As stated by Bechhofer and McCrone (2009: 23) “the decade between 1997 and
2007 in particular was a period of major social and political change in the UK”. Thus, for some
devolution is only a stepping stone to an independent Scottish state (McCrone 2012: 74, 79).
The SNP has always strived for Scottish independence. The party was a merger between different
parties and in the beginning the party had two wings – a pro-independence wing and a pro-
devolution wing. The first leader John MacCormick was pro-devolution and after he resigned in the
beginning of the 1940s due to his unsuccessful attempt to convince the pro-independence members
of another direction, the aim for independence became clearer. Though some members still
supported devolution and the party in general supported it in the 1979 referendum, independence
for Scotland has been on the agenda since the 1940s. In 1999 the SNP “promised a referendum on
independence in the first four years of the Scottish Parliament” (Cairney and McGarvey 2013: 242).
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However, due to electoral victories first by Labour and second by Labour and the Liberal
Democrats, the SNP did not form a government until 2007. In 2007 the SNP formed a minority
government and since it would not have enough votes at the Scottish parliament to get a bill passed
it prepared for the next election instead (op.cit.: 248). Thus, after an electoral success in the 2011
election, the SNP formed a majority government and a referendum on independence was in sight.
Even while not being in government, the SNP promoted independence. In 2005 the party introduced
the Scottish Independence Convention which was a cross-party group with the purpose of
promoting independence. The SNP was joined by the Scottish Green Party, Scottish Socialist Party
and Solidarity (op.cit.: 243).
In an attempt to respond to the success of the SNP in the 2007 election, the opposition leaders
introduced a review of the Scotland Act 1998 (Cairney and McGarvey 2013: 245). It was named the
Calman Commission and its aim was to “recommend any changes to the present constitutional
arrangements that would enable the Scottish Parliament to serve the people of Scotland better”
(Jeffery 2009 quoted in Cairney 2011a quoted in Cairney and McGarvey 2013: 245). The final
report had two functions; firstly, it justified the need for continuing the union. Secondly, it
recommended some financial reforms where the most important was further devolution regarding
the tax. However, the report concluded that if for instance Scotland was given full fiscal autonomy,
it could be difficult to continue the union (Cairney and McGarvey 2013: 245). As a consequence of
the Calman Commission’s report, the Scotland Act 2012 was introduced and it led to further
devolution of e.g., tax and borrowing. Additionally, the Scottish executive was renamed the Scottish
government (op.cit.: 247).
After the SNP formed a legislative majority in 2011 they got a mandate for a referendum on
independence and they made clear that they intended to use this mandate. However, in order to
make the referendum legally valid the SNP as the Scottish government had to agree with
Westminster since only Westminster can declare Scotland independent (Hazell 2009: 103). This
problem was solved with the Edinburgh Agreement from October 2012 in which the Scottish and
the UK governments agreed that the referendum could take place and that it had to be held before
the end of 2014. Furthermore, the agreement outlined that it would be the Scottish government
which should legislate about the referendum e.g., they decide the wording of the question and the
exact date (Edinburgh Agreement 2012: 1, 3).
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With the legal base for a referendum set, the campaigns for and against devolution could start and in
the following section the two different scenarios for an independent Scotland outlined by the
Scottish and the UK governments will be compared.
4. A comparison of the white papers by the Scottish and the UK governments
In November 2013 the Scottish government published the white paper Scotland’s Future presenting
its idea of a future for an independent Scotland. The white paper fills around 650 pages and deals
with everything from membership of the EU to postal delivery services (The Scottish Government
2013). The white paper outlines the benefits of an independent Scotland and the vision of the
current Scottish government i.e., the SNP if it becomes the first government in an independent
Scottish state (The Scottish Government 2013: xiv).
As a response the UK government, which since 2010 has been a coalition government between the
Conservatives and the Liberal Democrats, has published a series of analyses called Scotland
analysis. At the moment there are thirteen analyses dealing with everything from international
relationship to science and research (Scotland Office 2014a). They involve several government
departments and are produced with help from experts e.g., academics and economists (ibid.). The
aim of the analyses is to “ensure that, when people in Scotland come to make their choice in 2014, it is
in full knowledge of how the UK works and what the implications of leaving it may be” (Scotland
Office 2013a: 62). Besides the UK government’s informative purpose, it is through the analyses made
clear that they hope for Scotland to remain a part of the UK.
In the following the paper will examine both governments’ white papers and compare the two
different scenarios for the future of an independent Scotland with special reference to Scottish
membership of the EU and the currency.
4.1. The EU
Since 1973 the United Kingdom has been a member of what today is called the European Union
(henceforth called the EU). Even though it was not one of the founding members, it has a strong
position within the union today. At the moment the UK has the third largest number of MEPs, more
precisely there are 73 British members of the European Parliament out of 766 (Scotland Office
2014b: 57). Moreover, from 2014 the votes in the Council are based on the population of the
member states meaning that the UK will get 12 per cent of the votes due to its 62 million
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inhabitants. In the case of independence, Scotland’s population will give Scotland 1 per cent of the
votes (ibid.).
The Scottish government wishes for an independent Scotland to be a member of the EU.
Nevertheless, in the white paper Scotland’s Future the current Scottish government takes into
account that this is the plan of the current Scottish government i.e., the SNP, and if another party
gains legislative majority in an independent Scotland the future can be different (The Scottish
Government 2013: x). However, with that said Scotland is the one part of the UK with most
supporters for the EU, so membership of the EU is highly probable (Wellings 2010: 502). The
Scottish government also uses this support for the EU in the campaign for Scottish independence.
Besides emphasising the obvious benefits of independence regarding the EU e.g., the Scottish
interests can be better represented, the Scottish government also states that staying with the UK
does not necessarily mean staying within the EU as well (The Scottish Government 2013: 217).
Hereby they refer to the promise made by Prime Minister David Cameron in 2013 on having a vote
on the British membership of the EU in 2017 if the Conservatives win the 2015 election (Sparrow,
A 2013). Thus, the Scottish government attempts to persuade the Scots to believe that membership
of the EU is more likely as an independent state than as a part of the UK.
Consequently, based on the white paper by the Scottish Government (2013) it is assumed that an
independent Scotland would seek to be a member of the EU. However, the way in which it would
have to apply is unclear. Both the UK and the Scottish governments acknowledge that the case of an
independent Scotland seeking membership of the EU is without precedent (Scotland Office 2014b:
63: The Scottish Government 2013: 221). New member states’ application follows the procedure set
out by Article 49 of the Treaty of the European Union (The Scottish Government 2013: 221). The
Scottish government is of the opinion that this article will not be suitable in Scotland’s case since it
is already a member of the EU by being a part of the UK. The government believes instead that an
independent Scotland would almost automatically be a member, and thereby avoid the long process
of acceptance. This can be legally possible with Article 48 which “provides for a Treaty amendment
to be agreed by common accord on the part of the representatives of the governments of the
member states” (ibid.). In addition, the Scottish government believes in a continuity of effect where
an independent Scottish membership of the EU will be on the terms of the membership Scotland has
today as a part of the UK e.g., an independent Scotland would adopt the British opt-outs.
Nevertheless, the Scottish Government recognises that it would be up to all the EU member states
to agree on the terms of the transition to a Scottish membership (op.cit.: 221-222).
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The UK government approaches an independent Scotland’s application for EU membership in a
different way. The UK government is of the opinion that since Scotland would be a new state it
would have to officially apply on equal terms with any other states, and thereby follow the
procedure for application set out by Article 49. Besides informing the Scots about the implications
of independence, the UK Government tries to prepare the Scots to the fact that the application
process can be long and lead to Scotland loosing the benefits it has today as a part of the UK e.g.,
the British opt-outs and rebate (Scotland Office 2014b: 62, 68).
The view of the UK government is based on a statement by the President of the European Council
who said that “a new independent state would, by the fact of its independence, become a third
country with respect to the Union and the treaties would, from the day of its independence, not
apply any more on its territory” (Herman Van Rompuy 2013 quoted in Scotland Office 2014b: 62).
In addition to this statement, in February 2014 the European Commission President stated that for
Scotland to join the EU would be “difficult, if not impossible” (José Manuel Barroso quoted in
Pickard and Dickie 2014) due to, among other things, a Spanish opposition against accepting an
independent Scotland. However, in the same article it is emphasised that the Spanish foreign
minister has stated that if the referendum takes place in an agreed context with the UK, Spain has
no objections (ibid.).
The next sections will analyse the Scottish and the UK governments’ respective views on an
independent Scotland’s membership of the EU with focus on the British opt-outs and rebate, the
Schengen travel area and the euro.
4.1.1. The British opt-outs and rebate
Even though the United Kingdom is a member of the European Union it is not a fully-fledged
member. Over the years the UK has negotiated opt-outs regarding the euro and the Schengen travel
area, and a special agreement regarding decisions within Justice and Home Affairs. The opt-out
regarding the euro means that the UK can keep the pound instead of adopting the euro (Scotland
Office 2014b: 68). Together with Ireland the UK is “able to maintain their own border control
systems permanently” (op.cit.: 71), because they have negotiated an opt-out regarding the Schengen
area which means they are not obliged to join the border aspects of Schengen (op.cit.: 71).
Moreover, the UK is a unique member in the sense that it is the only member state which has
managed to negotiate a rebate from the EU budget which in 2012 was “worth £3.11 billion to UK
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taxpayers” (op.cit.: 58). Furthermore, the UK is only obligated to try to avoid excessive deficit due
to Protocol 15 of the Treaty on the Functioning of the European Union (TFEU) – which is the same
protocol allowing the UK to keep the pound (op.cit.: 69). Member states have all signed the TFEU,
which is also known as the Lisbon Treaty, and they are required to avoid a deficit over 3 per cent of
the states Gross Domestic Product and a debt of 60 per cent of GDP, otherwise they will be met
with sanctions. Due to Protocol 15 of the TFEU the UK cannot face any sanctions (op.cit.: 69).
Also, some sanctions can be imposed “in the form of what is known as macro-conditionality, where
budget payments would be suspended in the event that it did not comply with economic and fiscal
recommendations” (op.cit.: 70). Even if Scotland is able to negotiate an opt-out from the euro, the
requirements would still apply, since the UK has negotiated an opt-out from these as well (op.cit.:
69-70).
In addition to the already mentioned derogations, the UK government has negotiated special terms
regarding Justice and Home Affairs allowing the UK to choose on a case-to-case basis if they want
to participate in the proposed legislation (Scotland Office 2014b: 71). In 2013 the British parliament
voted on whether they will opt-out on pre-Lisbon measures regarding police and criminal justice.
There was a vote in favour of opt-out, but the UK has sought to rejoin 35 of the 130 measures
(op.cit.: 72).
In the opinion of the UK government these special terms are something that belongs to the UK and
cannot be adopted automatically by or shared with an independent Scotland. Firstly, the EU is a
union based on treaties and the UK is the one which has signed the Treaties of the EU (Scotland
Office 2014b: 57). Secondly, the rebate cannot be shared, because it is not a constant amount of
money and it reflects the shares which the UK has in the EU economy and receipts (op.cit.: 75).
Thirdly, the rebate is paid by the other EU member states, so as an independent state Scotland will
have to contribute to the UK rebate on equal footing with the other member states. Fourthly, it
would need an approval from all the member states to give an independent Scotland a rebate. In
regard to the opt-outs they cannot be automatically adopted by an independent Scotland since
several of them are mandatory for new EU member states to implement e.g., the euro (op.cit.: 65).
Moreover, the UK government emphasises that the UK has highly favourable fish quotas which is a
benefit for Scotland, since fishing is an important sector for both the Scottish economy and the
Scottish people due to the long tradition of fishing (Scotland Office 2014b: 7; The Scottish
Government 2013: 283).
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The current Scottish government is of the opinion that an independent Scotland should be able to
continue as a member despite being a new state and that “Scotland’s transition to independent
membership will 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 2013: 13). In other
words the Scottish government does not want for Scotland to join the eurozone and instead of
seeking membership of the Schengen area it wishes to stay part of the Common Travel Area, CTA
(op.cit.: 13-14). Lastly, the Scottish government wants to adopt the UK’s opt-in regarding Justice
and Home Affairs which would allow an independent Scotland to participate in the proposals
beneficial for Scotland (op.cit.: 224).
Consequently, the Scottish and the UK governments differ in their opinion of if and how easy an
independent Scotland could get the same benefits it has today as a part of the UK e.g., the opt-outs
and the rebate.
4.1.2. The Schengen area
The Schengen agreement is bipartite and includes an abolition of borders between the EU member
states and judicial cooperation as well as cooperation between the member states police services
(Europa 2009). The first part of the agreement makes it possible for “every EU citizen to travel,
work and live in any EU country without special formalities” (European Commission 2013). This
part is also known as the Schengen travel area. The UK and Ireland are the only two EU member
states which are not a part of the Schengen area, but they take part in the cooperation aspects which
is the second part of the agreement (Europa 2009). The Schengen cooperation is facilitated by the
Schengen Information System (SIS) which allows the member states to share information about
persons. Each country can add information by using national networks and thus, improve the
database (ibid.).
The Schengen agreement was signed by five member states in 1985 and during the 1990s the rest of
the member states except Ireland and the UK signed the agreement. In 1999 the Schengen
agreement was incorporated into the EU legislation through the Treaty of Amsterdam of 1997
(Europa 2009). In addition, the Schengen travel area does not only include EU member states. Some
European non-EU countries have joined the Schengen area i.e., Island, Liechtenstein, Norway and
Switzerland (ibid.).
The Common Travel Area (CTA) includes the UK, Ireland, the Isle of Man and the Channel
Islands. The CTA is essentially about free movement and when you have entered one of the nations
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of the CTA you are able to travel to another CTA nation without permission and “passengers are
not required to carry a passport or national identity document” (UK Border Agency 2013).
The Scottish government states that they wish for Scotland to remain a member of the CTA instead
of seeking to join the Schengen travel area (The Scottish Government 2013: 14). In the opinion of
the Scottish government “the CTA [...] is part of the broader ‘social union’ that is the expressions of
the close economic, social and cultural ties across the nations of these islands” (op.cit.: 14). Even
though the Scottish government seeks to have an independent Scottish state, they still recognise that
Scotland has a very close tie with the rest of the UK and the other members of the CTA due to the
many years of union and their shared history. Moreover, it is made clear that one of the main
reasons for the Scottish government to stay in the CTA is because it allows free movement for the
citizens in the CTA countries (The Scottish Government 2013: 223).
In an attempt to strengthen the case for independence, the Scottish Government (2013: 14, 29, 223,
456, 489) emphasises several times that the CTA dates back to the 1920s, while it is not mentioned
in the Scotland analysis regarding the borders at all (Scotland Office 2014b). The focus on the year
of the beginning of the CTA can be explained as a way for the Scottish government to underline
that it is possible to leave the union of the UK and still work closely together. Thus, it is an obvious
reference to Ireland which became independent in 1921 and now works together with the UK e.g.,
in the CTA (Oakland 2011: 3; Scotland Office 2014c: 37).
Both the Scottish and the UK governments touch upon the fact that it is not possible to be a member
of the CTA and the Schengen travel area at the same time which is also acknowledged by the EU
(Scotland Office 2014b: 71; The Scottish Government 2013: 224). For both the CTA and the
Schengen area Scotland would have to apply for membership and according to the UK government
there could be some obligations Scotland would have to fulfil (Scotland Office 2014c: 32).
Moreover, the UK government stresses that it could be difficult for an independent Scotland to not
join the Schengen area since it was made mandatory for new member states in 1999 (Scotland
Office 2014b: 70). Despite the fact that an independent Scotland would have the opportunity to seek
an opt-out from the Schengen area, the opt-out would be difficult to obtain since all member states
have to approve it. Furthermore, “The Commission had issued opinions on the two applications [by
the UK and Ireland regarding the Schengen agreement], stressing that the partial participation of
these two Member States should not reduce the consistency of the acquis as a whole” (Europa
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2009). However, in favour of Scotland’s case it can be argued that since Scotland already has an
opt-out from the Schengen area by being a part of the UK, it would not make a difference as such.
In Scotland analysis it is emphasised several times that it will be difficult for Scotland to deal with
border issues on its own e.g., by not being a part of the UK Scotland has to invest in border controls
themselves (Scotland Office 2014c: 6,31, 32, 33, 50). In addition, the UK government outlines
some of the benefits the Scots have now as a part of the UK like the possibility of travelling freely
around the UK. As a member of the CTA it is possible to travel to other CTA nations without
showing a passport. On the contrary, as a member of the Schengen travel area the Scots would need
to show documentation if asked for it (Scotland Office 2014c: 35). In an attempt to scare the Scots,
the UK government emphasises some consequences of Scotland joining the Schengen area –
voluntarily or not. Firstly, the level of illegal immigration could rise due to the open borders
between the Schengen countries; after entering into one of the Schengen area’s nations it is possible
to travel freely (op.cit.: 34). Secondly, as a member of the Schengen travel area Scotland would be
obliged to control external borders, for instance the borders between Scotland and the rest of the
UK (op.cit.: 33).
Thus, in the case of independence the Scottish government wants to maintain the current
arrangements regarding borders i.e., membership of the CTA. However, the UK government
emphasises that this is perhaps not possible due to the fact that today membership of the Schengen
area is mandatory for new EU member states.
4.1.3. The euro
The euro is the common currency used by some of the EU member states. In the beginning of 2014
it was used by 18 member states (European Commission 2014). The euro was introduced with the
Maastricht Treaty from 1992 and it was implemented in the first countries in 1999 though at first
only for cashless payments. However, on 1 January 2002 the old currencies were replaced with euro
coins and banknotes (European Commission 2014). As stated above (see section 4.1.1.) the UK has
a permanent opt-out regarding the euro and is allowed to keep the pound as currency.
It is emphasised by the UK government that membership of the euro is mandatory for all new
member states of the EU. Since 1993, it has been a formal requirement “to commit to adopt the euro
in due course” (Scotland Office 2014b: 68). Unless an independent Scotland would be able to
negotiate an opt-out from this accession criterion, the Scottish government will be required to
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commit to this on equal terms with other new member states. However, an opt-out has to be
approved by all EU member states which makes it more difficult to obtain (op.cit: 69)
According to the Scottish Government (2013: 222) an independent Scotland will neither seek nor
qualify for being a member of the eurozone. The Scottish Government emphasises that member
states can only adopt the euro if they meet some convergence criteria. The criteria includes that the
state’s inflation rate must not be “more than 1.5 percentage points higher than the three lowest
inflation member states of the EU” (op.cit.: 222). Moreover, the annual deficit to GDP must be less
than 3 per cent and gross debt must be less than 60 per cent of GDP. The member state’s “nominal
long-term interest rate must not be more than two percentage points higher than in the three lowest
inflation member states” (op.cit.: 223). In addition, to adopt the euro membership of the Exchange
Rate Mechanism II, ERM II, for two consecutive years is required, and the currency must not have
been devalued during these two years. The Scottish government does not believe that an
independent Scotland would live up to these criteria, in particular with reference to the required
membership of ERM II which the UK, and thereby Scotland, does not have today (op.cit.: 222-223).
The UK government recognises that certain criteria exist and that an independent Scotland must
conform to these. In addition to the criteria outlined by the Scottish government, the UK
government emphasises that to this point no member state has joined the eurozone, and thereby
adopted the euro without having its own currency first (Scotland Office 2013b: 78). Also, the UK
government states on the assumption that an independent Scotland cannot avoid adopting the euro
as a new EU member that there will be a one-off cost in connection with the transition from one
currency to another e.g., the change-over of notes and coins. Moreover, due to Scotland’s size the
influence on the euro area monetary policy would be limited. Despite highlighting the
disadvantages, the UK government emphasises that a Scottish adoption of the euro would lead to
reduced transaction costs with other countries using the euro. Nevertheless, the UK government
concludes that the gain would not be large since the transaction costs with the rest of the UK would
rise (op.cit.: 85-86).
Besides the costs of a transition to the euro, as a member of the eurozone Scotland would be met by
stronger rules regarding the economy (Scotland Office 2014b: 69). An independent Scotland would
for instance be obliged to “submit a draft budgetary plan to the Commission every October” (ibid.).
Despite the fact that there will be complications and costs in regard to an independent Scotland’s
transition to the euro, the current Scottish government does outline that they will not seek
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membership of the euro, but instead they want to keep the pound and be in a monetary union with
the UK.
4.2. The currency
Both the Scottish and the UK governments’ white papers conclude that there are four possible
options for independent Scotland regarding the currency. For the Scottish Government (2013: 110)
the possibilities are the continuing use of the pound either pegged or flexible, adopting the euro or
having a new Scottish currency. The UK government’s view on possible currency arrangements
only differ in relation to the pound where they too see two options for an independent Scotland:
using the pound “with or without the agreement of the UK” (Scotland Office 2013b: 105).
The Scottish Government (2013: 110-111) wants for an independent Scotland to be in a sterling
union with the UK. Their white paper concludes that being in monetary union with the UK, and
thereby keeping the sterling, would be the best solution for an independent Scotland (The Scottish
Government 2013: 110). Moreover, the Scottish government emphasises that this solution is
beneficial for both an independent Scotland and the remaining parts of the UK. Firstly, Scotland
and the rest of UK are essential partners with regard to exports. Scotland’s main trading partner is
the UK and in return the UK’s second largest trading partner is Scotland. Secondly, there exist
several companies which operate on both sides of the borders for which it would be easier and
cheaper to have the same currency in Scotland and the rest of the UK. Thirdly, with a monetary
union there would be a high degree of labour mobility for both people in Scotland and in the rest of
the UK. Fourthly, when analysing an optimal currency area, the economies of both Scotland and the
UK are doing well and the productivity in the two economies is at the same level. Lastly, despite
differences in the long-term economic cycles the short-term economic trends are relatively
synchronised due to which it is easier to cooperate in a monetary union (op.cit.: 111).
In addition, the Scottish government suggests that “monetary policy will be set according to
economic conditions across the Sterling Area with ownership and governance of the Bank of
England undertaken on a shareholder basis” (The Scottish Government 2013: 110). Thus, the
Scottish government wants to let the Bank of England be in charge of monetary policies and
acknowledges that the UK has a bigger economy, and thereby more influence. Furthermore, the
Scottish Government (2013: 114) suggests the continuance of today’s integrated market for
financial products, e.g., bank accounts and loans. Lastly, both governments should contribute to
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secure financial stability which will be beneficial for the consumers in both an independent
Scotland and the UK; however, the Scottish Government (2013: 113) does not state whether there
should be equal contributions from the two parts.
The UK government, however, has a different stance on a sterling union. In Scotland analysis:
Assessment of a sterling currency union it is emphasised that becoming an independent state
“means leaving the UK’s monetary union and leaving the UK pound” (Scotland Office 2014d: 6).
This analysis was published in February 2014 about a week before the British Chancellor of the
Exchequer, George Osborne, stated his opposition to a sterling union between an independent
Scotland and the rest of the UK. He argues that a monetary union would not work, using the
eurozone as an example since a sterling union would be similar to the eurozone in some ways. In
the eurozone the members share the monetary and banking systems, but they have separate fiscal
and political systems (The Economist 2014). According to George Osborne it was this asymmetry
which caused the euro crisis and he fears that “Britain might have to rescue a stricken Scotland to
protect the two countries’ shared financial system” (ibid.).
In addition, the Scotland analysis regarding a sterling currency union explains the success of the
current union by the fact that certain policies are shared like monetary and financial stability
policies. Another explanation for the success is that areas like taxation and spending, too, are
coordinated (Scotland Office 2014d: 5). Moreover, it is emphasised that the Scottish economy has
had the opportunity to grow within a secure economic framework which has resulted in higher
growth in economic output in Scotland compared to the total growth in the UK (op.cit.: 5).
However, some of the main disadvantages of a currency union are also outlined in the Scotland
analysis. Due to the size of an independent Scotland, and thereby the size of an independent
Scottish economy, the UK would be exposed to a higher fiscal and financial risk (Scotland Office
2014d: 8). Moreover, an independent Scotland would be more dependent on oil and an independent
Scottish economy will be more vulnerable to global fluctuations in oil prices. As a result of these
variations, an independent Scottish Government could be forced to raise taxes or reduce public
spending (op.cit.: 7). Lastly, despite the good intentions of the Scottish Government when stating
that the current government wants to maintain the pound, there is no certainty that future
governments in an independent Scotland cannot wish otherwise. The UK government argues that
this uncertain future of a currency union can cause damage in form of financial speculation. They
use the example of the Czech Republic and Slovakia, where a monetary union only lasted 33 days
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after the two states separated (op.cit.: 8). Conclusively, HM Treasury sees too many challenges for
it to be wise for the UK government to form a currency union with an independent Scotland (op.cit.:
9).
In addition, the conclusion of the Scotland analysis regarding currency and monetary policy is “that
continuing membership of the UK is in the best economic interests of Scotland and the rest of the
UK” (Scotland Office 2014b: 68). Moreover, this is also an example of the UK government’s
campaign strategy of persuading the Scots to vote ‘no’ in the referendum on independence in
September 2014.
However, as mentioned in the previous section, an independent Scotland will most likely be
required to adopt the euro upon seeking membership of the EU (see section 4.1.3.) which will make
all the speculations about a sterling currency union superfluous.
5. Implications for the future of Scotland and the UK
Both in the case of a ‘yes’ and a ‘no’ vote at the referendum on independence there will be
implications for Scotland and the rest of the UK. The greatest impact will be on Scotland and the
Scots since it is a referendum on independence for Scotland and consequently, the public debate
concentrates more on the implications for the people of Scotland than the implications for the rest of
the citizens in the UK. Thus, the following section will deal more with the impact on Scotland.
In the following the paper will review some of the already foreseen implications in case of both a
‘yes’ and a ‘no’ vote. However, not all the implications in case of a ‘yes’ vote will be dealt with in
detail since some of them are outlined in the precedent sections which compared how the Scottish
and the UK governments see a future independent Scotland.
5.1. In the event of a ‘yes’ vote
In the Scotland analyses the UK government states several times that if Scotland becomes an
independent state it means that Scotland would leave all aspects of the union of the UK e.g., the
monetary union and the Common Travel Area, CTA (Scotland Office 2014c: 32; Scotland Office
2014d: 6). However, based on the plan outlined by the Scottish government independence appears
to not include full separation from the union, especially not from pivotal areas like borders and the
currency (see section 4.1.2. and 4.2.). Basically the Scottish government seeks a “modern
partnership [...] between the nations of these isles” (The Scottish Government 2013: 111). A part of
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