Monday, 27 June 2016

Number 10 has a Plan

It is not the case that Number 10 do not have a plan. They have a very clear plan. David Cameron let the cat out of the bag in the House of Commons today. He told Angus Robertson, Leader of the SNP group, that Scotland should want to stay inside two single-markets: the British one and the European one.

Similar, "helpful" questions came from Ken Clarke, who pushed fairly overtly for Parliament's preference (for which read, the least Brexit-like) and Pat McFadden, who asked him if he knew of any country which was admitted to the single market but which did not have to accept free movement of workers (the answer obviously being "no, none").

The Plan

The United Kingdom is going to negotiate to become a member of the European Economic Area, or the EEA. The so-called "Norway" option. There will be some quibbles over the specifics and there may be some variation, but it is what is happening.

The Government is holding-off invoking Article 50 for a very good reason. This is a Brexit Prime Minister's button to push, and the longer it isn't pushed, the less room there is for them to save face without agreeing to a terrible deal. Cameron worked this out when he made his resignation statement on Friday Morning. The only person who can successfully lead the UK out of the EU, in the absence of an EEA offering, is a Tory Prime Minister with a substantial (50+) seat majority. With an EEA offering, the coalition of compromise is there across the parties.

Perhaps most importantly, Cameron has essentially decided that the political price for this decision should be that the Brexit Tories should be the ones to be very clearly and publicly responsible for the reneging on promises about immigration, financial contributions to the single market, and economic instability. Put plainer still, PM Boris Johnson will be the one that is blamed for a generation, by Remainers for taking us out of the EU, and by Leavers for the lies and a settlement that undermines the core of the democratic choice he persuaded them to take.

What would it mean

The ironic thing about the EEA is that it is the solution that does Britain the least economic damage and causes the least disruption, yet it is also the one choice that does the polar opposite of "taking back control". We will find ourselves bound by the vast majority of the legislation passed and promulgated by the Commission, Council and Parliament, but will have zero democratic input into those decisions.

It is true that the UK would regain some control over the fisheries and agriculture policies, but we would probably pay roughly the same membership fee as we do now (per capita, Norway pays more!) and we have to protect most, but not all of the treaty rights to free movement of workers.

What about Scotland?

This is important for Scotland for several reasons.

The UK is leaving the EU

It is now extremely unlikely that the UK will remain in the EU. There is no intention among those who matter to try and outright reverse this result. The priority of those who will be in government has swung firmly behind damage limitation.

Reverse Greenland won't happen

That means that any hopes of Scotland staying in the EU proper, while remaining in the United Kingdom, is unlikely. The only circumstances in which that could happen is if some kind of "reverse Greenland" proposal is agreed, to try to ring-fence membership for the UK that only has territorial application to Scotland, as part of the transition to the EEA.

This is a nice, seductive and attractive idea on the surface, but it's totally unworkable. In reality, it involves either the break-up of the British single market into EU and non-EU zones, or else there is very little that can be offered for Scotland that the EEA doesn't provide already. Differential free movement workers rights within a state would also be a nightmare to get right, albeit the actual border enforcement would not itself be radically different from the Norway/Sweden arrangement.

It also faces considerable political obstacles. The EU will not want to set a precedent whereby states can effectively "opt-out" parts of their state from the most onerous parts of EU membership. To do so would undermine the core objectives of the EU. It would be difficult to reconcile the "rights" of these "within a member-state" member-states in the European Council and its Parliament, and difficult to establish lines of accountability for Treaty obligations. The EU is, first and foremost, a Union of sovereign states, and any suggestion that something different would be arrived at would represent such a fundamental change in its nature as an institution as to justify far wider treaty change.

This is completely against the interests of especially the Eurozone. They seek, if anything, greater flexibility to allow for aggressive integration of its member-states. That is not something that can be done while creating different tiers and types of European Union membership. It is also not something that is likely to be entertained by any other state in the EU with a secession movement, lest differential membership terms be seen as a stepping-stone towards outright independence.

Scotland has to Choose

Given this, Scotland will soon have to make a choice. They will have, in all likelihood, the opportunity to choose between three outcomes:

1. Accept being part of the UK, which is itself a member of the EEA
2. Become an independent state, securing its own EEA membership immediately or almost immediately as an intermediary step to full EU membership; or
3. Negotiating as part of the UK's EEA settlement that Scotland receives accelerated EU membership if it chooses to vote to leave the UK in a second referendum

My Preference

As I have indicated elsewhere, it is now (tentatively) my belief that the third option is the most desirable of those three, but it will be the most complicated to achieve. I also believe that this option has its fewest drawbacks if it transpires that the rest of the UK would be in the EEA rather than a looser arrangement with the rest of Europe. We would still, in those circumstances, functionally retain a single market with the rest of the UK, and would be able to trade with them without any serious impediment. The same, incidentally, would be true of the second of these three options as we'd both have the same relationship with the European single-market.

In many respects, therefore, very little in terms of the economic relationships between Scotland and the rest of the United Kingdom would stand to change if we seceded. The key impediments to Scottish independence would actually be fundamentally the same as they were in 2014. On the currency, the pound has weakened, albeit it may strengthen in the coming months. Back in 2014 I always said that a separate Scottish currency, initially pegged to either the pound or the Euro, was preferable to a currency union.

I always thought that problem was overblown. It is a necessary challenge that comes with independence, but in the medium term the answer is obvious and it is not clear that it would significantly impede trade. There will be very little pressure for Scotland immediately to join the Euro, not least because of its own current challenges and the pragmatic interests of both Europe and Scotland in finding a responsible way to address Scotland's deficits, which substantially exceed the Exchange Rate Mechanism's minimum requirements.

The fiscal situation is definitely more acute. I am not going to deny that; indeed I have argued at length about it. But that is the case not because of Brexit but those underlying economic conditions. If anything, the effect of our withdrawal from the EU may well affect the balance of tax generated and public spending committed within the United Kingdom substantially. If Scotland makes clear that it intends to be a full member of the EU, rather than just an EEA member, it may stand to benefit from some of the jobs and business, especially in the financial sector, that the UK currently has in London, thus far seen as a "gateway" to the European Union.

Settling the Mandate

What is clear, though, is that Scotland very clearly indicated a preference to be involved in the political institutions of the European Union, rather than just the single market. I think it is necessary, once we know the tenor of the UK's new relationship with the EU, that Scotland should be given a clear opportunity to choose between the two Unions, and the two relationships that come with them.

If it is the view of the people of Scotland that this fiscal transfers enjoyed by Scotland, the stability of a common currency with the rest of the UK, and the new likely control of fisheries and agriculture, are are better option than seeking outright European Union membership, there would in the event of a referendum be a clear choice for those people. You can still vote No. That would provide clarity as to the conflicting two mandates Scotland has issued in the 2014 and 2016 referendums. This is not a vote British Unionists should fear. There would also still be a clear base for all Liberals, keen to keep all of the UK in the EU, the opportunity to make the case for reintegration of each of the respective two states in decades to come, should the EEA prove an unsatisfactory deal.


People have absolutely nothing to fear from another Scottish independence referendum, given the very substantial uncertainty that now afflicts both what it means to persevere with the British Union or to depart from it in favour of the European one. What is different is that we need to know what the depth of feeling of the Scottish people was at, apparently, wishing for a diametrically opposite conclusion to those of the English and Welsh people in relation to the European family. The only way we can resolve that democratic deficit is another referendum.

If the difference between the EEA and the EU really is so shallow that the Scottish people really do not mind, I suspect that the British Union, with its pooling and sharing of resources, would in the minds of the Scottish people outweigh that of Europe. In those circumstances, those who prefer or see their primary loyalty to that Union have absolutely nothing to fear from another plebiscite.

Indeed they may be able to kill Scottish independence for a generation with a second No vote in quick succession. I cannot see what they stand to lose, if they are also passionate Europeans, in those circumstances. For if the Scottish people see the EU as so fundamental that we should leave, then leaving demonstrably would advance those interests and values and that is something we should enable them to do.


The fact that we are negotiating Britain's future in Europe, with a conclusive end-point, in many respects actually removes some of the uncertainty of a future referendum for Scotland. The fact that the UK is having to clarify its terms of departure from the EU makes it much easier for the EU to consider the hypotheticals for Scotland, without hitting opposition from other states. Countries like Spain will be far more willing to entertain "pre-negotiation" for Scotland when they know it only sets a precedent where the parent state is leaving the EU already, because Spain has no intention of leaving the EU.

Imaginative thinking doesn't have to mean delusional thinking in the aftermath of this referendum result. The bottom line is that, once we know what the UK is likely to get as a relationship with the rest of the EU, Scotland must clarify its own trajectory. Not to maintain this is, I'm afraid, simply anti-democratic, and actually will turn Scotland's politics back away from real bread and butter issues.

If you want a neverendum, constitutional uncertainty, and economic insecurity, by all means fight Brexit at a UK level. You will make the job harder to secure an EEA agreement, meaning the rest of the UK will diverge more harshly from the EU, and you will make the break-up of the United Kingdom more likely. You will give the SNP an easy narrative for the next 5 years to avoid accountability on its domestic agenda. And the Scottish people will harbour an unresolved grievance, on both sides of the divide.

I don't want that. I suspect in their heart of hearts, most Unionists don't either.

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