It isn’t about complete independence for Scotland, but a choice between two Unions

Nat O’Connor is Adjunct Lecturer in Maynooth University and a former lecturer in Ulster University.

The EU contains federations (like Germany), unitary states (like Ireland) and highly devolved countries (like Italy). It also copes with the diverse relationships EU member states have with non-EU territories, including overseas territories and co-operation that extends beyond the EU. There was no fundamental incompatibility on a constitutional level with the Union of Great Britain and Northern Ireland remaining in the European Union. However, once the UK formally left the EU on 31st January 2020, Scotland can no longer be a member of both unions.

The Scottish Parliament election on May 6th is not a proxy vote for Brexit-style independence based on uncompromising sovereignty. The SNP gave up their Euroscepticism before Brexit, and now court pro-EU voters with a policy of “independence in Europe”. Scotland’s voters can now weigh up the pros and cons of each union. The typical benefits of discussed about UK membership include defence, market size, currency, legal system, social policy, technology and cultural bodies. The EU does not have competencies in all these areas, but it can still be compared to the UK.

Defence

The UK is widely acknowledged to be a military heavyweight in terms of its defence budget and military technology, and the UK is a nuclear power with a permanent seat on the UN Security Council. The EU is a defence organisation, with the old WEU merging into the EU under the 2009 Lisbon Treaty and 20 EU members are in NATO. The combined military strength of France, Germany, Italy, Poland and Spain alone is at least three times that of the UK. France too is a nuclear power with a permanent Security Council seat. However, the EU is untested as a defensive alliance and has found it difficult to co-ordinate border protection. While Scotland might still be in a strong military alliance in the EU, the UK has a more proven ability to project military power.

Market Size

In population, an independent Scotland would be 118th in the world, sandwiched between Slovakia and Norway. The top ten countries have 4.5 billion people between them. Small and medium sized countries must compromise by pooling their sovereignty if they are to trade and prosper in today’s globalised world. The United Kingdom’s population makes it the 21st largest country in the world, and the fifth largest of the developed industrialised countries after the USA, Japan, Germany and France. The UK’s large internal market can support a lot of economic activity. The UK’s openness to trade also makes future international trade agreements likely.

If the EU was a country, its population of 448 million would be the third largest in the world after China and India. The EU Single Market and Customs Union gives access to that population as a market, and the scope of the Single Market continues to expand. The EU has several major trading agreements, which the UK has lost (temporarily) by leaving. The EU clearly offers a stronger environment for trade. But Scotland is deeply integrated into the UK market, so there would be a very difficult transition period for Scottish businesses to reduce their integration in one union to search for markets and business partners in another.

Currency

It is fair to say that both the British Pound Sterling and the Euro are strong global currencies, widely used for international commerce, seen as stable and holding their value against the US dollar. Sterling is one of the top currencies for financial services, with the downside of sometimes making British goods exports artificially expensive and imports artificially cheap. The Euro is an incomplete project that has had to overcome serious problems. The 2008 financial crisis tested the limits of the currency, although COVID-19 has seen stronger monetary policy and something closer to fiscal transfers being used to bolster Europe’s economies during the pandemic. Recent European treaties have made it clear that Scotland would have to join the Euro.

The best currency for Scotland depends on what market Scottish businesses are trading with. For as long as the Scottish economy is deeply integrated with the rest of the UK, sharing Sterling makes more sense. If Scotland does leave the UK and rejoin the EU, it will certainly be better off with the Euro than with a notional Scottish Pound as the ill-fated Irish Punt demonstrated when it was briefly unpegged from Sterling and hammered by global market forces and speculators before Ireland joined the EMU.

Legal System

Both the UK and the EU operate strong rule of law, and both push a variety of anti-corruption measures. While the EU has some rogue operators among its member states where corruption is a real concern, Scotland would have no difficulty fitting into the EU’s legal order. Given the longstanding uniqueness of Scottish law, there is less work needed to untangle Scotland from the rest of the UK.

Social Policy

The EU does not have competences in most areas of social policy, although Single Market provisions can influence procurement and other aspects of health, education and housing policies. The UK has the NHS, a long tradition of social housing and of education from pre-school through to some of the best-known universities in the world. The EU does not directly provide any of these things, and it is worth remembering that social policy (pensions, welfare, health and education) represents two-thirds to three-quarters of European countries’ budgets, including in the UK, whereas the EU is simply not involved. The UK’s budget was around 40% of economic output pre-pandemic (2018), while the EU’s total budget is less than 1% of the EU’s collective GNI.

Nonetheless, every EU member state except Ireland has a national health service that is universal and run as a public service. Likewise, all EU countries provide tax-funded education at all levels, including a greater level of subsidised pre-school education compared to the UK and lower university fees. Scotland already has its own sub-divisions of the NHS, a well-established and unique education system, several leading universities and a large stock of social housing. In principle, Scotland could continue to provide its social policies as European social policies are broadly compatible with Scottish social policy. But two big problems for Scotland are, firstly, the loss of collective expertise from belonging to UK-wide organisations like the NHS, and secondly, the loss of money from the Treasury. Good relations will allow Scotland to benefit from international best practice including from the rest of the UK, but the EU won’t do anything to fill the hole in Scotland’s public finances. On the contrary, EU membership comes with fiscal discipline and the Scottish Government would be obliged to balance its books sooner rather than later. This may lead to higher taxes, lower spending or both, which could affect the outcomes achieved by Scottish social policy.

While the EU membership does provide some redistribution of membership fees in terms of agricultural supports (a third of the EU’s budget) and structural funds, this is small beer compared to the substantial fiscal subsidies from central government in the UK to Scotland’s public spending. On the whole, the UK is a better bet for Scotland when it comes to social policy, at least until the Scottish economy is strengthened and/or Scottish public spending is aligned to what Scotland can independently sustain.

Technology

The UK is among the world’s leaders for science and technology. So are Germany and France, as well as centres in many other EU countries. While the UK may gain short-term trading benefits from regulating differently, that may or may not provide sustainable long-term economic gains. The UK government can be faster and more flexible than the EU, which has to co-ordinate 27 member states and sometimes regional capitals. Nonetheless, the EU is a world leader in many areas of technology and several pan-EU initiatives would give Scotland access to high tech industries and networks. Scotland is deeply integrated into the UK and therefore benefits more from the UK’s technological prowess. In theory, Scotland could find as good if not better access to technology across the European Single Market, but the dislocation to Scotland’s economy to get there would be considerable.

Culture

The UK has the BBC, a vibrant music industry, world-class museums and any number of other cultural strengths. The EU does not have a shared language, let alone a shared culture. While each member state brings its own cultural institutions into the EU mix, these are still very much national treasures. Scotland has its cultural identity and its own treasures too, but the BBC brand will be hard to beat and the importance of the UK’s single market for the music and film industries and other cultural products should not be underestimated. Scotland already has BBC Scotland which could be re-branded. But the culture question is really one of Scotland’s own culture versus its involvement in shared UK culture, as EU membership does not compete with the UK (or any member state) in terms of cultural bodies.

Conclusion

Scotland has a better offer from the EU in terms of market size, but Scotland is currently deeply integrated into the British market. The UK’s substantial offer in cultural bodies and social policy is unmatched by the EU. The level of UK subsidy for Scottish public spending is big deal. The EU would give minor structural funds for a country like Scotland but would also demand fiscal discipline. As unions, both the EU and UK offer decent defence, currencies, legal systems and access to technology.

In most respects, while the European Union is a solid proposition, Scotland is currently better off in the UK because it is already in the UK. However, as well as being a tautology, that is a short-term argument. The real question is whether Scotland would be better off in fifty years from now as a member of the UK or the EU (assuming it won’t have the option of both).

If better off means greater environmental sustainability, quality of life and economic prosperity, an independent Scotland in the EU could probably achieve the first two, but it remains to be seen whether Scotland can ever seriously rival England’s economic power. Scotland in the EU would find itself in the same position as the other mid-weight member states, namely Austria, Croatia, Denmark, Finland, Ireland and Slovakia, and the slightly larger Czechia, Portugal and Sweden. These countries seek to occupy niches in the global economy based on higher value and export-led growth. Several are poorer than Scotland on a GDP per capita basis but manage to provide decent social policies. Scotland could find economic niches too, but it won’t come easily. As the example of Nokia in Finland or the Irish Celtic Tiger showed, mid-weight countries can lose prosperity very quickly if their top industries fail. These countries would also be direct rivals to Scotland for foreign direct investment and export markets. If Scotland remains in the UK it won’t have to compete globally to anything like the same extent, as it could continue to orient its economy towards the large UK internal market.

Of course, it is not as if a hypothetical future Scottish-English border will be closed. With the UK-EU trade deal and the likelihood of continued close trade between both sides into the future, Scotland would still have substantial access to the UK economy but with major disruption. Losing Sterling would be damaging given the likelihood of Scotland retaining a major stake in the UK market and a customs border with England would be a massive headache.

There is no rational answer to the siren call of national identity, but one aspect of Scotland’s future seems certain. Unionism has triumphed over go-it-alone nationalism. The only unanswered question is which union Scotland will belong to twenty years from now.