Nicola Sturgeon

Second Time Around: EU Membership for Scotland is More Difficult, Not Less

And so here we are again. A second independence referendum now seems more likely a question of when, and not if. Those of us who fed into the debate in 2014 are already preparing to do so again. And while the issues remain remarkably the same, the context has changed entirely.

I did not involve myself in the politics of the 2014 referendum at all. In part because I genuinely didn’t make up my mind until the month before. However, as I also contributed towards the academic debate surrounding independence I did not want to appear too partisan.

In 2014, Dr. Daniel Kenealy and I wrote a paper in the European Law Journal, considering the issues surrounding an independent Scotland’s prospective European Union membership. We argued that, although Scotland’s continued membership of the European Union would not be automatic, it was highly likely that it would continue without interruption.

However, that was then, and this is now. And while the issue of EU membership is likely to feature heavily in the debate on Scottish independence once again, the context has changed considerably.

Timing

Nicola Sturgeon wants to time a referendum such that it will be held towards the end of the UK’s Brexit negotiations, but before the expiration of the two year time limit. This is, purportedly, so that Scotland can have a “genuine” choice between independence with EU membership, or union without.

However, this makes little sense for a number of reasons.  Much has been made of the length of time these negotiations might take. Such negotiations almost always go down to the wire, and Article 50 TEU allows for the possibility of seemingly-indefinite extension.

A cynic might take the view that the real reason behind the proposed timing is to ensure the referendum takes place before people acclimatise to Brexit and realise that the sky hasn’t actually fallen in. It is notable that the proposed timeframe is far shorter than the SNP felt necessary in 2011 to conduct a campaign that fully explored the issues.

Furthermore, the timing makes even less sense if the object of the referendum is to allow voters a “genuine choice”, because no such choice will exist. Unless the First Minister seriously proposes that a new state could be set up and continued membership of the EU negotiated within the space of a month, Scotland WILL be leaving the EU one way or the other. The choice on offer will be between Brexit inside the union and Brexit outside of the union, with potential for EU membership further down the line. This, of itself, poses a whole host of new issues that did not exist in 2014.

Sincere Co-operation

The position of a territory seceding from a state that itself is seceding from the EU is vastly different from a territory seceding from a fully-fledged Member State. In the latter circumstance, that secession would result in a considerable dislocation in the EU’s single market, which its institutions, and the Member States, would be legally obliged to seek to avoid. As Dr. Kenealy and I argued in 2014

“[t]he need to avoid such a dislocation represents not merely a pragmatic reason for the EU to enter negotiations with Scotland immediately following a ‘Yes’ vote but also a legal reason. Article 4 makes clear that if such negative externalities, as would be created by Scottish expulsion, threaten to compromise the attainment of the EU’s goals, then steps must be taken to avoid them. The task of ensuring that the Single Market does not suffer any sudden, sharp dislocation is one that flows from the Treaties. To allow the EU to stumble, unprepared, into such a scenario by refusing to address the issue of an independent Scotland until Independence Day, would be a violation of the principle of sincere cooperation, bordering on a dereliction of duty by the Commission and the Member States.”

This statement, however, clearly does not apply mutatis mutandis to a post-Brexit scenario. The unavoidable dislocation has already taken place. There is no impending hole in the EU’s single market that the institutions, or the Member States are obliged to seek to avoid.

This does not mean that there is no chance that institutions and Member States will not seek to make and independent Scotland’s transition into the EU as smooth as possible. Certainly, post-Brexit, some within the EU – most notably, Guy Verhofstadt – have made such overtones, seemingly to spite the UK. While a desire to stick-it to the UK among officials may well work to Scotland’s advantage, it doesn’t come close to the EU-wide legal obligation to work co-operatively with a seceding Scotland that previously existed.

Good Will

You wouldn’t have thought it by the end of the campaign, but the first independence referendum actually came about in a spirit of remarkably good will. The SNP, to everyone’s surprise, won a majority in the Scottish Parliament elections with a clear manifesto commitment that an SNP majority in the Scottish Parliament would mean an independence referendum. This, of itself, is at odds with the more equivocal commitment contained within the SNP’s 2016 manifesto.

The year following the referendum, the UK Government and the Scottish Government signed the Edinburgh Agreement, under which the Secretary of State would make an order under s.30 of the Scotland Act 1998 to grant Holyrood the legislative competence to hold a referendum that would “deliver a fair test and a decisive expression of the views of people in Scotland and a result that everyone will respect.”

The present circumstances could hardly contrast more starkly. The First Minister and the Prime Minister appear to be engaged in a game of constitutional “chicken”, and it’s not clear which party, if either, will blink first.

In 2014 I argued, quite sincerely, that from the moment Scotland voted ‘Yes’ its closest ally would be the rest of the United Kingdom. This was not out of some misplaced belief in David Cameron’s (or, more likely, his successor’s) magnanimity; but quite simply because it would be in the UK’s interests. With a similar outlook and so many shared interests, Scotland would likely be a close ally of the UK in the European Council and Council of Ministers, much like Ireland. I have little doubt that the UK Government would have gone to bat for Scotland’s continued membership of the EU. In the present circumstances such good will seems unlikely, and insofar is the EU is concerned, utterly fruitless in any event.

Currency

In 2014 I did not think it was at all likely that Scotland would be compelled to join the Euro. This was not  because I believed that Scotland would inherit the UK’s opt-out, but because the SNP had been explicit in their intention to continue using the Pound Sterling, whether in a formal currency union or not. As Scotland would have not have had an independent currency it would not have been possible for Scotland to join the Euro.

However, having been the Yes campaign’s key weakness in 2014, it is now clear that the “use the Pound, one way or the other” approach is unlikely to be used again. Any plans for independence would likely have to include a plan for an independent currency and central bank. Consequently, the main barrier to Scotland’s being compelled to join the Euro evaporates. All new members of the EU (and make no mistake, Scotland will be a new member) are obliged to eventually join the Euro.

While it is the case that it is possible to contrive to not join, by keeping your currency out of ERM II, as Sweden does, it is unlikely that Scotland would be able to get away with this for too long. The SNP may have to prepare itself to be able to sell the prospect of Scotland using three different currencies within the space of a decade.

Conclusion

The First Minister wishes to present the choice she wishes to put before the Scottish people as between independence within in the EU, or Brexit within the UK. Scotland’s continued membership of the EU was one of the key issues of the 2014 independence referendum, and it is likely that it will be once again. However, while the issues may well be the same, the context is vastly different; and this changed context turns Scotland’s continued membership of the EU from likely in 2014, to nearly impossible in 2019.

Scotland will be leaving the EU. The reality is that the only choice on offer is between Brexit within the UK, or without it. Whether we like it or not, this is the new reality to which Scots voters need to become accustomed, and about which the First Minister needs to be honest. Only then will we have a rational debate about Scotland’s future.

The EU won’t change: whatever the result of the #EUref, the left has more to fear than the right

imageThe EU referendum campaign has been the weirdest in living memory. One day, David Cameron argues that we should stay in the EU as we “just don’t know” what will happen in the years ahead; the next, George Osborne confidently makes projections 25 years into the future. Lifelong Eurosceptic Jeremy Corbyn now embraces his inner Europhile in an effort to placate his MPs. Michael Gove, Iain Duncan Smith, and Boris Johnson now, apparently, want to throw cash at public services. Meanwhile, Nicola Sturgeon is making the argument that staying in the Union is better for jobs, trade, and investment – seemingly without a hint of irony. But perhaps it’s Alex Salmond, the most famous supporter of Scottish independence since William Wallace, making the argument that we should remain in the EU because otherwise Scotland will become independent, that takes the prize for utter ridiculousness.

However, aside from the somewhat strange positions adopted by politicians, there is a bizarre ideological contradiction at the core of both the “Leave” and “Remain” campaigns. That contradiction, quite simply, is that the politicians whose views are most in-line with the ideological underpinnings of the European Union are campaigning to leave, while those whose views are totally at odds with the EU’s direction of travel are campaigning to remain.

When considering an organisation like the European Union, there are essentially two orders of complaint.

The first order complaint is fairly ideologically neutral: that the European Union deprives the citizens of Member States of any direct say over matters that would usually be the subject of political discourse and division. Invariably, the main proponents of this argument appear to be drawn from the right. Complaints about the surrender of sovereignty can frequently be heard from the Conservative benches of the House of Commons, but seldom heard from the Labour benches.

The second order complaint is distinctly partisan, and from a left-wing perspective more worrisome: that having been deprived of any direct say over matters that would usually be the subject of political discourse and division, we have had imposed upon us a free-market ideology from which we are not at liberty to depart.
Though the preference for free-market ideology has been evident, in particular in judgements of the ECJ, since the early days of the EEC, the abandonment of the façade of ideological neutrality came during the 1980s. During this period we saw the entrenchment of a consensus that arose in the 1980s, when almost every Minister in the Council was drawn from the centre right. This consensus led to both the Single European Act and the Treaty of Maastricht.

In recent years, this ideological preference has become more overt. For example, in two recent cases before the European Court of Justice (ECJ), the Court ruled on a conflict between the rights of workers to withhold their labour and companies’ rights of free movement. Normally in cases such as these where two competing rights are in conflict the Court will grant a wide margin of appreciation to the Member State. However, in Viking and Laval, the Court ruled that the rights of workers were subject to the the rights of corporations, and not balanced by them. In doing so, the Court ruled that workers are only allowed to strike where it’s not too inconvenient for their employers. And there I thought the whole point of a strike was for it to be inconvenient.

The court further ruled in Viking that it was lawful for companies to discriminate between domestic and imported labour, thereby creating an incentive for companies to import workers from other Member States in order to undercut wages.

Of course, the most high-profile recent example of the EU’s ideological preferences can be seen in the treatment meted out to Member States who found themselves in fiscal trouble during the Eurozone crisis – in particular Greece. Having knowingly created artificially low interest rates in the so-called “PIGS” states, the EU institutions turned their backs on these states, insisting that “there is no alternative” to harsh austerity measures. Of course, there was an alternative – but one which would involve unpicking the ideological preferences of the EU.

The left consoles itself with the socialist scraps thrown from the EU’s capitalist table – such as directives on working time, maternity pay, and roaming charges. However, the left ignores the fundamental entrenchment of neoliberalism that the EU mandates.

Thanks to the EU, the most basic instruments of left-wing governments have been neutralised, with the exception of tax and spending (although the Commission’s coming for that next). States are no longer at liberty to nationalise, regulate, or subsidise as they see fit. A left-wing government wouldn’t blink at rescuing Port Talbot steel works – but even if Jeremy Corbyn was Prime Minister there’s absolutely no chance his government would get Commission authorisation for supporting the steel industry. In recent years, too, we’ve seen the Commission clamp-down on airport subsidies, of crucial importance to many in Scotland.

Unlike in domestic politics, this ideological preference cannot be undone by a majority, even a relatively sizable one. A similar uniformity of ideology as was evident in the 1980s would be necessary before a reversal of this ideological choice became possible, let alone likely. Such uniformity becomes less and less likely as more and more states are represented at the Council.

It is surprising, therefore, that so many on the Conservative benches are so antagonistic towards the European Union, relative to those on the Labour benches. If Conservatives don’t like that their political autonomy over the ideological direction of the country has been stripped away, they can at least console themselves with the fact that the levers of power of which they have been deprived are nonetheless being pulled in a manner that is, for the most part, to their pleasing. For example, John Major’s government actually quite liked the EU’s deficit-limitation rules because they represented the entrenchment of “good conservative values”.

By contrast, the left is usually quite at peace with not pulling the levers of power themselves provided that they are being pulled in a manner of their pleasing (the internationalisation of human rights is a good example of this). But in EU Member States control over the levers of power has been surrendered and that power is being exercised in a decidedly right-wing manner. It is astonishing, therefore, that the Labour Party should be the strident defenders of the European Union, while it is the Conservatives who are amongst its harshest critics. The Labour Party has convinced itself that the European Union can be a vehicle for left-wing ideology when sixty years of evidence has shown that the opposite is, in fact, the case.

Normally the place for debating substantive matters should be the internal democratic processes of the organisation – that is to say, European Parliament elections. The fact that these questions have dominated the referendum debate, and not the more relevant question of what power (if any) the EU should exercise is testament to just what a democratic failure the EU really is. Despite the seismic political shifts that have taken place in Member States in the past 30 years – the fall of Thatcher and Kohl, the rise of New Labour and France’s Socialist revival, the end of sixty years of Fianna Fáil hegemony in Ireland, and the annihilation of PASOK by Syriza, to name but a few – the political direction of the EU has never changed. If anything, recent evidence has shown that despite rising disquiet amongst voters, the determination of the EU’s leaders to pursue a right-wing, neo-liberal, free-market agenda has become more trenchant, not less.

So the right should console itself with the fact that they’ll almost certainly be getting their way whatever the result. If we leave there’ll be a Tory government in Westminster unfettered by the interfering busybodies in Brussels and Luxembourg. If we remain the EU institutions will be vindicated, and the free-market ideology will become even more entrenched. For the left, it’s difficult to find a silver-lining in either scenario.

This blog is adapted from an article I wrote for Grapevine – available now. 

SNP makes the case for scrapping tax-free personal allowance and imposing a “Flat Tax”

Sturgeon ParliamentLabour (and the Liberal Democrats) have called the SNP’s bluff, by proposing a 1% tax increase in order to offset cuts to public services. Surely, the left-wing SNP warmly embraces slightly higher income taxes over austerity? It seems not, and the SNP’s spin machine has gone into overdrive, inventing new meanings for words, which hitherto had a commonly understood meaning.

In order to defend themselves against the claim that the SNP, while speaking the language of Syriza, bear a far closer resemblance to the Tories or New Labour when it comes to taxation; the SNP’s spin doctors (another trait they share in common with New Labour) have invented a new definition of “progressive”. Any tax expert will tell you that a progressive tax is one in which the effective rate increases with the value of the base. Income tax is progressive in that respect, because higher earners pay a higher proportion of their income in tax than lower earners; Council Tax, by contrast, is regressive to its base (property values) because the effective tax rate is lower for higher value properties. Simple stuff.

However, in response to Scottish Labour’s proposals to increase the Scottish Rate of Income Tax (SRIT) by 1% in every band, the SNP invented a novel definition of progressivity. The SNP described Labour’s proposals as “regressive” because the relative increase in the proportion of higher earners’ income tax is smaller than the relative increase in lower earners’ tax. In other words, the proportion of the proportion of income.

The SNP’s cyber-warriors went into overdrive, lovingly embracing this new definition of progressivity, seemingly without the slightest clue about what they were actually saying. For example, the first £11,000 of income is tax-free. A certain amount of tax-free income is a feature in almost every tax system and is, surely, progressive? Well, no longer, according to the SNP. Because we pay no tax on the first £11,000, the first penny of income tax is an infinitely higher burden than zero.


As can be seen on the above graph, the rate at which the tax burden increases (green line) is significantly higher at the lower end of income tax, because the tax-free personal allowance represents a much larger share of total income. Because of the withdrawal of the personal allowance above £100,000, the rate at which the tax burden increases in the top brackets approaches zero (the only constant being the weekly National Insurance threshold of £112). Under the SNP’s new definition of progressivity, the personal allowance is regressive, and presumably therefore, has to go.

By contrast, taxing us on every penny we earn at a single rate – a flat tax, without any personal allowance – would be much less regressive under the SNP’s conception of progressivity.

The SNP’s measure of progressivity is what’s called a derivative, and by the SNP’s new definition of progressivity, it’s not just Labour’s proposals that are regressive, but also the whole of income tax itself! In their attempts to spin Labour’s proposals as regressive (which I hope is clear by now, they are not) the SNP’s spin doctors and their online infantry have been making the case for scrapping the personal allowance and imposing a flat tax. And if you believe that’s “progressive” then you really will believe anything.