Chief Secretary to the Treasury Danny Alexander on Scotland analysis: EU and international issues
Chief Secretary to the Treasury speaks at the launch of the latest Scotland analysis paper on EU and international issues.
Thank you William [Hague]
What you’ve said is a real reminder of just how influential the UK is internationally.
How we project our collective power and our ideas for good…
And particularly for the benefit of the poorest and most disadvantaged people in the world.
Being on track to meet the target of 0.7% of GNI on international aid, even in these most challenging times, is one of our proudest achievements
It was also a reminder of how being in the United Kingdom family…
And the influential membership that gives us of…
The EU. The UN.
The G7. The G8. The G20.
The IMF. The World Bank.
Really gives us – as Scots – an ability to punch above our weight internationally.
To fight for Scottish interests across the world.
To promote Scottish values across the world.
And to export Scottish products across the world.
It’s one of the most powerful reasons why we’re better as part of the United Kingdom.
The research before us today gives us Scots – I think – two powerful messages.
The first is that – as William majored on – we have more influence in the world as part of the UK.
And the second is that our membership of these international organisations – those I just mentioned – comes a lot cheaper as part of the UK.
And my message is that – by leaving the UK – we would pay more…
But that we’d influence less, and we’d achieve less.
I’ll explain shortly how – on our EU membership alone – Scotland will be between £1.9 billion and £3.8 billion better off as part of the UK in the next 7 years.
But before I get into the details, I want to talk about the principles.
The question that will be put in September is of monumental importance.
The UK is a family of nations that has grown together through good times and bad times.
Our ancestors have literally fought and died to protect it from harm.
And I ask everyone in Scotland to reflect on our history.
We are woven together in so many ways…
And I have a strong sense that as the debate intensifies – as the referendum gets closer – that the rest of the UK doesn’t want to see our family of nations torn apart.
Our nation is valued and appreciated.
The UK is successful.
And let’s remember that a ‘Yes to Independence’ vote is a one way ticket.
There will be no going back.
Money
So William has already explained why we Scots would lose influence and clout by leaving the UK…
But why – you might ask – does it also save Scotland money?
Surely greater influence comes at a greater cost?
But the truth is, that as a United Kingdom we simply have more financial clout.
You may have seen that earlier this week I made clear that the UK Government would – of course – honour our debts should independence occur.
And that an independent Scotland would pay its fair and proportionate share of the debt to the continuing UK Government.
We took that action to ensure that those who lend to us continue to do so at low interest rates – which is crucial for every business and mortgage-holder across the whole UK, including in Scotland.
The markets were showing the first signs of unease and nervousness at a situation in which they might have ended up being owed money by a newly Independent Scotland with no credit history of its own.
Because all the experts agree that a new country with no track record in financial markets – like an independent Scotland – would not retain the same credibility in financial markets as the UK.
The National Institute of Economic and Social Research has estimated that an independent Scotland could expect to pay a premium above UK borrowing costs of up to 1.7 percentage points.
With UK gilt yields currently around 3 per cent, that would mean an independent Scotland paying more than one and a half times the interest rate we get as part of the UK right now.
The referendum will decide whether that is a price we want to pay in future…
But I was not going to allow taxpayers in all parts of the UK to pay more for that risk in advance of the referendum.
EU Budget – paying more to get less
Our Union – our history – is crucial here.
In debt management, we achieve better deals for everyone in Scotland because of our collective strength.
And that is true elsewhere.
Let’s look at the EU…
Before we get into the detail of the analysis, I won’t surprise anyone if I say that I’m a strong supporter of the European Union…
Or that I believe our membership is vital for our economy, that our coalition believes it is vital for investment and trade, but above all for jobs.
I don’t think the EU is perfect. I think it’s far from it…
But I think we’re at our best when we’re at its centre.
Reducing bureaucracy…
Leading trade deals…
Something – again – we have far more clout in as part of the UK.
But our membership of the EU doesn’t come for free.
The UK contributes to the EU budget, like each member state.
And those combined contributions are then distributed throughout the Union, based on seven-year budget agreements.
Now, explaining, and quantifying the benefits of our EU budget position isn’t ever the most straightforward task!
But I’ll try to do it as clearly as possible today.
The bottom line is this.
Scotland outside of the UK would have to negotiate its own way back into the EU…
And – as such – its terms of membership would be entirely different to those it currently enjoys.
At present, Scotland gets the benefits of EU Membership at a discount of between £1.9bn and £3.8bn over the next 7 years…
And that’s because we are part of the UK.
Outside of the UK we’d pay more and get less.
CAP and Structural
In terms of paying in, every nation contributes according to their National Income…
And in terms of receiving money back, there are two main programmes:
- Structural and Cohesion Funds
- Common Agricultural Policy – or CAP
And it’s easy to see the impact both those funds have here in Scotland.
In Glasgow the Structural Funds have helped turn old buildings like the town hall into new cultural and digital projects.
And Structural Funds in my own part of Scotland, in the Highlands, have had an even bigger impact.
CAP payments too, play a crucial role in supporting farmers across the country.
Rebate
On top of those funds, the UK also receives a unique, permanent rebate on our contributions.
This rebate is – essentially – the refund we get on what we pay in to the EU budget.
We get some back, because we don’t take as much out as other Member States.
And the UK’s rebate is currently worth around £3 billion pounds every year.
It was hard fought for…
It took 12 years after entry to achieve…
And it is strongly objected to by every other member, every time the budget is negotiated.
Now, the research before you models the impact that Scotland’s independence would have on each of those three areas.
On Structural Funds, Scotland would lose out on around £200 million over this seven year spending round…
And that’s because the UK Government has recognised Scotland’s specific needs, and acted to ensure that Scotland received – compared to England – a higher percentage of the UK allocation.
On CAP payments, the picture is more complex.
There are question marks over transition periods, and negotiated splits, and whether Scotland’s CAP payments would need to be phased in over a 10 year spell…
As has happened to every other country that has joined the EU in the last three accessions.
But in the best case scenario – incidentally the only scenario put forward by the Scottish Government.
In the best case scenario CAP payments would increase by £850 million over the seven years…
And in the worst case scenario – CAP payments – would in fact decrease by over £1bn.
But the most important figure here is what would happen with the rebate.
The Scottish Government’s position is that the UK’s rebate can simply be shared in the event of independence.
But that’s not how a rebate works.
It’s not an annual lump sum that can be divided.
It’s based on a formula, reflecting the UK’s respective shares in the EU’s economy and receipts…
So the new amount would relate to the continuing UK, excluding Scotland.
There would be no ‘Scottish share’ left.
For Scotland to secure a rebate, or a correction upon accession…
There would have to be a change to the rulebook approved by every other single EU member state.
Quite simply, it would be unprecedented.
No other country has ever secured any budgetary correction on joining the EU…
So it is inconceivable that an independent Scotland would secure a rebate as the UK has…
In the unlikely event that any correction could be secured at all.
We also have to remember that all new member states contribute to the UK’s rebate…
Which means that an independent Scotland – like any other EU member state – would have to make a contribution to the rest of the UK…
We calculate nearly £600m over the seven year period.
The numbers
So – adding those factors together – how much might it cost for an independent Scotland to be a member of the EU?
The graphs on page 96 of your documents set this out.
The best case scenario for an independent Scotland, based on the Treasury’s analysis, is that for 2014 through to 2020…
With structural funds going down, a loss from the UK rebate, a contribution to the UK rebate…
And an increase in CAP receipts.
Scotland would be £1.9 billion worse for the period.
And in the worst case scenario…
Where CAP receipts went down rather than up…
Scotland’s net position would be £3.8bn worse.
What this means for Scottish families is that over the next seven years…
Continuing as part of the United Kingdom will save them at least £750 per household.
Possibly climbing to £1 470 per household.
So, as part of the UK…
We Scots pay less, and we get more out of our EU membership.
UN
Of course, the EU is just one example.
What about – say? – the UN?
As part of the UK, Scottish views – Scottish values – are represented by one of the founder members, with a permanent seat on the Security Council.
And while an independent Scotland could join the family of the United Nations…
It wouldn’t have that permanent Security Council seat, and the influence it brings…
And it would also pay for its membership at a rate equivalent to similar countries.
So – with regards to the UN’s regular budget – our analysis shows that an independent Scotland might be expected to contribute between $12.9m and $18m a year…
And to the peacekeeping budget, between $50m, and $64m.
That’s before we take into account the UN’s specialised agencies, like UNESCO or the World Health Organisation.
White paper
This is a huge decision for Scotland.
And – as such – we can’t afford to base it on anything but the very best information.
But what struck many people about the Scottish Government’s White Paper at the end of last year…
Was that when it came to money – time after time – their figures made clear they were based on a very partial account of the “best case scenario only.”
But I think the Scottish people deserve to see the best and the worst case scenarios.
And it’s fair to say that some of the Scottish Government’s best case scenarios are optimistic.
That Scotland would keep the pound they claim – despite the fact that such an arrangement would be highly unlikely to work, and highly unlikely to be agreed.
That Scotland would be in a stronger fiscal position than the rest of the UK – a claim based on wildly optimistic oil and gas forecasts, which conveniently ignores unfunded commitments on tax and childcare.
Or that Scotland would join the EU under article 48 – despite the fact that many key figures have said this couldn’t happen.
Conclusion
But when it comes to the EU – what the facts show – is that Scotland and the rest of the UK are better together, and stronger together.
And everything we’ve covered today only serves to highlight that.
As a United Kingdom we get a seat on all the most important international tables…
And put Scottish values and British at the centre of all global decisions.
As a United Kingdom we have a historic and successful network of embassies and trade bodies across the world.
Which opens up the whole globe for Scots to travel and do business in.
And as a United Kingdom we secure good deals on debt and on the cost of these memberships…
Which puts more money back in Scottish pockets.
But by leaving the United Kingdom.
We would see our international influence decrease.
And we would see the costs to our country increase.
We would be getting less, and paying more.
So let’s keep a situation where we pay less, and we get achieve more in the world together.
We are better together.
Thank you for listening.