IF A majority of those voting in the referendum opt for independence, then Scotland will leave the UK. But it won’t happen straightaway. There will be extensive negotiations, mostly with the UK government, but also with international organisations of which Scotland wishes to become a member.
The first question is “who negotiates?” It might seem obvious that this would be the Scottish and UK governments, and they will have to be the dominant parties to any negotiation. But there are difficulties. First, the UK government presently represents the whole UK, and includes ministers representing Scottish seats. In the negotiations it will be its responsibility to represent the interests of the UK apart from Scotland. This will require careful thought. Although the Scottish Parliament and government are elected only by Scots, they are not the only representatives with a democratic mandate in Scotland. Scottish MPs can also claim that too.
In practice, both sides will have to nominate negotiating teams. The Scottish team might include people who opposed independence but now wanted to make it work. They will have to be given the task of agreeing how to put into practice the decision taken by the Scottish people.
In parallel with the negotiations with the UK government, there will have to be conversations with international organisations of which Scotland hopes to become, or remain, a member. The most important of these is the EU, and it is inevitable that the UK government will also participate in those discussions. Similarly, if Scotland wishes to remain a member of Nato, discussions will have to proceed in parallel, and again the UK will be at that table also. Nato membership will obviously be critical to the Scottish/UK defence negotiations.
The length of the negotiations is hard to predict. The Scottish Government has published a short “Transition Plan” which suggests that they can be completed in less than 18 months. This looks to be a remarkably ambitious timetable as the list is long and some items are contentious. Hard bargaining takes time.
High up the list of issues, the negotiators will have to find a way to disentangle the institutions of the British state. Little attention will need to be given to devolved issues such as justice, health or schooling. But many public services operate on a UK basis: defence and foreign affairs, economic and monetary management, tax collection, banking and financial regulation, social security benefits and pensions, citizenship, immigration and border control, energy regulation, the BBC, university research and many others. Economic and fiscal issues will loom large. Agreement will be needed on currency and monetary policy, and the UK’s national debt will have to be shared out, as will its other future obligations, such as the government stake in the big Scottish banks. It is likely that an independent Scotland would wish to be in the EU, although the way in which this would be secured is not completely clear. The most likely legal framework is that the UK would be the continuing member state and Scotland would be an applicant, but the EU might not treat Scotland as just another accession state, as it is already within the EU, and its people are EU citizens. The extent to which other member states would want to use the negotiations to secure their own aims is not clear, and while it seems unlikely that Scottish membership would be turned down, conditions might be attached. It is possible that Scotland would be obliged to join the Euro, but unlikely at least in the short term, though it might well be required to give a commitment to do so at some point in the future. It is also possible, though on balance unlikely, that Scotland would be obliged to participate in the Schengen agreement on borders.
It is inevitable that economic and financial issues will dominate the negotiations between Scotland and the rest of the UK. An independent Scotland would of course have a choice about what currency to have, but it is now the policy of the Scottish National Party to keep the pound sterling. A good argument can be made for this, but it is not a decision Scotland could make for itself: it would have to be negotiated with the UK. A single currency implies a single monetary policy, and almost certainly an integrated system of banking regulation. As current experience in the Eurozone very clearly shows, it works well only if there is close integration of fiscal policy as well, because the amounts which governments spend and borrow have a very significant effect on monetary policy and interest rates. These conditions will be difficult to negotiate, and could be hard for an independent Scotland to accept. Scotland leaving the UK would precipitate a division of the UK’s assets and liabilities. Some of this would be straightforward. Physical assets which lay inside its borders would readily transfer to Scottish ownership, but the allocation of financial items would be more complex.
The most significant of these is the UK’s national debt. It is over £1 trillion at present (66 per cent of GDP) but is expected to grow over the next two years to over 70 per cent of GDP. Scotland would be expected to take a share of that, as it has benefited from the borrowing. The share might be on a per capita basis (the present national debt works out at about £33,000 per household), or on some other basis such as share of tax revenues. The UK’s liabilities, however, also include promises and commitments of other kinds. The most significant of these is public sector pensions. These are estimated to be about £969 billion, mostly from unfunded government pension schemes, such as those for health service workers or civil servants. A formula would have to be agreed for Scotland’s share of this and Scotland would be responsible for paying the continuing pensions. Then there would also need to be agreement on dividing up other UK liabilities, such as the payments on PFI deals (£32bn) and nuclear decommissioning (£60bn).
In the economic negotiations, Scotland will be very much the smaller partner seeking agreements from the UK to meet its own needs, and may not be in a very powerful negotiating position. The negotiations in relation to defence, however, might take a different tone. Since Scotland will represent the strategically important northern border of the UK, and since it contains important UK defence assets, this may be an area where the UK will want Scottish agreement for its own purposes.
Whether an independent Scotland joins Nato will be an important consideration. As a member of Nato, Scotland would participate in common defence as that is the key aspect of Nato membership. Air defence would be of particular importance, as Scottish airfields have been key Nato assets until now. Negotiations might agree that this could continue, using either suitable Scottish aircraft, or assets from a Nato ally, most likely the UK. All aspects of defence negotiations between Scotland and the rest of the UK would greatly be eased if Scotland remained a Nato member.
The most difficult defence issue, however, concerns the UK’s nuclear deterrent (currently based at Faslane and Coulport). Scotland would not wish to be a nuclear power, and could not properly do so, because of the nuclear non-proliferation treaty. The policy of the SNP is that Scotland should not hold nuclear weapons. This is likely to be subject to intense negotiation linked to discussions over Nato membership, and to the wider negotiating portfolio. A number of outcomes might be envisaged. First, the UK might agree to withdraw weapons. Safe withdrawal is likely to take a number of years. Alternatively, the UK might succeed in negotiating an agreement to continue to use Faslane and Coulport either as leased bases (as was agreed with the Irish Free State in 1922 for naval vessels to operate from the so-called “treaty ports” in Cork, Bantry Bay and Lough Swilly) or even as continued UK sovereign territory. An agreement might be reached for facilities to be available to the UK for a period of years, perhaps the lifespan of the present submarines or missile systems. Again agreement might be easier to reach if Scotland was a member of Nato and thus committed to its policy of nuclear deterrence. The UK’s nuclear weapons, under sovereign control, are nevertheless also explicitly committed to the Nato strategic nuclear mission, with some coordination of operations with the United States.
An independent Scotland would have to create its own tax collection system. It is not clear how much this would cost to run, or what its compliance cost to business would be. In the interim, however, Scotland would have to negotiate with the UK for a shared tax collection system for at least a transitional phase.
In the same way as for tax, an independent Scotland would have to create its own social security system: but until it was able to do so it would have to negotiate with the UK to continue running common social security policies and administration.
In neither of these cases is it likely that the UK would refuse to continue to assist an independent Scotland with the administration taxation and benefits for a period, but it is under no obligation to do so. How long the period of cooperation would have to last is unclear. Creating new administrative systems to run taxation and benefits has taken notoriously long times but it would be in the UK’s interest to set a deadline for Scotland to run its own independent systems.
There are a number of other UK-wide public services that would have to be separated out in a similar way. Scotland would have to manage its own borders and immigration policy. Provided Scotland had not joined the EU Schengen area, it would be possible to negotiate the continuation of the Common Travel Area with the rest of the British Isles to include Scotland. This would make practical sense. Scotland would then still have to police its own external borders, but not those with England or Ireland. In practice this would constrain Scotland’s ability to operate a different immigration policy from England and Ireland, and – as the Republic of Ireland has found – this limits Scotland’s capacity to offer citizenship, for example to expatriates or their descendants. (The Republic of Ireland made changes to its constitution in 1984 to limit Irish citizenship because this was seen as a way of some people avoiding immigration restrictions to the EU.)
Putting independence into effect will be a very major task. It has already been suggested that it could take a period of two years from a referendum vote in favour to make the necessary arrangements. Given the scale of the task, even a period of that length would present challenges. Several processes of negotiation will have to proceed in parallel, across a range of subjects on which little preparatory work will have been done.
The outcome of the negotiation is hard to predict. It will be in the UK’s long-term interest to help Scotland become a stable and prosperous country, but in the negotiations the UK government will be obliged to look after the immediate interests of England, Wales and Northern Ireland, for whom it will continue to be responsible. As the smaller party, it is inevitable that Scotland will be looking for a significant deal of goodwill, particularly in the transitional phase.
At the end of the period of negotiation, it would be expected that the UK Parliament would pass a law to declare Scotland independent, and to give up jurisdiction over it. That Act might, as has happened when the UK has given up colonies, provide Scotland with an interim constitution, but it would be up to the Scottish Parliament to adopt it or amend it in future. Implementation is likely to take even longer than the two-year period. Unless Scotland is willing to tolerate disruption to services, transitions to independent tax collection and social security systems are likely to take longer, and this may constrain Scotland’s ability to operate distinctive policies.
Of course, independence could be made to work: but the process of negotiation, putting the resultant deal into practice, and winding down the inevitable transitional arrangements are each very major tasks. They will only be kicked off after a Yes vote and will certainly not be over by 2016.
• Scotland’s Choices: The Referendum And What Happens Afterwards written by Iain McLean, Jim Gallagher and Guy Lodge is published on 18 April (Edinburgh University Press, price £12.99). Copies can be ordered direct by phoning 0131 650 4218