Independence essay: Important issues not addressed

Gavin Hewitt has extensive experience in the Scotch Whisky Association and the UK diplomatic service. Picture: Greg Macvean

This is the latest in a weekly series of essays in which influential figures explore ideas related to the Scottish independence referendum

Challenges to the Scottish Government’s views on independence are regrettably rebuffed too often by dismissal of the messenger, an assertion that all will be well and accusations of “bluff and bluster”. Sometimes it goes as far as intimidating calls from senior SNP members. That is not a good basis on which the electorate should decide Scotland’s future on 18 September.

I have a long experience in EU matters dating from 1970, the start of the UK’s successful negotiations for EU entry in 1973. Thirty-seven years in the British Diplomatic Service, followed by ten years heading up Scotland’s leading trade body, the Scotch Whisky Association, have given me deep insights into international political and economic relations and the business world in Scotland, the UK and abroad.

Against that background, I am concerned that important issues for any new independent state have not been adequately answered by the SNP. There is too much emotion in their arguments to persuade a Scot like me that we can tick the Yes box when it comes to the referendum in September. From a purely economic and business perspective, there are great gaps and uncertainties in the SNP presentation.

A key matter of personal concern to everyone is the future currency of Scotland. Much has already been said on the subject; but it is absurd, and dangerous, to reject the stated position of the three UK parties likely to form a future UK government that there will be no sterling currency union. The UK rejection is not a bargaining chip. The UK position is absolutely consistent with its position on the euro. Lack of a currency union will cost England, Wales and Northern Ireland additional transaction costs when trading with Scotland, but they will be proportionately a fraction of the costs falling on those living and working in Scotland. Scotland might adopt the pound unilaterally, but in so doing would lose all control over monetary policy. It seems that the Scottish Government doesn’t want to address the currency issue properly because it would have to spell out to the electorate what that would mean for their wallets.

I have no doubt that, if the electorate were to vote for independence in September, Scotland would — eventually — become a new EU member state. But it is folly to reject out of hand the clear guidance from Brussels that securing EU membership would not be an easy passage.

I have been involved in numerous negotiations on the accession of new countries to the EU. In Scotland’s case, there has to be a negotiation not least to address the budget contribution and the number of MEPs.

Changes would affect every other EU member state; and those member states would want a say in that negotiation. Scotland’s position is possibly more straightforward than that of recent EU candidates since Scotland’s laws and regulations are already aligned with EU requirements through UK membership. But there would be difficult negotiations on a broad range of issues including the application or otherwise of the range of opt-outs that the UK has secured over the years, eg obligations on new member states to eventually adopt the euro and enter the Schengen border control arrangements. But the issues for negotiation go much wider, including rules on VAT.

In an independent Scotland, food, transport, newspapers, books and children’s clothes would probably no longer be VAT exempt as all new EU members have to apply the rigours of the 2006 VAT Directive. What would be the consequences for the cost of living in Scotland?

In addition, negotiations for EU membership would almost certainly not be completed or the terms ratified by the SNP’s stated date of independence of 24 March 2016. The reason is simple. Scotland’s negotiations for membership would take at least 18 months to two years; each of the parliaments of the 28 member states then have to ratify the accession terms for the admission of a new EU member. That process through national parliaments, even if it were to go smoothly, takes at at least two years. And there would be many pitfalls. Newer EU member states are unlikely to support easier terms for Scotland than they themselves were required to sign up to; and there are real political issues to address, including Spain’s and Belgium’s concerns about Scotland’s independence setting a precedent for nationalists in their own countries.

Absence from the Brussels negotiating tables, even temporarily, would not help Scotland deliver the policies it wants on issues such as fishing and agriculture. Without the assistance of EU-funded subsidies for Scottish farmers, who will pick up the tab while Scotland waits for ratification of its accession terms?

I also have wider concerns about an independent Scotland inside the EU.

It is a fantasy to believe that a small country such as Scotland (by population 20th in the EU league and smaller than Finland and Slovakia) would be able to deliver for Scottish companies the international trade clout that the UK delivers through its influence in Brussels and its international network. I have been ambassador in three countries, now all EU member states — Croatia, Finland and Belgium.

I cannot recall a single occasion when these countries have been able to deliver within the EU on a trade issue peculiar to that country. I know from personal experience how success on an issue of concern to Scotland has depended on the political and economic clout the UK has been able to bring to negotiations.

The UK and EU are massively important for industries such as the Scotch Whisky industry where export success has been built on the EU single market and EU multilateral and bilateral trading links — trade policies that the UK championed and drove forward. An independent Scotland would not have the weight of the UK to persuade the Commission in Brussels to override the interests of other major trading countries within the EU, whether France, Germany and Italy. Scottish- based businesses would lose access to the invaluable network of UK diplomatic posts; 90 Scottish embassies/consulates do not add up to the 270 UK posts in 160 countries.

An independent Scotland would have to establish a wide range of new regulatory authorities at considerable cost and creating considerable uncertainty for businesses in Scotland. This would have a knock-on effect on investment and other business critical decisions. Establishing new Scottish regulatory organisations is not a fast or easy process, given the slow pace at which the Scottish Parliament works when introducing new laws, including the extensive consultation periods. This is bad for business where economic certainty and regulatory clarity are key criteria.

As a Scot, now living again in Scotland, I have had the good fortune to see how others see us. They welcome Scots wherever we go, but our real standing in the world and our ability to reach out and do business to the benefit of Scotland depends on the economic strength and political standing of the Union of the United Kingdom of Great Britain and Northern Ireland.

• Gavin Hewitt was chief executive of the Scotch Whisky Association from 2003 to 2013