Scotland and Europe. The renegotiation agenda and the Scotland Bill

David Cameron’s proposed areas for renegotiation have implications for the Scottish Government, a situation that will increase once the Scotland Bill is passed.

The distinct Scottish interest in the European renegotiation and referendum can be seen under two headings. The first concerns matters reserved under the devolution settlement to the UK Government but where Scottish interests and preferences may be distinct. The second concerns devolved matters that also have a European dimension. This produces a potentially long list of questions.

Now that the renegotiation agenda has narrowed down to David Cameron’s four baskets, outlined in his letter to the president of the European Council, the list has shorted; but at the same time, new competences are about to be devolved under the Scotland Bill currently finishing its parliamentary passage.

The Prime Minister’s first basket, on economic governance, concerns reserved powers, but with a potential impact on Scotland. The UK Government is concerned about the effect on the City of London but the Scottish financial sector also has an interest. European moves to entrench fiscal discipline through successive agreements, notably the Treaty on Stability, Coordination and Governance have led to increased control of sub-state government budgets. The UK’s decision not to participate in the Treaty means, however, that the new fiscal powers of the Scottish Parliament will not be affected.

The second basket, increasing competitiveness, is shared by the Scottish authorities (and everybody else) but its interpretation may be more difficult, if it means a reduction in the social dimension of Europe. The Scottish Government has called for ‘better regulation’ rather than less regulation.

The third basket concerns sovereignty. Removing the UK from the application of the ‘ever-closer union’ clause is largely symbolic.  David Cameron has also demanded that national parliaments, acting together should have a greater say, or veto, over European legislation. It is not clear what this actually means. National governments acting in sufficient numbers already have a veto under the qualified majority voting provisions and where a government has a parliamentary majority (as it does in most member states), the distinction is moot. If the intention is to give national parliaments, as opposed to governments, a stronger role, this is something that the UK could do on its own, following the Danish model of allowing Parliament a role in setting the negotiating provision. Alternatively the Government may be thinking of building on the existing provision for parliaments to intervene in European legislation where they think that subsidiarity is being breached. This is restricted to the application of subsidiarity, does not provide for a role in making policy and does not give national parliaments a veto. It is hardly ever used but is of more symbolic importance.

For Scotland, another issue is whether any new provision would apply to sub-state parliaments. In the subsidiarity case, there is provision for sub-state parliaments to be involved, either through territorialized second chambers (in Germany, Belgium and, partly, Spain and France) or the Committee of the Regions, although again they almost never use this. The UK Government’s proposals make no mention of involving devolved bodies.

More generally, David Cameron insists that subsidiarity be respected but appears to limit this to the member-state level, rather than extending it to the devolved level. Then there is a reference to the UK’s right choose whether to participate in future Justice and Home Affairs (JHA) measures, many of which are devolved in Scotland and Northern Ireland. In 2014, the UK had to decide whether to opt in or out of the whole JHA provision. It decided to opt to opt out and then opt back in selectively. It seems to want to keep this freedom for future measures but, if it did, then Scotland would have to follow whether it wanted to or not.

The fourth basket concerns migration, which the UK government has linked to welfare and the demand to limit in-work benefits for migrants. The Scottish Government has taken both a pro-welfare and a pro-immigration stance and, under the new Scotland Bill, will take over some benefits and have the power to top up others. It could, potentially, make up benefits lost by UK Government changes (which, it seems, will have to be taken away from UK citizens as well). The top-up power, however, is a crude instrument since it does not allow Scotland to redesign the pattern of benefits. The cost would have to be met by the Scottish Government. If it is true that in-work benefits do attract migrant workers, this would meet Scottish Government objectives and, under the new Scotland Bill, it would gain the income tax paid by them. Yet, the employer and employee National Insurance (NI) contributions would go to the UK Exchequer. This could trigger a demand for devolution of NI and a broader redesign of the tax and benefit system in Scotland.  On the other hand, there is little evidence that in-work benefits do affect migration flows.

The most difficult issue in relation to Scotland is therefore the same as the most difficult issue in the negotiation as a whole. There is likely to be a face-saving compromise on this. In the longer run, however, Scotland’s vision of the EU, which is more positive, in favour of engagement and more concerned with the social dimension, is broadly shared among the main parties. This will at odds with a UK Parliament where Eurosceptic voices are likely to predominate. 

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Michael Keating's picture
post by Michael Keating
University of Aberdeen
13th January 2016

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