Scottish referendum: Implications for the EU

Implications for the EUTweet: @UKScotland

@ESRC@Davidnfbell

WelcomeTweet: @UKScotland

@ESRC@Davidnfbell

The ESRC Future of the UK and Scotland Programme

Professor Charlie Jeffery

Edinburgh Agreement 15 October 2012

“Should Scotland be an

independent country”

Yes?No?

Future of UK and Scotland: What is it?• Recognition by ESRC of the importance of Scotland’s

referendum– For social science– For Scotland and the rest of the UK (and the EU!)

• Ca 45 researchers working on key themes: economy, policy, constitution, citizens

• Communications activities: events, stakeholder relations, website

• One-stop shop at www.futureukandscotland.ac.uk

http://www.futureukandscotland.ac.uk/

Impact on Business

Professor David BellUniversity of Stirling

The Independence Referendum: Impact on Business

PROFESSOR DAVID BELLESRC RESEARCH FELLOWDIVISION OF ECONOMICSSTIRLING MANAGEMENT SCHOOLUNIVERSITY OF STIRLING

Business Attitudes

• Lack of information and trust in politicians– 60 per cent of firms claim that they do not know enough about the

implications of the referendum – Businesses are suspicious of information provided by politicians and

both campaigns. (23% want more information from politicians, 46% would prefer local Chamber of Commerce)

• Unwillingness to show preference for either side– Thus far, business has been cautious about expressing a view.– Some companies considering including independence risk assessments

in their trading statements to satisfy shareholders and customers who remain uncertain and cautious about the outcome

What are the key issues for business?

Currency• “We will therefore retain the pound in an independent Scotland.” (White

Paper on Independence)• For

– Scotland and rUK currently form a strong trading partnership. Retention of pound makes sense on transaction costs grounds.

• Against– Scotland will be heavily dependent on North Sea Oil revenues. Changes

in oil price will affect Scottish economy, but not rUK. Uniform monetary policy may be harmful in the absence of fiscal transfers.

– Both Scotland and rUK heavily indebted. Scotland would have to immediately borrow from international money markets and has no reputation with these markets. Borrowing costs likely to be higher than rUK. To contain these and to establish credibility with the markets, Scotland may have to immediately impose tight fiscal policy. The political costs of this might undermine the credibility of the monetary union.

EU Membership

• “ … the Scottish Government will immediately seek discussions with the Westminster Government and with the member states and institutions of the EU to agree the process whereby a smooth transition to full EU membership can take place on the day Scotland becomes an independent country.” (White Paper on Independence)

• “While the Scottish Government recognises the political and economic objectives of the Eurozone, an independent Scotland will not seek membership.” (White Paper on Independence)

• “If we remain in the UK, the Conservative Party’s promise of an in/out referendum on EU membership raises the serious possibility that Scotland will be forced to leave the EU against the wishes of the people of Scotland.” (White Paper on Independence)

Corporate Taxes

• We plan to set out a timescale for reducing corporation tax by up to three percentage points below the prevailing UK rate. (White Paper on Independence)

• “Monetary unions allow for significant differences in fiscal and economic policies. .. Corporation tax in Ireland remains at 12.5 per cent but is higher elsewhere in the Eurozone” (White Paper on Independence)

• Even at a UK level, this may prove problematic if Scotland has to agree a tight fiscal pact with rUK in order to remain part of the sterling zone.

Scotland’s “geographical”share of sea-bed

UK oil revenues from 1980/81 to 2012/13 = £242bn, but tax take highly volatile

North Sea Revenues

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

£0£2,000£4,000£6,000£8,000

£10,000£12,000£14,000

UK

Oil

Re

ve

nu

es

(£

m)

The Financial Sector

• Scotland has a relatively large financial services industry which contributed £8.8 billion to the Scottish economy in 2010 – more than eight per cent of Scottish onshore economic activity. It employs more than 85,000 people.

• Many of its contracts (e.g. pensions) extend beyond the proposed independence date.

• Much of its business comes from outside Scotland. Potential loss of business if currency union not agreed.

• “Major financial institutions operating in the Sterling Area will therefore be subject to the same prudential supervision and oversight in both Scotland and the UK. As the Fiscal Commission Working Group made clear, such an approach is in the clear economic and financial interests of Scotland and the UK.” (White Paper on Independence)

• Would shared regulation be agreed? Would banking union be part of the agreement?

Income Tax

• The White Paper has no specific proposals in relation to income tax, though it is the largest source of revenue to the Scottish Government.

• Income tax contributed £10.8bn of total revenues of £56.9bn in 2011/12. Corporation tax contributed £3bn and North Sea Oil £10.6bn.

• Incomes in Scotland are unequally distributed. The same is true of the UK as a whole. The top 10 per cent of earners contribute 47 per cent of income tax revenues. The top 1 per cent contribute 20 per cent of revenues.

• The Scottish and rUK labour (and capital) markets are highly integrated.

Conclusions

• Business cautious about expressing a view, but aware of risks

• Low risk outcomes for business:

– Membership of EU agreed, without any change in current arrangements (in relation to e.g. Schengen/Fiscal Stability Pact)

– Sterling zone arranged, including fiscal pact with rUK

– Business regulation continues to be the same throughout UK

• “No” camp refuse to pre-negotiate on these issues

• “Yes” camp refuse to discuss more risky alternatives

Impact on Business

Professor Brad MacKayUniversity of Edinburgh

The independence referendum: Impact on business

Professor Brad MacKay

ESRC Research Fellow

Head, Strategy and International Business Group

University of Edinburgh Business School

The sample

Based on a sample of 52 companies

By Sector No. %

Financial Service (life insurance, retail, wealth man.) 16 31

Energy (incl. Oil and Gas) 8 15

Electronics/Technology 7 13

Life Science 6 12

Engineering/Ind. Manufacturing 11 21

Other 4 8

Total 52 100

Indicative Profiles

24

By Size No. %

Large 34 65

Medium (2XS/M) 18 35

Total 52 100

Customer Base (Est) No. %

Scotland 4 8

rUK 16 30

rUK/EU/Global 32 62

Total 52 100

Origin No. %

Scotland 29 55

rUK 5 10

Overseas 18 35

Total 52 100

UK HQ No. %

Scotland 35 67

rUK 17 33

Total 52 100

Risks

25

IndustryFinancial Services

Life Sciences

Electronics/Technology

Engineering/Ind. Manuf.

Energy (incl. oil and gas)

Key uncertainty

Change in currency Yes Yes Yes Yes Yes

Regulatory ChangesDouble

Regulation Yes Yes YesYes – Decom-

misioningSkilled labour (Recruitment/Retent.) Yes Yes Yes Yes YesChanges in income and personal taxation Yes Yes Yes

Yes – Corp. tax translation

Yes - Corporate Tax

Reputational risk Yes Yes Yes Yes

Relocation of competitors Yes

InvestmentUniversitie

s Yes Yes Yes

Access to financing Yes Yes

Collaboration (Border) Yes

EU Yes Yes

Opportunities

26

Financial Services

Potential opportunities

Frequency (N=14) %

YES 6 42%NO 8 58%



Frequency (N=6) %

YES 5 71%NO 2 29%

Engineering/Ind. Manufact.


Frequency (N=5) %

YES 4 80%NO 1 20%

Potential opportunities Frequency (N=4) %YES 6 100%NO 0 0%

Energy(inc. oil and gas)

Potential opportunities Frequency (N=5) %

YES 2 33%NO 4 67%

Opportunities

27


Life Sciences




Key Opportunities

Income tax decreases Yes

Liberal Immigration Yes Yes

Revitalise Scot politics Yes

Lower tax Yes Yes

R&D Rebates Yes

Access to government Yes Yes

Scottish Brand Tourism Scot Diaspora Pride

Redesign regulations Yes

Government funding Yes Yes

Connections Flights

Advisory services Law Firms

Lobby EU Yes

Contingency Planning

28

Financial Services

Contingency planning Frequency %YES 7 50%NO 7 50%


Contingency planning Frequency %YES 2 29%NO 5 71%

Engineering/ Ind. Manufact.

Contingency planning

Frequency (N=5) %

YES 4 36%NO 7 64%

Life SciencesContingency planning Frequency %YES 0 0%NO 6 100%

Energy

Contingency planning

Frequency (N=5) %

YES 1 17%

NO 5 83%


29


Life Sciences





Risk register Yes Yes Yes

Monitoring Yes Yes Yes

Informal conversations Yes Yes Yes Yes

Analysis/tactical plans Yes Yes Yes Yes

Too uncertain Yes

Reduce exposure Yes Yes Yes

Invest in opportunities

EU Implications

Significant issue for 5/52 companies interviewed;

20% to 30% of exports outside the rUK;

Possible implication for FDI;

Between 70% and 80% of Scottish exports go to rUK;

Currency and uncertainty are primary risks;

EU negotiations have indirect implications for business.

30

Conclusions: Triggers and tripwires for firm behaviour

Customers Ability to sell products/services (location, regulations,

reputation); Ability to access markets (ie. MoD, EU, rUK).

Employees Ability to attract high value, skilled labour (ie. quality of life); Ability to maintain high value, skilled labour (ie. personal

taxes).

Shareholders Ability to create value (ie. perception, profitability); Value destruction (ie. through increasing costs/complexity).

31

Impact on businessProfessor David Bell

Professor Brad MacKay

Tweet: @UKScotland@davidnfbell

Migration, mobility and higher education

Dr Scott BlinderUniversity of Oxford

Migration in the Scotland Independence Debate

Dr Scott BlinderMigration Observatory

COMPAS, University of Oxford

The Scottish Referendum: Implications for the EUBrussels, 11 Feb 2014

Immigration policy in anindependent Scotland: Context

• Immigration in Scotland– 7.2% of Scotland’s population is non-UK born– Increased from 4.1% in 2004– Similar % to Portugal, Malta, Lithuania

• Significant share from EU– 37% of non-UK born in Scotland are from EU– 15% from Poland

• Sources: 2012 Labour Force Survey (UK), 2011 Scotland Census

Policy Context

• Immigration is a “reserved power” (Westminster)

• Scotland’s different interests and needs?– Skills shortages– Population needs (target for growth!)

• Employer concern– some sectors concerned visa and immigration law– all sectors concerned with EU status– (research by Centre for Population Change, another ESRC project)

Immigration policy in anindependent Scotland: Proposals

• Scottish Government White Paper: more open immigration policy– non-EU high-skilled labour migration – restore

‘human capital’ element of points-based system– Non-EU students – restore Post-Study Work visa– More “humane” asylum system– EU migration – “will remain open to EU nationals

exercising their treaty rights”– Low-skilled (non-EU) migration – not mentioned, but

implied barriers or limits

Immigration policy in anindependent Scotland: Political support?

• Effects of independence on political support for migration? Is a more open policy sustainable?– Scottish Government view– Political science view

• (C Boswell, U of Edinburgh)

What does Scotland’s public say?

• Migration Observatory/YouGov survey– 2000+ in Scotland, 2000+ in England/Wales– Representative on-line panels

• 58% in Scotland want less immigration (75% in England/Wales)

• However…

Public support?

• Less salient issue in Scotland• Little public opposition to some immigrant

categories– Reduce students: 22%– Reduce high-skilled migrants: 23%– Reduce citizens’ spouses/children: 22%

• These overlap with Scottish Government proposals

Public support for Scottish control

• 60% prefer Scottish Government as immigration policy-maker (over UK Government, EU, and local governments)…

• …though many do not agree with the policy they expect from an independent Scotland

• Will this lead to sustained anti-immigration opposition?

Proposal: Common Travel Area

• Scottish membership in a Common Travel Area (with the rest of the UK and Ireland), outside of Schengen– Acceptable for EU member state?– Pressure from UK toward immigration policy

convergence? Border controls?• Majority in Scotland (64%) believe border

controls between England and Scotland unlikely to happen

Proposal: Citizenship Policy

• Inclusive citizenship policy– British citizens (automatic)

• “habitually resident” in Scotland• born in Scotland, even living outside of Scotland

– Ancestry / residency (eligible to apply)• Scottish descent (a parent or grandparent who qualifies

for Scottish citizenship)• lived in Scotland for at least 10 years and with a

“demonstrable connection” to Scotland • migrants residing legally in Scotland on “qualifying visas”

And if ‘No’ wins…

• Status quo continued tension?– b/w Holyrood & Westminster– b/w UK & EU (re free movement)

• Room for sub-national policy-making?– Canadian example – PBS with regional ‘bonus

points’• Add to public support for devolution?

– Immigration policy as part of ‘devo-max’?


Professor Sheila RiddellUniversity of Edinburgh

The Future of Higher Education in Scotland

Presentation to The Future of the UK and Scotland Seminar, Brussels, 11th February 2014

Sheila Riddell

Centre for Research in Education Inclusion and Diversity,

University of Edinburgh

Scottish Higher Education, the Devolution Settlement and the Referendum on

Independence

Much of the referendum debate has focussed on the economy – but HE has also featured prominently

Central to economic, social and cultural welfare of the nation

Seen as key to social mobility and of great concern to general public

HE policy mainly devolved – but some aspects reserved e.g. research funding via Research Councils

HE policy illustrates policy divergence post-devolution, but also inter-connectedness of UK systems.

Free higher education seen as flagship SNP policy – SG White Paper contrasts Scottish approach with

‘marketised’ system in England

‘…free education for those able to benefit is a core part of Scotland’s educational tradition and the values that underpin our education system. One of the major achievements of devolved government in Scotland has been to restore this right to Scottish domiciled undergraduate students’

By way of contrast:‘The Westminster Government has pursued an increasingly market-drive approach to higher education, increasing tuition fees for undergraduate students to up to £9,000 per year’(Scottish Government, 2013, p.198 )

But differences between English & Scottish systems may be exaggerated – both highly socially

segregated

English students incur much higher levels of debt – long-term impact unclear.

But abolition of fees in Scotland has not produced greater social equality in participation – and increased student fees in England has not led to greater social inequality.

Scottish policy of free undergraduate tuition not economically progressive - of greatest benefit to the middle classes because:(1) Far more middle class young people go to university –

higher levels of prior attainment(2) Shift from non-repayable grants to repayable loans.

Scottish students dependent on the state leave university with loans of c. £28,000 c.f. middle class counterparts

(3) Free HE has impact on rest of education system. Reduction in college funding & failure to reduce class sizes.

Participation in HE sectors by deprivation quintiles (percentages) People from most deprived neighbourhoods make up only 7% of

student population in ancient universities; those from most advantaged backgrounds make up 38%. No change over past

decade.

Ancients 1960s Post ‘92s CollegesDepriv-ation quintile

2000 -2001

2010 -2011

2000 -2001

2010 -2011

2000 -2001

2010 –11

2000 -2001

2010 -2011

1 (least) 38 38 30 30 28 26 19 17

2 23 25 23 24 21 22 21 183 17 17 20 19 18 19 21 204 12 12 15 15 17 18 20 225 (most) 8 7 11 11 15 16 18 23

Undergraduate fees policy - new challenges for an independent Scotland

rUK-domiciled students currently pay fees of up to £9,000 if studying in Scottish universities

White Paper states SG’s belief that it would be possible to continue to charge rUK students post-independence whilst EU and Scottish students continue to study for free – otherwise free tuition in Scotland might produce influx of rUK students.

However, experts in EU law cast doubt:

‘The Scottish Government would face an extremely steep uphill battle to convince the EU institutions that it should be entitled to retain a practice involving systemic direct discrimination against one particular cohort of EU citizens’ (Professor Niamh nic Shuibne, Professor of EU Law, University of Edinburgh)

Fees policy has impact on cross-border student flows. Scottish students more likely to stay at home. Welsh students more likely to leave - portable

support.Young applications by country of residence and country of institution

applied to 2010 - 2013.

Country of residence

Applying to

2010 2011 2012 2013

England England only

81% 82.4% 82.4% 80.9%

Northern Ireland

NI only 33.4% 29.5% 36.3% 34.1%

Scotland

Scotland only

87.5% 87.4% 89.8% 89.4%

Wales Wales only

25.7% 23.3% 20.3% 19.7%

White Paper states that post-independence Scotland would remain part of UK research area.

BIS Paper on Science and Research states that there can be no guarantee that common UK research area would be sustained: ‘National governments fund national research programmes’. Paper argues that:

(1) Scotland would develop its own research priorities

(2) Few examples of cross-border research funding – Nordic Research Council disburses £13 million per year c.f. seven UK Research Councils - £3 billion per year.

(3) Scotland can already compete for EU funding – not clear that it would be more successful post-independence

(4) Regulatory differences would make collaborations difficult

(5) UK charities might not wish to fund Scottish research

Implications for research policy – Scottish & UK governments express different views

Scottish Government – universities would prosper because government would control essential economic and social levers.

Existing beneficial arrangements would remain – e.g. UK research area would continue, SG would continue to charge rUK undergraduates.

Additional benefits – SG would be able to implement its own immigration policy to allow international students to stay in Scotland post-graduation.

UK Government expresses different view – UK research area unlikely to remain; Scotland unlikely to be able to treat rUK students differently from home and other EU students; different immigration policy incompatible with open border.

These differences would have to be resolved in post-independence discussions.

Conclusion: Would independence be good for Scottish universities?


Dr Scott BlinderProfessor Sheila Riddell

Twitter:@UKScotland

A Scottish Yes to independence? A UK No to Europe? Scenarios and

challengesProfessor Michael Keating (Director of the Scottish

Centre on Constitutional Change)Dr Fabian Zuleeg (Chief Executive European Policy

Centre, BrusselsTwitter: @UKScotland

Thank youFor more information visit:

http://www.futureukandscotland.ac.uk/www.esrc.ac.uk/scotland

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Scottish referendum: Implications for the EU

Education

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