Speech

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.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Danny Alexander

Thank you William [Hague]

What youve 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.

Its one of the most powerful reasons why were 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 wed influence less, and wed achieve less.

Ill explain shortly how on our EU membership alone Scotland will be between 贈1.9 billion and 贈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 doesnt want to see our family of nations torn apart.

Our nation is valued and appreciated.

The UK is successful.

And lets 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.

Lets look at the EU

Before we get into the detail of the analysis, I wont surprise anyone if I say that Im 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 dont think the EU is perfect. I think its far from it

But I think were at our best when were 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 doesnt 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 isnt ever the most straightforward task!

But Ill 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 贈1.9bn and 贈3.8bn over the next 7 years

And thats because we are part of the UK.

Outside of the UK wed 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 its 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 dont take as much out as other Member States.

And the UKs rebate is currently worth around 贈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 Scotlands independence would have on each of those three areas.

On Structural Funds, Scotland would lose out on around 贈200 million over this seven year spending round

And thats because the UK Government has recognised Scotlands 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 Scotlands 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 贈850 million over the seven years

And in the worst case scenario CAP payments would in fact decrease by over 贈1bn.

But the most important figure here is what would happen with the rebate.

The Scottish Governments position is that the UKs rebate can simply be shared in the event of independence.

But thats not how a rebate works.

Its not an annual lump sum that can be divided.

Its based on a formula, reflecting the UKs respective shares in the EUs 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 UKs 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 贈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 Treasurys 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 贈1.9 billion worse for the period.

And in the worst case scenario

Where CAP receipts went down rather than up

Scotlands net position would be 贈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 贈750 per household.

Possibly climbing to 贈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 wouldnt 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 UNs 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.

Thats before we take into account the UNs specialised agencies, like UNESCO or the World Health Organisation.

White paper

This is a huge decision for Scotland.

And as such we cant afford to base it on anything but the very best information.

But what struck many people about the Scottish Governments 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 its fair to say that some of the Scottish Governments 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 couldnt 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 weve 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 lets keep a situation where we pay less, and we get achieve more in the world together.

We are better together.

Thank you for listening.

Updates to this page

Published 17 January 2014