Where stands Scotland? The political implications of Brexit

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By Alex Bruce @alexandersbruce

A month out from the UK’s momentous decision to leave the European Union, Orbit Communications Director Alex Bruce considers the implications for Scottish politics, for Scotland’s future relationship with the rest of the UK and with the European Union – and the likelihood and potential outcome of a second referendum on Scottish independence.

As was widely predicted prior to the 23rd June, the vote to leave the European Union has provoked a short term shock to the UK economy, particularly in terms of currency exchange rates, share values and the UK’s international credit rating. Leave campaigners continue to argue that the longer term economic gains of leaving the EU will outweigh this short term instability, but there are also worrying signs of the potential for significant job losses in the longer term, particularly in financial services.

At a political level, the Leave vote provoked an immediate leadership crisis within both of the main UK political parties. Even prior to the vote, it was always inconceivable that David Cameron would survive as Prime Minister if the UK voted to leave. Following an aborted leadership contest that saw all of the other contenders either eliminated or drop out, Theresa May has emerged as the new Prime Minister. Upon arrival at Number 10, she has made immediate efforts to shore up a potentially deeply divided Conservative party by appointing leading Brexit campaigners to those ministerial portfolios at the front line of Brexit negotiations. The challenge from here will be to reconcile the very high (some might say unrealistic) expectations of Leave voters and campaigners with what is likely to be a brutal negotiation with the EU27 in which EU leaders appear to hold most of the cards.

Meanwhile, a new leadership contest within Labour is already underway. However, it currently seems unlikely that challenger Owen Smith will be able to win the support of a majority of Labour party members, most of whom fiercely maintain their loyalty to Jeremy Corbyn’s leadership. If Corbyn clings on to the leadership, what will happen to a Labour party led by someone who has the confidence of only a small minority of the Labour parliamentary party remains to be seen. But its credibility as an effective opposition at Westminster has all but disappeared.

With a majority vote for Remain in Scotland, there has been an immediate increase in support for Scottish independence – albeit not the 60% support the SNP leadership had set as a benchmark to determine if a second independence referendum was winnable and therefore worth calling. Nicola Sturgeon remains sensibly cautious on the matter – treading a fine line between keeping the party faithful onside while at the same time not wishing to paint herself into a corner of having to call a referendum prematurely and then face the career-ending prospect of losing.

As opinion polling has consistently shown, it is also important to remember that it was predominantly the economic uncertainty of independence which swung the outcome in favour of ‘No’ in 2014 (and not the Vow as many on the Yes side have sought to claim). Confronting the Scottish electorate with a second independence vote before the future terms of the UK’s relationship with the EU are known might be seen by many as having jumped off the Brexit cliff only to be asked to take an event bigger leap of faith by leaving the UK.

Nicola Sturgeon has secured a mandate from the Scottish Parliament to seek negotiations with the EU institutions and other EU Member States to explore how Scotland could preserve its relationship with the EU as the UK prepares to leave.

But the issue now for Scotland is it lies stuck between a rock and a hard place. Although the First Minister may have received a warm welcome in Brussels, the devil of any future arrangement lies in the detail. Ultimately, just as the remaining EU Member States cannot be seen to give the UK an easy ride following its decision to leave, giving Scotland a preferential deal on EU membership which fudges the economic criteria would set a hugely dangerous precedent – as would transferring the UK’s preferential terms of EU membership to Scotland as a ‘successor Member State’.

The latter arrangement sets equally dangerous precedents within the UK. Scotland was not the only constituent part of the UK to vote Remain. A deal to secure preferential terms of continuing EU membership for Scotland will prompt an immediate clamour for similar treatment from Northern Ireland and London – something the UK Government is likely to be equally unwilling to entertain.

Despite all of the political manoeuvring currently underway to explore scenarios whereby Scotland could remain both a member of the EU and of the UK, the reality is that Scotland’s best prospect of a continuing positive relationship with the EU is either through a well negotiated Brexit deal for the UK as a whole that preserves access to the single market – or else by becoming an independent country and subsequently applying for EU membership.

In the current context, the economic case for Scottish independence is arguably on even shakier ground than it was in 2014. Latest figures show Scotland’s public expenditure outstripping its annual revenue by the order of almost £15 billion and the oil price remains stubbornly low. In pure financial terms, Scotland’s trade relationship with the rest of the UK is worth four times more than its exports to the European Union. The issue of currency also remains to be resolved although there are now moves afoot within the SNP to explore the possible creation of a new Scottish pound.

The outcome of a second Indyref will largely come down to whether the Scottish electorate’s economic instincts are now trumped by a sense that Scotland no longer has much in common politically with the rest of the UK – and a willingness to go through a potentially painful economic ‘adjustment’ to be able to strike out on its own path with the longer term aim of rejoining the European Union as an independent country. Given the current fractious nature of UK politics, it would be foolish to rule that out either.