Examination of witnesses
Professor Christina Boswell, Professor Graeme Roy and Dr Tobias Lock.
Q11 The Chairman: Good morning. I am never quite sure of the collective noun for academics—a reflection of academics. We are very grateful to you. This is intended to be a formal conversation—the room probably lends itself to that. We will record it, and we are very grateful to you for participating on that basis. It will be an opportunity to reflect the work we are doing, in the fall-out from Brexit, in relation to the implications for parts of the world that perhaps do not always receive at the centre the attention they might. One of those is the situation of the devolved nations. We thought that bringing you together from slightly different academic approaches would be formative for us, because our interest is in the politics, economics and legal side, so we are trying to determine your take on it. This is a cross-party Committee. It has always acted in that spirit, and we tend to come up with independent thinking of our own based on the evidence we receive, so we are extremely grateful to you. It would be sensible for the record if you introduced yourselves and then, unless you want to make a great opening statement, we will kick off. Let us start to my left with Christina, who is, for the record, no relation.
Professor Christina Boswell: That is right. I am Christina Boswell, professor of politics at the University of Edinburgh.
Dr Tobias Lock: I am Tobias Lock, senior lecturer in EU law at the University of Edinburgh.
Professor Graeme Roy: I am Graeme Roy, director of the Fraser of Allander Institute at the University of Strathclyde.
The Chairman: Its paper on the Scottish Parliament has been circulated to us. We will kick straight off. I suspect you might have anticipated this question. What is your reaction to the Prime Minister’s speech setting out the UK Government’s approach to the Brexit negotiations, which in England is being exemplified in Parliament over the next week or two by providing the opportunity for the Government to trigger Article 50? Picking up my opening remarks, what are the political, economic and legal implications for Scotland of the Brexit model that the Government are now pursuing?
Professor Graeme Roy: My first comment is that it provides clarity to the Government’s thinking, which is quite important. Whether you agree or disagree with what was said, the fact that now there is something out there with the start of a plan is quite helpful.
From an economic perspective—I will come back to the point about migration—there is probably not much to disagree with on the core achievements that we are looking at in priorities about trade, access to markets and relations with the EU. Of course, the question is whether everything that was said can be delivered, because it will be part of a negotiation. The things that interested me were the ideas about tariff-free access to the EU. That is fine, but you need negotiation and so on. What would associate membership of the customs union look like? We are starting to get through the subtleties and differences between free trade, the customs union and so on. There were some interesting things about how that could be achieved and whether or not it would be deliverable, so from the economic side it was quite interesting.
We heard a phrase that has been repeated on a number of occasions, namely that the deal will need to work for all of the UK. From an economic point of view it will be quite hard to deliver that, in the sense that we know that the regions and devolved nations of the UK are quite different. Something that might work as a priority for one part of the UK might not be the best priority for another. There will be negotiations and trade-offs that benefit some parts more than others.
To take migration, we know that Scotland’s population is projected to fall in the future without EU migration. We have an ageing population and the working age population is expected to fall. One solution to that is higher levels of skilled migration from the EU or outside, but in other parts of the UK migration was one of the totemic issues in the referendum, so what might be the best solution and outcome for one part of the UK might not always be the best for another.
The Chairman: Can I pick that up, to bring in Christina on the migration issue, which, certainly from England’s point of view, was very evident in the referendum campaign? It would be useful if you could say something about the dependency ratio in Scotland, the projected demographics and the extent to which that is divergent from the UK as a whole, and how much you are, if I can put it in simplistic terms, “running out of labour” to meet the requirements of both seasonal agriculture and public services like the health service. What is your take on that?
Professor Graeme Roy: If we look at the Scottish population as a whole there are two parts to that. One is that it is projected to grow more slowly than the rest of the UK, and it is more likely to age faster than the rest of the UK, so the dependency ratio becomes a challenge.
The Chairman: Unlike Japan, it is not in an absolute decline, but it has nevertheless demographically stalled, if I can put it that way.
Professor Graeme Roy: Yes, and that has implications for public services and so on. Quite a lot of work was done in advance of the 2014 referendum by a number of academics on the long-term population projections for Scotland and the rest of the UK, comparing that with what it might mean for the public finances. A number of academics from national institutes and the IFS made different projections to look at what the outlook might be for Scotland. It has probably not changed much since then, so that is worth looking at.
The second point you raise, which is also interesting, is that we know there are certain sectors of the Scottish economy that have recently depended significantly on access to EU migrants—food and drink, hospitality, et cetera—and there is proportionately a higher number of EU migrants working in those sectors relative to others. What does that mean for those sectors going forward, and what differences might Brexit mean for them at sectoral level? There is a national picture and a sectoral picture, which is interesting.
The Chairman: Some of this was referred to in the document you circulated. On the sectoral picture, is there anything in tabular form that you could send to prompt us, not least because we have specialist sub-committees that pay regard to some of the sectoral implications as well?
Professor Graeme Roy: Yes, definitely. There are some really interesting things. I can forward you links to some of the work by the Scottish Parliament Information Centre, for example. Its library has some examples of Scotland’s population projections, and the proportions of people born outside the UK but in the EU who contribute to various sectors. That is useful information and it will be helpful for you.
Q12 The Chairman: Thank you. That is helpful. Christina, given your background in the area of migration pressures and pulls and pushes, would you like to comment on that, as well as generally?
Professor Christina Boswell: I agree completely with the comments of Professor Roy, and flag up the particular significance of EU immigration in relation to the overall immigration of foreign nationals to Scotland. Scotland has a history of being an emigration country, and it is only in the last couple of decades that it has shifted to net immigration, which has contributed substantially to population growth. For example, EU immigration since 2000 is estimated to have contributed 50% of net population growth in Scotland, which is a more significant contribution compared with the rest of the UK. EU nationals comprise a more substantial proportion of foreign nationals in Scotland than in the rest of the UK. As you probably know, SPICe has produced good information on that. More specifically, EEA nationals comprise 61% of foreign nationals in Scotland compared with 56% in the UK on average.
There are a couple of more general points about the particular benefits of EU immigration in Scotland. In the mid-2000s, after the A8 accession in 2004, we saw more substantial flows of EEA immigration to Scotland. Free-movement provisions facilitated that flow, and a pretty good geographical distribution of EU immigrants across different areas of Scotland, more so than in previous waves of immigration, which tended to be clustered in the usual city hubs. It facilitated a good spread across Scotland, and the flexibility implied by free movement rights facilitated permanent settlement. Although I do not have specific figures on it, there is some qualitative research about permanent settlement and how free movement provisions facilitate that.
In a post-Brexit scenario, my prediction is that the UK Government would be keen to preserve many of the existing flows of EU nationals, so that businesses and public services retain the type of EU labour and skills they currently have, but that kind of UK-wide system might not necessarily cater for the particular benefits of EU immigration under a framework of free movement that has particularly benefited Scotland, given the particular demographic needs of Scotland.
The Chairman: Thank you for flagging that up. In a bit we will come back to some of the wider issues about public opinion. While it is fresh in my mind, can you say a bit about the acceptability of those flows to the resident population? One reads, and I know anecdotally, that typically in, say, Lincolnshire and East Anglia there has been something of a pushback because of the rate of change. Do you see that in Scotland? Do you see it in rural areas where it is perhaps more evident? Lord Kinnoull may want to come in on this, because he lives in rural Perthshire. Do people sit comfortably in the Scottish world? If not, in what areas is it sensitive? Charles, do you want to say anything on that?
Earl of Kinnoull: I am very interested to hear the answer. I have agricultural interests, which I should declare. We employ EU nationals on a seasonal basis. We have built, essentially, a mini-village for them to live in. They mix very well. More or less the same people have been coming for 20 years. When somebody stops coming, their cousin comes instead. They mix very well. As I was saying to my colleagues last night, in Perth there are three Polish supermarkets. If you want someone to repair an electrical fault, they now form quite a high percentage of those people. The communities rub along pretty well together, but the people coming in from other nations tend to be from rural communities; they come from rural communities and go to rural communities, so there is a good cross-over. A comment made to me is, “You do realise that the people who are coming over are the best”. It is the best who have been going furth of their native countries and coming to us. For my bit of Perthshire it has worked very well, even though the percentage of non-Scottish children entering some of the very small local schools is now quite high.
Professor Christina Boswell: There are clearly examples where it has worked very well. I would not be perhaps too rosy-eyed about barriers to integration. There is a substantial problem of deskilling of EU immigrants. Many have higher than average skills compared with the domiciled population in Scotland but are on average taking lower-skilled jobs. There are challenges and issues.
In opinion polls—this is probably familiar to you—when surveyed, Scottish opinion is on average less negative about immigration than the rest of the UK. Although it is more negative than, say, London, generally it is relatively less anti‑immigration. A poll by the Migration Observatory in Oxford found that 68% of Scots polled wanted a reduction in immigration, as opposed to 75% for the rest of the UK, so there is anti-immigrant sentiment.
I am perhaps slightly cautious about what would happen at the prospect of a shift in political conditions, namely more devolved powers for Scotland and a relative liberalisation of immigration in Scotland. The party political dynamics at the moment are very propitious. There is generally cross-party support for a more open and, let us say, permissive approach to labour migration in Scotland, but I would not predict that that would necessarily remain the case, because, as we know from all immigration countries, there are huge political incentives to mobilising public opinion on an anti-immigrant platform. The media are not reliable and—
The Chairman: In a post-Brexit situation, that decision may be seen as being Scottish if a special arrangement is made.
Professor Christina Boswell: Exactly. If it was seen as the responsibility of the Scottish Government it could have rising salience, because immigration issues are not as salient in Scotland as in the rest of the UK at the moment. That could shift. Having said that, I am not making an argument to rule it out. It would be desirable to have a regionalised decentralised approach to immigration, but we should be cautious about handling it politically and trying to secure buy-in of the main political parties to such an approach.
Q13 Earl of Kinnoull: In the period before accession of some of the more recent members of the EU 27 nations, various visa arrangements—I am talking of only a small sliver—allowed the farming businesses in our area to bring people in. That worked very well. We subscribed to a service that dealt with everything so that as a farmer you could get on with the farming. Do you feel those arrangements were successful beforehand? Did you know about them, and could they be reintroduced and form part of a solution?
Professor Christina Boswell: I suppose you are talking about the SAWS programme—the seasonal agricultural workers scheme. I imagine that something like that will emerge again, and we are already hearing indications that there will be a seasonal worker programme for agricultural labour. It could be efficient from an economic point of view. My concern is that it would obviously lead to a ratcheting down of rights and conditions compared with free movement conditions. It is good that under free movement EEA nationals are able to switch employment. They are able to come and go in a flexible way and are not bound by particular conditions.
My concern—this has happened across European countries and North America—is that in a dualist scheme, where everybody wants to throw attractive packages at high-skilled migrants in the global competition for the best skills and so on, by contrast you have programmes for the low-skilled that have limited rights and restrictive packages in relation to things like family reunion, length of stay, access to various public services and so on. My concern is that we would see a ratcheting down of rights for low-skilled workers. There are unanticipated effects from those sorts of temporary programmes, in encouraging forms of irregular overstay or work beyond the terms of the scheme and discouraging integration, so people end up staying. Policies and programmes have not always been put in place from the beginning to facilitate integration, so there are drawbacks to that kind of approach.
The Chairman: Is there any evidence that it has a chilling effect on the demand for indigenous skills? To put it in very simple terms, do employers find it easier to use an agent to import EU nationals than to make sure that people in their local communities are trained up to do the job, and that has a repercussive effect on job prospects? Is that an issue under debate?
Professor Christina Boswell: There is always a risk that that takes place. You can tailor your selection or recruitment criteria to put the onus on employers to demonstrate that they have offered adequate conditions and salaries—for example, that they have done proper recruitment, and publicised vacancies to domestic workers and so on. There are ways to try to keep a check on that.
Q14 The Chairman: Tobias, I was about to make the joke that it is not often we get lawyers at the end of the queue. I am not one. You have listened to that. This is meant to be an overview from your different academic disciplines. You have a strong background in law. The EU functions on law, because it is about agreement, determination of competences and so forth, so it is appropriate to bring you in at this point to get your take on how this is going to articulate, but feel free to join in on the economy and the more obviously political issues as well.
Dr Tobias Lock: I have a few points on the original question about the Prime Minister’s speech. We can now see that she wants to leave the single market. That means that Scotland will also leave the single market, unless a differentiated approach is taken. I am sure we will come back to that later. It has put the Scottish Government’s proposals properly on the table; they are now live and the Scottish Government have issued their document.
On the negotiations in general, it is interesting that the Prime Minister was quite vague on various elements of trade, as Graeme mentioned. Associate membership, or partial membership, of the customs union is unprecedented and does not exist at the moment. Nobody knows how that is supposed to work, which means that because the Prime Minister has excluded for the UK a predefined approach that has precedents, such as joining the EEA or EFTA or falling back on WTO terms, it will need to be negotiated. That makes it more difficult and makes what is going to happen far less predictable, and it means that the procedure is unclear. We know how Article 50 will be negotiated, but the EU seems to be adamant that the Article 50 agreement is about withdrawal, not the future relationship.
The Chairman: Is that your reading of the article? I am not going to debate it and go over the whole subject, but basically who has the better of that argument?
Dr Tobias Lock: The EU does, because Article 50 says that you negotiate a withdrawal agreement, “taking into account the future relationships”, which suggests to me that that is something different from the actual withdrawal agreement.
The Chairman: Is that also within the two-year period? I am interested in your take on whether that has to be at least envisioned, as the Americans would say, and, if possible, tied down in the two-year period, without prejudice to the fact that there may be a trade agreement to follow it.
Dr Tobias Lock: Article 50 probably allows for an interim agreement to be concluded. That can be done within the terms of withdrawal. It is also covered by the “whatever happens next” view.
The Chairman: To give you some background, we took evidence on this in the European Parliament, specifically from David McAllister. From the way he described it, he would see a rather simplistic divorce agreement as the primary instrument of withdrawal, accompanied by a heads of agreement as to the pattern for future relations as it was happening, or, if not exactly at the same time, at least as part of the overall package, which would lead perhaps to further resolution of detailed issues later.
Dr Tobias Lock: What could be done under Article 50 is the withdrawal agreement, plus an interim agreement that for the next five years, say, perhaps the UK should remain a member of the single market, but leave the CAP, the fisheries policy and all that, and that within those five years—to use language like the Prime Minister’s—we are going to do the best possible deal for both sides, or something like that.
Q15 The Chairman: May I probe one other point: the approach to the European Court of Justice? Clearly, in the political arguments across the UK, although it was a collective decision, in England there is a lot of sensitivity about the powers of the ECJ. Presumably, any interim agreement will be in that remit, so it does not free us, if I may use that phrase, unless and until we leave. Do you see any distinctive difficulties about the way the ECJ approaches its work, as against that of an adjudicatory body under WTO or, by analogy, free trade agreements elsewhere, or indeed the EEA machinery? Is there some sort of distinctly distasteful element of the ECJ in terms of national sovereignty that you would like to identify?
Dr Tobias Lock: If I adopted a strong Eurosceptic view, there is one difference between, say, the ECJ and even the EFTA court that deals with the interpretation of the EEA rules, which are basically the same as the rules of the single market under the EU treaties: the ECJ claims that EU law has primacy over domestic law and has direct effect, and can be invoked in the national courts in and of itself without any national law saying that it should do so. By the way—I see you have the Supreme Court judgment on the table—that is what the Supreme Court has now accepted in its judgment. Part of its reasoning is that EU law is different from anything else and is an independent source of UK law. That is exactly what the ECJ came up with in the 1960s in Van Gend en Loos and Costa v ENEL case law. In that sense, the ECJ’s approach is different and encroaches more on sovereignty than, say, the EFTA court.
Whether in practice that makes any difference, I am not so sure. Obviously, the national courts have got used to applying EU law, but if you had an implementing Act in the UK—an EU-UK relations Act 2019—that said, “We have this trade agreement with the EU, which, according to its terms, has to be given full effect in national law and therefore national courts must apply it”, you would end up with a very similar result. The only question then is whether there is a third-party adjudicator. Is there an international forum for disputes about interpretation of the agreement that may arise because there are different views on it on the continent and on this island? The question is whether or not there is a third court—an international court—that can resolve those kinds of disputes.
The Chairman: If push came to shove and we had a dispute in the withdrawal agreement, for example about the size of the budgetary contribution the UK should make, and the parties are unable to resolve it, would that go to the international Permanent Court of Arbitration in the Hague?
Dr Tobias Lock: The international Permanent Court of Arbitration is not a court.
The Chairman: It is an arbitration body.
Dr Tobias Lock: It is not even that. It is not a standing body; it is just a list of arbitrators.
The Chairman: It is a machinery for resolving international disputes.
Dr Tobias Lock: Yes, but it depends on the consent of the parties. You cannot unilaterally force another party to accept the jurisdiction of an arbitration panel. It would be for the EU, and presumably its member states, to accept its jurisdiction, which I cannot imagine they would do.
Q16 Baroness Suttie: Moving on to Scottish public opinion and Scottish political opinion, since the referendum last June have you detected a shift in public opinion in Scotland towards Brexit and its implications?
The Chairman: Who would like to go first?
Professor Christina Boswell: I assumed that we would have a John Curtice here.
Baroness Suttie: You are all academics from across the UK and you are more appropriate people—
The Chairman: He is a great guy, but we should not listen only to him.
Professor Christina Boswell: He rightly pointed out that there is a Venn diagram-type dynamic for those supporting Scottish independence and those supporting Brexit. While a third of those who voted against independence might have shifted to a pro‑independence position with the prospect of Brexit, in parallel a third of those who voted for Scottish independence last time, according to opinion polls, would prefer Brexit to Scottish independence. I can only defer to those sorts of analyses and polls; I have no particular expertise in analysis of Scottish public opinion.
Professor Graeme Roy: From the narrow sphere that we deal with, which is primarily the business community and its reactions, looking at Brexit we tend to find in our surveys a very similar reaction in the business community to that of the rest of the UK. When we did a survey shortly after the result, one of the most striking results was that about 80% had done no preparation at all for Brexit. I can give you the exact number. It may be in our report. It was staggering. It was very similar to the UK as a whole. The CBI did similar polls and had exactly the same result. Most businesses operate on the basis of what it means for their sectors, so they tend not to consider whether it is Scotland or the rest of the UK, because most businesses are dealing with exactly the same issues.
The Chairman: A lot of them will be integrated across the English-Scottish border.
Professor Graeme Roy: Exactly. The financial services industry in Scotland services largely two markets. One is the UK domestic market. The banks and insurance companies—Standard Life and so on—work in the UK domestic market. Their reaction is exactly the same as any other business that operates in that market across the UK, but they also service London, so indirectly their view of Brexit is how they think it could impact on the City of London. Their sense of what it means for Scotland is what it means for the sector, which just happens to be in the rest of the UK. In that part of it, we are detecting pretty much the same issues and reactions.
There is a wider, thorny issue about the constitutional element and how businesses will react to different outcomes. There, the early evidence is mixed so far. It is pretty obvious that businesses do not like uncertainty, so if there is anything that brings more uncertainty, whether about Brexit, further constitutional change and so on, that is where you might expect to see something in the future.
The Chairman: Are there any discernible differential effects on investment plans for business, or not?
Professor Graeme Roy: It is very difficult to say. All the evidence since the referendum is that the UK economy was a lot stronger in the run-up to the referendum than most people predicted. That has carried momentum right the way through and built up relative resilience. The Scottish economy is in quite a different place from the UK economy at the moment. The Scottish economy has been growing at about one third of the UK rate over the last year or 18 months. It probably has nothing to do with Brexit. It is not that Scotland is now exceptionally worried about Brexit, that Brexit has happened and Scotland is not happy in the UK; it is much more a local issue there, but we can see how it is potentially impacting on the whole business community. In the UK, the economy has been relatively robust. The uncertainty of Brexit is there, but that robustness is still there, so it almost deflects some of the uncertainty that has happened with Brexit. In Scotland, there is a much weaker economy, so if you put the Brexit uncertainty on top of that, it creates a much more fragile environment.
Q17 Baroness Wilcox: Would you say that your present leader is causing that by not concentrating at all on trading or anything like that? It is only about coming out. When any word she uses makes it sound as if everything is dreadful and it is nothing to do with the Scottish people at all, do you think that is having an effect?
I will follow that with the question I was going to ask and then you can decide whether to answer it or not. Are the existing mechanisms for inter-parliamentary dialogue between Westminster and the devolved legislatures sufficient to deal with the situation?
Professor Graeme Roy: That is a very good question, which strays quickly into the politics of where Scotland is at the moment, the whole debate about the future of the constitution, domestic policy and so on. There are a number of things, so you will not mind if I skirt round some of the raw political elements.
There is quite a lot of debate at the moment about the domestic agenda in Scotland. We have been clear in a lot of our work that we think Scotland is going through a substantial economic challenge at the moment, with the decline in the North Sea feeding through to the economy as a whole, and there is massive constitutional change with the new powers coming down. We have written a lot about that. We do not think people fully appreciate the scale of the new powers; half the budget is now to be determined by revenues raised in Scotland. Substantial big powers are coming to Scotland. It would be challenging enough to go through that new process, and the exceptionally complex fiscal framework, but if you throw on top of that a slightly weak economy and all the constitutional challenges of Brexit, it creates a challenging cocktail for Scotland that other parts of the UK do not have to deal with.
There is a whole host of difficult domestic issues at the moment. Substantial change is happening in Scotland both economically and fiscally. With that in the background, the whole process of Brexit adds a further layer of complexity and uncertainty. That is a big challenge, and it will be very difficult to deal with.
Baroness Wilcox: Maybe that answers the question. Maybe London, England or whatever should be seen to be more helpful rather than not, and Scotland should look more to wanting that help rather than saying, “Let’s run away and run it on our own”. Is there any push on that?
Professor Graeme Roy: As with all these things, when the two Governments work together, you get much better outcomes.
Baroness Wilcox: Exactly.
Professor Graeme Roy: A really good example of that was the fiscal framework.
The Chairman: That was successful in your view.
Professor Graeme Roy: I think it was. Behind closed doors, the two Governments got on with it, and in the end there was an agreement. Okay, it will be subject to review at some point, but I do not think either Government would say they got a bad deal. Both got to the place they wanted. Both sides had to give up something they wanted in exchange for other stuff. That is a good example where the Governments got down to it.
A big thing about the fiscal framework and the new Scotland Act was the new changes to intergovernmental relationships to try to strengthen them. I do not think people realised they would be tested so quickly by Brexit. People might have different political opinions, but is the intergovernmental machinery working behind closed doors in the background to deliver outcomes that work for both Scotland and the UK? We might come to that when we think about the Scottish situation and the different options.
The Chairman: We should return to that.
Professor Graeme Roy: Now is the time when these frameworks will be tested.
Q18 Baroness Suttie: Continuing that theme, Professor Roy, you already referred to Theresa May’s speech. She said she wants “a Brexit that works for the whole of the United Kingdom”. Obviously, here in Scotland, politically the perception is that it is much more pro-European. On the issue of immigration, there is evidence along those lines. How do you think that would be possible politically? Do you think it possible that she can create a Brexit that suits all parts of the United Kingdom, including Scotland, which is evidently more pro-European?
The Chairman: I think we need an all-stations response on that.
Professor Graeme Roy: If I may, I will concentrate on the economic aspects. To try to get an agreement that works for the benefit of all the different parts of the UK is the right ambition, but there are substantial differences between the different parts of the UK economically and fiscally, which mean that there will be quite significant differences in whatever agreement comes down. For example, some of the work we have done looks at the different sectoral impacts of Brexit in Scotland and the rest of the UK. We found that the sectors in Scotland are different from the rest of the UK. A deal that might work in favour of some sectors might not work in favour of others, so even before you begin thinking about a regional differentiation, the fact that the impacts might be different by sector means they all have different impacts, not just in Scotland but in regions of the UK. For example, if the UK Government were prepared to give up certain of their negotiating tools in favour of a deal for a car manufacturing plant, it would have a significant regional impact, but other parts of the UK, such as Scotland, would have no benefit from it at all. Looking purely at a sectoral dimension, there will be different regional dimensions, which means that it will be hard to achieve something that works for the benefit of everyone. I mentioned migration. That is another one where there will be different regional implications from a different policy overall.
There are fiscal and public finance elements. Where do you get into the repatriation of powers? What more powers might the Scottish Parliament get? How might the Scottish Parliament use them to its advantage? Will there be a disadvantage relative to other regions of the UK? When you break down the issues, all of them have different regional implications. If you take a particular stance on each individual issue, it will have regional impacts. It is a noble ambition, but whether it can actually be delivered will be a key challenge.
Professor Christina Boswell: On Baroness Wilcox’s point about the First Minister’s tactics, and the proposals set out by the Scottish Government in December about a differentiated approach with Scottish retention of membership of the single market, probably most of us agree that that is very implausible legally and politically for a number of reasons. Does that very implausible positioning, crystallising the difference between a UK-wide and a Scottish position, have the ultimate aim of triggering a second referendum on Scottish independence, or is it a starting bid in a negotiating position that might be watered down? The UK Government should not rule that out. In my personal view, the First Minister is quite flexible and pragmatic in many ways. It might be canny for the UK Government to be generous in their offer about devolution and differentiated approaches that fall short of Scotland remaining in the single market, which is probably not very feasible. It would probably be astute of Theresa May seriously to consider which of the powers repatriated from Brussels could belong with devolved Administrations, and to look at the devolution of other powers that are not being repatriated from Brussels. That might in a sense undercut some of the posturing by the First Minister. That is just my personal interpretation and opinion.
Whether there is a form of Brexit that works for the UK and Scotland is a really tricky question. Looking just at immigration, part of what Scotland is losing could be delivered in a post‑Brexit devolved immigration regime, or a regime that allows for a more liberal approach to recruiting EU nationals and non-EU nationals, to address some of the economic, labour market and demographic issues faced by Scotland. Other aspects implied by free movement probably cannot be delivered in a post-Brexit scenario, including the full set of rights associated with free movement, and UK nationals being able to live and work abroad in EU countries. It is implausible that Scotland could retain such rights short of having separate citizenship status, quite frankly. I think it will lose that.
I would not underestimate the social and cultural attachment of many remain voters in Scotland to the EU project; it is not just reducible to economic or demographic considerations. There is strong attachment to a European identity and to Scotland being outward-looking. There is also greater acceptance of a system of multilevel governance. The Scots are more used to the idea that governance is multilevel and complex and that, in a sense, the EU has embraced and accommodated that devolved system. Many Scots felt quite comfortable about that.
Baroness Suttie: And political identity too. They are much more used to having multilayered identity and not thinking it is a problem.
Professor Christina Boswell: That is quite right. For Scottish remain voters there is a lot to lose, which cannot always be addressed.
Dr Tobias Lock: I cannot tell you much about the empirical side of things, but from a legal point of view, at the risk of stating the obvious, a Brexit that works for all will have to be achieved through two approaches. One is the negotiation approach, and of course it is hard to predict what will come out of that. There is also the internal approach; Brexit will mean the loss of regional funding and CAP funding, all of which comes through the EU at the moment. One way of achieving a Brexit that works for all, or for as many as possible, is to try to replicate or improve the funding that is currently available and make it even better. That is something the UK Government and possibly the devolved Governments can do; they will be completely free to ensure that the domestic side of things works. The negotiation side is a bit less predictable.
Baroness Suttie: On the negotiating side, do you think the fact that there is such a distinct difference between what the First Minister of Scotland and the Prime Minister of the United Kingdom are saying will be a disadvantage for our negotiating position?
Dr Tobias Lock: I am not sure. I do not think it will be relevant for the EU 27 and the Commission when negotiating. We would be overstating the Scottish Government’s influence, but I am sure people disagree.
Q19 The Chairman: Hastily, having touched on that, can I ask Graeme a question? In order to find something that works for the whole of the United Kingdom, are you satisfied from the technical point of view that the necessary input/output information, including sectoral information, is available, so that at the end of the day your institute, for example, will be able to come up with a plausible account, and keep score of who won and who lost or at least whether there were particular areas where there was a problem?
Professor Graeme Roy: That is a really good question. One area where Brexit will pose a real challenge is that the quality of data and information at UK level to look at things like sectoral and regional impacts is quite weak, even on things like migration and labour flow.
The Chairman: For the record, Christina is nodding.
Professor Graeme Roy: The best data we have for EU migration is the 2011 census, which is quite a long time ago. We have no real data on flows of migrants—who wants to come in and where they move. Some data appears in labour market surveys, but we do not have the breadth or quality of data. A big thing we found in our study of Brexit was that the impact on Scotland was driven not just by the exposure of Scotland to the rest of the EU but by Scotland’s links to the rest of the UK and the exposure of those sectors to the EU, so there was an indirect effect. If the City of London takes a hit, a back-office financial services company in Edinburgh gets hit by that, not by the direct link with the EU. We do not have much data and information on that. That sort of stuff becomes important when we start to think about differential impacts and about what outcomes might be different in Scotland from the rest of the UK. The level of our information is quite weak.
The Chairman: Is it worth adding a sentence—I am looking at Christina—about having a single market within the United Kingdom? I am not going back to the Act of Union, but it has affected certain things, such as EU migrants coming to England and then moving to Scotland. Traceability of that has not been an issue in the past, so I presume that also vitiates the data.
Professor Christina Boswell: On the data, net migration figures are derived primarily from the international passenger survey, which is such a small sample that it does not make sense to disaggregate it for Scotland. That is why it is meaningless; it is not a robust enough sample. We would need to fix that, not least for political reasons. Given the overall aim of the Government to reduce net migration, were Scotland to have a more permissive approach there would be concerns that it would run counter to the net migration target, so obviously we would need to disaggregate that data. Scotland would be extracted, or subtracted, from the aggregate national data, but we cannot do that at the moment.
The Chairman: Thank you. We probably need to be more disciplined now, but those were very useful side shoots. Charles, do you want to say anything about the Supreme Court?
Q20 Earl of Kinnoull: I do not want you to comment on the eight to three aspect of the judgment; I think we all have a high state of knowledge of that. Turning to the 11-nil bit of the judgment, what do you feel is the reaction here? More broadly, where do you feel it leaves the Sewel convention in general?
The Chairman: We will confine that to Tobias, if we may, in the interests of time.
Dr Tobias Lock: What is important about the 11-nil part of the judgment is that the Supreme Court has not decided anything but the fact that it cannot decide questions relating to the Sewel convention. It is neither a loss nor a win for the Scottish Government if you look at it like that. While the Supreme Court said that relations with the EU are reserved, in the next paragraph it said that the question of whether the accretion of powers for the Scottish Parliament that might result from Brexit would trigger the Sewel convention was something it would discuss when it talked about the Sewel convention. Then it said that the Sewel convention is not justiciable because it is a convention. It is now open game, politically speaking; everyone can claim that the Sewel convention applies, and there is no arbiter to decide authoritatively whether it does or does not, apart probably from the Presiding Officer of the Scottish Parliament if they said, “We are not going to allow you to pass a Sewel Motion”. That is what the convention does.
Earl of Kinnoull: We are desperately short of time, but there is a very interesting sentence in one of the paragraphs that makes it absolutely clear that the UK Parliament is supreme. There was a strong debate about whether or not the latest Scotland Act had interfered with that at the time the legislation was passing through the House of Lords. Do you believe that was clear before, or has it been clarified by the judgment?
Dr Tobias Lock: I would have thought it was always clear before, because the Scotland Act is itself subject to express repeal. If Westminster so decrees, it can do so. The political consequences would be clear, but that is the legal position.
Q21 Lord Whitty: Professor Boswell made it very clear, and I think the rest of you agree, that a differentiated outcome for Scotland is politically implausible and non-deliverable; in other words, that Scotland remains in the single market while everybody else in the UK does not. Am I right that you all agree with that, or is there some nuance of it that might be deliverable? If that big-print theme of the Scottish Government’s position is not deliverable, what would you put in as your alternative Scottish Government position? Does it involve the issue of powers or money? Dr Lock referred to compensatory measures. How would you put that in relation to the non-achievement of the flagship aim of the Scottish Government?
Dr Tobias Lock: I think that what the Scottish Government propose is legally deliverable, but politically it will be very difficult, because it will require massive devolution to Scotland. There would have to be a regulatory regime in Scotland that was in compliance with the single market rules. It would have to be able to diverge from what we have in the rest of the UK.
The Chairman: It would be dynamic.
Dr Tobias Lock: It would have to be dynamic. All the issues—immigration, product rules, trade and everything else—would have to be devolved. There is no other way to do it in practice, and that is a big ask. The key problem is that in many respects it would lead almost to quasi-independence, because you would have to split up the internal market of the UK. The Scottish Government have gone very far in trying to argue that that can be avoided by Scotland staying in a customs union with the rest of the UK. That seems to be the basis of the proposal, but that overlooks the fact that, if you want to join EFTA, you have to sign up to all EFTA trade deals. If you do that, unless the UK does the same thing, you cannot be in a proper customs union with the UK because you will have different customs tariffs as regards third countries.
The Chairman: And regulatory requirements, possibly.
Dr Tobias Lock: Possibly, yes. You would not have customs checks at the border, provided the UK and Scotland agreed on zero tariffs, and the UK and the single market agreed on zero tariffs, which is fairly likely, but at least some rules of origin declarations would need to be made for stuff being brought across the border. That is a problem.
If I understand it correctly, however, the EFTA countries are not the EU; they are not as strict about their own rules as the EU Commission would be about the acquis, so there might be some flexibility, but I imagine you would be asking them not only to admit Scotland as a non-independent state but to waive the requirement for Scotland to sign up to all those agreements, which is a requirement in the foundational treaty. Politically, that is a very difficult one to get through, but if you could resolve that issue and you accepted some sort of customs border within the UK, which is the necessary implication of EFTA membership and single market membership, it would be possible.
Lord Whitty: It is not quite a requirement of EFTA membership that you have to be a member of all the EFTA free trade agreements, because there is differentiation within EFTA.
Dr Tobias Lock: There is indeed.
Lord Whitty: They are not subject to all the provisions of EFTA’s free trade agreements.
Dr Tobias Lock: That is right, but you would need to negotiate that as an exception, so you would need to negotiate two exceptions to the rules of EFTA membership.
The Chairman: Graeme, are there economic implications?
Professor Graeme Roy: The Scottish Government were probably right to put forward the proposal, to get it on the table and have an open and frank conversation. To be fair to them, they have been clear all the way through in saying that it is exceptionally difficult, and even that delivering it would be exceptionally difficult. We are in unprecedented times, as Tobias said. Theresa May arguing for associate membership of a customs union is a good example. We do not know what that means. I would not dismiss the proposal out of hand. It is worth a conversation. Whether you get there is ultimately largely political, legal and practical, such as the point about borders and so on.
In that context, one area where you might wish to probe or go further is what might be the list of priorities for the Scottish Government underlying the overall objective. Is it a differentiated migration issue? Is it access to EU structural funds or the equivalent? Is it access to EU research funds for universities? What do the Scottish Government want to achieve by their proposal to remain in the single market, and can you break down the individual components, going back to Christina’s point, to provide something the Scottish Government could pragmatically accept because it went quite a long way towards the outcomes they wanted, although it might not be the bells and whistles of Scotland’s being a member of the single market and the UK not? That would be an interesting thing to explore.
Q22 Lord Selkirk of Douglas: I will try to narrow down my points and make them as brief as possible. The Prime Minister has committed herself to working very carefully to ensure that “as powers are repatriated from Brussels back to Britain, the right powers are returned to Westminster, and the right powers are passed to the devolved administrations”. Are there any powers currently reserved to the UK Government that could usefully be devolved as a result of Brexit? You have already mentioned one, which was a share of VAT. Answering that question would need a little bit of thought. Could you write in rather than giving your answer now?
The Chairman: We can join with that a question about EU competences, in so far as they flow directly down—for example, the environment, fisheries or agriculture. How much will they be changed? Are you happy to do that, or do you want to spend some time on it now?
Professor Graeme Roy: There are a couple of things. The Scottish Government paper is quite helpful in setting out the types of areas you want to look at. First, what powers repatriated to the UK might you want to transfer immediately to Holyrood? Secondly, what powers repatriated to the UK might not currently be devolved competences but the Scottish Government may want or may ask for? That might be part of a negotiated settlement between Scotland and the UK.
The Chairman: Does it have to be a binary issue? Would there be some that could be shared?
Professor Graeme Roy: Some could be shared. Thirdly, there are the ones you might need in order to get a differentiated agreement, and that list is exceptionally long. I would probably encourage politicians not to try to reopen all the work that has already been done on transfer of powers. The Calman and Smith commissions have been through that. A lot of work has been done on it, but, to be fair, there were areas where they did not go, because they were EU matters and outside the remit. VAT is a good example where full devolution and the freedom to set different rates between Scotland and the rest of the UK might be problematic. Some people might see it as problematic because of the creation of a potential border, but there could be variations—for example, the ability to set different VAT rates on, say, hospitality, or a tourism tax or something like that. There are things you could look at if you wanted to explore that.
The Chairman: The list is not necessarily closed. Perhaps you could pass on some thoughts on it.
Q23 Lord Selkirk of Douglas: If you would look at it and send us a note, it would be of great help. Could the Canadian system provide a useful model with regard to immigration? There is a lot of interest in that in America, because the Americans keep accusing the Canadians of having a porous border, and there seem to be parallels between Canada and Scotland, so it might be worth looking at that. Finally, is there sufficient capacity and resources for the Scottish Government and Parliament to take on the additional responsibilities? If not, what adjustments need to be made?
Professor Christina Boswell: I can certainly talk to the Canadian system and its applicability here. The Canadian system is incredibly complex and involves a whole series of regional arrangements that vary across the different provinces of Canada. They incorporate all three modes of selecting and recruiting immigrants: points-based systems, which recruit on the basis of human capital; employer-led systems; and occupation or sectoral shortage systems. All three are represented there. When we talk about the Canadian model, a lot of people mean the particular arrangement for Quebec, which perhaps has the greatest autonomy of all the provinces in Canada, in that it has its own points-based system. Are those applicable to Scotland? Potentially, yes. I can imagine some sort of points-based system that probably includes criteria based on particular occupational or sectoral shortages. It might not be an open one based purely on human capital; it could encourage settlement.
In relation to the applicability of the Australian and the Canadian systems—both are interesting decentralised systems—two of their conditions are met in the case of Scotland. One is that there are sufficiently robust and mature political decision-making institutions and mechanisms so that decision-makers are accountable and there is effective public deliberation. I do not think that is true for all the other regions of the UK. I am a bit more sceptical about the APPG proposals, for example, that there could be a regional approach across the UK.
The Chairman: It is about capacity to some extent.
Professor Christina Boswell: To some extent, although points-based systems do not require a huge amount of capacity. Employer-led systems, especially occupational and sectoral ones, would probably require a MAC for Scotland, which would require more capacity. One condition is whether you have the right political decision-making structures in place, and I think Scotland does, but other regions of the UK may not.
As to the other condition, we should remember that those are settler countries. Their provincial or regional programmes are very much designed to attract people to settle in regions that are often sparsely populated and do not attract as much immigration as they would like. That is the case for Scotland, but certainly not for London. There is a different logic behind having a differentiated system for London.
My final point is that the stumbling block relates to the point about aggregate net migration and the political context. Canada and Australia are settler countries where it is acknowledged that a steady flow of immigration is part of their economic and social strategy. That is not necessarily the case in the UK, so a differentiated system would have to go hand in hand with a clear political message that it was for Scotland, and the net migration figures would need to be disaggregated to indicate that clearly. We would have to think carefully about retention and onward movement after an initial period in which people were expected to stay in the region that had recruited them. That has not really been resolved in Canada and Australia. It is not such a political issue there because onward movement is not seen as so contentious and problematic, but potentially it would be in the UK.
The Chairman: To be clear, this is about political buy-in for the population and the need for Government, or the deciding authority, to be clear about their objectives in launching such a programme.
Professor Christina Boswell: I think that is viable. Both the SNP and the Scottish Labour Party have consistently advocated a more expansive approach to labour immigration in Scotland, so I do not think that is an issue. As to the broader saleability of a decentralised system for the London Government, who are keen to regain control, this might send out a signal that they are giving up control, so I imagine that politically it could be a tricky one to sell.
Lord Selkirk of Douglas: We need to do more research on it.
Professor Christina Boswell: We do, and we need to look more carefully at the Canadian and Australian systems and their applicability, because they are very complex.
Earl of Kinnoull: I am very much interested in Canada, but has it been a success in Quebec?
Professor Christina Boswell: It depends; it is in the eye of the beholder. Different studies suggest that up to 40% of those initially recruited under the provincial system relocate after the initial period. There are different figures on it.
Earl of Kinnoull: Has the Quebec economy versus that of the rest of Canada done well over the last 15 years?
Professor Christina Boswell: It would be difficult to isolate the particular effect of immigration, but I would say that on balance it has undoubtedly been beneficial to Quebec, and is seen as beneficial to its economy. As to whether it is as beneficial as a system that could adequately retain those who are recruited specifically for Quebec, obviously it could be improved; there is some criticism about the problem of retention.
Q24 The Chairman: We should begin to move towards a close, but there are two areas I want to probe a bit. One is to be clear about the machinery as we go into the negotiation. We have talked about that a bit. There is the joint ministerial committee and a specific sub-committee to deal with the exit negotiations. There is also an interesting question about links between the devolved nations and the EU institutions themselves. Ultimately, I suspect there may be a question about ongoing machinery on the assumption that the United Kingdom has left and will want a continuing relationship, in which the devolved nations may have an interest. A bit of it is about the machinery and whether it can work. You discussed, on the question about the financial framework, whether the organs within the UK worked successfully. You might want to come back to that.
The second question is about the devolution arrangements themselves. If I may use the phrase, we have a disruptive decision arising from the United Kingdom’s referendum decision to withdraw, which calls into question the whole panoply of powers coming from Europe and by what criteria they should be allocated to the different levels of administration. I think Graeme talked about other issues between the UK Government and the devolved nations that might be looked at independently or autonomously on their own merits. Can we fill that out a bit more? I am trying to get a picture of the dialogue that needs to take place—both the machinery that is needed and to some extent the agenda. We will park the issue of a second referendum or future constitutional status. Treating it as a matter of practicality, something has to be done.
Dr Tobias Lock: Under the current devolved powers, for policies made at EU level and what is happening in Scotland on the administrative side, the main things would be agriculture, inshore fisheries and the environment. Graeme can probably fill in the economic bits, but agriculture raises certain problems. If you had different agricultural policies throughout the United Kingdom with different levels of subsidy, provided the money comes with it, which is quite important, you might create different markets, or some sort of market disruption within the UK.
The Chairman: I ought to declare an agricultural interest as well. There will also be issues to do with technical specification—for example, access to GM foods and whether you can use glyphosate or whatever.
Dr Tobias Lock: That issue would need to be addressed. There is even a certain argument for re-reserving that power. In their paper, the Scottish Government say they would like to have powers over employment law and consumer law. Consumer legislation would not be a big deal in many respects. We have Scots law as the private law of this country anyway. It is different from English law. Why not have slightly different consumer protection? Employment law might raise issues about diverging standards. If they are very different, you might end up needing some sort of posted worker arrangement; otherwise, agencies established in England could employ people at very low standards and post them to Scotland to work. That is an extreme example, but it is conceivable. There is an inherent problem with regard to a common labour market if there are different labour law regimes.
Professor Graeme Roy: There is a whole host of different issues, and, once you start to unpick them, they unravel. There is something about the importance of how the politics plays out and sits above all this, and obviously there is a relationship between Ministers and how they interact. Once you get down to the practicalities, that is where the mechanisms between the government machineries become very important. That is as much about relationships in the Civil Service, such as the sharing of information and the whole process for that. I should declare an interest, as I was a civil servant until 10 months ago. You can see where it works well. The fiscal framework is a good example of the various departments devolving powers working closely together, with good information being shared so that it can be delivered. There is a whole question about whether the mechanics are in place and are robust enough to deal with the politics going on above, and whether they can get the job done. The point about joint working is absolutely crucial. There will be pressures on either side.
As regards the capacity in both Governments, the UK Government and the Civil Service are under tremendous pressure to get the resources to deal with Brexit, but the Scottish Government will have their own pressures from new powers coming down the line; they are expanding and going into new areas. It is exceptionally complex.
Probably all of it will have to be opened up slightly, because things like the fiscal frameworks and the way Scotland is funded cannot cope with the repatriation of the new powers. For example, how will the transfer of agricultural subsidies come in? Will it be through Barnett? We know that Scotland gets a lot more agricultural subsidy than its population share. Will it come through some form of hypothecated tax? I do not know which tax you would hypothecate. Will there be an agricultural subsidy, or will an amount just be given to Scotland? How will different parts of the UK react to Scotland getting a large chunk of money? It has to be opened up, but we must have the mechanisms in place to make sure that it is done in a co‑ordinated way.
The Chairman: And the political will to make it work.
Professor Graeme Roy: Yes, exactly.
The Chairman: I conclude by thanking all three of you. As always happens, we have diverged from the strict timetable because so many different perceptions opened up. You have done that in a way that has been very productive for us. It has thrown light on the overall proceeding.
As regards taking things forward, this session has been recorded and obviously we will make available a transcript when we can, but very much on the basis that we have found it very useful. To borrow a phrase from trade negotiations—we have not talked a lot about them explicitly—I would like you to feel that this is a living relationship. If you have other material to send us—Professor Roy in particular undertook to send us a bit of material—or there is anything you want to draw to our attention, please feel that you can. It will be a challenging time for everyone, but you have illuminated it very well. Thank you.
