Committee on Exiting the European Union
Oral evidence: The UK’s negotiating objectives for its withdrawal from the EU, HC 1072
Wednesday 8 February 2017
Ordered by the House of Commons to be published on 10 February 2017.
Members present: Hilary Benn (Chair); Alistair Burt; Maria Caulfield; Joanna Cherry; Mark Durkan; Jonathan Edwards; Michael Gove; Peter Grant; Andrea Jenkyns; Mr Peter Lilley; Karl McCartney; Mr Pat McFadden; Seema Malhotra; Dominic Raab; Stephen Timms; Mr John Whittingdale; Sammy Wilson.
Questions 816 - 963
Witnesses
I: Michael Clancy, Director Law Reform, Law Society of Scotland; Professor Nicola McEwen, Professor of Politics, University of Edinburgh; Professor Alan Page, Professor of Public Law, University of Dundee.
II: Michael Russell MSP, Minister for UK Negotiations on Scotland’s Place in Europe, Scottish Government; Ian Mitchell, Deputy Director External Affairs, Scottish Government; George Burgess, Deputy Director EU and International Trade and Investment Policy, Scottish Government.
Michael Clancy, Professor Nicola McEwen and Professor Alan Page.
Q816 Chair: Good morning. Can I welcome you, on behalf of the Committee? Thank you very much indeed, for giving up your valuable time to give evidence to us this morning. We have been so speedy we are starting five minutes early—I hope that is not going to cause you a problem.
Can I welcome Michael Clancy, director law reform, the Law Society of Scotland, Professor Nicola McEwen, professor of politics at the University of Edinburgh, and Professor Alan Page, professor of public law at the University of Dundee?
Can I kick off with a question about the Scottish Government’s proposal that Scotland should find a way of remaining in the single market, while the United Kingdom leaves the European Union? First, do you think that is feasible and, in particular, can you shed any light on what you think the attitude of others would be? There has been a lot of focus on the proposal being put by the Scottish Government to the Government here in Westminster, saying, “Would you think about it?” but what can you tell us about the views of others in Europe about the likelihood that they might or might not agree to this. I do not know who would like to kick off. Professor McEwen, it looks as if it falls to you.
Professor Nicola McEwen: It is a credible proposal that merits examination. Obviously, it would raise lots of challenges. There are lots of complexities. The practicability of the proposal would depend on what Brexit turned out to mean, so the nature of the UK-EU relationship might determine how feasible that proposition would be. We do not yet know what that will be. However, you are right to imply that some of the biggest challenges are around political will—political will within the United Kingdom, first, and then political will within the rest of the European Union.
My understanding is that the position most EU member states have taken is that these are domestic matters, and any proposal would have to come as part of the UK Government’s proposal and negotiations, before they will make a judgment. I suspect there would be concerns about a part of the United Kingdom remaining within the single market and some of the issues that that might create in terms of fairness or access for the other member states.
There are enormous obstacles in the way of political will at different levels, but the stage at which the proposal is blocked may have broader political implications for wider debates on the constitution—whether it is blocked first within the United Kingdom, or whether it is blocked further down the line.
Q817 Chair: Mr Clancy, Professor Page, do you want to add anything to that?
Professor Alan Page: The proposal implies that Scotland would continue to adhere to the acquis communautaire—it would have to, because that would be part and parcel of being part of a member of the single market—at the same time as the rest of the United Kingdom was assuming the freedom to go in a different direction. If that were to happen, if you were then to have a divergence in requirements between Scotland and the rest of the United Kingdom, that in turn would have implications for trade within the United Kingdom.
Michael Clancy: Thank you, Chairman. It is the case that it is more a political question than a legal one. When one looks at the Scottish Government’s paper, it starts off looking at the UK’s position within the EEA, and as we know in order to become a member of the EEA, you have to be in either the EU or EFTA. Judge Carl Baudenbacher, who is president of the EFTA Court, has recently explained that in very succinct terms in lectures that he has given across Europe over the last few months.
Therefore, bearing in mind that the EEA agreement is an agreement between the EFTA states and the EU states, it is difficult to see how one could be floating between the two, so therefore one would have to be either in the EU or in EFTA to participate in that kind of way.
Q818 Chair: Is there any precedent you are aware of for any entity other than a state acquiring either of those forms of status?
Professor Nicola McEwen: We are clearly in uncharted territory.
Professor Alan Page: Very much so.
Chair: That is very helpful. Thank you very much indeed.
Q819 Joanna Cherry: Mr Clancy, good morning. I wonder if I can start with you. In the various commentaries the Law Society has put forward since the Brexit vote, you have talked about the importance of ensuring a whole-of-government approach within the UK. Can you explain to us what you mean by that?
Michael Clancy: Yes, thank you, Ms Cherry. Mr Chairman, when the vote happened in June, Bernard Jenkin, who was chairman of the Public Administration Select Committee, wrote to Oliver Letwin explaining that he thought this was a whole-of-government project. Taking up that theme, we analysed exactly what one could interpret that to mean. It is fair to say we came to the conclusion that it was not simply a whole-of-UK-government project but had to involve the devolved Administrations.
Then tweaking that idea slightly, you can get from whole-of-government to whole-of-governance. That involves engaging with civil society and other bodies, so we get the fullest impression of critique on the proposals from the Government, in terms of the White Paper and what is to come, and also make sure that there is a degree of consistency and agreement as to the way forward. That is really what we were intending to convey when we were saying it should be a whole-of-government project.
Q820 Joanna Cherry: Do you think the way in which the British Government is handling the process so far is achieving that objective?
Michael Clancy: That, too, is a political question rather than a legal one, and you as a politician are far better placed to answer it than I. However, clearly, the creation of the Joint Ministerial Committee on EU Negotiations is a step in the right direction, and we applaud the idea of that. It is up to the participants in that joint committee to make the best of it that they can.
Q821 Joanna Cherry: Professor McEwen, can I ask you a more political question: do you think the joint ministerial committee process is working effectively?
Professor Nicola McEwen: It is very difficult to tell, because it so lacks transparency, as the joint ministerial committee does in general. Certainly, there are more intense inter-governmental relations through the JMC in various forums now, as part of this process, than there have ever been.
The JMC on European Negotiations had quite a distinctive remit. Unlike any of the other JMCs, it was set up with the specific purpose of trying to reach a common UK position—trying to come to an agreement, an agreed decision. There is no sign, as yet, that that objective has been able to be fulfilled, and there is certainly frustration on the part of the devolved Governments. The Scottish Government has been quite vocal, but we have also had frustration on the part of the Welsh Government about their ability to exert influence through that process. The situation in Northern Ireland obviously complicates the JMC process now, too, making it almost impossible to come to a common agreed position prior to the triggering of Article 50, if that is the end of March.
Q822 Joanna Cherry: What is it that is frustrating the Scottish and Welsh Governments?
Professor Nicola McEwen: I am sure you will have an opportunity to ask the Minister later on, but the Scottish Government now have an agreement that government ministers will report on their participation in inter-governmental processes, and all of the letters that are sent are on the Scottish Parliament website. Certainly, if you read those, you can see a sense of frustration that they were perhaps not consulted prior to the Prime Minister’s speech or prior to the publication of the White Paper, and I am not sure if that is true or not. There seems to be a commitment since the last JMC plenary, which I think took place last week, that there will be bilateral discussions now between senior officials on the Scottish Government’s proposal. I simply do not know enough about how those discussions are unfolding and how serious an examination that proposal is being given.
Q823 Joanna Cherry: Are you able to help us with any suggestions as to how the process for consultation and discussion could work more effectively?
Professor Nicola McEwen: It would be nice if it was more transparent. Obviously, it is appropriate for governments to engage privately—to have a space for frank and private discussion—but a bit more scrutiny of that process would possibly help it along the way.
There is perhaps one illustration, in relation to Wales rather than Scotland, where there is maybe a sign of how it might not be working. The Prime Minister’s Lancaster House speech, which effectively ruled out participation in the single market, came, I think, a day before the Welsh Government’s White Paper, which stated their desire to stay within the single market. That seems, to me, to be an uneasy situation when the stated objective is to have close co-operation between the Governments. The timing of that did not sit quite well.
Q824 Joanna Cherry: I wonder if I can ask you a couple of questions about the Scottish Government’s proposals in the document “Scotland’s Place in Europe”. You have described it as a credible proposal that merits examination. The Chair asked you whether there was any precedent for any entity other than a state acquiring membership of the EU or the EEA through EFTA, and you said we were in uncharted territory. You will be aware that the Faroe Islands are currently exploring the possibility of membership of EFTA. Could you explain, for the benefit of the Committee, the relationship the Faroe Islands currently have with Denmark and the EU, and what the Faroe Islands are trying to achieve?
Professor Nicola McEwen: I am not an expert on the Faroe Islands, but it is a federacy, so it is part of the Kingdom of Denmark but has a very high level of autonomy. As a very small island community, it may not offer the most direct parallels for Scotland—a much bigger entity sharing a land border with the rest of the UK. Obviously, that adds more challenges and more complexities. If that negotiation bears fruit and if the Faroe Islands does join EFTA, that would potentially set a precedent for an entity that is not itself a sovereign state being part of that organisation, and that possibly throws up more opportunities for the proposal that is on the table.
I said it was a credible proposal, but I do think some of the complexities surrounding the proposal are glossed over in the Scottish Government’s paper. There may be more detailed papers that the advisory council has prepared, but there are significant challenges—not so much around trade, because the proposal is not for Scotland to be part of the EU customs union but to be part of the single market, but around how you manage and govern the complexities, and that would be perhaps more challenging than is discussed in the paper.
Q825 Joanna Cherry: You said there that you did not think there would be challenges for trade, because of the course the proposal is that whereas Scotland would be in the single market, it would not be in the customs union if the rest of the UK is not in the customs union. That is correct, isn’t it?
Professor Nicola McEwen: That is the proposal. I am not saying there would not be challenges; it is just a different set of challenges.
Q826 Joanna Cherry: Just to get back to EFTA—this may be more a question for Professor Page, but I will be corrected if I am wrong—there is nothing in the EFTA treaty that says a member state has to be sovereign, is there?
Professor Alan Page: Not that I am aware of, no.
Q827 Joanna Cherry: Thank you. Professor McEwen, just getting back to the Faroe Islands, Scotland is sometimes told that it has the most powerful devolved parliament in the world. How does the degree of power of the Scottish Parliament compare with the degree of power of the Faroese parliament?
Professor Nicola McEwen: I would have to check back on the exact measure. When you are comparing the degree of power, it can be quite difficult. There are some indices of powers that are exercised by different entities, but of course they are quite blunt tools, because the nature of power and self-government is different in different cases. I would have to check back on the exact comparisons between those two. My sense is that the Faroe Islands has more self-government than the Scottish Parliament has. However, the Scottish Parliament has a lot of autonomy, if you compare it with other entities within even federal states.
What the Scottish Government lacks is the same level of influence. In political science, we often draw a distinction between self-rule—the powers that can be exercised within the devolved territory—and shared rule; that is, the extent to which they can influence the powers at the central level that affect their competence. The level of shared rule for Scotland and the other devolved territories in the UK is lower, generally, than most of the similar entities in federations like Canada, for example.
Q828 Joanna Cherry: You write a blog for the website Centre on Constitutional Change; that is correct, isn’t it? I am just looking at your blog from March of last year, and I wonder if I can read out a short passage and ask you to expand upon it.
You say, “If, on the other hand, we include the parliaments of regions or provinces within federations, where regional and national parliaments are each sovereign within their spheres of jurisdiction, the Scottish Parliament’s power is on most measures surpassed by the American states, the Canadian provinces, the Australian states and the German lander. Also, federacies like the Aland Islands (Finland) or the Faroes (Denmark) have substantial political authority. They too rank more highly than Scotland in international comparisons on comparative indices like the Regional Authority Index.”
Professor Nicola McEwen: Yes, that is the index I was thinking of. Sorry, my memory does not stretch back to last March to remember the exact rankings of each of the members, but I would reiterate the point that the biggest difference with all of those entities is on the level of shared rule—the level of influence—which is one part of the political authority that entities within multi-level states and federations can exercise.
Q829 Joanna Cherry: Just think back to this issue of whether or not Scotland could have a differentiated agreement while remaining part of the United Kingdom. We had some very interesting evidence a couple of weeks ago from the Chief Minister of Gibraltar. Of course, we heard that whereas Gibraltar is in the European Union, they are not members of the customs union. Would the Committee be right in understanding that, in the European Union’s arrangements as they exist at present, there is precedent for differentiated arrangements within member states.
Professor Nicola McEwen: Yes.
Joanna Cherry: I am conscious of not overrunning my time, Chair. May I have one more question?
Chair: Of course.
Q830 Joanna Cherry: Professor Page, you prepared an analysis for the Scottish Parliament on the issue of which powers are likely to be repatriated to Westminster, and which powers are likely to be repatriated to Holyrood, in the event of the United Kingdom exiting the European Union. Yesterday, the leader of the Conservative and Unionist Party in Scotland, Ruth Davidson, in a speech to Scottish farmers talked about being willing to be flexible and pragmatic in relation to which powers went where in respect of agriculture and farming policy. Could you comment on that?
Professor Alan Page: I did see it. I was a little bit surprised by it, I have to say, because agriculture is a devolved competence, and therefore one that one would expect to remain with the Scottish Parliament. I had indeed assumed that was the case, and there was general agreement that devolved powers would remain where they are. There are, I know, funding issues in relation to agriculture in particular that would need to be addressed, but, yes, I was a little bit surprised by it, as a statement.
Joanna Cherry: Thank you.
Q831 Dominic Raab: Good morning. Thanks for attending as witnesses. The EU and many here have made the point about the indivisibility of the single market and its four freedoms, and I just want to drill down a little bit on some of this. If the UK was out of the single market, which is the state today, can you identify for me what the positive legal basis would be in the treaties of the wider EU framework for Scotland to remain in the single market? I will perhaps ask Professor Page firstly on that.
Professor Alan Page: The short answer is I have absolutely no idea. However, if there was an agreement, the agreement would provide the basis for whatever relationship there was then to be between Scotland and the EU. However, I cannot—I think I am right in saying—identify any particular provision in the existing treaties that would cater for that possibility. There is provision in relation to things like co-operation in higher education and so on, whereby there may be a relationship between the EU and other, non-member states, but I am not aware of any general basis for such a relationship.
Q832 Dominic Raab: Is there a risk that any agreement that might be agreed at the international level would risk suffering not being compliant with EU law and ending up in the ECJ, or is it just a question, in your view, of the political will forcing it through?
Professor Alan Page: Yes, again there is the question of political will, which Professor McEwen has addressed, and that would then have to be followed through in the actual ratification of whatever agreement was arrived at. It would not just be monetary political will: “Oh, yes, we will agree to this.” It would have to go through the individual member states’ procedures for ratification of that agreement, yes.
Q833 Dominic Raab: I am just interested, on this aspect—and there is a crude distinction being made between the divorce and the new relationship. Is it your view that this would fall within the terms of the new relationship and the terms that would need to be agreed?
Professor Alan Page: The divorce, as I understand it, is supposed to be negotiated with a view to or in the light of the new relationship. I am not sure there is much more I can say usefully around that.
Q834 Dominic Raab: I am interested to know, in the absence of a positive legal basis for it, what you think the voting procedure for this aspect might be. Would it be unanimity or QMV?
Professor Alan Page: I think Article 50 provides for QMV.
Q835 Dominic Raab: Article 50 does?
Professor Alan Page: Yes, and therefore I assume this would be covered by that. However, we are probably talking about a mixed agreement, which would require not just the agreement of the EU but the agreement of the member states.
Q836 Dominic Raab: Do you think that in relation to that, unanimity would probably be required?
Professor Alan Page: I am not sure that it is required for a mixed agreement, but the point is that all the states would have to agree to it.
Q837 Dominic Raab: All the states. I just wondered, Professor McEwen, as we talked about the distinction between law and political reality, if all the member states would need to agree, bearing in mind the views from Spain to Croatia, do you think it is politically realistic to think that all the member states would agree to such a differentiated arrangement? What is your best guess?
Professor Nicola McEwen: It would depend on what the nature of the agreement was, what calculations they made, and how it affected their internal domestic politics. If you are asking about Spain and concerns about the impact on Catalonia, clearly that is present and part of the debate. My sense is that the situation that the United Kingdom, and Scotland, is in now makes it look even less like Catalonia’s situation within Spain than was the case two years ago. That does not mean the Spanish Government would not be concerned about any direct implications for them. It may not just be Spain; there are other EU member states that have strong regions within their boundaries too, and there may be some concerns about undue influence, if that was the way it was perceived, or some sort of preferential treatment for what would be considered a region within an ex-member state, as part of that process.
Q838 Dominic Raab: We talk a lot about Spain, but you are right to broaden this out. Which of the other member states with federal systems do you think might be most apprehensive, let’s say, about individual federated parts having bespoke arrangements? Who would be the top three on your list beyond Spain?
Professor Nicola McEwen: Belgium, probably, and Belgium is interesting here in the nature of a mixed agreement, as we just saw with CETA; that is a decision that would also be taken by the regional parliaments as well. Italy is not a federal system, but it is a devolved system, so it has territorial issues as part of its politics. But I do not think the issue is just about internal territorial dynamics. We can anticipate that there may be broader concerns on the part of some member states, irrespective of whether they have those territorial issues to contend with, about a part of the United Kingdom having access to the single market, and what that might mean for their own national interests and their four freedoms issues.
Q839 Dominic Raab: Thank you. If—and I want to try to think about getting this out in my mind—the UK was out of the single market and Scotland remained in, there would obviously be differentiated arrangements for free movement in the two parts of Britain. What arrangements could make that happen on the notional, let’s say, border between the UK and Scotland? Perhaps I will go to Professor Page.
Professor Alan Page: On the border implications, I have to confess to not having thought this through or thought seriously about it. As regards the particular question of immigration, as you know we talk about alternative methods of immigration control that would not involve actual border checks, which it is argued could be as effective or more effective than border checks and which would remove one argument in favour of, or justification for, a hard border. Then there is the analogy with Ireland, which has been drawn, rightly or wrongly. However, beyond that I do not think I have anything to add.
Q840 Dominic Raab: Do Professor McEwen or Mr Clancy have a view on that?
Michael Clancy: Our committee has recently been talking about what might be the sort of shape of this, and of course different immigration rules could come into that. As we know already, the border is, in a sense, pushed back beyond the ports and airports into areas where immigration status is checked by the health service, by landlords, and other service providers such as local authorities and things like that. There is a different tax code for people resident in Scotland, with an S at the beginning of the code to identify that person as a Scottish taxpayer. There are mechanisms that already exist, which with a bit of imagination could be applied to this kind of situation, whereby you would be able to identify people who were Scottish residents as opposed to residents of other parts of the UK.
Q841 Dominic Raab: Would I be right in thinking that if we went down that route, effectively Scotland would be a route for free movement into the whole UK, but you would apply law enforcement powers to try to curtail that? That seems to be the model you have expressed, but I do not want to caricature it.
Michael Clancy: You are right not to caricature it. Clearly at the point of law enforcement, if someone were found to be continually resident in England and applying for benefits or healthcare or something like that, that person would be flagged as being a Scottish resident if we adopted some kind of differential immigration rules. What the consequences of that would be would depend on the particular circumstances of the case.
Q842 Dominic Raab: Finally, if Scotland stayed in the single market while the UK was not, has anyone north of the border, so to speak, done an independent assessment—that is, from government, whether UK or Scottish—of the net impact this would have on immigration into Scotland? Professor McEwen, are you aware of that?
Professor Nicola McEwen: Some of my colleagues in Edinburgh are doing some work on this just now, and also looking at the feasibility and implications of a differentiated set of immigration rules. There is probably a distinction to be drawn between labour market mobility and freedom of movement more generally within the common travel area. Some of these issues around common travel area movement are already being discussed for Ireland, and that would have implications for Scotland and the rest of Britain as well.
Q843 Dominic Raab: I understand that and I am sure there is a huge amount of work going on with technical aspects and arrangements. I just want—
Professor Nicola McEwen: In terms of numbers?
Q844 Dominic Raab: Yes.
Professor Nicola McEwen: There was some evidence given to a Scottish Parliament Committee just before Christmas, I think, that tried to model some of the long-term impacts on reductions in inward migration. It is difficult to model, because we do not know whether or by how much it would be reduced, but there were certainly some concerns about the impact it would have on dependency ratios, given the age profile of EU migrants, who are younger and more likely to have children than the rest of the population within Scotland. There are some concerns about not just the overall numbers but the impact it has on long-term issues around dependency ratios.
Dominic Raab: Have I got time for one more, Chair, or not?
Chair: If you are very quick.
Q845 Dominic Raab: To each one of you, we have talked a lot about the risks, and I can understand that, but if we think of the opportunities of leaving the EU for Scotland as well as the UK, I wondered whether it was fisheries, the devolution of powers back to Scotland from Brussels or export opportunities you had in your mind. Notwithstanding the understandable risks, what particular concrete opportunities would there be for Scotland? If you have one each, that would be wonderful.
Professor Alan Page: That is a useful way of thinking about it, and from a Scottish perspective it is important to think about this not just in terms of being in the single market or not but in terms of what things matter to Scotland vis-à-vis our relationship with Europe, as it is now and as it might be in the future. It is only when you get down to that level that you can begin to make a proper assessment of the advantages and disadvantages, benefits and disbenefits, of where we might end up.
Professor Nicola McEwen: Probably the most obvious example is around the area of competition policy and some of the constraints that has introduced. The most visible is around minimum pricing for alcohol, which was blocked at least for a while, around concerns about competition. My own research a couple of years ago also looked at energy and the development of renewable energy in communities on the islands, and there are some difficulties there in being seen to unfairly subsidise, from that competition perspective, some quite vulnerable communities where you wanted to have extra subsidy or added enhancement for development in those areas. Those are some of the areas that may be possible, depending on the nature of the new regulations.
Michael Clancy: It is an intriguing question. If we take it to the great repeal Bill, then the great repeal Bill may offer opportunities in terms of extending the competence of the Scottish Parliament. The competence of the Scottish Parliament at the moment is constrained by having to comply with EU law. If EU law is domesticated, in a sense that restriction flies off. That allows us to look at the principles that should guide us in terms of reconstructing the supranational legal order into the domestic legal order. Those will be things like adherence to the rule of law, making sure of access to justice and that the proper administration of justice should be followed, and acknowledging more acutely, in some respects, some principles such as subsidiarity and proportionality that might apply at the moment only in the EU sphere, unless you take into account the general localism agenda.
Q846 Chair: Thank you, and can I just ask one follow-up question? You were discussing the possibility of Scotland remaining part of the single market. If that were agreed, that would be part of the Article 50 agreement, but then in answer to a question from Dominic Raab, I think you said that all member states would have to agree. Can we just be clear as a Committee: would it also require a change to the EU treaties for that to happen? I know this is uncharted territory, but it would be helpful to know, because clearly if it requires a change to the EU treaties, not only do all 27 member states have to agree but those states that require referenda in order to approve changes to treaties would be faced with the prospect of having a whole lot of referenda on this change.
Professor Alan Page: I am assuming it would be an association agreement, rather than an amendment to the treaties.
Chair: Right. That is very helpful, thank you.
Q847 Mark Durkan: Just to come back to some of the points that have been touched on, I suppose, relating to the great repeal Bill and other matters, first, which policy areas where the EU currently exercises competence would you expect to come to the Scottish Parliament when the UK leaves the EU? On the particular point made by Mr Clancy, beyond those that are currently in the EU competence that would or may transfer, which areas already in Scottish competence are subject to restriction where significant differences might open up?
Michael Clancy: The “Scotland’s Place in Europe” paper, which the Scottish Government has published, indicates those areas where the EU currently holds competence and one might expect further devolution: agriculture, food and drink, fisheries, aspects of environmental law, criminal law aspects in terms of the European Arrest Warrant and things like that, and health, higher education and research, and particularly civil law matters. This is a point that is not picked up in the Government’s White Paper, although some aspects, such as criminal law, are being repatriated. But civil law matters are crucially important, and we ought not to omit or overlook them, because they relate not only to commercial legal transactions, and the enforcement of judgments and things like that, but to very personal matters, such as the jurisdiction for family law questions, maintenance issues, and things of that nature. These are of deep importance to individuals the length and breadth of the country. I would like to highlight that particularly as being one of the areas that would be repatriated, but it is also something that the UK Government ought to have included in the White Paper, and we ought to remind them of that.
Q848 Mark Durkan: In terms of the list that you reflected from the Scottish Government’s paper, they are not all of a kind and on a par when it comes to possibly linked funding questions, and I refer to what Professor Page said earlier in terms of agriculture. What thought has been given to whether or not there can be different journeys for these powers? Will some of them go directly to the Scottish Parliament? Will some go through some sort of transit arrangement in the UK, in some sort of holding pattern in Whitehall or Westminster? When we look at that list of competences, what journey is planned?
Professor Alan Page: The brief answer to the first part of your question—which powers are currently devolved but are the subject of EU competences—the ones I listed were justice and home affairs, agriculture, fisheries and the environment. These are the key ones, so far as Scotland is concerned, and the ones you would expect to remain within the Scottish Parliament’s competence.
You are then talking about what additional competences and powers might be devolved, and as Michael Clancy has said there is a long list in the Scottish Government’s paper, “Scotland’s Place in Europe”. I would expect that to be part of the negotiation within the United Kingdom that is going on at the same time as the negotiation between the United Kingdom and the EU, so that there would be an agreement, as the UK Government’s White Paper in fact anticipates, as to which powers will end up where. They state in that White Paper that they are open to the possibility that there should be further devolution, but at the same time they set a limit to that process by saying that further devolution should not lead to the introduction of additional or new barriers to trade within the United Kingdom. That is the point that I made in the work I did for the Scottish Parliament: namely that many of the reserved competences are UK single market related, and that is why they are in schedule 5 of the Scotland Act and the equivalent provisions in the Northern Ireland Act.
I would have thought that, rather than being in a holding pattern, there would be an agreement that these powers would be devolved, however extensive or limited the additional powers are to be. However, allied to that is this key question of funding. How is agriculture, or UK-wide, Scottish or Northern Irish agricultural or farming policy, to be funded when the United Kingdom leaves the European Union?
Q849 Mark Durkan: It is exactly that point. You have said which powers end up where, and the question then, surely, is going to be what the journey of those different powers might be. It may be different for different powers, not least because if we are talking about making laws on environmental standards—that is a straightforward matter of legislative competence and administrative enforcement. Agriculture, however, brings in the whole question of agricultural support payments, which obviously are EU-derived, but the money comes as annually managed expenditure, so the Treasury may well have a view that says they would need more time in relation to those competences that have involved public expenditure by the AME route, and therefore they should be taken in a different class from other things. Has anybody anticipated those kinds of issues and complications?
Professor Alan Page: That is an interesting point, because powers and money, in terms of devolution, have been dealt with entirely separately. The devolution legislation says absolutely nothing about money. That is the subject of separate funding agreements. However, so far as the powers are concerned, I am just thinking about the Scotland Act 2016, which provides for the phased, if you like, delegation or devolution or transfer of powers in relation to, for example, welfare. There is no reason at all why you could not build into whatever agreement a system whereby powers were not just devolved—“There you are; get on with it”—but it was done in a more orderly, structured, thought-about way. But yes, there is the separate question of the money that goes with that.
Could I just add one point in relation to that? In terms of funding, the funding settlement in the UK, the block grant, comes without strings attached. It is not tied to particular programmes, so it is up to the devolved Administration to spend that money.
Q850 Mark Durkan: That is not so with annually managed expenditure, which is the form of expenditure that is used in relation to agriculture.
Professor Alan Page: Yes, which is not an issue, but will become one.
Q851 Mark Durkan: I will not go into Northern Ireland expenses and welfare reform and other things. Professor McEwen?
Professor Nicola McEwen: Just on that point, I wonder if it may be insightful to think back to the discussions around money in relation to the partial devolution of social security in the Scotland Act 2016. Social security, as you know, is AME funded too, but my understanding is that they could not identify a sustainable way to maintain that in relation to the devolved social security competences without issues of parity, which were not what either government wanted. There is a possibility that that set some sort of precedent around other AME-funded projects that are now the subject of fiscal transfers post-Brexit. That is just a note of caution on that.
On the broader point about the repatriation of competences, there is an awful lot of ambiguity, I find, in what the Government White Paper says and what the Prime Minister’s speech said about what the repatriation of EU competences may mean for devolved competence. There is the commitment to ensure that the devolved parliaments do not have less power than they currently have, but that is quite distinct from saying that they will have an awful lot more power. It does not preclude it, but it is at the very least ambiguous, and it seems to me to be an obvious source of tension as the negotiations get under way.
Q852 Mark Durkan: In that context, then, as we await the great repeal Bill—the great “Download and Save” Bill—at what point would the consent of the Scottish Parliament be required to terms within that bill? Would the consent be to the Bill at large, or would the consent be specifically to those areas that would directly address the competence or future competence of the Scottish Parliament?
Professor Alan Page: The assumption is that the great repeal Bill will require legislative consent motions. That will mean that consent will be sought to particular provisions, or these will be the provisions that require consent. It will be on that basis but, again, going back to previous examples, the Scottish Parliament said at the time of the Scotland Act 2012 that this was too big a question to just give a yes or no answer to, and there was a lot of to-ing and fro-ing before an agreement was eventually reached. Yes, it will require consent, and I would have thought that the process of securing consent—if I can put it like that—would inevitably take in all aspects of the proposed settlement that were of interest to the devolved legislatures.
Q853 Mark Durkan: In respect of the Scottish Parliament, you expect that the great repeal Bill would be subject to an omnibus legislative consent motion that deals with everything that that says, or would there be bespoke legislative consent motions in respect of how particular competences might be addressed, some of which may be coming straight away, and some of which may be pending other negotiations?
Professor Alan Page: One Bill, one legislative consent motion, unless the Bill was to be substantially amended. We do have the possibility, of course, that we are not talking just about a great repeal Bill but about amending devolution legislation, which would be subject to separate legislative consent motions. There must be a limit to how much you can put into this great repeal Bill.
Chair: Thank you. We need to move on.
Q854 Mr Lilley: I would find it helpful if someone would explain to me what is meant by the term “single market”. I had to introduce the legislative consequences of the Single European Act, which does not mention the single market. It mentions the internal market of member states. It is not clear to me how one can be a member of the internal market without being a member state. Do people, when they are talking about the single market, mean the European Economic Area, and if so why do they not say so?
Professor Alan Page: My answer is that all these terms are in a sense interchangeable. The first term we had was common market, which then became the internal market, to which you are referring, as a result of the Single European Act, and is now referred to as the single market; but as defined by, I think, Article 6 of the Treaty on the Functioning of the European Union, it is an area in which the four freedoms—the free movement of goods, persons, services and capital—is secured.
Q855 Mr Lilley: However, there is not any mention in European Law of the Single European Act, outside the European Economic Area.
Professor Alan Page: No, there is not.
Q856 Mr Lilley: It is the single market. We are talking about Scotland being a member of the EEA. That means it would have to adhere to European law across a wide range of activities but have no say in the making of that law, no power to amend that law, and no power to repeal that law. Is that correct?
Professor Alan Page: That is correct, yes.
Q857 Mr Lilley: Is it not odd for a party that claims to be in favour of devolving power to Scotland to be in favour of moving from a position where it has some influence over all of these laws to one where it has no influence over all of these laws? It seems to prefer to have no influence over law-making rather than share that influence with the rest of the United Kingdom.
Professor Nicola McEwen: That is possibly a question for the Minister, rather than for us.
Q858 Mr Lilley: I will talk to him later on. All member states of the European Economic Area accept the supremacy of European law, effectively, through the EEA court. They also make contributions, do they not? Have you an estimate of how much Scotland would have to make, and would it come out of the block grant for Scotland? They have to accept free movement of labour.
Michael Clancy: I have not seen any attempt at a calculation on that.
Q859 Mr Lilley: Did not the Scottish Government include mention of that in its proposals?
Professor Nicola McEwen: I do not think in detail, but they include mention of the contribution, on which there is an assumption in the paper that that would come out of the existing UK contribution when it was repatriated, if you like, rather than the existing block grant.
Q860 Mr Lilley: Finally, you mentioned Spain. Are you aware that the leader of the ruling Partido Popular’s delegation to the European Parliament said on 30 January, “The position of my party”, which is the ruling party, “and that of the Government is very clear: we will not talk to anyone other than the Government of Great Britain. There can be no special common market solution,” as he put it, “for Scotland. Spain is going to say no to any kind of special solution for Scotland.”
Professor Nicola McEwen: Partido Popular has very strong views on these issues.
Q861 Mr Lilley: And it is the governing party.
Professor Nicola McEwen: Yes.
Q862 Karl McCartney: I will try not to let my potential 10 minutes to stretch to nearer 20. I am conscious that you have answered questions you have liked and maybe tried to duck questions you have not, so I will keep these as general as I can. Do you accept the model of democracy we have in this country? Obviously, we do not have an English parliament. We do have an Irish, Scottish and Welsh grouping. However, it was a UK referendum in which we made a decision, and we do have members of this Parliament from Scotland, Wales and Ireland, and therefore how Brexit goes is a decision that will be made here rather than elsewhere.
Michael Clancy: We can set it in a legal framework, which is that the Scotland Act 1998, schedule 5(7), says international agreements, including EU, “are reserved matters” for the UK Parliament, and that is why the Notification of Withdrawal Bill is before this Parliament.
Q863 Karl McCartney: I presume you accept the decision of the highest court in the land that we had recently.
Michael Clancy: Naturally.
Q864 Karl McCartney: I am very pleased to hear it, thank you very much. Finally, I believe we have heard, Professor McEwen, that you have a blog. You will have to forgive me, I have not read it, and I do not know if any of the three of you publicly declared for either side before the referendum, but do you accept that Brexit is going to happen, and therefore, going back to the reason you are here, can you give us your best optimistic negotiating objectives for the UK as a whole as we withdraw from the EU?
Professor Alan Page: Speaking for myself, yes, I do accept it is happening, and while I appreciate the Committee’s interest in the possibility of a differentiated Scottish solution, I have to say my own interest lies more in the consequences of the EU withdrawal for Scotland. I hope the Committee will at some point turn to that question as well, and in particular I am thinking about the protection of Scottish interests vis-à-vis decisions taken in London, which is an issue as old as the Union itself—the Anglo-Scottish Union, as opposed to the European Union—because whilst there is a lot of emphasis on the powers that will go to Edinburgh, Cardiff and Belfast, the powers that will come to London are infinitely more significant. They are far more important. There is a real issue therefore of the protection of the position of the devolved nations in relation to decisions taken in London, which will require, at the very least, a much more thoroughgoing system of intergovernmental relations, extending possibly so far as shared decision-making.
The other consequence I would highlight is the question of parliamentary control over the subordinate or delegated law-making powers that will be a feature of the great repeal Bill. I am thinking in terms not just of Westminster UK parliamentary control but also control on the part of the devolved legislatures as well. These are issues that I hope you will come back to in the fullness of time.
Professor Nicola McEwen: The UK polity is increasingly complex, and if there is a shared interest in its staying together in relative harmony, it is important that the institutions adapt to recognise that complexity. You talked about the absence of an English parliament, and the issue of England and how it is governed will re-emerge as the Brexit agreement is implemented, in light of some of the things that Professor Page was just saying. If there is to be co-ordination between the devolved Governments and the UK Government around things like common regimes for agriculture or whatever, without weakening the devolved powers, then that will have to be through the intergovernmental arena, and the institutions are not yet there to manage that on an ongoing basis. It does again raise the issue of who represents England within that type of forum.
There are lots of issues to be examined. Yes, this institution, the UK Government, remains very important for governing the whole of the UK, but the UK is much more complex politically than it used to be, and that needs to be taken into account.
Michael Clancy: The Law Society, of course, was neutral on the question. We have 11,500-plus members, some of whom would earnestly want Brexit and some of who would not, and some in the middle would have varying views at varying times. We were neutral then and we are neutral now.
You make the point that there is no English parliament, but the House of Commons has made arrangements for English votes for English laws, and those are proceeding at the moment. Where that comes up, that comes up, and that takes us back to the Sewel issue, because effectively applying the Sewel principles under that convention ensures that, as we know, where the UK Parliament is going to legislate in devolved areas, it requires the consent of the devolved parliament. A legislative consent motion is sought then, and the Speaker will apply that rationale to areas that fall within English law if they were devolved matters under the Scotland Act, the Government of Wales Act, or the Northern Ireland Act.
It all means that that same Supreme Court judgment, which you were so eager to get my assent to, examines the Sewel Convention too, and that in its sense says that the courts will stand back from the Sewel Convention. They are observers of the convention. The convention is a matter of politics, not law, but we know what the law is because the court also identified that law, and the proponents of the case for the Scottish Government and the Welsh Assembly Government were clear in accepting the legal decision about the law in that area. Matters of convention are matters for you and your colleagues, and no doubt if there are tweaks to be made to English votes for English laws, those will be made in due course.
Karl McCartney: Thank you very much for those answers.
Q865 Sammy Wilson: Professor Page, when you were giving your evidence, you indicated that if arrangements were made for Scotland to remain within the single market, there would be implications for UK-wide trade, which of course is one of the biggest single markets for Scotland. Could you spell out exactly what those implications would be?
Professor Alan Page: Simply it is that Scotland would continue to adhere to EU law—would continue to apply and comply with EU law—whereas the rest of the UK would potentially be going in a different direction, adopting different standards and so on. This would then raise the question of barriers to trade between Scotland and the rest of the United Kingdom and threaten the integrity of the existing UK single market.
Q866 Sammy Wilson: I assume, then, from what you are saying, those additional barriers would be detrimental to Scottish industry in relation to the biggest single market that is available to it.
Professor Alan Page: Yes.
Q867 Sammy Wilson: Are there also implications for initiatives taken by the UK Government to support various industries that may have a UK-wide basis—that Scotland would be exempt from those because it might go against the state aid rules to which they would still be subject within the single market?
Professor Alan Page: I have not thought about that. Yes, Scotland would continue to be bound by, in theory at least, the state aid rules. We were talking earlier about the advantages or potential advantages of leaving the EU, and one of them is the freedom to pursue your own industrial policy not subject to those rules. Yes, there would be that difference between different parts of the United Kingdom. Yes.
Sammy Wilson: Thank you.
Chair: Jonathan Edwards, did you want to ask a quick question?
Q868 Jonathan Edwards: Professor Page, you mentioned in an earlier answer the issue of shared competence, and to be honest it is something I am beginning to get my head around. With the devolved constitutions as they work at the moment, things are either devolved or they are not. What policy fields do you think would have to be considered for shared competence in the future? The obvious one that hits me between the eyes is international trade, because you could have the UK Government making trade deals that have huge impacts on devolved competence areas. What policy fields do you think might, in a more flexible constitutional framework for the UK, be deemed to be shared?
Professor Alan Page: My general point is that one of the weaknesses of the existing devolution settlement is this question that Professor McEwen raised earlier of shared rule. We think primarily in terms of self-rule—which powers will go to Cardiff, which powers will go to Belfast and which powers will go to Edinburgh—and reserved matters are left to be dealt with in London. If you apply the federal analogy, shared rule in the UK tends to be reserved rule. It is a matter for London. We need to address that or think seriously about that in this particular context, because if we just continue down that road, we will simply build up tensions and difficulties between the constituent parts of the UK. The intergovernmental system has to be made to work. There has to be a system, without necessarily identifying particular powers, although there are areas—and the Welsh Government paper singles out international trade agreements as a particular one—where that will be particularly important.
It is also important in relation to the question I raised earlier of subordinate lawmaking powers, where the question of the devolved parliaments’ consent agreement becomes very important.
Jonathan Edwards: Thank you.
Michael Clancy: We should not underestimate exactly what an effort that is going to be. We are about to enter an unprecedented epoch of policy development and law reform, and not only the UK Parliament but the Parliament in Edinburgh and the Assemblies in Belfast and Cardiff will have to be adequately skilled for that. It is going to be an enormous undertaking. The House of Commons Library paper identifies 19,000 instruments that will need to be examined in terms of repeal, retain or amend. That will see many of you, sitting around this table, working on this for many years to come—and us too, because each of them will have to be consulted upon.
Professor Alan Page: There needs to be a JMC EU Law Revision Committee on which all parts of the UK are represented and that will have oversight of this process.
Q869 Mr Lilley: But not Scotland, if Scotland remains part of the European single market.
Professor Alan Page: We are leaving that to one side for the moment.
Mr Lilley: It is rather important. They would not be changing anything.
Professor Alan Page: As I said, that is not my starting point in relation to this.
Q870 Chair: Mr Clancy, a final word, please?
Michael Clancy: The issue is that there are many options to deal with this fuller devolution, and we have to explore all of them: everything from a form of constitutional convention, through to an enhanced JMC, which may be of the kind Professor Page has described. I would like to see that enhanced JMC include bodies from civic society, academia and others as present in the room, rather than have some kind of Smith or Calman approach to this.
Chair: One thing I think we can all agree on is that any Joint Committee that is scrutinising these 19,000 bits of legislation is going to have its work cut out. We are very grateful. Unfortunately, we have run out of time, because we are now going to hear from Michael Russell, the Minister, but we are very grateful to all of you for coming today and helping us in our deliberations. Thank you.
Examination of witnesses
Michael Russell MSP, Ian Mitchell and George Burgess.
Q871 Chair: Good morning. Can I welcome Michael Russell, who is a Member of the Scottish Parliament, Minister for UK Negotiations on Scotland’s Place in Europe, and your colleagues, Ian Mitchell, deputy director, external affairs in the Scottish Government, and George Burgess, deputy director for EU and international trade and investment policy for the Scottish Government? You are all very welcome indeed. Thank you for making the time available to help us in our work.
Can I begin, Mr Russell, with the question of the single market? The Scottish Government have set out very clearly in the paper that you published your wish to find a way of remaining within the single market, and that has clearly been the subject of discussion in the Joint Ministerial Committee. The question I wanted to ask was about your understanding or perception of the attitude of the other 27 member states to this proposal being a runner, in particular in terms of precedent. You have quoted in the document Article 56 of the EFTA Convention, which says that any state may accede to the convention. As far as I am aware, unless you can tell us differently, there are no bodies that are not states that are currently part of the convention, so how exactly do you envisage that working?
Michael Russell: Thank you for the invitation to be here. I am grateful for the opportunity to give evidence to you.
There are probably two answers to that and, with your permission, I will give you both. The first of those is that, whilst there are presently no sub‑states, there has been a long debate about the possible membership of the Faroe Islands, and that is also quoted in the paper. It is likely that the Faroe Island will accede to membership through one of two possible routes, either through sponsorship by the Danish Government or through recognition as a legal entity. Both of those routes are possible for Scotland in its present condition, and that would mean either there would sponsorship by the UK or the creation of a distinct legal personality for the Scottish Parliament, something that exists for the sub‑state parliaments in Belgium. There is a technical mechanism, but it will not be easy—and that bridges me into the other answer.
I think what I asking for in terms of consideration of “Scotland’s Place in Europe” is no more or less than the UK Government are asking for in their proposals, which are somewhat less substantial, I have to say—that is, to have the opportunity to put these on the table for debate and discussion with the others who are involved. There are many commentators in Europe who comment on some of the things, for example, in the UK Government’s White Paper last week, to say those are not possible and they will not take place. However, the UK Government are saying, quite fairly, “We will now go in and attempt to negotiate them.” I believe the right thing with this document is for the UK Government to say, “We may not agree with every detail within it, but we are going to place this in negotiation in order to see what we can do with it.” That would be the fair thing to do.
Q872 Chair: Thank you very much. The second question I wanted to aske is on free movement. As I understand it, you propose that Scotland would wish to continue to operate that policy. When you were interviewed on the “Today” programme recently, you were asked a question about how it would work in relation to EU workers and migrants coming to Scotland and what happens if they then want to move to England. You said that their passport and their documentation would, in effect, show they are only entitled to stay in Scotland. The specific question I wanted to ask is: how do you envisage that working, and at what point would that documentation be issued to EU migrant workers—and we are assuming for the purposes of this question that those who are here now get to stay with all of their rights—
Michael Russell: Let us hope so.
Q873 Chair: Indeed. I think that is shared across the Committee, the country and the Government. They are saying that there are one or two member states that are not quite keen on it yet, but we hope that they can be persuaded. But after that, at what point in the process would this documentation or this stamp be issued?
Michael Russell: Let us start with the overarching policy, which is to say that this exists elsewhere and operates successfully elsewhere, in parts of Canada and parts of Australia. Indeed, the Scottish Affairs Committee of the House of Commons and, recently, the European and External Relations Committee of the Scottish Parliament, in that case unanimously, has said that free movement of labour is very important to us and should continue.
The example I gave on Radio 4 is an example and the paper deals in examples, but there are many things in this paper, as there are many more things in the UK Government’s stance, that require detailed fleshing out, and that is the work that we continue to do and want to do with the UK Government. David Davis gave an interview in, I think, Ireland before Christmas in which he talked about what the problem of migration was. The problem very often is not the border per se, and there will be a border; the problem is people overstaying their welcome, extending their visas without permission and things of that nature. Already, the way in which that is dealt with is in precisely the way that I am mentioning here: it is a matter of paperwork. It is provable that people have overstayed their visa, as a result of which they are not entitled to be here, and that is exactly the same situation. There is a rider added, which is to say that the place at which they can be employed and the place at which they can reside is Scotland. It is commonplace to do that. There are ways in which it is done elsewhere in the world that can be done easily here.
The reason we stress free movement of labour is because we believe it is important for the whole of the UK, and we reject the analysis of this that has taken place by others, but it is particularly important, we believe, in Scotland, given the ageing population, the nature of the economy—given some of the sectors are very vulnerable—and the issue of depopulation. I represent the constituency of Argyll and Bute, which is losing population faster than almost any other part of Scotland. We have a severe problem that can only be resolved by migration, and the migration that has made the most difference in recent years is that from other EU countries.
Q874 Chair: I appreciate absolutely that argument, but just on the point of the paperwork, if the proposal the Scottish Government have made were to be accepted, presumably the passports or documents of those who arrived after the cut‑off date would have to say “right to live and/or work in Scotland only”.
Michael Russell: Correct.
Q875 Chair: The question I am asking, just so I understand—we are trying to explore the proposal—is: at what point would that piece of documentation be offered? You would not do it when people arrived at Edinburgh Airport, but if they wanted to work, they would have to then make an application in Scotland. That is what I am just trying to understand.
Michael Russell: You would do it at the point of entry. This is now detail that we need to discuss and debate with people who are, dare I say it, convenor, more knowledgeable than you and I on the details of passports and paperwork. What happens already is that people coming from other European countries will pass through a border that is not the same as the borders we have now; that is axiomatic. In those circumstances, I can envisage—but it is for debate and discussion—that that would be the moment at which there would be that permission given in writing that that was what they would do. We can certainly debate and discuss the precise way in which it operates, just as there are very substantial details, for example, in the proposals of the UK Government that are now required to be very considerably fleshed out before we understand how they will work.
Q876 Chair: Finally from me, if that discussion were to take place at the border—because I think we are all assuming, rightly so, that for any EU citizen who wanted to come for the purposes of tourism we are not going to be talking about visas—does that mean that we might need to ask people who are arriving, “Are you planning to come and work in Scotland?” at the point that they arrive at, say, Heathrow, or has that yet to be determined?
Michael Russell: It has yet to be determined, but I have to say I am not as confident as you are on the issue of visas. I see there is no agreement or even outline agreement on that issue, so we do not know enough to know how that would work. However, we can say that, in principle, because it works elsewhere, it is possible to delineate the place that people should live and work and, indeed, that is presently the basis of enforcing restrictions on migration right across the board. That is the basis on which it is done—the written permission to do something.
Q877 Seema Malhotra: Thank you very much for coming in to give evidence today. I want to explore a little more how you think it will work if Scotland remains a member of the single market but the rest of the UK has left. How do you envisage that working?
Michael Russell: I am sorry; I am having difficulty hearing.
Seema Malhotra: Sorry. Is that better?
Michael Russell: That is better, yes, thank you.
Seema Malhotra: I just wanted to ask if you could help us envisage how it would work if Scotland remains a member of the single market after the rest of the UK has left.
Michael Russell: I am sorry to refer you to a paper of this length, but I think it is very clear about, in outline, how that would work. The preferred mechanism—and indeed there is a similar mechanism outlined in the Welsh Government’s paper that was published a couple of weeks ago—is the EFTA EEA route. The convenor has talked about sub‑state membership and the issue surrounding that, but it is membership of EFTA and, through that, membership of the EEA.
The issues then become trade within this island, and the paper very clearly says that if the UK leaves the customs union, as is now expected—and that was somewhat vague for a while, but I believe has been now set at rest by one of the Trade Ministers—then Scotland should leave too, so, essentially, you have a customs union within this island. The paper outlines how that will work. It outlines some of the advantages that would exist for both sides of the border, in fact, for that to be the case—the fact that there would not need to be a trading border. The proposal, therefore, is fleshed out well, but of course it now needs some detailed negotiation, because we will only get the detail of it once we have had that negotiation.
Q878 Seema Malhotra: What could you envisage are some of the disadvantages?
Michael Russell: I find it difficult to see disadvantages for Scotland in these circumstances. Certainly work will be required to ensure that the customs union operates seamlessly, and there will be difficulties for the rest of the UK in coming out of the customs union, in terms of the requirements, for example, on rules of origin, which will be difficult for them. For Scotland, it will work well.
It requires discussion and negotiation, but we have put a lot of effort into trying to find a solution that squares a circle, and it is important I make that circle clear. The circle is that the people of Scotland voted 62% to 38% to stay in the EU. Present polling would indicate that that has increased in terms of support for the EU. We are not saying that the rest of the UK should not leave. We accept and we think there will be big difficulties there. Our first proposal in here, as you know, was for whole of the UK to stay in the single market. That has been ruled out, but we believe, in those circumstances, the circle can be squared.
The outline proposal is here. The detailed negotiation needs to take place and, so far, I have to say I am disappointed that the UK Government have not entered into that detailed negotiation. I believe they should do so and I believe they should then take this proposal and put it within the Article 50 letter and within the process of negotiation.
Q879 Seema Malhotra: Do you envisage, however, that there may need to be more investment in terms of border checks, in some form, between Scotland and England? At what scale might that need to be and where would the investment need to come from?
Michael Russell: One of the hidden costs of Brexit will be a major increase in expenditure by the UK on all sorts of systems for trading goods because, by definition, they are going from a system that is free and open to a system that, no matter what is negotiated, will be less free and less open. The UK as a whole will invest heavily there.
The aim of this proposal is to try to diminish such a requirement for the Scottish‑English border almost to a vanishing point. We use as an example Switzerland and Liechtenstein—different in scale but still the same principle—and Norway and Sweden, which have some similarities to it. Providing there is a positive approach to this, and again I echo the view of the UK Government—providing we enter into this in a positive spirit and providing we can be imaginative—we think that those difficulties can be kept to an absolute minimum.
Q880 Seema Malhotra: What challenges do you also envisage for what jurisdiction Scotland might be under in terms of any trade or other related issues in relation to EFTA versus the rest of the UK? What implications could that have for, in a sense, the UK single market as we currently have it?
Michael Russell: As you will know, EFTA countries are able to negotiate their own trade arrangements, so if you give Scotland legal personality, which for the proposal in here it would need, then Scotland is quite able to enter into those arrangements. I am sure, given the present trade between Scotland and England, they would want to make sure it was an open border and free and open trade. We have said that all along.
The balance of that trade is interesting; England and Wales export slightly more to Scotland than comes from north of the border south. Part of the trade north to south is electricity on electricity pylons, but this will be an open trading border and everybody will benefit from that. I have to say again, in precisely the same way as the UK Government is talking about the rest of Europe and itself and hoping to have open trade, that is exactly what we would expect to happen.
Q881 Seema Malhotra: If I could just probe this a little further, in that scenario Scotland would be outside the jurisdiction of the European Court of Justice but within the jurisdiction of the EFTA Court, and the rest of the UK might be outside jurisdiction of the EFTA Court.
Michael Russell: It would be. The position here is it would be in the EFTA pillar. European court judgments are not binding upon the EFTA Court, but are taken into account by what is a much freer court. But I have to say I have no particular axe to grind on the issue of courts outside Scotland or outside the UK. We live quite comfortably in those circumstances, as, I would contend, does the UK. It is a fact of life that there are courts outside one’s immediate jurisdiction.
The origins of this argument are very strange and lie in a Swiss argument of the 1970s about EEA and European membership, which in itself lies, I am told, in a misreading of Swiss history, so we should get off the hook of courts outside the UK. I am quite comfortable with the EFTA pillar. I think it will give sensible judgments and we will be well represented in it, as indeed the UK is well represented in the European court.
Q882 Seema Malhotra: In your view then, in terms of the trade links with the rest of the UK, which obviously are of great significance for the Scottish economy as well, you do not have any real concerns about what the implications would be of Scotland staying within the single market if the rest of the UK leaves.
Michael Russell: No, none whatsoever. Indeed, I am, unusually, at one with some of the Brexiteers in this. I believe in open borders and free trade.
Q883 Seema Malhotra: Would there be any industry sectors in Scotland that would maybe have some concerns about that arrangement more so than others? Where might those industry sectors be?
Michael Russell: The sector that was most vocal in terms of exiting the EU was the fishing sector. I represent a constituency with strong fishing interests and I understand that. The common fisheries policy is widely regarded as a substantial failure, largely because the fishing waters were traded away in the 1970s on accession to the EU. As the EFTA-EEA arrangement does not cover fisheries, that squares that circle, essentially; it would not be part of the CFP. There are issues in agriculture because of the common agricultural policy to do with tariffs, which will require the UK to think very carefully about what happens next, but this is no disadvantage. For all other sectors, it is pretty positive. Some of the business opinion that we see in Scotland remains very concerned about the effects of Brexit, and this provides a much better means of moving forward.
I should stress this is a compromise proposal from the Scottish Government. I really want to stress that. I do not think it will come as a surprise to anybody in this room, given that I am a member of the SNP of some 40 years’ standing, that I believe in independence. However, we have worked very hard to put forward a compromise solution that we believe respects the decision made in England and Wales, but also respects the decision made in Scotland. Therefore, this is a proposal made in good faith. We published it some seven weeks ago and we really do feel it is about time the UK Government engaged with it with similar good faith.
Q884 Seema Malhotra: In terms of any budget contribution for remaining within the single market if the rest of the UK leaves, how would you see that being discussed or negotiated?
Michael Russell: We are not a negotiating party; we recognise that. We are not a negotiating party in the talks about withdrawal, though we hope we will be involved and consulted and will participate. But in those circumstances we would willingly agree to a recognised contribution. There is a recognised scale of contribution undertaken for EEA countries, and I am sure the UK Government will pass back to us the substantial bonus that they claim is going to be available in leaving the EU.
Q885 Mr Whittingdale: I hear what you say about your being relatively relaxed about the jurisdiction of different courts, but do you not see any problem arising from the fact that, ultimately, Scotland might still be subject to a superior court to the Westminster Parliament, even though that is not the case for the rest of the United Kingdom?
Michael Russell: No, I do not. Scotland has lived quite happily in circumstances where those courts exist; we presently have the Supreme Court. A logical view of this does diminish the concerns. If you take this view to its logical extreme, then clearly membership of ECHR is impossible. In fact, membership of the United Nations becomes pretty iffy, because there are mandatory resolutions of the United Nations. I think it is an exaggerated fear, I have to say, and I have no fears about it whatsoever.
Q886 Mr Whittingdale: The other question I wanted to press you on concerns what your legal colleagues in the previous session talked about: the thousands of regulations that are going to have to be examined in due course, once the great repeal Bill has been enacted. There may be a steady process whereby the burden of regulation south of the border becomes steadily less while it remains at the existing level north of the border. That again is something that does not concern you.
Michael Russell: I would want to have proved to me, to be fair, that deregulation was going to produce benefits. I am no friend of overregulation. I am a former Environment Minister; I know the frustration of certain types of regulation, as I know the convenor does as well, but in these circumstances I am sceptical about the bonfire of regulations that is promised again and again.
There are examples where regulation is used. Mr Gove and I debated, in Edinburgh, on Friday morning, early on, in front of a large audience, and we got on to medical trials and we have a difference of opinion on this. Many of the large pharmaceutical companies looking at the issue of deregulating trials are very sceptical about the promise and proposal to deregulate these trials. These trials exist for reasons of safety. If you are going deregulate them and, essentially, merge the process of approval of medicines with the process of having trials, you will compromise on safety.
We have to be very sceptical that there is some mountain of regulation that can be dismantled, except where those who wish to dismantle it wish to dismantle systems of protection of workers, social protection and human rights—and, yes, I am implacably opposed to that happening.
Q887 Peter Grant: You mentioned the Scottish Government’s paper “Scotland’s Place in Europe”. Have you had any response from the United Kingdom Government on that paper as yet?
Michael Russell: It depends what you call a response. This paper was tabled at the JMC (EN) and I spoke to it at the January meeting. It was agreed that officials would take the paper away and consider it. The Secretary of State for Scotland asked for a meeting with me and my colleague Derek Mackay two weeks ago, which we believed was to discuss the devolution aspects of it, and I should stress there are strong devolution aspects of it, but I still do not know what he wanted because he did not bring forward any proposals.
What we are looking for is a response to this, and the response we would like, because it is always best to go into negotiations saying what you want to have, would be for the United Kingdom Government to say, “Look, we do not agree with all of this. We do not agree with A, B and C; we do agree with D, E and F. But we are going to take this and we are going to put an element of this into the Article 50 letter, and we are going to have a discussion with the other 27 about the aspects of this to see what is achievable.” We think that would be fair. That would be a recognition of the different points of view and would not be difficult. There is a meeting of the JMC (EN) this afternoon, and I know the Welsh paper is being presented by my colleague Mark Drakeford, the Welsh member of the JMC (EN), and we will see what happens. I am sure it will be mentioned again.
Q888 Peter Grant: How many meetings of the JMC (EN) have there been?
Michael Russell: Today’s is the fourth. It meets this afternoon, though I am afraid I could not tell you where, because such is the process of setting these meetings that I do not even know, at this moment, where that meeting is taking place. I think it is somewhere within the environs of this building, but we do not know.
Q889 Peter Grant: To date, how much discussion has there been at JMC (EN) of the content of the proposed Article 50 letter?
Michael Russell: None, and that is one of the major issues that we have to address. The Prime Minister has said that there was a desire to have an agreed approach to the triggering of Article 50. We have not seen a draft letter. We do not know the date of submission of that letter. We have not seen a paper that proposes content for that letter, and indeed the forward work programme for the committee, which we received this morning at about 8.30, which does not give an awful lot of time to consider it, does not have the formal consideration of that draft letter on it as yet—certainly not in the March meeting, where we are to have, if I remember the term correctly, a deep dive into data protection.
Q890 Peter Grant: Just to be clear, you are telling us that there is nothing in the work programme of that committee before the date that Article 50 is triggered that would involve the Joint Ministerial Committee discussing the content of the Article 50 letter.
Michael Russell: The Article 50 letter is presently dealt with by means of a report back from the chair. I have made it clear, and I made it clear at the JMC plenary, along with the First Minister, last week that I am quite prepared, difficult as it may be for both of us, to lock myself in a room with David Davis for a day or two to look at that entirely confidentially. That is an offer I think all the devolved Administrations have made. We are very happy to treat this in any way that the UK Government wish to treat it, but we do not believe that Article 50 can be triggered unless there has been at least an attempt to get an agreement on the letter, and that has not happened.
Q891 Peter Grant: How much input did the Scottish Government have into the UK Government White Paper that was published a week or so ago?
Michael Russell: None. I was promised a copy on Wednesday morning, to have it in the afternoon. We received a copy 40 minutes before it was published on the Thursday.
Q892 Peter Grant: Am I right in believing that part of the terms of reference of JMC (EN) are to seek to find an agreed response to the negotiations and so on? To what extent has that committee started to fulfil its terms of reference?
Michael Russell: There is an intention, certainly from the devolved Administrations, to treat the committee very seriously and to endeavour to engage in discussion about what the position is. We will not agree on everything. There are very different positions around the table. The three devolved Administrations are in different places on this, though there is a similarity of view, particularly between us and the Welsh Assembly Government.
However, there is very great frustration that exists that we do not seem to be treated with either respect or concern, and that is worrying to us. The JMC plenary has now met twice since 23 June. I do not think either meeting has really got to the nub of the matter, but there was an agreement in Cardiff last week to intensify the work we are doing. I cannot honestly see much sign of it. I think there is an officials meeting due to take place tomorrow to look in some more detail at the Scottish paper, but that does not meet my definition of intensification.
Q893 Peter Grant: Thank you. I have just one other question, because I know that others want to come in. You have commented about the different attitude to EU migration, for example, that exists in Scotland compared with some parts of the United Kingdom. What is the current attitude of the Scottish Parliament as a whole, as distinct from either the Scottish Government or the SNP contingent in Holyrood?
Michael Russell: When the Scottish Parliament has voted on the single market or voted on Article 50, it has shown a considerable majority in favour of the position that the Scottish Government has taken. This paper was debated in the Scottish Parliament on 17 January and again there was a substantial majority in favour. Yesterday, we held a debate on Article 50, and 90 to 20‑something—I would have to look up the figures—were against triggering Article 50. There is no exact unanimity on all the details, but there is a very strong view that Scotland has taken a different path and that that needs to be respected. But I stress this is a compromise proposal in that regard. This is by no means something extreme. This is what we believe could work, and really what we want is a response on that basis.
Q894 Peter Grant: Just for the record, because I do not know how many members of the Committee would appreciate what the makeup of the Scottish Parliament is, the SNP are a minority Government in the Scottish Parliament. Am I right in thinking that yesterday’s vote against Article 50, as well as being supported by the SNP, was supported by the vast majority of Labour MSPs, supported by Liberal Democrats and by the Greens?
Michael Russell: The vote was the SNP, the Greens, the Liberal Democrats, and all but three Labour MPs. Three Labour MPs took a position in support of triggering Article 50, a sort of mirror image of what has been happening elsewhere.
Q895 Stephen Timms: When the Chair asked you about the documentation to allow free movement into Scotland but not England, you said that you could not really say yet in detail how it would work. Can I just put a suggestion to you about how it might work and see whether you think this would be satisfactory? That is, there would not be any documentation at all beyond the passport that people already hold. It would simply be that in Scotland the law would be different from the law in England. In Scotland, if you had an EU passport you would be allowed to live and to work, whereas in England if you had an EU passport you would not be allowed to live and work. You would probably be allowed to visit, but not to live or to have a job. If that was the position, is there a reason that might not work or do you think that would work?
Michael Russell: I am very happy to consider ways in which this could be implemented, and the Scottish Government has that openness on it. We do not have a monopoly of wisdom. We have put forward a series of proposals, but we have made it clear again and again, and I am very grateful for that, that that would be a possibility or a way to do so. There are issues there around the issuing of EU passports, but yes, there are a number of ways in which it could be done.
We are saying, in principle, we believe there are means to achieve this. The convenor quoted my interview on Radio 4, but that is an issue that we could certainly consider and will consider within that. Things move very fast in the world of Brexit, but what we have done is issued what we think is a useful, detailed paper. We are deepening and broadening that by further work with a large council of experts—a very distinguished group, with many academics and others working on it.
Q896 Stephen Timms: Just on the particular suggestion that I have put to you, does it look to you as though that would work or might there be some problems with it?
Michael Russell: It is probably best to consider these things in detail, but my reaction to what you have said is that it is very interesting and worth exploring.
Q897 Stephen Timms: It is not clear to me why it would not work. There is obviously a bit of hesitation on your part that it might not work because of something. I am just wondering what the something is.
Michael Russell: It is my natural caution to make sure that I do not welcome things that I do not fully understand, but I do welcome what you have said and it seems to me that it could work. Therefore, I would be very happy to discuss it.
Q898 Stephen Timms: Right. There is no aspect, though, that you would point us to that would require exploration.
Michael Russell: It would all require exploration, because we are not going to come to any conclusion about this without a great deal of work and exploration, but I am not hostile to it in any sense. I would not want you to think that my lack of enthusiasm is anything other than a product of my ministerial caution.
Q899 Stephen Timms: Right. Would you envisage some sort of registration being required for EU citizens who were in Scotland, exercising their free movement rights?
Michael Russell: I do not know. That would have to be considered. Instinctively, as a sort of civil libertarian, I worry about it. We want to keep it as simple as possible. Remember, if we can go back to first principles on free movement, the great beauty of free movement is it is simple to operate; it is not complex.
If I may take an example that might illustrate that, the people who grow soft fruits in the Angus Glens and down into East Lothian had years and years and years of difficulties in recruiting. Free movement greatly helped them, because people could come in, stay for six months and then go away again. They are now looking with dread at the idea of getting involved with the Border Agency and special arrangements, because they think this will just be so complex. They have said quite openly that the simplest solution for them is not to have people coming in; it is to move the bushes to Romania and Bulgaria and to grow raspberries, strawberries, blackcurrants and gooseberries there, where the labour is, rather than go through that.
If you take that and write it large in other areas, for example in the health service, the financial sector, tech and innovation or higher education research, this is an enormous increase in detail and paperwork for no benefit. Twenty-five per cent of staff in Scottish higher education research come from other EU countries, and that is a world‑beating sector: we are more cited than any other small country.
Q900 Stephen Timms: Do you plan to work up a detailed proposal for how this could work and, if so, when would you envisage that being completed by?
Michael Russell: We continue to work up further proposals on the basis of this and we will publish them from time to time.
Q901 Stephen Timms: Can you give us an idea of the timescale?
Michael Russell: The first timescale in here is the Article 50 letter. We have to get an agreement of putting this on the agenda at that stage.
Q902 Stephen Timms: Would you expect to have a detailed proposal for how free movement into Scotland but not England could work by that point, the end of March?
Michael Russell: Some of that will emerge from negotiation, if this gets to negotiation, but we will continue to publish and to add detail. I am not going to tie myself to a specific date, but we will continue to publish in that detail.
Q903 Stephen Timms: It does all sound terribly vague to me.
Michael Russell: No. If I may, with respect, it sounds much more detailed and comprehensive than anything the UK Government have published. I do not like to say “feel the length”, but there is substantially more detail in here. However, I am not going to over‑claim. I am going to make sure that we deliver ideas that can be negotiated.
Q904 Stephen Timms: Right. You have not given us any details at all about how free movement into Scotland but not England might work.
Michael Russell: The paper gives you substantial detail and we have indicated that negotiation will produce more. I go back to the point, and I make it again very clearly, it is only right that we are judged in the same way as proposals coming from the UK Government. We have more detail in these than the UK Government proposals. This is no more difficult to do, and what it does is retains what we have, and that is a very important issue. We are not asking for anything special. We are not asking for special treatment. In fact, we are not even retaining all of what we have, and I think that is a fundamental issue.
Q905 Stephen Timms: I completely agree with you that we are not getting detail from the UK Government, but I am disappointed we are not getting a little more detail from you.
Michael Russell: You have substantial detail in this paper, with respect.
Q906 Stephen Timms: I confess I have not read the paper. If there is detail there about free movement, could you summarise it to us?
Michael Russell: It would take me some time. I could read it into the record, but it might be better if members had a chance to read it.
Q907 Stephen Timms: Okay, thank you. You have made the point to us that there are a number of comparable arrangements elsewhere in the world, and you mentioned Canada and Australia. Can you outline to us how those work?
Michael Russell: There is detail in the paper and it does benefit study. Let me give you an example. Many years ago, the province of Quebec decided to build an aerospace industry. With shared sovereignty, at that stage, they had the opportunity to attract people from places that Quebec was not attracting people from and the Canadian Government was not admitting people from, in order to build that industry. They did that, and people had the permission to live and work in Quebec, but they did not have the permission to live and work in Alberta, put it that way.
That worked pretty well for them; they were able to do so and this is not a complex matter. I just think it is astonishing that there would be a view that this would be of such complexity that it could not be done. It can be done by the issuing of appropriate paperwork and possibly in other ways, which we need to explore.
Q908 Stephen Timms: Do you know what the paperwork was in the Quebec case?
Michael Russell: No, but I am quite sure that we could find out and endeavour to get you a copy.
Q909 Stephen Timms: If Scotland did have a different migration policy from the rest of the UK, would you envisage the policy for non‑EU citizens wanting to come into Scotland would also be different from the UK‑wide policy?
Michael Russell: That would not be the first change that would take place, but if it works on the EU side, I can see no reason why it should not work on other sides. However, that would not be the first change. In this paper, we are focused on a solution to a problem not of our making, and we are trying to find a creative and practical solution.
Q910 Seema Malhotra: I have a quick follow up on that. I understand, and from what I have read of your paper as well, that some of the solutions you might propose in relation to this border issue and control of movement—essentially, a different immigration policy in Scotland from the rest of the UK—would rely on looking at maybe what solutions might be found for Northern Ireland and the Irish border, and you would see some applicability for the Scotland‑England border.
Michael Russell: I am very reluctant to draw exact parallels. There are very different circumstances in Northern Ireland; it would be very foolish to deny that. Clearly, there are issues in Northern Ireland that require very careful and sensitive handling. The general principle I would enunciate is this: if it is possible to have a border with free movement of people and different migration policies on either side in one place, it must not be beyond the wit of man to have it in another place.
Q911 Michael Gove: It is a pleasure to see you.
Michael Russell: It is very nice to see you again.
Q912 Michael Gove: Thank you. If we had a differentiated solution and Scotland was part of the EEA and the rest of the United Kingdom was not, how would MiFID operate?
Michael Russell: The database?
Michael Gove: No, the directive that governs financial services.
Michael Russell: That will be an interesting issue for our experienced negotiators to put in place. It is quite impossible to say how every single directive will operate, just as it has proved impossible for the United Kingdom Government to say how every single directive will operate. It is important that we negotiate them one by one, and my concern is that if Scotland is disadvantaged by losing any directive, we should be able to say so and negotiate it. I am grateful for the question. If there is a specific disadvantage and you draw it to our attention, then we will very much consider it.
Q913 Michael Gove: The specific concern is, obviously, MiFID governs how financial services operate. It specifies that each nation has to have its own regulator. Who would the regulator of financial services in Scotland be in this case?
Michael Russell: We would have to discuss with our friends in the United Kingdom Government whether there would be a single United Kingdom regulator, whether the European regulator would suffice, or whether there would be a Scottish regulator. That is a matter for detailed discussion. I am not unhappy about that detailed discussion; I am sure we can find a solution to it. You and I, in a previous incarnation, ran education systems north and south of the border in very different ways, but we believed that there were rules and regulations that we could operate separately and effectively. I am sure we can do that.
Q914 Michael Gove: Who is the European regulator that would govern MiFID?
Michael Russell: I am sorry—I know you want to go through a series of questions in which you want to prove what I know and do not know about MiFID. What I want to do is to say to you that I am happy to negotiate those matters. I am not looking at my smartphone, unlike you, so I cannot look up who it is, but I am quite sure I could were I to use Google.
Q915 Michael Gove: You are the Minister in charge of this, but is there a European regulator for MiFID?
Michael Russell: With the greatest of respect, I am not going to get involved in this, convenor. This is not about what I know about MiFID. This is about what we are trying to negotiate with the United Kingdom Government.
Q916 Michael Gove: Okay. Which Scottish banks would be subject to the capital requirements directive?
Michael Russell: I am quite happy to enter into correspondence with you on every detail of financial services. I shall engage in this my colleague who is the Minister with responsibility for that. I am the Minister with responsibility for discussing the European negotiations, and I am happy to do so. There are, in other words, people better qualified than I to talk about financial regulation.
Q917 Michael Gove: I hardly think so; you are the Minister.
Michael Russell: But not for financial regulation.
Q918 Michael Gove: Who would be the appropriate regulator for data protection in Scotland?
Michael Russell: That is very interesting, because that will be a subject of the deep dive on data regulation and data protection that is taking place, according to the agenda for JMC (EN), next month. We will be able then to have a much clearer idea of the right way to handle this within the negotiations, and I look forward to it. One of my worries, however, is that if we do not remain a member of the single market, we will not be able to take advantage of the development of the digital single market, which is a key issue.
Q919 Michael Gove: Yes, but within that, who would be the regulator? Would it be the ICO or would you set up a separate Scottish regulator?
Michael Russell: We will be able to negotiate that as part of the process of negotiation.
Q920 Michael Gove: You do not know who would regulate financial services and you do not know who would regulate data protection. What about medical research? Would the UK MRC continue to regulate?
Michael Russell: I am quite prepared to provide a list of the things that I do not know. It will be a very long list. There are many things I do not know, but what I do know is that we have made a series of interesting and detailed proposals, which we would like to negotiate with the UK Government, with people on both sides who are experts in these matters, unlike you and I, and I would hope that in those negotiations we would make progress. I may be part of those negotiations, but I shall have experts on the other matters with me.
Q921 Michael Gove: On the question of procurement policy, if the United Kingdom leaves the European Union, Scotland stays in the EEA and we, in the rest of the United Kingdom, choose of course no longer to abide by EU procurement laws, does that put Scottish companies at a potential disadvantage when bidding for contracts in the UK?
Michael Russell: No.
Q922 Michael Gove: Why not?
Michael Russell: They will be competing on terms that will be agreed between the two countries. You might as well say that UK companies will be at a disadvantage competing for tenders in the rest of Europe, which I am sure you would not wish to say.
Q923 Michael Gove: I could say many things, but the question is: how could you guarantee that Scotland would not be disadvantaged?
Michael Russell: How could anybody guarantee that UK companies would not be at a disadvantage? I know there is some great expectation that UK companies will suddenly be free of all restrictions. When they are tendering in Europe, they will be subject to European regulation, just as they are now. In those circumstances, they might be at disadvantage if they have deregulated. These are the conundrums, Mr Gove, we have to resolve by negotiation.
Q924 Michael Gove: Again, no answers. On the question of Scotland’s contribution, Norway pays a contribution to be in the EEA. How much would Scotland pay?
Michael Russell: It will make the contribution according to that which is set at the time as the amount required, and that will, of course, be by negotiation.
Q925 Michael Gove: What would you guess?
Michael Russell: I would not guess. That would be very foolish, to guess on such a matter. Good gosh, you would not want to do that. No Minister would do that, as you know.
Q926 Michael Gove: In your paper “Scotland’s Place in Europe”, the figure is £3.3 billion. Do you stand by that figure?
Michael Russell: I stand by everything in “Scotland’s Place in Europe” as the basis for negotiation.
Q927 Michael Gove: But you have just told me that you do not know, and then the paper says it is £3.3 billion. Which is it?
Michael Russell: I stand by every item in the paper and I am happy to negotiate them.
Q928 Michael Gove: The Scots would have to pay £3.3 billion to stay in the single market.
Michael Russell: If that was the price to stay in the single market, it would strike me as a small price to pay for the lack of dislocation that you and your colleagues are forcing upon this country.
Q929 Michael Gove: Which budgets would that come from in the Scottish Government?
Michael Russell: It would come out of the Scottish Government’s budget.
Q930 Michael Gove: Which ones?
Michael Russell: It would come out of the Scottish Government’s budget. That is an answer, by the way, so I do know. It would come out of the Scottish Government’s budget.
Q931 Michael Gove: Fine, but it is quite a big budget; we do not know if it would come out of education or health or—
Michael Russell: It would come out of the Scottish budget.
Michael Gove: Okay.
Michael Russell: All that extra money for the NHS will, no doubt, pay for it.
Michael Gove: It would be money that would go to the NHS in England, not in Scotland, but there you go, because you would be giving all that money to the EU.
Michael Russell: We are still waiting.
Q932 Michael Gove: We get it when we leave. When rules are set within the single market, of course they are often set by qualified majority vote. When we complete the single market in energy, would you be happy for Scotland’s oil and gas resources, their allocation and their regulation, to be decided by qualified majority vote, with Scotland capable of either being outvoted or, indeed, if the UK is outside the EU, not having any representation at all?
Michael Russell: On the ground that Scotland was a member, I would be happy for Scotland to speak for itself in those negotiations, because I have to say the way in which Scotland has been spoken for has not been very effective for our national polity. Just ask Scotland’s fishermen about that matter.
In terms of other matters, the continuing membership of the single market will be beneficial to Scotland, and I do not have this extraordinary fear of allowing anybody else to take part in discussions about issues. This is back to the obsession with courts outside the UK and, frankly, it strikes me as the development of a bogeyman to make up for the shocking inadequacies of the current Government.
Q933 Michael Gove: You are happy to accept a single market in energy, which would mean that Scotland’s oil and gas—the regulations covering it—would be dictated by qualified majority voting within the European Union, and Scotland would not only be capable of being overruled because it had no votes but have no effective voice.
Michael Russell: I am entirely happy about taking part in a co‑operative and collaborative single market in a way that benefits Scotland in every aspect, frankly, rather than leaving it to the present situation or, even worse, leaving it to the type of Brexit that you and others appear to be encouraging, which would be utterly disastrous.
Q934 Michael Gove: How could Scotland defend the position of the oil and gas sector when it had no vote in an energy market?
Michael Russell: How could we allow Scotland to be dragged out of the EU against its will towards the type of Brexit that you are proposing? That is a far worse scenario.
Q935 Michael Gove: With respect, that is rhetoric and not an answer to the direct question.
Michael Russell: I do not think you have been short in rhetoric in your questions, so a modicum of rhetoric from me might be acceptable, convenor.
Q936 Michael Gove: I have had no answers so far on who would regulate financial services, who would regulate data protection, who would regulate medicine or how you would protect Scotland’s oil and gas sector in the single market. People in Scotland listening to this will be deeply concerned that one of the most talented Ministers in the Scottish Government cannot answer these basic questions.
Michael Russell: You have had a range of answers on serious proposals. You may not have liked the answers, but you have had the range of answers, and if I could urge you to get your friends in the UK Government, if you have them, to ensure that they take part in serious discussions, all these questions will be answered, firstly, to their satisfaction.
Chair: Given that exchange, I am beginning to regret I was not present when the two of you were debating recently. Be that as it may, Pat McFadden is next.
Q937 Mr McFadden: Good morning. Mr Russell, you have said that you are trying to square a circle here, and I understand the desire you have expressed for Scotland to stay in the single market, but we have had a response to this, haven’t we? The Government have said that it is their intention for the UK to leave the single market. They have also said that they will meet with you in this JMC meeting—and you have had four meetings and I have no doubt there will be four or more more—and all of that will happen. They have also said that this will be taken as a UK Government decision. Given their policy intention, what are you going to do?
Michael Russell: I agree with the first of those, which is that the decision has been made to leave the single market. I regret that and I also regret the way in which it was announced. The JMC was due to meet 48 hours after the Prime Minister’s Lancaster House speech. It was due to consider the matter; at least perhaps we could have been told.
The second one I do not agree with you on. The potential still exists for this solution to be put into place. I also think the rhetoric of those who say we entered as the UK and we will leave as the UK forgets the way in which the UK and its constitution has changed in the last 40 years. When we entered as the UK, we entered as the UK without devolved Administrations, without the nature of dialogue in this country that we now have.
Therefore, we have to recognise that it is a different UK, and if it is to leave, then there has to be that recognition that it leaves as a different UK, with the constituent parts taking a serious role and being involved in a serious way. That is what we thought was promised, and we still believe that is what is promised. The Prime Minister came to Edinburgh the day after she became Prime Minister and said that she wanted to fully engage and fully involve the Scottish Government. In those circumstances, we believe it is still possible and, we hope, probable that there will be a serious negotiation.
Q938 Mr McFadden: I understand the way the UK has changed in recent decades, but since you published this paper with this desire at the centre of it seven weeks ago, have you had any response from any UK Government Minister, anyone in the European Council or anyone in the European Commission to say that they think this should happen?
Michael Russell: Interestingly enough, the Secretary of State for Scotland said on television in Scotland on Sunday that he thought it was possible to have a differentiated solution. That remains, as I understand it, the position, and it is possible to have a differentiated solution. We have put a series of genuine proposals on the table. If the United Kingdom Government wish to take them off one by one, that is their business, but the reality is they are on the table.
Q939 Mr McFadden: What I do not understand, Mr Russell, is why the Scottish Government has not already called a second referendum. Despite what you say about the Secretary of State for Scotland, are you really telling the Committee that you think there is a serious chance that the UK Government will agree that Scotland stays in the single market while their policy is to pull Scotland out? Do you really believe that?
Michael Russell: I am a great believer in rationality. I believe this is a rational set of proposals. They are put forward in good faith. They have been worked on very hard, I have to say, and in all those circumstances I believe they deserve a proper hearing and consideration.
Q940 Mr McFadden: They might be rational, but what chance do you have of getting them?
Michael Russell: I still harbour a naive belief that politics, in the end, might be a result of rational consideration and thought. I know that does appear naive, but I hope it might be the case. The reality is we have a set of proposals here that we believe are workable, negotiable, and we think the right thing is for them to enter into negotiation and that is what we are seeking to do.
Q941 Jeremy Lefroy: Just one fact: I have looked at the paper and the figure of £3.3 billion refers to the UK as a whole, not to Scotland, as I understand. I would imagine that the Scottish figure would be about £300 million, although that is not quoted. That is directly from your paper. That is an important correction, because on the record it was being talked about as £3.3 billion for Scotland. My question is not about that, but I just thought it was an important correction to have on the record.
My question is about the single market in services, in particular. It has been said, both by the UK Government and, indeed, by others that the European Union has not been good at completing the single market in services. It is a question that I and other colleagues have raised time and time again with both the previous Prime Minister and this Prime Minister, and it has always been accepted that the European Union has been very slow at implementing a single market in an area in which the UK, including Scotland, is traditionally very strong. If Scotland were in as part of the European Economic Area and the rest of the UK was outside that, how would that affect Scotland’s ability to boost its own services sector on the basis that the European Union will continue in its rather dilatory attitude towards the single market in services?
Michael Russell: Even though the attitude might be defined by some as dilatory, it is a developing competence and it is one in which Scotland could continue to profit. Since we would remain within the single market, it would be a good place for people to locate to continue to build the services sector, and I think that would happen. There is a negative that, if we do not continue in the single market, will affect the services sector, and that is the free movement of labour. The dependence by certain parts of the services sector on labour from elsewhere is quite considerable. In those circumstances, an attrition of the ability of the services sector even to service existing markets might be the consequence of leaving the single market.
I do not think we should underestimate the way in which labour shortages will become a key issue in this debate comparatively soon. That is not to say, as the convenor has indicated, that people will be sent home. We all profoundly hope that that does not happen, and it is time the United Kingdom Government made sure it did not. However, there will be not only an impediment to people working but a push factor, where people will say, “Do I really want to come and work here? Do I really want to make my career here?” We are not talking, and not even in the majority talking, about low‑skilled labour that comes and goes. We are talking about people who contribute very considerably, both in the public sector and the private sector, and in the services sector as significant workers.
There is an opportunity that will grow within membership, because we will not be cutting off other trading opportunities. That is one of the fallacies of this argument—that in some sense it is an either/or. We will not be cutting off either opportunities; we will be continuing with some, and there are other parts of Europe that are building their services sectors too, because they recognise the need to do so. We would be foolish to withdraw ourselves from that at this stage, even though there is more mileage. It is not dissimilar to the point I attempted to make to Mr Gove about the digital single market. That has taken time to develop, but it is on the cusp of something big, and finding ourselves outside it will be very problematic for the tech sector, for example, in Scotland, which is a substantial growth sector that has produced major global companies, such as Skyscanner, but also produced a very substantial number of smaller companies that are very innovative. They rely on labour from elsewhere, and they rely also and will rely on the development of a digital single market.
Q942 Jeremy Lefroy: You referred earlier to the specific problems that parts of Scotland have in terms of declining population. Is this something that you would see as different from the rest of UK?
Michael Russell: I think so. I am not an expert on the demographics of the rest of the UK, but I can take an example from my own constituency. Certainly in Scotland there is a drift of population from west to east, and that is what is taking place. In terms of the population as a whole, 90% of the population growth anticipated in Scotland comes from migration. If that is limited, then the population growth will fall. We need substantial population growth in the western parts of Scotland. My constituency has 23 inhabited islands. If we do not have that population growth, then we are going to lose services, because the effect of declining population is a decline in services; places become less desirable to live, particularly for younger people, those with families and those who cannot get housing. It is a process of gradual decline.
We have taken in, in Argyll and Bute, on the island of Bute, a substantial number of Syrian refugees. They are not only welcome; they are essential if Bute is to maintain a population. You have to look at migration through that very different prism in Scotland, and realise the positive benefit of migration in Scotland and the net economic contribution of migration. That is a really important point. It is not a point that is got across regularly, but in Scotland we need population growth, not decline, and there is a net benefit from that taking place. Therefore, to stop it happening will be very problematic indeed.
Q943 Alistair Burt: In view of the problems of population and the like, do you think Scotland would have any room, say, to repatriate Scots-born journalists who now operate in London, who could be brought back to the west of Scotland, maybe to retrain as something useful like an anti-midge operator?
Michael Russell: The competence of anti-midge operators is high. It takes a lot of training to do that. However, should there be volunteers, we would be happy to have them.
Q944 Alistair Burt: We can probably work on that. That seems like a good opportunity. In trying to avoid the consequences of the very hard Brexit and WTO terms, clearly, during the period of negotiation, the Government’s determination to avoid that and seek a successful negotiation with the European Union will be influenced not only by this place but through the Joint Ministerial Committee. Has it yet set up a mechanism for how it is going to deal with its part of that negotiation? Will there be transparency with how the negotiations are going, so that at various stages the JMC would be able to give some sort of direction towards those negotiations to try to make sure we do not end up with no deal and do get a good deal?
Michael Russell: It is an interesting point. The committee is established on broadly two principles. One is to agree positions, and the other one is to have a form of oversight: if those positions are genuinely within the negotiations, what is happening with them? The person, essentially, who is the embodiment of that is the person who chairs it, David Davis. I say absolutely openly that I find working with David Davis absolutely fine, have no difficulty in doing so and trust him to do that.
I am not sure that is, however, the best way for a Committee to operate: simply empowering an individual to take on the remit of the committee. There has been no consideration of the involvement of the devolved Administrations in the process of negotiation, although it was raised at the last JMC plenary, in actual fact by the First Minister of Wales. It will be an issue now that needs to be discussed.
Q945 Alistair Burt: We would be very interested in how that process works. It is going to be essential that it works here so that there is some influence of Parliament on the negotiations, so we do not just get left at the end with a take-it-or-leave-it deal. I would imagine there would be different issues to be taken up the respective members of the JMC. Do you think that at some stage it might be possible to let the Committee know how this is developing, what your sense is of the relationship and whether or not it is working effectively? You could contact the Committee in due course.
Michael Russell: Yes. The role of parliamentary Committees here, in Belfast, in Cardiff and European Parliament committees is quite crucial. It is absolutely obvious that the committees of the European Parliament will insist upon knowing what is taking place, and of course they have a yes/no vote at the end of the process. In the last week I have given evidence to the Scottish Parliament committee, to this Committee, and to a House of Lords Committee, and I am quite happy to enter into those discussions from time to time—even the nature of discussions that we have had on occasions in this Committee—in order to ensure that there is that knowledge of what is taking place.
I entirely accept that negotiations should not take place with a running commentary, but that does not mean negotiators should not be accountable to parliaments. They should be; that should happen. It may be useful for the Committee on some occasion to have the principal members of JMC (EN) together giving evidence, which might give an interesting contrast of view.
Q946 Mr Lilley: We established earlier that there is no such thing in European law as the single market. There is the internal market of member states introduced by the Single Market Act, which obviously you would like to belong to if Scotland were an independent country as a member of the EU. I take it when you refer to the single market, you are referring to membership of the European Economic Area. Is that correct?
Michael Russell: That is what the paper refers to.
Q947 Mr Lilley: During the referendum campaign, the remain campaign said repeatedly that literally the worst possible outcome would be membership of the European Economic Area. It would involve us being subjected to European law, having no say in making that law, having no possibility of changing that law, having to make a net contribution, and accepting free movement. You are saying it would be good for Scotland to have no say in laws covering the environment, employment, social relationships and all the other aspects of European Economic Area, even though during the campaign we were told that was the worst possible outcome.
Michael Russell: I did not say it was the worst possible outcome, so I do not take responsibility for that. However, I have been, as you have been, to European Councils. As a Scottish Minister at European Councils, let me tell you what happens.
Q948 Mr Lilley: With respect, is that relevant to being a member of the EEA, because you would not be at European Council?
Michael Russell: Allow me to finish the answer in my own words, and then no doubt you can criticise those. The point I want to make is that as a Scottish Minister—and I have been, for example, to Agriculture and Fisheries Council—you do not get to sit even in the front row; that is an official and the UK Minister. You do not get to speak.
On one famous occasion in the Agriculture and Fisheries Council, there was a discussion of the North Sea cod recovery plan, a matter that would affect Scotland, as it is a North Sea nation. Among those who got to comment was the Luxembourg Fisheries Minister—not a full time job—but the Scottish Minister did not get to contribute. While I do think that being at the table and making the decisions would be a good thing, Scotland’s present position illustrates that being in the single market through the EEA would be better than being spoken for, usually by UK Ministers, at the Council of Ministers.
Q949 Mr Lilley: It is better to have no one speaking for you than to have a UK Minister who hopefully will be acting in the interests of Scotland as well as the rest of the UK.
Michael Russell: Were the present situation to continue, then for as long as it continued I would regard that as desirable. A more desirable solution would be Scotland’s membership. However, for the UK not to be there changes the dynamic. We must, to be frank, get the best we can out of a situation not of our making.
Q950 Mr Lilley: Although you have been a member of the Scottish National Party for 40 years, you are not very interested in getting back power to Scotland or having any say in, or any power to influence or change, any of the laws covered by the European Economic Area.
Michael Russell: No, that is not what I am saying at all. I was saying that the argument that has been put forward in this referendum, particularly by those who argued for leave, is thin. The thinness of it is in paragraph 2.1 of the Government’s White Paper, where they admit quite openly that Parliament has been sovereign during the entire period it has been a member of the EU and continues to be sovereign. On this issue of taking back control, I would love to take back control into Scotland. None of the proposals I have seen so far from the UK Government, for example on devolution of matters reserved to Europe, take back control to the devolved nations, unlike the promises that the leave campaign made during the referendum. I have to say, the words “taking back control” in the way you use them are not the way I would use them.
Q951 Mr Lilley: You do not want to take back control.
Michael Russell: I want to take back control in Scotland.
Q952 Mr Lilley: But you will not through the European Economic Area.
Michael Russell: I certainly will not if the hard Brexit being proposed at the moment takes effect, because that will produce for Scotland a hard Britain.
Q953 Mr Lilley: I have noticed you do not answer the question. We had a trade negotiator, Shanker Singham, here. He said that one of the disadvantages for the UK of being a member of the European Economic Area was that we would not be able to negotiate trade deals involving services—which are of particular interest to the UK, including Scotland—because you cannot negotiate a trade deal covering services if you do not have control of your services legislation. Do you think it would be a bad thing for Scotland not to be able to participate in trade deals involving services outside of the EU?
Michael Russell: The best solution is for the situation to continue as we are presently, but that is not on offer. I have to go for solutions that are not as good as I would have liked at present. In the national interest of Scotland, as this paper says, we are arguing a reasonable and practical solution. It is not the best we could have, but is the result of circumstances forced upon us. I am not going to be an apologist for things I do not think will work as well as I would like them to, but I am going to try to get the best possible situation that I can.
Q954 Mr Lilley: At present, the EU’s trade deals tend not to include services, because they are of not as much relevance to most other countries in the EU as they are to us. Services are important in Switzerland, and its trade deals do include services. You want to remain in a situation where the EU tends to largely ignore services and be in a position where you would not be able to get any deals including services, rather than participating in trade deals the UK might be able to negotiate with other countries.
We had a meeting in Parliament the other day with trade negotiators from Australia, New Zealand, Singapore, Mexico, the United States and Canada. All have said their countries would be very keen to negotiate trade deals, and possibly even a prosperity area for those countries where services play a major part. Would Scotland not like to be part of a prosperity area of some kind?
Michael Russell: It is a bird in the hand, really, is it not? I do not want to be disrespectful to trade negotiators, but there are no such deals at the present moment. The reality is that there is a developing trade in services in the EU. It is going in the right direction. It is positive for Scotland. In the present circumstances, we are being asked to give that up for promises that have no great validity.
The basic argument in this is quite simple. A huge dislocation is going to take place—a huge dislocation—and there is absolutely no evidence that on the other side here are huge advantages. You can ask endless questions about the detail of this. Prove the advantages and people no doubt will follow. However, if you cannot prove the advantages, then I will have to say that people will increasingly—as they are—look very sceptically at this. They will say to themselves, “This is a going to be a huge cost for very little gain”. That is the reality.
Q955 Mr Lilley: Finally, on the issue of what your document says about the possible contribution Scotland will make, I see that it is based on an assumption related in some way to what Norway would pay. I looked up what InFacts, the remain campaign’s fact correction blog, said during the campaign. It said that if we were foolish enough—it did not use those words—to join the EEA, we would have to pay an amount exactly equal in pounds per head, £96, to the Norwegians. I notice you have adopted a different methodology now than was adopted during the campaign. Do you have any thoughts about that?
Michael Russell: I would stress that paragraph 103 says that exactly what would be contributed if we opted for EEA membership would depend on negotiation over the contribution. That is the position of the paper and that is the situation. There will be speculation on this. The kindest thing I can say about remain and leave campaigns is that not everything in a political campaign appears to be true. The trouble with that is that quite a lot of the leave campaign stuff was not only untrue, but is going to cost us an enormous amount of money.
Q956 Jonathan Edwards: We have a situation where the Scottish Government and Welsh Government, the Scottish Parliament and the National Assembly for Wales, all want to keep our countries within the single market with full participation, membership or whatever term you want to use. Working on the assumption that the UK Government are not going to listen to those demands—and I admit I am perhaps more cynical than you and have probably been down here for far too long—what sort of mitigating factors are the Scottish Government looking at?
What measures would be needed to protect the Scottish economy following a hard Brexit? Would you be looking at VAT powers and corporation tax powers? We have already discussed immigration. We had a very interesting discussion in the first session about the need for the constitutional framework of the UK to alter considerably: rather than the matters being devolved and non-devolved, shared competences are needed in areas such as international trade. Are the Scottish Government looking at those?
Michael Russell: I do not want to say anything in terms of the overall objective, short of saying this is on the table for negotiation and we want to negotiate it. However, the paper does deal at paragraph 176 onwards with detail of competences that need to change. They broadly fit into three areas. First, there are the repatriated competences that we would expect to have and, indeed, the leave campaign said we would automatically have if we left. Those are in areas like agriculture and fisheries and a whole range of other areas that are presently devolved.
Now we are hearing a very different rhetoric on these than the rhetoric we were hearing during the campaign. The word “automatic” has dropped from the lexicon, and now we are told that nothing must interfere with the so-called single market in the UK, though that is a unitary market, not a single market. In these circumstances, we believe that needs to be honoured.
Secondly, there are the repatriated competences in reserved areas. Those things that we believe are at risk from leaving the EU—citizens’ rights, employment rights—should be devolved. Finally, there are the additional powers that we would need in order to become a member of EFTA and the EEA. Those are well laid out. Those are the things that we hope the UK Government would enter into discussion about. We put those on the table.
Q957 Mark Durkan: In respect of the great repeal Bill, first of all, will Scotland need any equivalent reception legislation of its own, underpinning any particular rights? On the question of consent, do you see the Scottish Parliament as just giving consent to the overall great repeal Bill, or will you seek a more articulate approach in relation to legislative consent for each specific area that changes the competence of the Parliament?
Michael Russell: Those are really important questions on what the process will be. The agreement presently is that there is no agreement. There are two possible routes. One is a substantial legislative consent motion detailed item by item. This is, I think, the route the UK Government prefer, but I should stress we have no agreement on it. It is possible, and indeed in some areas would be desirable, to have separate Scottish legislation, particularly on areas that will be devolved back to Scotland. Otherwise, we think things might tend to stick in Westminster.
The reality is that we are looking at both of those options. This is an enormous task. As the Committee will know, it is not a single piece of legislation; it is many pieces of legislation, and there is the question of how things change. It is going to create quite a legislative burden for a period of time. It will be difficult enough for Westminster, and there are obviously issues that apply in Scotland. In all those circumstances, it is a discussion still under way. The data gathering is well under way and there has been work between all four Administrations on that. However, the final solution for where this goes has still to be found.
Q958 Joanna Cherry: This is just a brief clarificatory question. A figure was put to you by Mr Gove of £3.3 billion. Mr Lefroy pointed out that it comes from paragraph 103 of “Scotland’s Place in Europe”. That figure is an estimate of what the UK’s net contribution as a whole would be if the UK was to stay in the single market through the EEA mechanism. That is correct, is it not?
Michael Russell: Yes.
Q959 It is based on figures from the Institute for Fiscal Studies.
Michael Russell: It is indeed.
Q960 Joanna Cherry: It says, “However, if it contributed and received back the same proportion of national income as Norway, the UK's net contribution would be around £52 per person (£3.3 billion in aggregate) per year compared to a net contribution to the EU budget of £121 per person per year if we remain part of the EU”. For the record, that is the correct figure.
Michael Russell: Indeed, and that is very helpful. It just shows that asking questions in a constructive way gets the right answer, because that is exactly the correct answer. Can I add one point? There is of course a point that needs to be borne in mind on the cost of not being in the single market. Best estimates on that—and there are many of those estimates within the paper—indicate, for example, that Scottish GDP would be up to £11 billion lower. It shows that up to 80,000 jobs would be lost. It shows that average wages would drop by about £2,000. The cost of contributing to the single market would seem a bit of a bargain compared to the cost that Scotland would have to pay.
Q961 Sammy Wilson: You have just mentioned the cost of not being in the single market. You have referred a couple of times to the massive dislocation it would create for the Scottish economy. Could you just spell out for us how this massive dislocation and massive cost would occur? What would be the cost?
Michael Russell: You only have to talk to those people who are in business to realise what the difficulties are. You can pick up sectors and see where the problems occur. Higher education is the third largest sector in the Scottish economy. Tim O’Shea, the principal of Edinburgh University, described the effect as “bad, to awful, to catastrophic”. His only axe to grind is that he wants to see the best higher education in Scotland. He pointed to the effect on research grants, studentships and keeping the university’s reputation.
On health services in Scotland, I had a meeting with health workers in Glasgow last week who make an enormous contribution as highly-skilled workers. Replacements for those would be very hard to find. At the other end, I have mentioned the Angus fruit growers, who will have to, as I said, move the bushes because they cannot get the labour. That is quite a dislocation, taking your whole business out of a country and moving it elsewhere.
I have mentioned the tech sector. It is very interesting, because there is a complete interchangeability across here; they are drawing in lots of people. In the newspapers and on the internet two weeks ago there was an advertisement from the French Government saying, “Come and bring your start-up here, and we will give you residence and all sorts of other rights”. They will look at the availability of labour—they are already—and say, “No, I will go elsewhere.” I can go through sector by sector.
I can then look at the dislocation from harmonisation of standards. There is a harmonisation of standards at the present moment that will not exist. Whatever happens, on one side or the other, they will atrophy. There will be two or more sets of standards. That adds to business cost. It is a question of investor confidence. Investor confidence, particularly from those who have invested to be in the single market, will decline. That is a very substantial problem. In financial services, the loss of passporting will have an effect.
I am quite happy to go through sector after sector, industry after industry, but there is also a human cost. We should not forget the human cost. I am sorry to mention my constituency again, but I promise it will be almost the last time. As Michael Gove knows, I was on the island of Luing on Friday night. Having debated with him at breakfast time, I was speaking to about 50 people who turned up for a public meeting on Brexit, out of 140 who live on the island.
They have a number of problems. One of them is that they hope to have a bridge and a fixed link to Seil, the next island, which joins them to the mainland. They were by now beginning to have an application for European structural funds, and they do not know what to do. They do not know what is going to happen after 2020. Okay, funds in the system now are guaranteed, but nobody has the faintest idea what the system will be.
There is this huge dislocation. I repeat my point. If there is this pot of gold that is going to be so enormous, so wonderful for us, that it is going to wipe out all that dislocation and we are all going to be so pleased by it, please let us know about it. However, if there is not that pot of gold, then this is dislocation at huge cost and for little benefit.
Q962 Sammy Wilson: Let us look at all of the impacts that Scotland being outside the single market in Europe would create. If, let us say, despite all the difficulties, Scotland was able to stay in the single market and the rest of the UK was outside the single market, would many of the dislocations that you have described to us, Mr Russell, not occur between Scotland’s trade with the rest of the UK?
We would have the same barrier: Scotland inside the single market for Europe but outside as far as the rest of the UK is concerned. Many of the things that you have described—and I will not go through them all—could equally apply there. Here is the difference: four times the amount of your trade is with the rest of the UK than it is with Europe. Are you prepared to be part of the single market in Europe at the expense of four times more trade with your biggest market?
Michael Russell: No, because that is neither necessary; nor will it happen. Indeed, it is not what the United Kingdom Government say will happen. I am sorry that you have not read paragraph 147 onwards, because that tells you the exact situation. I have also indicated here earlier today that the trade north to Scotland is about £52 billion and the trade south is about £46 billion. It is, if I may sound a little bit like a UK Government Minister, in both our interests to continue with that trade. That trade would not be affected by this, because, as I have also explained to you, membership of the customs union is the key issue.
I would have thought that perhaps there was a bigger worry, for example in Northern Ireland, about the effect on the agricultural trade. These are very serious issues, and they are not just Scottish issues. They are hugely significant issues for all devolved Administrations and they need to be treated as such. To argue that in some sense they can be magicked away because there is an objection to them on trade is not true. Here is the evidence it is not true. I know members of the Committee wanted evidence. There is the evidence; please read it.
Q963 Sammy Wilson: Where is the consistency? You are saying that, because you have a trade deficit with the rest of the United Kingdom, therefore the rest of the United Kingdom would be keen to keep its market with Scotland. However, you are saying the same argument does not apply with the rest of Europe. Surely the rest of Europe would want exactly the same advantage. If the kind of dislocation you are talking about is not going to occur between Scotland and the United Kingdom, why would it occur between Scotland and the rest of the EU?
Michael Russell: Here is a classic case of having your cake and eating it. Here is a classic case of the way in which it can be done. It is laid out in rather more detail than that original phrase. This is the way it can be done. Look at the goods that go from Scotland. Electricity is a proponent of that, and it is unlikely that the pylons are going to be disconnected and dismantled in these circumstances. This is, if I may with respect, Mr Wilson, say, a chimera. It is raised in this way because it appears to those who do not understand the trade to be an objection. However, it can be dealt with in a single paragraph. It is not going to happen.
Chair: On that point, unfortunately, Mr Russell, you have run out of time and so have we. On behalf of the whole of the Committee, can we thank you very much indeed for coming today and for assisting us with our inquiries?