How Salmond is using EU uncertainty to boost Scottish independence

The Scottish First Minister is encouraged by a new poll showing that support for independence dramatically increases when the prospect of UK withdrawal from the EU is raised.

While Westminster has fixated on an EU referendum that may or may not take place in 2017, rather less attention has been paid to a referendum that is certain to happen, that on Scottish independence next year. 

With the Yes campaign behind in the polls, the SNP is attempting to regain the initiative by launching a new paper on the economic case for independence. Deputy First Minister Nicola Sturgeon has pointed to six areas in which she claims Westminster is "is hindering Scotland's potential". They are:

- The decision by the last two UK governments to cut capital spending, which would have supported an extra 19,000 jobs in Scotland. 

- Westminster's failure to store oil revenues in a sovereign wealth fund, comparable to that in Norway, now worth an estimated £450bn.

- The debt and credit boom presided over by the last Labour government. 

- The increase in income inequality witnessed under every government since Margaret Thatcher's. 

- The concentration of economy activity in London at the expense of the rest of the UK. 

- The coalition government's decision to pursue austerity, rather than a growth-led economic strategy. 

After seeing off Nigel Farage last week, Alex Salmond was in ebullient form on the Today programme this morning, rattling off statistics showing that over the last five years, an independent Scotland would have been £8bn better off and that over the last 30 years, Scotland had contributed more per head in taxation than the UK average. 

The First Minister went on to offer a clue to his improved mood when he cited a new poll showing that while the Yes campaign trails the No campaign by 44 to 36 points (a smaller gap than in some others), when the prospect of UK withdrawal from the EU is raised the two sides draw level on 44 points each. The poll showed that while the issue of EU withdrawal has little effect on those Scots who have already made up their mind, among undecided voters three times as many support independence as oppose it under those circumstances. "I would say it's all to play for," Salmond concluded. On that point, he is right. The biggest advantage that Salmond has is time. By September 2014, he hopes that the full force of the coalition's spending cuts, less than half of which have been introduced, will have persuaded Scotland that the time is right to go it alone.

Incidentally, on the EU, it's worth noting an important story in today's FT, which reports that Germany plans to avoid the full scale renegotiation that David Cameron hopes to use to repatriate powers from Brussels. It notes that while Merkel is sympathetic to Cameron's desire to improve Europe's economic competitiveness, "she is convinced that this can only be done by improving the process of European decision-making and not simply by repatriating powers to national capitals." So long as this remains the case, it will be difficult for Cameron to persuade his ever more eurosceptic party that is should vote to stay in. And that, as Salmond knows, plays into his hands. 

Scotland's First Minister and Scottish National Party leader, Alex Salmond, attends a Commonwealth Games event at Glasgow Airport. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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What is the EU customs union and will Brexit make us leave?

International trade secretary Liam Fox's job makes more sense if we leave the customs union. 

Brexiteers and Remoaners alike have spent the winter months talking of leaving the "customs union", and how this should be weighed up against the benefits of controlling immigration. But what does it actually mean, and how is it different from the EU single market?

Imagine a medieval town, with a busy marketplace where traders are buying and selling wares. Now imagine that the town is also protected by a city wall, with guards ready to slap charges on any outside traders who want to come in. That's how the customs union works.  

In essence, a customs union is an agreement between countries not to impose tariffs on imports from within the club, and at the same time impose common tariffs on goods coming in from outsiders. In other words, the countries decide to trade collectively with each other, and bargain collectively with everyone else. 

The EU isn't the only customs union, or even the first in Europe. In the 19th century, German-speaking states organised the Zollverein, or German Customs Union, which in turn paved the way for the unification of Germany. Other customs unions today include the Eurasian Economic Union of central Asian states and Russia. The EU also has a customs union with Turkey.

What is special about the EU customs union is the level of co-operation, with member states sharing commercial policies, and the size. So how would leaving it affect the UK post-Brexit?

The EU customs union in practice

The EU, acting on behalf of the UK and other member states, has negotiated trade deals with countries around the world which take years to complete. The EU is still mired in talks to try to pull off the controversial Transatlantic Trade and Investment Partnership (TTIP) with the US, and a similar EU-Japan trade deal. These two deals alone would cover a third of all EU trade.

The point of these deals is to make it easier for the EU's exporters to sell abroad, keep imports relatively cheap and at the same time protect the member states' own businesses and consumers as much as possible. 

The rules of the customs union require member states to let the EU negotiate on their behalf, rather than trying to cut their own deals. In theory, if the UK walks away from the customs union, we walk away from all these trade deals, but we also get a chance to strike our own. 

What are the UK's options?

The UK could perhaps come to an agreement with the EU where it continues to remain inside the customs union. But some analysts believe that door has already shut. 

One of Theresa May’s first acts as Prime Minister was to appoint Liam Fox, the Brexiteer, as the secretary of state for international trade. Why would she appoint him, so the logic goes, if there were no international trade deals to talk about? And Fox can only do this if the UK is outside the customs union. 

(Conversely, former Lib Dem leader Nick Clegg argues May will realise the customs union is too valuable and Fox will be gone within two years).

Fox has himself said the UK should leave the customs union but later seemed to backtrack, saying it is "important to have continuity in trade".

If the UK does leave the customs union, it will have the freedom to negotiate, but will it fare better or worse than the EU bloc?

On the one hand, the UK, as a single voice, can make speedy decisions, whereas the EU has a lengthy consultative process (the Belgian region of Wallonia recently blocked the entire EU-Canada trade deal). Incoming US President Donald Trump has already said he will try to come to a deal quickly

On the other, the UK economy is far smaller, and trade negotiators may discover they have far less leverage acting alone. 

Unintended consequences

There is also the question of the UK’s membership of the World Trade Organisation, which is currently governed by its membership of the customs union. According to the Institute for Government: “Many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.”

And then there is the question of policing trade outside of the customs union. For example, if it was significantly cheaper to import goods from China into Ireland, a customs union member, than Northern Ireland, a smuggling network might emerge.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.