Minister for Europe's Speech at European Parliament Office

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Minister for Europe, David Lidington, today gave a speech about the potential impact of independence on Scotland.

Thank you for that kind introduction. It is great to be back in Edinburgh.

I have spent the day so far meeting members of the Scottish Parliament, and representatives of Edinburgh’s business and academic communities. And always, the discussion has been on what independence would mean for people and businesses in Scotland.

With less than 450 days to go until the referendum, it is right that the focus should shift from rhetoric to reality, and that people throughout Scotland should take a good hard look at what the options mean for them. Scotland is faced with a choice between staying within the UK, or leaving and going it alone.

As Minister for Europe, I from time to time meet people who remember the referendum campaigns of the 1970s, both on Scotland and on the European Union. And people ask why we have these issues have been opened up once more. But my own view is that there is no point in ignoring questions of such magnitude where they remain unresolved. People here in Scotland will make their decision on 18 September next year.

This is democracy in action, and I believe that it is right that people should have the opportunity to decide their own future. But I don’t agree that if the vote here for independence, then “everything will be much the same on Day One… only better”. This, to me, is a casual and complacent assertion that underestimates the size of the task involved and the associated costs.

So rather than making sweeping statements and counter-claims, I have six straightforward questions. And I would ask you to consider whether you think you have heard credible answers to these questions so far in this debate. The first is what happens with EU membership if Scotland becomes independent? There is no precedent for the break-up of an existing member of the European Union, so no one knows for certain. But Jose Manuel Barroso, the President of the European Commission, who is surely an authoritative voice on this issue, has said that an independent Scotland would be regarded as a new country seeking accession to the European Union for the first time.

Independent legal opinion sought and published by the UK Government says that the remaining nations of the United Kingdom would be seen as the continuing state, retaining the UK’s international rights and privileges and its EU membership. In the face of that evidence, the Scottish Government has now admitted that membership would not be automatic and that negotiation would be required. The task facing an independent Scottish Government would then be to win over 28 member states, each of which would have a veto. This includes those countries that are anxious about the unity of their own nations, cautious about setting precedents and with little motivation to make the journey smooth for Scotland.

The second question is what would happen to the pound? Under the terms of the EU treaties, all new EU member states are expected to make the legal and political commitment to adopt the Single Currency. The United Kingdom and Denmark have the right to keep its own currency, but Mr. Barroso said in November that no new member states would be allowed to opt out. The Scottish Government knows that the pound is popular, but recent experience has shown that being in a currency union without other kinds of integration is less than straightforward. There is no guarantee that the UK and Scotland would be able to come to an agreement on a currency union. The Chancellor of the Exchequer has said he thinks it’s unlikely that it could be made to work. And even if it could be agreed, it would require a newly independent Scottish state to accept significant limits on its economic sovereignty and to submit its budgetary plans to Westminster for approval.

The third question relates to Schengen, the agreement that abolished passport and immigration controls for almost all the EU member states. Would an independent Scotland join? As defined in the Treaties, all countries seeking accession to the EU are expected to join the Schengen area. There is no automatic right to opt-out, and no legal grounds to suggest that membership is anything other than obligatory. If an independent Scotland were to join Schengen, then control of its borders would be out-sourced to Europe’s periphery. The one border that Scotland would have to secure would be that with England, drawing a line between Scottish businesses and their main trading partners.

The option that is favoured by the Scottish Government – to remain in a Common Travel Area with the UK and Ireland – is not on offer to new member states. It would be a significant new opt-out demand that would expend considerable negotiating capital with no certainty of success and which would, again, require the unanimous agreement of each Member State.

The fourth question is what would happen to the payments being made to the EU budget if Scotland became independent? Now the Scottish Government itself has said that an independent Scotland would be a net contributor to the European Union. But suggestions that Scotland would retain its share of the UK’s rebate appear to stand on very shaky ground. At the EU budget negotiations in February, the UK was able to defend its rebate but this was a hard-fought fight against the entrenched interests of other member states.Legal opinion received by the UK Government is clear that an independent Scotland would not get a share of the UK rebate. Scotland would have to negotiate such arrangements from scratch and it would be very difficult to secure any similar deal.

So if a new independent Scottish state were let into the EU, the default expectation must be that Scottish taxpayers would see their payments to the EU rise significantly.

The fifth question is who will stand up for Scotland’s interests in Europe when it comes to negotiations on financial service or energy or fisheries or agriculture? The Scottish Government’s position is that this can only be done by those who care for Scotland alone. Their assumption is that an independent Scotland would negotiate as a small state, with its bargaining power amplified by a flood of goodwill.
Now it’s true that the UK Government now negotiates on behalf of the whole of the United Kingdom. And by doing so, it brings to the table its considerable weight within the EU and experience and its extensive diplomatic network.

We have a track record of using our position as one of Europe’s biggest economies; with the third largest population; membership of the UN Security Council, G7, G8 and G20; and 40 years of forging alliances to fight for all the UK’s interests in Europe. We also have one of the most inclusive arrangements anywhere in the EU when it comes to devolved administrations participating in the making of decisions. Scotland has benefited from the UK’s strong voice in Europe. UK ministers – not least the Prime Minister – have forgone sleep and hotel beds, negotiating hard through the early hours. And they have delivered on issue after issue.

On the EU budget, we secured the first ever cut in the long-term budget, which will benefit taxpayers in every part of the United Kingdom. On financial services, we have secured safeguards for British firms - in Edinburgh as much as London - on the Single Supervisory Mechanism and on the Markets in Financial Instruments Directive. On fisheries, we achieved a deal on discards that the Scottish Fishermen’s Federation welcomed as a “practical plan”. The Offshore Health and Safety Directive, agreed shortly before the 25th anniversary of Piper Alpha, the world’s worst offshore disaster, won praise from Oil & Gas UK. And on Tuesday morning in Luxemburg, I bumped into Environment Secretary Owen Paterson - who was somewhat bleary eyed – a third of the way through gruelling negotiations on reform to the Common Agricultural Policy (CAP).

The mandate that Owen Paterson helped to secure this week is a breakthrough that offers greater clarity and certainty to Scottish farmers, and a reassurance that the Scottish Government and Scottish Parliament will have the freedom to deliver a common agricultural policy here tailored to the needs and circumstances of people in Scotland. And last night – again in the early hours - the Financial Secretary to the Treasury Greg Clark secured a deal on resolving troubled banks that will protect taxpayers around Europe. When it comes to negotiations, in general what we find is that small nations with similar interests to our own look to the UK to take the lead.

And in the heat of a debate in which national interests are at stake, you don’t want to be relying on just goodwill in the corridors of Brussels. It’s a commodity particularly in the small hours of the morning are in very short supply.

My sixth question is about the UK’s security and its wider role in the world. As the Minister with responsibility for NATO, I am taking a close interest in how the defence and security elements of the debate are unfolding. You will have seen the latest reports from independent experts on the defence capability of an independent Scotland. Are you genuinely confident about the answers that the Scottish Government has given on NATO membership? NATO membership is not automatic. It is a matter for the North Atlantic Council to determine, as has been pointed out by NATO itself.

And even though the SNP has reluctantly changed its view on membership, the response from NATO is that an independent Scotland would still need to apply. Outside experts, such as the Scotland Institute, have said that the SNP position assumes automatic entry and imposes conditionality on NATO. And the Scottish Government has to accept that NATO membership is not a done deal. Every NATO member, whether it possesses nuclear weapons or not, needs to sign up to the Strategic Concept which states in terms that NATO will be a nuclear alliance for as long as these weapons exist.

And this is not something that can be fudged or brushed under the carpet.

Those are my questions. I don’t pretend to be dispassionate about the answers. I care a great deal about the choice that people in Scotland will make. I also don’t want to suggest that independence only cuts one way. I am quite clear that if Scotland were to leave the United Kingdom, it would be a loss for all sides.

Both Scotland and the UK would be diminished - in our global standing, in our future economic prospects and by erecting barriers that would cut across the long-standing ties of friendship and family between us.

So I want to use the remainder of this speech to set out the positive case for what we can achieve in Europe if we stay together. First let me knock down the suggestion that the only way Scotland can remain a member of the EU is if it votes for independence. That is just not true. In January, the Prime Minister set out clearly his vision for Europe – a Europe that is more competitive, more flexible, more open and more democratically accountable. His goal is to reform the EU into a body in which the British people will feel comfortable, and then to hold a vote in which we settle the question of Britain’s membership once and for all – a vote in which the Prime Minister made clear, he wants to campaign, heart and soul, to remain in the EU.

The background to the Prime Minister’s speech was five years of undeniably tough times in Europe. The speech has sparked a major debate about Europe’s future, and this is a debate that we are helping to shape. The Eurozone has been in an extended recession. One in four young people is unemployed. Countries across Europe have had to slash spending, and not just in southern Europe. Sweden is looking at cutting pensions and sickness benefits, as is Denmark. Finland is under pressure to raise the pension age.

In that European context, Britain has been holding its own. We have an economy that is starting to recover. We have remained attractive for investors. UN figures released this week showed that we have held onto our position as number one in Europe for foreign direct investment, which rose by 22% last year at a time when investment worldwide fell by 18%. And businesses created 1.3 million private sector jobs across the UK since 2010. Our employment rate is above the EU and Eurozone average, and higher even than the employment rate in the United States.

But we urgently need to tackle competitiveness in Europe because the EU is central to our future prosperity. It is forecast to be our main market for the next ten to fifteen years.Now the Scotch Whisky Association can tell you that the French drink more Scotch in a month than they do cognac in a year. But Europe matters for other Scottish exports too: seafood, agricultural products; wind and wave technology; machinery; equipment; oil and gas; and as a source of students for Scotland’s top universities.

And sometimes hidden amidst the gloom in the world’s biggest marketplace, the EU, are opportunities for Scottish firms. This year’s Global Connections Survey showed that Scottish exports to the EU rose by 14.7% in 2011. Take a firm like Jaggy Nettle from the Borders, which got a grant from the UK Government to go to Milan Fashion Week, and now sells its clothes in luxury boutiques alongside labels like Prada.Europe is also the source of about half the UK’s investment stock. Last year, Spain’s Gamesa chose the port of Leith for a new wind turbine manufacturing plant in an investment worth £125m, and France’s Chanel bought up the Barrie Knitwear cashmere mill in the Scottish borders.

But while Europe remains our biggest market place, we live in a world that is changing rapidly. In China, there are now over 160 cities with populations of more than one million people. They include Edinburgh’s twin city of Xi’an and Glasgow’s twin city of Dalian. There are twice as many people living in these two cities alone as there are in the whole of Scotland. UN figures released this month forecast that the global middle class will number over three billion by the end of the decade, over half of whom will be in Asia.

This is an opportunity for all of us as it’s the global middle class that wants the exports that UK firms produce. Working together, our EU membership is helping us to win better terms for trade across the world in the developed and emerging economies alike. We need to focus on this challenge. We cannot afford to stand still.

And we are winning support from other member states because they can see that the reforms we are seeking benefit all of Europe and not just the United Kingdom alone. To take a single example, at the G8 summit in Lough Erne this month, we helped to launch negotiations on the Transatlantic Trade and Investment Partnership, the world’s biggest ever trade deal. The benefit to the UK from this deal between the EU and the United States would be up to £10 billion a year, the equivalent of £380 per family in the UK.

For Europe, the figure is £100 billion and for the US £80 billion. Success with this trade and investment partnership will bring concrete benefits for businesses in Scotland, for which the US is the largest international export market – the destination for £3.5 billion of goods and services every year.

The Wall Street Journal said the deal was, and I quote, “a major political coup” for the UK, but recognised too the effort that had gone into these talks. It noted: “They didn’t come about by accident: they were the result of months of diplomatic effort by British officials”. I would add by British Ministers too, especially the Prime Minister who has worked hand in hand with Angela Merkel in pushing for the deal with other European countries.

In summary, I would like to ask each and every one of you to weigh up the options very carefully ahead of a referendum. We know that a vote for independence is a vote for uncertainty, with its attendant risks and costs. And we know that no one is forcing the Scottish people to go down this path. I can say in all sincerity that people throughout England, Wales and Northern Ireland want our centuries-old Union to continue. And when it comes down to it, the vote next September will have the greatest impact on Scotland’s young people, the majority of whom want to stay in the UK according to the most recent polls.

Independence would close off an avenue of opportunity for those who are self-confident enough to use the double identity they have as British and Scottish to make their way in the world – as countless Scots have done before them. Some will have ambitions that lie mainly or wholly in Scotland, but there will be others that want to test themselves against a wider field.

…Politicians who could measure their stature against Disraeli, Lloyd George or Keir Hardie, with the ability to inspire and lead 63 million British people. I am reminded here of Gordon Brown, an MP from a Scottish constituency, of others with a Scottish heritage such as Tony Blair and Harold Macmillan, who led the whole of the United Kingdom.

…Diplomats who want to make their careers in a diplomatic network with 267 posts in 154 countries and twelve territories worldwide.

…Soldiers, sailors and aviators who could command the world’s finest military in operational missions around the world.

…Scottish economists who want to tackle global poverty via the G8, the G20 or the world’s top economic bodies.

…Businessmen and women who may well be based in Edinburgh or Inverness, but who are equally at home in London or Cardiff, and who can call on UK Trade & Investment’s export support in more than 100 markets.

…And athletes who – after the Commonwealth Games in Glasgow next year will want to represent Team GB at the Rio 2016 Olympic Games.

By working together, we can provide that support and help the next generation to prosper.

My belief is that the people of Scotland should have the opportunity to have the best of both worlds. We should help each other out as family and friends do.

That is our common purpose within the UK, and that is what should be our joint endeavour over the coming years.

Thank you very much indeed.