Scotland and the

united kingdom
Enlightening the Constitutional Debate
What our experts found
We were warned against the false legal certainty that
was being claimed about Scotlands admission, readmission,
or contnuaton in the European Union, in an event on
Scotland and the EU. The claims of the Scotsh Government
about the process for this were being contradicted by
ocials in the UK Government and the EU. As there has
never been a comparable secession within an EU member
state, nobody is certain what EUlaw would require.
Tax and Spending examined how governments would
balance the budget in Scotland following either a Yes or a
No outcome. Following a Yes outcome, the risks idented
were the current downward trend of North Sea Oil revenue,
and Scotlands unfavourable oldage dependency rato (that
is, rato of the populaton over 65 to populaton of working
age). The rst would put downward pressure on tax receipts;
the second, upward pressure on social protecton
enttlement spending. Following a No outcome, there
would be pressure to reform the current Barnet Formula
The most important peacetme issue facing
the United Kingdom, since its formaton in 1707,
will be decided in the Referendum on Scotsh
Independence on 18 September 2014. The
decision reached by the people of Scotland
will also be of vital importance to the other
natons of the United Kingdom.
Because of the signicance of the Referendum
and its outcome, The Royal Society of Edinburgh
and the Britsh Academy held a series of events
to examine the key questons and issues. Each
event sought to analyse the eect of consttutonal
change on a partcular issue currency and nancial
services; welfare and public services; taxaton; the
economy; research and higher educaton; defence
and internatonal relatons; borders, immigraton
and citzenship; and culture and broadcastng.
The series culminated on 8 April 2014 with
the launch of a book
1
bringing together the
discussions and debates which owed from
each event.
for block grant to Wales, Scotland and Northern Ireland.
This would likely be led from Wales, where policy makers
believe that a needs assessment would be more appropriate.
Therefore, relatve block grant to Scotland may decline, or
be reshaped, following a No outcome.
Defence and Internatonal Relatons outlined the tasks
of a defence force. This queston should be resolved, for an
independent Scotland, before the queston of how much to
spend on defence is considered. Too ofen, the discussion
proceeds in the opposite directon: deciding a budget rst,
and what to buy aferwards. On Trident submarines currently
based at Faslane, it was noted that the UKs policy of refusing
to prenegotate, as it puts it, for the contngency of a Yes
outcome, makes it partcularly hard to predict how the issue
will be resolved. But Trident likeforlike replacement policy
may cease to be the consensus policy of all UK partes that it
currently is. The queston was also raised as to whether the
decommissioning of Trident could be achieved within the
ReferendumtoIndependenceDay tmetable suggested by
the Scotsh Government.
1
Enlightening the Consttutonal Debate ISBN: 978 0 902198 27 2
Available from: seriesbook@royalsoced.org.uk or online at: www.royalsoced.org.uk/seriesbook
2
The Real Economy examined the business case for and
against independence. Scotlands brand risked contaminaton
from antEU sentment in England which was not shared
by the leading Scotsh politcal partes. An independent
Scotland would be a small, open economy, highly dependent
on revenues and employment from the North Sea, accountng
for up to 20% of Scotsh GDP. As oil is a depletng resource,
there is a strong case for an oil fund to invest against the day
it runs out; but oil revenue cannot at the same tme be spent
to maintain the current level of public services.
There were two expert sessions on Currency and Banking,
one in London and one in Edinburgh. The Edinburgh session
was partcularly topical, as it took place a few hours afer the
Governor of the Bank of England, Mark Carney, spoke in
Edinburgh on the requirements for a currency union to
succeed. Of the various currency optons open to an
independent Scotland, our experts discarded two as
impractcal: namely, joining the Euro, and sterlingisaton
(using the pound sterling as Scotlands currency without
formal insttutons to support it, such as an independent
central bank or an agreed currency area with the rest of the
UK). The remaining viable optons included a formal monetary
union (the Scotsh Governments preferred opton); an
independent currency pegged to another, as in Denmark
or Hong Kong; or an independent currency allowed to oat
across a wider range of values. Each of these optons carries
signicant risks. One risk is of speculatve pressure against
the Scotsh currency. Such pressure destroyed the Czech
Slovak monetary union of 1993 within weeks of its creaton.
Culture and Broadcastng discussed how (or whether) the
role of the BBC should be fullled in an independent Scotland.
However, the case for new TV channels in Scotland could be
made whether the Referendum outcome was Yes or No.
There was a queston to be answered as to the conditons
upon which a Scotsh Broadcastng Service, in the event of
independence, would have access to content produced by
the BBC, which would then be an insttuton of rUK.
On Immigraton and Citzenship, our experts noted that the
issue would be more urgent now than when the Irish Free
State was created in 1922, then taking a leisurely thirteen
years to draw up its natonality rules. The Scotsh
Government is comfortable with Scots having dual
citzenship afer independence, but one of our experts
warned of the risks of Scotsh policy then being hollowed
out as a result of decisions taken in other jurisdictons with
many dual citzens. Our experts noted that the Scotsh
Government plans a more liberal immigraton policy than the
current UK, for good reasons of labour force strengthening;
but they wondered how such policies would be consistent
with maintaining the Common Travel Area with the rest
of the UK, Ireland, the Channel Islands and the Isle of Man.
Science and Higher Educaton policy explored what one
expert called the delicate ecology of higher educaton
and research funding in Scotland. Opposing views were
expressed: that the present system of funding via the UK
Research Councils should be maintained if Scotland votes
2
In the inelegant jargon of internatonal lawyers.
Yes; and that small is beautful" when it comes to
research and innovaton. The calibre of Scotlands
universites was celebrated. Optons for future funding of
Scotsh, English and EU students are unclear in the event
of either a Yes or a No.
On Welfare and Public Services, our experts warned that
social protecton expenditure would be under severe
pressure in Scotland whether the outcome is Yes or No,
because of the need to bring the budget closer to balance
in either case. The people want welfare expenditure to be
controlled from Scotland, which might be a good idea in any
case even with a No outcome, because of the close link with
the NHS and local authority spending, which are already
devolved. This would require hard thinking about the
purposes and structure of tax to pay for the welfare state.
One possibility would be to make Natonal Insurance a more
real (as opposed to notonal) social insurance tax.
In the nal event, Scotlands Referendum and Britains
Future, our experts looked at the historical, legal and
consttutonal aspects of the debate. The discussion focused
on the future of the Union in terms of changing
understandings of sovereignty, shifing paterns of natonal
identty, and uncertainty over the course of postReferendum
consttutonal politcs. It was noted that neither side in the
debate sought to emphasise a classically strong concepton
of sovereignty as the 'prize' of a Yes or No outcome.
On the natonalist side, the retenton of various historical
aspects of Union postindependence monarchy, currency,
social etc., is stressed. On the Unionist side, there is
acceptance in principle that levels of scal and legislatve
autonomy beyond the enhancements to the devoluton
setlement already provided for under the Scotland Act
(2012) are consttutonally viable. If this suggests that the
consttutonal optons are situated on a spectrum rather than
oering a clear binary choice, the queston of politcal
identty, too, is fuzzy. The vast majority of Scots profess a
Scotsh identty, but today this takes a predominantly civic
rather than ethnic form. Also, many combine their
Scotshness with a more or less strong Britsh identty.
Identty, then, can be no simple predictor of allegiance in the
consttutonal debate and, given the prominence of Scotsh
identty, the form and strength of supplementary Britsh
identty may be the more signicant variable.
In these shifing consttutonal sands, it is unlikely that the
September Referendum will oer a denitve resoluton.
Certain maters may be predicted with some condence,
including the internatonal legal standing of rUK as the
'contnuator'
2
state and the treatment of an independent
Scotland as a new state. As the vote draws nearer, however,
its longterm signicance remains shrouded in doubt. A Yes
outcome will be the cue for complex negotatons with the
EU and rUK alike. A No outcome is also likely to be the
prelude to a new consttutonal accommodaton in which
any extension of devolved powers to Scotland is likely to engage
the other natons of the United Kingdom much more than
previous rounds of Scotsh consttutonal reform have done.
3
Key messages
The inevitability of changenew powers for Scotland
Throughout the series and across the range of discussion
topics, some overarching messages were heard. One theme
which emerged in many of the discussions was that whatever
the outcome of the Referendum, the status quo will not
remain. Things are set to change in Scotland, with or without
independence, as the full provisions of the Scotland Act
(2012) come into eect.
The Scotland Act (2012) provides new powers to the Scotsh
Parliament. The main provisions of this Act are:
a new Scotsh rate of income tax to be in place from
April 2016;
new borrowing powers for the Scotsh Government;
full control of stamp duty land tax and landll tax from
April 2015;
the power to introduce new taxes, subject to agreement
of the UK Government;
the power to legislate on maters relatng to air weapons;
giving Scotsh Ministers powers relatng to the misuse of drugs;
giving Scotsh Ministers powers to set regulatons for the
drinkdrive limit;
giving Scotsh Ministers powers to set the natonal speed
limit;
giving Scotsh Ministers powers relatng to the
administraton of electons to the Scotsh Parliament;
The Act also formally changes the name of the Scotsh
Executve to the Scotsh Government.
If the outcome of the Referendum is No, Scotland will
inherit these new powers, and the powers contained in
the Scotland Act (2012) may not represent the limit of these
new powers. All the main Unionist partes in Scotland have
signalled that they wish to go beyond the Calman scheme
embodied in the Act of 2012. All of them would like to
devolve more spending powers to the Scotsh Parliament.
That must require devolving more tax powers. But this raises
dicultes. For instance, rates of VAT may not normally be
varied within a single EU member state. An independent
Scotland can choose its VAT rate. A devolved Scotland
cannot. It can vary rates of Corporaton Tax, but recent
worries and parliamentary inquiries into the tax aairs of
multnatonal companies suggest that this would not be a
wise move for either Scotland or rUK. The only taxes of any
consequence that are lef are the rest of income tax, and
Natonal Insurance. We await the Unionist partes detailed
proposals on what further devoluton might look like.
Some unanswered questonsthe known unknowns
Another theme prevalent throughout this series has been
that of uncertainty, and the acknowledgement of socalled
known unknowns. There are many aspects of this debate
which remain uncertain, and voters in the Referendum must
therefore make their decisions in the absence of complete
informaton about what the implicatons might be for certain
aspects of Scotsh life. Some of the main uncertaintes which
would result from a Yes outcome are summarised here:
EU membership
The Scotsh Government has stated that it is appropriate
that Scotlands transiton to full membership is secured
under the general provisions of Artcle 48 [of the Treaty of
European Union, which] provides for a Treaty amendment
to be agreed by common accord on the part of the
representatves of the governments of the member states.
The alternatve route, Artcle 49, provides the legal basis,
and denes the procedure, for a conventonal enlargement
where the candidate country is seeking membership from
outside the EU. Under Artcle 48, the party negotatng on
Scotlands behalf would not be the Scotsh Government, but
the UK Government. If the UK Government elected in 2015 is
Conservatve, then Prime Minister Cameron has promised an
inout referendum on revised terms which he promises will
have been negotated: so these maters will certainly be
added to the Artcle 48 agenda. The Scotsh Government,
in short, will have no control over either the content or the
outcome of negotatons under Artcle 48. Under Artcle 49,
it would be in control of its own applicaton. Its White Paper
says that it will approach EU membership negotatons on
the principle of contnuity of eect. But it would not
automatcally inherit the various optouts and rebates that
the current UK has secured from the EU: e.g., a contributons
rebate and an optout from the Schengen common travel
area. The outcome of those will emerge from the
negotatons with a counterparty (the European Council),
whose compositon is currently unknown.
NATO
The Scotsh Government states that it will notfy NATO of
our intenton to join the alliance. the basic premise of
NATO is that all members must make an actve commitment
to the alliance and Scotland would recognise and play our full
part in building collectve security and capability. However,
the White Paper also states that The Scotsh Government is
commited to securing the complete withdrawal of Trident
from an independent Scotland as quickly as can be both
safely and responsibly achieved. We cannot say how NATOs
Council will respond to these two commitments. But, as the
Council acts by unanimity, we can say that its positon will be
determined by whichever member state is both most hostle
to Scotlands proposals and prepared to threaten a veto.
Division of Assets and Liabilites
The Scotsh Government acknowledges that in the event of
a Yes outcome, there will have to be negotatons with
representatves of rUK over a huge range of issues. They will
include:
Splitng of UK assets and liabilites;
Sharing some existng UK services, including overseas
embassies and consulates, the Driver and Vehicle Licensing
Authority (DVLA) and the BBC;
The future employment situaton of public and military
employees of the UK in Scotland, and of Scotsh public
and military employees in rUK;
The Common Travel Area currently comprising the UK,
Ireland, the Channel Islands and the Isle of Man (this


negotaton will also involve the other counterparty
governments);
Sterling and the Bank of England;
The nuclear submarine base at Faslane and the armed
warhead store at Coulport, which are the main components
of what is currently Her Majestys Naval Base (HMNB) Clyde.
For many of these negotatons, internatonal law oers a
default positon. On other maters most obviously Faslane
and Coulport principles of internatonal law will not help
the negotators. On those, a purely politcal bargain must be
struck. Splitng liabilites could be more controversial. In
relaton to the UKs existng stock of government bonds on
issue, HM Treasury has stated that:
The contnuing UK Government would in all circumstances
honour the contractual terms of the debt issued by the UK
Government. An independent Scotsh state would become
responsible for a fair and proportonate share of the UKs
current liabilites.
Various principles for apportoning liabilites between
Scotland and rUK have been suggested. The Scotsh
Government says:
The natonal debt could be apportoned by reference to the
historic contributon made to the UKs public nances by
Scotland, or on the basis of our populaton share. We may
choose to oset Scotlands share of the value of UK assets
against our inherited debt.
As there is no default positon in internatonal law for the
historic contributon apportonment, we predict that for
most liabilites the choice will be between populaton share
and relatve GDP. Populaton share is simple and an obvious
default. Consideratons of ability to repay may, however,
push the partes towards an apportonment based on relatve
GDP. The Scotsh Government repeatedly states that, once
North Sea actvity and tax receipts are assigned to Scotland,
Scotsh GDP per head will be higher than that of rUK on
Independence Day. A relatve GDP assignment of liabilites
would in that case be less favourable to Scotland than a
populaton share assignment. For the liabilites and
contngent liabilites arising from the UK bailout of failing
banks in 200809 including RBS and the then Bank of
Scotland group we are not aware of any agreed principles
of internatonal law that may be applicable. Pension
liabilites should be easier. There are two main liabilites:
state pension enttlements of people living in Scotland or
wishing to claim state pension in Scotland; and the liabilites

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The Britsh Academy is Registered Charity No. 233176
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of unfunded and underfunded schemes for public
employees. For the later:
The Scotsh Government proposes taking our fair share of
pension liabilites based on responsibilites for meetng the
pension enttlements of pensioners who live in Scotland.
The bargaining positon of rUK is unknown.
The Scotsh Government insists that Scotland will remain in
the sterling area, and will seek membership of the Monetary
Policy Commitee of the Bank of England. It argues that that
is in the interests of rUK as well as of Scotland, because the
present UK is what economists call an optmum currency
area. The current UK Government insists that the rUK
Government would be very unlikely to agree to that. Sterling
is an insttuton, not an asset. Therefore, afer independence,
it becomes an insttuton of the contnuator state, namely
rUK. Its negotators will consider whether admitng Scotland
to a currency union is indeed in the interests of rUK. The
optmal currency area argument should have some trac
ton; but so too will arguments which conclude that the
nearcollapse of the Eurozone from 2009 onwards occurred,
among other reasons, because some Eurozone members
were scally undisciplined. It is predictable therefore, that
rUK will insist that if it admits Scotland to a common
currency area, Scotland will have to agree to harsh rules
capping its maximum public debt and decit.
The Scotsh Government states that an independent
Scotland does not wish to be a nuclear weapons state.
Indeed it cannot be, because the Nuclear Nonproliferaton
Treaty (NPT) of 1970, which Scotland would presumably sign,
states that the NPT nonnuclearweapon states agree never
to acquire nuclear weapons. Therefore, it is proper for
Scotland to give notce to rUK, as it already has done, that
the nucleararmed submarines and warheads must be
removed from Scotsh territory. What is unclear is how the
rUK will respond. Quite independently of the Faslane
queston, the UK politcal partes and the armed services are
in the middle of arguments about how, or whether, to
replace the present Trident deterrent force. These
arguments cut across partes (and Services). We cannot
predict the stance to be taken by the UK Government which
will be elected in 2015. Even if negotatons are started by
the current Coaliton Government, its positon on Trident
and Faslane may be altered by the new Government. Apart
from the terms of the NPT, internatonal law is no help here.
The outcome, whatever it is, will be intrinsically politcal.