Independence and what it means for Scottish agriculture
The Brexit vote has prompted the question of Scottish independence to once again rear its ugly head. Justin Fox examines the implications of Scottish independence on the country's agricultural sector.
As if the tumult of Brexit and the triggering of Article 50 was not enough for the Government in Westminster to be getting on with, the re-emergence of the question of Scottish independence continues to add to the seismic shock currently running the length of the UK. In a speech on Monday 13th of March, the First Minister of Scotland, Nicola Sturgeon, set forth her desire for a second independence referendum sometime in 2018/19 in spite of having been defeated at the ballot box in 2014.
The Scottish National Party (SNP) has wasted little time in using the result from the Brexit referendum to regalvanize their push for a fully independent Scotland. Both supporters and opponents of such a possibility are already well in the swing of making claims and counter-claims about how well a sovereign Scotland would fare, and it can be difficult to make sense of an issue clouded by 'ifs', 'buts' and 'maybes'.
For example, whilst it goes without saying that all of Scotland's (and Britain's) industries would feel an immediate repercussion should the northernmost part of the Union secede, the state of agriculture and farming deserves special analysis simply because of how intertwined its fate is with the wider UK.
Just from a statistical perspective, collectively the UK's current agricultural workforce is roughly 293,000 strong, farming 71.61 per cent of the nation's landmass. Of this figure, many farms, suppliers, distributors and others operate across the England-Scotland border without distinction between the two and for a border to spring up virtually overnight would totally change the state of play for businesses of all shape and size.
But from Scotland's point of view, some sort of border is now inevitable. If Scotland decides to remain within the UK, its relationship with the EU will change. Yet if Scotland decides to leave the UK, its relationship with the UK will change. Ignoring for the moment the question of whether Scotland will end up leaving the UK, Brexit is now going to happen and the UK is going to have to renegotiate its trade status with the EU.
One option is a "Soft Brexit" where the UK keeps its access to the EU's Single Market. Another option is a "Hard Brexit" and this will happen if no deal can be reached during the two years after Article 50 has been invoked. A Hard Brexit would mean that imports and exports between the UK and the EU could be controlled and subject to tariffs.
Should Scotland remain part of the UK, a Soft Brexit would give Scotland access to the EU Single Market. If Scotland leaves the UK but remains a member of the EU, a Soft Brexit would mean that it would be easier for Scotland to continue to trade with the UK. Similarly, a Hard Brexit would have implications for Scotland regardless of whether it stays within the UK.
Scottish politicians would prefer a "Soft Brexit" deal that keeps the UK in the Single Market, although this option is not universally popular in Westminster because it would involve making concessions on other issues such as the free movement of people. In 2015 Scottish exports to the rest of UK amounted to £49.8 billion and exports to the EU amounted to £12.3 billion. Food and drink accounted for 4.8 per cent of both figures so the Scottish agriculture sector has a lot at stake here. But if Scotland decides to leave the UK, it will have little say in the UK's trade negotiations.
Of course, it's not just trade that could fundamentally change. There are an estimated 181,000 EU nationals living in Scotland. Of these, an estimated 115,000 are employed with many of those people working in elementary occupations such as unskilled agricultural work.
Although it is not yet known whether EU nationals will be able to work in the UK post-Brexit, it seems likely that there will be some restrictions and controls as the topic of immigration was without question one of the driving factors behind the Brexit referendum. If Scotland stays within the UK, this could make it more difficult for the Scottish agriculture sector to recruit EU nationals. Alternatively, in the event that Scotland leaves the UK, it may become more difficult for Scottish people to work in the UK and vice versa.
There is also the issue of funding. Currently, each part of the UK gets public funding based on the Barnett Formula. Scotland does particularly well out of this, receiving the greatest funding per head of the four UK countries. The Barnett Formula has long been controversial however and even its founder wants it amended to a more equal system. But if Scotland left the UK it would no longer receive this form of funding and with oil prices low at present, revenue from North Sea oil may well not be enough to cover this shortfall.
On the other hand, Scotland also receives lots of EU subsidies, with the agricultural industry being a prime beneficiary of this income. It receives grants for farming "Less Favoured Areas". These are areas of land that aren't ideally suited to being farmed but that are farmed anyway. 85 per cent of Scotland is considered to be land of this type.
If Scotland decided to remain in the UK post-Brexit then it would certainly lose these EU subsidies. It is possible that these subsidies could be replaced with the money from Westminster that will no longer be being spent on EU contributions but this is far from guaranteed. Ten per cent of the UK's farms could go from profit to loss without EU subsidies so this is a serious consideration.
And it's not just the amount of money, but what form that money will take. In 2013 in the run-up to the last Scottish independence referendum, the SNP published their intent to retain Sterling in the event of independence although it has yet to clarify its stance on this issue, having already set up a 'Growth Commission' to advise on the matter. However, if Scotland leaves the UK and joins the EU it will almost certainly be forced to adopt the Euro.
Sterling has fallen in value since the Brexit referendum and this has helped UK exporters. In fact, this has already helped Scottish farmers who benefited to the tune of £96 million from the falling exchange rate last year. A Scottish agriculture sector that had left the UK and was pricing its produce in Euro rather than Sterling however might find it more difficult to sell its produce to the UK, though.
There's also the fact that when you're trading in different currencies, currency fluctuations introduce risk. That's a particular concern in the agriculture sector because decisions taken at the start of the season often don't turn into income until the end of the season when the crop can be sold. Adverse currency movements over the season can make the difference between profit and loss.
All of this though could be completely irrelevant. If Scotland becomes independent, it is not guaranteed that the new nation will be permitted to join the EU and Single Market. EU membership requires every existing member state to agree to the new country joining the EU. Spain does not seem sympathetic to Scottish independence due to fears Catalonia will follow Scotland's lead, unless a second referendum had the blessing of the Prime Minister and the UK's central government.
As a result, it is possible that Scotland could end up in a sort of no man's land, being in neither the UK nor the EU. This would mean that Scotland would have to negotiate trade deals with both the UK and the EU, and those trade deals could include controls and tariffs that would adversely affect Scottish imports and exports.
Nobody can accurately predict what effect Brexit will have. Leaving such a union has never been done before, and could go brilliantly or terribly. But whereas the UK is in for a bit of a roller coaster ride over the next few years, Scotland's position is even more difficult because it has the added complication of whether it should leave the UK.
Whichever route Scotland decides to take, there are going to be major implications. The Scottish agriculture sector, which currently benefits from EU subsidies and access to an EU workforce, is particularly exposed. Constant speculation will not benefit the stability of the economic markets, but hopefully whichever route Scotland takes, confidence will return once the path ahead appears to be clearer.
