Scotland’s deficit and joining the EU

Some commentators have suggested that an independent Scotland could not join the EU with its current budget deficit, which – based on the Government Expenditure and Revenue Scotland (GERS) 2015-16 report – was 9.4% in 20151. This was the biggest in the EU, 1.9% worse than the next country, Greece, and 7% greater than the EU28 deficit of 2.4%.

But is it the case that Scotland’s ascension to EU statehood would be prevented by its current fiscal position? Regardless of your opinion on the validity of the GERS figures (which only really show how Scotland is performing as part of the UK, with limited control over economic policy2), you might reasonably expect the EU to look at these figures when considering Scotland’s membership, since they’re the only ones that exist.

The deficit would almost certainly exclude Scotland from joining the euro (a condition of which is a deficit of no more than 3% of Gross Domestic Product (GDP) and government debt of no more than 60%). But what about the Stability and Growth Pact (SGP), which some commentators cite? The EU describes the SGP as “…a set of rules designed to ensure that countries in the European Union pursue sound public finances and coordinate their fiscal policies.” Its criteria also demand a 3% deficit limit and debt-to-GDP ratio of no more than 60%3.

“It’s a myth that Scotland will have to meet the deficit criteria to join the EU.” contacted Steve Peers, Professor of EU, Human Rights and World Trade Law at Essex University, and asked how – given the deficit – he thought the SGP would play into Scotland’s EU ascension should it vote for independence. He told us: “It’s a myth that Scotland will have to meet the deficit criteria to join the EU,” adding: “The Pact isn’t binding, although some EU legislation on reducing deficits would apply. However, those laws are applied quite flexibly.”

When Croatia become the 28th member state in 2013, its deficit was over 3%.

For context, based on the latest (2015) Eurostat figures, six EU countries had a deficit of over 3% of GDP in 2015: Croatia, France, the UK, Portugal, Spain, and Greece. In 2014, 13 countries exceeded the 3% ceiling. Perhaps most interestingly, when Croatia become the 28th member state in 2013, its deficit was over 3% (6.2% in 2010, 7.8% in 2011, 5.3% in both 2012 and 2013) and has remained over 3% since (although they have since been striving to meet the 3% limit).

We also looked at the Fiscal Stability Treaty, an accord signed in 2012 to “reinforce the budget discipline of euro area governments following the sovereign debt crisis that started in 2010.” It covers euro area countries, but other EU states can join if they wish to do so4. We reached out on Twitter to Dr Kirsty Hughes – writer and commentator on international and European politics, and former senior political adviser in the European Commission – and asked whether she thought Scotland would have to sign up to the treaty. She said it wouldn’t have to, as it’s an intergovernmental treaty (as opposed to being written into existing EU treaties5) – though there would probably be pressure to do so. Dr Hughes also said that a key question would be whether the treaty would be brought into the EU on Brexit, adding that there would “equally be a reluctance at [the] moment to re-open EU treaties.” believes Scotland should aim for a balanced budget within a sensible timeframe in the event of independence. But from what we’ve learned in the process of researching and writing this post, it seems that having to cut the deficit in a rush in order to be accepted into the EU won’t be necessary. We hope this post helps bring some clarity to the issue.

Reuters: Scottish government believes it can call, win new independence vote


The Scottish government is increasingly confident it can win a new independence referendum and is considering calling one next year as Britain exits the European Union, sources close to the Edinburgh administration say.

“I believe the Scottish government is thinking very, very seriously about going for an independence referendum next year,” Charles Grant, an adviser to the Scottish government’s Standing Council on Europe, said on Thursday.

One Scottish lawmaker, speaking on condition of anonymity, said: “If you don’t call (an independence vote) now, it’s off the cards for a generation,” because economic damage from Brexit would make voters nervous of more change.

Has the Scottish Government budget increased or decreased since 2010?

Full Fact, a UK fact checking charity, has posted an analysis of whether the Scottish Government budget has been cut since 2010.

It also has posts on the attainment gap (“…actually a slightly smaller gap than is the case in England and compared to the average of the mainly wealthy countries covered by the PISA figures”), and whether there is demand in Scotland for a second independence referendum.

An Independent Scotland and the EU: What Route to Membership?

European Futures published an informative article today by Drs Kirsty Hughes and Tobias Lock on how an independent Scotland could transition into becoming an EU member state.

It’s well worth reading. A few excerpts:

On political will

There is considerable political goodwill to Scotland in EU capitals since it is facing Brexit despite having voted to remain. That political goodwill, on current trends, is likely to feed into an effort to fast-track Scotland’s EU membership in the event of a successful independence vote.

On Schengen and the euro

Scotland – like Ireland – would be likely to keep the Schengen opt-out (and so stay in the Common Travel Area). It would probably have to commit to eventual euro membership, but would not meet the criteria yet, and would, like Sweden, be able to postpone this (probably indefinitely).

On accession timeframes

Accession talks could be completed well within one year (given that Scotland is arguably much more fully compliant with EU rules than Austria, Sweden and Finland were in 1993).

…whether ‘normal’ or ‘fast-track’, Scotland could be an independent Member State by 2023 or 2024, if it became independent from the UK by 2020.

While waiting for ratification, after signing the accession treaty, Scotland could take part in EU Council meetings as an observer, but not vote.

Scottish GDP intends to create a number of interactive charts looking at how Scotland fares on key economic and social indicators in the context of the UK, Europe and the rest of the world. The first, below, concerns simply Gross Domestic Product (GDP).

It shows GDP (onshore), GDP (including a population share of extra-regio [offshore and overseas] UK economic activity), and GDP (including a geographical share of all offshore activity occurring in Scottish adjacent waters).

Tap and hover for more information.

Source: Quarterly National Accounts Scotland (QNAS) 2015 Q4 Statistical Bulletin and QNAS 2015 Q4 Summary Tables, produced by the UK Statistics Authority for the Scottish Government, published 3 May 2016

Economy roundup

Brexit negotiators should consider deal which keeps Scotland in the single market, says EU report

The National, 17 February 2017:

BRUSSELS is ready to do a separate Brexit deal with Scotland, according to leaked European Parliament negotiating documents.

In a confidential report, seen by The National, senior EU figures say they’re ready to explore how to make the Scottish Government’s proposals for a differential Norwegian style post-Brexit model work.

Regarding Scotland in particular, the analysis says the “different position of that devolved territory and of the UK Government regarding the participation in the single market as well as their approach to the free movement of citizens” should be explored and the possibility of “whether differentiations could be envisaged in the current constitutional and institutional set up of the Union should thus be addressed.”

New Wings Panelbase poll

Wings Over Scotland has published results from a newly commissioned online poll of 1,028 adults resident in Scotland between 8 and 13 February 2017, covering primarily local elections and independence. As far as independence goes, Yes came out at 46%; No at 54%.

In other independence-related figures, when don’t-knows are excluded, 52.5% of respondents were in favour of an independent Scotland inside or outside of the EU; 47.5% want Scotland to be part of a UK outside of the EU.

Update, 17 Feb: James Kelly’s analyses of the poll on 15 and 17 Feb are worth reading.

Update, 18 Feb: Full datasets have now been published on the Panelbase website.