Recent Brexit Developments in Scotland

Our “The future of Scotland post Brexit” report was published in the weeks after the EU Referendum to reflect where Scotland was at that point. Since then there have been some developments in the debate and also some reaction to the public pronouncements coming from the Prime Minister and her Cabinet. In addition there has been more time to consider what aspects of Brexit may be particularly relevant to Scotland or have greater impact in Scotland.

On 13th October, Nicola Sturgeon, the First Minister of Scotland, made a keynote speech on the opening day of the SNP Conference which touched on a number of aspects including her view of Brexit and what she regards as being an acceptable outcome for Scotland. She confirmed also that a Second Scottish Independence Referendum was still an option for the Scottish Government if it considered it necessary to protect Scotland’s interests. 

In her speech Nicola Sturgeon went on to suggest that the Scottish Government will set out a plan for Scotland and seek to make this plan a key element of the UK’s Article 50 negotiation. She added that this plan envisages substantial additional powers for the Scottish Parliament, not only all those that currently lie with the EU but also significant new powers to be transferred from Westminster, including powers to strike international deals and greater powers over immigration. It may be that any plan will be informed by the views of the Scottish Government expert committee chaired by Professor Anton Muscatelli which was established previously to consider the impact of proposed changes to the UK's relationship with the EU on Scottish interests. 

So while it is still no clearer whether the Scottish Government will at some stage push for a Second Scottish Independence Referendum, this remains “on the table” and therefore is a possibility depending both where its negotiations with Theresa May’s UK Government land and the deal agreed with the EU on Brexit. It is a matter for conjecture whether this stance is with a view to using the result of the EU referendum as a pretext for another Scottish Independence Referendum or whether the prospect of a Scottish Independence Referendum is being used to strengthen the hand of the Scottish Government in discussions with the UK Government. 

There are clearly other factors that will influence whether the Scottish Government will in fact seek a Second Scottish Independence Referendum. These include whether it can make progress with the EU and/or individual EU states as to Scotland’s ongoing membership of the EU. There is also a doubt, at least at present, as to whether any Scottish Independence Referendum if held would gain majority support. 

Possible Impact of Brexit on Scottish Devolution Arrangements

During the EU Referendum campaign those supporting Leave made a number of statements that suggested that exit from the EU would result in the repatriation to the Scottish Parliament of powers in a number of areas. There has, however, been no confirmation from Theresa May or her UK Government that this would indeed be the outcome and if so to what extent. In a debate in the House of Commons David Mundell, Secretary of State for Scotland, acknowledged the prospect that there would be changes. The plan referred to in Nicola Sturgeon’s recent statement suggests that this is what the Scottish Government will seek in the context of the Brexit discussions. 

There are a number of areas that would fall within this repatriation. Some more obvious areas are agriculture and fishing that have been highlighted to transfer to the Scottish Parliament. These are areas which are currently held at EU level but where the Scottish Parliament has implementation powers. It now seems likely, however, that there are other powers currently in Brussels in areas such as employment law, consumer protection, social policy and the environment that the Scottish Government may seek to be moved to Scotland. Any such transfers of powers may have a profound effect on the Scottish devolution settlement and necessitate further monies being released by Westminster as part of an adjustment to the agreed Fiscal Framework with additional budget being required by Holyrood. 

One other aspect of any new Scottish Devolution arrangements could be for the control of VAT to be devolved. This was something considered by the Smith Commission set up after the 2014 Scottish Independence Referendum. As it was not permitted under EU law, the alternative approach of assigning a portion of VAT revenues to the Scottish Government was adopted. 

More radically it seems that the Scottish Government may seek powers to strike international trade deals and greater powers over immigration. Conceivably areas such as procurement and state aid could also be fully vested with the Scottish Parliament. 

Scotland and the Great Repeal Act

Theresa May has announced that one aspect of the Brexit strategy will be to pass through Westminster a “Great Repeal Act” essentially to repeal the European Communities Act 1972 but to retain in UK law in the short term much of the substance of EU law. This raises particular issues in Scotland as a large part of EU law relates to competences that have been devolved including agriculture, fishing, public procurement and environmental law. 

To the extent the Great Repeal Act relates to the translation of EU law in devolved areas its implementation would amount to legislation in those areas. Under Section 28(7) of Scotland Act 1998, the UK Parliament, as a sovereign legislature, retains the power to make or unmake any law for Scotland whatever. However, under the “Sewel convention”, the legislative consent of the Scottish Parliament would be needed when Westminster legislation touches on devolved matters. This takes the form of a legislative consent motion (LCM) of the Scottish Parliament. Given the result in Scotland of the EU Referendum, the make-up of the Scottish Parliament and the likely attitude of the Scottish Government, there is the real prospect that any LCM would be defeated.

As the term suggests, the “Sewel Convention”, as a constitutional convention, takes the form of a political as opposed to a legally binding undertaking. However, Section 2 of the Scotland Act 2016 inserted a new subsection (8) into Section 28 Scotland Act 1998. This gave statutory recognition to the Convention by stating: “But it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament.” While the inclusion of the word “normally” allows an obvious way for the UK Government to ignore the Convention without necessarily breaching the Scotland Act, given that the Great Repeal Bill would be quite exceptional, it is clear nevertheless that this would give rise to political and constitutional issues which may be hard for the UK Government to ignore, particularly if it seen to undermine the Scottish devolution settlement and becomes an additional pretext for an Independence Referendum.

Separate from these issues, it has also been suggested following Great Repeal Act that many laws affecting devolved issues could be unilaterally scrapped by Westminster as a consequence of Brexit. This is because secondary legislation could be used to revise or revoke former EU laws and such secondary legislation does not require an LCM. This also has the potential to cause both political and constitutional contention and may necessitate further review of how Scottish devolution operates post Brexit. There is also the option of the Scottish Parliament deciding to implement EU legislation in devolved areas by “tracking” EU legal developments in its areas of responsibilities. 

Sector Sensitivities in Scotland

Since the outcome of the EU Referendum we have been involved in much consideration of what a Brexit outcome may mean for businesses in Scotland, particularly if there is no ongoing membership of the Single Market. There are clearly some business sectors which are more proportionally more significant in Scotland and/or where the impact of Brexit may be different when compared to the rest of the UK. 

Obvious areas include fisheries and agriculture where there will be a very significant impact from Brexit. There is the possibility that depending on the outcome of any Brexit discussions and any bilateral agreements with the EU or other fishing nations (which could require granting access on a quid pro quo basis) the UK would gain control over its international fishing zone and the current EU system of quotas on UK fishermen will fall away. In agriculture the subsidies currently available to UK farmers under the EU’s Common Agricultural Policy would fall away although these may (in part at least) be replaced by some form of UK equivalent, more tailored to UK interests including food security, however there is no certainty that any post-Brexit expenditure will match that available under EU schemes and tariffs on certain products. There are also complex EU rules right across agricultural production that there would be scope to alter post Brexit although it is safe to assume that UK farmers would still have to meet EU health and safety standards if they wanted to have access to the Single Market. 

Other sectors important to Scotland include food and drink, where there is great sensitivity to the prospect of Scotland losing membership of the Single Market and having restricted access to EU employees. The University sector is also very important to the Scottish economy. Universities will face a period of uncertainty around the impact of Brexit across a wide spectrum of areas including specific issues such as the impact of migration controls on overseas students and staff and the loss of access to EU research funding. 

Conclusion 

There is very little additional clarity yet on what the preferred outcome for the UK of Brexit negotiations will be and what can be negotiated with the EU. Ahead of us we have a process which is likely to be lengthy and the outcome of which is both constitutionally and politically uncertain. There is a clear Scottish dimension developing with negotiations to be had on the eventual outcome in Scotland against the backdrop of a Second Scottish Independence Referendum. What is clear is that Brexit will have a further knock on impact on Scotland at a constitutional and economic level, it is just the extent of this impact remains to be clarified.