This statement is being delivered just 23 days away from the possibility of a catastrophic no-deal Brexit. Scottish ministers have always been clear that Scotland did not choose to leave the European Union and that it is wrong to take us out against our will, which is a view that is shared by many across the parliamentary chamber. We have also consistently done as much as possible to achieve the least damaging Brexit outcome. That work has been and continues to be made unnecessarily difficult by the approach of the United Kingdom Government. Our offer of compromise, made in December 2016 and repeated since, has been rejected out of hand.
The new proposal that the Prime Minister tabled last week is a step backwards from even those of the previous Conservative Government and appears designed to fail. The UK Government has not put forward a realistic plan to secure a deal; the proposal is instead part of a political tactic to shift the blame on to Ireland and the European Union. The UK Government is making demands of the EU that it knows that the EU cannot accept.
Further, we now know that the UK Government wants a much more distant long-term relationship with the EU, which would mean a harder, more damaging Brexit, in which previous commitments to remain aligned with EU regulations would be abandoned. We find ourselves in a position in which, while the House of Commons has legislated to prevent a no-deal Brexit and the UK Government has told a court that it will send a letter to the European Union to request an extension, the UK Government has also indicated that it will go out of its way to thwart that process. In short, if the UK Government does not correct its current disastrous course, the UK is at significant risk of crashing out of the EU at the end of this month, and Scotland will be dragged—unwillingly—with it.
As a responsible Government, we must do what we can, here in Scotland, to prepare for the impact of exiting the EU without a deal or a transition period. That is why, today, the Scottish Government is publishing an overview of its assumptions and mitigation measures, and the analysis that underpins its approach to handling the impacts of a no-deal EU exit.
Any EU exit would have negative impacts on our economy and living standards, but the impacts of a no-deal exit without a transition period would be particularly severe and should not be underestimated. The document that the Scottish Government has published today is the product of an extensive programme of work across Government and with our partners. The First Minister chairs weekly meetings of the ministerial group on EU exit readiness, which oversees cross-Government activity to prepare and improve readiness for leaving the EU. The Scottish Government is working extremely closely with its resilience partners at the national level and locally across Scotland. That includes work with Police Scotland and other partners through the activity of the multi-agency co-ordination centre. We have also been working closely with local government and the national health service, as well as providing advice and support to businesses, individuals and the third sector. If the UK leaves without a deal, more than 200 legislative instruments will be needed to ensure that the Scottish statute book is ready, and the vast majority of those are now in place.
A no-deal EU exit at this time of year would present additional challenges. There is an increased risk that, as a country, we would also need to address concurrent resilience events such as severe weather, which are more common at this time of year than they might have been in March, when a no-deal Brexit was previously a possibility.
However, it is important to be clear that no amount of preparation could ever make us ready, in any real sense, for the needless and significant impact of a no-deal outcome. In February, the Scottish Government’s report entitled “No Deal Brexit—Economic Implications for Scotland” set out that such an exit would have the potential to generate a significant economic shock that could tip the Scottish economy into recession. If all other factors were to remain constant, the 5 per cent increase in prices that a no-deal EU exit might bring could push an additional 130,000 people into poverty. Even in a scenario under which a free trade agreement with the EU could be secured, our economy would be worse off than it would be under membership of the single market. Our modelling indicates that, under a free trade agreement, by 2030 Scotland’s gross domestic product would be around £9 billion lower than if we stayed in the EU, which is equivalent to £1,600 per person in Scotland.
The Scottish Government is putting in place a range of measures that will help to mitigate the worst economic effects of a no-deal exit. In the event of increased traffic flows between Northern Ireland and Scotland, we will seek to deal with potential disruption by repurposing the disused port at Stranraer to hold up to 300 heavy goods vehicles. We will support our food and drink sector by helping small and medium-sized enterprises to prepare for EU exit. We have plans in place to enable suppliers and public sector caterers to operate more flexibly, and we will continue to support food suppliers with their planning. We will provide online information and support on areas of concern to the public, such as the rights of EU citizens after exit. We will also make available £1.5 million in grants to help small and medium-sized enterprises to prepare for exit.
The Scottish Government has also been working with Scottish Enterprise to reinforce the Scotland-wide prepare for Brexit programme, which includes an information campaign, a guidance website and call centre, roadshows and grants. The Convention of Scottish Local Authorities is working with a number of enterprise agencies, in conjunction with the Scottish Government, on how to support businesses as they prepare.
Scottish communities are already under pressure. Last year, we invested more than £1.4 billion to support low-income households, £100 million of which was to mitigate the worst effects of UK Government welfare cuts. Tomorrow, we will publish an online tool and an accompanying report that highlight the areas in Scotland of greatest vulnerability to EU exit, whether with or without a deal. The analysis, which is the first of its kind in the UK, tracks various factors that make communities vulnerable to the impacts of exiting the European Union.
As a result of that analysis, we are putting in place a plan to establish a £7 million rapid poverty mitigation fund. In the event of a no-deal exit, the fund will be allocated to local authorities so that the people who are most in need can get support quickly and efficiently. That may be through the Scottish welfare fund, discretionary housing payments or particular help with food insecurity or fuel poverty.
We are also giving the farming community and the crofting community the certainty that they need to plan and to invest in their businesses. We have already—on Friday of last week—paid farmers and crofters £327 million of nationally funded basic payment scheme loans to support them if we leave the European Union on 31 October.
Marine Scotland will continue to enforce fisheries legislation to ensure stock sustainability, protect the marine environment and comply with our international obligations. Marine Scotland is working with its partner agencies and counterparts across the UK to prepare for the range of possible challenges following a no-deal Brexit. Specifically, it will work with the Scottish Environment Protection Agency to protect environmental standards through continued application of current regulatory regimes.
We are also preparing for the possibility of disorder at sea that goes beyond fisheries offences, which might seriously threaten the safety of marine users. The UK Government is responsible for safety at sea, the enforcement of the UK’s borders and defence against any hostile or illegal activity at sea. Marine Scotland will be a responsible partner and will work closely with Police Scotland and UK Government agencies to provide monitoring and support as appropriate. We expect the UK Government to confirm its capacity to respond to any serious incident and to say how it will work with Scottish partners to deliver on that.
A significant proportion of medicines, medical devices and clinical consumables are imported from the European Union, and the risks surrounding that area were highlighted recently by the National Audit Office. We have set up a Scottish medicines shortage response group, which will review evidence and intelligence and recommend action on such issues, should they emerge.
In our universities and colleges, we have guaranteed the continuation of existing funding arrangements for eligible EU students who enter further or higher education in Scotland up until the 2020-21 academic year. We continue to discuss the impact of Brexit with universities, colleges, students and the Scottish Further and Higher Education Funding Council, which published advice for universities and colleges last week on the actions that they should take.
Our partners in Police Scotland are preparing for the potential impacts of a no-deal exit. A flexible resource of 300 public order-trained officers has been operational since the beginning of August and is ready to deal with any Brexit-related civil contingency issues that may arise. That flexible public order resource is supported by around 60 officers who are based at the Brexit co-ordination centre in Bilston Glen. We have pledged £17 million to ensure that our police force has the capacity to respond to EU exit-related issues, particularly around ports and borders.
Local government is another vital partner in preparing for EU exit. Following discussion with COSLA on local authority requirements, the Scottish Government gave councils an additional £1.6 million for EU exit preparation. That is the same proportion of additional resource for no-deal preparations as has been made available to councils by the Conservative Government in England. As I stated, a further £7 million to support vulnerable people will be immediately available if a no-deal Brexit takes place on 31 October.
The document that we have published contains a significant number of further actions. I will not set them all out in my statement, but I urge all members to familiarise themselves with the relevant detail.
However, I must stress that much of the responsibility for tackling the issues that we identify in the overview that we have published today rests with the UK Government. That is not a political statement; it is a fact. The document includes information on the actions that we understand the UK Government intends to take. We are reliant on the UK Government, for example, to resolve any issues that are connected to goods crossing the Channel, where the flow of goods is expected to reduce to 40 to 60 per cent of the present flow.
We will continue to push the UK Government for further action, clarity and information in the event that we are to leave the EU without a deal in place. However, the level of engagement from the UK Government in that respect has been inadequate, and our planning has been made unnecessarily difficult by the UK Government’s failures to engage and share information. For example, we have not seen any update of the yellowhammer planning assumptions since we received on 7 August those dated 2 August.
Today, the UK Government is publishing a new report on no-deal readiness, which presents a complacent and entirely irresponsible attitude towards no deal. The paper conveys the additional requirements on businesses and long lists of tasks that businesses would have to undertake to continue to trade. It is no wonder that, yesterday, Her Majesty’s Revenue and Customs assessed the cost to business of additional red tape from no deal as £7.5 billion or that, today, the Institute for Fiscal Studies said that no deal would
“push national debt to levels last seen in the 60s”.
There is a range of actions that we believe that the UK Government must take now in order to further mitigate impacts in Scotland and across the UK. It must put in place plans to ensure that the supplies of essential imports, such as medicines and medical devices, are not disrupted due to border issues, and it must also share the information that we need on delays and other issues at the border. The UK Government must confirm whether arrangements that avoid additional tariff or non-tariff barriers on exports of food and drink produce with priority countries will be in place. It must continue to share data on the continuity of supply of medical supplies and radioisotopes and make sure that regulatory frameworks are in place for their continued supply.
The UK Government must act to minimise as far as possible the worst effects of an economic shock. It must provide urgent clarification on future immigration policy, and it must be able to guarantee financial support to local economies and communities through continued or guaranteed European funding. It must take account of the differences in the separate criminal justice systems in any no-deal planning and tackle the loss of access to key EU law enforcement tools. It should take action now to support households to manage the increased cost of living and prevent more people from falling into poverty.
There are significant financial consequences of planning for and responding to a potential no deal. Of the £98.7 million consequentials from Brexit preparation funding that we have received from the UK Government, we have now committed £98.25 million before the outcome of EU exit is even determined.
In August, the UK Government announced further funding, of which Scotland will receive £40 million in consequentials in the spring. However, the costs of EU exit are expected to far exceed the consequentials that we have received from the UK Government. The finance secretary has requested an additional £52 million from the UK Government’s £1 billion operational contingency fund to help us prepare for a no-deal outcome. A portion of that is to support maritime safety and security, as it is clear to this Government that the resources of Marine Scotland, Police Scotland and the navy will not be sufficient should there be increased activity around fisheries or illegal activities. That is the minimum requirement for operational activity, but the real costs of a no-deal exit will massively outweigh that amount, and further funding will be required.
I have outlined the issues that we face, the range of measures that we are already taking and will take if they are required of us, and the resulting costs to the Scottish public purse. Despite the differences in view between us and the UK Government, we remain committed to ensuring that effective preparations are in place. However, there is only so much that any Government could do to tackle the worst impacts of a no-deal Brexit.
To even countenance no deal as a realistic prospect has always been illogical, and economically reckless. Now, under the Benn act—the European Union (Withdrawal) (No 2) Act 2019—it is also illegal. We therefore call on the UK Government to rule out the possibility of a no-deal exit, as is entirely within its gift to do. The UK Government should instead act to secure from the EU an extension to the article 50 negotiating period, to enable a general election. The Scottish Government would support a future vote on EU membership that includes an option to remain in the EU.
There is no doubt that a no-deal outcome would have profound consequences for jobs, investment and living standards across Scotland and the rest of the UK. The UK Government should do the responsible thing and rule it out now.