European and External Relations Committee

Meeting date: Thursday, September 29, 2016

Official Report 659KB pdf

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European Union Referendum (Implications for Scotland)

Good afternoon and welcome back to the meeting. Our final item of business today is a further evidence session on the implications of the EU referendum for Scotland. I welcome to the meeting David Martin MEP and Alyn Smith MEP. Before going to members’ questions, I will give the witnesses the opportunity to make some opening remarks. Who would like to go first?

Alyn Smith has kindly volunteered me.

I was pouring the water.

I will make some very brief opening remarks. First, in general terms, we are naturally focusing here on the British Government’s negotiating position, but I think that we should seriously consider how we influence the other party’s negotiation position as well. I am sure that the committee has already thought about that. Despite how Michel Barnier was portrayed in the British press, he is not at all anti-British or unsympathetic to the issues that we will be raising with him. I think that he would be a very good person to be in touch with. Collectively, we are trying to build contacts with him and his team. Likewise, from a Scottish perspective, Guy Verhofstadt, the Liberal leader in the European Parliament, has shown a great deal of interest in the unusual position that we find ourselves in of voting to remain in the EU while the rest of the UK voted to leave. He is very interested in how he can assist the Scottish case.

Very briefly—I will try to do it as telegrammatically as possible—there are three things that we need to try to defend as a nation post Brexit. First, we have to find methods of protecting jobs; secondly, we have to find a way of protecting rights; and, thirdly, we have to look at our security.

All of that has been well rehearsed so, again, I will be brief. In relation to jobs, full access to the single market is, for me, the key issue. I do not believe that we will be able to obtain that if we do not have some movement on free movement. If we stick to the stated British position on free movement, I think that we will find on the other side of the fence no access to the single market—I mean no membership of the single market. As a passing point, since the phrase slipped out unintentionally, we keep hearing British Government ministers talking about access to the single market, but I have no idea what they mean by that phrase. Every country in the world has access to the single market; it is membership of the single market that gives us the privileged position that we have.

Again, the committee will be well aware of all the options post Brexit. For me, the Norway option is the best one, but I cannot understand why we would want to have no say in setting the rules while still paying the bills. I cannot understand what the advantage of that would be compared to having full membership of the EU. The Swiss option has been talked about also, but for Scotland and the UK as a whole it is important to bear in mind that the Swiss do not allow the free movement of services. A UK agreement that did not give us access to the service market would not be good news.

I do most of my work in the European Parliament on the Committee on International Trade and I am the spokesman for my group on the Canada agreement. It is a good agreement for a third country, but it would not be a good agreement for the United Kingdom. In the past two or three weeks, I have heard a number of British ministers talking about an agreement such as the Canada one being a suitable option. I will not go through all the options of that agreement, but it does not give unfettered access to fishing or agriculture; it more or less gives tariff-free access for manufacturing goods, although there are exceptions even there; it does not involve financial services; and it does not give any role in setting standards. If we want to sell in the single market, we have to accept the single market standards. I therefore do not see why the Canada agreement is suddenly becoming this great option for us. It is good for Canada, because it has a different relationship with the European Union, but it would not be good for the United Kingdom.

Finally, on jobs and the WTO option, my work on the Committee on International Trade recently took me to Geneva—I have just come back—where the Secretary of State for International Trade, Liam Fox, spoke. As I told Alyn Smith before this evidence session, Liam Fox implied that, because the UK was an original and continuing member of the WTO, there would be no problem for the UK in moving from membership of the EU to full WTO status.

There might be no problem in terms of membership but, immediately after Liam Fox had spoken, the director general of the WTO pointed out that our schedules are 40 years out of date and said that it would take years to update them. On one hand, the secretary of state says that there is no problem, but on the other hand the director general says that the WTO is in deep conversation about how to handle the issue and expects it to take years. The idea that there is a simple option whereby we sign up to the WTO and everything is fine is clearly not a good one.

I mention in passing something of which I am sure the committee is well aware. The WTO option would mean a tariff of 10 per cent on our whisky, instead of whisky having completely free access to the European market, as it currently does.

13:30  

I will be much briefer on the other two issues, to leave time for discussion. I think that there is no way that the current British Government will protect the social and labour rights that we have as a result of our membership of the European Union. My view is that Scotland should push hard to make those matters a Scottish responsibility. We need to make a case for devolving those matters to the Scottish Parliament and Scottish Executive, because it is clear that the Scottish people want to defend those rights and it is also clear that, if there is no change at British Government level, those rights will not be defended.

There is an argument that even with its existing powers the Scottish Executive could sign up to the European convention on human rights and have its own version of the British Human Rights Act 1998, thus defending the human rights that we have at European level. That should be a high priority for the Scottish Government.

Finally, on security, given Scotland’s devolved justice system, I do not think that there should be a major impediment to Scotland remaining part of the European arrest warrant system—again, that is a personal view; it is debatable. Alyn Smith and I are trying to see Interpol about the issue, and Government ministers have been speaking to Interpol. I do not see why the Scottish police could not be part of Interpol, even if the rest of the UK decided not to do that, so that we could defend our security in that way.

There are many other issues, but jobs, rights and security are the three key ones. Other areas to consider include how we remain part of the research programme and the Erasmus programme and how we can take advantage of agriculture and fisheries powers coming back to Scotland, bearing in mind the dangers in that regard. If we do not have full access to the single market, it could be difficult for some of our agriculture and fisheries products to compete in Europe. I will stop there.

Thank you.

I endorse everything that David Martin said. It is worth stressing to fellow parliamentarians that, post Brexit, five out of Scotland’s six representatives in the European Parliament have committed to working together as team Scotland, as we have often done in the past, to get a result for the people whom we serve. There is a great deal of cross-party joint working going on across the Parliament, and we are seeing such an approach from a number of UK MEPs. We are co-operating to try to get the best deal in whatever will be Scotland and the UK’s future.

I compliment the committee on its inquiry, which is getting a lot of useful information into the public domain. A sad side effect of the dreadful EU referendum campaign was that a lot of organisations did not prepare for the eventuality of a leave vote and its implications for farming, fishing and all sorts of other industries. I was at a meeting with the Law Society of Scotland this morning, and it is clear that only now are some organisations really going through the gears on what leaving the EU actually means. The committee’s work is important in that regard.

I will add a few points about what is going on over the water. Mr Barnier and Mr Verhofstadt are very alive to the Scottish question. My advice to Scotland and to the committee is that Scotland should not be silent as the process goes forward. We cannot wait until we see, fully formed, what the UK is going to present as its article 50 demand. Instead, we must take the opportunity to consider what Scotland’s demands are. What do we want to keep? What do we want to remain part of? How do we want to do that?

There is good will towards Scotland at present. To paraphrase what Palmerston said—as almost everyone who has been involved in politics since Palmerston has done—countries do not have allies, they have interests. It is up to us to define our interests and ensure that we are part of the discussion. The door is open at the moment, but I suspect that it is going to start closing. There is an idea that article 50 is entirely under the control of the UK, but all that the treaty says is that the member state informs the Council, and arguably that was done verbally by Prime Minister Cameron in the summit after the meeting. In the event that the 27 states decide that article 50 has been triggered, the UK will rapidly find out that 27 is a bigger number than one and that there is a lot of other stuff happening that the member states of the European Union want to be getting on with. The idea that the UK can string this out beyond what is reasonable is unlikely. We still have to put together what a realistic article 50 approach is. The good will is not going to last forever. There is a timescale that needs to be respected.

On the plurality of interest of the UK, it will be no surprise to hear that I support that Scottish Government’s and Scottish Parliament’s efforts to reach out to the plurality of interests in the UK, including Gibraltar, Northern Ireland and other places. There are a lot of interests that have just been thrown up in the air and we need to find some sort of joint approach.

There is good will at UK official level, and indeed politically. All talents are needed on this. I am happy to continue the discussion with members and I thank the committee for the invitation to do so.

Thank you.

From what you have both said, there is an understanding in the EU institutions and the European Parliament of Scotland’s unique position. Do you agree with that, or is there more work to be done?

There is always work to be done and a focus on that will need to be maintained. There is a recognition that we voted to remain and that if there is an opportunity to find some sort of circumstance that will suit Scotland it should be explored. That needs to be approached issue by issue, rather than on a wider basis.

More worrying is the position of Northern Ireland, in that it directly involves another member state that will remain part of the 27, whereas we are part of the member state that will not. There is also an awareness of Gibraltar’s situation. We fit in that picture. The fact that Scotland has been so vocal immediately following the Brexit vote has made us part of the picture, and we can use that to Scotland’s advantage. However, we must not go silent in the process.

How can the Parliament and the committee most effectively engage with the European Parliament and its committee system to ensure that Scotland’s voice is heard?

That is difficult to say in some ways, because the European Parliament has not yet decided the form of its approach. Eventually, we are likely to have a Brexit committee, but we are not there yet. The president has appointed a special representative, Guy Verhofstadt, leader of the Liberal group, to be Mr Brexit for the Parliament. He is the initial point of contact. However, I hope that the European Parliament will have a Brexit committee, in the way that we have committees for everything else that goes on, that will analyse the article 50 process once it starts. I guess that we do not have such a committee at present because article 50 has not been triggered.

I have one piece of advice. I am treading on eggshells here, but if defending the Scottish interest is seen as promoting independence, you will find some hostility in the Parliament, from all the usual suspects. The Spanish and a number of other nationalities are very nervous about that. If the approach is seen to be genuinely about promoting the difference between Scotland and the rest of the UK in terms of desires and the European connection, you will find a sympathetic audience. It has to be handled very delicately.

I endorse that from my political perspective. If there is a perception—it would be entirely wrong—that we are trying to use this as a pretext to a mad dash for independence, there will be a backlash. We need to approach it on a granular level. To pluck an example out of the air, if we ask how Scotland can continue to be part of the Europol network, people will engage with that discussion. If we ask how we can remain part of horizon 2020, Erasmus, the Hague convention or whatever else, we can have a granular discussion about technical specifics, rather than a broader constitutional discussion.

Umpteen places across the EU have a different constitutional status vis-à-vis their member state and the EU. There are umpteen examples that we can point to for a wider status. As a starter for 10, it is about identifying the bits of the acquis that we want to remain part of and the bits of the framework that we want to continue to be active in, which will allow us to engage subject by subject and committee by committee. I suggest that that is where the discussions start, rather than going straight to the Mr Brexit, Ms Brexit or whoever they are going to be in due course. We should make the discussion more about, for example, how to keep a specific programme going, which would allow a granular level of discussion. That would be more productive for where we are now.

It has been suggested to us that, for that to happen, we need a clear indication from the UK Government that it is comfortable with Scotland doing that. What are the chances that the UK Government will do that?

I have no idea. It is very difficult to judge at the moment what the Government’s attitude will be.

But what if the UK Government gave that indication, even in those devolved areas?

That would make life much easier.

The key thing for Scotland is membership of the European single market. The First Minister has been very clear that she wishes to retain that and the evidence that the committee has taken so far suggests that sectors across Scottish society also wish to retain access to the single market. Could we argue for a differentiated relationship on that?

Whether as part of a UK agreement or a bespoke Scottish settlement, we should argue for maximum access to the single market. There is no question but that that is where our economy would benefit most. It would be very difficult for Scotland to have a different level of access compared with the UK because goods move so freely across the UK. It would be close to impossible to identify Scotland as a separate market in that context.

There is a similar argument with regard to free movement of people, as there is an indication that the attitude to that is different in Scotland from that of people in the rest of the United Kingdom. However, it would be difficult to have free movement in Scotland with a porous border between us and the rest of the United Kingdom.

I take on board what you have just said about the difficulty of a differentiated relationship. Will the UK Government’s negotiating position affect the willingness of the remaining 27 member states to engage directly with Scotland’s specific situation? If the UK Government is heading towards a hard Brexit and a WTO rules default situation, will that make the remaining 27 more open to looking at a differentiated relationship for Scotland?

It is very difficult to say. One of the paradoxes is that the harder the Brexit, the more difficult it will be for Scotland to have a differentiated relationship. If it is a really hard Brexit and we are completely out of the single market, it will be very difficult for one part of the United Kingdom to be in the single market. Therefore, a hard Brexit will make the situation worse not better. The softer the Brexit, the easier it will be to have nuances in Scotland’s position compared with the rest of the United Kingdom.

As with every aspect of Brexit, there are so many variations at the moment. We hear that one option for Northern Ireland is to have a porous border between the north and south of Ireland which, if I was a Northern Ireland unionist, I would be furious about. To have a hard border between the north of Ireland and the United Kingdom would not be a very satisfactory settlement if you live in Northern Ireland and regard yourself as British. However, that seems to be one of the few ways of keeping the border between north and south Ireland open.

One of the things that the EU has managed to do over the years is be a flexible organisation when it has had to be. Where is there flexibility for Scotland’s position, and any negotiating position for Scotland, in the coming six to 12 months, particularly given the elections that will take place in France and Germany?

You asked several questions at once there. In relation to Scotland, once the heat goes out of the process—and the heat might be around for quite a while to come—I think that there will be flexibility on some of the issues that Alyn Smith and I have mentioned, such as the Erasmus programme, horizon 2020, and even Europol and keeping the European arrest warrant. The big issue is the single market, and that is where it will be difficult to get flexibility.

13:45  

When it comes to the UK position—and this is corridor talk rather than any formal position that anyone has adopted—I am told that, if a British Government was prepared to compromise on the free movement of people, there could be freedom of moment in principle but people would have to have a job offer before they could come to the United Kingdom. That was floated by one of the Brexiteers—although he was shot down quite quickly by the Prime Minister—and it has also been discussed in the corridors in Brussels. It would mean that free movement of labour still existed, although people would need a job offer before they came here. Some of us would argue that that is not in the spirit of the single market as we currently have it, but it would be a pragmatic way of solving a problem that has resulted from two hard positions that do not seem to be prepared to come together. It could be one way of bringing them together.

It is one of the known unknowns at the moment. As Donald Rumsfeld said, there are things that you know you do not know and things that you do not know you do not know. The question of what the UK position is going to be is actually an opportunity for Scotland, because there is an open ear in Whitehall, certainly at official level. People are trying to formulate some sort of UK bid at the article 50 stage that would respect the constitutional issues that have been thrown up for Gibraltar, Northern Ireland and ourselves. The external territories have wider issues than the home nations do.

Scotland therefore has an opportunity to be vocal with a list that states our starting point. Politically, our starting point is that remain means remain, of course, but let us be specific about the programmes that we want to keep and about the distinction between what is clearly within devolved competence and things where there are other implications. As part of that discussion, let us be particularly vocal with the UK about the things that we want. We should do that privately where necessary, but we should be as public as we need to be. Although it is a democratic process, my point is that there is a concurrent discussion that needs to be had with Brussels and the member state capitals, to ensure that Scotland’s needs are respected in the process.

As the two negotiations coincide, I hope that we will still have that good will in the bank so that we can find a solution. With Norway and Iceland nearby, political Scotland has a clear awareness of the fact that there are other ways of skinning this, and there are ample constitutional examples that we can point to on particular issues. Some of the bigger demands include those that relate to the passporting of financial services. I can think of constitutional ways of passporting financial services for Scotland-domiciled organisations, but those might not exist for organisations south of the border. That throws into sharp relief the question of the situation in the UK jurisdiction as it stands.

Our starting point has to be what we want to keep—and we need to build a consensus in Scotland about why we need to keep those things—and then constitutional exceptions can be found in discussions with Brussels. Let us always bear in mind the fact that the member state is the member state and that there will be one representative in those discussions, but we are not without allies. We are having a good discussion, Government to Government, with the Irish in particular and with other nations, so there are people to whom we can talk about those issues rather than simply allowing the discussion to be a narrow channel between Edinburgh and London. There is a wider discussion that we should be having.

Given the timescales for the elections in France and Germany, how do you think those events will impinge on or affect the situation in Scotland and in the UK?

They will have a significant impact. We should throw into the pot the fact that the Dutch are also having elections, and of the three countries Holland possibly has the biggest anti-European—perhaps it is better to call it sceptical—audience, which could cause some difficulties. Even if negotiations start early next year—assuming that we believe the rumour that they could start in February—I do not think that we will see a lot of progress until October or November. I certainly do not think that we will see any weakening of the Dutch, French or German positions before then; in fact, we might well see a hardening of their positions.

The elections make the negotiations complex. Some people have even argued that we should not trigger article 50 until October next year, but I gather that the view on that is that waiting so long is politically unacceptable. I suspect that the negotiations in the first nine months will not be easy.

There is an active danger that there would be an incentive across the 27 member states: if the UK established a precedent that a country could leave the EU and somehow get a better deal, everything could start to unravel really fast. We do not need to think too hard about other European countries that have that sort of element in their politics—Hungary leaps to mind, but there are plenty of others.

Every single member state will have an interest in what happens and will want its interests to be looked after if it is approve whatever Brexit eventually turns into. The domestic reality in 27 other places will be pivotal to what the UK gets in the end. The UK cannot demand terms and get them. Article 50 is just an opening bid; it is not remotely the end of the process.

Alyn Smith mentioned that the discussions are at the member state level, and Scotland does not have the opportunity to contribute to those discussions. How do you see Scotland having direct discussions with European countries and representatives? It is clear that five of the six MEPs are on the same page, but there is a challenge for Scotland in fully getting its message over.

It will be a challenge, but that is where the Scottish Government has already cut something of a dash. Nicola Sturgeon has been over to meet the German foreign minister and—just at the beginning of this week, I believe—Fiona Hyslop was over in Paris, meeting Harlem Désir. The channels will remain open, and the negotiations will be the negotiations, but we can talk to the people who are taking part in them.

Incidentally, we should also demand to be a formal part of the UK negotiating team. There is a very live discussion on that between Michael Russell and David Davis. If we are silent in the process, decisions will be made on our behalf in Brussels, Berlin, Paris, Ljubljana and London. Therefore, it is up to us to ensure that we are vocal about what we want. We want a place in those discussions and a seat at the table. If that is refused, it is refused—the constitution is what it is—but we certainly should not allow decisions to be made for us without making the case.

I endorse what Alyn Smith says about the First Minister and other ministers keeping contacts open in Europe. It will not be easy. People will not negotiate at the moment, but nevertheless it is vital to have dialogue and to keep the contacts open.

As members are well aware, at the end of the process the European Parliament will have the right to say yes or no to any Brexit deal, so it is worth speaking to a wider group of MEPs and ensuring that MEPs understand the demands. I am not predicting this, but it is not impossible that we will say no to a Brexit deal initially. We have said no to some big deals in the past. Do not assume that, just because the member states have negotiated a deal, the European Parliament will rubber stamp it. I always defend the rights of the European Parliament, but it is ludicrous that it has the right to say yes or no to such a deal, but the Parliaments of the United Kingdom do not also all have that say.

What would happen if the European Parliament said no? What constitutional crisis would that kick up in these islands?

A big one. The problem with the whole article 50 process is that we are in uncharted waters, to use a cliché. We do not know what would happen. One assumes that there would have to be a return to the negotiating table, but we just do not know what that would mean for the two-year period.

The two most recent examples of the European Parliament saying no to international agreements were the anti-counterfeiting trade agreement—that simply killed it—and the passenger name records agreement with America. When the European Parliament said no to that agreement, the Vice-President of America came to the Parliament and pleaded with us, and the negotiators went away and negotiated an agreement. The two cases had opposite outcomes. In one case the Parliament killed the agreement and in the other there was a delay of a few months, so it is impossible to make a prediction about Brexit.

It will depend entirely on the good will with which the negotiations start and continue. If there is good will and mutual self-interest, a deal can be struck—we are all grown-ups.

However, the omens are not good. Pronouncements from various London ministers have been slapped down—I should not use that language; I will say “contradicted”—almost immediately by the ministers’ boss, and we saw the reaction of the French and German foreign ministers, who offered to explain to Boris Johnson, in English, how the Lisbon treaty works. We are not looking good here. The extent to which the UK is throwing good will away is a problem for us, because we do not look serious or credible.

That underlines the need for Scotland to be vocal and reasonable. We will have interlocutors in the discussion who will be in the room—from a UK perspective, they will be at arm’s length from someone who will not be in the room.

The result of the UK referendum has led to questions for other EU member states. Given the political uncertainty in member states that have a strong populist right-wing view, could there be a domino effect of withdrawal from the EU?

I do not see that happening. The evidence from the polls is quite the reverse. The way in which the UK had a vote, won a vote and then collapsed into chaos did not look good. A number of anti-Europe movements are watching carefully. The Front National has a close relationship with the UKIP group in the European Parliament and the parties are comparing notes; there are ingredients of the same discussion in various European countries.

That underlines our point that there is an incentive for the 27 Governments and the institutions of the EU to make the UK’s departure tough, pour encourager les autres and to make the point that we cannot leave a club and get a better deal. I do not see there being a domino effect in any particular member state, but the risk of a domino effect makes things tougher for us.

You said that Scotland will have to demand a role in the negotiation process—not just by unilaterally entering into informal discussions with other member states but by being part of the team that the UK sends to the Brexit negotiations. The Scottish Government and the Scottish Parliament will make representations to the UK Government about that.

When Québec’s representative gave evidence to the committee last week, he talked about the comprehensive economic and trade agreement process, with which David Martin will be familiar. At the time of the CETA process, there was an expectation on the European side of the table that not just federal Canada but the Canadian provinces would be represented in the room. Of course, the provinces have considerably more relevant powers than the Scottish Parliament has.

How can we create an expectation among the other 27 countries that the UK should bring Scotland, Wales and Northern Ireland into the room for the negotiations, if there is currently no such expectation?

We should try to create that expectation, but the two situations do not match. It was the European Union that insisted that the provinces were involved in the Canadian negotiations, because of past experience. A key demand from Europe in the trade negotiations was access to public procurement, the bulk of which is controlled by the provinces, and we recognised that any deal that the federal Government in Canada did to give us access to public procurement would be pointless if we did not have a guarantee from the provinces. There were a number of other devolved matters on which we needed assurances that the provinces would respect the deal. The Canadian constitutional position is that the Canadian Government cannot give away the rights of the provinces, so to make the deal credible we insisted that the provinces were involved in the negotiations from the start.

It is unfortunate, but the constitutional position here is clear. Whether we like it or not, the UK Government has the right to negotiate the terms of Brexit. That does not mean that we should not try—do not misunderstand me on that.

14:00  

Absolutely, so how do we create a set of circumstances in which there is a level of expectation?

It has to be done domestically first, but we also have to look to allies in Europe. They cannot insist, but we could get them to ask questions. Has the issue been discussed with devolved Parliaments and regions? Is the Scottish Government on board? Has the Northern Ireland Assembly had a chance to discuss the issue? There are allies in some member states who would be prepared to pose such questions. Again, as was said earlier, it is also about the First Minister speaking to leaders of other member states, to leading members of the European Parliament and to the European Commission, making them aware of the conversation and getting them engaged in it. However, we should not be unrealistic, so we must also bear in mind that, as Alyn Smith indicated and we all know, they have their own concerns about the process and that their number 1 priority will be to look after themselves.

I agree with that.

The reality is that CETA is not deliverable unless the provinces sign up. They had to be involved in a way that, bluntly, we do not.

For us, this is primarily a political discussion within the UK about the plurality of interests that we all have, and the unanimity of purpose across Scotland’s political parties is a big strength in that regard. It is also about building coalitions with industry groups, farmers, fishermen or whoever and saying that Scotland has a list of demands that are distinct, legitimate and reasonable, and that we expect to be represented.

The UK constitution is what it is and we are all familiar with that, but we have people outside that process who we can deal with. However, we must not be silent in the UK context or, indeed, within the EU, because we have arms at our disposal.

We are unpicking an interesting issue here. It is clear that the Canadian provinces do not have treaty-making powers but can have agreements. Similarly, there are issues in the UK that are clearly devolved to Scotland and deliverable only in Scotland. I would have thought that that would have had a bearing on perceptions of the Brexit negotiating process.

One would hope so. However, the problem is the constitutional position, which is that the UK is the member state and has not, in any sense, given Scotland, Northern Ireland or Wales international competence. From a European point of view, even if there are issues around deliverability inside the UK, all that Europe needs is the British Government to sign up for something, because the British Government is responsible for delivery.

Going back to 1997-98, as many of you will know, part of the reason why we have the constitutional settlement that we have now is because we learned the lesson of Brussels and Belgium. The Belgium Government sometimes cannot force its federal constituent parts to deliver on European policy. For example, one of the Belgian Parliaments—the Parliament of Wallonia—has said that the Belgian Government should not ratify CETA. Unless that Parliament changes its mind, the Belgian Government, even though it has a majority in its own Parliament, cannot sign up for CETA. However, we are in a different position, like it or not.

My example is about how complex our connections with the EU are. Last night, Rachael Hamilton and I were at a meeting of the south of Scotland alliance, which was very keen for me to follow up on the reclassification of the NUTS 2 areas. If the south of Scotland became a designated area, an estimated €970 million, or about £840 million, could be available to it. What will be the status of the NUTS 2 negotiations on the reclassification of the south of Scotland in the light of Brexit? Is reclassification on a shoogly peg? If so, can the negotiations be salvaged?

That is a good question. My attitude, which I think five of the six Scottish MEPs share, is that life goes on, we are part of all the systems and we should continue to argue for what we would have argued for in the past.

The level at which an area qualifies for regional funding has been contentious since that funding began. The statistics on unemployment, per capita income and so on show that NUTS 2 would be a better level than NUTS 3 for the south of Scotland. The alliance has a strong case that we will continue to fight for. It could be a pyrrhic victory: if we won the case but were then out of the European Union, the victory would make no difference. However, if you believe that we should continue to do our job and fight for what we think is in the best interests of Scotland for as long as we are an EU member, it makes a lot of sense to argue for using NUTS 2 as a base area for regional funding for Scotland—and not just for the south of Scotland.

I echo a lot of that. I have been working with the south of Scotland alliance for the best part of a decade. If Dumfries and Galloway and the Scottish Borders were amalgamated into a NUTS 2 region, the numbers would be different.

We must also be aware of the realpolitik. Everything will stop quite soon unless something pretty dramatic changes. We will certainly fight the good fight but, to an extent, that horse has bolted.

Thank you for giving evidence today. I have found your contributions to be quite pessimistic so far, which is in contrast to the standing ovation that Alyn Smith got from other MEPs in the European Parliament. I am finding it quite difficult to detect any sign that the MEPs are going to come to Scotland’s rescue.

On the overall debate, you have not shone much light on how it would be possible for Scotland to maintain a meaningful relationship with Europe. Erasmus, horizon 2020 and Europol are all important issues for co-operation, but those are not really what the big debate is about; it is about the single market and the customs union, and you have given no indication that it is going to be possible for Scotland to maintain our relationship in those areas. MEPs are not going to have much of a role, and without the UK Government’s giving a green light for all the institutions in Europe to speak to us, it is going to be very difficult to make progress. Is that what you are basically saying to us?

Yes, it is, to be frank. I am trying to be realistic rather than pessimistic. It would be very difficult for Scotland to have a distinctive relationship with the single market. In all those areas that you have just mentioned—and which we have mentioned, too—it is possible to retain some rights and security in relation to Europe, but that would be extremely difficult with regard to jobs and employment unless the British Government negotiates a good deal on access to the single market.

As a slight aside, I have mentioned that I have just come back from a WTO meeting. Liam Fox made great play of Britain being a free-trade country and about how getting out of Europe would open up market freedoms. Following that, one of the WTO director generals told us in private—I will not quote him directly, and because there are three of them, I can hide which one of them said it—that Liam Fox does not seem to understand that the WTO is the World Trade Organization, not the world free-trade organisation. I thought that that was a nice riposte.

The big picture is freedom of movement and access to or membership of the single market. My point about not going silent is that we should talk about the things that we can talk about. If you were to put a motion to this Parliament that Scotland wanted to remain part of the Erasmus programme, you would pretty much have cross-party unanimity that that was something that the Parliament wanted to do. That is an earnestness of intent that we can talk about with the institutions, to show them that that is one way in which we want to remain part of Europe and to start to get good will in the bank about things that we can deliver.

Likewise with Europol justice and home affairs co-operation, there are ways in which, in any likely scenario, Scotland will be able to be engaged in the way that Norway, Iceland, Switzerland or other countries are. There are many unknowns in the process in relation to the single market, but there are still things that we can talk about. Therefore, let us not go silent; instead, let us be vocal about the direction of travel that we want to establish and build some momentum towards that while we are having concurrent discussions with the UK.

The MEPs are not going to ride to our rescue any more than another member state is, but they are useful in reaching the member state capitals. Given that the European Parliament will get to sign off whatever Brexit and its terms eventually are, we need to maintain a lot of lines in the water. However, it is up to Scotland to work out what our demands and interests are and then to engage ruthlessly, member state capital by member state capital, to demonstrate why this is also in their interests and why they should help facilitate that.

Am I right in saying that the strongest key for unlocking that would be for Theresa May at some point—preferably sooner rather than later—to say that as long as Scotland is part of the United Kingdom, she is happy, given the democratic vote in Scotland, for institutions to speak directly to Scotland about how our relationship with Europe could be maintained?

She can be as happy or as unhappy as she likes, because the institutions are not talking to the UK.

I am talking about once the process starts.

Aye. Once a negotiation is under way we need to ca cannie with the institutions. That is my point about differentiating between Brussels and the member state capitals; we can have the dialogue with the member state capitals about what our interests are, and they will be in the room as the 27 states are negotiating with the UK. We also need to have discussions with the UK about ensuring that our interests are properly represented. That process will be inelastic up to a point.

It would be helpful to have the good will or acquiescence of the UK, and there is a degree to which we need to establish as much of a joint operation as we can, but there are limits to that process. There is a mandate from the people of Scotland and the Scottish Parliament that I want to see respected. We need to talk about things that are deliverable within Scottish competence, because that means that we can do things about them. That would allow us to establish the earnestness of intent and to illustrate the wider point that we expect something different out of this process, whatever it is going to be. That will be a multilevel discussion and waiting for the say-so of the UK Government will only take us so far.

Can you see any circumstances in which negotiations between the UK and the EU institutions would break down?

Certainly.

It would happen almost immediately, I would imagine. Article 50 is an opening bid. We have heard a lot of people saying that we will get a lot more clarity once article 50 is triggered. I think that the moment of clarity will come when the member states say no to the article 50 bid.

Charles Grant from the Centre for European Reform has written a very helpful paper about the different sets of negotiations; after all, there is not just one. Ending the treaties is a fairly straightforward technical matter, but what comes next is what will be the guts of the issue. I hope that, when the article 50 bid is put together, it will reflect all of Scotland’s interests and will include a scenario that respects what we want. It will be up to the 27 states to decide whether to acquiesce to it; then it is up to the European Parliament to decide whether it suits the interests of the wider population of the European Union; and then it is up to the European Commission to decide whether it respects the treaties. The set of interests ranged against us is much more varied than just the UK.

What is the key issue? Is it free movement of people?

There are the nitty-gritty issues that Alyn Smith has described, but even the formal, administrative part of article 50 could be extremely difficult. The easiest thing about it might be the leaving date, because that will also be in the agreement.

Because some programmes will run beyond the leaving date, there is a question about what happens to Britain’s on-going budgetary contributions. How much will they be and who will pay? There are questions about what will happen to pension rights—I am not talking about our MEP pensions, although even that is not unimportant—because there are millions of pounds involved in the pension rights of British employees in the Commission, the Parliament and so on. Who will pay that bill? There is a host of such issues that have to be settled as part of the leaving process. In parallel—some member states argue that it should be done subsequently, but I hope that it is not—we will also have to talk about the future relationship, which I understand will be outlined, but not necessarily detailed, in article 50 negotiations.

14:15  

That is the key part. If we assume—and it cannot be firmly assured—that the British Government is lobbying for complete access to the single market, the free movement of people will be the crux issue, because a number of member states will not move on that. We do not need them all to move, but we need 21 out of 27 to agree to the Brexit deal. However, the Poles, the Hungarians, the Czechs, the Slovaks, the Slovenians and the Lithuanians, all of whom have big populations living in the UK, will want to defend their populations, so they will not give in on free movement, and if we believe the British Government, it will not give in either. Something has to give. If the British Government takes the Liam Fox position, which is to settle for the WTO, we will have a very bad deal in terms of the British economy, but getting agreement from the other member states probably will not be difficult.

You talked about the Parliament vetoing any deal. In what circumstances would that happen? Would it be a compromise too far on free movement?

If three out of four of the freedoms that we have talked about—the fourth being the free movement of labour—are guaranteed to Britain but one is not, I think that you would have a problem inside the Parliament. However, the nitty-gritty issues might also be some of the ones at which Parliament takes umbrage, because Parliament is one arm of the budgetary authority, and if it does not think that the budgetary settlement is suitable, it can easily reject it on that basis, too.

What happens to all the agencies? Would Britain still be part of them, or would we give them up? As an example off the top of my head, let us consider the European Chemicals Agency, which has to approve every new substance that comes on to the market. We are members of that agency, and we pay for that at the moment, but what happens after we leave? Will we have our own chemicals agency, which will cost a fortune? Will we not take part in the European Chemicals Agency but accept all the European laws? Will we pay for it and try to influence it? Trying to influence an agency from the outside could even be controversial inside Parliament. If we multiply that by however many agencies there are now—environment, food safety, the whole lot of them—all those things have to be settled as part of our exit, and any one of them could trigger a controversy. You are all parliamentarians, so you know what happens in Parliaments. One thing can get a bit of resonance and grow legs, and then you find a movement against the agreement.

That is interesting. Does Ross Greer have a supplementary on that point?

I have a very short question, but it is on a new point. If David Martin will forgive me, I would like to go back to what he said about independence. I agree entirely with what you said, Mr Martin. Having spoken to my own party’s colleagues in the Flemish Parliament at the weekend, I understand the domestic situations that other countries are taking on board. Do you agree that, at the moment, it would be irresponsible to take any option off the table because, if nothing else, they are all negotiating tools and points of leverage with the UK Government in what could become tense domestic negotiations within the UK?

The short answer is yes. If you are pushing me harder on my own personal position, which I have thought about a lot since 23 June, I have to say, frankly, that the emotional case for independence is much stronger but that the Brexit settlement is critical. This is probably not the place to go into it, but a hard Brexit actually makes the case for independence harder—bizarrely—and a soft Brexit makes it easier. In terms of negotiating, though, any negotiator keeps every option on the table, so we should do that.

I very much echo that. As recently as two and a bit years ago, the people of Scotland were being told that we were a family of nations and that to safeguard our European status we needed to stick with the UK. Then, less than two years later, we find ourselves in a very different situation. It will not surprise you to hear that I absolutely think that independence must be on the table, because it gives an urgency to the discussions and a leverage over the UK Government. That is recognised by everyone, not least in Brussels, but it is not our first place to go to. So much is in flux. As I told the Sunday Herald just this week, until we can establish what we would become independent from, there are a number of dotted lines into the future where we can tease only so much out.

I am talking about our status within the European framework, which means a lot more than just single market membership or single market access. Our cross-party starting point has to be: what are Scotland’s best interests? We can track back from that in our discussions with the UK Government and with the member state capitals. Independence should absolutely be on the table, because it gives us a leverage that we would lose if we gave it up.

I want to ask David Martin to elaborate on his comment about the relationship between a hard or soft Brexit and independence. With those issues, would it not be a question of timing?

Maybe. I am thinking quite narrowly, but I accept that there are wider arguments for and against independence. On the narrow issue of jobs, a hard Brexit means that the UK is out of the single market and if the purpose of independence is to keep Scotland in the single market, we would face difficulties. I have been involved in the Scottish debate too long not to realise that we will start getting into difficult arguments here, but the reality is that, if Scotland were inside the European Union and the rest of the UK were outside it, we would need a hard border between Scotland and England. Roughly a quarter of a million jobs depend on our trade with the European Union and 1 million jobs depend on our trade with England. A hard border in that situation would not be good news.

If we had a soft Brexit, that border would not exist and we would have a more realistic choice between independence and remaining part of the European Union. It is one of the paradoxes but if the UK goes for the hardest possible option, it makes it very difficult for Scotland to retain its economic links with the UK as they are at the present time. In my view, that would do a lot of damage; indeed, that is what I was hinting at with regard to the emotional versus the practical problems of a situation that none of us wanted but which we now face.

The logical conclusion of your argument is that the question of independence—if that is an option—should be settled before Brexit.

No, I do not think that that is my argument. My argument is that, until we know the nature of Brexit, it is difficult to know our economic position. There are much wider debates to be had about independence—I am not trying to extend that argument in this committee meeting as we can do that elsewhere—but, purely on an economic basis, it will be more difficult for Scotland to become independent if the UK ends up with a hard Brexit.

With regard to a softer Brexit or a middle Brexit, we have the example of Switzerland and Liechtenstein. They are both in EFTA, but only Liechtenstein is in the EEA. I understand that there is some flexibility regarding their border, which is not closed. Does that illustrate your point that having a softer Brexit would make it easier to have differentiated relationships?

Exactly. If there is a soft Brexit, there is no need for a border between Scotland and England even if one country is in the EU and the other is not. If there is a hard Brexit, my argument—my claim—is that we would need a hard border, which is where the difficulty would come.

Going back to my earlier comment about Northern Ireland, nobody wants a hard border between the north and the south but, if we were to get to that situation, the only way to avoid it—and even this would be an ad hoc relationship—would be for Northern Ireland to have a hard border with the rest of the United Kingdom. For one part of the country to have a hard border with another part seems crazy to me, but it might be the only way to keep that island together.

As you said earlier—and as unionists in Northern Ireland have told me privately—that would be completely unacceptable to the unionist community in Northern Ireland.

Yes, I can imagine that. I was going to say that they voted for it, but let us not go there.

Let us go back to a point that you made earlier, Mr Martin, about social protection issues that, in many cases, are not in devolved areas. We seem to have a consensus that Scotland should be able to negotiate and push in devolved areas, but social protection and employment are not devolved. You suggested that we should look at transferring those powers to the Scottish Parliament, which is a point that was also raised by Nicola McEwen when she gave evidence to us last week. How quickly should that happen?

As quickly as possible. We are again moving beyond the realms of this committee, but my own view is that, whatever happens post Brexit, the relationship between Scotland and England is already fractured more than it was before. There is an argument now, if not for independence, at the very least for maximum devolution of powers. We need a further movement of powers to Scotland beyond the devo max that we got after the independence referendum. That is the only way to keep the relationship workable; I know that many people do not want to keep it workable but, for those who do, maximum devolution is now the only option. Scotland has clearly indicated that it has a different set of preferences from the bulk of the people in England—not even the rest of the UK, but England. Therefore, we need to look yet again at another constitutional settlement, and labour and employment laws will be key elements of that.

Can you take your colleagues in the Labour Party with you on that?

I have been walking on eggshells and desperately trying not to be party political. Actually, you might be surprised to learn that there is a growing movement within the Labour Party that recognises the need for a new relationship. Of course, not everybody agrees with that.

At that point, we will end the evidence session. I thank both MEPs very much for giving evidence in what has been an absolutely fascinating session. Unfortunately, we have to finish because the committee cannot meet while the Parliament is sitting. I therefore close the meeting.

Meeting closed at 14:26.