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Home , Scotland, Scottish Government, United Kingdom

Scotland in the UK

April 2014

Contents

Know the facts 1

Scotland in the UK : the best of both 3

Our economic strength and 6 The UK 7 Our 7 9

Our shared 12

Our place in the 16

Conclusion 19 1 Scotland in the UK

Know the facts

On 18 2014, who use their services to in Scotland will take understand the benefits to one of the most important Scotland of being in the decisions in our lifetime - to UK and the implications stay in the United Kingdom of leaving. or leave it and become a separate independent state. The UK Government has undertaken a As for programme of analysis Scotland, I have been all to explain the benefits over our in recent of Scotland being months discussing the part of the UK and to referendum with individuals, examine the implications communities and a wide of . This range of organisations. booklet sets out All over Scotland, people the main conclusions have asked me for clear, so far. The detailed simple information that analysis - and much can help individuals, the information - can be found organisations they online at www.gov.uk/ work for and the people scottishreferendum. Scotland in the UK 2

The UK Government wants everyone in Scotland to be well informed before the referendum. So I would encourage organisations to make this information available to ensure everyone can understand the positive case for Scotland remaining in the United Kingdom.

Alistair Carmichael MP Secretary of State for Scotland

You wish to join the online by accessing @YouDecide2014, www.gov.uk/scottishreferendum and .com/youdecide2014 f 3 Scotland in the UK

Scotland in the UK today: the best of both worlds

Being part of the UK gives allows us to pool benefits in the Scotland the best of both good times and share risks in worlds. the bad times.

At Holyrood we have a powerful And our settlement Scottish that is flexible. The Scotland Act controls more than £27 billion 2012 extended the powers of of spending - around 60% of the with all public spending in Scotland. the largest devolution of The Scottish Parliament has powers from in the power to make and change 300 . the law to meet Scottish needs and aspirations on childcare; From 2016, further ; training and skills; devolution will give the enterprise; and social care; Scottish Parliament additional justice and policing; housing; the tax powers, so it will be environment; agriculture, fisheries responsible for raising one- and rural affairs; and , third of the money it spends culture and . in Scotland. These powers include a new Scottish Rate At the same time we benefit of which will allow from being part of the UK; with the to a UK Parliament that takes decide the rate of tax that decisions on behalf of everyone people in Scotland pay. The in the UK on the , UK Government has also defence, and announced powers to enable international affairs. We benefit the Scottish Government from being part of a larger, more to issue its own bonds and diverse and stable economy that borrow for capital investment Scotland in the UK 4 Main powers that are and devolved

Main devolved:

COURTS EDUCATION HEALTH AGRICULTURE

POLICE BUSINESS ENVIRONMENT FISHING SUPPORT

CULTURE SPORT FIRE & RESCUE & ARTS

Scotland Act 2012 adds:

Stamp Scottish Duty Landfill Tax Borrowing rate of Land Tax powers income tax APRIL 2015 APRIL 2015 APRIL 2015 APRIL 2016

Main reserved:

DEFENCE & WELFARE MACRO SECURITY ECONOMIC POLICY

FOREIGN AFFAIRS BROADCASTING ENERGY REGULATION 5 Scotland in the UK

such as major transport An independent Scotland projects, , schools would need to apply to all and flood defences. international organisations it wished to join and establish The UK is four nations united its own domestic institutions. and free of . Together There are more than 200 UK we created the NHS and public bodies that currently the BBC, fought for freedom perform functions in Scotland in world wars, celebrated - the government of an Olympic success and built Scotland would best and most enduring union need to decide how many of nations in the world. of these would need to be Independence would mean replicated. Creating and Scotland leaving the UK to running these institutions form a new state. The rest would have to be funded by of the UK would continue. Scottish taxpayers. UK laws and institutions - like the of - would continue to operate in the continuing UK and the continuing UK would retain its membership of organisations like the EU, the UN, NATO and the G7. Scotland in the UK 6

Our economic strength and security

As part of the UK, Scotland’s across Scotland, England, economy has performed and Northern . strongly. Over the last 50 The size and diversity of the years, growth in economic UK economy has helped output per person has been protect us from economic slightly stronger in Scotland shocks, like the 2008 banking than the UK average. This crisis. The UK Government demonstrates that Scotland spent £45 billion recapitalising does well from being part of the Royal the UK, outperforming small (RBS) in 2008, and the bank independent . From also received £275 billion of 2000 to 2012 Scottish growth state guarantees and loans. per head was than In total this support would , , Ireland, have been twice the size of and . the whole Scottish economy in that , including North Within the UK, we pool Sea oil. resources and share risks

Growth rates in GVA (Growth Value Added) per head

Sweden 1.6% Scotland 1.2% 1.2% Finland 1.1% Ireland 0.8% Luxembourg 0.8% Portugal 0.2% Denmark 0.1% 7 Scotland in the UK

The UK Pound it would mean being exposed The UK is one of the most to much greater risk, with the successful monetary, fiscal possibility that UK taxpayers would and political unions in history, be asked to bailout Scotland in the and the current arrangements event of a fiscal or financial crisis. bring significant benefits to Scotland. Taxation, spending, Our single market and financial The UK’s large domestic market, stability policy are co-ordinated with one currency and one set across the whole of the UK to of rules, allows businesses to the benefit of all parts of the freely across the whole of UK. Risks are pooled and the the UK benefiting businesses, UK has a common workers and consumers. In 2011, against uncertainty. Scotland sold goods and services to the other parts of the UK worth If people in Scotland vote to over £45.5 billion. This is double leave the UK, we would also be the amount we export to the voting to leave the UK pound. rest of the world and four times That is part of the choice that as much as to the rest of the we are being asked to make. combined.

The Scottish Government has This trade is supported by a proposed a with common business framework that the continuing UK. All three is the basis for every stage of a major UK political parties have business from hiring employees, ruled out a currency union to borrowing money, to getting because it would not be in the goods to market either online or interests of the continuing UK on the high . or an independent Scotland. For an independent Scotland, a currency union would make it more difficult to adjust to economic challenges, as we have seen for European countries in the euro currency union. For the continuing UK, Scotland in the UK 8

In the event of independence, the Scottish Government would have to choose between:

 adopting the pound informally, in the way that Panama and Ecuador use the US (so-called “sterlingisation”), meaning Scotland would have no control over its interest rates and no lender of last for its ;

 joining the euro, which an independent Scotland could be obliged to do as part of joining the EU, and would mean the euro replacing the UK pound in circulation and Scottish interest rates set by the European Bank;

 creating a new Scottish currency, which would give the Scottish government full control over all , but would mean uncertainty about the value of savings and , and huge costs to business.

Within the UK, we benefit from the strong UK pound, without any of these risks. 9 Scotland in the UK

Scotland analysis: Regardless of the choice of BankingFinancial sector Services assets as currency, independence would Banking sector assets as a proportion a proportionof GDP of GDP put an end to all of this.

It would mean businesses that work across the UK having 1 to deal with two sets of rules and regulations and two tax 880%1 2007 systems, all of which would increase costs and create uncertainty, making it harder to do business across the whole UK. Scotland2 The UK Government’s analysis puts the potential cost per 1254%2 current if in Scotland every independent year of putting a between Scotland and the wider UK economy, and establishing different regulatory Ireland3 and other systems, at £2000. 894%3 2007 Financial services The size of the UK economy means that it can sustain and support a vibrant and secure financial sector. An United 4 independent Scotland would Kingdom have a banking sector more than 12 times the size of its 492%4 current economy – far more than Ireland, Iceland and 5 when they got in to difficulties. Cyprus

700%5 2013 Scotland in the UK 10

We benefit from the UK’s the continuing UK would face position as a global leader costs from operating in in financial services and the both markets - costs which financial sector is one of the could ultimately be borne most important in the Scottish by individuals (either as tax economy – it contributed £8.8 payers or customers). billion to the Scottish economy and supported 8% of total There are also a number of Scottish employment (nearly UK-wide 200,000 jobs) in 2013. and advice bodies - like the Financial Conduct Authority, The Scottish financial sector, the Financial Ombudsman and all these jobs, depend on and the Money Advice customers in England, Wales Service - which it would and – as be costly to duplicate in an well as those in Scotland. independent Scotland. The Our UK single market means financial services industry that financial services firms estimates this would cost in Scotland can sell their millions of pounds. products to customers across the UK without any barriers. The UK also has well-funded Nearly 90% of ISAs and 80% arrangements which protect of mortgages sold by Scottish deposits in UK banks up to firms are sold to customers in £85,000 if banks get into other parts of the UK. difficulties. If Scotland became independent, Scottish banks Independence would break and their customers would up this domestic market. An no longer be covered by this independent Scotland would protection. An independent have to set up its own legal Scotland would have to and regulatory framework for establish its own deposit financial services, and its own guarantee scheme under EU tax system. This would mean law. If one of the two large that firms selling pensions, banks in Scotland were to fail, insurance and mortgages in an the costs for compensating independent Scotland and in depositors would fall almost 11 Scotland in the UK

entirely on the one remaining might relocate parts of their bank. If failed, business to England if there an independent Scottish were to be a vote in favour of government could be independence. required to step in. Currently, the deposits that would Independence could lead to be covered by a Scottish reduced choice and higher scheme would be worth more costs for financial products for than 100% of the in Scotland, including economy. for mortgages, insurance and pensions. On the basis of Instead of risking these extra independent analysis, the UK costs, firms could decide to Government has estimated focus on only one market. that an average annual Companies like RBS and mortgage payment in Scotland Bank of Scotland have could increase by £1,700. spoken of the risks of higher costs in the event of . Others like Standard Life and Trust are considering how they Scotland in the UK 12

Our shared United Kingdom

Sharing our resources across of revenue. Since devolution, the UK supports public Scotland’s geographical spending in Scotland share of oil and gas receipts and in the future - spending has fluctuated between £2 in Scotland has been around billion and £12 billion. The 10% higher than the UK Scottish Government’s figures average since 1998. This show that in 2012-13, the was equivalent to £1,300 per geographical share of North person in 2012-13. Sea revenues by more than £4 billion – equivalent to Wherever we live in the UK, more than half of Scotland’s people receive the same education budget lost in one benefit payments, regardless year. However, as part of the of the peaks and troughs of UK, the Scottish Government’s local , or differences budget actually increased in between local populations. 2012-13, benefiting from the The size and strength of the strength and diversity of the UK economy helps us to UK’s economy. support people in times of need and to provide financial security in our old age.

In the event of independence, Scotland would receive a share of oil and gas revenues, which would have to be negotiated. However, oil receipts are one of the most volatile sources 13 Scotland in the UK

£ millions 14000 12000 10000 8000 6000 Scottish health spending 4000 Scottish education spending 2000 North sea revenues 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Within the UK, the oil and gas Innovative industries, like sector, and the renewable renewables, gain from the energy sector, benefit from UK’s world-leading and a single energy market thriving research . of millions of customers. Researchers across the Scotland’s energy industry UK benefit from to relies on unrestricted access infrastructure, like advanced to the 24 million electricity computing and through UK customers in England and membership of international Wales – 10 times as many as facilities, such as the in Scotland. As part of the UK, European Centre for Nuclear we work together to maximise Research (CERN). Sharing the potential of renewable these costs makes them energy, with Scotland’s more affordable. At the same dynamic renewables sector time, researchers in Scotland benefitting from the sharing of directly benefit from UK-wide the costs by customers across research funding. In 2012- the whole UK. 13, Scotland secured over 13% of UK Research Council Scotland in the UK 14

funding (£257 million) – better is not clear why it would be in than Scotland’s GDP share the continuing UK’s interests (8%) or population share to change arrangements for (8.4%). In addition to public UK institutions to enable them funding, the UK’s charitable to serve two separate states in organisations fund significant the future. amounts of research in Scotland; approximately 14% A new Scottish state would of funding raised by members inevitably need to create a of the Association of Medical wide-ranging set of new public Research Charities in 2011 was organisations. Establishing an spent on research in Scotland. entirely new set of institutions would be an enormous task The UK Research Councils are requiring substantial up-front just some of over 200 UK-wide investment. public bodies that serve people in Scotland today. They are The institutions we share as underpinned by shared values part of the UK are deeply and allow everyone in the UK to embedded into our daily lives. take advantage of economies For instance, the National of scale to minimise costs to Lottery is played by millions taxpayers, to maximise the of people across the UK, and UK’s global reputation and to the money it raises supports pool resources and risks where sport and culture across the that makes sense. However, whole of the UK, with over if Scotland left the United 50,000 individual good causes Kingdom, it would also leave all in Scotland receiving funding the institutions of the UK. worth £2.5 billion in total since 1994. A new Scottish state The Scottish Government would have no automatic right has said that it would seek to continue being part of the to continue to share many of UK National Lottery. these institutions in the event of independence. But these The BBC is one of the greatest institutions are not shared with of our shared institutions. It other separate states, and it is admired across the globe 15 Scotland in the UK

and informs, educates and entertains millions of viewers and listeners at home. In the event of independence, broadcasters - including the BBC - would serve the public in the continuing UK.

As a new separate state, an independent Scotland would not automatically be entitled to a share of the BBC. Any bid to make use of existing BBC assets, or to show BBC programmes, would have to be negotiated. Scotland in the UK 16

Our place in the world

Together as the United Scottish businesses benefit Kingdom, we influence the from the active support of world around us. The UK is at UK Trade & Investment’s the top table of the EU, NATO, (UKTI’s) 169 offices in over the G7, the Commonwealth 100 countries. and the UN Security Council - the only country in the world And, as part of the UK, we that is part of all these bodies. pool our resources to make a We shape the international real difference with international decisions that affect Scotland , as the second largest aid and use our influence to donor in the world and as the promote and first country in the G7 to hit human across the globe. the 0.7% GNI () commitment. Our The UK’s diplomatic global shared efforts allow the UK to network represents Scotland work to end extreme ; worldwide, employing ending the need for aid by over 14,000 people in creating jobs, unlocking the 267 Embassies, High potential of girls and women Commissions, Consulates and and helping to save lives when other offices in 154 countries humanitarian emergencies hit. and 12 Overseas around the world. We use We all benefit from the UK’s our networks to promote strong voice in , where and protect the economic we use our influence on issues interests of businesses that matter to people and based in Scotland - for businesses in Scotland, like example defending budget contributions, fishing against counterfeits, and agricultural subsidies. discriminatory taxation and Everyone in the UK gains trade barriers. from the terms we have 17 Scotland in the UK

The world’s top ten aid donors

1 USA $31.55 billion 2 UK $17.88 billion 3 $14.06 billion 4 $11.79 billion 5 $11.38 billion 6 $5.83 billion 7 $5.58 billion 8 $5.44 billion 9 $4.91 billion 10 Austrailia $4.85 billion negotiated in the EU, including UK’s EU budget rebate, an the opt-out of the euro and independent Scotland would the Schengen and our actually have to pay towards the budget rebate, which is worth rebate of the continuing UK. over £3 billion. As part of a United Kingdom, In the event of independence, we also work together to an independent Scottish defend ourselves at home. Government would need to The UK’s integrated approach apply to join international to defence protects all parts organisations, including of the UK. Our security and the EU, which would need intelligence agencies guard the agreement of all 28 us from , member states. The Scottish and cyber-crime. Government’s expectations for the terms and timetable The UK Armed Forces of EU membership are are the best in the world, unprecedented, which is keeping us safe in the UK, why the President of the and contributing to conflict EU Commission, the Prime prevention and humanitarian of and others operations overseas; have raised concerns. sustained by an annual Instead of gaining from the defence budget that is one of the largest in the world. Scotland in the UK 18

Our defence spending In the event of independence, supports the defence industry the current boundary between in Scotland, which employs Scotland and the continuing around 12,600 people. In UK would become an the event of independence, international border between companies based in Scotland separate states. Both a would no longer be eligible for separate Scottish state and the contracts that the UK chose to continuing UK would have to place domestically, for national make decisions about how to security reasons. manage the flow of people and goods across that border. It is Our UK border is also likely that over time, differences protected, with over 20,000 in tax and regulatory regimes people and more than £2 would develop as the two billion spent to stop people different governments and goods that could harm us pursued different policies to from entering the UK. Within their own circumstances. the UK, people and goods These differences could be can move freely. Travel around exploited by criminals through the UK does not require smuggling. It is also identification documents. that the governments would There are neither customs want to pursue different inspections nor administration immigration policies. However, associated with the movement an independent Scotland of goods. 23 million could not pursue a much more cross in both directions each open immigration policy and year between Scotland and also seek to join the Common England; 15 million of Travel Area with the UK freight move in each direction; and Ireland. 7 million rail passenger journeys take place between Scotland and the other parts of the UK; and there are 800,000 air passenger journeys between Scotland and Northern Ireland. 19 Scotland in the UK

Conclusion

Scotland is an integral part And with our own devolved of the UK. We all make a Parliament at Holyrood we are contribution and receive the able to take decisions on key benefits of being part of a issues that affect our day- of nations. to-day lives in relation to our health, our schools, our justice As part of the United system and our environment. Kingdom, Scotland has influence at home and around For over 300 years, we have the globe. Our industries worked together with our are better protected and friends and family in other supported by the strength and parts of the UK. And by diversity of the UK economy voting in September to stay and we are able to have our in the United Kingdom we voice heard on the world stage can continue to achieve more through UK membership of together than we would apart. international organisations.

Our distinctive national culture; our churches, our education and our legal system are – and have been – respected within the United Kingdom.

If you want to find out more information or access the Scotland analysis papers please go to: www.gov.uk/scottishreferendum or you may wish to join the debate online by accessing @YouDecide2014 and facebook.com/youdecide2014 f