Organised by the Economic and Social Research Council and the UK Research Office Tuesday 11 February 2014, Brussels The Scottish Government is holding a referendum on 18 September 2014 asking “Should Scotland be an independent country?” The UK’s Economic and Social Research Council (ESRC) has initiated a Future of the UK and Scotland programme of activities bringing the best of UK social science to the debate about Scotland’s constitutional future and its implications for the rest of the UK and Europe. This work aims to both inform the debate in the run-up to the referendum and assist in planning across a wide range of areas which will be affected by the outcome of the vote – whether for Scottish independence or continued Union. This meeting offered an overview of the programme of work and focused on the key areas of migration and business, on questions about Scotland and the UK’s future membership of the EU as the Scottish referendum – and potentially a UK referendum on EU membership – approach.

1. Implications for the EU
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@Davidnfbell

2. Welcome
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@Davidnfbell

3. The ESRC Future
of the UK and
Scotland Programme
Professor Charlie Jeffery

4. Edinburgh Agreement 15 October
2012

6. “Should Scotland
be an
independent
country”
Yes?
No?

7. “Should Scotland
be an
independent
country”
Yes?
No?

8. Future of UK and Scotland: What is it?
• Recognition by ESRC of the importance of Scotland’s
referendum
– For social science
– For Scotland and the rest of the UK (and the EU!)
• Ca 45 researchers working on key themes: economy,
policy, constitution, citizens
• Communications activities: events, stakeholder
relations, website
• One-stop shop at www.futureukandscotland.ac.uk

10. Impact on Business
Professor David Bell
University of Stirling

11. The Independence Referendum:
Impact on Business
PROFESSOR DAVID BELL
ESRC RESEARCH FELLOW
DIVISION OF ECONOMICS
STIRLING MANAGEMENT SCHOOL
UNIVERSITY OF STIRLING

12. Business Attitudes
• Lack of information and trust in politicians
– 60 per cent of firms claim that they do not know enough about the
implications of the referendum
– Businesses are suspicious of information provided by politicians and
both campaigns. (23% want more information from politicians, 46%
would prefer local Chamber of Commerce)
• Unwillingness to show preference for either side
– Thus far, business has been cautious about expressing a view.
– Some companies considering including independence risk assessments
in their trading statements to satisfy shareholders and customers who
remain uncertain and cautious about the outcome

13. What are the key issues for business?

14. Currency
• “We will therefore retain the pound in an independent Scotland.” (White
Paper on Independence)
• For
– Scotland and rUK currently form a strong trading partnership. Retention
of pound makes sense on transaction costs grounds.
• Against
– Scotland will be heavily dependent on North Sea Oil revenues. Changes
in oil price will affect Scottish economy, but not rUK. Uniform monetary
policy may be harmful in the absence of fiscal transfers.
– Both Scotland and rUK heavily indebted. Scotland would have to
immediately borrow from international money markets and has no
reputation with these markets. Borrowing costs likely to be higher than
rUK. To contain these and to establish credibility with the markets,
Scotland may have to immediately impose tight fiscal policy. The political
costs of this might undermine the credibility of the monetary union.

15. EU Membership
• “ … the Scottish Government will immediately seek discussions with
the Westminster Government and with the member states and
institutions of the EU to agree the process whereby a smooth
transition to full EU membership can take place on the day Scotland
becomes an independent country.” (White Paper on Independence)
• “While the Scottish Government recognises the political and economic
objectives of the Eurozone, an independent Scotland will not seek
membership.” (White Paper on Independence)
• “If we remain in the UK, the Conservative Party‟s promise of an in/out
referendum on EU membership raises the serious possibility that
Scotland will be forced to leave the EU against the wishes of the
people of Scotland.” (White Paper on Independence)

16. Corporate Taxes
• We plan to set out a timescale for reducing corporation tax by up to
three percentage points below the prevailing UK rate. (White Paper on
Independence)
• “Monetary unions allow for significant differences in fiscal and
economic policies. .. Corporation tax in Ireland remains at 12.5 per cent
but is higher elsewhere in the Eurozone” (White Paper on Independence)
• Even at a UK level, this may prove problematic if Scotland has to agree a
tight fiscal pact with rUK in order to remain part of the sterling zone.

17. North Sea Revenues
UK Oil Revenues (£m)
Scotland‟s “geographical”
share of sea-bed
£14,000
£12,000
£10,000
£8,000
£6,000
£4,000
£2,000
£0
UK oil revenues from 1980/81 to 2012/13 = £242bn, but tax take highly volatile

18. The Financial Sector
• Scotland has a relatively large financial services industry which contributed
£8.8 billion to the Scottish economy in 2010 – more than eight per cent of
Scottish onshore economic activity. It employs more than 85,000 people.
• Many of its contracts (e.g. pensions) extend beyond the proposed
independence date.
• Much of its business comes from outside Scotland. Potential loss of
business if currency union not agreed.
• “Major financial institutions operating in the Sterling Area will therefore
be subject to the same prudential supervision and oversight in both
Scotland and the UK. As the Fiscal Commission Working Group made
clear, such an approach is in the clear economic and financial interests
of Scotland and the UK.” (White Paper on Independence)
• Would shared regulation be agreed? Would banking union be part of the
agreement?

19. Income Tax
• The White Paper has no specific proposals in relation to income tax, though
it is the largest source of revenue to the Scottish Government.
• Income tax contributed £10.8bn of total revenues of £56.9bn in 2011/12.
Corporation tax contributed £3bn and North Sea Oil £10.6bn.
• Incomes in Scotland are unequally distributed. The same is true of the UK as
a whole. The top 10 per cent of earners contribute 47 per cent of income tax
revenues. The top 1 per cent contribute 20 per cent of revenues.
• The Scottish and rUK labour (and capital) markets are highly integrated.

20. Conclusions
• Business cautious about expressing a view, but aware of risks
• Low risk outcomes for business:
– Membership of EU agreed, without any change in current arrangements
(in relation to e.g. Schengen/Fiscal Stability Pact)
– Sterling zone arranged, including fiscal pact with rUK
– Business regulation continues to be the same throughout UK
• “No” camp refuse to pre-negotiate on these issues
• “Yes” camp refuse to discuss more risky alternatives

21. Impact on Business
Professor Brad MacKay
University of Edinburgh

22. The independence referendum: Impact on
business
Professor Brad MacKay
ESRC Research Fellow
Head, Strategy and International Business Group
University of Edinburgh Business School

23. The sample
Based on a sample of 52 companies
By Sector
No.
%
Financial Service (life insurance, retail, wealth man.)
16
31
Energy (incl. Oil and Gas)
8
15
Electronics/Technology
7
13
Life Science
6
12
Engineering/Ind. Manufacturing
11
21
Other
4
8
Total
52
100

24. Indicative Profiles
By Size
No.
%
UK HQ
No.
%
Large
34
65
Scotland
35
67
Medium (2XS/M)
18
35
rUK
17
33
Total
52
100
Total
52
100
Customer Base (Est)
No.
%
Origin
No.
%
Scotland
4
8
Scotland
29
55
rUK
16
30
rUK
5
10
rUK/EU/Global
32
62
Overseas
18
35
Total
52
100
Total
52
100
24

25. Risks
Industry
Financial
Services
Life
Sciences
Electronics/
Technology
Engineering/ Energy (incl.
Ind. Manuf.
oil and gas)
Yes
Double
Regulation
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes – Decommisioning
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes – Corp. tax
translation
Yes
Yes Corporate Tax
Yes
Yes
Yes
Yes
Universitie
s
Yes
Yes
Key uncertainty
Change in currency
Regulatory Changes
Skilled labour
(Recruitment/Retent.)
Changes in income and
personal taxation
Reputational risk
Relocation of
competitors
Investment
Yes
Access to financing
Yes
Collaboration (Border)
Yes
Yes
EU
Yes
Yes
Yes
25

26. Opportunities
Financial
Services
Potential
opportunities
YES
NO
Electronics/
Technology
Potential
opportunities
YES
NO
Frequency
(N=14)
%
6
8
42%
58%
Frequency
(N=6)
5
2
Potential opportunities
YES
NO
%
71%
29%
Engineering/
Ind. Manufact.
Potential
opportunities
YES
NO
Energy
(inc. oil and gas)
Potential
opportunities
YES
NO
Frequency (N=4)
6
0
Frequency
(N=5)
4
1
Frequency
(N=5)
2
4
%
80%
20%
%
33%
67%
%
100%
0%
26

27. Opportunities
Industry
Financial
Services
Life
Sciences
Electronics/
Technology
Engineering/ Energy (incl.
Ind. Manuf.
oil and gas)
Key Opportunities
Income tax decreases
Yes
Liberal Immigration
Yes
Revitalise Scot politics
Yes
Lower tax
Yes
Yes
Yes
R&D Rebates
Yes
Access to government
Yes
Yes
Scot Diaspora
Pride
Scottish Brand
Tourism
Redesign regulations
Yes
Government funding
Yes
Flights
Connections
Advisory services
Lobby EU
Yes
Law Firms
Yes
27

28. Contingency Planning
Financial
Services
Contingency
planning
YES
NO
Electronics/
Technology
Contingency
planning
YES
NO
%
50%
50%
Frequency %
2
29%
5
71%
Life Sciences
Contingency planning
YES
NO
Frequency
(N=5)
4
7
%
36%
64%
Energy
Contingency
planning
Frequency
7
7
Engineering/
Ind. Manufact.
Contingency
planning
YES
NO
Frequency
(N=5)
%
YES
1
17%
NO
5
83%
Frequency
0
6
%
0%
100%
28

29. Contingency Planning
Industry
Financial
Services
Life
Sciences
Electronics/
Technology
Engineering/ Energy (incl.
Ind. Manuf.
oil and gas)
Contingency Planning
Risk register
Yes
Yes
Yes
Monitoring
Yes
Yes
Yes
Informal conversations
Yes
Yes
Yes
Analysis/tactical plans
Yes
Yes
Yes
Too uncertain
Yes
Reduce exposure
Yes
Yes
Yes
Yes
Yes
Invest in opportunities
29

30. EU Implications
 Significant issue for 5/52 companies interviewed;
 20% to 30% of exports outside the rUK;
 Possible implication for FDI;
 Between 70% and 80% of Scottish exports go to rUK;
 Currency and uncertainty are primary risks;
 EU negotiations have indirect implications for business.
30

31. Conclusions: Triggers and
tripwires for firm behaviour
 Customers
 Ability to sell products/services (location, regulations,
reputation);
 Ability to access markets (ie. MoD, EU, rUK).
 Employees
 Ability to attract high value, skilled labour (ie. quality of life);
 Ability to maintain high value, skilled labour (ie. personal
taxes).
 Shareholders
 Ability to create value (ie. perception, profitability);
 Value destruction (ie. through increasing costs/complexity).
31

32. Impact on business
Professor David Bell
Professor Brad MacKay
Tweet: @UKScotland
@davidnfbell

33. Migration, mobility and
higher education
Dr Scott Blinder
University of Oxford

34. Migration in the Scotland
Independence Debate
Dr Scott Blinder
Migration Observatory
COMPAS, University of Oxford
The Scottish Referendum:
Implications for the EU
Brussels, 11 Feb 2014

35. Immigration policy in an
independent Scotland: Context
• Immigration in Scotland
– 7.2% of Scotland’s population is non-UK born
– Increased from 4.1% in 2004
– Similar % to Portugal, Malta, Lithuania
• Significant share from EU
– 37% of non-UK born in Scotland are from EU
– 15% from Poland
•
Sources: 2012 Labour Force Survey (UK), 2011 Scotland Census

36. Policy Context
• Immigration is a “reserved power”
(Westminster)
• Scotland’s different interests and needs?
– Skills shortages
– Population needs (target for growth!)
• Employer concern
– some sectors concerned visa and immigration law
– all sectors concerned with EU status
– (research by Centre for Population Change, another ESRC project)

37. Immigration policy in an
independent Scotland: Proposals
• Scottish Government White Paper: more open
immigration policy
– non-EU high-skilled labour migration – restore
‘human capital’ element of points-based system
– Non-EU students – restore Post-Study Work visa
– More “humane” asylum system
– EU migration – “will remain open to EU nationals
exercising their treaty rights”
– Low-skilled (non-EU) migration – not mentioned,
but implied barriers or limits

38. Immigration policy in an
independent Scotland: Political support?
• Effects of independence on political support
for migration? Is a more open policy
sustainable?
– Scottish Government view
– Political science view
• (C Boswell, U of Edinburgh)

39. What does Scotland’s public say?
• Migration Observatory/YouGov survey
– 2000+ in Scotland, 2000+ in England/Wales
– Representative on-line panels
• 58% in Scotland want less immigration (75% in
England/Wales)
• However…

40. Public support?
• Less salient issue in Scotland
• Little public opposition to some immigrant
categories
– Reduce students: 22%
– Reduce high-skilled migrants: 23%
– Reduce citizens’ spouses/children: 22%
• These overlap with Scottish Government
proposals

41. Public support for Scottish control
• 60% prefer Scottish Government as
immigration policy-maker (over UK
Government, EU, and local governments)…
• …though many do not agree with the policy
they expect from an independent Scotland
• Will this lead to sustained anti-immigration
opposition?

42. Proposal: Common Travel Area
• Scottish membership in a Common Travel Area
(with the rest of the UK and Ireland), outside
of Schengen
– Acceptable for EU member state?
– Pressure from UK toward immigration policy
convergence? Border controls?
• Majority in Scotland (64%) believe border
controls between England and Scotland
unlikely to happen

43. Proposal: Citizenship Policy
• Inclusive citizenship policy
– British citizens (automatic)
• “habitually resident” in Scotland
• born in Scotland, even living outside of Scotland
– Ancestry / residency (eligible to apply)
• Scottish descent (a parent or grandparent who qualifies
for Scottish citizenship)
• lived in Scotland for at least 10 years and with a
“demonstrable connection” to Scotland
• migrants residing legally in Scotland on “qualifying
visas”

44. And if ‘No’ wins…
• Status quo  continued tension?
– b/w Holyrood & Westminster
– b/w UK & EU (re free movement)
• Room for sub-national policy-making?
– Canadian example – PBS with regional ‘bonus
points’
• Add to public support for devolution?
– Immigration policy as part of ‘devo-max’?

46. Migration, mobility and
higher education
Professor Sheila Riddell
University of Edinburgh

47. The Future of Higher Education in Scotland
Presentation to The Future of the UK and Scotland
Seminar, Brussels, 11th February 2014
Sheila Riddell
Centre for Research in Education Inclusion and
Diversity,
University of Edinburgh

48. Scottish Higher Education, the Devolution
Settlement and the Referendum on
Independence
Much of the referendum debate has focussed on the economy – but
HE has also featured prominently
Central to economic, social and cultural welfare of the nation
Seen as key to social mobility and of great concern to general public
HE policy mainly devolved – but some aspects reserved e.g. research
funding via Research Councils
HE policy illustrates policy divergence post-devolution, but also
inter-connectedness of UK systems.

49. Free higher education seen as flagship SNP policy –
SG White Paper contrasts Scottish approach with
„marketised‟ system in England
„…free education for those able to benefit is a core part of
Scotland‟s educational tradition and the values that underpin
our education system. One of the major achievements of
devolved government in Scotland has been to restore this
right to Scottish domiciled undergraduate students‟
By way of contrast:
„The Westminster Government has pursued an increasingly
market-drive approach to higher education, increasing tuition
fees for undergraduate students to up to £9,000 per year‟
(Scottish Government, 2013, p.198 )

50. But differences between English & Scottish systems
may be exaggerated – both highly socially
segregated
English students incur much higher levels of debt – long-term
impact unclear.
But abolition of fees in Scotland has not produced greater
social equality in participation – and increased student fees in
England has not led to greater social inequality.
Scottish policy of free undergraduate tuition not economically
progressive - of greatest benefit to the middle classes
because:
(1) Far more middle class young people go to university –
higher levels of prior attainment
(2) Shift from non-repayable grants to repayable loans.
Scottish students dependent on the state leave university
with loans of c. £28,000 c.f. middle class counterparts
(3) Free HE has impact on rest of education system.
Reduction in college funding & failure to reduce class
sizes.

51. Participation in HE sectors by deprivation quintiles (percentages)
People from most deprived neighbourhoods make up only 7% of
student population in ancient universities; those from most
advantaged backgrounds make up 38%. No change over past
decade.
Post „92s
Ancients
1960s
Colleges
Deprivation
quintile
2000 - 2010 2001 2011
2000 2001
2010 2011
2000 2001
2010 –
11
2000 2001
2010 2011
1 (least)
38
38
30
30
28
26
19
17
2
3
4
5 (most)
23
17
12
8
25
17
12
7
23
20
15
11
24
19
15
11
21
18
17
15
22
19
18
16
21
21
20
18
18
20
22
23

52. Undergraduate fees policy - new challenges for an
independent Scotland
rUK-domiciled students currently pay fees of up to £9,000 if
studying in Scottish universities
White Paper states SG‟s belief that it would be possible to
continue to charge rUK students post-independence whilst EU
and Scottish students continue to study for free – otherwise
free tuition in Scotland might produce influx of rUK students.
However, experts in EU law cast doubt:
„The Scottish Government would face an extremely steep
uphill battle to convince the EU institutions that it should be
entitled to retain a practice involving systemic direct
discrimination against one particular cohort of EU citizens‟
(Professor Niamh nic Shuibne, Professor of EU Law,
University of Edinburgh)

53. Fees policy has impact on cross-border student flows. Scottish students
more likely to stay at home. Welsh students more likely to leave - portable
support.
Young applications by country of residence and country of institution
applied to 2010 - 2013.
Country
of
residenc
e
Applying 2010
to
2011
2012
2013
England England 81%
only
82.4%
82.4%
80.9%
Norther
n
Ireland
NI only
33.4%
29.5%
36.3%
34.1%
Scotlan
d
Scotlan
d only
87.5%
87.4%
89.8%
89.4%
Wales
Wales
only
25.7%
23.3%
20.3%
19.7%

54. Implications for research policy – Scottish & UK
governments express different views
White Paper states that post-independence Scotland would remain part of
UK research area.
BIS Paper on Science and Research states that there can be no guarantee
that common UK research area would be sustained: „National
governments fund national research programmes‟. Paper argues that:
(1) Scotland would develop its own research priorities
(2) Few examples of cross-border research funding – Nordic Research
Council disburses £13 million per year c.f. seven UK Research
Councils - £3 billion per year.
(3) Scotland can already compete for EU funding – not clear that it would
be more successful post-independence
(4) Regulatory differences would make collaborations difficult
(5) UK charities might not wish to fund Scottish research

55. Conclusion: Would independence be good for Scottish
universities?
Scottish Government – universities would prosper because government
would control essential economic and social levers.
Existing beneficial arrangements would remain – e.g. UK research area
would continue, SG would continue to charge rUK undergraduates.
Additional benefits – SG would be able to implement its own immigration
policy to allow international students to stay in Scotland post-graduation.
UK Government expresses different view – UK research area unlikely to
remain; Scotland unlikely to be able to treat rUK students differently from
home and other EU students; different immigration policy incompatible with
open border.
These differences would have to be resolved in post-independence
discussions.

56. Migration, mobility and
higher education
Dr Scott Blinder
Professor Sheila Riddell
Twitter:@UKScotland

57. A Scottish Yes to independence? A UK
No to Europe? Scenarios and
challenges
Professor Michael Keating (Director of the Scottish
Centre on Constitutional Change)
Dr Fabian Zuleeg (Chief Executive European Policy
Centre, Brussels
Twitter: @UKScotland

58. Thank you
For more information visit:
http://www.futureukandscotland.ac.uk/
www.esrc.ac.uk/scotland
Follow us on Twitter:
@UKScotland
@ESRC
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