Scotland's place in Europe: our way forward

A Blindfold Brexit and Extension of Article 50

41. The UK Government has hitherto shown little willingness to consider other options or come forward with a substantive alternative to the Chequers proposal, although it has indicated there may be some minor concessions in relation to the border on the island of Ireland. Notwithstanding this, the core elements of the proposal remain unchanged and the UK Government is demanding flexibility from the EU to reach agreement.

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42. The only alternative to this proposal, as presented by the UK Government, cannot be no-deal. Instead, as we have set out an extension of Article 50 to allow time for a consensus to be reached across the UK should be agreed. The EU have been clear that all options for the future relationship remain available to the UK, and that it is only the self-imposed constraints of the UK Government - its red lines - that limit the choices available. If this remains the case then the consensus of informed opinion is that while the UK Government may yet achieve agreement on withdrawal - although this is by no means certain given the difficulty of agreeing a solution for the Irish Border - a political declaration is likely to be high level in nature and lacking a clear sense of what a future relationship between the UK and the European Union will look like. The UK will then be negotiating after 29 March 2019 from outside the European Union.

43. The UK Government committed through the Lancaster House speech^[30] to reach a detailed agreement on the future relationship by October 2018. The subsequent implementation period was agreed to allow for necessary practical arrangements to be made. However, in the absence of such detail, the implementation period will further extend the period of uncertainty and see the UK leaving the EU with very little sense of what a future relationship might look like. This would have a hugely detrimental effect on both citizens and businesses. Of particular concern is the effect on investment decisions that are being taken now by existing businesses in Scotland or prospective businesses looking to locate or invest in Scotland. Business investment has remained muted, for example the latest ONS statistics show that business investment grew at 1.6% in 2017, compared with a pre-Brexit forecast by the OBR in March 2016 of 6.1% annual growth for 2017^[31]

44. Leaving the European Union with no-deal or a bad deal would inflict significant damage on Scotland. Similarly, leaving with nothing other than a high-level political declaration - not legally binding - to guide the shape of our relationship with the EU as a third country is also not an outcome the Scottish Government considers viable.

45. Perhaps of greater concern is that any declaration or agreement will be set within the most turbulent of political times in Westminster. For example, Michael Gove suggested in September 2018 that it may be possible to leave the EU with the Chequers proposal and then, once out, unpick that steadily over time or negotiate a different type of relationship^[32]. This approach undermines the UK Government negotiating position, implying that the UK Government may not be negotiating in good faith.

46. The so called 'blindfold Brexit' that the UK Government's current policy would lead to would be a wholly unacceptable outcome from the Article 50 process:

• The UK Government would have little over 18 months to negotiate a complex and comprehensive future economic relationship with the EU, amidst a period of multiple other priorities for the EU. If these negotiations failed, or only partially succeeded, the UK would have no preferential trade arrangements with our largest trading partner and be obliged to fall back on WTO terms of trade that would severely damage our export industries, both
  in the goods and services sectors.
• During these crucial negotiations the UK would no longer be a member state of the EU but a third country facing the collective negotiating strength of a market in excess of 400 million consumers. This not only weakens the UK's negotiating hand, but also brings the risk that if the negotiations conclude in either no-deal or a bad deal there would be no possibility of limiting the damage.
• A period of a further two years of negotiations will itself bring further uncertainty and the accompanying economic damage.

47. The Scottish Government opposes the UK exiting the EU against a backdrop of such uncertainty on the specific content of the future UK-EU economic relationship, not least because the indications are that the best form of relationship that may be achieved in the time available - a basic free trade agreement - will significantly damage Scotland. Instead we propose the UK Government seeks an extension of the Article 50 process to enable the UK Parliament to scrutinise and evaluate the options for the UK and provide a more secure basis for future negotiation. In particular it would allow for the UK Parliament to mandate the Government to secure a beneficial future relationship with the EU that involves membership of the European Single Market and Customs Union. Moreover an extension of Article 50 would also accord the necessary time for a second EU referendum to be legislated for^[33] , in the event Parliament agrees.

48. Extension of Article 50 is provided for within the existing text of the treaty, requiring agreement both from the UK and unanimity from the remaining 27 Member States of the EU^[34]. This decision may be influenced by the fact that they have seen the UK Government prevaricate and delay reaching agreement over the terms of the UK withdrawal, including in relation to the border on the island of Ireland and the detail of what they want of a future relationship. The Scottish Government would however urge the UK Government to change its negotiating strategy as a matter of urgency, and keep the UK in the European Single Market and Customs Union. The Court of Session has also recently referred a case to the Court of Justice of the European Union (CJEU) on whether the UK can unilaterally withdraw Article 50. A ruling on this, that the CJEU will make in late November, will also have a significant bearing on the options for the UK.