Scotland's place in Europe: our way forward

Acceptability of European Single Market and Customs Union

67. The Scottish Government is clear that continued EU membership is the surest way to secure future social, economic and environmental benefits. Nonetheless, a model such as membership of the EEA combined with being in a Customs Union with the EU could be made to work if the UK Government dispensed with its inflexible red lines and worked closely with the EU to negotiate a solution that would keep Scotland and the United Kingdom in the European Single Market and Customs Union.

68. The UK Government's refusal to explore this model seems to hinge on two principal issues. Firstly that it would require continued participation in free movement of people, and secondly that the UK would be subject to the rules of the EU with limited influence over them.

Free Movement of People

69. The Migration Advisory Committee's final report provides very clear evidence of the positive impact of EU citizens on the UK's economy, public services and finances. This is in line with evidence already published by the Scottish Government. Given this clear evidence, the Scottish Government cannot accept the recommendations from the MAC to route future EU migration through the current UK immigration system. Such a recommendation would mean that 75% of EU workers currently in the UK - a higher percentage in Scotland - would not have been eligible^[47]. In the hospitality sector, for example 97% of the EU workforce would not have been able to come to the UK^[48]. We know that the Tier 2 migration route for skilled workers is bureaucratic, costly and burdensome for business. The proposed extension of the Immigration Skills Charge will be a significant cost for employers.

70. It is, however, important to be clear on what the MAC said, and did not say, in relation to free movement of people and the European Single Market. They were careful to stress that their recommendations on migration rules were on the assumption that there was no relationship between those rules and the nature of future trade relationships the UK enters into. In other words, if adopting a different migration policy - such as free movement with the EU - brought other benefits, in terms of trade, investment and growth, that might overall be the best migration policy for the UK. Given the overwhelming evidence, cited again in this paper, of the economic loss to the UK in leaving the European Single Market and Customs Union, the economic case for the UK to retain free movement and European Single Market membership is equally overwhelming. Given Scotland's major demographic challenges and the needs of our rural communities in particular, the case for Scotland is even stronger.

71. There is evidence of shifting public opinion on migration and indeed the MAC notes that the 'UK may find itself in the position of ending free movement just as public concern falls about the migration flows that result from it.' The Ipsos MORI Issues Index provides long-term trends on attitudes about what individuals across England, Scotland and Wales cite as the single most important issue facing Great Britain today. After reaching a peak of 40% in 2015, concern about immigration is currently at a lower level than in 2010^[49]. In August 2018, 44% thought the most important issue is Brexit and the EU; 9% thought it was the NHS, hospitals or healthcare; and only 6% thought it was immigration^[50]. There has been a decrease in the proportion of people in Great Britain prioritising the control of immigration from other EU countries over access to free trade with the EU. Further recent polling suggests that people in other parts of the UK are now - as with people in Scotland - more likely to prioritise UK/EU free trade over such concerns around immigration^[51].

72. Non-UK EU citizens within Scotland play a crucial role in our economy, our public services and our communities. After months of uncertainty, the UK Government confirmed earlier this year how their rights will be protected - and the Prime Minister has since stated that those rights will be protected even in the event of no-deal. The UK Government now needs to provide absolute clarity and a guarantee to EU citizens that they will honour the rights already agreed and contained with the draft Withdrawal Agreement and the EU Settlement Scheme design. We know that the lack of equivalent commitment to UK citizens in other EU Member States will be worrying for them, and urge the UK Government to seek guarantees about their future rights as a matter of priority.

73. The National Conversation on Immigration report published by British Futures on 17 September identified a lack of confidence in the UK Government's ability to manage immigration competently and fairly, as well as a lack of trust in the UK Government and a lack of understanding about how the current arrangements work. 'Almost no-one knew the detail of current free movement rules… When we explained these regulations in the discussion, there was scepticism that such regulations were ever enforced'^[52].

74. There are existing limitations and restrictions on the exercise of the right of free movement that could be much better explained and more effectively enforced. For example, EU citizens seeking work in the UK have no access to job seekers' benefits here for three months after they arrive, and can be refused those benefits and required to leave the country if they do not have a realistic prospect of finding work. EU Member States may refuse entry to, or in certain cases remove, EU citizens of other Member States on the grounds of public policy (such as criminality), public security or public health; or in the event of abuse of rights or fraud, such as 'sham' marriages.

Influence and 'Taking Back Control'

75. Secondly, it has been suggested that membership of the European Single Market and Customs Union is not consistent with the UK 'taking back control' of its own laws from Brussels. As the Scottish Government has consistently set out, we accept that our proposal does not deliver the same level of influence as our preferred future relationship - EU membership. EEA and Customs Union membership does however ensure that the UK and devolved legislatures are responsible for laws that affect the UK, and in return for market access and other benefits implement laws that are consistent with those of the EU in relevant sectors of society and the economy.

76. While EEA membership would require the UK to adhere to all European Single Market legislation, including with regard to so-called flanking measures such as maintaining high environmental standards and labour market protections, it does not require the UK to remain within either the Common Agricultural Policy or the Common Fisheries Policy. EEA membership protects the free movement of services from which the Scottish economy increasingly benefits and would guarantee that UK (and Scottish) interests were properly represented at the wide array of EU regulatory agencies responsible for setting standards for all goods and services freely circulating within the European Single Market. It would also facilitate future participation in emerging market areas, such as the Digital Single Market that is of growing benefit to Scotland.

77. A similar relationship on the European Single Market has functioned very effectively for Norway. The Norwegian Government recently published a strategy setting out its future relationship with the EU. As well as an ambitious agenda for the future relationship with Europe the paper also sets out the benefits of this model to Norway. "The EEA Agreement occupies a unique position among the various agreements Norway has concluded with the EU to safeguard Norwegian interests. The EEA Agreement helps to ensure economic security and predictability. It is vital for the Norwegian business sector, for Norwegian jobs, and for our ability to maintain a sustainable welfare society. Without labour from other EEA countries, many Norwegian businesses would come to a standstill. Without access to the internal market and a level playing field in the EEA, the Norwegian export industry would suffer.

78. Under the EEA Agreement many Norwegians make use of their rights under the Agreement to cross borders, live, work, invest, and study in other EEA countries. Younger generations take these opportunities for granted. The Government sees it as one of its main tasks to increase awareness of the importance of the EEA Agreement for safeguarding fundamental Norwegian interests"^[53].

79. As the Scottish Government has demonstrated, backed by the vast majority of independent analysis and evidence, the best outcome short of full membership for the future relationship of the UK and EU for both economic and social policy outcomes would be European Single Market and Customs Union membership. In this critical phase of the negotiations it is vital to recognise this as the most viable option at this seemingly deadlocked stage of the negotiations.