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How Europe will change the face of Scottish business

After the earthquake, the reckoning.

Following the "peasants revolt" across Europe, policy-makers are calculating the cost of the infusion of populist and nationalist parties into the corridors of Brussels, and wondering how much harder it will make the task of stabilising the eurozone crisis, pressing on with reform, and boosting the whole project's legitimacy in the eyes of sceptical voters across the continent.

For those who believe that the European Union's main tasks are to promote growth and jobs, grow the single market, boost research and development and join up the EU energy markets, the fear is that the invasion of wrecking parties of various shades from Spain, the UK, Greece and France presages another prolonged spell of constitutional navel-gazing. The worst outcome will be destablised confidence, and increased grass-roots indifference to Brussels and the European project.

It remains to be seen whether the new nationalist MEPs will live down to expectations that they will spend all their time in the bar, engage in internecine fights, and generally not turn up to do their job.

In the meantime, there are serious Scottish interests at stake. Here, the Sunday Herald looks at four areas of European competence that are of special importance to Scotland and examines the prospects for progress under the new European mandate that follows the election and the appointment of a new European Commission president this summer.

ENERGY

For some observers, the best outcome for the UK when it comes to the doling out of the 24 European Commission portfolios would be energy, which no UK representative has ever previously held. According to one Brussels insider, the outgoing commissioner, Gunther Oettinger, was "lacklustre to say the least". He was also pro-nuclear, and it is said he didn't "get" the renewables revolution pioneered by the Scottish Government and others.

Now, not least because of the antics of Russian president Vladimir Putin, the energy portfolio is one of the most strategic - although any appointee is unlikely to be more pro-Scottish renewables than Oettinger, especially as wind energy hostility has swept into the European Parliament with Ukip's 24 MEPs.

Renewables-rich Scotland has a big interest in driving EU action to support development of technologies such as offshore wind, marine energy and carbon capture. It also wants to advance the grand project of a North Sea supergrid to lower power costs by allowing the region to share the most efficient power sources, pool load variability and power station unreliability, and allow wider use of renewable energy.

More than half the EU's energy needs are covered by external suppliers: in 2012 almost 90%of oil, 66% of gas and 42% of solid fuels used in the EU were imported at a cost of more than €1 billion a day. Scottish renewables are not ready to fill the gap, but with more EU support, they could point to the way ahead.

FARMING

After tortuous negotiations over the reform of the Common Agricultural Policy (CAP), the priority for Scotland remains securing proper recognition in Brussels for this country's unique geophysical circumstances that have always made it an awkward fit in successive pan-European masterplans.

As Alyn Smith MEP, a member of the European Parliament's Agriculture Committee, puts it: "In some of the islands it's like trying to scrape a living farming on the moon, whereas in Angus we have some of the best agricultural land in Europe."

The priority is to secure an optimum system of awards from Brussels, as it completes the move from a production-based system to an "area-based" CAP.

The new system divides Europe between "grassland" (permanent and temporary) and "rough grazing regions". This process has been tougher north of the Border than in the rest of the UK, which made the transition to the new system in the last round of CAP negotiations in 2005.

The issue is finding a way of classifying Scottish land that avoids creating more "slipper farmers" - inactive landowners who reap European subsidies without producing anything - and instead gets money to responsible, hard-working food producers.

NFU Scotland's parliamentary officer, Clare Slipper, puts it thus: "We have been trying to seek demarcation within the rough grazing region that would reward farmers who are producing on that land in order to encourage active production."

But Scotland also needs to secure its just desserts from Europe's "less favoured area" (LFA) scheme - top-up payments for land that has various disadvantages for farmers. Scotland is 85% LFA, whereas the UK as a whole is only 15%, which is one reason, according to Smith, that Scots farmers cannot rely on Westminster to fight their corner.

The Scottish Government is expected to announce its plans for the two "pillars" (subsidies and rural development) under the CAP between 2015-20 soon.

In negotiations such as these, lobbying firepower matters. Ousted Liberal Democrat MEP George Lyon was seen as a farming specialist, so all eyes will be on Scotland's new Ukip MEP, David Coburn, to see if he will make common cause with Scotland's other MEPs, or whether the country will be, as Labour MEP David Martin fears, "a man down" at the Brussels barricades.

FARMING

One of the reasons that the Scottish Fishermen's Federation (SFF) is concerned about the role of Scotland in the European Union following a Yes vote is its frustration with the slow pace of reform of the Common Fisheries Policy (CFP), the framework governing the management of fishing in European waters which came into force in January this year. The SFF thinks that a supplicant Scotland will have a weak hand in securing advantage for one of the Continent's largest fishing fleets.

The thrust of the reform is about decentralising decisions to take more account of local circumstances, and striking a better balance between the need to conserve stocks and sustaining fishing communities.

As the SFF noted in a letter to First Minister Alex Salmond last month challenging the Scottish Government's 18-month EU accession timetable, efforts to improve the CFP overran by two years, leaving one of Scotland's key industries in a state of permanent frustration.

High on their list of grievances are the rules on "by-catch" (netting fish boats didn't mean to catch), notably new rules against discards (throwing anything unwanted back into the sea) which the SFF sees as "simply not practicable in the short-term, or indeed necessary".

The SFF - which has openly questioned the Scottish Government's commitment to preserving the interests of Scotland's fishermen in the context of its complex EU accession negotiations - wants Brussels to allow more flexibility on this issue. The implementation of the reform - and the influence of EU membership politicking on the issue - are issues to be closely watched.

FINANCIAL SERVICES

Scottish nationalists hate to acknowledge it, but Edinburgh and, to a lesser extent, Glasgow are financial services centres largely by virtue of their relationships to the City of London. The wish-list that the Scottish industry will present to the new regime in Europe is little different to that of City lobbyists, who are worried that the past five years of heavy (as they see it) regulation will get worse with the departure of influential British champions including Sharon Bowles, the Liberal Democrat MEP who chaired the European Parliament's Economics and Financial Committee and who was thus able to moderate assaults on City interests.

Britain's new European Commissioner - most likely Andrew Lansley MP - will not hold any of the key portfolios relating to finance, which will go to a eurozone country representative. The best that the industry can hope for is a strong economic liberal, although many on the left will disagree.

SNP MEP Alyn Smith supports the extension of the single market in financial services, noting that "there are a number of countries who are not intending to implement [the single market] with much enthusiasm. Try and set up a pension fund in Italy and you will be struggling".

However, he grumbles that the Edinburgh industry, represented by Scottish Financial Enterprise, is "taking its line second-hand from the City".

He said: "[UK finance is] swimming against the tide, and instead of trying to influence it, they're saying no, no, no, keep us out of it. Sadly, what SFE say about improving the single market has no substance. When did you see a briefing by them about what they would like to see happen in Brussels?"

Owen Kelly, chief executive of SFE, said: "The financial services industry supports the EU and what it gives us in terms of benefit of the single market. But as with so many areas, regulation needs to be well-founded and well-informed."

Kelly notes mixed progress towards the single market in financial services - and the slow progress in several areas reflects the fact that this is an organisation of states with wildly diverse economic and legal histories.

Scottish financial players will be worried that the rise of populist nationalist forces threatens the pace of financial service market reforms. Several parties, including the French Front National, are avowedly anti-globalisation.

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