Martin Potter examines the implications of the EU referendum for Scotland and the future of UK financial services
The EU referendum in the UK will be held on 23 June 2016. By then, reams of print will have covered the implications and arguments 'for' and 'against' remaining in the EU.
The Scottish parliament will, on 5 May, also have its election. Off the back of the Scottish independence referendum in September 2014 and the UK general election in May 2015, it feels like non-stop elections north of the border. You might well expect Scottish parliamentarians to be more focused on retaining their seats than on the EU referendum campaign a few weeks later. However, there'll be no avoiding the EU question on Scottish doorsteps. It also raises interesting questions for actuaries and the future of UK financial services.
Bagpipes and bananas
Nicola Sturgeon, first minister of the Scottish parliament and leader of the Scottish National Party, has said it would be inconceivable that another independence referendum wouldn't be triggered if Scots voted to stay in the EU but the rest of the UK voted to leave. Some suggest that, in this scenario, there would be such strength of feeling that a second independence referendum would produce the result of Scotland leaving the UK.
There are a lot of 'ifs and buts' in all this. Scottish nationalists won't want to push for another referendum if they're likely to get another 'no'. It is also not clear whether Scots feel differently about the EU than the rest of the UK. Being 400 miles further north, Scotland experiences migration differently to the South. But many other frustrations with the EU are the same in Scotland.
Among these, of course, are some well-known EU myths. Matching the oft-reported 1994 EU proposal to ban curved bananas, Scots were outraged in 2005 by supposed proposals to ban the bagpipes - although these turned out to be rules protecting workers using loud machinery.
It does seem odd that a country where 45% recently voted to break one union and seek control of their own destiny would vote more strongly to stay in another union and be happy with Brussels' controls. But maybe the chance of that second independence referendum could lead to different EU referendum voting in Scotland.
One hopes that the arguments in the run up to 23 June will genuinely help all voters, both in the North and South, decide on the benefits of staying in the EU and the controls they want Brussels to have. As actuaries, we will see this through the lens of the EU markets we operate in and the financial legislation and regulation that comes from the EU.
Going it alone
There are various models through which the UK could end up outside the EU. Essentially, these depend on whether we sign up to other agreements - for example, the European Free Trade Association, the European Economic Area, Schengen open borders - and whether we agree to follow other laws to continue doing business with the EU.
As an example, Switzerland, which is outside the EU, has more than 120 bilateral agreements with Brussels to secure access to Europe's markets. Switzerland has also had to sign up to the free movement of people, for workers and their families, from the EU. Brussels would be wise to the UK trying to cherry-pick only the legislation that it liked. Going it alone, without lots of deals and agreements, will make trading difficult (just think tax, tariffs and legal barriers) in financial services as much as other sectors.
An interesting twist would be that, in the absence of EU law governing already devolved powers, the Scottish parliament would gain new powers over social policy, the environment, agriculture and fisheries. However, this probably wouldn't be enough to avoid another independence referendum if Scots had voted to stay in the EU.
With an independent Scotland still in the EU, the rest of the UK would face a dilemma on how to continue trading with Europe as well as its neighbour Scotland. It's hard to imagine not going down the deals and agreements route with Brussels.
For UK actuaries, this would aim to ensure our markets weren't restricted and would leave us with much the same legislation and regulation we have today. This feels like a long road, with complications, anomalies and additional hurdles to clear along the way. The alternative of going it alone would require more creativity and compromise from actuaries and others - possibly without the resourcefulness and support of our Scottish cousins.
Martin Potter is on the IFoA Scottish Board and partner at Hymans Robertson