By Scott McLeod
A no-deal Brexit would be damaging to Scotland’s economy and public finances, a Holyrood committee has warned.
In a unanimous, cross-party report, the Finance and Constitution Committee said the UK leaving the EU without a deal is not in Scotland’s national interest.
The report warns Scotland’s finances are exposed to volatility and risk through the operation of the fiscal framework – the agreement between the Scottish and UK governments which sets out how Scotland is funded.
Reliance on forecasts for the annual budget and “substantial movement” in these forecasts are highlighted. The report notes these risks are “exacerbated” by the uncertainty of Brexit.
Committee convener Bruce Crawford said: “The Office for Budget Responsibility states that the referendum vote to leave the EU appears to have weakened the economy and predicts that a no-deal Brexit could have a severe short-term impact on the public finances and would be a lot worse than an orderly Brexit.
“The committee is strongly of the view that a no-deal Brexit would be damaging to the Scottish economy and public finances and, therefore, is clearly not in the national interest.”
Mr Crawford said Scotland’s budget is “becoming increasingly complex and subject to a greater level of risk”
There is concern about how no deal would affect Scotland’s biggest exports like Whisky. The Scottish Whisky Association has stated:
“A no-deal Brexit would damage our industry, by forcing cost and complexity into the production and export of Scotch Whisky, and must be avoided.”
The Scottish Whisky Association released a brief outlining some of their Brexit concerns. One of the major concerns is changes to the labelling of bottles as the Brief states:
“Product labels will need to display either an EU address of the producer or, if that is not possible, the relevant importer into the EU market. Currently many Scotch Whisky companies list a Scottish address to comply with this requirement.
A no-deal Brexit could necessitate at least two different labels from March 2019: one for products sold in the UK; and at least one (sometimes many more) for products destined for the EU.
This would increase costs because of shorter bottling runs and having to manage additional stock keeping units (SKUs). One SME in our sector considers the cost of this change to be in the region of £1.6m a year.”
Holyrood is due to debate the Budget Bill at stage one on Thursday. As a minority government, the SNP relies on gaining opposition support to pass the budget.