Introduction

The speed with which a newly independent Scotland would be able to muster its full defence posture would be influenced significantly by the nature of post-referendum negotiations between Edinburgh and London.  What should Scotland reasonably seek to secure as part of its share of UK military assets?  What factors should be borne in mind as negotiators representing Edinburgh and London collaborate in trying to agree on this issue?  To what extent could agreement be reached?

The subject of ‘Scotland’s defence’ is currently saturated by pre-referendum politicking but it is important to note that in the event of a vote for independence, Scotland and the UK would have everything to gain from cementing agreement on military asset apportionment in as swift and cordial a manner as possible. Ensuring that a newly independent Scotland was able to mount its defence swiftly would be as much in London’s interests as it would Edinburgh’s.

A key theme of this report is that whilst the legal principles applied to post-referendum negotiations would be of great importance, of equal importance would be that maturity and recognition of shared interests and values define the approach of, and interactions between, Scottish and UK negotiators.  Those characteristics – perhaps more than the legal principles applied – would have the greatest bearing on how mutually satisfactory the asset apportionment process was.

The House of Lords Select Committee on the Constitution has made the following public declaration:

‘…in the event of the Scottish independence…the UK’s assets and liabilities would fall to be apportioned equitably between Scotland and the remainder of the UK, subject to negotiations. An exception to the latter point is that Government assets fixed in Scotland would become assets of the new Scottish state.’ [1]

This acknowledgement paves the way for a constructive discussion about asset apportionment in the event of a Yes vote.  This report attempts to highlight some issues of importance and to draw attention to how both sides can benefit from a levelheaded and realistic negotiation.  This is, admittedly, an analysis which examines things principally – though not exclusively – from a Scottish perspective.

This report is not driven by any partisan stance on Scottish independence.  It is borne instead of a rational appreciation of the fact that Scotland may vote for independence this coming September and that if it does, it would be remiss of the UK’s political community not to have given serious thought to what should follow.  Planning for possible outcomes is an essential element of judicious politics; not supporting those outcomes is no excuse for neglecting to contemplate and prepare for them.

Given that it would benefit both London and Edinburgh to see as seamless a ‘defence transition’ as possible in the aftermath of a Yes vote, it may not be wise to leave the first tentative discussions on military asset apportionment until after the referendum.

Asset apportionment – key issues

1. Calculating asset apportionment between Scotland and the UK.

The least controversial method of calculating ‘equitable’ asset apportionment between Scotland and the UK would be to designate Scotland’s ‘asset inheritance’ by means of percentage population share.  In utilizing this method, we can assume that in the aftermath of a Yes vote, London and Edinburgh would enter asset apportionment negotiations under the assumption that Scotland should inherit an 8.4% population share of UK defence assets.  For clarity, a notional cash value should be attached to this ‘population share’.

2. In military terms, what would Scotland inherit?

The Ministry of Defence’s Annual Report and Accounts for 2012-13 lists the UK’s total asset value at £92.28 billion.[2]  Based upon a population share of this sum, we can assume that a newly independent Scotland might expect to inherit a notional £7.75 billion worth of UK military assets.

What this means in practical terms is that in looking to build its own defence posture in the aftermath of a Yes vote, the Scottish government should approach transition negotiations with the UK government looking to secure the transfer of military equipment, infrastructure and – where appropriate, cash – to the value of £7.75 billion.

3.  What would Scotland look to secure in asset apportionment negotiations?

When contemplating Scotland’s notional £7.75 billion ‘defence inheritance’ from the UK, it is entirely possible that after the first – and all-important – round of discussions, Scotland may still be holding around £4.7 billion ‘credit’ from its original £7.75 billion.  If the UK government would not agree to transfer from the UK inventory further equipment requested by the Scottish government, the Scottish government could expect to receive some – or all – of that remaining sum in ‘cash value’ so that it could procure desired equipment elsewhere.  This observation is expanded upon below.

The House of Lords Select Committee on the Constitution acknowledges that in the aftermath of a Yes vote, ‘assets fixed in Scotland would become assets of the new Scottish state.’  If this acknowledgement is to stand, it is reasonable to assume that MoD facilities in Scotland – including the Faslane Naval base, RAF Lossiemouth; Leuchars in Fife; Craigiehall, Redford and Dreghorn barracks in Edinburgh and Glencorse in Midlothian – would all ‘become assets of the new Scottish state’.   Precisely what else would fall under this designation would need to be clarified.[3]

In budgeting to meet the costs of those ‘fixed assets’, Scottish planners would have to ascertain their monetary value.  However, this may prove to be a challenge.  The UK government has neglected to publish an up-to-date national asset register; nor does the MoD demonstrate any willingness to divulge its own ‘regional’ spending statistics.

Based upon the most recent official UK government figures (2006-7), MoD facilities, dwellings and property in Scotland – including Faslane RAF Lossiemouth; Leuchars; Craigiehall, Redford and Dreghorn barracks in Edinburgh and Glencorse in Midlothian – were valued at roughly £1.43 billion. [4]   Whilst this figure is almost certainly obsolete – indeed, it may be considerably lower now, given the stark nature of the contemporary economic landscape – if we continue to use it as a guide we can speculate that the Scottish government’s purchase of those assets from its £7.75 billion military ‘inheritance’ would make little dent in that sum.  Having transferred those ‘fixed assets in Scotland’ from UK to Scottish ownership, this ‘inheritance’ would still stand at some £6.32 billion.

Aside from paying to maintain – for future use – those ‘fixed assets in Scotland’, the Scottish government would also look to prioritise the transfer of selected military aircraft and ships from the current UK inventory, in agreement with the MoD.  The Scottish government has in fact earmarked a number of assets which it would seek to negotiate for transfer to Scottish service in the event of independence.  Those assets include: two Type 23 frigates (£149.6 million); four Sandown minesweepers (£133.7m); one Bay landing ship dock (£128.7m); two offshore patrol vessels (£26.6m); six patrol boats (£1.2m); 16 Typhoon fighter jets (£976.5m); six Hercules planes (£129.4m); and six Lynx helicopters (£75m). The combined monetary values attached to these items – factoring in value depreciation – amounts to around £1.62 billion. [5]

Combining the £1.62 billion for the transfer purchase of aircraft and ships with the £1.43 billion cited earlier for the purchase of the ‘existing fixed assets in Scotland’ brings a total sum of £3.05 billion.  It is thus interesting to note that even after negotiating the transfer of those assets from the MoD, Scotland would still be able to draw upon a notional sum of £4.70 billion from its initial £7.75 billion ‘defence inheritance’.

In alluding to this scenario, The Scotsman has described how ‘the rest of the UK would owe an independent Scotland almost £5 billion in defence assets or cash’.[6]  This observation – whilst perhaps a little crass – represents an accurate portrayal of the situation which may follow the intial apportionment negotiations over ‘fixed MoD assets in Scotland’, and those UK vessels and aircraft earmarked by the Scottish government as ‘desirable for transfer’.

The remaining £4.70 billion of ‘credit’ would form the basis for Scottish negotiators to negotiate the transfer of other desired equipment from UK service to Scottish.  This sum – if some or all of it were to be released to Scotland in ‘cash value’ rather than equipment – would provide the affordability for Scotland to procure preferred equipment elsewhere, if agreement could not be reached with the MoD.

4.  Scotland’s military priorities should be acknowledged in asset negotiations.

An independent Scotland’s security and defence priorities would be very different from those of the UK.  It would make no sense for Scotland to try to recreate what the UK currently has and does.  This should be recognized in the event that military asset apportionment negotiations are required.  Previous Westminster committees have acknowledged that a newly independent Scotland would be offered a ‘proportional share’ of military equipment as part of its share of UK inherited assets (UKIA): assets such as Typhoon jets have been mentioned in such observances.[7]

However, whilst Scottish negotiators should negotiate reasonably, it would not be unreasonable for them to refuse equipment that is not deemed appropriate for, or superfluous to, Scotland’s defence requirements.  In the event that such negotiations were to take place, Scottish negotiators should be firm in looking to transfer only what is deemed to be required for Scotland’s needs.  A newly independent Scotland should not be pushed towards ‘military solutions’ which are not in Scotland’s best interests.

5.  Asset value calculations must be realistic.

In any future asset apportionment negotiations, the cash value set against equipment being considered for transfer from UK to Scotland must be calculated carefully.  All equipment should be valued at its current, depreciated cost and not original ‘shelf’ cost.  This is most important: depreciation – of original cost as well as of original technological novelty and utility – must be acknowledged and incorporated into all valuations.  

6.  Where appropriate, Scotland could look to transfer value rather than equipment.

In cases where equipment is not deemed to be necessary or effective, Scottish negotiators should seek to transfer value (i.e. cash equivalent) rather than equipment.  This option might be especially relevant when it comes to some of the ‘big ticket’ items in the MoD inventory which Scotland would have no interest in – nuclear weapons, aircraft carriers and submarines are ready examples.  It should be borne in mind that whilst a newly independent Scotland would have no interest in such military assets, Scottish taxpayers have nonetheless made sizable contributions towards the research, development and construction of those assets.  So, in lieu of allocation of those assets to Scotland, it would desirable to have their value traded off against those which Scotland would need.

Likewise, whilst it has been widely acknowledged that a newly independent Scotland would be offered a ‘proportional share’ of UK military assets, there has been no shortage of flippant commentary suggesting that strict apportionment may see Scotland ‘inheriting one-third of a frigate’.  Such an approach is unhelpful and it significantly belittles the significance of any negotiations which may take place.  In circumstances where the MoD might dispute the transfer of particular assets to Scotland, then the cash value of the equipment under dispute should be allocated to Scotland, thus allowing Scotland to procure the contested item elsewhere.  Such an understanding would – hopefully – ensure that the desires of both sides are met.

9.  It makes economic sense to ensure a consensual approach. 

The UK is the largest defence spender in the EU but it is being forced to reduce its spending. This downsizing is a considerable challenge; indeed, Peter Quentin of the Royal United Services Institute has described the provision of affordable defence as ‘one of the UK’s thorniest issues’.[8]

MoD negotiators should be mindful of this in the event that they engage in asset apportionment negotiations with Scotland.  It should be remembered that Scotland is a sizeable ‘military spender’ within the UK; its 2011-12 contribution to UK defence spending was around £3.3 billion, an outlay which exceeds the annual military expenditures of both Denmark and Finland.[9]  It is significant to note that if Scotland becomes independent, this sizeable annual contribution will be lost to the UK.  What this means is that if the UK was to try to maintain the equipment levels it currently has, it would have to match the current ‘Scottish contribution’ in its annual defence spend, and from a diminished tax base.  This scenario does not seem at all likely.

If Scotland votes for independence, the UK would have to downsize its military.  It would thus make perfect economic sense to use asset apportionment negotiations to reallocate the UK military in ways which would meet the UK’s readjusted needs as well as Scotland’s.  Indeed, prudent negotiations might also lead to efficiencies which could be mutually beneficial.  Agreeing to a variety of shared arrangements – for example, joint fast jet maintenance and various types of training – would make economic sense.  It would also, importantly, reflect and enhance the relationship between Scotland and the UK.

10.  It makes military sense to ensure a consensual approach

Certain commentators seem intent on asserting that the closeness and shared interests of Scotland and the other component parts of the UK will suddenly diverge if Scots vote for independence.  However, this is an inaccurate and unhelpful projection.

It is worth emphasising that London would have nothing to gain from seeing a newly independent Scotland – its closest neighbour and second-largest trading partner – somehow idling in the aftermath of a Yes vote.  London’s political, economic and security interests would be best served by seeing Scotland ‘up and running’ as quickly as possible; this includes ensuring that a Scotland-sized ‘security gap’ does not open up to the north of the English border.

It is wrong to suggest that Edinburgh and London would cease to share security interests and concerns, simply because Scotland had voted democratically for independence.  There would remain a close symbiosis between Scotland and the UK and threats to one capital would certainly represent threat to the other.  A cooperative approach to addressing those threats would make good sense, for a variety of reasons.

Ensuring that a newly independent Scotland was able to muster its defence as quickly and seamlessly as possible would thus be in London’s interests as much as Edinburgh’s.  Seeing this happen would depend greatly upon both sides working hard to reach a swift and mutually satisfying conclusion when negotiating the apportionment of UK military assets.

11.  The UK government should consider showing a fuller asset breakdown

Given the considerations, it makes sense for the UK government to be more compliant in allowing the Scottish government to make ‘military contingency plans’ for possible Scottish independence.  This needn’t be done in the public sphere, so that the UK government ‘loses face’ or is criticized for ‘making concessions’; it can be conducted behind closed doors, secluded from the heated partisanship which is coming to the fore ahead of September’s referendum.

As this point, things are not being conducted at the governmental level with the maturity suggested by the signing of the Edinburgh Agreement.  A judicious political approach would see the UK government acknowledging that whilst it does not support Scottish independence, it would be foolish in the extreme not to prepare for it.  It is worth repeating that facilitating the quickest possible transition for an independent Scotland’s military forces would be in London’s interests as much as Edinburgh’s.

At this current point, the Scottish government is greatly hindered in its attempt to conceptualize what a Scottish Defence Force might look like due to the fact that the UK government has neglected to update the national asset register, and because the MoD remains intransigent on divulging its own ‘regional’ spending statistics.  This is not helpful.

Conclusion

A newly independent Scotland would look to secure an 8.4% population share of UK military assets.  This arrangement would see Scottish military planners presiding over a multi-billion pound ‘startup fund’ which they could use to seek the transfer of equipment, infrastructure and cash value for the development of a Scottish Defence Force.  Key issues would be how quickly Edinburgh and London could reach agreement on military asset apportionment, and precisely what Scotland would be left with at the end of those negotiations.

Military asset negotiations would be complicated and they would not be isolated from simultaneous negotiations on a range of other issues.  However, those complications need not be overly challenging; nor would they have to result in dissatisfaction on either side.  A key emphasis of this report has been that whilst great significance would be attached to the legal principles which would apply to post-referendum negotiations, equally significant would be how far maturity and recognition of shared interests and values infused those negotiations.

If these characteristics were to prevail on both sides, the most difficult issues could certainly be resolved.  It is important to remember that an unreasonable, unyielding approach – or succumbing to retributive political posturing – would serve no-one’s interests.  Given the delicate complications involved, and given how it would suit both parties to facilitate as seamless a ‘defence transition’ as possible in the aftermath of a Yes vote, it may not be prudent to leave the first tentative discussions on these issues until after the referendum.

References

[1] See the House of Lords Select Committee on the Constitution, ‘Scottish independence: constitutional implications for the rest of the UK’.  Call for Evidence, 23rd January 2014 at:
http://www.parliament.uk/documents/lords-committees/constitution/Scottish%20independence/Call-for-evidence-Scottish-Independence-inquiry.pdf
[2] ‘Annual Reports and Accounts 2012-2013’.  Ministry of Defence, 2013, p. 26 at:   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/222874/MOD_AR13_clean.pdf
[3] We can also assume that the Cape Wrath Training Area, and the RAF facility on Benbecula would also constitute ‘assets fixed in Scotland’ which ‘would become assets of the new Scottish state.’  An independent Scottish government may well wish to negotiate with the MoD over continued use of those facilities. 
[4] Channel 4 News, ‘Could Selling off Britain’s Assets Cut the Debt?’  7th March 2011 at: http://www.channel4.com/news/could-selling-off-britains-assets-cut-the-debt
Also, David Maddox, ‘Scottish independence: “£5 billion defence assets” claim’.  The Scotsman, 9th February 2014 at: http://www.scotsman.com/news/politics/top-stories/scottish-independence-5bn-defence-assets-claim-1-3299615
[5] Scotland’s Future.  Your Guide to an Independent Scotland.  Scottish Government, 2013, pp. 239-242. Value of military items (and numbers of items) calculated on the basis of an array of Parliamentary Questions, available online:
T23:  http://www.theyworkforyou.com/wrans/?id=2013-03-22b.145094.h#g145094.q0
River Class: http://www.theyworkforyou.com/wrans/?id=2013-01-17b.131197.h&s=%28%28section%3Awrans%29+estimate+the+value%29+speaker%3A11189#g131197.q0
Typhoon/Herculeshttp://www.theyworkforyou.com/wrans/?id=2013-07-04c.162997.h#g162997.q0
http://www.theyworkforyou.com/wrans/?id=2013-07 17a.165317.h&s=%28%28%28%28%28section%3Awrans%29%29%29%29%29+speaker%3A11189#g165317.q0
Hunt MCM:  http://www.theyworkforyou.com/wrans/?id=2013-03-22b.145094.h#g145094.q0
Lynx: http://www.theyworkforyou.com/wrans/?id=2013-09-04a.166267.h&s=%28%28section%3Awrans%29+lynx%29+speaker%3A11189#g166267.q0
http://www.theyworkforyou.com/wrans/?id=2014-01-27a.184325.h&s=%28pursuant+to%29+speaker%3A11189#g184325.q0
[6] Maddox, ‘Scottish independence: “£5 billion defence assets” claim’.
[7] See for example The Defence Implications of Possible Scottish Independence. House of Commons Defence Committee, 6th Report of session 2013-2014, p. 25.
[8] Peter Quentin, ‘The British Army Reserves Judgement’. RUSI Newsbrief, 13th March, 2013 at: http://www.rusi.org/publications/newsbrief/ref:A514077C33D4E6/#.Ul_jgFCkpsU
[9] See ‘Government Expenditure & Revenue Scotland 2011-2012’.  The Scottish Government, March 2013 at: http://www.scotland.gov.uk/Resource/0041/00415871.pdf   Section 2, Table 2.5.
See also Crawford & March (2012).  For Scandinavian spending patterns, see Gerard O’Dwyer, ‘Norway Bucks Trend as Neighbors Curb Spending’.  Defence News, 24th October 2012 at:  http://www.defensenews.com/article/20121024/DEFREG01/310240001/Norway-Bucks-Trend-Neighbors-Curb-Spending   Gerard O’Dwyer, ‘Strong Norway Economy Allows $100m Defense Budget Boost’.  Defence News, 16th October 2012 at: http://www.defensenews.com/article/20121016/DEFREG01/310160007/Strong-Norway-Economy-Allows-100M-Defense-Budget-Boost
———————————————————————————————————————————————————————————————–* A shorter version of this report was submitted to the House of Lords Select Committee on the Constitution, 28th February 2014.  This submission has been accepted and published by the Committee.

Dr John MacDonald is Director of the Scottish Global Forum