BY 2014 IT IS likely that political debate across the UK will be centred on the independence referendum - and with a fair prospect that the independence cause will win.

Unfortunately for Alex Salmond, this is not the independence referendum battle on which he is engaged, but a powerful groundswell of opinion across the UK on changing our relationship with the European Union.

That shift in opinion will be driven by pressure within the Euro zone for greater fiscal and monetary integration to deal with the economic crisis about which the IMF eloquently warned last week. In its latest World Economic Outlook (WEO) it set out why it believed that notwithstanding the policy action taken thus far, the crisis had deepened “and new interventions have been necessary to prevent matters from deteriorating rapidly.” After declaring that risks of a serious global slowdown were “alarmingly high”’, the IMF went on to identify “a further deepening of the euro zone crisis” as one of the two most serious near-term risks now facing the world economy (the other being the US fiscal cliff).

As the pressures for a federal solution intensify, with greater fiscal and monetary control exercised from the centre, the UK authorities will have little choice but to offer a referendum on our EU membership, the terms of that membership being re-written without sanction or approval from the UK parliament.

The more that “the European question” comes to dominate UK politics, the more that the referendum on Scotland’s independence from the UK will come to be seen as marginal, if not irrelevant to the greater battle over fiscal and monetary sovereignty being fought, as it were, overhead. What will an “independent” Scotland gain if, as is more than possible, it will be subject to greater surveillance and control by Brussels over fiscal policy?

The irony is not lost on many within the SNP itself who have long championed “the Norway model”, that the two wealthiest countries in Europe in terms of GDP per head are Norway and Switzerland – the two countries that have opted not to become members of the European Union.

As the Scottish referendum draws nearer it is expected that scrutiny and analysis of an independent Scotland’s share of UK debt and deficit will intensify, together with scrutiny of her share of the costs of residual shared UK obligations and services. But the more contentious numbers with which an independent Scotland will have to deal are the costs – direct and indirect - of her continuing membership of an organisation intent on reducing her area of fiscal policy discretion – constraints that will make the Swiss and Norwegian examples all the more attractive as an alternative.

A none-too-discreet veil has long been drawn on these costs by the UK Treasury which has consistently refused to undertake a cost benefit analysis of the UK’s membership. Arguably as debilitating for the UK was the closing down of debate on the options for recalibrating our relationship with the EU.

Thirteen years ago, in 1999, I co-authored an analysis with Professor Patrick Minford for the think tanks Politeia and Global Britain. Entitled Britain and Europe: Choices for Change*, it set out to show that there were choices and why we would be compelled to face them, given the unsustainable nature of the EU’s economic and social model. That crisis has duly come about, in an altogether more dramatic form than I envisaged at the time. And I was delighted to see the other week that Professor Minford has continued to present and update his critique and more pertinently, his estimate of costs. He argues that the current costs of the UK’s membership far outweigh any benefits, and that the framework within Europe that is now evolving to cope with the Eurozone crisis is likely to impose even greater costs and pressures on the country. There is now a strong case for the UK to leave the EU.

His view is that the Eurozone crisis is likely to continue for a number of years, with the European Central Bank acting as a backstop until agreement is reached on a new institutional structure sufficiently reassuring to Northern Europe that its transfers to Southern Europe will have a good chance of being repaid.
“The institutional framework now being developed”, he writes, “implies a high degree of monitoring and intervention by creditor countries of debtor countries within the Eurozone. There will be controls on bank behaviour, targets for governments, and new financial taxes.

“While in principle this will take place within the Eurozone, there will be pressure to extend it to all EU countries on the grounds that other EU members could ‘undercut’ Eurozone arrangements. The UK will be seen as an offshore competitor with banks, businesses and governments in the zone that are burdened with these controls and regulations. Such competition will be argued to be unfair under the Single Market, for which Qualified Majority Voting applies. It would be easy to extend these things to the UK by majority vote. At best, the Eurozone will be obsessed with the euro crisis for the coming decade, stalling any progress in liberalising markets and in increasing competition, things that could have lessened costs of membership to the UK. This tendency for the euro to strengthen the drive towards excessive regulation as a way of bolstering the single currency was something widely foreseen at the start of the euro. But the crisis is likely to make this much stronger.”

For the UK this prospect is extremely damaging. Even without any change in the status quo, the economic costs to the UK of the EU are substantial. Minford now estimates these at between 11 and 38 per cent of GDP. The attractions of leaving the EU for specific Scottish industries such as fishing are evident enough. So, too, is the freedom to set taxes at rates and levels best suited, as in Switzerland’s case, to attract cross-border capital and to maximise inward investment. Indeed, Scotland would enjoy far greater freedom outside the EU to arrive at a level of Corporation Tax that would give her a real competitive advantage in world markets and free from the risk of the EU, desperate to protect its inefficient economic model and billowing welfare costs, moving in to shut down tax competition.

(*) Britain and Europe: Choices for Change, Bill Jamieson and Patrick Minford, Politeia and Global Britain publication, 1999,