Claim Scotland needs a deficit of 3% or lower to join EU is Mostly False

Scottish Labour MP Ian Murray spoke in the House of Commons about the prospect of an independent Scotland joining the EU.

The Edinburgh MP asked Scottish secretary Alister Jack about Scotland’s deficit and how it would meet EU entrance targets. Jack agreed and stated that under the Maastricht criteria Scotland’s deficit would have to reach three per cent of GDP or lower

Ferret Fact Service looked at this claim and found it Mostly False.

Evidence

The issue of Scotland’s deficit has been a major talking point regarding the potential for the country to join the EU after a vote for independence.

The deficit is the difference between government day-to-day spending and the revenue it brings in.

Ian Murray’s claim that Scotland’s deficit is at eight per cent comes from the latest Government Expenditure and Revenue (GERS) report. This shows Scotland’s estimated deficit in 2018-19 at 7 per cent of GDP, if a geographical share of revenue from the North Sea oil industry is included.

The current deficit figures are based on the constitutional arrangement that is currently in place, and if Scotland were to become an independent country it is likely that different economic and political decisions would be made, so GERS figures show us relatively little about what Scotland’s long-term financial position would be. However, they do give a credible picture of Scotland’s current financial position.

But would a deficit as high as seven per cent stop Scotland from joining the European Union?

The first step for any country wishing to join the European Union is to comply with a set of standards broadly set out in the ‘Copenhagen criteria’, which cover stable governance, democracy, protection for human rights, a market economy, and the ability to adhere to the EU’s political and economic aims.

Candidate countries then have to fulfil the requirements in the 35 different policy areas or ‘chapters’. These are negotiated with the EU and each chapter is not signed off until current EU members are satisfied with a candidate country’s progress. The country then moves on to its transitional agreement and, once ratified, will become a member on an agreed date.

For Scotland, the route would be the same, although it is likely that many of the criteria would be fairly easily fulfilled given it has been part of a member state since 1973, when it was the European Communities.

All new members of the EU are formally required to work towards membership of the Euro and to reduce budget deficits to 3 per cent or less as part of the rules set out in the Maastricht Convergence Criteria.

If a member country does not comply with the convergence criteria rules on public deficits, the European Council has the option to enforce policies to reduce the deficit, known as the Excessive Deficit Procedure (EDP). If the country uses the Euro, sanctions may be applied, but every EU country is expected to keep their deficit in line with the 3 per cent rule. A deficit of under three per cent is a prerequisite of joining the common currency.

However, new members can also negotiate transition periods allowing them more time to meet specific EU rules. There are also no formal timescale that countries must work to as part of the convergence process.

Therefore, a deficit of three per cent of GDP or lower is not an official requirement for entry to the EU. The EU could grant an independent Scotland a transition period that would allow the country to join the EU with an initial budget deficit of more than 3 per cent, then apply pressure to ensure Scotland works towards achieving it.

There is precedent for countries with deficits higher than the three per cent limit being allowed into the EU. Croatia joined in 2013, when their deficit was at 5.3 per cent of GDP. The EU launched EDP measures and Croatia has subsequently been able to reduce its deficit.

Using the current GERS figures, Scotland’s estimated deficit of seven per cent would have to be reduced to comply with the EU’s rules, but a deficit larger than 3 per cent would not necessarily prevent an independent Scotland from joining the EU.

Ferret Fact Service verdict: Mostly False

Ian Murray’s claim that any country joining the EU must have a deficit of three per cent or below is misleading. While EU rules state that member countries should keep their deficit below that threshold, it is not a specific condition for new candidate countries. It is instead intended as a measure to ensure members comply with EU “budgetary discipline”. Official estimates show that the difference in spending and revenues for Scotland, or notional ‘deficit’, is seven per cent of GDP, not eight per cent.

Ferret Fact Service (FFS) is a non-partisan fact checker, working to the International Fact-Checking Network fact-checkers’ code of principles. All the sources used in our checks are publicly available and the FFS fact-checking methodology can be viewed here. Want to suggest a fact check? Email us at factcheck@theferret.scot or join our Facebook group.

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