Scotland can NOT keep the Pound & does Scotland - England = France?(93 Posts)
When any country splits, just like any messy ‘divorce’, temperatures are raised and both parties are obliged to look after their own interests; so it is expensive, takes a lot of legal time to resolve each claim, and usually at the end of it, neither side comes out as clear winners.
In Czechoslovakia, the last European-ish split, it took from 1990 to 1993 to finalize and 12,000 bills of legislation. So while the SNP insists that a Scottish split from the rest of the UK takes around 18-months – even assuming ‘old enemy’ temperatures do not reach boiling point to unwind over 300-years of history/integration, it MUST take twice as long to separate us even if Holyrood or Westminster have nothing else more ‘constructive’ to do.
So assuming there really were irreparable differences, the key to a successful divorce is the recovery, and the Pound is key to that on BOTH sides and practically the Pound cannot be shared between Scotland and the rest of the UK, and I’ll explain why.
Very generally speaking the SNP is similar to left of centre Labour, and Scotland currently receiving from Westminster around 10% higher spending per person than the rest of us, is USED TO HIGH PUBLIC SPENDING - and Westminster, through large economic peaks and troughs, is used to paying it – so a Scottish parliaments main headache is how to SPEND their annual income, not how to MAKE it.
So if similar to every UK Labour administration, full of high unsustainable public spending, high on ‘social justice’ wage increases, but short of business problem awareness - as the economy weakens, to continue PAYING for the high fixed cost of the State – a Labour, or any other left of centre government, will either run up National Debt and /or put up everyone’s taxes, which drags on the economy further.
As business/employment incentives are not in their vocabulary, businesses taxes although higher now fall, companies go bust - and those who achieved ‘social justice’ for a while, no longer have jobs.
A Scotland under the SNP MAY NOT knowingly follow this negative approach to a business cycle, where a Scottish hated Conservative government has to come back to Westminster every now and then and get the Private Sector/Businesses/Employment back on their feet to pay the Public Sector bills - but ALL GOVERNMENTS CAN OVERSPEND as tax receipts to cover spending often depend on (unforeseen) global ‘events’ i.e. a banking crisis, or a rise/fall in the price of oil.
It is worth noting that we had both a banking/business crisis and a huge volatility in the price of oil due to events beyond our shores (an independent Scotland will need to rely on) which during the administration of the last Labour government alone, the price for Brent Crude Oil traded under $20 a barrel to over $140 a barrel – and currently trading around $100 a barrel.
So how can a high spending Scotland faced with the prospect of running an annual deficit spending economy (for whatever reason and as the UK did from 2001/2 onwards) BORROW from the international capital markets to FINANCE the overspend, if Scotland can not issue UK government bonds, better known as Gilts?
So surely without a Scottish currency and government bond market (at a credit rating/cost of borrowing yet to be decided by credit agencies and every banks interest rates will be set higher than the governments) as night follows day, the ONLY real option to cover their spending is ever higher taxes to everyone - including businesses needed to get the economy/tax receipts – putting Scottish businesses into a slow decline, as the UK saw with that ‘social justice’ combination, during the high interest rate 1970’s, many of whom e.g. British Car Companies, were never to cover.
And domestic interest rates and currencies although open to MARKET forces, are economically intertwined, especially in periods of excessively HIGH or LOW currency rates - where if a currency is too weak a Central Bank of Scotland may need to RAISE Scottish interest rates to firm the Scottish currency up, or LOWER interest rates if too firm. Again using the Pound and the last administration as an example, I can remember the $ to £ as high as $2.10 and as low as $1.37, before settling in a range in the $1.60’s.
In Conclusion re Scotland the Pound; the rest of the UK, can NOT risk having an independent country open to the similar to France’s socialist high Public spending, left of centre ‘social justice’ pay rises whether businesses can afford them, high taxation on wealth until it leaves the country, non business friendly country economic model, still needing to run a deficit economy with flat economic growth, unemployment still over 10% and not the first clue how to fix it.
And Scotland needs the flexibility of its own currency and government bond market to give the Scottish people independence from Westminster to carry out the NON Conservative core policies, which in 1979 when Labour passed the Conservatives an indebted country with businesses in terminal decline and the lowest income tax around 32%, a higher rate of 60 odd% upwards, with 90 odd% tax on income from investments. And last but not least, in 2010 when Labour passed the Conservative coalition an annual £157 bil a year overspend, manufacturing had fallen from 22% of our economy to 12%, with tax rises to the masses to come AFTER the 2010 general election, if they won it.
Maybe the left of centre SNP is different, but they will have to duplicate many of the UK’s fixed costs e.g. an army etc and UK history shows that overly high State Spending reliance is an unsustainable country/economic model - and if taxes do NOT rise substantially on all those receiving that spending - those getting a fat State today, passes the bill on to future generations which is NOT fair.
To leave the UK for the promise of spending ‘jam today’, or because of a Conservative Poll Tax decades ago when a left of centre Council Tax subsequently went up 110% plus over 13-years, or a recent ‘bedroom tax’ to try and free up social housing bedrooms for the 5 million Shelter said in 2009 needed one - is not only falling for someone’s propaganda, but extremely short sighted.
For an independent Scotland, where the two main political party’s SNP and Scottish Labour (or equivalent) keeps promising and bribing the electorate with ever increasing spending/welfare, with the economic ways to SUSTAINABLY pay for it all within a potentially volatile Scottish currency, interest rate and oil environment – it is a recipe for AT BEST a stagnant, high unemployment Scottish economy, similar to France, but they have enjoyed lower EU interest rates than the UK to fund their (over) spending, for the past 15-years or so.
“France: the new sick man of Europe”
P.S. _This was a view for rest of the UK’s citizens on why an independent Scotland CAN NOT be allowed to keep the Pound, why Scotland faced with a French economy we should not offer too many concessions to keep Scotland - and why WE should march on Westminster if our politician offers the UK’s silver to and independent Scotland on top of their(?) oil.
You may well be making good points, isitme, but all that bold and caps and the general tone sounds a bit hectoring. Not sure that's the way to persuade people thinking of voting 'yes', especially Labour voters who will probably resent your party political right-wing bias. (Labour voters have been identified as an important demographic that is swinging towards 'yes' at this late stage.)
I'm not in Scotland btw, just an anxious onlooker in England who will miss them if they wave good-bye!
NB higher public spending per head in Scotland reflects relative deprivation. Same in Wales, I believe.
I agree with edams.
You make some good points but it's lost in the presentation and some right wing bias.
The thing that is scaring me is that in two weeks Scotland could be divorcing the UK on what is at best a huge gamble on optimism. If you look at the long term numbers it simply doesn't stack up.
Salmond utterly scares me. He's a slick salesman who is wearing a large fur coat but no knickers. The entire campaign is style over substance and people are falling for it.
YY quite Niceguy, I don't know how Salmond's getting away with pretending there's any risk of the NHS being privatized in Scotland - he's the only person who has the power to do that!
edamsavestheday ..... no "hectoring", just stating the facts; there is no way economically/fiscally Scotland CAN, for Scotland's sake (never mind ours), continue to use the Pound.
And the country model they wish to follow, only has longevity during economic booms, or ends up with much higher taxation now, or National Debt followed by even more taxation/spending cuts later - possibly for another couple of generations.
I do not want Scotland to leave, both emotionally and due to the shit storm that will follow for everyone - so I would rather give it to them straight what happens to ANY government in the world following a welfare State Utopia promise by politicians now, that has to be paid for later - hardly likely to be mentioned by a Labour politician. lol
But if you want to persuade people you have to think about your tone. And your tone does come across as both hectoring and right wing. That's what your first two readers and telling you!
I clicked on the thread because I'm really interested in the issue, but I'm afraid I couldn't make it past a couple of the many paragraphs.
Is there somewhere I can read this in more digestible (and palatable) form?
Oh gosh this reads like something that was written for publication and rejected by a striong of editors.
Is you need to do more to tailor your material to your audience. And I say that as someone who also doesn't think that Scotland can keep Sterling.
Niceguy2 …. I am not looking for marks out of 10 re presentation, the issue of the Pound despite months of ‘debate’ for some reason that escapes me STILL seems under debate as no one has clearly explained in detail why Scotland cannot keep it – which happens when politics are conducting in TV debates with 2 minutes to answer questions and often rely on soundbites.
That is what the Scottish ‘YES’ vote relies on.
Furthermore in addressing the ‘numbers don’t stack up’ observation of yours, you are right, the RISKS for Scotland are huge, which is why I went into such detail, which people can take or leave – better still, those saying YES, telling me why they can use the Pound with their own government borrowing needs, rather than try and discredit those facts as being ‘too long’.
FYI to all, I have used the volatility of currency, interest rates and oil during the 2000’s as an example of what can happen, even during a global economic boom, to the income of an oil economy that had a Triple A rating, running a small budget deficit.
An independent Scotland of course will not have that AA or AAA rating and interest rates far higher than ours, which will affect Scottish government borrowing and Scottish businesses/consumer borrowing from their banks.
I don't really think it's up to you, is it? (unless you're David Cameron in disguise)
AgentProvocateur ...... the EFFECTS of a break up of the UK will be huge TO ALL, over many years, when governments should be concentrating on ALL OF US, not splitting the UK's assets/liabilities ..... and as there will be no way back, it is best a split is done for the right reasons rather than the ambitions of politicians.
schmee I think the cliffnotes for the above is basically:
Scotland are spending more money than they earn in tax. So they either need to borrow more money or raise taxes. Borrowing money is going to be hard because they'd be using the UK pound without a central bank or the ability to print their own currency. Plus if they welch on the debt (because UK refused to guarantee their spending) then markets won't exactly be lining up to lend to someone whose first act is to welch.
There really isn't a debate over the pound anymore in my opinion. The UK government from all parties have said no. And that's it really isn't it? Only Salmond is saying "Meh, they're lying".
The joint bank account analogy here perfectly sums up why i hate the stance.
So you want a divorce but you still want to use the joint bank account. But only until you choose not to. And you don't want to agree to any rules on spending because you're all independent now! Doesn't sound like a good idea to us? No thanks. And now you're accusing us of lying! Erm.........
And as for the oil? Of course it all hinges on that doesn't it? Without North Sea oil the SNP bid for independence would fail. Right now they have a cash cow to spend on whatever pet project they like. But oil runs out and is predicted to. The price is volatile and the SNP predicted prices for oil are extremely optimistic. It's a bit like getting a shit load of tax credits now. Sure right now financially it's easy to manage. But what about when you're older, the kids have left home and the tax credits stop? What you gonna do then when you're used to a certain level of living but the free money has stopped? Wouldn't it be good then to still be with your partner to spread the pain?
This is why the rest of the UK still heavily borrowing each year to pay our national bills, running a £1.4 tril National Debt, will be affected by Scotland's decision - and if the rest of the UK's currency and interest rates will be higher after the split, I suggest the SNP tells the Scottish people what THEIR independent interest rate and currency will look like.
“Get your money out of Britain: Global banks warn investors 'Yes' vote would be 'cataclysmic' for UK economy”
• Value of the pound could plunge by 15% in the event of a 'Yes' vote
• Japan's top bank Nomura advises investors to brace for sterling collapse
• Separation of union after over 300 years would be a 'cataclysmic shock'
• Jitters saw the pound fall to a 10-month low against the dollar yesterday
• Shares in major Scottish businesses also tanked amid a surge for 'Yes'
• Sterling continued to fall today as second poll puts referendum on knife edge
niceguy, thank you for the rational summary, I literally can't read all the bold and underlining. Isitme, you're coming across as if you're writing in green ink at home, do you know what I mean?!
isitme, one last try... if you want to persuade people, you have to talk to them nicely. Bold caps and brusque bossy statements are not persuasive, even for people who largely agree with you.
People are giving you really useful feedback, dismissing it with 'it's not about presentation' seriously misses the point.
Niceguy - that was fantastic. Thank you so much. And I apologise but I think I may be using your explanation/analogy in conversations to look informed!!! Thanks.
edamsavestheday ... my opening post had a main point about the the Pound, with surrounding information WHY running a deficit economy, which can happen to any government, but especially one with high spending NEEDS to have it's own currency and government bond market - hence for those just interested in the Pound explanation, I highlighted it in bold type.
The next time I used bold, I was basically being told Scottish Independence had nothing to do with me or my family, which was 100% wrong, so that reply was also in bold type - as I proved in my last post.
But I get your overall point.
The other thing that doesn't make sense to me is one of the first things Scotland will do after becoming independent is join the EU. Huh!?!?! You want to go your own way but then join a huge leviathan of countries where there's so many rules & regulations that literally no-one understands it.
Hang on a minute though. Firstly didn't Salmond early on claim that they wouldn't need to join. That they'd automatically be members! That turned out to be wrong didn't it? Even when the president of the EU said Scotland would not be accepted automatically guess what? Salmond said he was wrong and they would. Sounds familiar to the pound doesn't it?
Yes'er's think they can join within 18 months? Really? You need the unanimous support of all 28 member states to join. 28 countries!....I bet if you asked them all what colour the sky was, the answer would take more than 18 months to come back!
Plus Spain may have other thoughts about letting you join since that would give incentive to Catalonia to go it alone too. The new baltic states wouldn't be too much in a rush either since they had to wait years and promise to adopt the Euro.
Ahhh yes, the Euro. Back before 2008, the SNP were all for the Euro and didn't even want the UK pound. The pound sucked! Oh how the tune has changed now eh? Again, no mention of that eh Mr Salmond? Where's your love of the Euro now eh?
Except wait. Joining the Euro is a precondition of membership nowadays. I don't rate Scotland's chances of joining the EU without promising to switch to the Euro. Especially when Latvia, Estonia etc. all have had to. I can't see why they'd agree to special terms for Scotland that they've had to suck on themselves.
And what about the EU laws we've got opt outs on? You're not going to get them are you? The EU already hates the UK for having them. Those opt outs will stay with the UK and not iScotland.
Ditto with the our EU CAP rebate. You won't get that either but we still will and you'll have to pay towards it. Thanks Scotland. We'll enjoy spending that.
The really amazing thing is. Is that despite all the uncertainty. Salmond is standing there with his cheesy grin and dismissing all these problems as "scaremongering". It's not scaremongering. It's legitimate concerns you can't/won't answer.
Niceguy2 ….. For a Scotland politically needing independence, but still needing to anchor itself to more stable interest and currency rates than a small stand alone country trying to find it’s feet, I can see the attraction for Scotland/Salmond of joining the EU – after all it was the EU one-size-fits-all ultra low interest rates that allowed countries like Greece, Spain and the government in Dublin, to borrow to economic growth – only to crash and burn on that debt/spending later.
But re Scotland and oil, admittedly I have no idea what high portion oil revenue would be to Scotland, but similar to other countries around the world, as their main income from oil is priced in U.S.$’s, it might make sense to have a Scottish Dollar, pegged either solely to the U.S.$ , or to a small basket of currencies including Sterling and the Euro.
That way, unlike the UK or Euro zone, when virtually all commodity prices priced in U.S.$’s RISE for sometimes years get and imported into a country using potentially weaker domestic currencies, that $ based country does not import so much cost push inflation. Or Salmond could go the whole hog, and apply to become the U.S.’s 51st state. lol
But isn't that the funny thing Isitmebut?
Salmond is selling the whole "Scotland is one of the richest countries in the world" but then can't survive on its own without being part of the EU?
And sure you can be "politically independent" but remember your interest rates are being set in another country for whom Scotland is just a minor footnote of interest compared to Germany & France's interests.
Your currency is being printed elsewhere (still) and you are told how much VAT you can/cannot charge.
Your independent country's budget has to fall within a certain criteria or you get fined by the EU.
Doesn't that sound kinda like where they are today? Except now the SNP can replace the Bogeyman of Westminster with Brussels instead.
'But if you want to persuade people you have to think about your tone.'
Absolutely. As does the tone from the posh boys at Westminster. They have a long way to go to lose that pomposity and nerdiness that not only turns off the Scots, but the English too!
Totally agree with all those who've pointed out the financial realities which will descend on Scotland if they break away
Unfortunately, many "yes" supporters aren't listening; they really do seem to believe the Sainted Salmond's assurances, even though he's provided little detail and seems to believe that he only has to demand and something will be given (currency union, membership of EU, etc, etc)
This is entirely their choice, of course - just so long as they don't expect to come crying to the rest of the UK if it all goes wrong ...
I've thought long and hard Bout the issue of whether Scotland can or cannot use the pound.
My thinking is that the pound sterling is the currency and therefore property of the United Kingdom. Without Scotland the United Kingdom ceases to exist and we are left with a rump Uk that has no more legitimacy to having the pound than the breakaway Scotland does.
One thing that is certain is that you cannot have 2 segregate sovereign states sharing a currency. It was that failed experiment that has led Greece, Italy etc in such a bad economic diatonic as they went on a spending spree that was underwritten by Germany and the economically stronger Euro members.
But I think that the politicians are all panicking unnecessarily and the Nos will actually win this referendum. the reporting of the opinion polls has been deliberately scare-mongering as the polls that show a yes lead have failed to take into account undecided voters and they are more likely to vote No. So I believe that the Nos will win by a comfortable margin
I would like to see a solution to the West Lothian question which is very unfair to non Scots electorate
Apparently it's not only currency union and EU membership which Salmond feels are his for the asking ... Radio 4 have just reported that he claims to have spoken to the Queen and been told that she'll be very happy to remain Queen of Scots
Maybe the Scots would do well to think VERY hard about exactly where voting for this megalomaniac's proposals will take them??
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