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Scotland can NOT keep the Pound & does Scotland - England = France?

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Isitmebut · 09/09/2014 11:14

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”
www.theguardian.com/world/2014/jan/14/france-sick-man-europe-economy

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.

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edamsavestheday · 09/09/2014 12:31

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!