So, no share of national debt for an independent Scotland then..

[ItsAllGoingToBeFine]

Uk treasury has recently announced that it will guarantee the entire debt in the event of independence.

Osborne is to definitively announce there will be no monetary union (or will he?)

Scottish Government has already pointed out that if the UK takes this position there would be no reason for them to take on a share of the national debt.

But surely Osborne et al are cutting off their noses to spite their faces? Just one example - rUK gets loads of oil/gas from Scotland, surely they would have to pay more if it were in a different currency?

[Isitmebut]

Much of Scotland’s higher spending per head may not have been financed DIRECTLY by oil, but you ain’t done too badly for voting Labour.

www.martinfrost.ws/htmlfiles/scotnews09/090112-cuba.html

Scotland on a par with Cuba for state largesse
Jason Allardyce January 11, 2009

"Welcome to McCuba. Scotland is set to become the third most state-dependent country in the world. Soon Havana and Baghdad will be the only capitals that rely more on public spending than Edinburgh, according to economic forecasters.

They say the uneven flow of government funds to north of the border is putting an “unfair burden” on English taxpayers. They predict that public spending will soon rise to the equivalent of almost 70% of Scotland’s gross domestic product.

The forecasters — from the Centre for Economic and Business Research (CEBR), a consultancy that advises the UK government — warn in a report that the burgeoning Scottish public sector is “unsustainable”.

The CEBR paper, commissioned by The Sunday Times, shows that the annual public sector wage bill in Scotland has risen by 55% to £12 billion since the Scottish parliament was established in 1999, with nearly one in four working for the state. A further £2.3 billion is spent annually on pensions for public sector workers, whose ranks have grown by nearly 50,000 in the past 10 years.

The report will renew concerns among English taxpayers about the preferential treatment enjoyed by the Scots, who benefit from free personal care for the elderly, no tuition fees and free school meals.

The extra level of funding per head that Scotland receives has grown from £828 in 1999 to £1,644. In 1999 the state spent £4,993 per head in Scotland and £4,165 in England. Now Scotland receives £9,179 and England gets £7,535.

Last year public spending was the equivalent of 43% of GDP in England and 56% in Scotland, placing Scotland 20th on a table of 160 countries most dependent on state spending, and England 67th.

The CEBR forecasts that the Scottish figure will rise to 67% by 2012-3, while the UK will rise to 48%. This would place Scotland in third place in the league of countries most dependent on state spending.

John Blundell, director-general of the Institute of Economic Affairs, said: “Scotland has been heading this way for an awfully long time. Adam Smith must be rolling in his grave.

“My impression is very much that Scotland got into a vicious circle of creating more and more benefits and more government jobs"


Isn't that what happened to Greece; why should England underwrite Scotland's policies now and future spending, later?

[Isitmebut]

And this is the bit that REALLY upsets me, when Salmond brags about Scottish services re Englands.

The extra level of funding per head that Scotland receives has grown from £828 in 1999 to £1,644. In 1999 the state spent £4,993 per head in Scotland and £4,165 in England. Now Scotland receives £9,179 and England gets £7,535.

As we found with Brown, any Scottish fool of a politician can either spend more money, or money the State can't afford, for electoral gain.

[niceguy2]

It's incredibly hard to know who is telling the 'truth'. I suspect it's more a case of lies, damn lies and statistics most of the time.

However there are two things I'm finding hard to swallow with the Yes campaign.

1. If you want independence why retain the pound? How can you possibly seek to be independent yet tie yourself to the country you just divorced economically with the same currency?
   
   It's a bit like a wife divorcing her husband but wanting to keep the same shared bank account with each putting their money in. It's just going to end in disaster isn't it?
   
   
2. The yes campaign seems to be cherry picking the bits they want and ignoring the bits they don't want. So for example we'll divorce, keep the pound but let's not talk about the obligations we'd have to agree to. We'll join the EU but not the Euro even though it's a condition of joining.
   
   
   Right now they are campaigning based on nationalism. Heart over reality. And anyone suggesting that in reality there will be problems is portrayed as negative campaigning and bullying from Westminster.

[Isitmebut]

Niceguy2…the truth about the truths, is apparently that NO ONE knows, and that is scary.

Here is a post I prepared earlier.

So all three main UK political parties insist that an Independent Scotland will have it’s own currency and control it’s own interest rates, rather than have interest rates set by the BoE, where similar to the problems of a ‘one rate fits all’ EU, what might be right for England, may not be right for Scotland – which could lead to restrictive, or overly loose money e.g. inflation.


And this also right for the UK, as if Scotland, used to spending more money per head that the UK (see below), gets itself in trouble, it needs to sort itself out.


What I’ll add is that if we get into some asset/liability bun fight with Scotland, I’d suggest versus the oil argument that Scotland funded the exploration and continual cost of lifting (a-hem), if they were not under the BoE financial umbrella for decades, where would there interest rates have been?


And could the UK Treasury make a claim for the difference for that financial umbrella?


And my evidence of this potential Scottish Liability is if you look at any of the non core EU countries interest rates BEFORE they joined the EU and financial umbrella of the European Central Bank i.e. Ireland, Greece, Portugal and Spain (never mind the smaller East Europeans), they were SUBSTANTIALLY higher than after they joined.


Moving on from here, Scotland now needs to figure out, with all the theoretical benefits of financial independence, where they can decide the exchange rate of the Scottish Groat, and what interest rate is neither too stimlautive or loose for its OWN economy – where the markets would price Scottish interest rates on the international markets e.g. for Scottish government bonds, and decide Scottish domestic rates from there IMO.

[TheresNoMeWithoutYou]

What I am taking from camerons campaign is that he is wanting rid of Scotland whilst pretending otherwise. Everything is loaded to piss people off and divide them. Its not about unity at all. The intelligence of those running the campaigns (both sides) is denying us fair information and good debate.

[HollyHB]

TheresNoMeWithoutYou > Everything is loaded to piss people off and divide them.

That's about the size of it, there is no real advantage to fiscal union except vote catching. And fiscal union is a separate issue from using the pound and the only reason to conflate the two issues is vote catching (which both sides do).

The real options are:

1. Use of Sterling without monetary union (like Ecuador does with the US Dollar). This is equivalent to an interest-free loan equivalent to the amount of paper money in circulation.
   
2. Scottish Pound at a maintained par (similar to the Bahamas/USA currency or the postwar Irish Pound). The financial pressure of maintaining par forces you to shadow the interest and tax rates of the other country whether you want to or not.
   
3. Scottish Pound floating like the Norway Krone. The cost is that, to stay in the EEA, you have to follow most (not all) EU rules but don't get a vote or a say in what the EU rules should be.
   
4. Scottish pound floating, but not part of the European Free Trade Area. You don't have to follow EU rules but you do face huge tariff barriers.
   
5. Adopt the Euro and join the Eurozone as a fully-fledged EU member.
   

Those are the options. It's impossible to have monetary union with a country that doesn't want monetary union.

[Isitmebut]

Theresnomewothoutyou……quite the opposite.


Cameron wants the UK to remain intact, the majority of the Conservative Party and people of England do – but the SNP attempt to tell the Scottish people ‘we will get what WE want, despite if it’s right for England’ AFTER you vote ‘yes’, is disingenuous at best.


Cameron and the Conservative Party admittedly have the electoral boundaries stacked again them, resulting in Cameron needing to be several points AHEAD of Labour in the polls, just to get a parliament majority of ONE – so it may appear that it is in their interest for Scottish Independence, than Labour, who only need around 35% of the UK vote to get a parliamentary majority.


But what Osbourne has said, based on the sovereignty and financial lessons of the EU before and after the 2007, makes complete sense both countries.


The ‘one currency and one interest rate, fits all’ within the EU, was always going to be a disaster, as how can the same rates be right for industrialised Germany AND a deck chair economy like Portugal, or a small East European country getting around stone roads via a donkey?


So how can an independent Scottish economy, where Salmond in total control of Scotland’s budget/spending decides to rub English noses into their spending per head even more, and/or gets into huge bank/financial debt - be then expecting to be bailed out by the English parliament and/or Bank of England???


No matter if the Queen of Westminster wants Scotland to say, the English parliament has to look after ENGLISH taxpayers interests, while the Scots do what is best for them.


Scotland should do what it always does, just blame the Conservatives and get on with voting with the FULL facts (of the currency and interest rate issues at least) in front of them.

[Isitmebut]

HollyHB....there will not be the uses of Sterling, as whatever hair brained financial hocus pocus Scotland adopts (using your examples) will influence Sterling, so lets move on.


So the rest look to me as an Independent Scotland, not actually independent at all, and susceptible to potentially wild currency moves.


You don't mention your views on what international country might be the benchmark for Scottish government bonds, why not, as the currency is only a part of Scotland's capital markets new positioning in the world.

[SantanaLopez]

'No debt then' is a shocking position to take.

There's no way iScotland would be admitted to the EU.

iScotland would be a joke internationally, and the interest rates on any loans would be crippling.

[ItsAllGoingToBeFine]

If Scotland is not entitled to a share of the currency, why on earth should it take on that currencies debt?

Without sharing its currency rUK would hold the entirity of the debt, and this debt would no longer be backed up by oil,as Scotland would be happily outside a currency union.

[SantanaLopez]

Morally, yeah, but if Scotland refuses to take its share of debt,

a) there will be no negotiation over assets
b)the interest rates charged to an independent Scotland would be crippling

put a) and b) together and you have a big problem.

Then issue c) EU membership.

[ItsAllGoingToBeFine]

[Idly wonders if their are international mediators who oversee the breakup of countries]

[SusanneLinder]

www.adamsmith.org/news/in-the-news/sams-comments-on-scottish-independence-and-sterling-widely-featured

I never wanted a currency union anyway. Suits me fine to be completely independent.

However even according to Mark Carney, Governor of BoE it would make sense to have a currency union, as we do trade with each other. Difficulty for UK govt is that Scotland could leave this union at any time, make UK govt economy unstable.

[niceguy2]

Unfortunately for iScotland/Salmond the supposedly independent advice from the BoE is that if you want monetary union then both have to sign up to strict conditions. Ie. iScotland would have to be bound by very similar tax/spending policies and underwrite our banks etc. Something which the SNP seem not to want to do.

Now the civil service have also come out against monetary union saying pretty much the same thing and advising the govt directly against it.

It just seems crazy for the rest of UK to risk picking up the tab for iScotland when there's no benefit to us at all.

[Isitmebut]

Niceguy2….an excellent summary, I wish I’d have summarised it so – you’d think the ‘yes’ voters here would understand the other side of the Sterling coin.


Itsallgoingtobefine…..please understand when mentioning international bond interest rates, I’m not really talking about assuming UK debt, that is currently funded and costs the UK taxpayer over £50 bil in interest alone.

Scotland like any country will need to issue bills and bonds for annual cash management and any deficit spending i.e. large infrastructure spending and a recession.

[OldLadyKnowsNothing]

futureukandscotland.ac.uk/blog/currency-reflections-legal-issues

Sorry I couldn't paste that as an MN link, but it's an interesting (and important) message.

[niceguy2]

Good article OldLady and certainly a lot to think about there.

Personally I think ruling out a currency union completely was a tactical error. It will make Scots feel like they're being bullied and dictated to. The complete opposite of what we want.

But at the same time you can fully understand both the government's position and the electorate.

The UK govt would be foolhardy to go against the advice of the BoE and the civil service who have both said it's not a good idea unless significant undertakings are given by Scotland. Something they won't do.

Also as I've said before iScotland seems to want to cherry pick the good bits and leave the bad bits. So yes we'll keep the pound because it's better than the Euro but in a few years if the alternative looks better we'll adopt that.

As with any divorce emotions will play a part and I can't see why the rUK electorate will stomach that.

The whole England would suffer in trade argument is exactly the same issue as our (UK) position with Europe. Namely if you don't let us cherry pick the policies we like and forget the ones we don't then we'll take our ball and go home. And guess what? France and virtually every other EU country are saying "Non!"

And bear in mind that the rUK is in a much better position weather any economic storms unlike Scotland whose economy wouldn't be able to mount a bank bailout.

Ultimately it comes down to this. If someone is threatening to leave, you can compromise a little to try and convince them to stay. But there simply is a line you must draw before you think "If you wanna leave, leave cos you're taking the piss now" After all, if iScots leave the union, the rest of us have to wake up the day after and look at ourselves in the proverbial mirror. And frankly I don't want to feel like I've been buttfucked.

[Isitmebut]

On trade, back in 2010 I saw what I thought was a disturbing economic stat; that the rest of the Uk did more trade with Ireland (Dublin), that the rest of the emerging B.R.I.C. (Brazil, Russia, India & China) nations combined, with probably around 2.5 billion citizens between them.

Now I’m hearing how much we depend on trade with Scotland, it just confirms to me that we need to widen our trade substantially.

Cameron needs to fly a few more trade delegations to those places and others, as we seem to have been content trading with ourselves, and all that all-eggs-in-one-local-basket risks, that narrow focus keeps throwing up, including the still recession hit EU.

[Toadinthehole]

This issue is being seriously mischaracterised. It is not at all about how an asset (in this case, sterling) is divided up.

What Osborne and co have ruled out is the possibility of a currency union. Everyone has assumed this means the rUK gets to "keep the pound", for obvious reasons. However, it would be completely within the rUK's power to issue its own entirely new currency - the rUK dollar say - and leave sterling for Scotland to continue with should it choose. It would affect the rUK's national debt - it would simply be denominated in a new currency.

Contrary to some remarks made on this thread, debt and assets aren't carried with a currency. A currency is just a unit of exchange. The Greeks didn't dispose of their liabilities once they adopted the Euro - far from it, as they are aware.

For reasons that should be immediately obvious, a currency union is not a current asset of the UK. It doesn't even exist yet, for Pete's sake. Unfortunately, this point has been completely obscured in the argy-bargy. The real question is the extent to which Scots voters should be allowed to assume that everything promised by the Nationalists will come to pass. Now, most of these things are a matter purely internal to Scotland, and are no one else's business. On the other hand, a currency union is very much the business of the rest of the UK, and I for one am finding it really hard to understand why the Nationalists are so outraged at Osborne, Alexander and Balls pointing out that they have the interests of people others than Scots to consider and weigh up.

I am English, and some time resident in Scotland. I hope Scotland stays, but I don't see that Scotland is entitled to the special treatment that Alex Salmond and co have come to expect.

[Toadinthehole]

Oldladyknowsnothing

There are some problems with the article you cited. I will mention some.

1. I don't think Osborne was "pre-negotiating" the break-up of the Union. It was not him that put a currency union on the table. Furthermore, how the Union might break up is one thing. What rights and independent Scotland would have afterwards is quite another. The article is unfair in levelling this charge at Osborne.
   

2 . Polls might have shown a slight move towards independence, but they still show pro-Unionists comfortably in the lead. There is no reason for pro-Unionists to panic.

1. A position taken on the advice of the BoE's senior banker and a senior civil servant should not be characterised as "sound bites". This is also unfair.
   

1. I agree that as the successor state, the rUK would, as a starting point, be responsible for all UK debt, and iScotland wouldn't. What the article doesn't mention is that iScotland would not, as a starting point own any assets nor be a signatory to any treaties. This is why iScotland would be outside the EU and have to apply for entry. The article notes that the UK has agreed to guarantee all sterling debt up to independence. This was responsible. Salmond pointed out that Scotland could refuse to pay any proportionate amount. That was irresponsible. Legally, legislating for independence is something only within the power of the Westminster parliament, which is not bound legally by the referendum result. Morally, it would be well within its rights to refuse to legislate until the nationalists adopted a more reasonable position.
   

As an aside, it seems that iScotland also wouldn't own any non-territorial assets. So, the Parliament building in Edinburgh would, I'm guessing, continue to be owned by Her Majesty's Government - of the rUK.

1. The article notes that the Irish Free State eventually paid no debt. What the article doesn't say is what was given in return. The IFA, despite its hostility to the UK, allowed the UK to maintain military bases on Irish soil up to WW2, in which it remained significantly neutral.
   

1. The article notes that bitter words spoken in the referendum will linger on. So they shall. That's too bad - but once again the implication that the Unionists are fighting dirty is unfair. It is not unfair for leaders of big business to point out that they would prefer the Union to continue. Nor can it be fair for Westminster politicians to remain absolutely silent while Nationalists increasingly presume what special arrangements will be made and which rules bent in order to suit iScotland to the disadvantage of everyone else.
   

1. The article says the tactic might backfire. Now, I am English. I used to live in Scotland, but don't any more. I hope Scotland remains in the Union. But I am exasperated at this constant chorus of "Bully! Bully!"whenever something happens that the Nationalists don't like. The debate should not be stymied by oversensitivity to the sensibility of nationalists. For twenty years now I have been watching them make claims about what true Scots are like, what they believe, how much a poor victim Scotland is and has been, and how anyone who disagrees with them is a sort of class enemy. It is that sort of cheap rhetoric that has enabled them to make it a real possibility that a small island full of people who are more or less the same might divide in two.
   

The was a comment made to the article that I liked:

I think that some level of pre-negotiation became inevitable after I read the White Paper - it made so many assertions that couldn't be guaranteed, the unionists were always going to respond. I agree with them - Salmond's assertion that a currency union was in both sides [sic] best interest is manifestly nonsensical

This is the problem. The Yes camp makes unsubstantiated assertions - removal of Trident, continued EU membership and now a currency union, and when the No camp cough politely and say "well actually..." the Yes camp responds with a metaphorical shriek.

[OldLadyKnowsNothing]

Toadinthehole, thank you for your comments. I have to disagree with some of them, though.

1 If stating, clearly, (if wrongly) and with no room for negotiation, that an iScotland could not use the pound isn't "prenegotiation", what is it?

2 The polls do still show a majority "no", but this is no cause for complacency. The polls also show movement is towards "yes", and there are months to go yet.

3 Granted, but wtf was a civil servant doing opening his gob in the first plae? Absolutely against protocol.

4 The Treasury have agreed that rUK will take responsibility for the whole of the debt, they have no alternative, as it was they who issued the gilts and the Scottish Gvt have no borrowing powers at present. However, your assertion that iScot would have no assets is jawdropping! You do know we too pay taxes, and have done for the past 300 years? We already own circa 10% of BoE, of every piece of military equipment, of international embassies, even of the London sewerage system!

5 I'm happy to take your word on that.

6 When we vote yes, there wll be no need for bitterness from us. We're a forgiving lot. :)

7 The tactic has already backfired. Yes gains new converts every time a Tory opens his mouth, and Alexander and Balls haven't made the situation any easier.

A currency union is in the best interests of everyone, including rUK. But there are alternatives, it's not the be-all and end-all.

[Toadinthehole]

Hi OldLady

1. The issue is not who gets to use the pound, but whether there will be a currency union with the BoE as lender of last resort after the union would broken up. This is an issue the nationalists, not Osborne, raised. They "prenegotiated".
   

1. I agree. However, the point is that Westminster has no need to panic, and I don't believe this was a panic move.
   

1. Civil servants open their gobs all the time - to advise government ministers. There is nothing controversial about ministers making that advice public - it happens from time to time.
   

1. OK. I apologise if the following answer is overly technical. For the last 300 years, Scots have paid taxes to the Crown of UKGB and (after 1801) the Crown of UKGB&I (ignoring the 1922 name change). Over this time, the Crown has built up assets and also liabilities ("the national debt"). These assets and liabilities are not owned or owed by the people of the UK, but by the Crown. Accordingly, it is not possible to say that and iScotland would "owe" 10% of the debt - it would continue to be owed by the Crown of UKGB&NI. Hence Salmond's threat. Similarly, UKGB&NI assets would continue to be owed by that Crown. I believe there are separate rules relating to natural resources, so the oil would vest in iScotland.
   

1. Not all of you aren't actually, no. My abiding memory of living in Scotland during the 90s was the enormous amount of stereotyping of English people that went on - both by academics in the universities, in the media, and more alcoholically in the pub. I really do not miss being painfully aware that, being English, I was liable to get a kicking by the neds if I got caught in the wrong place, due to my English accent. I felt frankly unwelcome and have never desired to live in Scotland since I left. It is my opinion that Anglophobia is pretty deeply rooted in Scotland. I am aware that these days Scotland had a substantial English population, and thought that might have changed the nature of the nationalists' tactics - but having followed the debate for the last year, my view is that it hasn't.
   

I will add that since leaving Scotland I have spent most of my life outside the UK. I will make two points.

1. I have felt much more welcome where I've been than I ever did in Scotland.
   
2. Compared with everyone else, Scots and the rest (English, Welsh NI) are really are more ore less the same in terms of culture, views on politics and so on.
   

1. We'll see. But I don't agree that a currency union is in rUK's best interests. I also - as it happens - don't believe the rUK would need to give a reason why. It would be an independent country and not responsible for Scotland.

[Toadinthehole]

I see now José Manuel Barroso is in the firing line for stating what I thought was pretty clear: an iScotland would have to apply for EU membership and this might be opposed by some members.

Nicola Sturgeon is flat wrong when she says Scotland has been a member of the EU for 40 years. Scotland has never been a member of the EU any more than Helensburgh or Pitlochry has been.

[OldLadyKnowsNothing]

I'm sorry you had a shitty time (well, some of it) when you lived here. I actually understand what you mean about your accent marking you out; when I moved from Montrose, Angus to Cupar, Fife in 1971 (aged 9) the locals decided I was "English" and treated me accordingly. I'll never live there again either.

As for the rest, as you say, we'll see. When we say yes is when the real negotiations start, the rest is so much posturing (from both sides...)

[niceguy2]

When we say yes is when the real negotiations start, the rest is so much posturing (from both sides...)

I can see why you'd think the Scottish/UK politician's are posturing. But what about Mark Carney? I thought his analysis of the facts were pretty spot on. Namely:

"The Bank of England governor has said an independent Scotland would need to give up some power to make a currency union with the rest of the UK work."

A treasury analysis paper concluded that there's no evidence a currency union would work.

Top civil servant Sir Nicholas MacPherson also warned against the arrangement. (source)

And the EU president who has nothing to do with UK politics at all so can't see why he'd be biased has said that Scotland joining the EU would be pretty much "impossible"

OK I don't trust words that come out of Cameron & Milliband's mouth. But I do trust Mark Carney who has an outstanding reputation.

And the response from iScotland campaign is simply "Ahhh it's all lies & rubbish!" What? Everyone is lying? Really?

Or could it be you've overplayed the benefits of independence without really examining what's in it for everyone else.