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

[Isitmebut]

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.

Why does Independent Scotland even want a currency union

So that, if the worst comes to the worst, we'd have to bail them out??

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.

I see your logic but disagree. Wales, N. ireland and England would still be the "United Kingdom". We'd just be slightly less united than we were.

Semantics aside the big reason why Scotland can't share the currency isn't because we're being mean and nasty. It's because the central bank will be in England.

As we've seen over in Europe, you can't have a successful currency union without political and economic union. It doesn't work. The US dollar works because they are one nation and one government. Sterling works because we have one government and one nation too.

It could work if iScotland agreed to some ground rules such as setting their budgets within a framework agreed with England. And not to vary taxes too much from what rUK would have. But wouldn't it be odd for Salmond to promise to stick to spending plans drawn up by a foreign government as soon as they go independent??

I thought the whole point was so us English can't tell Scots what to do!

Without those assurances you end up basically with Scotland free to do what they want but the BoE having to bail out Scotland if/when the shit hit the fan.

To use my earlier analogy. Would you share your joint bank account with your ex if they wouldn't even give you promises on what they will spend and how? Yet you'd be on the hook for any debts they run up!?!?! You'd be completely insane!

All thus means is a currency union is inevitable because the uk needs oil revenues to back up the value of the pound.

www.bbc.co.uk/news/uk-scotland-scotland-politics-27602204

Not really. The OBR estimates £15 billion over 5 years which is £3 billion a year. It's not that much in the greater scale of things.

Scotland needs it far more than rUK does. Just about every spending plan Salmond has made hinges on oil.

I read an interesting article that said part of the problem - that particularly the no campaign hadn't accounted for - was that for those voting Yes, rather than people deciding to vote for independence many people are deciding to vote against the no vote because they don't like the Tories etc etc. They're choosing salmond as the lesser of the two evils if you like.

And if the no vote don't appreciate this subtle difference and tweak their campaign to improve the options for those that want to vote against things as well as improve the options for those that want to vote for things they risk losing a chunk of the vote.

However I think it's criminally negligent that they are letting the vote go ahead when there are so many important factors that are unknown - the currency, eu membership, borders, and so many more. Because what is going to happen when people vote yes on the basis of what salmond told them (or Cameron, works both ways), they want to keep the pound, retain membership of the eu etc and then discover they're going to have to apply for eu membership and convert everything to euros etc etc - they're not going to be able to turn around and say that they want to change their minds because the nasty man told them lies...

I think you're right Zipzap and all that tells me is how short term a lot of people are.

Ultimately the Yes campaign are selling a dream and the Better Together campaign are selling reality.

Of course the dream looks better. It always will. But reality always kicks in, in the end.

All the Yes campaign is selling is independence. That's the only question. Do you want independence for better or for worse.

Everything else is moot. Westminster will not deal in advance of the vote and it is in Westminster's interests to allow as much uncertainty as possible ( although thus might change as it is affecting the markets) which means that the Cross party Yes campaign cannot make guarantees.

And there is an upcoming general election anyway.

Where's the uncertainty? Can you share the pound? No. The only people not accepting that is the Yes camp.

Do you need the agreement of all 28 countries to join the EU? Yes.

I don't see uncertainty. I only see a refusal to accept the facts.

All this talk of oil being so important is worrying....Spending in the Scottish oil industry is largely based on expectations of them finding (a lot) more oil in the not too distant future. Perhaps they will. Perhaps they won't.

Can we share the pound? yes especially if this market volatility continues.

Can we join the EU? Yes
m.scotsman.com/news/pat-cox-pragmatic-eu-will-make-room-for-scotland-1-3535507

Of course you can join the EU. I'm not saying you can't. I would want iScotland to be in the EU.

I'm saying the path to joining won't be anywhere near as smooth as predicted and the deal you get is likely to be worse than the UK currently has for the reasons I've already said. The article you linked is basically assuming that Scotland will be treated as a special case and given preferential treatment. Yet by the author's own admission there's been no precedent so frankly preferential treatment may not be given at all.

Bottom line is that all 28 member states must agree and you'll only get that after protracted negotiations and I don't see any reason why the new EU countries would be inclined to treat Scotland favourably.

Can you share the pound? Again yes.....if Westminster backtracks from what they've said. Could that happen? I guess in theory they could. I wouldn't bet a nation's future on it though. We've all seen what happened to the Lib Dems when they changed tack on student loans. This would make that seem rather trivial.

Apologies if this question is showing my ignorance, but how can it be that an issue that has such a potential impact on the rest of the UK, is only to be voted on by Scotland?

Clam ...... no apology needed, and I suspect that over the next few weeks your question will become more valid, as if Brown (maybe still with political ambitions in or out of Scotland) is in charge of 'negotiations', the rest of the UK already receiving 10% less spending per person, will get screwed royally.

niceguy2 ..... re Scotland and the EU, believe it or not the European Central Bank even without being stung by allowing new members in without meeting strict fiscal/spending/economic criteria, still looks to run a tight individual country spending ship - which is not what the SNP appears to dangling before the Scottish electorate.

France, mentioned at the end of my opening post, is the ECB exception that has been given even more time to sort their spending out, as spending on the fat State is still taking over 55% of output, they could not mange to pay down an annual spending deficit that was around 1/3rd of ours - and the clueless socialist government has few answers, have run out of political capital with the voters, and faces revolting French citizens.

In general I agree with you isitmebut. The Scottish government are in general more in line with the French way of spending so I don't have much confidence they would stick to spending plans.

The other thing that is not often talked about is NATO. Until (2012) the SNP were staunchly against joining NATO. Strangely enough the tune was changed just in time for the referendum. Once again it was then argued that in the event of independence, Scotland would be accepted as a continuing member of NATO. Once again that was proven to be wrong.

So in short the SNP has (wrongly) believed that independent Scotland should:

1. Adopt the Euro and not the pound (source)
2. Automatically maintain EU membership (source)
3. Automatically maintain NATO membership (source)
4. Share Sterling (source)

All have been proven wrong and they've had to change their tune on each.

My question is this.

How many times must the SNP be allowed to be proven wrong before Scottish voters start to think "Err....are they just telling me what I want to hear?"

And that's before we factor places where they've maybe stretched the truth somewhat like for example exaggerated Scotland's oil reserves.

Call me a cynic but I simply don't trust anyone who sells nothing but a dream then dismisses anyone who questions if it is realistic as a bully/pessimist.

Niceguy2 ….. Unfortunately politics appears to have gone that way, where ‘social’ and other political promises are made without the detailed substance that IF/WHEN brought in, they all tend to have knock on implications adding doubts to the sustainability of that revenue/services source.

‘Scottish’ oil is a case in point, even the Arabs have known for decades that due to the finite reserves and price volatility, they needed to both diversify their economy and with small indigenous populations IMPORTING the majority of their labour very cheaply (without a benefit in the world), were able to put money into Future Generation funds, mainly invested in stocks, bonds, and property overseas.

Scotland, who has no guarantees on the oil price for revenue streams, just as the world fed up relying on the likes of Russia and Iran to supply their energy needs and will Frack themselves to death to both bring down the price and secure supply – so could a Scotland ‘open the taps’ to lift more oil to pay their bills as those with oil on land and/or in more hospitable places than the North Sea? I believe I saw an OPEC report a while ago saying the opposite is true, the North Sea is yielding less each year.

Scotland also appears to believe that they have no national debts/liabilities, a well funded (by UK standards) spending per capita that can only increase and a Private Sector/businesses that adds balance to their economy, will all stay in Scotland come-what-may with the inherent volatility of a small currency and interest rates.

Well in England, many companies are ALREADY looking to hedge their bets on the UK leaving the EU and not wishing to lose their EU license to do business, are starting to relocate parts on their businesses to Dublin, who also has the benefit of a 12% Corporate Tax, over half that of most EU countries.

I realise socialist governments have a problem understanding that companies are run for the benefit of their shareholders e.g. pension funds, rather than the State, but is it such a stretch to imagine Scottish companies would be able to plan ahead better in Dublin, than any city in Scotland? Their stock prices pan-holing, already discounting potential problems ahead, would indicate they may have to.

So a Scottish economy, unbalanced, living it large on fixed annual costs like any Arab country, has what share of the UK’s National Debt of £1,421,000,000,000, currently costing around £52 billion a year in interest charges alone (coming out of annual spending budgets), with interest rates near all time lows, and likely to go up in the Spring?
www.nationaldebtclock.co.uk/

What share of the UK’s Pension Liabilities are Scotland’s, to come out of their oil revenue, that a few years ago £4.7 trillion was UNFUNDED and on top of the £1.4 trillion National Debt above - also to come out of annual spending budgets when due????

www.if.org.uk/archives/2031/ons-reveals-full-uk-pension-liabilities
More important are the total government liabilities of £5 trillion. These break down as follows:
• Government employee pensions: £1.2 trillion ( unfunded: £0.9 trillion;* funded: £0.3 trillion)
• State pensions: £3.8 trillion (all unfunded)

No wonder Gordon Brown got all emotional talking about it the other day, it makes me want to cry for my children, and their children's children.

Well all this has to be sorted out in a very messy divorce I alluded to within my OP.

Mr Salmond and the ‘YES’ campaign are all too ready to dismiss the threats of businesses that feel they HAVE TO leave an independent Scotland as they are ready to dismiss the oil experts who tell him that he is overestimating Scotland’s oil reserves and the ease of lifting it.

“BP opposes Scottish independence and backs oil decline warnings”
www.telegraph.co.uk/news/uknews/scottish-independence/11087039/BP-opposes-Scottish-independence-and-backs-oil-decline-warnings.html

“Sir Ian has estimated there are between 15 billion and 16.5 billion barrels left that would be economic to extract but he said a recent high-profile report by a group called N-56 – “sponsored by Yes campaigners and welcomed by the First Minister” claims there are 21 billion barrels remaining.”

“In 1999 daily production was 4.6 million barrels but this has fallen to 1.45 million barrels. He said by 2030 this will be down to 1.1 million barrels, by 2040 down to 500,000 and by 2050, it will be as little as 200,000 to 250,000 per day”.

But without the SNP addressing the fundamental country/economic FACTS of the Scottish currency, how much higher an independent Scottish interest rates will be, there has had to be a huge dose of reality brought to bear on the SNP by businesses for the sake of Scottish voters – as businesses, whether starting up, established, looking to relocate to Scotland, small, medium of large – they HAVE TO PLAN AHEAD for years to come.

And how many companies can NOT know their domestic currency and rate when pricing/trading with country’s outside Scotland, their small country interest rate premium (especially as a financial institution) when borrowing and lending - before worrying about an independent Scotland, with less oil than they are counting on, with their share of the UK debt/liabilities, putting up other costs of a company doing business i.e. business rates and labour costs.

An independent Scotland needs a balanced revenue economy and the sheer uncertainty being placed on Scottish businesses now and over the medium term, causing them to ‘blink first’ by making contingency plans, does not bode well for that balanced economy.

So with the likelihood of annual budget deficit spending/borrowing, Salmond’s threats of not paying back UK debts/liabilities, when an independent Scotland needs a credit rating from the international credit rating agencies (which determines what rate of interest their government bonds has to pay investors for any given country’s risk of principal/coupon repayment), is NOT a financially wise move.

This may be the wrong place to ask this question, but if the vote does go to the "Yes" side, does that mean that Scotland have to become independent? Or can they change their mind?

Hi Thumbwitch ... there is no way back from a 'YES' vote as the unenviable task of unwinding 300-years of a United Kingdom has to start and move as quick as it possibly can under the sheer weight of legislation constitutionally, legally, financially, allows it.

Scotland would have democratically made up it's mind, that nice Mr Salmond would rather understandably declare war (with whose army?) than go back, so a process affecting everyone within the current UK, really would be unstoppable - and personally I'd never touch a dram of Scotch Whiskey again as a 'cut nose to spite face' personal protest ( after we've finished what we have). lol

Well I’ve just seen that Kim Yong-un will be taking up my ‘YES’ Scottish Whisky slack, and with his own Free Market expertise, wishes to expand his relationship with the SNP led Scotland - and what with the respect with Putin, I’m beginning to think we’ll be like the U.S., with McCuba on our doorstep, but digging secret tunnels back in. lol

“North Korea comes out in support of Scottish independence... so it can start importing whisky”
www.dailymail.co.uk/news/article-2752137/North-Korea-comes-support-Scottish-independence-start-importing-whisky.html

• Repressive communist state keen to develop trade links with Edinburgh
• Pyongyang-backed newspaper says separation 'very positive for Scotland'
• Regime's SNP embrace comes after Ukraine rebels voiced Salmond support

“It comes after Mr Salmond praised Vladimir Putin. In March the SNP leader said he admired ‘certain aspects’ of the Russian president’s rule, adding: ‘He's restored a substantial part of Russian pride and that must be a good thing.”

.... and the bummer is, in the event of a McCuba 'missile crisis', they've got all our fricking missiles. lol

Sorry, gallows humour.

Good lord, he said that about Putin? That gangster?

Good to know that Salmond has the backing of the communists then, that's all good, I'm sure

The Scottish Nationalists back in the days before WW2 had form for supporting whichever side was against the British Empire. Just sayin'....

There are some rather interesting footnotes in C J Samson's Dominion about this.

I fear there are too many voters in Scotland who are going for the 'sticking it to The Man' thing, who haven't on this occasion realised that it isn't for the duration of one Parliament this time. It's for life, and for their children's and grandchildren's life.

Scotland will manage fine.

1. They could use the pound in the way that Panama where I have spent a lot of time uses the dollar ( no currency union but they just choose to use it and depend on the success or otherwise of the US which is not a very big risk).

1. Or they could join the EURO if it would have them.

1. They could invent a new currency - call it the Scot or something.

(Currency union with the rump UK is out as we don't want them with their left wing policies and high taxes affecting our our right to our own self determination free of Scotland)

Scotland will be fine apart.

So do we have current good pretender to a Scottish throne - directly descended from the last Scottish King?