Following Westminster’s refusal to countenance a CU an angry over-reaction by Alex Salmond created the distinct impression that, if Scotland was not allowed to keep the Pound, an independent Scotland would not take on a share of historic UK debt.
Whilst not explicitly followed up by the leaders of the Yes campaign (1) the impression that Scotland could refuse to take debt was certainly encouraged to grow amongst the rank and file supporters who continually stated the “no Pound, no debt” mantra.
The position was made even easier when the UK Treasury (under pressure from international investors that they were not about to get stuck with Scottish rather than UK debt) clarified to the markets that in the event of Scottish independence they would legally take on all historic UK debt.
This was fuel to the fire of the meme.
Rather than state that an independent Scotland would not take on debt the leaders of the Yes campaign would simply remind everyone that the UK had guaranteed all debt. The implication being that it then followed that an independent Scotland would not have to take debt.
The trouble is that it does not follow as a few seconds thought and more importantly a close reading of the UK Treasury announcement would show.
Whilst the rUK was prepared to guarantee all debt to international creditors in the very same announcement it stated that Scotland’s share of this debt would be covered by a side agreement between rUK and an Independent Scotland.
So the UK Treasury announcement also stated that an independent Scotland would indeed continue to have debt, but in this case it would be debt to the rUK rather than a collection of international creditors.
Failing to pay this rUK debt would have been a default and would have made Scotland an international pariah. It would also be relatively easy for rUK to recover this money from Scotland given the numerous cross border payments that would apply between the nations.
The desperation stage of the argument would then follow.
This would run that an independent Scotland would simply refuse to agree to debt with the UK and the UK would have no means to force such an agreement on an independent Scotland.
This unfortunately omits to recognise that any Scottish Free State Act would have to pass through Westminster. The concept that the text of a Scottish Free State Act would not include an allocation of debt within it is laughable.
Why on earth would rUK enable the new Scottish state to start entirely debt free whilst lumbering rUK citizens with more debt per head than they had the day before? Any party even considering such a suicidal deal would be swiftly despatched at the ballot box.
Therefore the Act and the final agreement on the establishment of a Scottish state which would be signed by the Scottish Government would contain provisions on Scotland taking debt. If the Scottish Government refused to sign the agreement including debt then independence simply wouldn't happen. The rUK would have the luxury of time on their side during these negotiations whilst the Scottish Government would not, economically and politically they would be charged with delivering on independence as quickly as possible.
Like the Irish delegation before them in 1922 (who also reluctantly took on Imperial debt) Scotland would have found their ability to make ridiculous demands such as “no Pound, no debt” was nothing more than empty rhetoric that actually did them more harm than good in the final outcome.
(1) for example watch Salmond in the final TV debate craftly hint that if they don't get a CU they would not take any debt without actually saying it - 22:30 in
Isn't UK debt a joint & several basis?
ReplyDelete