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Tuesday, 19 November 2013

Where There's Muck, There's Brass

It's been a long time since I've had to think about my school qualifications. This morning, however, I've dusted off my passes in Higher Economics and Mathematics and made an interesting deduction - I'm certain my teachers at Dunoon Grammar School would be incredibly proud.

Depending on which figure you believe (I've taken the median figure) current UK National Debt is running at £1.3 trillion.

Assuming a Yes vote in the Scottish Independence Referendum next September, Unionists say that Scotland will assume a pro rata share of that debt.

Calculation One: 8.6% of £1.3 trillion = £111.8 billion

What Calculation One shows: A 'pro-rata' Scottish share of UK National Debt.

Now, that completely independent think-tank The Institute of Fiscal Studies concluded in its report yesterday that an independent Scottish Government would have to service any national debt using loans repayable at 6.65%. For the sake of comparison, that's about three times the rate curently paid by the UK. It's also substantially more than other economic 'power houses' like Bulgaria, Hungary and Slovenia. Indeed, within the EU, only Greece would pay more according to the IFS. We could argue about the rate but let's play along...

Consequently, an independent Scotland would have to spend substantial sums merely to keep national debt at sustainable levels.

Calculation Two: 6.65% of £111.8 billion = £7.4 billion

What Calculation Two shows: The yearly payments required from an independent Scottish Government merely to keep 'our' National Debt static.

Funnily enough, that is suspiciously close to the IFS assessment of the annual deficit faced by an independent Scottish Government, around £6 billion per year. Therefore, they say, in order to reduce the National Debt, an independent Scotland would have to raise taxes or make substantial cuts. It also means that almost all of Scotland's supposed structural deficit is taken up by interest payments on the debt ran up by successive UK Governments. And, incidentally, that £1.3 trillion deficit figure almost exactly matches the figure given to bail out the bankers. Neat, huh?

Of course, we know that under an SNP administration, an independent Scotland would make cuts including approximately £1.5 billion per annum in Defence spending. We would also be relieved of our potential share of paying for HS2, London sewerage works and a whole host of rUK commitments - all of which would eat into that £6 billion annual shortfall. We also know that an independent Scottish Government would be making decisions that benefit the Scottish economy rather than that of London and the south east of England hoping that they would stimulate growth and eat further into that deficit. Add to that those rUK headquartered companies that will continue to operate in Scotland after independence whose tax receipts are currently counted in rUK figures but whose VAT and Corporation Tax, generated north of the border, would now accrue to a Scottish Exchequer and the figure diminishes yet again.

But here's where it gets interesting. What if we had no National Debt in the first place?

I can hear the uproar from the Unionists already but, in fact, this is a position they have talked themselves into. They have, for some time now, warned Scots of three separate, 'separation' scenarios, all of which would lead to exactly that position.

Scenario 1: You take a share of UK National Debt but don't you dare ask for a share of the National Assets bought whilst accummulating that Debt. They all belong to rUK.

News for you guys. No share of assets equals no share of debts.

Scenario 2: The rUK is the sole successor state. Independent Scotland will have to re-apply to all international organisations. You are a brand new country, you have to start again. By the way, there's no guarantee you'll get into the EU, UN, NATO the Commonwealth etc, etc...

International law is fairly clear on this. No successor state status; no debt attributable to the 'new' country. It's like a bigger version of Rangers and The Rangers.

Scenario 3: The rUK will not be inclined to grant you currency union. It's the Bank of England's pound. You can't use it. Sod off and use the groat or the merk...

Again, international law and conventions are unambiguous on this one. If we have no stake in 'your' currency, we have no obligation to repay any debts run up in its name.

So, Unionists, you have a problem. Either admit a shiny, new, independent Scotland has no debt from day one...

...or admit your spokespeople have been economical with the truth or, as we say in Scotland, full of shit.

3 comments:

  1. Excellent Blog! Do this more often please, I've missed it!

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  2. Very good stuff. Of course, added to your already convincing and cogent argument is the fact that the thieving barstewards down south have been trousering our cash for years and it is obvious that we have already PAID OFF our share of any debt and then some.

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  3. Excellent blog that is to the point and easy to understand.

    ReplyDelete