In the independence referendum debate, the SNP have found themselves repeatedly on the back foot particularly regarding post-independence currency.
Nicola Sturgeon, the Deputy leader has repeatedly stated that there is no need for a Plan B, see here for a February 2014 outing on the subject.
Alex Salmond, the leader of the SNP and First Minister of Scotland has belatedly decided he has 3 Plan Bs. He too was castigated by Alistair Darling in the first televised debate and so came up with not one, not two but three currency plans. Say what you like about Salmond, he gives you value for money - three plans for teh price of one! What a man!
Retain Sterling as part of a currency union (something which all three rUK parties have categorically refused to countenance), retain Sterling as some sort of Sterlingization position - where Scotland's monetary policy is then decided in Westminster and not Edinburgh and according to the needs of the rUK economy and not Scotland's or, join the Euro.
My view is that if Scotland votes for independence, then part of the price they will have to pay, to join the European Union, will be to adopt the Euro.
That aside though, John Swinney the Scottish Finance Secretary has weighed-in to the debate and added the full depth of his intellectual prowess. He has said (and try to hear this without the necessary petulant voice which neatly captures his point) - If Scotland cannot be part of a currency union with rUK, then Scotland will take on none of the UK debt or liabilities. So there, nah, nah, nah!
Consider this though. Most all governments operate using the debt markets to one degree or another. Current national debt for the UK is in excess of £1.3 Trillion or 80% of GDP and climbing (this is why George Osborne gets a 'Could do much better' on his end of term report!). For the US the debt mountain is more than $17.8 Trillion for Federal debt or 105% of GDP and a further ~$5 Trillion for debt owed by the individual states. Germany's debt is around 80% of GDP and that is probably understated when the European Central Bank commitments are properly considered. Norway is a country much mentioned by Scottish Nationalists. They too need to go to the debt markets. Their debt to GDP ratio is in the acceptable 30% range but still the Norwegian government has to borrow.
So, John Swinney's first genius act as the economics guru for Scotland is to send a message to the world of finance that Scotland doesn't pay its debts! It welshes on them! It runs away from its obligations!
So here is question # 1 for Scotland - who do you think will lend you money? International banks and finance organizations have a thing about debt defaulters - they don't like them. In fact to go further, they shun them. Argentina defaulted on its debts and this had two consequences - a great depression which lead to riots and social unrest and hardship and, it could no longer borrow money. Oh and yes, Argentina has oil as well!
And here is question # 2 - this time for Scotland's pensioners and would be pensioners. You have paid in to a system, all of your working life but that system was predicated on you getting a pension at a set time in the future. If an independent Scotland repudiates its debts, who will pay the pensions of Scotland's OAPs? Certainly not the rUK.
Think about it, the 'divorce' has become messy and one partner has decided, in a moment of pig-headedness, that they are not paying anything for the mortgage on the house or maintenance for the children - they're offsky! A little way down the road, this partner realises that they actually need to get a new mortgage and they need a share of the house sale proceeds, to pay their new debts and a house deposit. They find that they can't get a new mortgage because they have a default against their name and numerous county court debt judgements against themselves, relating to the jointly held debts that they walked away from and even their lawyer tells them they have no chance of getting any help from the former partner, because they can cite abandonment and abdication of fiscal responsibility and so the individual is, if you will excuse the expression, buggered!
That is the position in which Scotland will find itself, post-independence if they adopt Swinney's policy.
Of course, that all pre-supposes that after a Yes vote, the rUK will allow Scotland to just walk away from its share of debt. Why should they? Why should Scotland which has enjoyed and continues to enjoy the fruits of the debt - schools, hospitals, roads, etc., - be allowed to wipe the slate clean. Need I remind Salmond, Swinney, Sturgeon and the voters of Scotland, that this is a referendum on independence. All legislation to enact the consequences of a Yes vote must be passed by Westminster. Can you really see English and Welsh and Northern Irish MPs voting to allow Scotland to walk away 'Scot free' (no pun intended) from its obligations? Can you? Why would they agree to burden their rUK constituents with debt for Aberdeen Royal Infirmary or Mrs MacGregor's pension?
Come to think of it, I don't know why I am so bothered about Swinney's comments unless its just this arrogance that thinks all of the power in this debate, lies in Holyrood.
I hope Scotland votes No on September 18.
Nicola Sturgeon, the Deputy leader has repeatedly stated that there is no need for a Plan B, see here for a February 2014 outing on the subject.
Alex Salmond, the leader of the SNP and First Minister of Scotland has belatedly decided he has 3 Plan Bs. He too was castigated by Alistair Darling in the first televised debate and so came up with not one, not two but three currency plans. Say what you like about Salmond, he gives you value for money - three plans for teh price of one! What a man!
Retain Sterling as part of a currency union (something which all three rUK parties have categorically refused to countenance), retain Sterling as some sort of Sterlingization position - where Scotland's monetary policy is then decided in Westminster and not Edinburgh and according to the needs of the rUK economy and not Scotland's or, join the Euro.
My view is that if Scotland votes for independence, then part of the price they will have to pay, to join the European Union, will be to adopt the Euro.
That aside though, John Swinney the Scottish Finance Secretary has weighed-in to the debate and added the full depth of his intellectual prowess. He has said (and try to hear this without the necessary petulant voice which neatly captures his point) - If Scotland cannot be part of a currency union with rUK, then Scotland will take on none of the UK debt or liabilities. So there, nah, nah, nah!
Consider this though. Most all governments operate using the debt markets to one degree or another. Current national debt for the UK is in excess of £1.3 Trillion or 80% of GDP and climbing (this is why George Osborne gets a 'Could do much better' on his end of term report!). For the US the debt mountain is more than $17.8 Trillion for Federal debt or 105% of GDP and a further ~$5 Trillion for debt owed by the individual states. Germany's debt is around 80% of GDP and that is probably understated when the European Central Bank commitments are properly considered. Norway is a country much mentioned by Scottish Nationalists. They too need to go to the debt markets. Their debt to GDP ratio is in the acceptable 30% range but still the Norwegian government has to borrow.
So, John Swinney's first genius act as the economics guru for Scotland is to send a message to the world of finance that Scotland doesn't pay its debts! It welshes on them! It runs away from its obligations!
So here is question # 1 for Scotland - who do you think will lend you money? International banks and finance organizations have a thing about debt defaulters - they don't like them. In fact to go further, they shun them. Argentina defaulted on its debts and this had two consequences - a great depression which lead to riots and social unrest and hardship and, it could no longer borrow money. Oh and yes, Argentina has oil as well!
And here is question # 2 - this time for Scotland's pensioners and would be pensioners. You have paid in to a system, all of your working life but that system was predicated on you getting a pension at a set time in the future. If an independent Scotland repudiates its debts, who will pay the pensions of Scotland's OAPs? Certainly not the rUK.
Think about it, the 'divorce' has become messy and one partner has decided, in a moment of pig-headedness, that they are not paying anything for the mortgage on the house or maintenance for the children - they're offsky! A little way down the road, this partner realises that they actually need to get a new mortgage and they need a share of the house sale proceeds, to pay their new debts and a house deposit. They find that they can't get a new mortgage because they have a default against their name and numerous county court debt judgements against themselves, relating to the jointly held debts that they walked away from and even their lawyer tells them they have no chance of getting any help from the former partner, because they can cite abandonment and abdication of fiscal responsibility and so the individual is, if you will excuse the expression, buggered!
That is the position in which Scotland will find itself, post-independence if they adopt Swinney's policy.
Of course, that all pre-supposes that after a Yes vote, the rUK will allow Scotland to just walk away from its share of debt. Why should they? Why should Scotland which has enjoyed and continues to enjoy the fruits of the debt - schools, hospitals, roads, etc., - be allowed to wipe the slate clean. Need I remind Salmond, Swinney, Sturgeon and the voters of Scotland, that this is a referendum on independence. All legislation to enact the consequences of a Yes vote must be passed by Westminster. Can you really see English and Welsh and Northern Irish MPs voting to allow Scotland to walk away 'Scot free' (no pun intended) from its obligations? Can you? Why would they agree to burden their rUK constituents with debt for Aberdeen Royal Infirmary or Mrs MacGregor's pension?
Come to think of it, I don't know why I am so bothered about Swinney's comments unless its just this arrogance that thinks all of the power in this debate, lies in Holyrood.
I hope Scotland votes No on September 18.
think that you will find that all of these comments from these institutions are based on the premise that an independent Scotland takes on its share of UK debt. If that doesn't occur because Salmond and Swinney are unable to get their own way on currency and because they can't make the numbers add-up, then why should someone in rUK pay the pension of someone that is effectively a foreigner? As said though, I suspect that the currency issue will be taken out of Scotland's hands as part of its EU entry negotiations and the new currency will be the Euro.
ReplyDeleteGood article, but no wonder the comment by "anonymous" wishes to be just that! Writing rubbish , the Independent newspaper is not independent!
ReplyDelete