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A Particularly Idiot Claim About Scottish Independence

There are any number of idiot claims about Scottish Independence of course. They wish to go therefore we should prevent them from doing so is an obvious one. If they want to go then goodbye and good luck is the correct response. As it was when Britain freed so many colonies last century. As the EU should have said about Brexit. We may even think you’re wrong about the benefits but it is your country and your life.

That it’s an economically bad idea is no constraint – Ireland’s independence in 1921 didn’t exactly usher in a golden age of wealth for the population. It took reintegration with the UK economy in the 1980s and 90s for that to really happen.

There’s also an easy way to solve the whole thing, give the English the vote and they’ be independent by Tuesday afternoon.

To add to our list of stupidities there’s an argument being put forward that Scotland, on separation, would not have to shoulder any of the UK’s common debt. Attractive as this might be it ain’t true, not in the least. The argument goes like this:

The British State has already acknowledged that it was taking full responsibility for all the commitments associated with currency in the event of Scottish independence in 2014. In January, 2014 the Treasury made a statement on currency, post-independence: “In the event of Scottish independence from the United Kingdom, the continuing UK government would in all circumstances honour the contractual terms of the debt issued by the UK government”.

This established the principle that rUK was the ‘continuing state’ in international law, and that rUK was responsible for both the currency assets and liabilities.

The UK would continue to make sure that extant gilts would be paid off. Well, OK, that makes sense. Back then they were still trying to sell £50 billion a year of new ones plus roll over the maturing part of the extant stock. If they’d said “We’ll cover our bit, say 92%, the rest of it will be paid in Bawbies by the Scots, as they wish” then we can imagine a certain disturbance in the market. Possibly a little rise in the interest rate demanded for the privilege of lending to the UK. So they didn’t say that, Instead they said “We’ll see you right sunshine, what the Scots do won’t affect these debts”.

Sensible, prudent and in the best traditions of a central bank that knows what it is doing.

The conceptual leap that is being made here is that such a statement to the debt markets is some sort of contractual promise to the Scots taxpayer. That because, in its own interest, the rUK has agreed to make creditors whole, therefore there not only will not but cannot be any comeback to the newly independent Scotland to chip in to cover this bill. With the rUK standing in the middle as the guarantor but also demanding a few oats and the like as a contribution.

That really is what they’re doing. That’s all they’re doing too. And boy are they going to be surprised it they try to insist upon that. It’s almost worth staying awake to see them go when they find that out.

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1 year ago

And there should be a “comeback…to chip in,” as Scottish voters and MPs helped create the governments that issued the debt (and spent the loot, some of it on Scotland).

1 year ago

Acting as guarantor for a debt doesn’t mean you don’t go after the debtor if they default.

1 year ago

The only case I can remember of an ex-colony paying any of its debts was Ireland, for a time, paying back the British landowners for their estates.

Of course I don’t imagine England would pay Scottish pensions, health care, infrastructure costs, or buy expensive unreliable windmill-generated electricity.

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