Independent Scotland (part II)

[KC Cantiaci]

In this scenario Scotiland has no ownership/political control of sterling, so the debt is expunged.

AFAIUI, it isn't expunged. It doesnt just disappear. The debt will still exist but Scotland won't be contributing to the payments. It's picking and choosing what bits Salmond wants from the UK and dismissing the rest.

If Scotland do not accept a proportion of the debt, or won't contribute/pay interest payments to the rUK on Scotlands share, they will be in default. So in that regard, rUK will still end up paying out but Scotland's credit rating will go down the chute which could affect them going forward if they ever need to borrow money. And if Salmond is refusing to accept part of the debt, then surely he can't expect a share of UK bought assets like RBS or BoS as they were bought/bailed out with borrowed money which is now part of the debt??

 

[dweezil]

In this scenario Scotiland has no ownership/political control of sterling, so the debt is expunged.

Is debt really tied to the nominal currency? I'd have thought they could repay at an exchange rate in Groats or whatever.

As a business we can have our debt in any form, and have swapped at times to access different interest and exchange rates.

 

[Paul R]

Scotland as a government entity doesn't exist yet, so can have no debt. The BoE borrows the money for the UK government, some of that money gets spent in the Scottish part of the UK by the Scottish government.

Paul

 

[KC Cantiaci]

Is debt really tied to the nominal currency? I'd have thought they could repay at an exchange rate in Groats or whatever.



As a business we can have our debt in any form, and have swapped at times to access different interest and exchange rates.

That's how I understand it. The currency itself isn't the reason why Scotland could walk from the debt, it's being used as a bargaining chip to gain BoE support via a currency union. Salmond knows that if Scotland refuse a share of the debt, then as the debt is in the name of the UK, the rUK will still be liable. I'm not sure what rUK could do other than cry foul and tag Scotland with a default. It won't be a good start and hardly cements a good working relationship between UK and Scotland going forward.

 

[auric]

Three views from Gordon http://www.telegraph.co.uk/news/ukn...-voters-independence-will-only-help-rich.html http://www.theguardian.com/politics/2014/aug/31/gordon-brown-battle-for-britain http://www.dailyrecord.co.uk/news/scottish-news/gordon-brown-greedy-power-firm-3825655

 

[gassor]

Isn't the debt repayments a bit like maintenance for the kids which a couple divorce and the ex hubby leaves the family home. Might be separate, but he has still got financial responsibilities to ex-wife and kids.

 

[Guest432]

Scotland can walk away from the debt but will it damage their credit rating when they apply for new loans? I read that there are two views on this as yes they will be viewed as a high risk subject to higher interest rates and no as they will be starting from scratch with no debts so lenders may view this as an advantage.

I'd be happy for Scotland to walk away from their debt as it only constitutes 8% of the total loans and as long as they never come back cap in hand or looking to use rUK NHS infrastructure, education, defence, lending etc.

Personally I think if Scotland walk away from the debt and establish their own currency they will be bankrupt within 20 years, they just don't have a large enough population to generate enough tax revenue and oil production is on the decline.

 

[KC Cantiaci]

Isn't the debt repayments a bit like maintenance for the kids which a couple divorce and the ex hubby leaves the family home. Might be separate, but he has still got financial responsibilities to ex-wife and kids.

I'd say it's a similar'ish analogy. The couple would divvy up the assets but the husband (or wife) can refuse to pay their share of a joint loan.... but the loan is still there and repayments are still expected to be paid by the lender(s). The difference being there isn't a court to settle the case and insist on the absentee parent paying their share.

 

[TheDecameron]

Scottish NHS and Education infrastructures have existed for a lifetime. Along with a separate police and legal system. There's been a separate parliament since the 13th century, albeit with an interregnum between 1707 and 1998.
Good to go, as they say- following a bilateral negotiation.

 

[Guest432]

Yes but have they been financed solely by Scottish tax revenue or UK as a whole tax revenue?

My understanding is Westminster give Scotland a big pot of money and the Scottish govt decides how that is spent i.e free prescriptions and education etc. After leaving can Scotland still keep that budget the same value just from Scottish tax collection?

 

[KC Cantiaci]

Scotland can walk away from the debt but will it damage their credit rating when they apply for new loans? I read that there are two views on this as yes they will be viewed as a high risk subject to higher interest rates and no as they will be starting from scratch with no debts so lenders may view this as an advantage.

They don't technically have an existing debt to walk from but there would likely be a new one issued by the UK govt as Scotland's share of UK debt upon the split. On this basis, it will be a messy negotiation as to what that is and whether SNP and co will recognise it. If the UK govt do issue an amount as a technical loan and Scotland refuse to pay, this could be seen as a default or dismissed as not a valid agreement. Either way, I imagine it would be construed as Scotland choosing to ignore/accept their responsibilities and could affect future borrowing. Would you lend to someone if you had evidence of them reneging on previous obligations?

I'd be happy for Scotland to walk away from their debt as it only constitutes 8% of the total loans and as long as they never come back cap in hand or looking to use rUK NHS infrastructure, education, defence, lending etc.

Not sure what basis Scotland could 'come back cap in hand'? They'd have to borrow on the open markets like everyone else and interest/borrowing rates would be set on risk and ability/willingness to pay. But as for their share, this is also subject to debate with varying amounts being bandied around from £100 to £150bn??

Personally I think if Scotland walk away from the debt and establish their own currency they will be bankrupt within 20 years, they just don't have a large enough population to generate enough tax revenue and oil production is on the decline.

I guess that would depend on their spending policies and commitments once independent.

 

[Guest432]

Not sure what basis Scotland could 'come back cap in hand'? They'd have to borrow on the open markets like everyone else and interest/borrowing rates would be set on risk and ability/willingness to pay.

Same as they did in 1707 when they joined the Union because of near bankruptcy.

 

[Jonathan Ribee]

If Scotland choose not to accept a proportion of the UK debt as a negotiation strategy, then this is not a massive blow to the UK. The debt is likely to increase over the next few years because of Scotland as they spend more than receipt in tax revenue consistently - even when the UK as a whole does the opposite. Without Scotland the gradual reduction of deficit should be faster.

Additionally - Scotland not accepting a proportion of the debt will allow the UK to reasonably cease backing of any major infrastructure projects in Scotland, committed investment etc with virtually zero negotiation. It will also immediately stop any negotiation on currency sharing, rights Scotland may think it has to Bank of England reserves etc.

It will also quite probably increase the cost of borrowing for a shiny new Scotland, which as they will now be a competitor to UK plc, can only help the UK as a whole when investing in infrastructure, talking to prospective investors, manufacturers etc.

Although the UK needs to continue to honour all debts, that £100+ Billion need not be lost forever. Given 65% of Scotland's trade is with the rest of the UK, I'm sure something could be found to increase tariffs, make operating costs in Scotland so expensive the business moves elsewhere and the taxation revenue also - in fact as already pointed out EU banking legislation and the need for some international businesses to be in the EU may make this happen anyway.

Essentially, if Scotland vote YES to independence then the UK Government ceases to have any duty of care for their citizens and should seek to protect the well being of UK citizens. A clean break with no further financial liability and removing any net of support for Scottish people, businesses, companies and the expense of risk to the UK would seem to be worth £100 Billion.

In the short term, any disruption to the Scottish economy will have an immediate impact on thousands of UK companies and probably reduce tax receipts. In the longer term, the chance of migrating the some of the Scottish economy to the UK and other EU nations without the cost associated with the most "expensive" old UK citizens - what is that worth?

If you have a vote this month - please, please, please vote YES.

 

[TheDecameron]

I'm having serious doubts now. It's like those little Free Staters getting a bloodied nose with a clever geographic/ economic partition. Look at what they lost, they've never recovered from it. I knew they could never go it on their own without the U.K - they're waiting patiently on the door step to be let back in.

 

[Jonathan Ribee]

How do you do border passport checks on trains? Stop at Carlisle and check all the document for anyone not getting off? I can see how cars (shut down all but a few roads and nick the operating manual from San Diego) and planes (just like other international flights) would work. But the trains will probably need thinking about. Are there any rural routes that cross back and forth over the border? A solution like the old S-Bahn and U-Bahn in Berlin?

 

[TheDecameron]

Jonathan, I think you are pissing in the wind and you've got your trousers a bit wet.

 

[gassor]

How do you do border passport checks on trains? Stop at Carlisle and check all the document for anyone not getting off? I can see how cars (shut down all but a few roads and nick the operating manual from San Diego) and planes (just like other international flights) would work. But the trains will probably need thinking about. Are there any rural routes that cross back and forth over the border? A solution like the old S-Bahn and U-Bahn in Berlin?

There are no border passport checks between Ireland and the Northern Province, so why would there be one between God's Own Country and Engerland?

 

[davidsrsb]

Customs and immigration at the border would be the least of the social problems. If Scotland is not in the EU, all Scots in rUK and vice versa will be on work permits - millions of foreign workers create a lot of paperwork

 

[TheDecameron]

There are no border passport checks between Ireland and the Northern Province, so why would there be one between God's Own Country and Engerland?

It may be useful to intercept any Yorkshiremen travelling north on holiday with less than ten bob in their pocket.

 

[Jonathan Ribee]

There are no border passport checks between Ireland and the Northern Province, so why would there be one between God's Own Country and Engerland?

Eire and the UK are in a common passport area. This area is also part of the EU, although separate to the bigger Schengen area.

NeuScotland would have to negotiate being allowed to continue as part of that area.

Not being in the EU (as seems likely for Scotland) and having a very different immigration policy to the common area (as stated could be the case by Salmond - Scotland has a bigger need of young skilled workers than the UK as a whole) may make that a problem as well. You can't really operate different immigration policies in a common passport area.

Eire and the current UK are in the EU together (free movement etc) and have substantially similar immigration policies - deliberately to facilitate this. All visa agreements with other nations are the same etc.

http://en.wikipedia.org/wiki/Common_Travel_Area

If Scotland wishes to apply for EU membership, it would have to agree to joining the Schengen Area (current EU policy for new members) after the minimum qualifying period, demonstration of fiscal propriety etc - along with the Euro, or somehow get an opt out agreed in a process where any member state could easily veto exceptional requests.

http://en.wikipedia.org/wiki/Schengen_Area