Andrew Neil was ranting (I think it's fair to say) on Twitter yesterday on Scottish independence and Scottish currency issues, so I wrote a thread in response. He's been rude to all-comers on the issue so far and no doubt he will be to me. But he will have to address some issues now, or be shown to simply be making assertions that are without foundation:
I should add one final comment. He is, of course, another BBC commentator, alongside Kirsty Wark of late, to show their complete lack of objectivity on this issue.
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Richard,
I have been following your discussions for some time and I very much support the way in which you lay things out, in simple terms. I do believe within the Unionist community there is always a narrative of, these things are too incredibly complex for tiny wee scotland to comprehend…. therefore failure is almost inevitable.
One minor area which perhaps you could enlighten me on, perhaps there is some basic modelling of numbers? would be debt being converted to SP. So as you rightly say, positive balances would be transfered to SP, which would mean the central bank would be sitting with the sum total of GBP wealth in scotland (assuming folk dont offshore or choose not to convert). fine.
What happens to debt? from an individual perspective debt is likely to exceed savings or assets for the majority of the population, especially in terms of mortage debt. Would this not therefore mean that the debt would be transfered to SP or be bought by the central bank in some manner? Meaning that the central bank would have (sum total of GBP wealth, minus the Sum total of GBP debt?) In my estimation, this could very likely be negative at the point of indpendence, which would immediately mean borrowing to fund forex reserves etc?
Secondly I think the forex discussion is interesting, since I know very little about it. My very initial thoughts are that Scotland has a positive balance of trade, with the vast majority of trade being with USA, rUK & EUR, three reserve currencies.
This must be a position of huge strength, when we sell goods and services we will build up a surplus (positive balance of trade) in these currencies, which can be used to buy back SP if it becomes weakened due to speculating forex traders.
Question:
What software or methods are available that could be commissioned to economically model the first few years of independence, I assume this sort of thing is done often in the world of finance?
Perhaps YESscotland should be comissioning this sort of stuff?
Is there anything to your knowledge available on the base fiscal position on Independence day +1? i.e Total value of Scottish mortgages, Savings and investments, tax revenues etc. For me GERS falls far short in this regard.
You mention that Scotland would only be liable for the amount of debt based on how much rUK decides to pay back. I see this as a serious issue. For example if Scotland was becoming a relative success or indeed any political spat developed. rUK could use its relative size to throw far more money at its national debt, forcing scotland to pay more. This could in turn derail Scotlands ability to forward plan for spending etc Do you see this as a significant issue?
Thanks
I genuinely do not know the balances in Scotland so I cannot answer – but it is true there are both debits and credits to translate. The net sum is not known: no doubt it could be estimated but to hand I do not have the data
With funding I am sure this could be done
Sorry….
Andrew Neil for all his aggressive ranting is a bit of a wimp really! There’s countries like Iceland and the Seychelles with their own currencies and all with populations very much smaller that Scotland’s. Whatever happened to Neil’s inner “Brave Heart?” Too much time living in the decadent South?
It seems he has not come back to me as yet….
I still don’t understand the perceived fragility of a Scottish currency. We supply 40% of UK foods, much of the world’s whisky, we have overseas sales of natural resources (oil, gas, energy, water), financial services , computer games, digital integration etc. I understand that Scotland has had a permanent Balance of Payments surplus in contract to our UK friends so there is a regular market to buy the Scottish Alba or whatever, thus protecting its value.
Yes we will buy imports but there are many areas where we are looking at a positive encouragement to the currency value. Add to that from Day One we have no inheritance of any share of total UK debt.
How did India, Jamaica or whoever else obtained independence cope? Why would our situation be any different?
No one really knows Scotland’s balance f trade – the day is not collected, which also makes working out Scottish GDP and supposed claims on its deficit very hard
But almost certainly it is not as claimed i.e. it is better than expected
And there is no reason on earth why Scotland cannot make the transition to being a fully blown country try in its own right
The British lost their North American colonies because under the Tory Lord North they wouldn’t allow an adequate circulation of government created currency. Now the establishment Tory fools in charge in London are about to lose Scotland and possibly the other countries making up the union in due course. Incompetency isn’t the word!
http://numismatics.org/a-history-of-american-currency/
So what A Neil is saying is that Australia,New Zealand,South Africa were all basket cases just because they ditched the £Pound in favour of there own currency,he is just another anti In dependant Scotland bitter man.
Makes perfect sense for an independent Scotland to have its own currency, for the reasons you set out. Why though do you say they wouldn’t inherit any of the UK’s national debt? I clearly recall that when it looked as though Quebec was going to secede from Canada there was a lot of discussion about how much of the existing Canadian debt would be passed on to them as a kind of legacy. Why would that not apply here? I understand you’re saying that the UK would still exist and so it would still have all of its debt but without the Scottish revenue side. (Not a way to start off the new relationship on a good footing – the English public would be seriously vexed I fear). However, hypothetically if the UK was dissolved (because it was dissolved into its separate components) then the debt would have to be divided up among the four successors according to some formula. Why would that not apply here (especially given the state was basically created by the Anglo-Scottish ‘merger’ of 1707)? Genuine question.
I addressed this issue a few weeks ago
Just search the Scotland subject index and you will find it
If the UK was dissolved then yes you would have to share out the debt as decide who got which embassy. They will never do that as rUK would then lose the UN seat and England and Scotland would have to rejoin the UN. RUK would the also be subject to the Nuclear non-proliferation treaty and would have to give up Trident.
Precisely
Interesting, thanks for that. I’ll have to check what happened in the case of Norway back before World War I and what was talked about in the Canadian case. I can see why the government of the residual UK wouldn’t want to open those various cans of worms, that makes sense. Mind you, given the current UK was formed in 1800 by the union of Ireland with the Kingdom of Great Britain that had been formed in 1707, if NI were to leave at the same time as Scotland that would dissolve the UK as far as I can see, unless an argument was made that EnglandandWales was the successor state and inherited both the Security Council seat and the debt. Makes sense.
England can be the successor state whatever the split
For the avoidance of doubt the official SNP policy on Currency was adopted by 780 votes to 720 at the April 2019 Conference and it is:
“an SNP Government should take the steps necessary to enable the Scottish Parliament to authorise the preparation of a Scottish Currency as soon as practicable after a vote for Independence with the aim that the currency be ready for introduction as soon as practicable after Independence Day”.
I don’t see any reference to messing about with Sterling for decades. I think it is a pity that Andrew Wilson managed to miss the Saturday session as it was quite exciting! Perhaps he should ask somebody who actually was there.
I agree Tim
Entire thread depends on the validity of the first point – ‘it will inherit none of the UK national debt’. Garbage – it will inherit its share of the UK national debt. See Brexit negotiations for how that works.
And there dies your argument.
There is no precedent there, at all
If you’re going to present an argument check that it’s valid
The sovereign status of the U.K. is not changed in any way by Brexit
Brexit debt obligations arise from a prior Treaty obligation to pay them
Please don’t waste my time with completely false a4guments
If no precedent exists then you can’t be correct in your assumption then can you? And your entire thread rests on one massive assumption.
Besides, Ireland left the UK in July 1921. It didn’t dissolve the UK and Ireland paid back around 90 million. A precedent does exist. Your argument is garbage I’m afraid.
As you would say – ‘If you’re going to present an argument – check that it’s valid. Please don’t waste my time with completely false arguments.’
Ireland did not pay
You’re really not very good at this, are you?
And all the 2014 documents that are already prevents to support my case have been noted on this blog
I wouldn’t bother commenting again
The British Government, the BofE and rUK (which does not even exist but is nevertheless making decisions) have made quite clear in 2014 that a shared currency with Scotland is not acceptable. The British Government emphasised it was taling responsibility for the entire UK debt, no matter what. Dissolution is ruled out. rUK claims sole, exclusive ownership of the currency (in which Scotland is a part owner); all of the assets-liabilities of the currency, including all the debt; all of this is non-negotiable. Scotland has accepted all of that, to avoid dissolution or adverse consequences for all.
These are the facts ‘Ben’. Your argument is simply false. It is already a done deal. rUK cannot now try the Brexit trick; agree an outline with the EU over NI, and then take the bits you like, and just deny the bits you don’t like.
rUK cannot simply take the currency for itself, then come along to an independent Scotland that has in consequence to produce a new currency, or use £Sterling as an outsider (a monetary dependency of rUK), and gratuitously dump some of the rUK debt that goes with the currency, onto Scotland’s responsibility (now as a foreign currency burden!). That isn’t an argument; it is plain daft. If rUK tries that one it is simply operating a scam. If rUK follows your advice ‘Ben’, it isn’t going to take rUK long to acquire a dreadful international reputation as global scavengers; rip-off merchants.
Spot on John
Scotland never issued any treasury securities. Only the issuing party is responsible, the institution whom is named on the treasury certificates, no one else. Scotland have no treasury and no central bank
Scotland will have a treasury and a central bank
It’s not 2014.
So what is different?
The point is that since they have no gilt/treasury issuing body there can be no liability. Only securities issued by a Scottish institution would be redeemable by Scotland. The idea that Scotland have to “give money” (whose money!?) to England (which would be a foreign country) is ludicrous. That’s not how money works, what would be the underlying asset for any money paid? It makes no sense.
Its not 2014! Its not 2016 either. Assertion isn’t an argument. You are making it up as you toddle along.
The only official statement made by the British Government (when independence was an immediate prospect) made clear that rUK accepted full responsibility for all the debt liabilities. It depended on nothing Scotland might do, or wish to do (as part owner), because rUK just said it was taking the currency, the central bank, the debt, everything; and no negotiation or discussion. It was accepted by Scotland. It really has nothing to with 2014, it is far more fundamental; if Scotland is independent in 2021 or later, rUK will claim the same sole ownership. It was non-negotiable, and Scotland – as reasonable negotiators – have never challenged it. It stands, but there is no reason for Scotland to accept rUK trying to weasel out of the conditions that rUK knew it must set, because they are the only conditions that actuslly work. They are the only conditions that work for rUK; fine, but they are also the only conditions that work for Scotland. That is also fine, but only works for Scotland if we are not burdened by the debt of a foreign country, in a foreign currency. No weaseling, no Brexit obfuscation, no scam allowable.
You can be as angry and assertive as you may wish; and you my not like it, ‘Ben’, but you are simply fantasising. Scotland is not going to be served up on a plate to suit social media foot-stamping.
Agreed
Sorry Richard, there’s a couple of things I don’t quite understand and I wonder if you’d be kind enough to clear them up for me.
Are you saying that, having rejected the leadership’s policy of sterlingisation, the membership’s position of swift transition to our own currency is the same one that you propose? If so, do regard this as the party’s position now too or is its position still one you described as “obfuscation”.
Many thanks.
The leadership is clearly ignoring the party membership and its views
I think the membership is in line with what I am suggesting
The leadership is in denial on that and is obfuscating
Thanks very much
If you think ppl will just voluntarily exchange all their GBP into SP, with no idea what the value of the new currency may be, you are deluded. And if it was compulsory, or effectively compulsory, just wait for a mass exodus of ppl from Scotland to England.
When people are paid in Scottish pounds, can only spend in Scottish pounds, and pay their taxes in Scottish pounds and the rUK continues he’s to sink like a stone I think you’ll find it is you who may be deluded
Scottish pound would be issued one to one with GBP on issuance then allowed to float in the forex markets like all other currencies. This isn’t hard
This is the third, fourth, fifth or sixth time on a thread people keep raising arguments that are completely false. There is no prospect of compulsion. There was no compulsion in 1707. Nobody is proposing it in Scotland, nobody; except trolls on social media. It has been made clear here often enough by Richard and commenters that there need be no compulsion, and nobody is arguing for compulsion. Read Common Weal they have done more detailed work on the transition than anyone; and compulsion is a “no-no”. Everybody knows there is no case for compulsion; it is a terrible idea. There is nothing to debate.
Absolutely right
Compulsion is a Unionist myth
I think I might claim to have done quite a bit of work on this. I had to re-write the Common Weal paper on currency as it treated it as a redenomination of sterling into S£ which if done like that simply destroys all our sterling. That would not be very clever! See http://www.reservebank.scot and perhaps join the Scottish Currency Group on Facebook. We now have 6 MPs, 1 MSP and one Growth Commissioner as members with a few more in the pipeline. I suspect there are a lot more in support who are perhaps hesitant to publicly disagree with the leadership position.
On your main point, though, there is absolutely no compulsion. Anyone who wants to keep their savings in sterling can do so. If you really want to keep legal contracts such as a mortgage in sterling then you can opt out of the Lex Monetae (which will deem legal contracts where both parties are Scottish to be in S£ as of Currency Day). Some things will stay sterling anyway such as a Stocks & Shares ISA, direct investments in shares, Investment Trusts and the like on the LSE.
Within this scenario of creating from scratch a Scottish pound (or whatever the name give to the new currency), I don’t understand how liabilities Scotland with inherited from the former U.K. will be paid for.
I think the cost of decommissioning the 3 nuclear submarine bases, the two commercial nuclear power plants, the four research reactors plus the nuclear materials production reactor, each under the ownership and control of the U.K. Government, will require a massive contribution ( several hundred £billion) in Scottish currency equivalent. How will Scotland detach itself from the complex financial liabilities structure created by the U.K. Government to cover the funding into the long term of these liabilities, the limited experience of which we have to date, is they always increase, the uncertain variable only being how much?
Simple
Amongst the many agreements that will be reached with the rUK on this issue will be one that says the rUK pays for this
The principle that former colonies do not pay for the abuse of former colonial powers is now well established
[…] I posted my tweets in response to Andrew Neil's comments on Scottish currency here, yesterday. […]
Richard: You should not be so quick to dismiss as simple something on which others might just have thought about( and have more specific empirical knowledge) than you. Firstly, take nuclear powered submarines: Scottish voters by significant majorities voted for Labour under Blair; his Government backed retention of Trident, whose base is in Scotland . This could not be construed as colonialism under normal definition of the word; similarly the Chapelcross nuclear material production plant produced plutonium and Tritium for the UK nuclear warhead programme, which for many years had majority support in UK General Elections, to collectively defend the whole of the U.K., including Scotland. Thirdly, the Hunterston and Torness commercial nuclear power plants generated electricity substantially( but not exclusively) consumed by Scottish based power users; fourthly, the nuclear research reactors at Dounreay; two civil, ONR military, and at East Kilbride, were part of research and development collectively funded from the U.K. exchequer, but benefitted almost exclusively the local aacottish economies in the communities where they are based. Thus, in any independence split, it would be entirely unreasonable for Scotland to pocket the “benefits” of each of these nuclear projects ( all of which I personally oppose) – none of which could properly be characterised as “ colonialist legacies”;but expect rUK to pick up the massive multi £100 billions legacy clean up tab.It is just a fantasy to think so. Those arguing for independence just better get ready to work out how they are going to pay for this gigantic bill.
I have answered the question
[…] an exchange with the eminent UK constitutional lawyer George Peretz QC last night as a result of my claim in my response to Andrew Neil that Scotland would not owe debt to the rest of the UK in the event of it becoming independent. I […]
Oh I see, I can’t reply – you’ve blocked me!
How wonderfully thin skinned of you Richard.
Don’t invite people to comment on your blog if you can’t handle it when they box you into a corner. Argue your way out!
I blocked you for time-wasting with comments that were deeply il-informed, misleading and wrong when this is a place for informed debate
And like the good troll you are you known how to get around the block
Och, Richard; I confess there was a value in Ben’s foot-stamping; it revealed something of the vacuous, intolerant, uncomprehending nature of Unionism.
I confess also that I do not agree that Scotland is, or ever was, a colony. Colonies did not choose to be colonised (the Scots should know – they colonised plenty). Scotland chose (i.e., those who could choose) this somewhat dysfunctional Union. If it looks like a colony it is only because slowly Scotland allowed itself to be colonised by a rather low-grade, secularised rabble of ill-collected, righteous, Holy-Wullie Scottish (small and capital ‘C’) Conservatives. We have been colonised by ourselves. Think of it perhaps in terms of the essential themes of Shaksepeare’s ‘Tempest’; but written by James Hogg. It is actually straightforward to fix.
Sorry to disappoint, but I have a life and have limited tolerance for such nonsense
As someone who campaigned for independence during the 2014 referendum, and was met many times by the scare stories about which currency we would use, your simple to understand explanations are very helpful. I can only hope that the S.N.P follow your advice, and make my job much easier, I hope next year, while out canvassing for a Yes vote. Many thanks.
Would it be fair to suggest that if Scotland was to become Independent then we would expect to see a transfer of GDP and tax take from London and the South East back to Scotland. I’m not suggesting it would be in line with a proportion of population but surely it would be significant?
I think it would be, yes
Would you hazard a guess at what it potentially could be?
No, sorry