Starting From Scratch
The Independence Negotiating Position For Scotland On U.K. Assets And Liabilities
In the White Paper produced for the 2014 independence referendum, Scotland’s Future, the SNP-run Scottish Government proposed a currency union with the rest of the UK after a Yes vote.
As part of that mature and simple settlement the Scottish Government also offered to take on board either a population share or an historic balance share of the UK’s public sector debt. The Better Together campaign, UK politicians of different stripes, and HM Treasury all rejected the White Paper proposals and declared that Scotland would not be “allowed” to use sterling post-independence. Even the Bank of England themselves to be presented as hostile to the proposal, although nominally independent.
The Alba Party has learned the lessons from 2014. At the heart of its post-independence economic proposals for the next referendum or election plebiscite is immediate moves o establish a new Scottish currency. Sterling will be used in the interim and indeed as an internationally tradeable currency can continue to value private assets and liabilities. However the UK’s rejection of a currency union therefore means that all facets of that previous proposal fall. In addition on 13th January 2014 the Treasury made it clear that they would honour the legal position that they had title to all U.K. debt, under all circumstances.
In addition, then First Minister Salmond specifically stated that the debt sharing offer was contingent on acceptance of the currency union proposal
“We remain prepared to negotiate taking responsibility for financing a fair share of the debts of the UK provided, of course, Scotland secures a fair share of the assets, including the monetary assets” he said.
- The Alba Party’s believe that the independence negotiations should be a matter for the Parliament not just the Scottish Government and that the new independence platform must be constructed with urgency.
- The ALBA proposal at the independence negotiations will be that Scotland will start from scratch as regards currency, debt and deficits.
In keeping with other declarations of independence the successor UK state will retain all public sector debt issued on its behalf. Scotland will only inherited debt of the current Scottish Government and local authorities.
This is a strong negotiating position but it is entirely fair for the following reasons.
First, more than 95% of the UK’s general government debt has been accumulated since 1980. More, as a percentage of GDP the debt has doubled since the financial crisis of 2008 when the government and Bank of England embarked on wholesale quantitative easing. That debt is largely owed by one branch of government (the Treasury) to another (the central bank) and therefore forms no legitimate liability for the Scottish or any other people.
- The Alba Party rejects entirely any obligation to share debt accrued through central bank money printing and sees no role for Scotland on paying interest on that debt which is a transfer from one government pocket to another.
Secondly, there can be no acceptance of debt liabilities without a proper reckoning i.e., valuation, of the assets which back that debt. When individuals or households buy a house or a car, they often take out a loan from the bank. This debt is a liability for the household but, equally, the house or car is an asset (which either appreciates or depreciates through time). Government debt is no different. The debt position is widely reported each quarter and each year but the assets – UK embassies abroad, military installations and equipment, government buildings and publicly-owned infrastructure and land – are never detailed nor marked-to-market.
Without such an accounting the debt is meaningless.
- The Alba Party will waive Scotland’s claim on 8% of the UK government’s assets (from Whitehall to the UK Consulate in Hong Kong) and accept as payment for its wasted territorial resources over the last 50 years the stock of government assets – buildings and infrastructure – that currently exist in Scotland. Territorial assets will therefore be divided geographically by country.
Thirdly, the costs of Brexit, a political adventure the Scottish electorate clearly rejected in 2016, should properly form a compensation claim by the incoming independent Scottish Government on the rest of the UK. The debt that Scotland will have to accrue to rebalance its economy because of a decision imposed unilaterally on the Scottish people will run into the billions of pounds.
- As a goodwill gesture Alba propose NOT to pursue compensation for this act of willful damage and will write off the consequential sums owed to the people of Scotland by the current UK government. Similarly the several hundred billion of oil and gas revenues wholly accrued by the Westminster Exchequer in the years since 1980 will not initially be subject to any similar reparation claim as this settlement proposes a clean balance sheet as a starting point.
- The world has changed since 2014 and the case for independence must be adjusted to meet the new world not the old.
- The rejection by the U.K. Government, and the other unionist parties, of the proposal for a currency union indicates that they have no interest in a apportioning of assets and liabilities.
- The proposal by ALBA for a new Scottish currency at the earliest possible date is better suited to the new economic environment.
- The economic damage wreaked by Brexit will require substantial capital investment sums in the Scottish economy. Starting from a position of zero debt will be a substantial advantage in raising the capital required for this process of reconstruction at current international bond rates.
- ALBA propose that the Scottish negotiating position in the independence discussions should be a clean break settlement.
Dr Jim Walker
3 May 2021