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Wings Over Scotland

Night bombing

Posted on January 12, 2014 by

Now here’s an explosive thing to drop at 10 o’clock on a Sunday night.


Click the image to read the full Financial Times story. Did the game just change?

(The implications of this are huge even beyond those identified by the FT. It suggests, for example, that the UK has already planned for a Sterling union to be in place, because it’s extremely doubtful it would want any debt-repayment arrangement between Scotland and the rUK to be conducted in a different currency. But we’ve already been at work for 17 hours, so a fuller analysis will have to wait until tomorrow.)

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  1. 20 01 14 10:42

    Alistair Carmichael – Taking our best shot | 18 September 2014 - YES to Scottish Independence

  2. 29 08 14 22:19

    48 Lies | A Wilderness of Peace

199 to “Night bombing”

  1. Blimey – clean sheet? 

  2. Dave McEwan Hill says:

    Pretty explosive – but does the UK treasury understand what message this sends out to the unsophisticated of Scottisah voters 

  3. That will make for some interesting independence negotiations! 🙂

  4. antmcg says:

    That means one of two things from my perspective. Either London are seriously worried that there will be a YES, causing their borrowing costs to increase, or again viewing a YES as given, they are trying to undercut the SG Governments hands in relation to negotiations.
    Maybe there are some financial wizards here on the site, that may be able to explain in layman’s language?

  5. Steve B says:

    I wonder if Darling or BT got a heads-up on this or whether this was sprung on them as well – tomorrow’s interviews with them (if this ever gets covered in the Scottish MSM) will be very entertaining 🙂

  6. HandandShrimp says:

    and quite possibly LOL
    Night all

  7. call me dave says:

    Looks like the tectonic plates have shifted a wee bit more. They may not say so but they are worried about this referendum going YES a lot more than even we think.
    Even more jam on the menu soon and Whitehall burning the midnight oil (OH that’s ours) to try and get a solution.  

  8. turnip_ghost says:

    It’s not April is it…?

    I actually can’t believe this….I mean….WOW!! No debt….but what would they want in return? Keeping nukes stationed in the Clyde? OR, like was written somewhere, governments always act in the self interest of themselves…They want to keep us sweet so we agree to the Sterling zone…

    Still…Incredible. Give it until lunchtime before this gets retracted due to the people in England going ballistic!

  9. Gordon Hay says:

    I expect this to be spun as the UK Gov. taking necessary steps to reassure markets that it will step in if an Indy Scotland can’t pay its debts, with a side order of insinuation that that scenario is likely and an added dash of references to the UK saving Scottish banks.
    Cynical? Moi?

  10. Kalmar says:


  11. Bill C says:

    Game over. British Establishment recognise that the ball is about to hit the slates.

  12. Angus McLellan says:

    And the 2014 Sybil Fawlty Lifetime Achievement Award for stating the bloody obvious goes to …

  13. Alex Grant says:

    Don’t worry this will portrayed by the MSM as necessary because Scotland will be a basket case! The econoic message is key and it ain’t being addressed properly by anyone but Business for Scotland. The Cabinet and the Yes team need a training day with Gordon Mack or Ivan McKee. WE can win if the economic story is got across.

  14. turnip_ghost says:

    And it just dawns…no debt, no assets. They can say we then have to have the costs of setting up embassies, army, navy etc etc etc

  15. Doug Daniel says:

    “We don’t think it weakens our hand,” said one Treasury insider. “If Scotland reneged on what it owed the rest of the UK, it would be an international pariah in the markets. The UK has a strong hand here.”

  16. Les Wilson says:

    Hymm, I see a pitfall here, which is that if rUK are going to take responsibility for the UK debt, while knowing that Scotland would have to still pay it’s share or the markets would take it out on us as they say, we may be considered a risk. However, the current position is that we will pay our share but require our share of UK assets.
    If, they put us into “must pay” scenario, then will they refuse to share assets because they may have ensured we have then to pay even without the assets ,or it would work against us. Neat, if they get away with it. Hmmm some good heads needed on this one as it might be a sneaky way to cheat us. (again!)

  17. kininvie says:

    Where’s Ivan when you need him?
    IMO: It’s a defensive move (and why would you do that when you are going to win?).
    Curiously, though, it’s also a vote of confidence than an Indy Scotland will be a responsible partner and take on its share.
    Taken together with the reported talks between the bank of England and the Scottish Government, it makes me think that Carney – a Canadian who knows something about independence referendums –  is taking a very sensible line in managing his risk.
    How this will play out with the dinosaurs in the depths of the Treasury remains to be seen. And the chances of others, such as the MoD pulling their heads out of the sand and making sensible back-up plans seem remote.

  18. Albert Herring says:

    rUK will retain the debt as insisted on by the creditors. We will pay our share of the capital + interest, as negotiated, to rUK.
    I believe this is the Scottish Government’s position, and is a sensible one.
    Looks like UK Government is accepting this reality.

  19. Tony Little says:

    AS I understand this, the rUK government are NOT saying iScotland has no debt, rather they are acting as a surety for the UK Bonds, while STILL expectable iScotland to pay to the Treasury a sum, or annual payments, commensurate with whatever debt is negotiated as iScotland’s share.
    I think this is clever and could provide both sides with a clarity that will help them in the future.  UK creditors will stay “on-side” as the BoE has guaranteed the whole debt; while iScotland can start with a clear debt position, and given its superior fiscal position, would not have to rely on the markets to cover a running deficit as higher (likely) interest rates.
    I wonder if there have <i>already</i> been informal discussions between the BoE and the Scottish government?

  20. caz-m says:

    FT (financial times) running a story that the UK government will cover the Scottish debt after independence.

    None other than Danny Alexander is behind the story. If someone could put up a link, would be very grateful.

    I am on ipad and not sure how to move files about.

  21. boglestone says:

    Quick, let’s do a runner!

  22. kininvie says:

    You should put your tits back on. Look at Ukraine’s actions after the USSR break-up. They happily accepted their share of debt, although they had no strict need to do so, because they knew what the alternative was. Scotland will need to borrow – no doubt about that, and we’ll need to be seen as creditworthy.
    Anyone who sees this as some kind of free pass to going into independence debt free isn’t appreciating how international finance works. Carney is making a  gesture of confidence here, and he won’t be popular in certain circles for doing it.

  23. Ghengis D'Midgies says:

    The Canadian at the Bank of England did already say he was open to, or would be meeting with the Scottish government. What happened to that? Maybe they already have had meetings and this is some of the result.

  24. Craig Dalzell says:

    I remember being mocked on the No pages for suggesting this last year.

    This isn’t *really* a clean sheet scenario. London can’t transfer debt to Scotland. Not while remaining the “successor state” in the arrangement. To do so would be a breach of contract between London and the specific holders of the gilts being transfered.

    I suggested then that the best it could do would be to keep all the debt but set up an arrangement with Scotland whereby we pay “our share” whatever that may be.

    It seems now this is precisely what they’re planning.

    One thing this *does* do for Scotland is immediately put paid to any suggestion that we’ll be paying a higher rate of interest on our “share” of the debt. *That* is the real game changing news here.

  25. Rev. Stuart Campbell says:

    “AS I understand this, the rUK government are NOT saying iScotland has no debt, rather they are acting as a surety for the UK Bonds, while STILL expectable iScotland to pay to the Treasury a sum, or annual payments, commensurate with whatever debt is negotiated as iScotland’s share.”

    Yes, that’s correct. But it makes the Scottish share of debt purely a Scotland-rUK issue, not one which could damage Scotland’s international credit rating. Which gives Salmond a much stronger hand in the independence negotiations.

  26. Doug Daniel says:

    “Anyone who sees this as some kind of free pass to going into independence debt free isn’t appreciating how international finance works. Carney is making a  gesture of confidence here, and he won’t be popular in certain circles for doing it.”
    I’m under no illusion that we’re going to suddenly be debt-free upon independence, don’t worry about that. It’s quite right that we accept our debts – even though they were run up in our name rather than by us – as long as we also get our share of the assets. I am, however, absolutely pishing myself at the idea that the Treasury thinks this is going to be anything other than a PR boon for the Yes campaign.
    Your average voter has no idea how international finance really works. However, you tell them that rUK has guaranteed the entire UK debt – including Scotland’s share – and they’re not going to see that as anything other than one less thing to worry about if Scotland becomes independent.

  27. kininvie says:

    Of course, it’s not all entirely philanthropy (that would be too much to ask).
    The UK govt simply cannot afford – literally – to have the rate at which it borrows rise. And if uncertainty about Indyref makes it look as though creditors might up the interest rates a bit, then the govt has to take steps – and guaranteeing the debt is what they have done to stop any uncertainty.
    But as I said previously, it is also a vote of confidence that an independent Scotland will step up to its share of the debt. In other words, for the first time, we are not being treated as an outright basket case by the Westminster establishment. And I guess we have a Canadian to thank for that.

  28. HandandShrimp says:

    One could not do a runner, if negotiations broke down it would have to be demonstratively because the Treasury were being unreasonable. However, in making the commitment is does weaken their position to the extent that it would be incumbent upon them to negotiate fairly. I don’t think anyone is asking more than that. They are not doing this as a favour. They are worried about a market premium and they can’t afford that. Debt is still rising. When they say they have halved the deficit they don’t mean half the debt is gone they mean the debt is rising at half the speed it was before. This is not a circumstance or pre-negotiation position they would have adopted out of choice.

  29. zedeeyen says:

    I don’t reckon this is a particularly tactical move, they’ve just done the sums and figured out that it’ll be cheaper for rUK to borrow at current rates against a £1.2tn debt than to borrow at even slightly worse rates against a £1.06tn debt, and so it’s better for rUK to guarantee the whole lot even if the Scots end up taking their share eventually.

  30. Brian milligan says:

    Telephone keeps ringing “Oh Johann have you heard from london how we are to treat this” Treat what? “The bank debt thing” FFS the bastards. Ahudnae heard. The bastards. will I phone whae di ye call him? whaes this talking to me at this time oh the night, oh a need a pee FFS.

  31. Graeme says:

    This is a relatively unremarkable piece of information. This is surely to be expected?

    In practice, it was never going to be the case that a proportion of gilts would be directly assigned to an independent Scottish Government. All that will happen is that the UK will continue to honour gilts, but the independence negotiations will see Scotland agree to make a proportional contribution towards those gilts, in GBP (this is irrelevant to whether or not we share a currency: Zimbabwe doesn’t pay its international loans in the Zimbabwean dollar) as and when they mature until there are no more “pre-independence” bonds or until we’ve paid an equivalent amount to cover all future such bonds, whereafter there is a clean break and nothing owed to or by either state to the other, them issuing gilts in respect of their own Treasuries independently.

  32. Dcanmore says:

    Okay, mortgage off the next 40 years of known oil assets for £400bn, drop the debt into that oil lake and invest £200bn into infrastructure, education, hi-tech reindustrialisation and green energy security over ten years while retaining £100bn for a sovereign wealth fund, then watch Scotland take off.

  33. Rev. Stuart Campbell says:

    This is interesting:

    “The international law is not clear. The Arbitration Commission on Yugoslavia declared that successor states must ‘together settle all aspects of secession by agreement’. However, when agreement cannot be reached, it appears that the presumption is that debt remains with the predecessor state.”

  34. squarego says:

    It’s a tactical move designed to make Scotland look like it might need rescued / bailed out by the mighty UK.
    2 guys walk into a bar. One of them whispers to the barman “In case you’re worried that that guy can’t pay – It’s ok I’ll take care of the bill.” Suddenly he’s the big man and the other is portrayed as the loser.
    I’m also suspicious of the effect this will have post-Yes vote. We’re happy to pay our fair share of our debt. But UK has (allegedly) already paid our debts and now they hand us their bill. Therefore we’ve already lost the ability to negotiate on those debts. Like the factor that comes round and says they got the roof fixed and your share works out at… £x

  35. Graeme says:

    Re this “giving Salmond a stronger hand” because of international credit implications, I don’t buy that for a second. RUK will seek some sort of collateral as security against non-payment as part of the independence negotiations, failing which they will be more hardball on shared incorporeal assets and how they are divvied up.

  36. Rev. Stuart Campbell says:

    “This is a relatively unremarkable piece of information.”

    It really really isn’t. It turns the debt share from a sword of Damocles hanging over Scotland’s head into a trump card.

  37. Rev. Stuart Campbell says:

    “Telephone keeps ringing “Oh Joan have you heard from london how we are to treat this””

    Maybe it’s just late, but it took me AGES to work out who “Joan” was. SPELLING MATTERS SOMETIMES, PEOPLE.

  38. Barontorc says:

    Smoke and mirrors guys. Somebody has to reassure the markets and it can’t be us as we’re just starting a clean sheet. There’s a lot of negotiating to be done come the day. All that’s clear here is that YES is much more probable than was previously bandied about.
    It’s also a no-brainer that significant talks have not been taking place between the parties. The rubbish press and BBC are being used to swing the NO vote, if it’s even remotely possible, but reality is certainly hitting home in Westminster.
    Expect an almighty hoo-ha from the little-englander divisions who’re outside the loop.

  39. Mark Coburn says:

    Think I’m gonna sleep sound tonight. Night night boys and girls. x

  40. kininvie says:

    But it makes the Scottish share of debt purely a Scotland-rUK issue, not one which could damage Scotland’s international credit rating
    Forgive me – you are wrong. Scotland’s credit rating will be determined (among other things) on whether it accepts a share of the UK debt. If it fails to do so, whatever justification it may have, it’s not going to be seen as creditworthy. The thinking will be that if Scotland can walk out on one debt, it can walk out of any of them….so why should we lend?
    Countries that repudiate debt take an enormous hit to their capacity to borrow in future. And like it or not, if we walk away from our share of UK debt, that is how we shall be perceived.

  41. Bill C says:

    “Scot Free” just took on a whole new meaning!

  42. caz-m says:

    Rev and Doug Daniel 100% correct.

    Sky News has already came out with the usual reply to it, Scotland gets independence and England pays fort it.

    This news is great way to end the day, after the bullshit that we had to listen to all day.

    I wonder how the Scottish media will push this one.

  43. fittie says:

    As we have been saying for ages the pound witout the backing of north sea oil will sink the markets know this and if they are holding uk bonds they will lose money ,

    Scotland will be expected to pay its share of the debt and it will if it gets its share of the assets
    this news must mean that a shared currenct deal must have been done also a shared assets deal
    remember the governer of the BOE and Alex were due a meeting and the governer has already stated hes willing to talk about a shared currency
    Fear of a sinking pound has driven the london treasury to this

  44. kininvie says:

    It really really isn’t. It turns the debt share from a sword of Damocles hanging over Scotland’s head into a trump card.
    No it really really doesn’t. It merely says ‘we have confidence that an independent Scotland will do the right thing (and the markets will stamp on it if it doesn’t)’
    But that vote of confidence is remarkable enough in itself. Let’s confine ourselves to that perception and not go overboard elsewhere.

  45. dadsarmy says:

    Thanks Rev, this basically confirms the position that the Treasury has already had, according to what NIESR said previously to this announcement, in this relevant report:

    I think it’s a sound move from Danny, which merits an upgrade to my assessment of him, though not on Indy things. It does remove a FUD from Project Fear, and though I don’t think it gives directly a stronger hand to the Scottish Government in negotiations, it does perhaps limit the rUK, and perhaps increase the probability of the rUK accepting a currrency union – not sure if it helps them to retain their credit rating, probably. The currency union could be traded off for Scotland borrowing what it owes the UK and paying it off in a oner, rather than what NIESR calls an IOU, whereby Scotland pays it off on a regualr basis.
    But yes, it’s a game-changer, I think, for the NO campaign.

  46. Hetty says:

    bbc news online, just for that Monday morning feel good factor, ‘slower growth for Scots economy’ and, god help us, a picture of Carmichael, entitled, ‘Scotland benefits from uk union’. 
    maybe this is to counteract the FT story…jeez and it is only the start of the week. 

  47. msean says:

    I think this works to the advantage of all,it’s a sensible solution,it doesn’t mean we avoid our ‘share’ it just keeps the city gamblers happy,that’s all. We’ll pay our debts alright, if there isn’t some other thing the continuing uk govt has planned,like sign over the oil for x number years or so to pay the debts. That way,they get rid Scotland and keep the black stuff for ruk to borrow against.

  48. Rev. Stuart Campbell says:

    “But that vote of confidence is remarkable enough in itself. Let’s confine ourselves to that perception and not go overboard elsewhere.”

    I can’t agree. It effectively says “All this debt is the rUK’s, and any arrangement between the rUK and Scotland for Scotland to pay some of it to the rUK is a matter for private negotiations between the two nations, not any of anyone else’s business.”

    There is no international law that says Scotland owes the rUK £x billion. (Just like there’s no EU membership law covering Scotland’s situation.) Scotland’s negotiators WILL have an option to play hardball over the debt that they didn’t previously have, without the risk of being seen as being in default by lenders. I don’t foresee it being used, because as we’ve said many times on the site, after a Yes vote it’s in everyone’s interests to play nice. But it (and several other ramifications, including the one you mention) will exist, and the public will be able to see that. This is big.

  49. Doug Daniel says:

    “No it really really doesn’t. It merely says ‘we have confidence that an independent Scotland will do the right thing (and the markets will stamp on it if it doesn’t)’”
    But that in itself is a trump card. Anything that says “Scottish independence is feasible” plays into our hands, because the ONLY thing that has stopped Scotland from pushing for independence for all these years is that belief – drummed into all of us, but luckily ignored by enough of us to keep a movement going – that we couldn’t do it. That’s what I think, anyway.
    To a lay person, this news basically says “all that stuff that Darling, Osborne and Alexander spout about international money lenders punishing Scotland is pish.”

  50. Doug Daniel says:

    Or what Stu said.

  51. Patrician says:

    said this back in November, probably bears repeating now:
    “I would enter the negotiations with currency off the table and let rUK then push for it to happen. Currency union is more beneficial to rUK interests than it is to Scotlands interests.
    Sterling isn’t the safe bet it used to be.
    If you want to make some money, short Sterling for:

    19 September 2014;
    Scottish Independence day 2016;
    and if the Tories win the rUK election in 2015, sell all the Sterling you own before 2017.”

  52. Papadocx says:

    This is as a result of the failure of HMG to confirm that the sterling zone will be open to Scotland in the event of a Yes vote. If a yes is the outcome and Scotland is out of the sterling zone then UK debt levels will overtop their limits when you take the oil out of the equation and rUK interest rates will be forced up, due to rUK higher dept levels.
    Since Scotland is a new country with a currency that has no history of debt management then lenders will want a premium till a track record is established, just like the longer you’ve had a credit record the easier and more confident banks are to lend to you as a customer at preferential rates.
    This is exactly what Salmond and Osborne have known all along, but can’t say it until the two governments OPENLY ACCEPT SCOTLAND WILL BE IN THE STERLING ZONE. Hence allowing Scotland to use sterling is advantages to both countries as Salmond has always said. Hence the reason nobody in HMG has ever said Scotland wouldn’t be allowed to use sterling they always say it is not guaranteed. So as not to scare the horses like their doing right now.
    This is now going to be spun that the markets are looking to rUK to take responsibility and cover poor wee Scotland’s debts. rUK have created this potential problem, the easy resolution is to come out tomorrow and state SG and HMG are in negotiation over how Scotland will fit into treasury committees after independence. As I have always maintained if Scotland is denied sterling then rUK WILL BE SHOOTING ITSELF IN THE HEAD! maybe they will but I doubt it. 

  53. kininvie says:

    ….not any of anyone else’s business.
    But it is most certainly the business of anyone who is likely to be asked to lend to Scotland in future. That’s the whole point. That’s the reason why the UK govt can do this without sticking their head in a noose and leaving themselves hostage to independence negotiations.
    You don’t walk into a bank and ask to be loaned a few thousand without someone checking your credit record. Did you default on a previous loan…? Oh well, sorry we can’t help you.
    We’ll just have to disagree, Rev. But I’m right. 🙂

  54. dadsarmy says:

    Yes, I saw something similar. The Scotish Government have already said they’ll take their fair share of debt, but are starting negotiations with the historical share which is considerably less than the per capita. But that potential legal posidition gives strength to the SG’s hand which might, however, be traded for other considerations.
    Maybe I’m getting over-excited here, but it seems to me the UK Government’s tactics of scaremongering are, at last, starting to rebound on it, as it ceases to be confined to us dumb schmucks, but gets out into the open world – which is not impressed. So perhaps the TASS and Russian undermining of Cameron. But if the fear of debt is unravelling, perhaps other things will as well, such as debt, currency union, even EU membership. Perhaps over the next few months we’ll see UKG forced more and more to retract its FUD, to the benefit of the YES side which can just sit with a sphinx-like smile on our faces. Project Fear coming home to roost – just like a homing pigeon. I certainly hope so.

  55. Rev. Stuart Campbell says:

    “The Scotish Government have already said they’ll take their fair share of debt, but are starting negotiations with the historical share which is considerably less than the per capita. But that potential legal posidition gives strength to the SG’s hand which might, however, be traded for other considerations.”

    Precisely. There is no internationally-defined measure of Scotland’s share. It’s between us and the rUK to sort out. At least, it certainly is NOW.

  56. Chic McGregor says:

    It may mean that the Treasury will insist on higher interest rates for Scotland’s share, no doubt claiming that those are what we would be charged if we assumed liability on the international market.
    We’ll see.

  57. Rev. Stuart Campbell says:

    “But it is most certainly the business of anyone who is likely to be asked to lend to Scotland in future. You don’t walk into a bank and ask to be loaned a few thousand without someone checking your credit record. Did you default on a previous loan”

    You’re missing my point. There will BE no previous loan, because this moves Scotland’s share of the debt from an international issue to a purely internal one. A better analogy would be that you’d taken out a mortgage and agreed your wife would contribute 40% to the repayments and you’d pay 60%. (Because hey, she’s a woman so she gets paid less, right sisters?) But as it happens she divorces you and leaves, and you have to pay it all yourself in order to stay in the house, and try to come to a deal with her that she’ll either surrender her share or pay you the money.

    The point being, as long as the bank’s still getting its repayments on the 1st of every month, it doesn’t give a shit about your domestic arrangements. Your wife hasn’t defaulted on anything – because there’s BEEN no default – so her credit rating stays unblemished. And the UK has just guaranteed that there’ll be no default.

  58. Papadocx says:

    PS It is rUKs debt for sure they arranged it and can’t pass it off to us unless we agree. So the rUK is getting itself into a straight jacket of its own making and will try to convince us daft jocks that it’s us that’s in trouble. GOOD GAME SOMETHING IS CHANGING BIG TIME.

  59. Rev. Stuart Campbell says:

    “It may mean that the Treasury will insist on higher interest rates for Scotland’s share”

    It can’t insist on anything. That’s the point. It’ll have to negotiate.

  60. Patrician says:

    On independence day, Scotlands credit rating will be shit, whether we take a share of the debt or not.  There is no history of debt repayment for us and it will take years to build up a rating during which time Scotland would have to pay through the nose for any credit.  The only trump card we have is the natural resources at our disposal, these won’t bring down the borrowing rates, they will only make it easier to get debt.  
    So, imo, it comes down to weighing up whether the assets we are going to get are worth incurring the share of UK debt we would take.

  61. Weedeochandorris says:

    I havent read all of the comments yet so somebody may have already highlighted this. The Telegraph says “its an attempt to prevent creditors from pushing up the cost of government borrowing.”

    “The promise comes amid fears from treasury officials that market jitters about an independent Scotland’s ability to service its share of the debt would drive up the government’s cost of borrowing in the coming months.”

    We’ve all seen the national debt clock!

  62. dadsarmy says:

    The beauty of this also, of course, is that it’s going to hit the rUK media to some extent at least, and that will make people in the rUK sit up and ask questions – putting more and more pressure on the UK Government to give answers – answers they don’t want to give the “SNP”. I love it when a plan comes together, and it is possible that the SNP have known this all along, hence minimal defence all the time. I think the rUK as a whole has been very slow to cop on – this is all major for them too.
    Thanks for the edit Rev, had to change livelihood many years ago with RSI, and though I’m as fast a typer as before, I’m nowhere near as accurate 😉

  63. Chic McGregor says:

    “It may mean that the Treasury will insist on higher interest rates for Scotland’s share”
    It can’t insist on anything. That’s the point. It’ll have to negotiate.”
    I was meaning in the negotiations.

  64. If Scotland is truly to be considered a new state rather than a continuing state then it HAS no debt liability in law. THAT would be the reality that would cause the Market to discount Treasury paper right now.
    IF England is indeed to be considered the continuing state, but guaranteed only its debt as a successor state, then it would be certain to default on that amount that is the difference between successor-state liability and continuing-state liability.
    As a new state Scotland has no liability for UK debt whatsoever. This obvious point is reinforced by the UK Government official legal position that Scotland was extinguished in 1707. Since Scotland at present does not exist and will not come into being until independence, when it secedes from the continuing state (England – see the UK legal opinion), it could not have accrued any debt during the 309 years is was subsumed within England. 

  65. Chic McGregor says:

    The Treasury can only guarantee Scottish debt and borrowing if the BoE is the common lender of last resort and sanctions future borrowing, which kind of blows objections to a common currency agreement out of the water.

  66. Arbroath 1320 says:

    Apologies for my economic ignorance here.
    My naive reading of this news tells me that Westminster, and the Treasury specifically, are terrified of what will happen to their beloved money markets around the time of a YES win in September. I’m certain that there has been many a late night discussion held between the ‘markets’ and the Treasury about what happens if Scotland gains independence. Let’s face it Westminster is stuck hand in glove with ‘markets’ and they will bend over backwards to appease them.
    This is why they are now coming out and saying they’ll accept full responsibility for the £1.2 Trillion debt. Westminster is terrified of the ‘markets’ going ‘bust’ over the debt issue if it is not clearly settled before Scottish independence. The Treasury were, in my view, caught like a rabbit in the headlights, they had no option but to accept full responsibility. Any action from the Treasury would send the London ‘markets’ into absolute and total free fall, something Westminster is desperate to avoid.
    We are regularly informed by the great British Brainwashing Committee that Broken Britain is now definitely into recovery. Westminster could not possibly allow this fragile recovery to be put at risk. There is only one thing that they could do, in my view, and that is what they have now done.
    I wonder if this news was discussed with Darling, Osborne, Cameron, Milliband, Balls, Clegg, McDougall, Lamont, Davidson or even Rennie before leaking the news to the FT?
    Talk about taking the wind out of Better Together’s sails!
    Let me see now, how many lies have Better Together been found out telling?
    Supermarket prices, postage stamp prices, membership of E.U., membership of NATO, mobile phone roaming charges and now U.K. debt name a few. :LOL:
    Just one wee question. Did Cameron discuss this with Putin before agreeing to the news release, has anyone asked Putin what he thinks about this news?
    Is this the price Cameron has to pay Putin for his help to keep Scotland in Broken Britain?

  67. dadsarmy says:

    The BBC has the news, but says it’s guaranteed until the referendum:
    “The UK Treasury is to say it will honour all UK government debt issued up to the date of the referendum on Scottish independence.”
    Which is interesting – what does it do after a YES? Guarantee it until Indy or after negotiations are complete? Or agreed in principle? It might be an incentive for the rUK to get the neogitiations done in a hurry …

  68. call me dave says:

    So it’s no debt (maybe) weighed against loss of assets.
    I think the Scottish debt share would be less than the assets due.  Anyone know if a ball park figure has been done for the assets?

  69. mactavish says:

    Here ends the lesson that shows tails can’t wag dogs.

  70. dadsarmy says:

    Telegraph: “However, instead of carving up the debt between the two countries, an independent Scotland would reimburse the Treasury’s payments. “
    So it thinks it’s the IOU method which would give the rUK a higher debt to GDP ratio and Scotland a lower one according to NIESR, than if Scotland borrows to repay the whole debt. Which increases even further the chances of the rUK dropping its credit rating (according to NIESR).

  71. Patrick Roden says:

    “It’s a tactical move designed to make Scotland look like it might need rescued / bailed out by the mighty UK.”
    Eh? This isn’t anything to do with Uk Gov/Scottish Gov politics, it’s everything to do with the UK treasury, being told that the LONDON financial markets are becoming ‘Jittery’ about the possibility that Scotland will vote Yes, and how this might leave them out of pocket.
    One of the sub issues that emerges from this story, is it shows just how much the UK gov is in the pockets of the big players in London’s financial markets.
    When London says ‘Jump’  Westminster says ‘How High Sir’

  72. DonUnder says:

    Alistair Darling will be on the phone to every Scottish newspaper editor right now making sure they’re all “on message”.

  73. call me dave says:

    Patrick Roden.   BBC UK website agrees with you
    “It follows approaches from investors to the Treasury and the UK’s Debt Management Office, says BBC Scotland business editor Douglas Fraser.”

  74. Patrician says:

    This has more to do with the currency speculators, Sterling has been under attack for a quite a few years now.  If I remember the name correctly, have a look at George Soros as being one of the most high profile of the currency speculators.  City of London traders don’t mind who they screw to make their bonuses. As the saying goes about them “They would eat their own young if there was profit in it”.

  75. mr thms says:

    What about the IOU Method?
    i read this the other day…

    “The second option, alluded to throughout the White Paper, is that the rest of the UK government remains liable for the entirety of the current UK debt and that an independent Scotland commits to paying its share of interest and principal payments as and when they fall due. We call this the ‘IOU’ option. This proposal was first suggested by the Fiscal Commission Working Group (2013) which suggested that the payments are made in line with the current UK yield curve. For example, if the UK’s debt stock included £1bn in 5 year gilts, and Scotland were responsible for 10% of the UK’s debt, then Scotland would pay the interest and principal on £100mn of 5 year gilts to the UK.”

  76. Graeme says:

    Stuart, it doesn’t “let Scotland play hardball”.
    The Treasury will simply say in post Yes negotiations that they will insist upon security in the form of incorporeal assets against the contributions Scotland pays to them (in GBP) in lieu of maturing bonds. We’re talking Bank of England pro-rata assets, security over government buildings, and potentially a domestically enforceable right over certain revenue streams in the event of a Scottish default under the bilateral agreement.

  77. caz-m says:

    On Clyde 2 referendum debate today, Blair McDougall screaming at Blair Jenkins that the currency was the most important issue the public wanted answers on. And accused the YES campaign of having no certainty regarding using pound streling.

    Well if I were Blair Jenkins, I would be round at the NO campaigns door first thing in the morning.
    And ram the FT report right down that fat lying bastard McDouall’s throat.

  78. kininvie says:

    I still think that this is the work of Mark Carney. After all, he’s about the only person within the ranks of the Westminster money men to have the detachment to see clearly. It was Carney who left the door open for talks with the SG about currency.
    It’s his job to ensure financial stability. So if he reckons that’s threatened he can bang some politicians’ heads together, point out a few realities and pick up the phone to Salmond.
    That’s what comes of appointing a brash colonial to the job instead of good clubbable types like Mervyn King. You get a bit of reality in the debate. More power to his elbow.

  79. A2 says:

    “Maybe it’s just late, but it took me AGES to work out who “Joan” was. SPELLING MATTERS SOMETIMES, PEOPLE.”
    Surely that’s intentional and the point? 🙂  

  80. A2 says:

    ie most people don’t know who she is.

  81. A2 says:

    Prepare yourselves for a particular nutty week of scare stories.

  82. ScotsCanuck says:

    Quoting Kininvie
    “Brash Colonial ….”,  hey mister !!!! We’ll hae a wee bit less o’ the Colonial, 
    … he’s a Canuck, eh!  🙂

  83. pmcrek says:

    Leon Trotsky once said, if you want to know whats going on in the world pay attention to the stock market.

  84. Appleby says:

    Holy shit. Sorry, but those were the words I said reading this. This is HUGE. This is game changer, hairs raised on the back of my neck stuff!

  85. ronnie anderson says:

    Rev,Doug D, they  are feirt of a reconing of 45 yrs of OIL revenue being exposed,SG need to get every thing out on the table, as we all know, Scotland did not get any increase in the Barnett Formula,as a result of UK borrowing. There has to be a root & branch, examination of the UK financial books. All the secret paper,s from every Gov,since the 60s have to be reveiled, this revelation is nothing more than a ploy. We have learned nothing from reading ,J H PATON for the past week, take this with a heavy dose of Sceptcisim. They are Lying Cheating Bastered,s.

  86. ronnie anderson says:

    mr thams, why should a Indy Scotland pay a share of the intrest, on a dept we did not incur, nor got a share of, were we ever consulted.

  87. mr thms says:

    #Christian wright

  88. Iain Henderson says:

    The IFS report was based on dodgy and worst case assumptions but the analysis was correct. So whilst we certainly wouldn’t be a poor country post indy (as they basically suggested), the debt burden would ensure we were not seriously rich in the style of Norway. So…small to medium sized rich country bordering a medium to large not so well of nation – where does it buy its goods and services from? Suppose your income goes up by 2% post indy – what extra will you buy? Suppose it goes up by 40% – oh maybe you could afford that boating holiday in the broads?

  89. john macdonald says:

    The BBC story has a subtle difference: “The UK Treasury is to say it will honour all UK government debt issued up to the date of the referendum on Scottish independence.” Note “up to the date of the referendum”. This is not a magnanimous gesture enabling us to start with a clean slate, but an attempt to reassure markets and forestall a rise in borrowing costs in the run-up to the referendum. After that, negotiations will begin on how much of the debt Scotland will assume. We will be equally entitled to claim our share of UK assets, but don’t expect that to be highlighted by the doomsayers who will insist that an independent Scotland would be saddled with an intolerable debt burden. 

  90. @thms – Huh?
    The continuing state is deemed to be the same state obligated under treaties and agreements, AND responsible for ALL external debt. The fact that a portion of the territory of the original & continuing state is now a new state does not alter those privileges and obligations in any way.
    In this context consider the tautologies: The continuing state is that state which goes on and the new state in the state which comes into being.
    in the case of a split yielding two successor states, each states carries the burden of external debt proportionally, but the UK position is that Scotland would not be a successor state, it would be a newly created state.
    In the case of a continuing state and a new state, the new state has none of the rights and obligations under treaties and agreements entered into by the original and continuing state, and has no liability for any external debt owed by the original and continuing state.
    The UK’s creditors know this, and understand that if Scotland becomes independent as a new state, they have no legal claim against it for any portion of the debt owed to them by the continuing state.
    As long as the UK Government held that Scotland as a new state would be liable for a portion of UK external debt, it left creditors with the fear that the UK continuing may not honour its entire obligation, confidence was thus undermined and the degree of RISK associated with underwriting UK sovereign debt increases. 
    Increased risk requires increase in the cost of borrowing and THAT is why HMG made this statement, to head-off that possibility.

  91. Macart says:

    Oh jeez, that’ll leave a mark. 😀 LOL
    I wonder if this is the reason for Mark Carney’s overtures a few weeks back? Appears both BoE and Gideon may have been sweating over this reveal for some time in fact. How long do you reckon it would take for the exchequer to come to this decision and make a release? They’ve just handed YES Scotland and the FM a major boost, I don’t imagine that was done lightly.
    Between this and that car crash embassies reveal, its been a bad weekend for BT. I’d really love to know what their private polling is telling them at this point.

  92. Ken500 says:

    The Westminster Treasury takes on it’s own debts, run up in the rest of the UK, by borrowing and spending too much.

    Westminster comes clean.

    The Westminster Treasury is already borrowing at 2.5% and lending at 1%., and printing money, so the richer can get richer and the poorer pay the price. The Westminster Treasury is already welshing on it’s debts. How long can that go on?

  93. Ken500 says:

    Scotland keeps on giving the UK Treasury debt repayments. The UK gov spend it, and do not pay off the Deficit. The UK Treasury have taken £3Billion? Scotland share of the Royal Mail sell off/Pension Fund, and not paid off the deficit.

    The Tory Party is funded by Bankers. The Tories have to do what the Tory Bankers decide. Mark Carney must have looked at the Barnett Formula, and realised it was against International Law.

  94. bunter says:

    Don’t trust the Bs, Im still wondering about the Scotland was extinguished bit in the UK Gov paper. Are we sure our entitlement to our sea borders and oil/gas reserves are cast iron as they will go to any lengths.

  95. Ken500 says:

    The divorced wife who leaves, will have to compensated for her share of the house (bought out) so the guy can stay in the house. Or the house has to be sold and any accumulated ‘gain’ split proportionately. How much wealth has the UK gained since 1707 (or 1928)?

    Win, win for Scotland. Westminster admitting defeat.

  96. john king says:

    ““We don’t think it weakens our hand,” said one Treasury insider. “If Scotland reneged on what it owed the rest of the UK, it would be an international pariah in the markets. The UK has a strong hand here.”
    And you don’t want to be an international pariah, look what happened to poor old Brazil, 

  97. Rev. Stuart Campbell says:

    “The Treasury will simply say in post Yes negotiations that they will insist upon security”

    Which they could have done anyway. The point is that they’ve just lost a major weapon – that of being able to threaten Scotland with an international debt default.

  98. JLT says:

    My jaw just hit the floor and I just about spilled my coffee.
    After yesterday’s papers all talking about Cameron insidiously talking to the Russians, this is unbelievable. Ammunition by the barrowload for today at work!!

    I’ve not read any of the comments above (I need to go to work now), but is there other sources on this. The more, the better as it means that this piece of news is concrete!
    Fed up yesterday; very happy today.

  99. john king says:

    If ye see the baliffs coming just hide behind the couch and don’t let on yer in, he he 

  100. Ken500 says:

    If Scotland is/was Independent it would not have/had to ‘borrow’ any money. Scotland ‘lives to it’s means’ and has been in surplus for years. Westminster made sure of that.

    Does Norway have to ‘borrow’ any money? It lends it’s monies to other countries and gets interest back.

  101. Juteman says:

    Of course, there is no chance of a Yes vote.
    According to the unionists.

  102. john king says:

    h&s says
    “One could not do a runner”
    One could if one really wanted to England might wake up one day and we’re gone,
     to resurface in Panama
      under an assumed name (just make sure you hide the canoes 🙂
    we could call ourselves Darien 2

  103. Ken500 says:

    A country’s credit worthiness is not decided by whether it pays off another country’s debt. It is decided on whether it balances it’s books. If you apply for mortgage, it doesn’t depend on whether you pay off your extended family’s debt. It matters whether you have the deposit and the wages to be a good credit risk and whether the collateral (the house value) will pay off debt. The UK Treasury uses tax evasion to get in funds (investment) into the City of London banking system. Not a safe bet. (Pozzi) A country welshing on it’s debt (Westminster), will find it harder to get further investment/borrowing IR sell it’s Gov Bonds.

    Soros didn’t like it back. – Greece.

  104. Ken500 says:

    EU continued membership will be decided by negotiation/contribution, and whether Scotland has always been good EU citizen. It has – unlike Westminster and Spain. Under EU Law/rules there is no Veto to keep a continuing member out.

  105. john king says:

    I keep seeing this need to borrow money as if it were the natural state of things “all countries have debt” no they don’t,
    Norway doesn’t need to borrow and has no debt other than what serves its purposes to avoid hardening its currency out of existence, 
    We could be really Scottish about this and start as we mean to go on, what will happen if we lose the yes vote? both Tories and Labour have promised years of austerity to service the debts Westminster has run up,
    so when we win the yes vote we accept there will be a period of belt tightening (that we would have had anyway) but this time on our own terms for our own benefit, 
    so the country we leave our descendants will not be awash with debt and we can then hold our heads high that we did it alone without asking ANYONE for help!

  106. scottish_skier says:

    There’s no choice for the rUK here; London took out the debt, not Scotland.
    You can’t score out ‘UK treasury’ on bonds and scribble in ‘Scottish Treasury’ then tell e.g. the Chinese that it’s Salmond that owes them.
    Joint UK-Scottish government statement precursor methinks.

  107. john king says:

    Sorry Ken500
    I hadn’t read your post when I put mine on but it does prove we cant be the only people who think this 😉

  108. Bugger (the Panda) says:

    What. Happened to my post about 10 mins ago. It just disappeared?

  109. art1001 says:

    In my opinion having to become public on this is a sign of weakness for London. 
    Up till now the markets and the international financial community never believed there was a realistic chance of YES. Now they seem too. (Maybe China is starting to have some fun behind the scenes teasing and tormenting their old colonial pest. They have long, long memories).
    The question the markets will start looking at is not Scotland’s viability (we have the oil rght?) its rUK. Can they seriously sustain such a debt mountain without US. I honestly do not think so. I think in the end the markets are going to have a big part to play. Uncertainty may cause a huge run on the pound by September and a crisis hit UK forced to put up interest rates. Even a narrow NO vote will not help them as the UK will now be seen to be unstable and a risk with a sizeable chunk of their population still looking to secede.
    My advice is that anything over 40% YES is game over for the UK as an economic entity and London should concede now and look to make a soft landing on all of this. They should be looking to do a deal NOW with Edinburgh that will calm the markets.

  110. Erchie says:

    The most obvious “security” the rUK could insist on is “accept the 1999 maritime borders and don’t make a fuss”

  111. NorthBrit says:

    Scotland has no debts.  The UK has debts. If Scotland and England were separately funded England would have more debt and Scotland would have an oil fund.
    England is claiming on highly dubious grounds to be the UK so that it can keep the UK’s security council seat, which it would almost certainly lose if it had to reapply for it. 
    If England is the UK it still has all of the obligations of the UK. 
    There is nothing for Scotland to renege on.  Point me to the document where Scotland owes anything. 
    There is no obligation moral or otherwise for a “new” country to take on someone else’s debts. 
    On the other hand countries that tell stupid lies to investors run the risk of becoming market pariahs.
    There is also a moral obligation on the Scottish Government to act in the interests of its citizens and not to take on the debt obligations of a third party, particularly a third party which has looted Scotland’s resources and whose legal opinion states that it doesn’t believe it needs to act in good faith.
    If there is to be a fair apportionment of debt, it should involve England raising additional debt to fund the payment to Scotland of the money that Scotland would have had if both countries had funded their own expenditure.

  112. Tris says:

    Slightly OT
    But what if the Scottish Government were to say that due to the transition from HMRC to a Scottish tax authority, that no income tax would be collected in the first month of an independent Scotland. Surely that would win over some of those who say they would vote yes if better of by £500 a year.

  113. Mealer says:

    The market was showing the tiniest signs of getting jittery.It had to be nipped in the bud.Late on a Sunday night before the markets opened.The treasury had a choice.It could announce its intentions to pursue a joint currency in the event of independence.Or it could announce that it will guarantee all the debt.It chose the latter because it thinks that will be enough to nip any jitters in the bud.And is very easy for the Scottish media to spin.Or ignore if it can’t be spun to London’s advantage.It doesnt completely alleviate the treasury problem of losing the backing the pound gets from having the oil reserves behind it.It may well be that the treasury,in the months ahead,has to announce its intentions to pursue currency union in order to keep the pound steady.Now that would be a game changer.The media couldn’t spin,or ignore,that.

  114. Macart says:

    That’s what I’m thinking too. I’ve a feeling something is about to drop from a great height. McCormick’s release on background talks vis a vis campaign positions, the delay in release, Carney’s invitation to the FM, releases by primarily Labour and Liberal types on devo+/federal possibilities. Not so much a unionist back slide as a precursor to something else entirely. Grief, even Torrance has been articulating a possible federalist line. Now that does say something. 🙂
    Spidey sense tingling.

  115. JimW says:

    There is another angle to this. Is it possible that by assuring that “The continuing UK government” will guarantee debts that Westminster is covering itself for the eventuality that, in international law, it may be forced to accept that it is a joint successor, and that the UK will no longer exist? Take nothing at face value.

  116. having had a nights sleep, is it not another subliminal message ‘too wee too poor’ ?

  117. Tom Hogg says:

    Gordon Hay at the top of the page got it bang on.  Darling on the radio harping on about Salmond threatening to default on debt (which he never has). To be fair, Jim Naughtie called him out on that particular lie, but missed a couple of open goals where Darling got mixed up between UK and rUK when talking about a post indy situation.

  118. Linda's Back says:

    Remind me of Darling’s financial credentials.
    It was the UK regulatory authorities headed by Chancellor of Exchequer Alistair Darling that had the powers to investigate the RBS / AMRO take over  but ignored fact that no  due diligence was done by RBS on a deal worth £49 billion before they gave its approval for the world’s biggest bank take over  deal that brought about the collapse of the Royal Bank.
    Incredibly, the FSA overlooked the rules on capital by allowing Goodwin and RBS to dip below 4%, below the minimum regulatory requirement on capital, to do the ABN Amro deal.   So much for relying on the UK regulatory body.
    At the time Fred Goodwin was an adviser to Alistair Darling as Chancellor, and was still a member of a key Treasury body advising Labour months after the banking crisis and quitting RBS
    Darling learnt no lessons from the collapse of Northern Rock in September 2007,   and his March 2008 Budget speech just  six months after the first UK bank collapse makes embarrassing reading today: “…we have maintained confidence and stability in the banking system … We have turned welfare into work and borrowing into wealth creation.”
    In a BBC Today Programme Lecture on 2nd May 2012, the Governor of the Bank of England, Sir Mervyn King criticised the lack of action by Alistair Darling and the last Labour government in the earliest days of the banking crisis when the first UK Bank, sorry English bank, Northern Rock, failed, which King said could have cost up to one million people their jobs.   Decisive action would have at least mitigated the problems encountered by other Banks including HBOS and RBS a year later. 

  119. as BBC Scotland is happily reporting this, I am immediately suspicious. (no mention of Cam & Putin though)

  120. Another London Dividend says:

    O/T I see Alistair Carmichael is outlining 20 reasons for the UK.
    Perhaps The Rev could produce a definitive 20 reasons for independence.

  121. McHaggis says:

    For those suggesting Scotland would be a debt defaulter and an international monetary outcast…
    even if what you think were true (which it is not), being a defaulter isnt always such a bad thing when you contrast the paths taken by, say, the UK and Iceland governments after 2008.
    One defaulted and jailed its bankers but is now swiftly heading back to prosperity, the other is still in a massive and ever deepening slump while still paying thousands of bankers million pound bonuses.

  122. Juteman says:

    Could this just be a headline to bury the Putin story?

  123. squarego says:

    On BBC News app. When did this happen? “The Treasury does not believe the pledge will weaken its negotiating position on the share of debt that a newly-independent Scotland would inherit.
    The Scottish government anticipates taking on such a share, but it has warned that it may not do so if Whitehall refuses an alliance on joint control of the pound.”

  124. Ken500 says:

    Scotland can use the £. Apart from the 1707 agreement. The £ is a tradable currency anyone can buy and use the £ under International Finance Laws. Many countries stopped using the £, when the £ kept on devaluing throughout 1970’s onwards. 1980’s Thatcher banking deregulation – tax havens. The world now uses the £ less and the $ more. (for trading) The financial crisis in 2008, which exposed weakness in the US/UK (world bankers) system, means that the world is not prepared to use currency (bonds) as a reserve. They are going back to Gold. Asia/China etc are building up Gold reserves instead of using (US/UK etc) Bonds as a reserve. Quantitive easing (printing money) devalues the $/£, so US/UK are welshing on their debt repayments. The countries who bought up US/UK (debt) bonds are no getting the expected returns on their capital they invested.

    The UK is containing the Debt. The US has increased their debt limits from €16trn to €18trn. If the US don’t rein in it’s debts it will fall off the cliff an take the whole world economy with it. ie not a recession – a Depression. Even more people will die.

  125. Ivan McKee says:

    This from Radio 5 last night worth a listen to get more background on how the mechanics of raising national debt works

    Starts at about 6:00, and very interesting comments from the guy at 10:45.
    Key points :
    – UK 10 year debt interest rate has gone up from 1.5% to 3% over the past 18 months
    – The markets are very good at factoring in risk well ahead of time.
    – The national debt agency basically has to do a sales job to persuade people to buy national debt. They need to make it seen as risk free as possible to lenders.
    Remember that this is an ongoing situation, the UK is going to the market all the time to raise debt due to the deficit (another £110bn additional debt this year) plus old debt maturing and needing replaced. So they need to do this now as its an issue about the interest rates on new debt they are taking out over the next few months.
    BT will have known about this in advance (I cant believe they would be so disconnected on something so important). They will spin it the only way they can – get the words Scotland, Indy and Debt into the same sentence and hope it scares people. Nick Robinson made this point on Radio 4 this morning at 8:20, (although Evan Davies made the point that it was actually worse for rUK).
    In terms of the negotiations this means that rUK has opted for the ‘IOU’ methodology for debt settlement with iScotland rather than the ‘clean break’ method. They had no choice but its a good concede at this stage, removes one uncertainty from the equation.
    The market will be looking at Indy as a 20 – 30 % likelihood of happening (based on polls at 60/40 or thereabouts): possible but not yet probable, but enough of an issue for them to have factored it into their plans. As the polls creep up then they need to take it more seriously and this forces more issues out into the open. The fact that the rUK debt:GDP ratio will be trashed when you take iScotland’s GDP out of the equation casues them another looming problem.  I don’t know how they would plan to smooth that over if rUK is standing behind the debt. It forces rUK and iScotland to be seen to be very cooperative across a range of matters – might even put the Sterling zone arrangements centre stage at some point.
    Politically the key thing is about ‘normalisation’. The more normal indy starts to seem the closer we get to a tipping point. There are a lot of default NOs who haven’t really thought about the issues yet because they don’t think its going to happen. As it gets more normalised the more they will look at the issue.s
    Also worth noting that the WP covers this issue (pages 348/9), with the ‘assertion’ from the SG that this IOU methodology is exactly what would happen. I think over the next few months we will find more and more of the ‘assertions’ made in the WP coming to be seen as inevitable – including the Sterling Zone and the EU. Builds credibility in the WP document itself. Does give some confidence that the SG has thought these issues through and is now waiting for things to move in the inevitable direction.
    All in all a good day for Yes (despite what Nick Robinson says).

  126. Tearlach says:

    Not sure how many folk heard the FM on GMS this morning after the 8:30 news. The key point he made confirms the Rev’s post at 12:37 this morning – ie after independence the debt issue will be a private matter between rUK and Scotland.

  127. Ken500 says:

    If Scotland stops using the £, the £ will devalue, which would not be advantageous for the rest of the UK. Exports would be cheaper but imports (far higher would be dearer) Goods in the UK would be dearer putting up the cost of living, ‘inflation’ even higher. Scotland would not be so effected because Scotland would have higher reserves (of currencies it exports more – pro rata)

    Scotland has the UK Treasury over a barrel – big time. Not using the £ has to be negotiated.(1707)

    Scotland could have it’s own currency. Print it’s one money ie set up a mint. Or join the Euro, that would take two years,so Scotland would have to use the £ in the meantime or the £ will devalue.It
    will devalue anyway if when Scotland stops using it. (10%?).

    The £ has devalued against the € since 2008. 10%?.It was a third before 2008. Now it is 1/6.

    2008 £ = 1.40 Euro

    Now the £ = 1.20 Euro

  128. Brotyboy says:

    @ Ivan McKee
    Thanks Ivan, I really needed to hear from you.

  129. Indy_Scot says:

    To me this looks like the action of a government that is expecting a Yes vote.

  130. callum says:

    The reason this has been released by the Treasury is to try and tell Scots voters that an independent Scotland will faced increased borrowing costs over the rates garnered by the UK.  The BBC this morning were saying that they had received inquiries from debt holders about the referendum and were threatening to withdraw support for the UK government (bear in mind that the UK is still borrowing huge amount every month)
    It’s all part of a “you are better together with the UK; see, they are good for something” — however, I get the feeling that it is going to spectacularly backfire.
    I genuinely think that Scotland will indeed face increased interest rates on borrowing to begin with; but it won’t matter, because we won’t need to borrow much in comparison to our share of the pre-2014 UK debt.

  131. callum says:

    Indeed, if Scotland did go with another currency in a few years time it would royally shaft the rUK.  They would be faced with increased interest on debt through a gradual reduction in their credit rating.  Scotland would pay off her share with an increased value currency. 

  132. Barontorc says:

    This event marks the first international acknowledgement of the possibility of independence and it was always going  to come through the pockets of others. What Westminster is doing is setting the rules for negotiation – “we pay the UK debt – which involves Scotland’s share – you pay us back every penny of that”. When Scotland begins negotiating on the basis of assets – rUK will then sit in magisterial mode to decide what share of the cake we’re getting and with all the scope in the world to mess us about.
    What a refreshing and clean-cut idea it would be to just say; ‘… keep your assets which we’ve paid more than our fair share of to place in the rUK and keep all of the debt which we’ve had no say in garnering, we want none of it, that’s our fall-back position. By the way the BOE is holding 8.3% of dosh belonging to us and we’ll either take it up the road or we’ll leave it on deposit. Oh,and by the way, all of the 91.7% of the balance, we recognise is yours….now about our continuing trading situation…’

  133. Ken500 says:

    If Scotland joined the Euro, the Euro would strengthen. There is no way the EU would be chucking Scotland out. Madrid and Westminster would be going first. (don’t obey the rules)

    Scotland will be getting love-bombed by Westminster and Brussels (even Putin/Obama) very soon. Win,win,win.

    The MSM just can’t keep up. Losers.

  134. caz-m says:

    A BBC Scotland GMS tactic is to put any rebuttals on after most people have arrived at worked and have radios turned off. They also went quite on a speech Nicola Sturgeon is making regarding housing benefit being stopped for under 25year olds if we stay in the UK.

    BBC News 24 Norman Smith tells the world that Alex salmond said he would default on the debt if he didn’t get his way. Utter lies that the SNP need to rebut ASAP.

  135. HandandShrimp says:

    Douglas Fraser’s piece on the BBC is not too bad. He sets out the issues clearly and given he is not exactly a cheerleader for independence he does acknowledge that this does appear to be good for the Yes position even if he caveats that position.
    It is a good piece of news because this puts the No camp on the back foot. Wild claims of Scotland “having” to take upwards of £150b will be hard to sell now. All the debt will remain with rUK and what Scotland is prepared to pay will be subject to negotiation depending on what we get in return. I note that Wabbit on the Guardian had a somewhat flakier than usual response to this piece of news which suggests to me that Corporal Jones’ epitaph might be appropriate.
    The fun with Indyrefski and this development have made for a pleasant weekend. Neither are gamechangers but the brick by brick building of a case is taking place and this is good.   

  136. kalmar says:

    Fair bit of coverage on Radio 4 Today.  The headline being that it’s a move to “remove an uncertainty” for the bond market etc.  Hard not to draw the conclusion that the possibility of a yes vote is beginning to be taken seriously out in the real world..  Plus it’s one less FUD for BT to bang on about.  Yay all round.
    It kind of shows up that there’s no real uncertainty over the currency option, surely the markets would need placating over that too if there was any doubt.

  137. Luigi says:

    The reason this Sunday night bombshell was dropped by the Treasury was to purely to steady the money market, which was beginning to show ominous signs of referendum jitters (thanks, largely to BT intransigence over an independent Scotland using sterling). The Treasury does not care what Scottish voters think. The Treasury does not even care what BritNats think. The Treasury only cares about stabilizing the money market. In our neo-capitalist system, the interests of the market override everything – everything. If the market jitters return, the next and only option will be for the UK and Scottish governments to issue a joint statement that they will cooperate and continue to share sterling currency in the event of an independent Scotland. Watch this space!

  138. Ericmac says:

    It has to be done this way.  The UK HAS to assume all responsibility for the debt.  There is no other option. There never has been.    

    The alternative would be to transfer debt to Scotland after Independence, this would effectively be the UK Government defaulting on its debt.
    Creditors would wake up discovering that instead of the UK gilts they had bought, they were now holding the debt of a smaller country with zero track record in the markets. 

    The Treasury have known this for months.  They have simply been waiting until the last minute and looking for the right way to spin it.  

    There may be have been increasing noise from creditors worried about the dilution of UK bonds in the event of Independence.  

  139. kalmar says:

    In our neo-capitalist system, the interests of the market override everything – everything.
    Well said Luigi!

  140. bunter says:

    O/T, a rather nasty front page in The Record this morning with a nasty individual holding a Nazi flag with the word Scotland on his t shirt neatly dovetailed above it.

  141. G H Graham says:

    England’s interests within Britain will ALWAYS come first so any assumption that this announcement heralds a recognition of equal accountability & responsibility with Scotland regarding debt is a naïve one.
    England/Britain cannot allow the interest rates (0.5%) to return to historically normal levels (average of 7.6% between 1974 & 2013) for many years to come because it has so much gross public debt (public sector debt, government liabilities, social security funds, local government debt etc.) right now (£1.3 trillion & rising), almost half its annual borrowings are used just to service the debt. 
    Britain’s gross public debt to GDP ratio is around 90% & is likely to rise until it reverses its annual deficit (difference between receipts & expenses) which is still running at around £100 billion.
    Osborne has reduced the deficit from £156 billion he inherited in 2009/2010 to the £100 billion now. But that took 3 years & it will take at least another 6 years of austerity (all other things being equal) to get rid of the deficit completely at the current reduction rate.
    But the gross public debt won’t have gone away. It’s hard to predict what it will be because economic growth forecasts are always wrong anyway. But it will likely balloon further to £1.5 or £1.7 or even £2.0 trillion (make your own guess).
    It is this colossal level of future public debt that England/Britain must service while convincing the markets that it will not default. If interest rates rise towards historically normal levels, its hard to see how England/Britain could service the debt. This would result in a sovereign debt crisis causing interest rates to rise to rates enjoyed by Greece & lead to an economic catastrophe with ensuing riots & anarchy.
    England/Britain then is beginning the process of attempting to sooth the markets in advance of Scottish independence by stating that the debt will remain consolidated & underwritten by the Bank of England. Scotland will be required to pay its share but England is attempting to mitigate market jitters.
    The exciting news is that it gives Alex Salmond a huge fiscal level with which to negotiate the terms on independence because England will at almost any cost, do whatever it takes to maintain low interest rates for fear of being declared a fiscal basket case & ending up bankrupt.

  142. Ericmac says:

    Scotland would need a strong currency to pay back its debt, the Groat and Euro are not an option as everyone understands.  And Scotland’s cost of borrowing would be a percentage point higher even with a strong currency.

    rUK would be Scotland’s biggest creditor.  They cannot afford Scotland to fail.  

    If you were a lender, you don’t make it impossible or difficult for your borrower to pay you… you don’t want them to go bust.   

    So the currency Union is the only sensible option for Scotland and rUK.  Given the ridiculous amount of debt the UK holds, they are forced to work with Scotland to ensure both countries remain stable.

    The financial situation in the UK is precarious without independence looming.  

  143. Jimmuckmc says:

    This is a turning point we can now convince people who have been wavering
    i am going to send this one to everyone I know
    thank you rev 

  144. Kendomacaroonbar says:

    To celebrate, I am offering a Wings Over Scotland Rear Window Car Sticker.
    Please send a SAE ( 8.5 x 4 inches ) and I’ll ping them back to you.
    My address details can be found in the Quarrantine forum.   
    Yours aye 

  145. Ericmac says:

    The markets will view any poll above 25% as indicative of additional risk in UK debt.   

    A constant 30% of people committed to voting YES (as we have had) and not diminishing over months, is significant risk on supposedly risk free Government Bonds. And the possibility of dilution of value after independence. 

  146. SquareHaggis says:

    Loads of questions from one doubting Thomas. First and foremost, can we trust such a wild assumption that the UK treasury has the means to guarantee paying off any of anyones debt? They’re bankrupt remember, borrowing like there’s no tomorrow.
    Coming on all ballsy like this stinks in a way where the smell doesn’t hit til the lid blows off.
    If I were an Englishman I’d be asking why all the austerity, fire-side sales and asset stripping – where is the money coming from all of a sudden to pay off this huge debt mountain? Where’s the collateral?
    If Salmond says we’re willing to pay our share, what is that share? If it’s possible to exit the rUK with a clean sheet (no debt) then why bind ourselves to an IOU? Furthermore, if Scotland is being responsible and not spending beyond it’s means then it has no debt, the treasury would be guaranteeing to service a debt equating to no debt. Creating debt out of nothing or selling on perceived debt is simply a continuation of the situation that got us into this mess in the first place.
    There was a big meeting with the banks in London last week, anyone know what that was about? Could it be they have they hatched a cunning plan?

  147. CameronB says:

    OT, but wow.
    Exclusive: Devastating dossier on ‘abuse’ by UK forces in Iraq goes to International Criminal Court

    “In 2006, it (the ICC) concluded: “There was a reasonable basis to believe that crimes within the jurisdiction of the court had been committed, namely wilful killing and inhuman treatment.” At that time, prosecutors cited the low number of cases – fewer than 20 – as a reason for not mounting an investigation. But, since then, hundreds of other claims have come to light – prompting consideration of the complaint now. It is the start of a process which could result in British politicians and generals being put in the dock on war-crimes charges.”

  148. bunter says:

    That fanny Norman Smith just stated again that Salmond and Sturgeon both threatened to default on the debt. A despicable liar on a despicable news channel.

  149. Les Wilson says:

    Thinking more deeply about this, the purpose is to quell the markets, right? So does this do that, well I would say yes, but not indefinitely. The reason I say this is that now they have said they will pay all the debt, in case Scotland defaults, but surely in such a case, and remember Scotland has no obligations here. Other than a tentative promise assuming the equitable share of assets. Something the rUK would be loath to do.
    Let us suppose, that they really, really, do not want to give us a share of assets, and try and fudge it. Scotland takes this as a no, or at least a not fair share. So threatens to default. Here is the rub, the rUK WOULD have to fund ALL the repayment costs. That MUST weaken the case in the bond markets, with £50 billion or so, which would no longer go through the Sterling area. The market costs would soar, regardless of their promise, as the said markets would lose confidence given the rUK debt levels.
    What does this mean, the hand of SG has been significantly improved, by the UK  move to cover the debt, which in the end, regardless of anything they say, they would have to do anyway. This is a game changer but rUK is certainly weakened, and the Scottish negotiators will know that full well. I think AS has had this up his sleeve all the time. Kudos to him. 

  150. chalks says:

    Simply put.  This is an admission that the Bank of England would be our lender of last resort and we would be in a currency union as such.

  151. Illy says:

    So, since Scotland runs at a profit currently (seriously, if we didn’t, Westminster would be letting us go without a fuss in these “times of austerity”), why do we need to borrow money again?
    Why can’t we just have a government that balances it’s books and works within it’s means?
    If we’re not going to get a good interest rate *anyway*, what’s the benefit to borrowing money?

  152. Patrick Roden says:

    “The Treasury does not care what Scottish voters think. The Treasury does not even care what BritNats think”
    So true, but this decision wasn’t a treasury idea, it was the financial markets forcing the treasuries’ hands because they have began to get worried about the possibility of a yes vote and how this will effect the markets.

  153. Atypical_Scot says:

    I’m 100% sure we’ve already been over pre-existing sovereign gilts and how it is impossible to hand the debt to another sovereign country. 
    The trump card in my mind is the confirmation that Scotland’s departure has a now confirmed negative affect on the markets. This means the subsidized Scotland argument has absolutely no worth at all, categorically, completely invalid. Good. 

  154. Cath says:

    Interesting. I’m not quite sure how to take this as it’s obvious, whatever the real reason, the media in Scotland will spin it like crazy to be a bad story, another subliminal too wee, too poor, reliant on the ever generous England standing behind you etc, etc.
    But I do have the feeling, behind the spin it’s quite a big change. It’s an acceptance that independence is possible – perhaps even likely. And it suggests the markets are putting pressure the UK government.
    Relying on creating then hammering people here with “uncertainties” in the hope we’ll vote no was always risky. People here are likely to be turned off the scares after a while and stop listening. But for the international world – who are taking an interest – for business and for the markets, uncertainty is absolutely not what they need. And they’re not stupid and open to UK propaganda.
    When the Putin stuff emerged yesterday, someone posted an article from 2012 about both the US and Russia being nervous about what would happen to the UKs nuclear weapons in the event of independence – so nervous they held a conference to discuss it. The EU, already quite narked with the UK government in many ways, can’t be happy about being used as a scare story in the way it is being used – it makes it come across as undemocratic and vengeful when it isn’t. It’s offered to answer the question but the UK gov won’t ask it. Currency markets, bond holders and businesses will be demanding more certainty over Sterling. All these people will know exactly where the source of the uncertainty is – the UK government. 
    It’s a fair bet they’re not that impressed as deliberately creating huge uncertainties about your country just isn’t a smart move. Which means it’s also a fair bet the UK government are coming under a lot of pressure from some quite powerful people to clear it up. 
    That’s one massive difference between an independence referendum and a devolution one I hadn’t really considered before. Devolution is entirely an internal affair and the government can use scare stories and uncertainties with impunity as it doesn’t reflect on the UK internationally. An independence referendum does, and the uncertainties and scares being created reflect on the UK as much as an independent Scotland. It’s very possibly the UK government will be under a lot of pressure to clear up the uncertainties from powerful people beyond our own borders. And that means pre-negotiating on some issues.
    Also, I’ve always said, if the UK government is serious about not wanting – or being able to deliver – more devolution, a narrow no vote based on lies and fearmongering is the worst possible scenario for them as well as us. There must be wiser heads that see that. If that’s the case, and pre-negotiation is already happening, it suggests some in the Better Together campaign are being hung out to dry right now.

  155. creigs1707repeal says:

    Seems Westminster is finally beginning to understand the lesson taught to them by Thatcher all those years ago–you can’t buck the market. The market will decide if there’s to be a currency union between Scotland and rUK and no one else. Finally it is beginning to dawn on Westminster just how foolish their position is on this issue. As Del Boy would say, “You know it makes sense.”

  156. Paul says:

    Why would we need to borrow anyway maybe if countries lived within their means the world economy wouldn’t be in the mess that it is of course the banks wouldn’t be very happy.

  157. chalks says:

    Illy –
    The capacity to borrow money is a must.  If you view a country as a business, then there are ‘overheads’ payable which we might not be able to pay at that moment in time without borrowing money, until the income on a specific day comes in….that’s just business, you might be expecting money, but other things have to be paid as well. 

  158. desimond says:


    The front page image may be upsetting but the inner pictures ( judging by the website ) are clear proof enough this isnt a fan of Scotland or the YES Campaign so no damage done there I reckon.

  159. @scotvote says:

    13th January, 2014 at 09:03 am Ivan McKee

  160. Weedeochandorris says:

    O/T The deceit of the bbc seems endless.

  161. bunter says:

    Salmond will probably be on BBC News 24 about 11.30, so they said, and wouldn’t be surprised if he is also on Daily Politics at 12.

  162. Rev. Stuart Campbell says:

    The key line from the actual UK government release: 

    “An entirely separate contract between the continuing UK Government and an independent Scottish state’s Government would need to be established. The respective shares of debt and the terms of repayment would be subject to negotiation.”

  163. Robert Kerr says:

    Your post at 10.23 is the most lucid and intelligent one for many a day on this site.
    I salute you with much respect.
    The world knows that there are two countries, Scotland and England, conjoined by treaty for now. I have worked and travelled to many places. Made welcome as a Scot in all, even France and Argentina!

  164. Triangular Ears says:

    I’m not wanting to get into a philosophical debate about the origins of money, but we could well ask why a country should need to ‘borrow’ money anyway? Why should banks be able to create money to lend to governments? Who is in charge here?
    I believe we have the perverse situation in the UK now where the government effectively IS creating money to give to banks to then lend back to the government for profit. Why not just create it and then use it directly?
    Also, assuming lending is an immutable reality, a higher borrowing cost for an independent Scotland, or rUK/EWNI might well be beneficial in the long run (after the short term pain) if it means that a state’s finances are run on a better footing. For example, this could force rUK/EWNI to scrap useless weapons of mass destruction. Iceland has been forced to reconsider everything and, after the initial pain, seems to be in a happier place.
    Scotland, of course, has always had to balance the books, as another commenter has already mentioned, so this experience could well be very good for a newly independent Scotland, and could well be seen as constituting a good credit risk. It is a demonstrable fact that Scotland has balanced the books since at least the Scottish Government came into being. It is a demonstrable fact that London has not, and has been extremely reckless.
    I think Scotland, if we truly are the 7th richest country in the world, should be aiming to have no national debt at all, and a savings fund eventually, like Norway. This does not mean that we should not have some sort of short-term borrowing, like an overdraft, but we should not be entertaining chronic deficits. I would go as far to say that we should have a constitutional bar on structural deficits.

  165. Dave McEwan Hill says:

    I cannot pretend to understand the intricacies on this issue but I think some obvious political things can be drawn from this development
    1. The midnight timing of the announcement indicates that they are far from happy at having to make it
    2. They had to make it. I concur with the suggestions of a previous poster. I have some family who work in the financial sector and they have been talking about the “jitters” for some time and even about investment starting to leave London.
    3. This represents a tacit acceptance that the refendum is quite likely to deliver a YES vote. a sentiment that has been strengthening among the better informed for some time.
    4. This in effect means Scotland starts independent indebt only to the UK but sharing the  UK’s assets against this debt –  the YES camp’s hitherto disputed position.
    5. This act, driven by neccesity, will probably be painted as a generous gesture to Scotland but why the path to independence should appear to be smoothed in this manner will not confuse those who know better. When the dust settles and all the spin evaporates we will be a little closer to independence.

  166. Jingly Jangly says:

    Well maybe the answer is that Scotland wont have any debt, we are due our 8.3% of assets, about 91% of said assets are outwith Scotland. Unless the UK is balance sheet insolvent, then the asset value should be higher than the debt. Therefore our share of the debt will be peanuts or nothing at all..,

  167. Craig P says:

    The George Soros’ of this world will be circling Sterling, trying to work out how they can make a personal fortune from any weaknesses in it. The BoE is merely trying to minimise the risk of another Black Wednesday.

  168. kalmar says:

    Cath said:
    It’s a fair bet they’re not that impressed as deliberately creating huge uncertainties about your country just isn’t a smart move.
    Very much this!  Grown-ups are starting to take an interest now, and the mendacious behaviour from Westminster isn’t playing well with the wider audience.

  169. Atypical_Scot says:

    @Jingly Jangly;
    Good call – insolvent – the UK plc probably is, the only reason Britain still can trade with such huge debts is the private wealth of the city. I’ll wager opening the books would raise a few eyebrows, another good reason to negotiate in house.

  170. gordoz says:

    Totally agree with what has been said thus far, however please all this is the WESTMINSTER Govt. Lets not rush too hard to celebrate.
    ‘As Vergil put it Beware of Greeks bearing gifts’

  171. pa_broon74 says:

    As I understand it, national debt doesn’t work the same way as private debt. Its got little to do with ‘credit history’ and everything to do with ability to pay which encompasses the countries economic outlook, GDP and productivity.
    A country having no credit history by itself I don’t think means anything at all. Also, the companies that issues the credit ratings have in the past been widely rubbished anyway. As usual markets will do what markets please.
    Its almost like mob psychology.
    If anything, what this does is clarifies the position on the debt which plays into our hands. It also clears up the currency union question too, in that, it would happen.

  172. Les Wilson says:

    I think the SG have played a blinder here and I am sure they having said a few things that have prompted this, for example, they will  accept their FAIR share oof the UK  debt, but only if assets are shared in the same way. SG knows and the markets certainly knows that the UK are going to be unwilling to do so. There is the uncertainty.
    I am sure that UK think that Scots have no idea how the markets work, yet here we have them proved wrong. It only takes the SG to say some other negatives that may jeopardise the money going into the UK budget AND the possibility that Scotland’s wealth could perhaps, if the UK  plays unreasonable conditions, then that again would lead the markets to reassess the credit worthiness of rUK. That would lead to rUK debt costing more. As time goes by, the more nervous they  will become. They have showed how scared they are here. Hell mend them! 

  173. Les Wilson says:

    Sorry rev a few typos in last post but no edit available.

  174. Robert Kerr says:

    They still don’t get it.
    1. BBC interview with AS. “Lady” interviewer interrupting continuously. AS showed calmness.
    2.Peston referring to us as “secessionists”.
    Fear is palpable. Fear and denial.

  175. desimond says:

    Its gone 12 o’clock and I havent heard any rants from the Welsh First Minister…surely some mistake?

  176. cirsium says:

    Why not just create it and then use it directly?  
    I’m with you there, triangular ears.  Thomas Jefferson wrote the following in the eighteenth century
    If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe that the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.

  177. chalks says:

    Is there not an argument that Scotland has been contributing to the debt, therefore we have a ‘credit history’, we contribute to the debt and any credit rating would hopefully reflect this?

  178. msean says:

    When the ‘balance’ rules come in,will it include news channels and other publications outwith Scotland,but broadcast and publish in Scotland. Even unjustified headlines screaming from an unsold paper on a shelf can unbalance opinions? Just wondering.

  179. KOF says:

    Re the Robert Peston link from gordoz.
    “whether Scotland were to decide to secede (or, to pick an unlikely corollary, in the event that the People’s Liberation Army of West Sussex, miffed about fracking, were to declare UDI)”
    So we are nothing more than just another county of Greater England then, according to Mr Peston.

  180. Chic McGregor says:

    As best as we can tell, at the moment Scotland is not running at a profit. We would need to borrow around 5% of our gdp.
    However, that is well less than current UK borrowing and well within the distribution of borrowing for ‘normal’ i.e. financially sound countries.  Alarm bells first start to ring at the IMF  when borrowing goes north of around 7%. The reasons most countries have a net borrowing requirement are manifold but is mainly  down to the existence of interest rates or rather  the differential in interest rates (lending v borrowing). There needs to be a differential in order to pay the wages of the financial sector, the people who organize the lending. Basically, that differential consists of money which does not currently exist in the system (world).  So new money has to be found from somewhere. For any given country, provided they have a central bank, they have the option of either simply printing more money or borrowing money  on the international market and that requirement varies depending on national economic performance, but worldwide, because of the capitalist system and the existence of a financial sector class which needs to be paid for the world as a whole needs to print more money every year and apart from some exceptional performers, most countries need some of that new money.
    Complicated I know. And it is that complexity which has enabled financial sectors to grow to way beyond their usefulness. In an ideal capitalist world required borrowing and lending should be targeted sensibly with staffing requirements appropriate to that  requirement. Interest rate differential would therefore be only that required to pay for a reasonable number of sector workers who receive reasonable remuneration for their job, the job being to enable the lending required by society.
    At one time there used to exist a crime of usury, charging exessive interest rates, which carried a jail sentence or worse.
    What we have now is a situation where the financial sectors have grown way beyond that required to do the job, where usury is no longer criminalised, where remunerative levels are obscene and where most lending and borrowing is not between lenders and public but is between each other at fiddled rates and valuations.
    Sorry, went into full rant mode there, will stop now.

  181. John grant says:

    does this news from treasury all but rubber stamp a monetary union after the yes vote , therefore everything the bitters spout really is a load of scaremongering pish 

  182. M4rkyboy says:

    Again,Westminster assumes Jurisprudence over what should be an International matter between 2 successor states.

  183. Jim says:

    “A person with knowledge of the treasury” said:…
    Dear oh dear.
    When desperation reaches this level, you know Yes is winning!

  184. FlimFlamMan says:

    @Triangular Ears
    It’s even worse than that.
    The money that governments ‘borrow’ is created not by commercial banks, but by the governments themselves. Buying a government bond requires handing over cash or extinguishing reserves; both of which are created by the government sector.
    You’re right about governments with their own currency not needing to borrow though, in which case worries about ‘credit worthiness’ are just phantoms.
    Unlike ‘borrowing’, deficits are often necessary, including structural deficits. It all depends on what the private and foreign sectors are doing, which are beyond the control of government.
    A constitutional ban would be dangerous.

  185. Chic McGregor says:

    Heard the spin on Radio S ‘markets are worried about an independent Scotland’s ability to service its debt’
    The truth is they are really worried about the rUKs situation if Scotland leaves the UK completely on its own. It is the possibility of Scotland’s economic strength being lost to the UK which, rightly, gives them the jitters.
    Yes Scotland probably (not certainly) would enter the bond market at a higher ‘newcomer’ rate but that situation would quickly right Iitself. It is the ongoing borrowing requirement of the UK and anything which might hasten the time of reckoning there which they are really worried about.
    Desire for keeping transitional change down to a minimum is understandable, but Scotland cannot bail out the rUK indefinitely and I hope our negotiating team makes sure there is an exit clause on any deal.

  186. FlimFlamMan says:

    @Chic McGregor
    “The reasons most countries have a net borrowing requirement are manifold but is mainly  down to the existence of interest rates or rather  the differential in interest rates (lending v borrowing).”
    Countries – the governments of those countries – borrow  – no quotes; real borrowing – for one reason: they use a foreign currency and run a government deficit.
    They ‘borrow’ – it’s not real borrowing because it is unnecessary – for essentially two reasons:
    a) They run a government deficit, and despite having their own currency they think or pretend that borrowing is necessary, or
    b) they run a government surplus – perhaps sensibly, perhaps not – but the financial sector whines about not having the guaranteed income from bonds, so the gov issues them anyway. Australia did this under Howard.
    So to government deficits. These are run when the combination of private sector saving overall, and the trade position of the rest of the world – ROW – is positive.
    Net saving by the private sector takes money out of the economy. An external trade surplus – meaning a trade deficit from the local perspective – takes money out of the economy.
    Under those circumstances a government has no option but to run a deficit.
    Economies are about trade; for every buyer there is a seller, so they always balance. If the local private sector/ROW combination side of the see-saw is ‘up’ – in surplus – the government sector side must be ‘down’ – in deficit.
    Not in the sense of “you really ought to do this” but as a simple matter of mathematics and accounting. Governments cannot control what the ROW does, and absent dictatorship cannot control the local private sector either. This is why attempts by governments to eliminate their deficits usually fail.
    In the cases where they succeed, if it is by convincing the private sector to go into debt then that creates it’s own problems.

  187. Barontorc says:

    Two snidey little gems from BBC news at lunchtime:- First of all, Douglas Fraser declared on the main BBC news that AS had said he wanted ‘joint-control’ of the BOE or he’d walk away from the debts.
    Next, Jackie Le Burd said on BBC Scotland news that the UK government had told the money market that they would guarantee the UK debt until ‘up to the referendum’. This was followed by Douglas Fraser who re-presented his piece to camera for the Scottish viewers but without the AS demand for ‘joint-control’ of the BOE.
    Horses for courses, eh? What silly, silly people they are.

  188. Chic McGregor says:

    Don’t disagree with any of that, and indeed alluded to it with a couple of vague generic references to the particular performance requirements of individual nation states.
    However my main point was in explaining why most countries seem to require a deficit and point to one of the main reasons for that Global requirement to print more money every year.
    There are other base system reasons as well, but I was trying to avoid the obfuscation which begins by examining the particular requirements of a nation.

  189. Jim Arnott says:

    The folks south of the border appear to have already started depositing brown stuff in their underpants. There are nearly 500 comments already on the Telegraph’s article (published at 11:15am this morning) on the Treasury position on UK debt. These commenter’s are, in the main, showing signs of hysteria Loving their discomfort

  190. FlimFlamMan says:

    @Chic McGregor
    The reasons you gave – interest rates and financial sector wages – aren’t the reasons governments run deficits though. Government deficits result from private sector saving overall and/or current account deficits.
    I think what you’re getting at is the private sector’s need to service it’s debt, and the effects on that of interest rates and exponential growth. It’s an important and complex subject in itself, but it’s not the reason for government deficits.
    The financial sector pays its wages the same way as all other businesses.
    I agree though with your comment – it definitely wasn’t a rant to apologise for – about usury and the size of the financial sector. Most of that sector’s activities are worse than useless.
    Basic loans, deposits, and the payment system are useful to society at large. Maybe some price hedging for agriculture; there are significant risks of crop failure. The rest largely extracts wealth from the real economy and causes periodic crashes/downturns, without benefit except to those running the system. And I haven’t even mentioned outright fraud.

  191. handclapping says:

    IMO the most important point is that this cat is now out of its bag. The DMO and Treasury are going to have to respond to every zephyr and if the polls start going Yes they have 9 months of spinning to do.

    And they must, Help to Buy has conned people into the housing market at unprecedentedly low levels of interest rates. If rates go up and those suckered by GO’s cunning stunt go bankrupt and the feel-good recovery so engineered comes to a crashing halt then the Tories are out. Cannot be allowed to happen, Tories are trusted on the economy and little else. Does not compute. Exterminate!

  192. Bill says:

    Are we included in this debt they say they will pay_ They have removed over £64 billion from Scotland without as much as a ‘by you leave’ so can we expect that this will be paid back to us too? And if it is to be treated now as a loan will it be paid back with the appropriate interest rate? Or is it better to own half of everything in England? Personally, I would prefer the former.

  193. G H Graham says:

    “…Alex Salmond has been going around saying he might default on Scotland’s debt if he didn’t get his own way … 

    Alistair ‘Flipper’ Darling is a LIAR.

  194. Rev. Stuart Campbell says:

    ““…Alex Salmond has been going around saying he might default on Scotland’s debt if he didn’t get his own way … “

    I liked the bit where he said if you get a divorce you divide up your car.

  195. Westminster just another way to spell sleekit,there are many connotations to the debt declaration but the spin on it will all be in Westminster’s favour.This to my way of thinking is a landmine and who steps on it first will be the loser,this is where dancing sweetly comes into it.

  196. Chic McGregor says:

    Agree it is the extraction of money from the money supply which to avoid deflation requires the printing of more.
    However, saving per se would not cause that, except temporarily, if there was only one interest rate and the bank loaned out all the money to borrowers as well as holding that from savers.  
    But of course, in that instance there would be no bank, as we know it, because it would generate no income to pay the staff.  The interest rate differential mechanism provides that income and it is that mechanism which means banks can (if only in cartel mode) virtually decide how much it is.  If it is more than simply required for staff that money can be used to grow the assets of the bank or to invest speculatively.  Once sufficiently removed far enough from the High St, it can effectively disappear in a number of ways.
    This is different from from say, services provided by taxation, where the tax money is returned to the system directly, or at least in principle should be.  Of course governments do not always act in a principled way but at least they are electorally accountable.
    If banks were government owned and the staff, therefore, civil servants.  Their wages could either be paid out of tax or out of an interest differential.  More likely the latter, and extra money generated would effectively be an extra tax take which most sensibly would be used to invest in existing sectors or start ups, employing many of the same people who currently work in the financial sector.  Difference is that their salaries would be under direct government control, and investment could be more strategically coordinated and dodgy dealing would carry far greater risk of detection and punishment.
    Obviously there is a problem with that in that politico types are generally clueless as to what is strategically sensible and unless the ROW follows suit those who are are going to work for the highest bidder.
    What would, I think, be a very good compromise though, rather than having nationalised industries, would be to have one national semi-autonomous competitor.  
    I think that would be extremely useful, not just for banking but in other areas as well, like energy supply.
    In that way, provided it is done sensibly, it would both inform government about the industry.  Bull shitting by industries would be quickly detected, information on the industry could also be used by impartial government analysts for example with inside real data to work on.  Cartels and dodgy dealing would be much harder to get away with, politicians would be far more clued up and better overall stratagies for the economy evolved.
    And the non nationally owned institutions couldn’t complain about it, as long as there is a level playing field (which would be in the government’s own interest) without being seen as anti-competition whingers.
    I know there are lots of objections to the above but there are solutions to all of them, just not enough time to explain properly here.

  197. FlimFlamMan says:

    @Chic McGregor

    However, saving per se would not cause that…

    It’s not saving, it’s saving overall — net saving; the difference between saving and investment — that creates deficits. That, and/or current account deficits.

    …the bank loaned out all the money to borrowers as well as holding that from savers.

    This sounds like the Loanable Funds Model, with banks matching up impatient borrowers with patient lenders. It hasn’t been true for a long time. As others here have commented, banks don’t merely move money around from lender to borrower, they create money from ‘thin air’. The vast majority of money in use today is this bank created, credit/debt based money, not government created currency.

    But of course, in that instance there would be no bank, as we know it, because it would generate no income to pay the staff.

    Banks also receive significant income from fees and proprietary trading, but that’s somewhat beside the point. These, including interest, are all forms of income. What matters, in terms of the creation of government deficits, is what happens to all this income. To all income in the economy.

    Income that is spent becomes someone else’s income, available for them to then spend in turn. On and on until the sun expands and kills us all, or George Osborne reaches critical smug and implodes, with the same result; whichever comes first.

    Income which is not spent, i.e. income which is both saved and not invested, does not become someone else’s income; it is lost to the economy for whatever period its owner chooses not to spend it.

    The Loanable Funds Model doesn’t apply in the real world, but bank created credit money does, so while some people are net saving, i.e. spending less than they are earning, others are taking out bank loans and spending more than they are earning.

    If these various actions add up to a private sector which is net saving as a whole then you can see the result: there will be a spending gap. The income in each period, of whatever length you’re measuring, will not all be spent, meaning less income, and therefore spending, in the following period, and so on.

    A shrinking economy.

    If we split the economy into three sectors — domestic private, domestic government, and ROW — and we have a private spending gap there are two sectors left which can fill that gap: ROW and our own government. We can run net exports to ROW, assuming we have enough goods and services that they want, or our government can run a deficit.

    We have no control over the actions of the ROW, and in any case it’s clear that not all countries can run net exports at the same time.

    We do, at least in theory, have control over our own governments, and in addition they are — again in theory, though often only to the minimum extent that they can get away with — charged with acting in our best interest.

    Also, and crucially, the government, unlike the private sector, can safely run continuing deficits, but only if it has its own currency.

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