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Wings Over Scotland

The Bank’s Holiday

Posted on August 26, 2013 by

The debt Scotland stands to inherit as an independent nation is often used as a stick to beat the Yes camp, and various “estimates” of the size of said debt – ranging from the merely extreme to the comically deranged – are a core element of the scare stories that suggest Scotland would have a fragile economy prone to collapsing the first time there was a bad year for oil prices/production.


But to understand the reality you need to dig a little into the nature of the debt, as the relatively widely-known figures of outstanding UK debt only tell half the story. Delving into the (deliberately) labyrinthine world of finance is a daunting task, but we’ll keep this as understandable as we can.

To predict the fairest and most likely outcome for an independent Scotland, you need to first know a little about the nature of government debt, where it originates, and the role of the Bank of England in its Quantitative Easing programme.

Government debt is issued in the form of bonds (called “gilts” in the UK for purely historical reasons, but for simplicity’s sake we’ll stick with “bonds” throughout this article). A branch of the Treasury, the Debt Management Office (DMO), issues the debt in auctions. You can see the results of the auctions here.

The buyer of a bond (banks, insurance companies, hedge funds, companies, foreign governments and private individuals) fork over cash in an auction in exchange for a bond. The bond is a contract that defines regular interest payments for the lifetime of the bond (up to 30 years), after which the nominal value of the bond (the principal) is given in cash to the holder.

After the term, the bond ceases to exist, and the holder of the bond has received cash interest payments and a cash nominal payment greater than the initial sum paid in the auction to the DMO. (The risk lies in the fact that depending on inflation, they may have lost out in real terms.)

So the DMO issues the debt and gives the Treasury the cash from the auctions to be used in regular government spending. Over time the Treasury gives money back to the DMO to be distributed to the bond holders as interest payments and for paying off the principal sums when the bonds mature.

The current outstanding nominal value of UK bonds is £1,269 bn (or £1.27 trn) according to the DMO here. This is the major component of the Big Scary Number of which Scotland has a proportional share, which would theoretically make up the Scottish Government’s inherited debt in the event of independence. (Minus, of course, consideration for Scotland’s share of UK assets.)

So far, so normal, but the system was changed in March 2009 when the Bank of England (BoE) began its Quantitative Easing (QE) programme. The programme is very simple: the Bank of England creates pounds Sterling electronically, essentially out of thin air. They use these pounds to buy UK government debt in the “secondary” market (ie from private investors, such as insurance companies).

Up until today, approximately £375bn worth of UK government bonds have been bought in the QE programme – roughly 30% of the outstanding bonds – and this number is now set to increase as the QE programme expands. So private investors are buying bonds from the UK government, then passing them along hot-potato-style to the Bank of England in exchange for newly-created money (and doubtless earning themselves a nice little commission on the way).

(If you’re wondering why the Treasury doesn’t just get the Bank to create more fake cash and pay the debt off in one go, the market believes that the amount of money printed in QE so far is a proportional measure to stave off the kind of deflation you’d normally expect in a debt bust like we’ve been experiencing, and not enough to result in excessive inflation. Another trillion and nobody would be fooled – it’d start the biggest run on a national currency since the Weimar Republic, and you’d quickly end up with a packet of Corn Flakes costing half a million quid.)


The defense that QE is not money-printing rests on two arguments. The most commonly asserted, but most threadbare, is the literally-true fact that the Bank of England is not printing up banknotes to specifically use in QE. In reality though, the people who receive the newly-created money have every right to convert it to cash, but just choose not to, so the point is rhetorical.

The other reason is more complicated, but more sellable: eventually the programme will be unrolled. For this to occur, the Bank of England would have to destroy the money electronically that they receive from selling bonds back to the private market (which they aren’t doing or planning to do), or in the form of interest payments and principal payments on the bonds they hold – payments they receive from the Treasury.

So far, so not money-printing, until we get to the end of 2012, when it was announced that the interest payments that the Treasury pays the Bank of England, instead of being magicked out of existence, had been collected up and were now to be given as a gift to the Treasury.

So the circle is now complete, and the government debt is being financed by money-printing, since the bond assets held by the BoE are depreciating in value as they approach maturity and all the cash received by the BoE in this regard is being passed on to the Treasury. The BoE therefore can never destroy the QE money electronically, since it all gets given to the Treasury and the bonds are eventually worthless.

It’s never mentioned, but Scotland would have just as much right to the bond assets held by the BoE as they would have obligation to the DMO’s debt, and it’s important to explain why these central bank holdings reduce the government debt, since the BoE really are directly funding the Treasury through money-printing and the Treasury will never pay off the bonds held by the BoE in any meaningful sense.

Still with us? In short, the consequences for an independent Scotland are that by 2016, because of QE, the net debt Scotland inherits a share of will to all practical purposes be at least 30% lower than the headline UK debt figure would suggest. (Because the £375bn of outstanding bonds don’t ever really have to be paid down, since every payment the government makes to the BoE gets sent back to them. Call it a permanent payment holiday.)

Given the current QE expansion plans brewing under new BoE chief Mark Carney, it’s not unreasonable to expect that 50% of Scotland’s share of the national debt will be cancelled out by the practicalities of Quantitative Easing, and that’s before any other reductions which might be obtained during negotiations.

But whatever happens, almost any frightening debt figures for an independent Scotland you hear from the No campaign and the Unionist media over the next year are almost certain to be greatly exaggerated.


*Yes, “Robert Bruce” is my real name. Want to see my birth certificate?

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    89 to “The Bank’s Holiday”

    1. Tattie-boggle says:

      It’s great having an increasing debt whilst you balance your books Better Together indeedy…..
      Another Debunked

    2. Iain M Campbell says:

      A well written and thought out explanation.  Too bad that most Scots will never read or hear of this from the main stream media. 

    3. Murray McCallum says:

      “In short, the consequences for an independent Scotland are that by 2016, because of QE, the net debt Scotland inherits a share of will to all practical purposes be at least 30% lower than the headline UK debt figure would suggest.”
      I like it Robert.  We can then negotiate about the 30% reduced figure – Scotland being a new nation and all that.  We are reasonable people after all.
      I also think (other than it being beneficial to all parties) the adoption of Sterling in the short term is essential towards making all the negotiations as transparent as possible.  Increased scope for shenanigans if we are dealing with two separate currency movements and dividing up assets liabilities at the same time.

    4. EmbraBoffin says:

      Good article. Don’t doubt your name at all but the author page links to Robin Bruce. I’M SURE I’M JUST IMAGINING IT THOUGH

    5. Dinnatouch says:

      My head hurts. Interesting article, but not one I’d feel confident trying to explain to a floating voter. 

    6. Robert Bruce says:

      no great conspiracy EmbraBoffin, my name is Robert, but most of the time I go by Robin “for short”.

    7. Kenny Campbell says:

      That is one of the main reasons why the GBP has devalued against the Euro. Its currently 20% lower than at the inception of the Euro. Thus meaning Euro imports are more expensive. On the plus side our exports are therefore sometimes cheaper depending on raw materials used.
      If the GBP continues to stealthily devalue then it will in fact have the effect of ballooning the valuation of NS Oil reserves….since they are valued and bought/sold in USD. e.g if a barrel costs $150 today and therefore its worth 100GBP. In future $150 will be worth say 110 or 120GBP….If of course we are allowed to stay in the much admired(or maligned) Sterling Zone ….lol

    8. Jiggsbro says:

      Yes, “Robert Bruce” is my real name. Want to see my birth certificate?
      Yes, please. We won’t get fooled like those suckers that voted for Obama! 😉

    9. les wilson says:

      This is what is happening across the world,and why along with some other “lulu’s”, is likely to create a gigantic world wide crash,  estimates from Stansberry Reseach for example predict it in or before 2015. To be closely linked to the UK economy will be very dangerous for Scotland, as Banks and the economy grind to a halt and return to a swift decline.
      One rated American Financial Report,  called the UK, ” the most indebted country on earth !”, considering the state of the American economy, that is a big statement that if anywhere near true, the Uk as it stands is  a basket case. Just look  at Osborne’s “reduction” of debt! it ain’t happening, it gets bigger every day.
      Scotland, we NEED to get out of it, and it is not that we will escape problems, however 5.3 million people with assets, can recover quicker,  this is not going to  happen anytime soon for the UK. 

    10. Taranaich says:

      Robert Bruce!?!  How come ye here from beyond the depths of time and space, O Traveller of the Worlds Beyond Worlds!?!  WHAT SORCERY IS THIS

    11. Atypical_Scot says:

      Can’t say I’ve thought too much about how much debt Scotland would inherit, simply because the true level of debt is unknown, here’s a shocker;
      One thing about gilts is, if your economy is doing jolly well, there is little (if any) need to sell negative return gilts as these are quick fixers usually seen as okay if little in number and size.
      Referring to the link in the above article for results of auctions to take a quick peek at the trend in the last decade, here is the 2002 release of UK gilts;
      And here is 2012 – note there’s more than one page;
      Lets just put that down to the UK’s emphasis in the financial sector because it’s great, and not imagine that this could be going very, very wrong.

    12. Kenny Campbell says:

      Personally I think Scotland should look to exit as a successor state and leave it all behind.

    13. pmcrek says:

      Kenny Campbell, the UKs assets still outweigh the debt though. If we take a fair proportional share of both we’re up on the deal.

    14. Gillie says:

      Mind all this depends on an independent Scotland being regarded as a successor state. If rUK baulk at this then Scotland will have no debt at all. A clean slate would give an independent Scotland a huge advantage. 

    15. Kenny Campbell says:

      What do they have that we need, everything in Scotland remains Scottish. Let them keep the aircraft carriers with no planes. the nuclear submarines and the shares in worthless banks, channel tunnel and lets not forget the embassies…
      Lets be away from all this nonsense and build our country unburdened by others debt.

    16. Murray McCallum says:

      If Scotland has no embassies what will be the impact on ferrero rocher sales? We need answers!

    17. Kenny Campbell says:

      Aye but think of the boost for Tea cakes or Carmel wafers……If wee Boyd disnae move to London next to Michelle Moan(sic) of course

    18. Murray McCallum says:

      Robert’s article maybe also demonstrates the false comparison of government debt to household debt.  Imagine if households could print their own money, or issue IOUs that paid interest back to themselves?
      Mind you, I guess some have actually tried printing money.

    19. MajorBloodnok says:

      Murray McCallum says: If Scotland has no embassies what will be the impact on ferrero rocher sales? We need answers!
      Here’s a clue: “Mmmm, with these Scotch eggs you are really spoiling us.”

    20. Gillie says:

      Well the UK is heading for more debt in the coming fight with Syria. Missiles cost money you know! As we speak George Osborne is writing out the cheques.
      Just think of those fantastic victory celebrations in Stirling next year. The Brits help beat those pesky Iraqis, nasty Afghans, troublesome Libyans and yobbish Syrians by bombing them back to the Middle Ages. 
      Doesn’t it feel great to be British fighting American wars. 

    21. handclapping says:

      Its time to leave this unholy mess behind us. Using the pound would make the transition to Indy easier for most, after all we managed Wilson’s pound in your pocket devaluation. However we could, and IMO should, set up our “Perth” (Stirling and Dollar having been taken 🙂 ) pegged at 1 Perth to 10 pounds so for everyday 1 mil = 1p, 100 mil = £1. This we could hold as long as it remained worthwhile and we’d have our own currency set up and running when (not if) Sterling collapses.

    22. Tony Little says:

      the UKs assets still outweigh the debt though. If we take a fair proportional share of both we’re up on the deal.
      Are you sure about that?  I was under the impression that total debts (i.e. every tiny little piece of debt irrespective of where it was)were greater than total assets.  Although maybe in retrospect that includes all personal debt as well, so you may well be correct.  I’ll have to check that.
      Great article Robert, and it brought back memories of my studies!  I think I could ‘walk myself’ through the points.  More please. 

      @handclapping: Bring back the Merk!

    23. proudscot says:

      Handclapping, if my spending money continues to disappear after independence, as fast as it does at present, I think a more appropriate name for a Scottish currency unit would be a “Lamont”! In fact, if George Osborne continues on his present path of over-inflating the UK Pound Sterling by QE, he could justifiably change its title to a “Baillie”, as no matter how substantial it looks, it’s actually practically worthless!

    24. pmcrek says:

      Tony Little,
      AFAIK UK assets are currently worth about £6 or £7 trillion. Most of it is property.

    25. seoc says:

      Westminster lied to us over McCrone on oil. They lied to us over WMD on war.
      We must assume that ‘once a liar – always a liar’ and we would be hopelessly foolish to believe even a word they say.

    26. Gillie says:

      A Lamont as a unit of currency??
      That will be like a 9 bob note!

    27. HandandShrimp says:

      It is difficult area, I speak as one who should know about this stuff, but the Rev makes fair points and explains it well.
      The key points if someones asks you about all this are
      1) The UK has already lost its AAA rating precisely because it is playing paper chase with the debt through QE. The rating being a reflection on how much worth a countries borrowing has to investors.
      2) Regardless of whether Scotland has to take a fair share of the debt it is still sodding there if we vote No. It doesn’t disappear if we vote No.
      3) All countries have a borrowing requirement (the number of bonds they issue to meet any shortfall in tax revenue against committed expenditure. Scotland’s borrowing requirement as a percent of GDP is actually lower than the UK overall one. If we leave, the UK debt will continue rise at faster rate than Scotland’s on current figures.
      4) rUK is keen to talk about debt and much less keen to take about assets. It is not uncommon to see trolls asserting that Scotland will get nothing but in the next breath take a ridiculous share of UK debt. This is clearly nonsense as is the assertion that the UK will be the successor country and Scotland will be treated as a new country with no treaties, no memberships and no call on assets but have an ongoing liability. Completely new entities do not have ongoing liabilities (although some would fall naturally such as PFI for schools and hospitals in Scotland, pensions for Scottish public sector workers etc.,) Welfare is different and would be classed as current expenditure not a ltransferable liability.
      Apologies if any of that is dull to the extreme. The bottom line is that there would be horse trading.

    28. Fairliered says:

      Seriously, you should all check your pensions and ISAs and sell any UK Gilt funds you hold in them. The value of them can only go one way – down.
      Less seriously, should the Scottish currency be called a Swinney in honour of the excellent job he has done in balancing the books despite Westminster threats and incompetence!

    29. Jiggsbro says:

      Regardless of whether Scotland has to take a fair share of the debt it is still sodding there if we vote No. It doesn’t disappear if we vote No.
      Good point: we have a share of the debt whatever we do. Independence just gives us choices about how to tackle it.

    30. jim mitchell says:

      This only serves as further proof of something that I (and others) have said for years, namely that since the end of Empire, Britain, because it’s actually had to compete with others instead of getting stuff on the cheap, has shown that when it comes to running and maintaining an economy, it’s parties of government are crap!
      Under them the economy has lurched from crisis to crisis With NO sign of that ever changing, in fact as all the Westminster parties continue to metamorphosis into the same thing, it’s going to get worse.
      Time to abandon ship right enough,

    31. Jamie Arriere says:

      Where do PFI debts come into this? Surely they are project-specific and can be assigned to one country or the other – I think there are far fewer up here to worry about! Is there a report or FoI request on this anywhere?

    32. Gillie says:

      Since Project Fear is going on their first Scottish tour, dates and venues to be announced,  I wonder if we will see and hear George “Ozzy” Osborne frighten us poor Scots with more gloomy tomes and scary memes from their back catalogue.
      1. Too wee, too poor and too stupid (a classic remastered)
      2. You can’t do that.
      3. You’re not allowed.
      4. You’ll be sorry. 
      5. We’ve got your IP address
      ………. and many more.

    33. Tony Little says:

      There are fewer than there could be (and compared to the rUK), but only because the SNP minority government in 2007 put a stop to the process.  According to a Guardian report in 2012 (I think) the debt at that time was about £30billion. 

    34. Seasick Dave says:

      1432. The panda cub will have to be taken into care.
      1433. Scotland Yard will be renamed Scotland Midden.

    35. Jeannie says:

      @seasick dave
      Without the Union, you won’t be able to afford haggis-feed – your haggises will all die and your haggis-keepers will all be made redundant.  You will be forced to make do with black puddin suppers.
      The few haggis that survive will be put into Edinburgh zoo where they will have to resort to artificial insemination to breed them in captivity as they will lose their sex drive.  Only the Union can ensure the survival of your haggis!

    36. Castle Rock says:

      O/T Its being reported that the 4 Unionists on the Referendum Bill Committee (Patricia Ferguson, James Kelly, Annabel Goldie and Tavish Scott) voted against calling on the UK government to follow the same ‘pudah’ rules as the Scottish government in the run up to the referendum next year.
      Its sad really on how low they will stoop to pervert the course of democracy.
      How they live with themselves I’ll never know.

    37. Breastplate says:

      Is the plural of haggis not haggii or haggeese 😉

    38. handclapping says:

      On this site its not plurals you have to worry about, its the apostrophy. Should it be haggis’ feed or haggi’s feed?

    39. Jeannie says:

      or haggises or haggae?

    40. MajorBloodnok says:

      Never mind the poor haggis farmers, who’s going to bring in the harvest when (according to the Express) so many Scots will flee the country on independence that the Lorn sausage slices will be rotting in the fields…
      (Right let’s sit back and see if some Unionist twit picks this up a ‘fact’.)

    41. Jeannie says:

      Think it’s just haggis-feed.  If the feed actually belongs to just the one haggis, it’s haggis’s feed.  If it belongs to two of them, it’s either haggis’ feed, haggises’ feed, haggii’ feed or haggae’ feed……I think…….but it doesn’t actually matter given that haggis/haggae/haggii/haggises don’t atually get fed 🙂

    42. A while ago I did some delving, being more interested in the lies spun by the No Campaign to do with the UK’s actual legal constitutional basis, and came across the interesting fact that when Eire, Canada, South Africa, New Zealand and Australia achieved ‘Dominion Status’ in 1937, which is independence / Full Fiscal Autonomy in all but a few minor respects, they were required by the 1937 Act to take on a proportional share of the British Empire’s debt and repay it.

      The first thing each of these Dominions did on gaining ‘independence’ was to tell the British Empire Treasury and Bank of England where they could stick their ‘debt’ repayments as they would not be getting a cent.

      Now having run my own business the basic figures in the relationship between the British Empire Treasury and Scotland is it appears at no time since the mid 50’s has Scotland done anything less than pay its own way. The figures indicate that since the early 60’s Scotland has been in a position of continuous surplus in its relationship with the British Empire Treasury.

      Since Holyrood started up the Scots have had to balance the books given the ‘pocket money’ they receive, a sum that has been shown time and time again to be less than Scotland’s contributions made worse by the reality only a small amount of Scotland’s pocket money ever leaves Westminster, given the high level of deductions for UK ‘benefits’ we never see.

      While I see the point of a proportional share of the bank bail out, in line with international responsibilities for banking (even though we were powerless to regulate said banks) I have a big problem accepting we have any responsibility for the massive public debt run up to save Westminster Government and politician’s skins as a result of their own failures of regulation and their continued pursuit of the discredited economic creed of neo-liberal austerity.

      Scotland entered the Union in 1706 with no Government debt and a fiscal surplus. The Union caused the collapse of a rapidly growing Scottish economy, courtesy of England’s war with France removing trading partners under French control. A blight the Scottish economy did not see any recovery from until the mid 1780’s and has never seen the equivalent economic growth at any point since then and yet has for the last 60 decades, if not longer, has paid its way.

      This being the case just why does an independent Scotland have to take on any of the share of a structural debt run up by the Bank of England and the City of London through the Ponzi scam of ‘selling UK Government debt’?

      I should have simply posted this on my Blog Stu – shouldn’t I  🙂

    43. Norrie says:

      Ta for the link the answer is even better.

    44. Jamie Arriere says:

      Yes, I was aware that the SNP had put a stop to it, and now has the Futures Trust funding some of the current projects, while I’m sure the rUK has continued with it. It would be interesting to get a current position on PFI debts as the two sides have diverged, and whether there is an argument for splitting the debt on the basis of the relevant projects in each country, rather than as a %age of them all.

    45. Jeannie says:

      I’m not going to mention it…..Morag should be along in a minute 🙂

    46. Breastplate says:

      I am grateful for the wisdom although I seem to be none the wiser 🙂

    47. Jeannie says:

      @major bloodnok
      Lorn sausage slices will be rotting in the fields…
      Not while there’s one hundred of us left alive!

    48. Stu – I have posted it on my own blog anyway …..

    49. gordoz says:

      Amazing read Mr Bruce / encouraging is an understatement
      O/T Dont know if everyone has seen this on english folks who will vote YES ?
      Nice decent coverage for once in this old red rag !!

    50. callum says:

      O/T – in other news, scientists in Edinburgh have said that a “Tory” may be born today after Ruth Davidson had been acting a little strange lately for the last 3 months.  A spokesman said, “Yes, she’s been unreactive to her keepers and has been avoiding all contact over the summer”

    51. alexicon says:

      O/T. More good news on Glasgow’s/Scotland’s crime rate.
      Serious crime down by a half and knife crime down by a third.
      Good news for residence.
      I’m just waiting for the bbc and the MSM to run banner headlines.

    52. Andy-B says:

      Antoher good piece Rev.
      O/T Rev, I apologise, but you might find this amusing, or not?
      The Tories are launching a set of memorabilia, about Maragret Thatcher, called
      “The Maggie Collection” the collection is to be unveiled at the next party conference, in September.
      The collection includes an ironing board a bib and a T Shirt
      the cover on the ironing board will feature the slogan, “What Britain needs is an Iron Lady”.
      The range will also include a postcard of Margaret Thatcher driving a tank.
      we’d better hurry up an put in our pre-order form, just in case, theirs a mad rush for them.

    53. Andy-B says:

      Just popping down to the shops with my wheel barrow of £20 pound notes to buy a

    54. Jiggsbro says:

      Just popping down to the shops with my wheel barrow of £20 pound notes to buy a loaf.
      Mind nobody steals the barrow.

    55. sneddon says:

      Tony I hope this helps answer your question regarding PFI
      Roughly 10 billion in repayments every year.  About 50 billion paid for projects.  These figures apply to UK except Scottish NPD funded projects.  There is also a secondary market in PFI payments which is a bit of a scandal as many of the ‘players’ pay no tax in the UK as well as just taking the piss.  I’m sure HS2 will join this list soon.

    56. Tony Little says:


    57. Jamie Arriere says:

      Well, if Cameron is seriously planning to bring the Cabinet up to Scotland, it’d better not be during the tattie scone-picking holidays – or else, I’m afraid, they’re not getting much of an audience……  🙂

    58. Andy-B says:

      Worth a read.
      Scary indeed, if their prediciton is correct, and inflation does rise, we’re in for very bumpy ride indeed.

    59. Jingly Jangly says:

      Can anybody tell me why debt is expressed as ratio to GDP surely it should be
      calculated as percentage of Total Govt incomings, not a percentage of the total economy?
      Also why has Britain managed to get away with keeping the public sector pensions liability,
      PFI and Bank Bailouts of the books, they said a few years ago that these massive debts
      would be on the books but it doesn’t look like its happened!!!!!

    60. Dramfineday says:

      with your avatar I was expecting this:
      “Clear? Huh! Why a four-year-old child could understand this report (pause). Run out and find me a four-year-old child. I can’t make head or tail out of it.”
      Hic! Dram.

    61. Gillie says:

      With so much debt an independent Scotland will have to introduce white pudding rationing. They’ll be a black market for Mars bars as they’ll have to be smuggled under the barb wire and minefields at the border. 

    62. Murray McCallum says:

      Jingly Jangly
      I guess GDP is a globally recognised measure and serves as a useful international benchmark for government debt to scale of economy. With much of the GDP of a free market economy being generated by private industry it does seem a bit old fashioned though.
      It is my understanding that government and public accounts are largely based on cash accounting.  They would therefore not show a value for future liabilities (like pension promises) that would, hopefully, be met by future tax inflows. They are largely only concerned with a one year period.

    63. Jeannie says:

      I’ve been puzzling over this article for most of the afternoon as I couldn’t make sense of it and finally drew myself a wee visual aid with lots of arrows and debt and pound signs.  Robert Bruce is right – you just wind up back where you started in the first place.  Think I’d be better just sticking to monopoly – it’s a lot easier to spot the cheats.

    64. lumilumi says:

      Thanks for the article, Robert Bruce!
      I’ll need to reread it to really take everything in, right now the UK policy of QE just seems like money laundering in reverse. You know, how you put laundry in the washing machine and socks always get lost. But QE is like discovering lots of extra socks after the cycle finishes! Not very durable socks, mind you. Might get holes in them the first time you wear them.
      On a more serious note, I just don’t get this No campaign obsession with and scaremongering about how much debt indy Scotland would have. As I see it, there are only three possible outcomes.
      1) Scotland votes No and is still liable for its share of the UK debt. Voting No will not somehow absolve Scotland of it or make the debt disappear.
      2) Scotland votes Yes, rUK spits the dummy and declares it’s the only successor state, indy Scotland a brand new state that can’t use the pound and would have to reapply to the UN, the EU, NATO, you name it, not to mention all those 14,000 international treaties it’d have to renegoniatiate. Being a new state, Scotland would not inherit a share of the UK assets. And crucially, not a share of UK liabilities (UK debts), though this gets rarely mentioned.
      3) Scotland votes Yes, rUK sits to the negotiating table and both parties are grown-up about things. For instance, as things stand, it’s in both Scotland’s and rUK’s best interest to share the pound for the time being. rUK needs Scotland a lot more than they let on.
      A lot of unionist seem to think that indy Scotland would inherit all the debts but none of the assets. I’m sure that’s what Westminster would like, and that’s the message peddled, or at least implied, by Scottish MSM. Which is all unionist, of course.

    65. Jamie Arriere says:

      Rumour has it that work is already under way on a tunnel under the border for such a purpose, emerging between Selkirk and St Boswells (it’s gonna be a big minefield) – it’s already being referred to as the Gala Strip!…..

    66. Listen to Max Keiser and Gillian Tett(FT) in the last 15 mins of

    67. Tony Little says:

      Hahaa!  I’ll keep that in mind for the future. 🙂

    68. handclapping says:

      Robert’s piece puts the mockers on the dependentists scaremongering over the Bank of England. Scots won’t get a say; OK, no say – only 40% of the debt then.
      Another item for further down the line is the ridiculously low interest rate is forcing pension funds to over-provide, sucking needed capital out of their sponsoring companies now, and, when rates return to normal, all that capital will be tied up in unneeded provisions in the pension funds and not available to finance the increase in trade that will come after austerity passes.

      Not that austerity is all that austere. Oh woe, we inherited £700 million debt from Labour, austerity, austerity! At the rate we’re going, who’d be the incoming government in 2015? Oh woe, we inherited £1400 million debt from the ConDems, panic, panic!

      Another £700 million, nice business to be done if your business is lending to the Treasury. It is? what’s it called? Oh, a bank.

    69. Boorach says:

      40% of the debt with only 8% of the population…… no thank you! 

    70. handclapping says:

      Like BT, badly worded. They insist we’ll get 100% of the debt. I’m insisting that the starting point for negotiation is 40% of which our share is at most 8.4% or 3.36% however on the £1,400,000,000,000 thats still £47 billion. Or trillion or whatever, I’m not sure I’ve got the right number of zeros there.

    71. Boorach says:

      Wonder if they’ll allow all those intent on leaving  the country in the event of a Yes vote time to move into rUK before calculating shares? 🙂

    72. Caledonalistic says:

      Sorry if someone said it already Robert but, if I were in your shoes, I’d definitely be registering my middle name as ‘The’.  

    73. Murray McCallum says:

      The negotiations will be as straightforward or complicated as each of the two parties wish to make them.  I personally think both will have failed if it becomes too complicated and drawn out with public disputes and complex legal arguments.
      For me the thing to remember is that there are good and bad things to be divided up.  Many of the bad things have been vastly overstated by the No campaign, as shown in Robert’s article.  The good things have hardly been talked about at all.

    74. Seems ‘Me too’ Ed Moriband is now bringing his knuckle draggers up to Scotland as well to have a ‘Shadow Cabinet’. No doubt both are doing so at Scottish taxpayers expense, of course, what with the extra policing, security, SAS/SBS cadres …. etcetera

    75. handclapping says:

      Now there’s a question; what good things have come out of the Union and where are they now?

    76. Murray McCallum says:

      By “good” things I mean state owned buildings, infrastructure, military hardware, investments, gold, and anything else the state owns on behalf of citizens. I would hope we would want our share of these things too.
      Maybe think of it as reparations if “good” is too big a hurdle!

    77. Xander says:

      QE, in my humble opinion, has one objective – to keep inflation higher than it ought to be. As touched on near the end of the article, inflation is the method by which UKGov intends to reduce all historical debt in real terms. This is the primary goal of QE. Debt issued today and in future will continue to be a problem but nowhere near as much of a problem as the massive historical debts that have already been built-up. Every additional % of inflation reduces that historical debt in current real terms. So where’s the problem?

      The problem lies in the fact that earnings are not keeping pace with inflation and have not done so for several years now. So with each passing year the available disposable income across the economy is also reducing. To use a metabolic metaphor, the body may feel as if everything is OK at present, however the body has already burnt through the fat and is now burning muscle. The economy is going to become weaker so long as real disposable incomes continues to fall.

      In other words the health of the economy is an illusion that can only be supported by further QE rather than what is essentially needed – a cold hard look at the international competitiveness of the UK economy.

      Disposable income is essential to a healthy economy, but the distribution of this disposable income is also key. Once the wealth is concentrated in too few hands, there is simply not enough disposable income widely enough distributed across the economy to support the economic activity, jobs etc necessary for a healthy economy. If those with the wealth spent that wealth 24/7/365 they could not hope to get anywhere near the level of economic activity that would occur if that wealth was distributed among a much greater %age of the population.

      There is an interesting comparison to be made with the Great Depression in America where immediately before the crash 1% of US citizens held approx 40% of all privately held US wealth. It took Roosevelt’s new deal and a world war production boom to overcome that barrier and redistribute the wealth among a much greater number of people. Does it surprise anyone that once this redistribution occurred, the US became an economic superpower (obviously helped by the size of the US market).

      Comments or rebuttals on the above opinions will be welcomed.

    78. Mark Harper says:

      Robert Bruce was my grandads name too! not only that but when my parents got married the best man was William Wallace… so there!

    79. scottish_skier says:

      Still not got the full tables, but nice to see a bit more detail from Angus Reid (Express Poll)
      Since January: Yes +7%. No -6%. Fits in nicely with the trends.
      I think the ‘16%’ would consider leaving Scotland if independent is cool. Equates to the ~18% who’d vote to join the union today in the WoS poll. The 12% unsure on this added to the 16% are your unionists/status quoers. Little love for the union in Scotland.
      Your 72% who would not consider leaving are your Devo Maxers + Independencers who do not have an irrational fear of everyday life.
      Of course the 28% wouldn’t leave (they’re probably too scared to leave the house to actually move), although some might see them doing so a bonus.

    80. Alba4Eva says:

      This is totally off topic, but something just jumped out and whacked me across the head.  

      While watching the BBC news channel there, there was a piece on Gibraltar.  It became so clear, that the whole argument about Gibraltar between the British and the Spanish is a staged charade… The Spanish and UK governments are escalating the Gibraltar faux conflict, because the UK government are concerned with Scottish Independence and the Spanish with Catalan independence.

      It’s a huge dirty game… The UK, or more precisely Westminster, will attempt to galvanise ‘British’ patriotic feeling over the next year by appearing to stick up for the people of Gibraltar, as will the Spanish Government in an attempt to galvanise pro-Spanish sentiment against the Brits.

      It was bugging me and niggling at me, that I have heard nothing about any conflict being even the slightest bit prominent in the news or any other media in my memory.  OK. I was aware of Gibraltar being UK owned and have likely heard a snippet or so in my life to date, but have never before been fed with news to the point that the issue is really as significant as is being made out… certainly not to the current escalation of events (namely, the creation of a reef by dumping concrete blocks and a retaliatory customs limitations by the Spanish.

      When you look at events, you first have to also look for motive.  Who has the motive for this?  ….Obviously the UK and Spanish governments have shared motive.

      I am absolutely convinced that the UK and Spanish authorities are working as a team to manipulate and escalate this.  I also believe that they are only just now kicking this into action, it is likely a 6-9 month project and when it peaks, we are going to be led to believe that it is getting quite serious and out of hand, when in fact it will be totally manufactured.  

      If I am wrong, then fair’ nuff… but I don’t think I am.

    81. Murray McCallum says:

      Yes inflation looks a likely escape route to effectively reduce the UKs debt burden. People on low fixed incomes will suffer most and those with modest savings (maybe saved over a lifetime) will see them significantly eroded. Interestingly index linked bonds have fallen of late as markets now seem to expect an inflation spike to occur towards the end of this decade.

      Don’t you think there will be increased tension between the Treasury and The Bank of England Monetary Policy Committee?  The MPC would naturally wish to raise base interest rates to counter increasing inflation, whereas the Treasury would be alarmed at the knock-on impact on the interest paid on UK bonds.

      The UK really does seem to be in a hole – a bit like Japan but without the high average savings of the Japanese (who have not trusted their government for quite some time).

      The introduction of a living wage and better / fairer tax progression would be a good first step.  In the longer term steps to raise general living standard through better quality employment would raise average disposable incomes. I personally think such measures are easier to take in a smaller country. For me it is a disadvantage to be in the UK – too many complex vested interests to forge a new path.

      As you say if all the wealth is held by too small a group it is effectively “lost” from the economy – the rich invest abroad or simply do not spend it (simply build their savings). Indeed the rich tend to be rent seeking and effectively build a private tax system that works against others building wealth through work.

    82. lumilumi says:

      @Skier above (7:15 pm)
      I also found it intriguing that the percetage of “people who’d leave Scotland” if Scotland became independent so neatly matches the hardcore No vote in other polls.
      When it comes to the raw prawn, few of them would. You don’t leave your home, your roots, your family, your job, your kids’ school, your everyday life in a huff about some political thing.
      How many of the people who vowed to leave Scotland if Scotland voted Yes in the 1997 referendum actually left Scotland? Not many, if any. Ms Mone (the bra entrepreneur) certainly didn’t. Now she’s threatening to leave Scottish women and their boobs unsupported again. Yawn.
      Anyway, if the BT scare stories of border controls along Hadrian’s Wall (well south of the actual border, thanks for conceding all that territory… :-D) came to pass, indy Scotland might be glad of it. Because the traffic might be the other way. Northern English and various immigrants to the UK scrambling to indy Scotland for a better life.

    83. Xander says:


      It petrifies me to think what may happen to all the pensioners and others on fixed/low incomes. I believe as you do that they will be first to feel the brunt of this QE policy – it’s only a matter of time. UKGov can’t continue to dump hundreds of billions into the economy without effecting an increase in inflation.

      Your point about MPC vs Treasury is a very good point. I can’t begin to imagine what may happen to mortgage holders once interest rates start to push up- particularly where those holders have leveraged every spare penny simply to obtain a mortgage on a property that is overpriced due to an under-supply of UK housing – a figure of some 3 million across the UK the last time I looked.

      I totally agree with your suggestion and conclusion regarding a good first step to address this, but I would add that a small oversupply of housing stock would be necessary to prevent the property speculation bubble from returning. Instead UKGov want to fuel the bubble via UKGov loans to mortgage applicants. This, I believe, will be an economic disaster.

      Why would the members of current UKGov care – they are mostly millionaires and won’t be in public office when the “merde” hits the fan.

    84. Murray McCallum says:

      I would add that a small oversupply of housing stock would be necessary to prevent the property speculation bubble from returning. Instead UKGov want to fuel the bubble via UKGov loans to mortgage applicants. This, I believe, will be an economic disaster.

      Absolutely. It is all so short sighted and desperate at the moment. The Westminster government’s policies are riddled with contradictions.
      I remember the days when a house was simply where you lived. Owning it, or not, was not success / failure.

    85. Bubbles says:

      You need to watch a different news channel. You’re right though; I’ve also noticed it. Not too sure it’s playing with the average Scot however. You are aware the fitba’s back?

    86. Alba4Eva says:

      Hey Bubbles,  they say keep your friends close and your enemies even closer.   :0)
      Football?   That would be that sport which only has 2 teams that compete each year… bit like a Scottish version of the boat race?

    87. CameronB says:

      I have speculated before, that Thatcher’s drive for home ownership was aimed at returning our social balance to that of feudal serfdom. We were encouraged to ‘bind ourselves’ to the land once again
      Thanks for the article Robert, though my layman’s knowledge of Government finance lends me to view QE as a FIAT Ponzi scheme. It is the insiders that get the true benefit, while it is us outsiders that pay the cost.
      I posted this link yesterday at the end of a thread. I think it give an indication of the levels of fraud one might expect to be common practice between Westminster and the City.
      I don’t know how that helps our understanding, but all I suggest is we will need a sharp team of operators do handle the negotiations. Possibly including one or two financial criminologists.

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