#IndyRef – Thoughts on Debt and a Currency Union in an Independent Scotland

Watching the Salmond-Darling debates, I was struck by one astonishing thing. This was not the continuing sad state of the rather thin debate over the referendum, which makes one despair for the future. That was distressing rather than astonishing.

No, what struck me was Alex Salmond’s assertion that the Pound belongs to Scotland as much as it does to the rest of the UK, and that if the UK did not agree to a currency union, an independent Scotland would not accept its fair share of the debt.

This position ignores a very fundamental fact. If Scotland became independent, it would be a different country from the UK. The UK would be a foreign country. I am not sure the Yes side actually realises this, since it seems to want to keep many of the things that come with not being a foreign country – like the Pound or the Queen.

If Scotland became independent, the Pound would no longer be Scotland’s. It would belong solely as a matter of law and policy to the remaining UK. Yes, Scotland could pull a Panama and use the Pound even if the UK did not agree to a formal union. I am not sure that this would be the best option for a newly independent Scotland, which would lose control over some elements of its economy. And it would be a curious choice for a country which felt so negatively about its association with the rest of the UK that it felt it needed to formally and legally sever that association. Why continue parts of the association if the relationship is so bad?

Further, Scotland would be both morally and legally obligated to take its fair share of the debt. Morally, I would not want to be part of a new country which, after a long and overall productive association, left the UK holding debt which Scotland played a role in incurring. Remember Royal Bank of Scotland? I would feel rather ashamed at this. In addition, the Scottish Government’s vision for an independent Scotland states that it ‘will be entitled to a fair share of the UK’s extensive overseas properties (or a share of their value)…’ Essentially, the SNP is laying claim to assets but denying responsibliity for debt. I have yet to hear an explanation for what appears to be a highly hypocritical position.

Legally, one could imagine the possibility of a rather nasty fight in the International Court of Justice over dividing the debt (and assets) – in much the same way there are frequently nasty fights in the courts over money when two people get divorced. In state divorce – just like in a divorce between two people – one side does not get to make all the decisions. There are legal proceedings and negotiations.

The British government has agreed to participate in negotiations if the vote is for independence. This does not mean, however, that it will agree to everything the SNP demands and give away the store. And nor should it. It has a responsibility to look out for the interests of the rest of the people staying in the UK. If I lived in England or Wales or Northern Ireland, I would expect the government to bargain hard and make sure Scotland took on its fair share of the debt, without any further strings attached – like a currency union.

Alex Salmond’s position is like that of a truculent child who, when he does not get his way, decides to stop playing and go home. Unfortunately, in the case of such a serious situation as breaking up a country, this is not an option. A negotiated settlement, where Scotland takes on its full share of responsibilities in the divorce – including a fair share of the debt – would lead to it being accepted as a respected and responsible member of the international community. A unilateral declaration on certain matters, such as debt, would leave the rest of the world wondering how responsible Scotland would act in the future.

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