What is the economic truth about independence for Scotland?

One of the features of modern life is the way that official policies invariably start counter-trends. For example the federal policies of the European Union seem to be leading to more divergence and not convergence as we see pressure for constituent nations to split. There is the example of Catalonia in Spain and also my subject of today Scotland in the UK whose government plans to hold an independence referendum on the 18th of September next year. This would potentially end a union which began back in 1707 – ironically the union began partly because of the financial problems in Scotland caused by the Darien colonial scheme. So both the way into union and the way out could be triggered by financial crises or at least be correlated with them.

As ever the politics of the situation are not for me. Instead I will concentrate on the economics and finance issues. However one area where political influence can and indeed probably will  seep into the economics is in forecasts of future growth. The more that the pro-independence campaign can nudge and push growth forecasts higher the better the numbers will look to them. The anti-independence campaigners will presumably try to resist this, but for them there is the issue of looking anti-Scottish and pessimistic. If we look back to the UK General Election of 2010 we saw forecast fantasies of around 3% per annum go unchallenged by our political class as for one reason or another it suited them. However reality has proved much more grim and the forecasts from back then should be only used for chip paper.

The Institute for Fiscal Studies (IFS)

There was some good news for independence supporters in the initial thoughts of the IFS on Scotland.

In 2011–12, 9.9% of the UK government’s revenues were generated in Scotland (assuming a geographic share of North Sea revenues). Since the Scottish population accounted for 8.4% of the UK population the average revenue raised per person in Scotland (£11,079 in 2013–14 prices) was higher than for the UK as a whole (£9,342 in 2013–14 prices).

So at this point, supporters of independence will be smiling. But a current strength of the numbers is revenue from North Sea oil which was 18.6% of tax revenue in 2011-12 for Scotland. But as we go forwards it is expected to do this.

which are volatile and expected to decline in the long run.

So there is something of a shark in the water here. If we add in the fact that Scotland spends more per head than the rest of the UK then the IFS considers that the fiscal position is more dangerous. Both the UK and Scotland spend more than they get in from tax but the Scottish position is more reliant on a fading source of tax revenue. This is what leads to the following conclusion.

For Scotland, greater demographic pressures, combined with the OBR’s forecast that revenues from the North Sea will fall sharply between 2012–13 and 2017–18, mean that PSND would increase continually from 2015–16 onwards.

So assuming falling North Sea oil revenues then the finances of Scotland will be under much more pressure than that of the overall UK. This will be added to by the fact that the expected demographics of Scotland are more unfavourable which put simply is that it will age more.

Accordingly we have another story which starts well for independence.

the Scottish debt-to-GDP ratio would be 71.8% at the end of 2015–16, somewhat lower than the 85.1% for the UK.

But would then deteriorate rather alarmingly.

The projection from our basic model is that Scottish debt would (absent further fiscal consolidation) exceed 100% of Scottish national income in 2033–34 and would exceed 200% in 2057–58.

Care is needed here as that far ahead  one can forecast almost anything! For example new oilfields could be tapped or a higher oil price maintained. But the underlying thesis is that an ageing population and declining North Sea Oil revenue pose a particular problem for Scotland as expressed below.

The fiscal pressures facing an independent Scotland would therefore be more immediately pressing than those facing the UK as a whole.

I do not know about you but this leaves me thinking that the best time for Scotland to press the independence button was when North Sea Oil was discovered.

The blueprint for Scottish independence

This takes entirely the opposite opinion to that of the IFS above.

On independence in 2016, Scotland’s estimated financial position will continue to be healthier than the UK as a whole. We will set out on a firm financial footing.

I think that the crucial word there is estimated! By whom we may wonder? Anyway as you can see it contradicts the IFS analysis although cunningly it does leave the matter open to some interpretation as whether it means then (perhaps true) or in the future (much less true). Intriguingly it seems to be planning to improve revenue by cutting taxes.

reducing corporation tax by up to three percentage points; and improving international connectivity by cutting Air Passenger Duty by 50 per cent

There is some talk about cutting tax avoidance and simplifying the tax system to save £250 million a year. Virtually every political scheme has something like that which usually turns out to be the economic equivalent of a mirage in a desert.

Actually it appears that extra spending is being promised too.

ensure that benefits and tax credits increase at least in line with inflation (as opposed to the current 1% per annum cap for many benefits).

uprate the State Pension by the triple-lock from 2016. This means that pensions increase by average earnings, CPI inflation, or 2.5 per cent – whichever of these is highest – and provides protection for the value of pensions over time.

reducing your energy bills by around five per cent by moving the costs of some environmental schemes from your energy bill and funding them from central government resources

ensuring that the minimum wage rises in line with inflation

The Bank of England and the Pound

The pound is Scotland’s currency just as much as it is the rest of the UK’s

This is an odd assertion in so many ways as surely the point of independence is exactly that. Yet in this area Scotland seems willing to submit to a type of English hegemony. If we move on from the obvious issue of an organisation called the Bank of England running matters post independence there are a litany of issues here.

1. The Bank of England will presumably set interest-rates to suit England (and Wales and Northern Ireland). This may or may not suit Scotland.

2. The value of the pound will mostly be determined by the much larger English economy in some respects similar to the way that Germany dominates the Euro. That has not worked out well for many of the Euro nations.

3. This is to say the least awkward, if further bank bailouts are required. Will the Bank of England be the “lender of last resort” in Scotland? How does this work when it has an independent treasury? Just as a guide, individual nations in the Euro area had their own central banks which survive to this day partly because of this issue.

4. There is also the issue of currency reserves and intervention which presumably also stay with the Bank of England.

5. What about the money supply of Scotland which will again presumably be controlled by the Bank of England and set for the rest of the UK?

6. Has anybody bothered to ask the citizens of the rest of the UK if they are willing to take the risk of having Scotland in a currency but not a political or fiscal union? This would take place just as the Euro is demonstrating many of the risks of such an arrangement. But added to it for the rest of the UK would be new oil or gas discoveries pushing up the value of the pound and thereby making their businesses and industry less competitive.

Anyway staying with the pound is unlikely to be as bad a choice as the previous effort. From 2006 when it was policy to join the Euro a plan which has presumably been binned.

Alex Salmond, the SNP leader, claimed that Ireland, Iceland and Norway demonstrated that small independent countries were amongst the richest in the world.

As to the banking sector, well matters hit trouble there too. From a speech given to Harvard University in March 2008.

Take financial services. With RBS and HBOS – two of the world’s biggest banks – Scotland has global leaders today, tomorrow and for the long-term.

As they say on a Question of Sport ,what happened next?

Also those wondering how the bailout costs for Royal Bank of Scotland might like to look at the word I have emphasised in the quote from the same speech below.

consider the remarkable success of indigenous companies that have become global, Nokia in Finland, Ericsson in Sweden, Maersk shipping in Denmark or for that matter the Royal Bank of Scotland.

I guess that is why they are trying to retain some flexibility going forwards.

The key point is that sovereignty over the decision with respect to the currency would rest with the Scottish Parliament.

How would a change work exactly?

For example a guide might be gained from the Euro area where we are regularly informed that it is impossible.

The banking sector

As there are banks which apparently were indigenous to Scotland what is the situation now? If Scotland takes the UK’s oil wealth some might argue it should take the socialised banking liabilities too. Of course that is easier said than done as the Bank of Scotland was subsumed into the Lloyds Banking Group but in theory at least it could be resurrected.

The whole independence argument could swing on this matter alone.


It is hardly a surprise that the future economics of Scottish independence are disputed as the debate is likely to be heated. However we even start the debate with disputed facts as for the last fiscal year (2012/13) the IFS informs us that the situation was this.

we estimate that public sector net borrowing (PSNB) was 7.0% of national income in Scotland compared with 7.4% for the UK.

However the independence blueprint tells us this.

In 2011/12, the latest year for which data is available, Scotland is estimated have run a net fiscal deficit equivalent to 5.0 per cent of GDP. In the same year the UK is estimated to have had a deficit of 7.9 per cent of GDP.

Quite different pictures are they not? In many ways the case for Scottish independence resides with which one is the more accurate and I will leave readers to make up their own mind on this. Although should the independence movement extend, the case could go further if say islands like the Orkneys (think oil reserves) decide that they do not want to be ruled from Holyrood. It is not only geographical distance that is a factor in such matters as I do not like being ruled by Westminster either (because of what it has become) and I live about two miles away!

As a final point – all the forecasts depend on assumptions which may not (indeed probably will not..) be true. But there are so many begged questions here as well, debt share, oil share, bank share, currency share.




This entry was posted in Bank of England, Demographics, General Economics, UK Inflation Prospects and Issues and tagged , , , . Bookmark the permalink.
Subscribe Find an Adviser
  • Anonymous

    Hi Shaun

    Well put. Salmond wants unrealistic terms, all the oil revenue and none of the RBS liabilities or HBOS liabilities.

    The is also a silent elephant in in the room. Britain has substantial military capability – some might say we spend too much on the military. England alone would find it more difficult to support. So an independant Scotland has a major geopolitical impact on NATO

  • http://fabadger.blogspot.com/ Dan Hill

    Whilst all other things are unpredictable at least one thing is for certain:
    the legal sector would see a nice boom.

  • Richard


    You announce at the top of the article that you will not be mired by politics yet you go on to show some intrinsically biased opinions rather than the so-called truth.

    For example, are you naive enough to believe that the Bank of England’s policy is not already screwed towards England? Would this not make sense, much in the same way that Germany dominates the Euro? You forget this pretty quickly when you discuss the independence factor.

    You start off by implying the negative view of the IFS is correct an then contradicting viewpoints are only estimating. The emphasis you put on this word is clearly meant to imply the IFS was not estimating too, which it is.

    You see? This is not an independent look at the facts and figures but an opinion piece that you’ve labelled as truth. Shame on you. I am not a pro independence voter I merely read this article in an attempt to find out the truth yet it is more political spinning with too much opinion that you place too much belief in, the fact that it is your own opinions notwithstanding.

  • forbin

    Hello Shaun,

    This is independence lite for Scotland . The pratical upshot is that the SNP wants to be shot of Westminster ( who can blame them ? ) and Mr Salmond wants nothing better than to get his trotters into the Euro trough .

    Like all the smaller Euro states their leaders will spin up the great day they join the Euro – yes I know Salmond said he’s keeping the pound but that’s not real independence is it ?

    So eventually Scotland will leave the UK and join the Greater Franco -German empire ……. and thus stop being independent again

    What else could happen ? Be a Norway ? How will the Orkneys , the great untold story here , think of it ?

    Yes of course they want all the oil money and none of debt – thats the political bartering going on . What they end up with is going to be interesting .

    So I’m all in favour of a tartan passport – but guys you’ll need to take your fair share of the money …. and the debt . After all you had members in Parliament voting on all that for at least 10 years .

    For England ? Well politically wise what’s Labour going to do to get votes? more self destruction?

    Financially wise I think an independent England will be just as worse off with or with out our Scottish cousins.

    Oh like Norway’s independence from Sweden , you’ll need your own currency and your own crown . They did it , so can you


  • Andy Zarse

    Richard, I was always taught at school to read the question thoroughly before putting pen to paper… If you had done so you would have firstly noted that Shaun used the word “truth” in a question as opposed to a statement. Secondly the article clearly imputes the truth is not known as there are too many variables. Perhaps you could re-read Shaun’s last two paragraphs in the Conclusion and then consider how your rant appears to the rest of us.

  • Robin B

    Well said Andy. What this illustrates is that it is nearly impossible to have a discussion about Scottish independence without it rapidly descending into the political or the emotive – which in many ways is what Alex Salmond wants. The trouble is, what will be the basis on which the voters of Scotland make their decision next September?

  • arrbee

    I suspect the reason the SNP have switched to the pound is that they’ve been told there is little chance of an independent Scotland being allowed to join the EC, let alone Euroland, any time soon.
    As Shaun alludes to above, countries like Spain would be very keen that any examples of what they regard as regional independence should fail completely.

  • DaveS

    Seems to me that in the unlikely event they won the vote then it would be a prime time popcorn extravaganza.

    I mean – what a mess – how on earth would they split the debt. the oil revenues, the bank liabilities, the NHS, the tax system, the BBC etc etc.

    And what would the “UK without Scotland” (what would we be called ?) trade balance look like. If we are importing Scottish oil & gas then we best export a heck of a lot stuff back to them to balance things out. Where are Mars bars made – hopefully this side of the border ?

    Its one of those black swan events – the outcome would be impossible to predict. With falling oil revenues it would be a disaster for Scotland but maybe it would be a disaster for the rest of us too.

  • Patrick

    Everything will be sorted out amicably. Don’t worry. Otherwise the international courts, at the end of the day if everything else fails, let’s have a good old war in the best traditions of this land. Let’s not worry though. Not that much, but it might be a disaster for all. I am not worrying.

  • Patrick

    I am a bit worried. That was my Mars bar, deep fried please!

  • forbin

    maybe you’re right because Sweden and Norway separation was a bit easier to acheive


    Hence my comments on a monarchy

    but I doubt Salmond would want that , the people? hmm, maybe – another king jimmy ?

    Rab C Nesbit ? kool but unlikely !

    Then after Scotland comes Wales , North Yorkshire and Cornwall…….


  • Anonymous

    Hi Arrbee,

    Maybe the SNP have dropped the euro because it’s unpopular with voters.

  • ninoinoz

    I think it is because there is a large fund management industry in Edinburgh e.g. Scottish Widows, Scottish Provident, etc. that, obviously, has a lot of English business.

    If they lose the pound, those businesses would move South.

    Strange. All that talk a few years ago of how joining the Euro would be the effective end of British independence, then the SNP wants independence but keep a foreign currency without having any say in setting interest rates whatsoever.

  • Anonymous

    Hi ExpatInBG

    Yes presumably some of the military infrastructure would head south as why would the Royal Navy base nuclear submarines in what is a foreign country? Also the European Union situation is odd in that if you do not want to be governed by Westminster then it is somewhat strange to let Brussels do much of it…

  • Anonymous

    Hi Dan

    Yes the lawyers always seem to win don’t they?

  • Anonymous

    Hi DaveS

    You make a good point about what the English trade balance would be should Scotland split from the rest of the UK. It would be something of a shocker I think although frankly our joint trade figures are already that as the GDP revision today reminded us. Whatever route is taken declining oil revenues will make matters worse.

    As to Mars bars most of the ones eaten in the UK are manufactured in Slough……

  • Anonymous

    Hi Forbin

    Thanks for the Norway history lesson as I had forgotten that Sweden took it over for a time. When the oil reserves were discovered I bet they wished that they had hung onto it!

    As to independence it is a bit like those Russian dolls where you can keep going. How about London as a city state?

  • Anonymous

    Hi Arrbee

    It would appear that Spain’s Prime Minister is already on the case. From the BBC’s Madrid correspondent.

    “Tom Burridge ‏@TomBurridgebbc3h

    Rajoy uncompromising on #scotland ‘in or out EU’ debate. ‘Scottish voters will have to take that into account.Laws will have to be followed’”

  • Chris Rick

    Did I read that there is a precedent that we in England don’t get to vote on Scottish independence? It will affect us as much as those who do get to vote. Does not seem fair. I also read that there is little chance of a ‘YES’ vote. Given the views expressed by my friends it is ironic because if the English got to vote Scotland would be off on its own in short order.

    As in most things I can’t find much unbiased information to enable me to come to a conclusion. It is obvious it will be expensive should it happen. Can we afford it?

  • David Lilley


    As you say there are too many begged questions. A vote for independence would be a leap in the dark. It is down to Alex to negotiate with his potential new partners and get some concrete resolutions before going forward.

    I particularly liked the statement in the White Paper “The pound is Scotland’s currency just as much as it is the rest of the UK’s”. This is true for members of the UK but it is not a claim that an independent Scotland can make.

    We all like a fighter and this will be a vote for Alex more than anything else. But when he retired a few years back the SNP fell back and similarly when Shiona McDonald retired.

    But we must all hope that, whatever the outcome of the vote, Scotland thrives.

  • Anonymous

    Thank you for a great column, Shaun. You think it odd that the blueprint for Scottish independence would claim the British pound as the Scottish currency. However, the Irish nationalists didn’t have much interest in having an independent currency either. It took a while for the Irish Free State to establish the punt and the punt only lost its anchor to the pound in March 1979 when Ireland entered the European Exchange Rate Mechanism and the UK didn’t. So the Irish never really had any kind of sovereignty with respect to monetary policy, they only gave up on rule from London when they decided on rule from Frankfurt.

    Arguably, this is simply a sign of maturity on the part of nationalist leaders. They realize that in the modern world there may be many nations but there can’t be that many currencies.

    In 1989 Slovenia’s leaders called for a confederation with a monetary union to replace the Yugoslavian federation, but when they declared independence in June 1991 they didn’t keep the dinar as their currency. Slovakian leaders promised a currency union after independence but within a month were forced to establish a separate Slovakian crown. So I think one can take the blueprint for Scottish independence with a grain of salt when it says that a common currency will be preserved. As you noted, the concentration of oil wealth in Scotland would be bound to create strains in a currency union of independent countries.

    I suspect that most separatists, whether Slovenes, Slovaks or Scots, really don’t care that much about common currency arrangements, one way or another. So they will promise them whether it is realistic or not. Their message to voters is, to paraphrase President Obama: “If you want your existing currency, you can keep your existing currency. Period.” And they hope that voters will be gullible enough to believe them.

    Andrew Baldwin

  • Anonymous

    That presumes an independent England can afford nuclear subs. The Russian military lost much capability as equipment aged and spares were unavailable following the USSR’s economic collapse.

  • JW

    Hi Shaun
    Given Catalonia and Basque, you wouldn’t expect anything else. However Hollande was suporting his view and I guess the Italians and Belgiums will be supportive.

    If enough Scots realise that this could mean years of negotiation to reaaply for EU membership, that will have automatic EZ membership attached, it could spell the deathknell for independance.

  • Anonymous


    True Scottish independence would include the Scottish pound under BoS control. Not acceptable to the SNP as the exchange rate would act as a barometer of economic performance! Look forward to spending £5 in Scotland and receiving a 5 Scottish pound note akin to the Irish punt prior to the Euro?

  • Anonymous

    I, possibly like many others, struggle with this Blueprint, but isn’t life interesting. I really think you have scratched the surface but then again so has the SNP. Good luck to the Scots, there’ll be many a hill to climb but at least this is one hell of a “two fingers” to the current garbage that falls out of Westminster et al. But not Threadneedle St. , alas. Perhaps they haven’t quite got the guts (competencies) to set up the own currency and that their major selling point is, what the electorate will still be able to see on the telly.
    The financial / economic impact is way down in the list of SNP party’s priorities, methinks.
    Good starter, nevertheless, for 10. I’m sure you’ll have further contributions to add to the pot.

  • therrawbuzzin

    There have been seven separate analyses of the likely future of Scottish oil revenues; only one, that chosen by the OBR sees those revenues declining in the short-to-mid term.
    The other six see them rising.

  • therrawbuzzin

    “Also the European Union situation is odd in that if you do not want to be governed by Westminster then it is somewhat strange to let Brussels do much of it…”
    It is not intellectually possible to argue that Scotland would be giving up its independence by continuing to be a member of the EU, without arguing that, AS A DIRECT RESULT OF THAT ARGUMENT, the UK Govt. is a costly, pointless exercise.

  • therrawbuzzin

    JW: Scaremongering nonsense.


    Mr Salmond said a letter from the office of the EC secretariat general stated
    it would be “legally possible” to negotiate from within, adding that Prof James
    Crawford, who had advised the UK government on Europe, said the timescale “seems

    The SNP later released a statement from John Lind, secretary of the SNP’s
    Aberdeen Central branch, who said he secured the letter from European Commission
    official Mario Tenreiro.
    He said: “I was very pleased to receive this letter from
    the European Commission which makes it perfectly clear that Scotland can
    negotiate its position from within the European Union, and equally pleased that
    the first minister referred to it at First Minister’s Questions.

    He insisted: “The letter is genuine, Scotland is a European nation and will
    become an independent European member state in March 2016, after we vote Yes
    next September.”

    The first minister also told MSPs that Sir David Edwards, who formerly served
    as a British judge in the European Courts of Justice, had commented that EU
    institutions and member states would be “obliged to enter into negotiations
    before separation took effect”, to determine future relationships.

    Mr Salmond said: “Scotland is a European nation. Resource-rich Scotland would
    be welcome. Anybody with an ounce of sense knows that.”

  • therrawbuzzin

    For your information:


    PROFESSOR ANDREW HUGHES-HALLETT: Professor of Economics, University of St Andrew’s

    No, in my estimation that is not right, for various reasons. One is that the number he’s taking is, of course, the gross liabilities of the RBS – and, of course, HBOS was in a similar position at the time. But of course any bank at any time has loans out which exceed the assets in the bank, so on his argument every bank would be technically bankrupt all the time, always. So it’s a nonsense statement. That’s easy enough for me to say. The real point here, and this is the real point, is by international convention, when banks which operate in more than one country get into these sorts of conditions, the bailout is shared in proportion to the area of activities of those banks, and therefore it’s shared between several countries. In the case of the RBS, I’m not sure of the exact numbers, but roughly speaking 90% of its operations are in England and 10% are in Scotland, the result being, by that convention, therefore, that the rest of the UK would have to carry 90% of the liabilities of the RBS and Scotland 10%. And the precedent for this, if you want to go into the details, are the Fortis Bank and the Dexia Bank, which are two banks which were shared between France, Belgium and the Netherlands, at the same time were bailed out in proportion by France, Belgium and the Netherlands. And furthermore the Government itself – of which Michael Moore, naturally, is a member – has already made its calculations of what Scotland’s own contribution to the bailout would have been. And that comes to… because I looked the numbers up and I used the latest GERS, that comes to about £0.9 billion, and not that [word unclear] £470 billion, or whatever you said to start with. So that’s on the basis of the sharing, so his own Government is already admitting that the sharing was going on. The last point I would make is by calculations from the Treasury and elsewhere, the cost of the bailout is actually largely in terms of interest charges in … and so on of loans that were made. The rest was actually guarantees, and therefore no money has actually changed hands in that sense. Of course, that makes it, of course, altogether cheaper, but as I said at the beginning, the real point is that it’s always the case here with bailouts of this kind – it’s shared across the countries. I might point out that it’s also… it’s not just the UK Government, but the US government, in the form of the Federal Reserve, bailed out on liquidity basis both RBS and HBOS. I think it was about $200 billon for HBOS and about $400 billion for RBS. That’s another example of international sharing.

  • therrawbuzzin

    There are no begged questions:
    Scotland is resource-rich and contributes £7bn gross to the EU budget.
    It is keen to expand further, and is willing to take on basket-case economies to do so.
    When govts. are asked to cough up Scotland’s share or vote us in, what do you think will happen?
    Scotland’s geographic position makes it strategically crucial.
    Nato would BEG us to join.
    It took Slovakia and Czech Rep less than three weeks to join, but who really cares?
    The £
    A pound WITHOUT Scottish involvement would quickly descend to the level of wampum, such would be the balance of trade nightmare. A currency union saves ENGLAND not Scotland.

  • therrawbuzzin

    Two Final Points, if I may:
    There is little point extrapolating Scotland’s future economy from one which has every economic policy aimed at enriching the CoL; Scotland’s just won’t do that.
    Orkneys/Shetlands questions have been raised; there is absolutely no taste for independence from Scotland there.

  • Anonymous

    It is a convenient assumption that RBS does 90% of it’s business in England, so England should be 90% responsible. If I recall correctly, Icelandic Banks did much business in Britain, but Britain did not bail them out ….

    UK loan guarantees bring risk on the taxpayer. There is a chance of hefty losses. Banks who take on risk normally ask for a risk premium, but I don’t see the taxpayer receiving any such benefit.

    Normal capitalism would let those banks go bust and only given taxpayers money to depositors. Sell off any assets worth selling & transfer the staff to the more prudent purchasers. Send the directors toward the job centre. It is obscene that these dubious characters continue to live the high life on subsidy.

  • therrawbuzzin

    Convenient? It’s probably understated.
    Did you not read about the $600bn bailout of the two in the US?
    Do you think that the US did that for Scotland’s benefit?

  • Anonymous

    Look at Iceland, look at Cyprus. Scotland could be left to support it’s own banks. That would be unpleasant for Scots taxpayers.

    Why would the USA bail out foreign banks ? forget philanthropy. I’d follow the money. Citibank, Goldman Sachs, BOA etc can and do pay lobbyists in Washington DC. why pay lobbyists ? Maybe the US banks profit from the FED’s foreign liquidity support.

  • orkers

    I live in the Orkneys and you’re correct.

    The Shetlands are quite happy about sticking with Scotland.

    The SG has promised us autonomy within the emergent Scottish State and that is going down well.

  • orkers

    Why doesn’t Gideon just say ‘no’ to keeping the UK monetary union going.

    Perhaps a run on the pound?

    Think about it.

  • ScotFree1320

    Barclays Bank – yes, that English based bank – received the single biggest bail out of any UK bank, but most of it didn’t come from the UK taxpayer.

    Barclays was bailed out to the tune of £552.32bn (at backdated exchange rates) by the US Federal Reserve and £6bn by the Qatari Government.  Or to put it another way, foreign governments bailed out Barclays to the tune of more than twelve times more money than the UK Government’s capital support for RBS (£45bn).

    So yes, it seems the US does bail out foreign banks.


  • ScotFree1320

    So if there’s a referendum in 2017 for the UK to leave the EU, I take it that you fully support all the other EU countries getting a vote in it too?

  • ScotFree1320

    I’ll go for the Aberdeen Angus fillet, or perhaps some tasty Scottish Salmon, thanks.

  • Andrew Morton

    You know I was going along with all this until he shot himself in the foot. Just how much research has this guy done? It takes one Google search to discover that neither Orkney nor even Shetland have any oil fields even close to their waters. In Shetland, oft cited by unionists as a separation candidate, there is no demand whatsoever for independence and even less for sticking with the remainder of the UK following Scottish independence.

    In a recent poll by the ShetlandTimes, only 8% of those polled showed the slightest interest in an independent Shetland. How much else of this article is chip paper?

  • ScotFree1320

    Grenada and some other Caribbean islands, ex-British territories, use the East Caribbean Dollar. It is pegged to the US$ at EC$2.5:1US$. By your logic therefore they’d be nothing if not American however if you ask any of their citizens, they’re independent. So go figure.

  • Andrew Morton

    The Scottish Government is engaged in backing the UK Government into a corner over this one. The Cameron government is squirming desperately trying to pretend that they won’t allow it whilst resolutely refusing to rule it out.

    Of course there is a currency Plan B, but they’re not revealing it yet. What everyone should bear in mind is that Salmond and the people around him are very clever. If anyone thinks they’re doing something dumb, then they just don’t realise what’s going on. The matter of the third question is proof in point.

  • Anonymous

    I’m afraid I don’t realise what’s going on.

    As for currency Plan B, well how about adopting the Euro. And Plan C, the Bitcoin … Nope. This is “selective” independence. Not what I was expecting from the allegedly clever Salmond and the people surrounding him. (Note: With politicos, I deem their intelligence to be relative and has zero meaning if you compare them with the average Joe.)
    Perhaps more will be revealed.

  • Andrew Morton

    I rest my case.

  • Anonymous

    My thoughts are that the Scottish & English pounds would not be pegged otherwise why bother? Just keep the pound but then BoEngland would control the exchange rate possibly to the detriment of Scotland?

  • Anonymous

    Hi Andrew

    Thank you and I see that you have weighed in on the debate about the impact of housing on the US Consumer Price Index. I have already had a go at explaining that the methodology there is the same as the UK CPI-H and is flawed. If the UK had the same weights as the US the the embarassment that is CPI-H would be even worse as it would be pushed further below the headline CPI.

    The interesting development is the different behaviour between US and UK rents.

  • Dickybeau

    Hi Shaun
    I was hoping you would take a look at the Scottish question (and hope you will do again)
    Europe: if I can find the paper by Graham Avery to the foreign affairs select committee others can

    It does look like this is a dead subject (although votes will still be necessary in 28 member states)

    Bank debt: there is an audit commission report somewhere (can’t find it) but it says that approx £130bn government cash was used to by shares and lend to banks. This amount will be repaid by the banks when the loans are repaid. All the rest of the money was guarantees that will not be required unless a bank fails.

    The £: the United Kingdom is a union of 2 countries (Darien always comes up here but ignores the English need to have allies against the French) the Bank of England (founded by a scot if I am not mistaken) is a joint venture and is 1 of the shared assets of the union (embassies, debt but not oil and whisky) the pound is a joint currency. It will be an interesting legal position no doubt.
    The white paper (free from Scottish Government website) appears to acknowledge the need to realign Scotland’s finances in the event of independence and I suspect that good financial husbandry will be an essential component to manage the economy. In the early years of a new country, it will be prudent to guard against shocks hence the continued use of a shared currency for some of the reasons previously mentioned.

    I want my country to manage its finances properly with demanding regulation of the banks and through planned growth in the economy. It is somewhat ironic that Mr Darling (who has shared responsibility for the uk mess because his party did not reign in the casino city and banks) demands a level of prediction of the future from the Scottish government that he couldn’t deliver himself when he had the opportunity

  • ScotFree1320

    The BoE does this already possibly to the detriment of Scotland along with interest rates, money supply and its other polices which are geared for the overheated city state of London.

    I think for continuity, keeping the £ is a good plan for the short term, but medium to long term a Scots £ freely floating would be my preference. The only danger is that the new currency would become very ‘hard’ as per the findings of the McCrone report, which would harm other aspects of the economy.

    Also, having a larger neighbour going through a run on its currency – due to its indebtedness and a sudden doubling of the trade deficit – is a situation best avoided. A friend in need is a friend indeed.

  • Anonymous

    Shaun, nice to know you read my posting to the RPI CPI User Group. Yes, the US rent CPI was up by 2.3% from October 2012 to October 2013, while the UK rent CPI was only up by 0.4%. The real rent increases in the US diverge even more strongly from Britain’s when you consider that British inflation is generally higher. A Reuters story last month by Ilaina Jonas said that the third quarter vacancy rate was the lowest since 2001, and only the sputtering economy had kept the rent increases from being higher. It seems there are good reasons to explain why US rent increases are so high, but why are British rent increases so low?

  • Anonymous

    Your article states Barclays has repaid the entire loan, Central banks correct role does involve providing liquidity.

    There is a difference between banks legitimately requiring liquidity and the insolvent who take taxpayers subsidy with little chance of repaying it.

  • Chris Rick

    No clear line to work with. I think that everyone in the country concerned should get a vote so, as you infer, the other EU countries should not get a vote in our future. I then think that everyone in the UK or GB should get a vote in whether a bit is hived off. Scotland is not a different country. I think that Tibet should get a vote in its desire not to be invaded by China and perhaps China should not be involved.

    The comparison you make is not like for like. Can’t think of a recent similar situation. The irony extends as it might well be close for the UK to stay in or get out of the EU but if the other countries in Europe got a vote we would out by a large majority.

  • therrawbuzzin

    there comes a time where you have to accept that wishing ill on an Independent Scotland doesn’t mean it’s going to happen,
    The US DID bail out HBOS and RBS to the tune of $600bn, far more than the UK Govt. and to deny it happened would just be silly.
    The US govt. did so in line with international banking convention. FACT

  • therrawbuzzin

    Salmond and his advisers are an excrutiatingly clever team.
    They deliberately chose an extended campaign, so that Darling and his camp could fire in like a great, big, stupid, clumsy dog, with project fear, and now Salmond, like the chased cat, takes his claws across the snout of that dog, deconstructing, piece by piece, Better Together’s argument, to leave it howling away, beaten and totally discredited.

  • Anonymous

    Hi therrawbuzzin,
    You seem to have forgotten manners. My posts have never wished ill on Scotland, however there are some tough questions – which should be publicly debated.

    I merely pointed out that small countries have problems bailing out big banks and it is unwise to rely on others to rescue your banks.

    Fact 1 : The USA did not bail out banks in Iceland or Cyprus.

    Fact 2 : Irish taxpayers are suffering losses from Allied Irish. Schools, hospitals and pensioners are receiving less cash.

    Fact 3 : British taxpayers are on the hook for RBS losses.

    Fact 4 : International trade is a jungle, where the USA and Russia can impose whatever trade terms they wish upon smaller countries.

  • therrawbuzzin

    I apologise if you mean Scotland no harm, but maintaining the incorrect assumption that the Scottish Govt. would be solely liable for the losses of two PRIVATE companies (one of them called HALIFAX BoS), even after it has been shown a number of times, beyond question, that it IS incorrect, is a strange posture, at the very least, and the point in question is one that I have had to correct so often that it irritates me to continue to have to do so, especially on an economics blog. I would be grateful if you would forgive that irritation, I assure you that it’s nothing personal.

    Fact 1:Icelandic and Cypriot banks have little if any business in the US; Icelandic banks’ business was EU located, Cypriot banks exposure was to Greek problem.

    Look, the $600bn was guaranteed; there is no point in continuing to argue it.

    Fact 2: That is correct, again Irish banks doing business in Ireland, somewhat hastily guaranteed by the Irish Govt.

    No US exposure.

    Fact 3: Only insofar as business done in the UK.

    If you are talking about share price, well that was an optional not related to the argument about bank debts.

    Fact 4: http://en.wikipedia.org/wiki/World_Trade_Organization

  • ScotFree1320

    I disagree with you: Scotland IS a different country. The very fact that the Treaty of Union exists in international law, that that agreement provides for the continuation of our education& legal systems among other provisions is in itself proof of that status for Scotland. The UK is the joining of Scotland with England & Wales and Ireland, the latter two by conquest rather than by agreement.

    I don’t see why it isn’t like for like, after all both the UK and EU were created by virtue of treaties backed by international law. Perhaps I am being too simplistic in that and if so, please will you explain why my presumption here is incorrect?

  • Anonymous

    My personal opinion is that no taxpayers should pay the liabilities of HBOS or RBS.

    However, my points are – an independent Scotland might face an Icelandic scenario. Foreign sponsored bailouts are not guaranteed or predictable.

    How to split British taxpayer liabilities is a question Mr Salmond should publicly answer BEFORE the referendum. The English and Welsh voters should also get a vote on the resultant financial deal.

    Mr Salmond should seek an agreement in principle from the EEA / EEC and tell the Scots voters before they vote.

    Mr Salmond should detail how an independent Scotland will defend itself and it’s oil. Does he have an agreement in principle from NATO ? How will Scotland track foreign submarines and defend it’s airspace ?

    I always support public referendums, this one means very big changes. It is dangerous to assume all will be resolved beneficially. Yugoslavia had a very harmful civil war. No blank cheques -> details in advance of the vote please. Scots voters deserve the facts before a referendum.

  • Chris Rick

    No need.

  • Anonymous

    You raise very good questions. I think Mr Salmond should seek agreements in principle and publicly answer how an independent Scotland works with NATO, the EEA and/or the EEC.

  • Anonymous

    The European commission is far more expensive than Westminister and achieves much less.

    When Galtieri invaded the Falklands, the USA did not liberate the islands nor did Brussels. Westminister has been effective at defence.

    I would suggest Scotland looks at the US federal system and consider a similar system for the defence of Britain. United we stand, divided we fall.

    I’d also ask what is the point of triplicating English, Scots and Welsh embassies around the world ?

  • ScotFree1320

    If Scotland is in the UK in 2017 and the referendum vote to leave the EU is carried, will David Cameron have negotiated in advance, an agreement in principle with the EU detailing exactly how the British separation from the EC would work? Seeing as it took Greenland three years to negotiate its exit, he doesn’t have much time!

    Besides, the UK Government could answer your EC questions tomorrow if it wished but it chooses not to, I suggest that’s because they know they won’t like the answer?

  • therrawbuzzin

    From whom would Scotland have to defend itself?
    Scotland’s geographic position, both as a maritime base covering the N Atlantic/North Sea, ans as part of what the US calls that “aircraft carrier” off the coast of Europe, makes it so strategically critical to Nato that it would BEG Scotland to join.
    As for EU, it is THE UK GOVT’s refusal to pre-negotiate which precludes the minutiae of Scotland’s EU succession which prevents detail being given.
    Salmond HAS answered your point on the share-out of liabilities: both they and the assets will be shared on a demographic pro-rata basis.
    We take both our share of the man-made assets and liabilities, (approx. 8.4%) or we take neither.
    This insistence on arguing about cast-iron guarantees and every minute detail is both ludicrous and fatuous.

  • therrawbuzzin

    “The European commission is far more expensive than Westminister and achieves much less.”
    Not for Scotland.
    Galtieri’s no gonnae invade Glasgow.
    Slovakia and the Czech Rep share embassies.

  • therrawbuzzin


    “2.9. Whist oil and gas production have declined over the past decade, recent increases in UKCS
    investment and exploration suggest that over the medium term this trend could be slowed and, in
    the short term, production is forecast to increase. The latest Economic Report by Oil and Gas UK,
    the main pan-industry body, estimated that field investment on the UKCS in 2012 was £11.4 billion,
    the highest level for thirty years, and is expected to increase to at least £13.5 billion in 201310.
    2.10. Such investment is expected to both prolong the life of existing fields and bring new
    production on stream. Oil and Gas UK forecast that production could potentially increase from 1.5
    million boe a day at present towards 2 million boe a day by the end of the decade.11 This would
    represent a 30% increase on current production levels.

    2.11. The Department for Energy and Climate Change also publish forecasts for future production.
    They expect production to stabilise at current levels for the next five years, as illustrated in Figure 2.
    The key difference between the Oil and Gas UK and DECC projections is that the latter incorporate
    “very significant negative contingencies” to reflect potential slippage in planned projects and
    production downtime

  • ScotFree1320

    There’s a big difference between the EU and London. The former has its power through the agreement of the nations who are its members, who volunteered to pool sovereignty in certain areas for the mutual benefit of all.

    London is a centre of absolute imperial power, guarding it jealously and letting it go only when it absolutely has to.

    The British were not very effective when the US invaded Grenada in the 1980s. As I remember Thatcher was seething with rage!

    What’s the point of the UK and Canada duplicating embassies too?

  • Bill Hume

    We already have our own crown…we keep it in Edinburgh along with the rest of the Scottish crown jewels.

  • Bill Hume

    We already have a monarchy…..Elizabeth the FIRST, known in England as Elizabeth the SECOND. Rather insensitively, the Post Office erected postboxes in scotland with EIIR on them……..we blew them up. What jolly fun.

  • Anonymous

    Good point on embassies.

    My British MP helps me and answers letters. MEPs don’t, despite their higher salaries. Spiegel reports that Greek whistleblowers are systematically ignored by Brussels. Good luck with Brussels and I hope the referendum frenzy includes a vote on England reverting to an EEA member (Eg Switzerland, Norway)

  • Anonymous


    Why do you think the Yes campaign is currently so far behind the No campaign in all the credible polls (and 29% behind in last weekend’s survey by Progressive Opinion who, before you dismiss them, were the first to accurately predict the Nats’ election win in 2011)? Clue: one-eyed Nat ranters like you, who they fear would take the lead in re-designing the new country in their own image, turn ordinary Scottish punters off in droves.

  • therrawbuzzin

    So, insults, but no answers to the arguments?
    Typical “Better Together” tactics.
    I will not be descending to your level.
    That is why the people of Scotland who are at present undecided WILL come to vote for independence.
    A slow process, but one I see beginning, with people I know.

  • Roger

    Scotland and England entered the Act of Union in 1707 as separate countries. Should one wish to dissolve the partnership it would be simply silly, never mind undemocratic, for the other to say no.

  • Roger

    I thought it already was a state within a state. It eats up hugely disproportionate amounts of public money, especially when unidentified public expenditure is taken into account. That, of course, is something which upsets many English folk in the midlands and north.

  • Roger

    It would be very odd if the EU took the unprecedented step of throwing out people (Scots) who are already in the EU. P.S. I have already set up a private store of Mars Bars.

  • tassiescot

    Why are the trying to pick holes in the independance vote.saying the Orkney and Shetland islands can go in dependant is a bit like saying London is leaving the uk because it had all the wealth all scaremongering as usual .wish they would just come clean and admit the uk would be far worse if without scotland

  • Anonymous

    Hi Roger

    That debate seems to have moved on this morning as the EU’s Barosso has apparently said this. From twitter.

    ” ‏@benedictbrogan
    Killer from Barroso: chance of an independent Scotland joining EU? ‘Extremely difficult if not impossible’ #IndyRef #Marr Big intervention”

    Mind you President Barosso has made plenty of stupid interventions in the Euro area crisis so that may be a long way from the end of the matter!

  • orkers

    Autonomy isn’t Independence and indeed the SG is in negotiations with both Orkney and Shetland as we speak. Perhaps you should engage your brain before attacking a fellow ‘Yes’ voter.
    Read the post before mine and remember that context is all. Just to press home the point.

    Vote ‘Yes’ for an independent Scotland.

  • Chris Rick

    That’s an interesting comment.

  • therrawbuzzin

    Barosso is a politician, who is sucking up to Cameron, in the most vaseline-arsed sycophancy imaginable:


    As Prof David Edward has it, and he’s far better qualified to say, and I quote his WRITTEN evidence to the Scottish Parliament:

    Professor Sir David Edward, British Judge on the European Court of First Instance from 1989-1992 and of the European Court of Justice from 1992 to 2004. He is a Professor Emeritus of the University of Edinburgh, where he was Salvesen Professor of European Institutions and Director of the Europa Institute from 1985 to 1989.

    In his paper, Professor Sir David says: “my opinion is that, in accordance with their obligations of good faith, sincere cooperation and solidarity, the EU institutions and all the Member States (including the UK as existing), would be obliged to enter into negotiations” before an independent Scotland takes effect.

    He also writes: “Looking to the presumed intention of the Treaty-makers . . .They cannot have intended the paradoxical legal consequences of automatic exclusion suggested above (paragraphs 11-13) nor, at a more practical level, that the complex skein of relationships, liabilities and obligations created by EU law should be allowed to unravel without measures being taken to prevent it.”

  • therrawbuzzin

    Should England, as the nearest EU border, prepare itself for another huge wave of immigration of EU citizens when all those North of Carlisle find themselves no longer within the EU, and as such, no longer entitled to stay in Scotland??

  • therrawbuzzin

    That, having looked at the demography of Scotland, is between SIX AND SEVEN HUNDRED THOUSAND immigrants, all jobless, all homeless, all at once.

  • Anonymous

    ‘Close’ is a relative term. I did a seismic site survey to the west of the Shetland Islands and I assure you, there are oil fields there and Shetland is the closest landmass.

  • Anonymous

    Well, I was right and you were wrong. Sorry that came as a surprise but as I said delusion was rife among Nationalists, who always believe in spite of contradictory evidence that by definition they speak for the nation.

    You don’t.