Wednesday, 12 February 2014

We will do what we like post independence say SNP -but they won't keep a joint pound, without rUK input

I have just taken part in the rowdiest Westminster hall debate in nearly 4 years in parliament. The issue was Currency in Scotland after 2014. The SNP members of parliament in London resorted to bullying and attempts to shout down any speaker they do not agree with. I will post the full debate for anyone to see, but on currency the SNP/ Salmond is all over the place. They want to keep the pound but want it underwritten by the rest of the UK, with an independent Scotland still in charge of everything else. As Pete Wishart, SNP MP muttered today during the debate: “After independence we will do exactly what we like.” Fine – that is his choice – but he will need agreements from the rest of the UK.

It does seems odd that the SNP think a Westminster establishment which they assert is incorrigibly hostile to Scotland [which it is not - we want them to stay] will suddenly accede to Scottish demands after independence.

But let me be clear: the idea, much insisted upon by Alex Salmond, that an independent Scotland could enter a currency union with the remaining parts of the United Kingdom, solely on Scotlands terms, is simply not happening. Noone in the British government would agree.

This response on this issue from a SNP government spokesman:

“This is nothing more than an attempt by the Westminster establishment to bully Scotland, now that they have started to lose the argument on independence. It is a sign of panic that will backfire badly.”

So now Scotland says it is being bullied? Where does the right appear to determine alone the outcome of post-independence negotiations between two parties – Soctland and the rest of the UK? The other party [ie the rest of the UK] has a right to its opinion too.

Again: according to the Scottish government: “No one will credibly believe these threats.
People know that the Westminster establishment will say one thing before the referendum but behave far more rationally after a yes vote when it’s self interest will lie in agreeing a currency union with Scotland.”

This is frankly rubbish. On this point this from the Adam Smith Professor of Political Economy at Glasgow University:

“It seems the Scottish Government’s response to not being allowed to participate in a formal sterling zone, which as we have shown would actually be ruinous for an independent Scotland, is to say that it would not accept responsibility of its fair share of rUK liabilities and particularly its fair share of UK public debt. Presumably in that case it would not be given the share of assets relating to the sterling monetary union, such as, crucially, its share of the foreign exchange reserves held at the Bank of England. How then would they be able to operate a sensible foreign exchange rate policy absent foreign exchange reserves? Where would these come from? Perhaps the answer would be by borrowing from foreign countries.

But who is going to lend to a country where its political leader has already said that it is going to renege on a substantial and significant portion of its debt? Such a statement means that an independent Scotland would only be able to borrow on international capital markets at penal interest rates – if at all – with the consequences that that would have for an independent Scotland’s fiscal deficit, public spending and taxes. One wonders how the Icelandic public feel about the governments of both the UK and the Netherlands currently seeking reneged debt that amounts to about around two thirds of Iceland’s GDP. And of course Argentina is still being pursued in international courts for debt it reneged on many years ago and is highly restricted in what it can borrow in international capital markets. The unpleasant arithmetic of reneging on ones share of debt is it seems long lasting and profound in terms of its economic consequences.”

Because the obvious truth is that Scotland would have much more to lose from post-independence negotiations than would the rest of the UK

Moreover, the Scottish government’s expectation that, having been rejected by the Scots, the rest of the UK will, far from smarting at this rejection, do everything they can to help the Scots on their way out the door is, shall we say, an expectation that defies the accumulated evidence of a million marriage break-ups.