England, Scotland and sharing the money

The one thing which worked in the referendum campaign to persuade more Scots to vote for the union was the united refusal of the main parties to allow Scotland to stay in the sterling currency union if she wanted to be independent. It was a defining moment which meant I thought the union was safe. I saw no need to go on and make a better offer on devolved powers, but others thought otherwise.

I regularly pointed out the contradiction of a party claiming to want to create an independent country, at the same time saying they needed to share a currency with its much larger neighbour, a neighbour it otherwise wished to leave. The fact that the SNP could not bring themselves to say they would have their own currency or join the Euro showed that they judged Scots voters wish to remain part of the transfer and mutual insurance system that is the UK state and sterling union. Their cry was make me independent, but also still dependent if need arises.

Party leaders have now latched on to the argument that a single country with a single currency is a transfer union, switching money from rich parts to poorer parts, and insuring parts of the country against economic adversity. If Scotland’s oil industry is riding high and generating a lot of taxable income, the rest of the UK should share that. If Scotland’s oil industry is in sharp decline, abetted by a collapse of oil prices, then Scotland should expect the rest of the UK to cushion the blow. Scotland has the same benefit rates and entitlements as the rest of the Union, whether oil tax is high or low, so they are underwritten by general UK tax revenues.

Into this largely happy transfer and currency union the SNP have injected the idea of fiscal independence. They want to decide how much income tax to raise, how to tax property transactions, how to tax air travel and much else. The logic of this move is to arrive at a place where Scotland spends what Scotland raises from her own economy.

You can do this in a currency union, though the Union Parliament would still need to control Scottish total borrowing as that will be a claim on the currency zone as a whole. It could become difficult if the Scots chose to set tax rates that either made Scotland very attractive for jobs and business, or were very hostile to jobs and business, as that would distort the labour market where there is free movement of labour. It would have implications for any common welfare system still in place.

Opinion amongst politicians and the public is divided over whether fiscal independence within a currency union is a good thing. As a result we are moving to a compromise system, where the Scots will enjoy some rights to raise their own taxes, but will still also draw on general UK tax revenue to pay some of their bills. Reaching a political compromise on this at a high level of generality was relatively easy. Making it work in practice is more difficult. The first requirement will be to draw up a new grant regime to pay for the items that are not paid for directly out of Scottish taxation. I will consider some of the complexities in a subsequent post.

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84 Comments

  1. Gary
    Posted May 20, 2015 at 5:23 am | Permalink

    under Bretton Woods the global currency effectively was gold, yet countries remained independent. Under free trade and a common currency you can still remain independent by law, culture and your endeavour. Only bankers think that is insufficient.

    • Denis Cooper
      Posted May 20, 2015 at 8:21 am | Permalink

      If Bretton Woods worked so well why did it only last a quarter of a century?

      Which is not a long time, really, just two and a half typical business cycles.

      • sjb
        Posted May 20, 2015 at 11:34 pm | Permalink

        Recently, I read The Summit by Ed Conway.

        On p388, he wrote:
        “Between 1948 and the early 1970s, the world enjoyed a period of economic growth and stability that has never been rivalled – before or since.[1] During that time, global gross domestic product expanded by 2.8 per cent – more than double the 1.3 per cent achieved during the gold standard and comfortably stronger than the 1.8 per cent between the early 1970s and the financial crisis of 2008. Remarkably, there was not a single global downturn – something, again, which one cannot say about any other period in economic history (particularly recent history).”

        [1] Oliver Bush, Katie Farrant and Michelle Wright, ‘Reform of the International Monetary and Financial System’, Financial Stability Paper No. 13, December 2011.

        Reply But the UK under two successive Labour governments had sterling crises and devaluations, with austerity packages.

        • Gary
          Posted May 21, 2015 at 8:31 am | Permalink

          the reason the Bretton woods gold standard precipitated a series of sterling crises was because sterling was overvalued , due to mercantilist economic policies, going into the gold standard, and gold enforces monetary discipline and mark to market.

          ” Britain in the 1930s had an exclusionary trading bloc with nations of the British Empire known as the “Sterling Area .” If Britain imported more than it exported to, say, South Africa, South African recipients of pounds sterling tended to put them into London banks. This meant that though Britain was running a trade deficit, she had a financial account surplus, and payments balanced. Increasingly, Britain’s positive balance of payments required keeping the wealth of Empire nations in British banks. One incentive for, say, South African holders of rand to park their wealth in London and to keep the money in Sterling, was a strongly valued pound sterling. Unfortunately, as Britain deindustrialized in the 1920s, the way out of the trade deficit was to devalue the currency. But Britain couldn’t devalue, or the Empire surplus would leave its banking system. ”

          en.m.wikipedia.org/wiki/Bretton_Woods_system

          • Denis Cooper
            Posted May 22, 2015 at 12:52 pm | Permalink

            But the world doesn’t stand still, and if a fixed exchange rate doesn’t eventually become inappropriate for one reason it’ll do so for another reason.

    • libertarian
      Posted May 20, 2015 at 11:31 am | Permalink

      Gary

      So remind us why gold became useless as a currency? Remind us who owns most of the gold now. I know Gary as we can’t trust bankers how about we base our currencies on tulips or conch shells.

      • Gary
        Posted May 20, 2015 at 6:28 pm | Permalink

        gold has been useless, it would seem, for 3000 years. Guess what ? Every Fiat paper currency has come and gone. Gold is still here.

        The dollar is the next to go. IMO

        Fiat paper money requires underpinning by taxation. You have to force people, by fiat, to accept the inferior money. That is why you have to have a taxable political union if you have a Fiat paper currency, but you don’t need one with gold. Bretton Woods is an example.

        Bretton Woods collapsed because govts cannot be trusted. America defaulted on their gold obligations because they wanted to inflate to pay for war. Vietnam. What a waste.

    • Hope
      Posted May 20, 2015 at 1:21 pm | Permalink

      I think if the English people were allowed to vote in the Sottish referendum they would be independent without any help. Cameron had no right to let us pay the taxes that funded his massive give away, under instruction from Gordon Brown, without us having a say. He really is a contemptible individual.

      Look at the election: the English people did not want a small minority of Scotts telling the English what to do. Held their noses and voted Tory to prevent it. The reality being it would not have made any difference to England under Labour. The cartel are intent on dividing England into regions for the EU superstate, another price worth paying for the EU fanatics.

      The Scotts could do a Frozen: let them go, let them go.

  2. Old Albion
    Posted May 20, 2015 at 5:30 am | Permalink

    It’s always been the same with the SNP. They want an independent Scotland with one hand in the English purse.
    I’ll be glad when they have their second ‘independence’ referendum and leave the (dis)UK.

    • Brigham
      Posted May 20, 2015 at 8:46 am | Permalink

      HEAR HEAR

    • yosarion
      Posted May 20, 2015 at 10:30 pm | Permalink

      Yet again when the English look in the Bowl and all that will remain is few old Rich tea and a couple of strawberry centers, all the Good ones will have been picked well before any Englishmen is invited to the pot, Some bloody Union, no Representation without Equal Taxation!

  3. Mark B
    Posted May 20, 2015 at 5:31 am | Permalink

    Good morning.

    I regularly pointed out the contradiction of a party claiming to want to create an independent country, at the same time saying they needed to share a currency with its much larger neighbour, a neighbour it otherwise wished to leave.

    Which is at the heart of the problem for the EU. Germany joined on the explicit understanding that they would never be the lender of last resort. You cannot have a successful currency union otherwise.

    As for the rest of the article, I happen to agree very strongly with it. But when talking about the ‘UK’ now days, is it only right to talk about England, as in effect, that is what we are really talking about.

    I think our kind host might find ‘some’ solutions to the problems he has raised if he was to look at how the Swiss deal with this issue. There, they have a much more flexible tax regime and, I would like to inject, a better democracy.

    Going forward, would it be better if we reintroduced the community charge throughout the entire UK and abolish completely taxation by central government ? This would mean that all the Home Nations could then be able to tax each and every individual under their jurisdiction and spend exactly on them that which they raise from them. Having a Central Government tax and then redistribute is a very inefficient.

    Just a thought.

    • David Murfin
      Posted May 20, 2015 at 6:39 am | Permalink

      How do you fancy your parish council doing that?
      There is presumably an optimum size (in population) for a nation, set by the amount of money needed for large scale useful infrastructure projects undertaken by ‘the state’.
      Too small, and roads and hospitals don’t get built.
      Too large and the money goes on vanity projects like HS2 and going to the moon.
      Really large and really useful projects get done anyway by co-operative effort and people paying voluntarily for what they want. Which state would have set up the internet?

      • Mark B
        Posted May 20, 2015 at 5:26 pm | Permalink

        David

        To take two of your examples. HS2 and Hospitals. If HS2 is such a good idea, then private finance can pay for it. That’s how the railways, road and canals were built.

        Hospitals have been built using PFI. This has been done at great expense to the UK taxpayer. Labour used PFI as a way of keeping spending off the books. The contacts were over generous and represents a poor return for the UK taxpayer. But if hospitals were built and funded by private enterprise properly, then there is no reason why they cannot be built and run as well.

        Big State equals big cash. And since the State, unlike private enterprise, cannot go bust, it is seen and used as a bottomless pit.

  4. Lifelogic
    Posted May 20, 2015 at 5:58 am | Permalink

    A very difficult balance to fix. How far does Westminster do to protect the Scottish people from the anti-business & lefty loon policies of the SNP/Labour? How do we protect the English from have to bail out the Scottish when they government borrow too much and wastes most of it?

    One thing for sure is we should not be buying any intermittent fake green energy off them at other than the true market rate. Indeed we should kill the whole foolishly subsidies industry by stopping all the subsides both new and already agreed (of these should be taxes out of existence).

    • Mark B
      Posted May 20, 2015 at 5:34 pm | Permalink

      Simple.

      We go for a Federalised System. National Parliaments’ for each of the Home Nations. And convert the HoL to a UK Senate. What the Scots can raise in taxes they can spend. Major projects can be done by Private enterprise.

      • Denis Cooper
        Posted May 21, 2015 at 8:45 am | Permalink

        Clegg had the idea of converting the House of Lords to a kind of Senate, but a better use for it would be to give broader and fairer parliamentary representation to political views which may be under-represented in the Commons thanks to the “winner-takes-all” nature of the FPTP system for electing MPs. And that can be achieved without changing anything else about the present electoral system apart from giving a seat in the second chamber to each of those candidates who came second.

    • fedupsoutherner
      Posted May 20, 2015 at 9:38 pm | Permalink

      I wouldn’t be too sure that we won’t be buying expensive wind energy from Scotland in the future. The Telegraph has some interesting things to say about Amber Rudd.

      The new Energy Secretary, Amber Rudd, is just as lost in the bubble of Green make-believe as her predecessor, Ed Davey . The most important challenge facing us, she says, is to limit “global warming to under 2 degrees C”; and she adds that there isn’t a cigarette paper “between me and Labour on our commitment to getting a deal in Paris” (she means the global climate treaty that isn’t going to happen next December).

      Just how long is it going to take Cameron to clarify what he is intending to do about our disastrous energy policy? Are we going to see an end to onshore wind subsidies or not? If he takes too long then Scotland will be covered in the damn things and the country will be held to ransom over subsidies and ‘community benefit’ for Scotland.

      Reply Yes he will end subsidies yo new onshore wind farms, and Miss Rudd has promised early action to do this. Watch what they do.

      • fedupsoutherner
        Posted May 21, 2015 at 8:36 am | Permalink

        Thanks for your reply John to this question. I wait with interest. The kennels we use for our dogs has just learnt that an extension to a wind farm near them wants to extend by 70 more turbines which will run right past the rear of their premises. It is wholly unacceptable that people’s lives are being ruined by such plans which they have to fight non stop up here in Scotland.

      • Hope
        Posted May 21, 2015 at 11:47 am | Permalink

        The Tory manifesto is clear that there will be continued support for the Climate Change Act.

        JR and his colleagues stood to be elected and voted Tory on this premise. It is not just about on shore wind farms. Energy is an EU competence that the LibLabCon cartel is committed to.

        Today we hear the failure of immigration and Cameron trying to blame the Lib Dems! His solutions are pitiful to say the least. As it has been pointed out, the numbers of immigrants who came here last year alone would equate to a city the size Nottingham which has 100 schools. Is Cameron going to match public services by the amount he allows in? He employed more additional tax inspectors than he did border control staff.

        May says the police should stop scaremongering, her dept is still not fit for purpose as explained by John Reid some 9 years ago. How about those illegals lost to May’s system? Any apology from her? Where are the staff for public services going to come from? Who will monitor serious criminals from the EU who are free to enter the UK and kill again? How does the licence system operate across borders? The EAW will not make us safer! These Euro fanatics need to start addressing the problems the public face each day and wake up and smell the coffee- outside Westminster.

  5. margaret
    Posted May 20, 2015 at 6:02 am | Permalink

    There are differences already in the welfare system.

    • formula57
      Posted May 20, 2015 at 6:49 am | Permalink

      Indeed there are and so any new arragements must in the interests of consistency ensure that Scotland’s apparent exclusive right to free prescriptions, free elderly care and free tuition is preserved. After all, the costs of such generosity have been met hitherto by England’s taxpayers and so why not continue with that? Was that not what the infamous Vow sought to do?

      • fedupsoutherner
        Posted May 20, 2015 at 2:53 pm | Permalink

        Don’t forget the free dental checks up and two yearly eye checks too!!

  6. Richard1
    Posted May 20, 2015 at 6:18 am | Permalink

    We should be careful with this. Scotland cannot possibly have total fiscal autonomy whilst her public spending – eg welfare benefits – are underwritten by the UK taxpayer. Equally it is inconceivable to allow Scotland to borrow against her own future tax receipts unless that borrowing is very clearly non-recourse to the UK taxpayer. Let’s be clear what that means: if Scotland can’t meet her obligations or tax receipts fall short, public sector employees in Scotland have their pay cut, or are laid off, and services – eg hospitals – close. Just like in Greece. The UK does nothing about it. It is very difficult to see how this can possibly work, and I don’t suppose for a moment it’s what the SNP intend – they would like to have their cake and eat it. More sensible would be to set minimum levels of each tax applicable throughout the union and allow individual nations to top up. 20% income tax and CGT, 15% VAT etc. total fiscal autonomy whilst there is a backstop for Scottish banks, and underwriting of Scottish public spending seems to me a nonsense and a recipe for confusion and blame-gaming in the future.

    • Richard1
      Posted May 20, 2015 at 6:21 am | Permalink

      You are certainly right that the Gordon Brown ‘vow’ was a ridiculous nonsense. Scots were never likely to be foolish enough to vote for independence. English MPs must ensure if these measures are to go forward there is reciprocal Justice for England.

      • Mark B
        Posted May 20, 2015 at 5:35 pm | Permalink

        There are no ‘English MP’s’. There are only UK Westminster MP’s. We do not yet have an English Parliament.

  7. Mike Stallard
    Posted May 20, 2015 at 6:35 am | Permalink

    First of all and most important: congratulations on your progress with the coming EU referendum. This is one of the most encouraging things I have seen on the web for ages. Where can we find your open letter to Ukippers please?

    About Scotland. Are they doing what Greece did? Trying to live like Germans with a third world economy? The result, of course, is bankruptcy either for Greece (as we see) or else for the entire Euro system (the Euro is sliding down against the pound slowly and surely).
    Please do not let the Scots do that to our pound sterling.

  8. Roy Grainger
    Posted May 20, 2015 at 6:52 am | Permalink

    It is a difficult issue as you say. Who in the government is responsible for handling it ? I am surprised there does not seem to be a minister dedicated just to this issue. Also, who is the minister responsible for negotiating our proposed concessions from the EU ? Again it seems there isn’t a dedicated minister. However we DO have a “Minister for Climate” so that is OK.

    Reply Mr Osborne will lead the financial negotiation with Scotland, and with the PM the EU negotiation

  9. DaveM
    Posted May 20, 2015 at 6:56 am | Permalink

    So, in sum. The SNP (not going to say Scotland or the Scots because they’re not all tarred with the same brush) want to tax lots at airports and tax businesses lots because they’re socualists. They then want to tax the people the bare minimum. Finally they want to spend the lot and take what they can from England. I’d say the insurance comes from the fact that they know the govt is desperate to retain the union. Sounds a lot like Germany and Greece. To that end can I suggest a subject for a future blog, Mr R: “What England actually gets from a Union with Scotland”.

    • Greg D
      Posted May 20, 2015 at 10:42 pm | Permalink

      I’m tarred with the same brush, but I believe we want to reduce air passenger duty to increase tourism. I think business tax policy would be around the same but might vary for green incentives etc. We want more companies to pay the living wage of £7.85 per hour. KPMG were on Scotland 2015 programme last night, and having signed up to the living wage agreement which includes cleaning contractors etc, it is not costing them overall due to reduced staff turnover and reduced training costs.

      We don’t want to spend the lot and take what we can from England, we want to manage our affairs responsibly, creatively, and then we can get on with rest of UK much better, 2 seats on the EU instead of 1

      The number of Scots becoming convinced by the case for independence is increasing, I can already see some No voters starting to sway a little. In my experience once you are a Yes you never change back. I was a No 10 years ago.

      So hopefully there will be an increase in English independence or get rid of these Scots attitudes! But we’d love to stay good friends, unavoidable after 300 years and 2 World Wars together.

      • DaveM
        Posted May 21, 2015 at 7:41 am | Permalink

        Half of my closest friends are Scottish! And the forthcoming rant is not aimed at you as a Scot.

        Like most others here, if I was Scottish I’d probably be a rabid independentist.

        However, I’m not, and I’m completely sick to the back teeth of England being shafted at every turn by politicians who are desperate to retain a Union that increasingly no-one wants, because they refuse to even entertain the idea of a federal-style UK which would work 100 times better than it does now and would keep most parties happy.

        I am not obsessed by the Barnett formula because clearly countries with a common currency but with huge differences in wealth and living standards is not healthy. But the whole issue of allowing Scotland to do what it wants with England picking up the tab in case it goes wrong WITHOUT REPRESENTATION FOR ENGLAND – bold, in red, double underlined, is the problem.

        The SNP seems to favour independence from the UK but closer union with the EU. Maybe, when that happens and when the Germans, the EMF and so on start imposing REAL austerity measures, the SNP will realise how benevolent and friendly the English really are.

      • Denis Cooper
        Posted May 21, 2015 at 8:54 am | Permalink

        “2 seats on the EU instead of 1”

        Mostly it doesn’t work like that. Scotland would have its small percentages of the votes and the MEPs, while the continuing UK would have reduced percentages, and even on those occasions when the two combined the sum would be roughly the same as now for the present UK. And for the now few cases where each member state still retains a veto over a decision of a certain kind it would only need one veto, not two.

  10. Ex-expat Colin
    Posted May 20, 2015 at 7:36 am | Permalink

    I understand that Scotland does not support itself currently? Promises of creating business and finding liquid gold only highlights severe risk. Wind….ony when it blows and still won’t blow enough.

    The No vote was not by a good margin IMO and watching a vast swathe of SNP voting suddenly arise simply highlights the risk.

    Stupid banking from a country that was well respected for that function raises the question – could they be trusted again? Fines rumble on and banks continue to behave poorly.

    Unfortunately, the troublesome part of Scotland (around Renfrewshire) have not provided for themselves adequately since the changes to their economy – automatically a Thatcher blame. That can be said about UK elsewhere of course. There is a constant dependency issue that simply won’t go away. Devolution is another dress up, only much more threatening to all of us.

    And the EU will turn it into Greece2 given a chance and of course is another threat to us.

    SSE and Ferrybridge ?

  11. DaveM
    Posted May 20, 2015 at 7:47 am | Permalink

    Totally OT – I love the Royal family in spite of the Queen’s failure to stand up for our sovereignty during the years of Blair’s treasonous handover of powers.

    However, as someone who has served in the forces for 25 years I am utterly sickened by the sight of our future King shaking hands with Adams and can’t help thinking that his credibility will be damaged massively by this. Any respect I had for Charles has now evaporated completely.

    • James Matthews
      Posted May 20, 2015 at 9:39 pm | Permalink

      Don’t blame Charles. He was doing his constitutional duty, as was the queen when she visited the republic and showed contrition for things for which we should feel in no way contrite. Blame our elected governments from John major onwards.

      And yes it was absolutely nauseating.

  12. Leslie Singleton
    Posted May 20, 2015 at 8:08 am | Permalink

    I’m sure this is a daft question but is Scotland even legally capable of borrowing in its own name as things stand. If so does the (rest of?) the UK guarantee or indemnify or what? Does Scotland have an account in its name at the Bank of England? Is there still a syndicated sovereign risk loan market? What would the Legal Opinion say?

    Reply Yes,the Scottish government has limited powers to borrow based on UK law and Treasury controls

  13. alan jutson
    Posted May 20, 2015 at 8:12 am | Permalink

    The SNP want their cake, want to eat it, but still want the rest of the UK to pay for the ingredients.

    I have no problem with them having financial autonomy, if that is what they really want, providing they do not have the ability to borrow from us, get handouts from us, and agree to settle their share of the UK debt.

    Financial Autonomy is what it says on the tin, you are on your own.
    You make your own decisions and live within them, be it good or bad.

    In turn the rest of the UK pays a commercial rate, under a commercial terms, to them, for any offices and facilities that exist in Scotland, and for which the whole of the UK benefit.
    Such facilities can of course be returned back to the UK should it prove to be more beneficial to the rest of the UK.
    Why would the rest of the UK then require HMRC to have any offices in Scotland for example.

    No problem in talking to the SNP at all about the details, as long as they are fair to both sides
    But
    Scotland cannot have it both ways.

    As usual the simple solution, is devolution along exactly the same lines for all UK countries

  14. petermartin2001
    Posted May 20, 2015 at 8:16 am | Permalink

    Its not often I read a economically themed posting on this blog with which I’m in general agreement! So no dissenting words from me today!

    I’ll just ask one question though. You say:

    “Party leaders have now latched on to the argument that a single country with a single currency is a transfer union, switching money from rich parts to poorer parts”

    Well yes. But don’t politicans tend to have done PPE courses at uni? If they don’t, they have colleagues who do, and can advise them? This is pretty basic stuff. It’s like saying that a Physicist has suddenly “latched on” to Maxwell’s equations or the Laws of Thermodynamics. Don’t politicians actually go to lectures? Or are they too busy arguing in the students’ union?

    I’d ask the same question of all the highly paid politicians and supposedly economics educated technocrats in the eurozone too. How on earth did they ever think a single currency union was ever going to work without a system of fiscal transfers in place to switch money from the richer parts to the poorer parts?

    It’s beyond belief that they were all unaware of the potential problems.

  15. Bert Young
    Posted May 20, 2015 at 8:26 am | Permalink

    North Sea Oil does not belong to Scotland . Many international companies have investments in the North Sea much of which is taken on shore to Scotland , but , the ownership is not Scottish . When the oil price is relatively high the Scots step up their rhetoric , when it is not , there seems to be little mention of how dependent they are on British resources .

    The Scots make little or no reference to the extra benefits they receive or to the discrimination that applies in their University fees programme ; they only wail away that they are different and the English are the ones to foot the bill . Their arrogance was more than adequately shown in their recent behaviour in the HoC . They must be made to toe the line – like everyone else .

    I cannot see anything special about Scotland any more than Wales , N.Ireland and England . The system of tax and spend should be applied equally across the British Isles ; where there are specific needs of support in certain localities , let them be applied everywhere on an open and specifically negotiated basis ; the Barnett formula is an anomaly of the past and should no longer be applied . Cameron has to put his foot down .

    • Denis Cooper
      Posted May 20, 2015 at 3:48 pm | Permalink

      If Scotland became an independent sovereign state then almost all of the oil would be in Scottish waters. Because of the northerly location of the oil fields there is no reasonable way that the maritime border between Scotland and the continuing UK could be drawn to give the latter more than a small share. The UK government does not dispute this now, and so would have difficulty disputing it during independence negotiations. But we have been over this before …

      • turbo terrier
        Posted May 20, 2015 at 6:30 pm | Permalink

        Denis

        When I last looked there is still a lot of oil out there available at a price but a lot of it is in designated international waters. Therefore does it not become the game of where it comes ashore? The oil companies own the product the government just levies tax on it.

        • Denis Cooper
          Posted May 21, 2015 at 9:18 am | Permalink

          Not in this case, the oil is in areas of the continental shelf assigned to either Norway or the present UK. For the UK that means that it belongs to the Queen, whose government licences its extraction. If Scotland separated from the rest of the UK it would get about 90% of the oil on any reasonable line for the maritime boundary. While there could be debate about the precise line that would be within narrow limits and it would make little difference:

          http://www.bbc.co.uk/news/uk-scotland-scotland-politics-20042070

  16. Denis Cooper
    Posted May 20, 2015 at 8:31 am | Permalink

    If the plan was for taxpayers in the rest of the UK to underwrite the finances of a foreign country – which is what an independent Scotland would be, let nobody make any bones about that – through a shared currency then surely the taxpayers in the rest of the UK would have to be asked directly whether they consented to that arrangement.

    It would be one thing for a soft UK government to cave in and agree to the SNP’s stated plan, it would be another and altogether more difficult thing for the UK government to then persuade electors in the rest of the UK to agree to that in a referendum.

    • acorn
      Posted May 20, 2015 at 4:50 pm | Permalink

      The Scots could use the Pound without any formal arrangement. It would be of no consequence to the rest of the UK. They currently issue their own banknotes with the permission of the BoE, lodging an IOU with the BoE to cover them; other wise they would be counterfeiters, that would stop. Likewise, you can pay your taxes in Zimbabwe with US Dollars; the US has no currency obligation to Zimbabwe whatsoever, they borrow or earn US Dollars wherever.

      • Denis Cooper
        Posted May 20, 2015 at 7:04 pm | Permalink

        But that is not what the SNP were proposing.

  17. outsider
    Posted May 20, 2015 at 8:33 am | Permalink

    Dear Mr Redwood, Thank you for addressing this difficult topic.

    One obvious question: How far will the credit rating on UK National Debt fall when income tax (very roughly a quarter of the tax base) is no longer a national tax and therefore no longer available to service the debt?

    ReplyIf done fairly with right balance of revenue and spending there should be no change

    • acorn
      Posted May 20, 2015 at 5:05 pm | Permalink

      A “credit rating” for a sovereign currency “issuing” nation is meaningless, it is never going to run out of its own currency. If you are a nation that “uses” someone else’s currency, like Greece; or a corporation like BP or Shell, then it means something.

      • Denis Cooper
        Posted May 21, 2015 at 9:51 am | Permalink

        You have to be more precise.

        In Greece it is not so much the nation as a whole which is running out of money, it is the national government. That is because the national government does not have the legal power to arrange for the national central bank to create more money for it to spend, control having been ceded to the ECB through the EU treaties.

        Even if a country has its own national currency the government might get in the same position if the exclusive right to issue that currency is vested in a national central bank which is really independent of the government, for example through entrenched constitutional provisions.

        In fact in the UK if Mervyn King had chosen not to be co-operative in early 2009 then he could have told Alistair Darling that he was not willing to go along with any proposal for the Bank of England to create new money and lend it to the government to fund its spending, and under Section 10 of the Bank of England Act 1998 he had both the right and the duty to reject any attempt to give him instructions to do that, and so if Darling wanted to force him to do it then he would have to ask Parliament to authorise the activation of reserve powers under Section 19.

        But in any case even if a government can arrange that it will never run out of the national currency to pay its bills it may still run out of people and organisations willing to be paid in it, especially the foreign ones.

  18. Denis Cooper
    Posted May 20, 2015 at 8:49 am | Permalink

    It was suggested long ago the UK government should retain control of various business taxes for the whole of the UK, but have a system to vary the tax burden from area to area according some objective criterion, such as per capita GDP or GVA or unemployment or a formula combining the two, with the objective of preferentially incentivising private investment in those areas of the UK which most needed it. Such a fine grained system across the whole of the UK, based for example on local authority areas, would mean that there was no politically motivated artificial distinction between the treatment of one area which happened to lie to the north of the Anglo-Scottish border and another similarly developed area to the south of the border in northern England; for the purposes of that UK system that border would be irrelevant, and likewise the Anglo-Welsh border and the internal maritime border for Northern Ireland.

    However I suspect that we are a long way past the point where this could be applied and possibly help to keep the country together, it is too late now.

  19. Sir Graphus
    Posted May 20, 2015 at 9:14 am | Permalink

    What must be avoided is Scotland undercutting England on tax rates knowing that the English will underwrite their tax shortfall.

  20. Denis Cooper
    Posted May 20, 2015 at 9:18 am | Permalink

    The SNP has built up great momentum in Scotland, and Cameron had no compunction about that borrowing some of that momentum to assist his general election campaign in England and Wales. I feel sure he will also have no compunction about relying on the SNP to help him win an “in” vote in the EU referendum, even though that could put the UK at even greater risk of the very disintegration which he claims not to want.

    The only question in my mind is whether he would prefer to rush on to hold the EU referendum on the same day as the next elections to the Scottish Parliament, which are scheduled for May 5th 2016, having been postponed for a year to avoid a clash with the UK general election*, or he would calculate that it would be better to first allow the SNP to achieve what is likely to be a smashing victory in Scotland and then follow up with the EU referendum separately in the autumn of 2016.

    * By Section 4 of the Fixed-term Parliaments Act:

    http://www.legislation.gov.uk/ukpga/2011/14/section/4

    “Section 2(2) of the 1998 Act has effect as if, instead of providing for the poll for that election to be held on that date, it provided (subject to sections 2(5) and 3(3) of that Act) for the poll to be held on 5 May 2016 (and section 2(2) has effect in relation to subsequent ordinary general elections accordingly).”

  21. agricola
    Posted May 20, 2015 at 9:48 am | Permalink

    The wishes of the SNP amounted to, “Having the cake and eating it”. I believe the Scots are far too canny to buy that one, and the English, who would have been expected to act as guarantor to such an arrangement, would not tolerate it.

    The Transfer Union is what we in the UK have always operated. The USA has another version. The major players in the EU can’t quite get their heads round the concept. Those EU countries that have benefitted from the weak state of the Euro have no inclination to support the high spender nations in the south.

    The adoption of a system for Scotland that highlights their need to take responsibility for their political decisions is required. The Scots can then make a judgement.

  22. bluedog
    Posted May 20, 2015 at 9:50 am | Permalink

    Consent to being taxed is a key attribute of participation of the co-operative joint-venture that is a nation. The SNP demand not to be taxed within the UK represents a disavowal of membership of the UK, it’s just that David Cameron hasn’t noticed. If the SNP wants and gets full fiscal autonomy, the UK is finished, particularly if Scotland pitches its tax rates at a discount to those of the UK. Hopefully a Conservative politician with high-level analytical skills and the ability to articulate complex ideas in simple terms will succeed in explain to Cameron where he is going wrong.

  23. Richard
    Posted May 20, 2015 at 10:05 am | Permalink

    How do they manage it in Canada where they do have different rates of tax in different provinces ?

  24. acorn
    Posted May 20, 2015 at 10:11 am | Permalink

    Still can’t see why a federal and country specific tax split is so difficult to achieve. The last PESA lists country identifiable spending of £456.2 billion for England, (£8,529 per head). Scotland £53.9 b (10,152 per head); Wales £29.8 b (9,709); NI £19.8 b (10,876 per head). That leaves about £135 billion of TME (£2,100 per UK head), that is not specifically identified with one of the four countries of the UK.

    I would guess that the average Sixth Form, armed with Chapter 10 of PESA 2014, could design a suitable tax plan to replace Barnett, in an afternoon.

  25. CHRISTOPHER HOUSTON
    Posted May 20, 2015 at 10:17 am | Permalink

    I hear the SNP administration in Scotland has been very slow to actually enact extra powers which they would say they had won from the Westminster government of which they are an intrinsic part.

    Taking their cue from Labour Party worst-practice they blame all previous/Westminster/Tory/Coalition governments for every debilitating regional and local cutback they themselves father.
    Increasingly particularly in England and Wales, Labour’s blaming of political opponents for its own crass economic cuts, is seen as a cruel attempt to deceive.
    So, when the SNP finally grows up, raises its own taxes and revenues and takes responsibility for its own economic errors, in a word stops blaming Big Bad Daddy Westminster, it can throw away its dummy rhetoric and, be subsequently voted finally out of power by the vast majority of brave and adult Scots.

    Me thinks the canny SNP and its MPs would dilly-dally and shilly-shally with endless requests for “clarification” and “further detailed discussions” so their political adolescence continues right up to their retirements but for an even more canny Scottish electorate who will vote them out of power within the decade.

  26. a-tracy
    Posted May 20, 2015 at 11:20 am | Permalink

    I just don’t understand how this all works?
    Iceland crashed and the UK lost out, I remember this affected local councils and their reserves which they’ll never get back, which then had to be made up by extra rates. Ireland not part of the UK but bailed out by the UK (£8bn) that we then can’t use for our own recovery? They held assets in this Country but were allowed to keep them even though they were insolvent. Are the rest of the UK just mugs, isn’t it time we roared back because we just seem to roll over and then when we’re told just our children in the union have to pay for their higher education, we’re the only ones paying for elderly care homes and even parking in hospitals and prescriptions just why are we taking it all the time?
    Now people in Scotland are talking about encouraging the North of England to break away and join them – what the heck is going on – the NE voted NO, we keep voting NO to mayors and regions but the political classes keep gnawing away and gnawing away until we get something we don’t want. Our politicians are weakening us as a nation.

  27. libertarian
    Posted May 20, 2015 at 11:32 am | Permalink

    We need full independence for England. Don’t care which way the others choose to go. How about asking us, the English, what we want? No thought not.

  28. ChrisS
    Posted May 20, 2015 at 11:39 am | Permalink

    There should be only three options :

    1. Full fiscal autonomy within the UK to mean just that : Responsibility for all taxes raising and expenditure with no cross subsidies either way.

    2. Financial but not political integration where each country in the UK is responsible for raising a substantial amount of taxation which they are then free to spend as they see fit.
    However, under this model, the taxes raised by the UK as a whole should be divided equally on a per capita basis and only the portion of taxes raised in each individual country of the Union can be raised and used to increase spending in that country alone.

    3. Full political and financial integration where spending per head of population can vary depending on need and there are cross subsidies where necessary.

    We don’t have either of these three at the moment. What we do have is much worse : We have Sturgeon calling for more public spending in Scotland but this can only come from one source : English taxpayers.

    I would favour moving to 1. so that Scotland can no longer whinge about England holding her back and will be responsible for what follows when her government increase spending.

    2. should be the fall back position if Scotland is not confident enough and rejects 1.

    3. Would require the abolition of the Scottish Parliament so we can rule that one out.

  29. John Wrake
    Posted May 20, 2015 at 12:03 pm | Permalink

    Dr. Redwood,

    When will our national politicians start telling the truth about this much-vaunted referendum?

    The Referendum purports to give the people of this country the right to choose whether we remain a member of the European Union or leave.

    Since our entry back in 1972 was fraudulent, being contrary to our English Constitution by allowing parliament to give away Sovereignty which it did not and does not possess and that process has continued through successive Treaties, all of them unconstitutional in the same way, any referendum is really only a choice between supporting or rejecting a lie. Of course, that basic fact is hidden by arguments about economic advantages, or human rights,
    or treaty obligations, etc. etc.

    I would have hoped that someone claiming to speak for England would have moved the debate away from money and towards the principle that the sovereignty of the people, embodied in a lawful monarch and loaned temporarily to a Parliament which the people can dismiss, is not compatible with the founding principles of the European Union, nor with its established practices.

    We are not to be governed by treaties, unlawful, fraudulent and treasonous.

    John Wrake.

  30. julian
    Posted May 20, 2015 at 2:33 pm | Permalink

    What happens if the Scots Nats get more or less fiscal independence, overspend as is likely and then go the the treaury for a bailout?

    The rest of the UK is then landed with the bill for tax and spend bonanza (again!).

  31. Ian wragg
    Posted May 20, 2015 at 3:27 pm | Permalink

    Why are we forced to subsidise the stupid windmills in Scotland
    The energy they produce should be bought at the pool price and any subsidies being paid by the Scotts. Now Ferrybridge is to shut down together with Longannet and Killingholme that’s another 5000 megawatts of generation about 10% lost
    Do you have a death wish John.

  32. James Matthews
    Posted May 20, 2015 at 4:13 pm | Permalink

    “Reaching a political compromise on this at a high level of generality was relatively easy. Making it work in practice is more difficult. The first requirement will be to draw up a new grant regime to pay for the items that are not paid for directly out of Scottish taxation.”

    For “political compromise at a high level of generality” read abject surrender to Scottish blackmail.

    How can a new grant regime be drawn up when the feckless David Cameron has promised to maintain the Barnett Formula?

  33. The PrangWizard
    Posted May 20, 2015 at 4:23 pm | Permalink

    Do not treat them as if they are merely angry ‘gentlemen’ with a grievance , they will always come back with a begging bowl and more threats. They know Cameron is weak and desperate to save the Union whatever the cost to England, he has to report to Her Majesty after all, and they will continue to attempt to make a fool out of him and anyone else, including the Queen.

    And how do you think they will be with ‘English Votes…’ based on their behaviours since arriving in London? I’ve said on many an occasion they will walk all over it. England needs a very strong voice, where is it? Where is the voice for our true parliament and the people of England?

    They insult the Union parliament. They may not be carrying guns but they are fighting England and the English, where are our warriors? Unionists simply roll over. We can’t rely on them in their comfortable clubs and complacent smugness – will they ever awake to defend England? – I fear not.

  34. JoolsB
    Posted May 20, 2015 at 4:46 pm | Permalink

    I see David Davis has written a piece in the Times saying Justice for England means England getting it’s own Parliament, it’s own First Minister and an English Cabinet. What a pity he didn’t win the leadership battle instead of PR man Cameron. The same David Davis who was one out of only six Tory MPs (shame on the rest of them) who voted against the discriminatory tripling of tuition fees for England’s young only.

    England would have done so much better under Davis, meanwhile we have “there’s Scottish blood in these veins” & “I don’t want to be PM of just England” Cameron giving away even more powers to Scotland and Wales whilst he couldn’t even keep his promised sop of EVEL.

    England is no safer under Cameron and Osborne than it would have been under Miliband. We were duped!

  35. Jon
    Posted May 20, 2015 at 6:22 pm | Permalink

    Nicola Sturgeon has demanded that “It is imperative that over the course of the next Westminster Parliament that the UK Government implements policies that not only help deliver our energy needs but also reduce fuel poverty and cut carbon emissions.”

    She also wants taxpayer subsidy to save ailing fossil fuel plants like Longannet.

    Obviously an impossible ask and full of contradictions but as Scottish Labour found it serves as a bat to hit their foes with.

    Perhaps the best way to slap that stinging nat on the neck is to give them what they ask. I don’t want their poison to infect the rest of the UK. I look forwarding to read what the difficulties are but feel we should give Scotland as much autonomy as possible, if just to save that poison spreading.

  36. Kenneth
    Posted May 20, 2015 at 7:13 pm | Permalink

    I think that the Conservative Party now has a great chance of retaking many Scottish seats at the next general election.

    Giving as much fiscal autonomy to Scotland will allow enough rope for the SNP to hang itself while its extreme policies do bad things to the economy. I do not wish this on anyone, especially Scots who I regard as friends and neighbours to the English.

    However, the SNP will inevitably damage the Scottish economy and this, I am sure, will give the Conservatives their best chance in decades of winning seats.

  37. Max Dunbar
    Posted May 20, 2015 at 9:53 pm | Permalink

    People in Glasgow, North Lanarkshire, West Dunbartonshire and Dundee were not convinced by these arguments and they formed a worryingly large block of voters who achieved a YES vote locally. These areas have a strong republican following and very large numbers of people who are at the bottom of the social scale. They wanted their revolution at any price, the price being paid by others of course. Glasgow and Dundee also produced the most aggressive demonstrators and most of the violence and intimidation. It would not be an exaggeration to say that the atmosphere at that time was febrile, especially in Glasgow’s George Square. Unfortunately, a momentum was created by the referendum and this has been reinforced by the General Election results.

    The SNP is determined to gain separation by the back door and fiscal independence amounts to just that. Handing these powers over to a far-left regime that will share a UK currency must surely have similarities to the current crisis in Europe with Greece. Fiscal independence is de-facto independence and if these powers are granted then we may as well have accepted the referendum results of the four zones listed above.

  38. Greg D
    Posted May 20, 2015 at 10:02 pm | Permalink

    The currency share would also have been for the benefit of the rest of the UK if it had been a Yes vote last September. rUK’s number one export country is USA but number two would have been Scotland. So we’ll never know if George Osborne would have implemented this – Alex Salmond claimed he would have to, having spoken to people close to the Chancellor (who he would not reveal, having agreed confidentiality!).

    I don’t think this contradiction Mr Redwood highlights re Scotland being independent but also dependent was a big issue at all in the Referendum – many of my fellow Yes voters and friends who voted No could all see that it mirrors the Euro but with 2 closer economies.

    Scotland simply wants to do better – to me it’s so frustrating as I know it can do much better, and this is the fault of successive UK governments who have mismanaged the Scottish economy. Yes, we want to borrow more but borrowing to improve infrastructure, develop green energy, and grow our economy is not the same as borrowing to pay lots of welfare as many think we want to do.

    In the lead up to the vote last September David Cameron said ‘all forms of devolution are there and are possible’ and leader of Better Together Gordon Brown said ‘home rule, federalism etc’ – so this is what people of all affiliations in Scotland are anticipating (apart from the current reckoned 28% who would never vote for independence). So why did they try so hard to keep us with these panicky promises!? I don’t believe it was just for nationalistic reasons!

    Reply The currency share in the Euro does not work, as Greece and Cyprus have already proved. That is exactly why if Scotland is independent she cannot share the pound.

    • Greg D
      Posted May 21, 2015 at 8:34 am | Permalink

      No, it doesn’t work, Greece’s only hope is to leave the Euro. A share may have only been for a few years to smooth things out for both. The question would have been if we couldn’t share the assets, should we share the liabilities of the £1.5 tn of which Scotland played little part in building up.

      An independent Scotland should have it’s own pound long-term, I was just trying to say that it wasn’t a big issue in the Referendum from the all the conversations I had and the mass of stuff on Facebook/Twitter – it was made out to be in the media, but I think most people got the fact we could establish our own currency, and also understood you could disagree with SNP policy and still vote Yes. Next stage is Holyrood elections and I think there is a strong chance the pro-independent Greens could be the second party and provide a far better constructive challenge to the SNP than a Scottish Labour party who lack policies.

      • Denis Cooper
        Posted May 22, 2015 at 1:04 pm | Permalink

        Sterling is a currency and it is wrong to think of it as an asset which can be set against liabilities, including liabilities denominated in sterling.

    • Max Dunbar
      Posted May 21, 2015 at 11:38 am | Permalink

      Contrary to what you say, Scotland has had decades to prove that it can ‘do better’ and it has managed its own economy to a large degree. The problem is that creative business was actively discouraged by the hard-line socialist local governments of the day. There has never been any shortage of ‘investment’ by central government in Scotland but the Scottish socialists chose to spend the money granted in ways which did not work towards creation of prosperity in a capitalist country. The state sector is the be all and end all here with grudging acceptance of a degree of private enterprise. This is the legacy of Scottish Labour and the tragic results of this soviet style command system are clear to see now.

      Unfortunately, the SNP ‘government’ is more hard-line than Labour and the calibre of many of the new SNP MPs also gives cause for concern. It is very unlikely that business will view Scotland as a good place to invest with such people in charge both at Holyrood and Westminster. Alarmingly, land reform is at the top of the agenda for the SNP. This sort of thing is normally the priority for revolutionary communist and ultra-socialist parties and will frighten off investment in the Scottish region.

  39. turbo terrier
    Posted May 20, 2015 at 10:11 pm | Permalink

    (allegation left out)
    The SNP cannot square the circle regarding energy. Their obsession with renewables wholly supported by subsidies cannot reduce fuel debt and poverty.

    As stated many times on this blog by your readers, the green crap and all it entails has got to go and not just to the new projects but right across the energy sector. But the perception is that CMD is strong enough to introduce them, it is one thing to say it, and totally another to do it. Our new energy minister states there is not a fag paper between her and Labour when it comes to the Paris summit. That is scary.

    It is only the complete stopping of all payments that will quickly make an impact especially to our high energy manufacturing sector.

    • acorn
      Posted May 21, 2015 at 5:42 pm | Permalink

      The frightening thing with all you Rednecks that comment on this site is your common diktat that the state should renege on its contractual liabilities with its own private sector.

      All the “green crap” subsidies were deliberately introduced by Westminster, to achieve a political objective of reducing Carbon emissions. The private sector weighed up the pay-back of such investment and signed legal contracts with the State to deliver what the State required of them. When you calculate the pay-back, you look at the lifetime leveled cost of generation in £/Mwh and the margin you require over 20 – 30 years.

      It appears such contractual obligations mean nothing on this site, why would any private sector company risk getting involved with a government run by Rednecks? Not the sort of people I would want to be running my Homeland!!!

  40. petermartin2001
    Posted May 20, 2015 at 11:56 pm | Permalink

    Slightly off topic. Sorry about that!

    I’m just wondering why there’s a need for a July budget?

    Am I being too cynical in thinking that the April budget was about winning the election, but now that’s been achieved, it’s going to be back to a policy of failed austerity economics with a vengeance?

    The only sensible way forward for the UK economy is to try to encourage growth. That’s just not going to happen if George Osborne puts his foot on the fiscal brakes. We need gentle acceleration which can be achieved through sensible tax cuts which need to be aimed at everyone not just the wealthy.

    Reply THe March budget was a coalition budget, which stopped us cutting certain taxes for example. I do nto expect this first Conservative budget to want to cut public spending compared to the coalition figures in March.I expect it to be a pro growth budget.

  41. Lindsay McDougall
    Posted May 21, 2015 at 12:26 am | Permalink

    THE VOW was the height of folly and the increased devolution promised in the Conservative Party manifesto mirrors it. Mr Cameron and his colleagues are making the same mistake that Gladstone made over Irish Home rule.

    There is one thing that we have to remember about devolution driven by nationalism:

    APPETITE GROWS WITH EATING.

    It is going to be a long, slow business reducing the scope of devolution. Firstly, the SNP must be told that they will get absolutely nothing unless they support standing orders to ensure English votes for English issues. Secondly, we must apply the Barnett formula in the most restrictive way possible – which means using the populations of the 2011 Census, not populations of the late seventies. It also means looking at the public expenditure per capita premiums for Scotland, Wales and Northern Ireland and ensuring that Scotland, the wealthiest of the Celtic nations, gets the smallest premium. Thirdly, we must ridicule at every opportunity the illogical ragbag of increased powers recommended by the devolution Commission.

    Another point to note is that both the Conservative Party and UKIP polled more votes in Wales than Plaid Cumry. Wales neither wants nor needs more devolution. As for Northern Ireland, part of the Unionist Community doesn’t want any devolution to Stormont at all. Therefore, the poison that will result from DevoMax for Scotland must not be allowed to contaminate Wales and Northern Ireland.

    There is another point to remember from history, should it be necessary. The ‘independent’ Irish Republic was allowed to share sterling. When sterling was later replaced by the Punt, the latter depreciated by about 6%. If Scotland ever goes independent, we should remember that.

    • Greg D
      Posted May 21, 2015 at 9:19 am | Permalink

      I would say it’s not devolution driven by nationalism, but the knowledge deep-down most Scots have that we should be doing much better.

      So if you’re suggesting reducing the scope of devolution, that will not play well at all. According to polls around a month or two ago 70% of Scots want control over what we raise as well as what we spend.

      We’ll never know how much the more powers promises affected the Referendum vote – my own opinion is it affected 4 to 5% so agree with John Redwood it’s not a lot, but almost enough to turn into a Yes vote. Incidentally a 51% yes vote would have been bad for us on reflection, we need to bring more of the country with us, and I think we are on our way to getting 60-65%

      So cutting back on devolution will only lead to more calls for another referendum as that almost makes the last one null and void – David Cameron “If you vote No you are not voting for no change”

      Scots are now really paying attention and analysing what powers are offered (both Yes and No voters) and currently we have a reduced powers offering arising from the reduced Smith Commission.

      • Max Dunbar
        Posted May 21, 2015 at 9:16 pm | Permalink

        Most Scots know that to do better means moving from Scotland and this also applies to the 56 SNP MPS who have just gained or retained seats at Westminster. Our youngest MP for several hundred years has not even completed her university course and is now entitled to a salary far in excess of anything that she could have achieved in Paisley. She probably has the same dreamlike feelings of euphoria as a lottery winner.
        How many of these people will want to give up the money and perks of an exciting and interesting life in London to return to places like Paisley after five years?
        For a Scot to do better he needs to see the bigger picture and grasp the opportunities that present themselves. Scotland has its limits. Putting barriers up in what is essentially a provincial backwater is not the answer.

    • Denis Cooper
      Posted May 21, 2015 at 10:13 am | Permalink

      Well, the punt fell a lot more than 6% against sterling, at least 20% and maybe more, as I recall etc ed

      • petermartin2001
        Posted May 23, 2015 at 1:04 am | Permalink

        The last recorded value for the Irish pound was GB£ 1 ≈ IR£ 1.12

        That was a good thing for the Irish economy. There’s nothing at all to be gained by artificially forcing up the value of any currency. They should be allowed to float. If we recalculate the value of the IR£ now n the basis of the euro replacement value at the time the exchange rate would be GB£ 1 ≈ IR£ 0.98.

        That’s a bad rate for the Irish economy. It’s too high.

  42. Richard
    Posted May 21, 2015 at 8:14 am | Permalink

    Will “fiscal independence” mean that Scotland will no longer be liable for their proportion of the UK national debt which currently amounts to £1.5 trillion ?

    • Denis Cooper
      Posted May 22, 2015 at 1:07 pm | Permalink

      No, it cannot and will not mean that.

    • petermartin2001
      Posted May 23, 2015 at 1:16 am | Permalink

      It depends! The UK National debt is also the financial asset of everyone who owns it. Everyone who owns that debt does so by virtue of holding UK Treasury bonds or UK National savings or whatever. There’s no possibility at all of a reduced size of UK ever defaulting. The debt is really like money which has been deposited with a bank. UK plc if you like.

      So if a fully independent Scotland issues its own currency, some Scottish owners of UK debt will transfer their money from UK plc to Scotland plc. The debt will be transferred in other words. It’s just like taking your money out of an account with Lloyds and moving it to an account with the RBS. The extent to which the debt is transferred will depend on whether the newly independent Scottish government allows its citizens to hold their financial assets in foreign accounts.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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