GOODBYES are rarely easy. As the UK is about to find out with the upcoming Brexit negotiations, the untangling of institutions long and deeply entwined needs to be done carefully and with due consideration for all parties involved. It is for this reason that I was disappointed during the 2014 independence referendum campaign with the level of debate surrounding the allocation of debt and assets between a newly independent Scotland and the remainder of the UK (rUK).
On Scotland’s side, there was the claim that it would quite willingly accept some share of the UK’s public debt but only if it received some share of public assets, notably access to a currency union. On the UK’s side, the claim was that Scotland was due no assets at all but would still accept the debt anyway.
Neither of these claims matched the historical precedents laid when countries have become independent, such as the cases created by the break-up of the USSR, the dissolution of Czechoslovakia, the proposals laid out in the independence debates within Canada and Quebec, and others. It was the examination of these cases and their hypothetical application to Scotland, as laid out in our publication “Claiming Scotland’s Assets”, which informed the roadmap for debt and asset allocation within the White Paper.
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As our favoured option, we accept and endorse rUK’s claim to be the continuing or successor state to the UK. There is, however, a price to be paid by rUK for accepting successor status. As with Russia and the USSR, rUK would be liable for the full portion of the UK’s debt and mobile assets (fixed assets such as military bases and mineral resources would be allocated by geographic location).
There are many good reasons for rUK to make this claim and several for our endorsing it.
For a start, as with Russia’s succession to the USSR, this claim would allow rUK to maintain the UK’s permanent seat on the UN Security Council and ensure that in a turbulent world, our independence does not add unduly to that turmoil. Secondly, should the UK formally dissolve as Czechoslovakia did then one consequence could be the invalidation of the by-then recently agreed Brexit deal between the EU and the UK. I am certain that rUK would surely wish to avoid even the possibility of those negotiations being forced open again.
It will also surely be aware that the alternative would be entering into possibly fraught negotiations over debt with not only Scotland but with the UK’s creditors which, if history is our guide, could last many years.
While the favoured “zero-option” split would initially leave Scotland with no mobile assets of its own, this does allow it a great deal of opportunity. Those assets which are absolutely required could be bought directly from the rUK, their cost could be offset against an equivalent value of UK debt, or similar assets could simply be purchased from elsewhere or built in Scotland as we’d require to create our own vision of independence.
The cost of these assets, when added to the cost of setting up new functions of government, our new independent currency and other necessary infrastructure, totals only a fraction of Scotland’s approximately £150 billion “share” of the UK debt. The White Paper has tentatively identified around £20 billion worth of required costs and estimates that even as better estimates are made it is unlikely to exceed £50 billion. This means that even in the event of Scotland paying a substantially higher interest rate on our debt bonds than the UK, we’d save almost £2 billion per year on interest repayments.
This is only one small part of the fiscal position that the White Paper lays out. A position which identifies net expenditure savings of over £1.7 billion per year and an increase in net income of over £4.2 billion per year as a direct result of independence and the consequences of it. Scotland’s deficit would drop from the eye-watering £14.8 billion per year assigned to us in GERS last year to a more manageable £8.8 billion before we could even begin our journey and take our first independent steps in over 300 years.
Dr Craig Dalzell is head of research at Common Weal Scotland.