We need to bust the myth that a deficit is a bad thing

Mervyn King agreed – but only after the 2014 indyref – that a currency union would have been possible with goodwill on both sides. However, at the moment there isn’t such goodwill and in any case it is highly unlikely that whatever policies rUK wishes to follow would also be appropriate for Scotland. The economies of Scotland and England are quite different and set to diverge further, which is exactly why we need our own currency and our own fiscal and monetary policy.

READ MORE: Andrew Wilson rejects claim Scots will struggle to get mortgages after independence

The only way to de-risk the transition is to complete it as soon as possible after independence day. Ireland in the 1920s is a very poor comparator. Those were the days when Ireland was dirt poor, currencies were based on the Gold Standard, and fixed exchange rates were the norm. None of those conditions apply to Scotland and it is worth noting that Ireland stayed poor until they broke the link with Sterling in the 1970s.

Wilson says: “We need to bring our deficit into line with a sustainable position but the priority right now and for the next five years is not that, it is for investing for recovery”. This accepts the entirely false premise that a government deficit is a “bad thing”.

It isn’t, as the state is not a household, state spending is the source of all money and as it is a double entry accounting system a state deficit equals a private sector surplus. It is only when the state runs a deficit that private sector net saving is possible, otherwise the private sector is simply pushed into debt instead. In the first few years of independence the Scottish Government will run a large deficit, maybe 8% of GDP, as that is necessary to fund the 42,000 new civil servants for eg the Ministry of External Relations, the associated buildings and services, generally repairing the damage from the Union, the Green New Deal etc. That will promote a post-independence boom and the resulting growth will see both the deficit reduce as taxes increase, and unemployment fall to the lowest levels achievable.

It is also worth noting that currently the Scottish Government has essentially zero debt as it is only allowed to borrow trivial amounts. Under the Vienna Convention “Continuing State” model the UK already declared would apply in 2014 (NB: This was a unilateral declaration not open to discussion), rUK keeps the assets (UN Seat) and the liabilities (the UK national debt) so Scotland is not liable to pay anything and there will not be any “solidarity payment”.

We are also very pleased to announce that plans for the Scottish Reserve Bank are advancing rapidly and we should be ready to commence phase one of a five-phase implementation plan in the next few months. So we should be ahead of the game and able to shorten the timescale for the new currency by a year or so depending on when indyref 2 is won.

Tim Rideout (Convener, Scottish Currency Group) and John Robson

THE money borrowed to finance lockdown does not have to be repaid. It is not real money in the sense that lenders have been deprived of its use, it is merely credit created by computer keystroke by the banks, and it will added to the ever-increasing national debt.

Common sense says we can never now repay or even reduce the national debt, and history proves we don’t have to, as it has risen from £350 billion in 1997 to £2000bn in 2020.

The banks have lent £1,650bn over 23 years and have never said a word about it, let alone asked for repayment, and they created that money in the knowledge that it would indeed never be repaid.

All that has to be paid is the interest on this magic debt money, so we will go from paying £1bn a week at present, to paying perhaps £1.2bn a week. But as we run a deficit economy we do not even have the money to pay that interest, so the banks will just lend the government that as well.

The only gesture government has ever made has been to try to reduce the annual deficit, and therefore the rate at which the national debt is increasing, and even that hurts too much.

Malcolm Parkin
Kinross

YESTERDAY I listened to the Nick Ferrari show on LBC, in which he invited people to call in and tell his audience how awful Nicola Sturgeon is and tell all his listeners how delusional Scottish people are and how lucky we are to have England to pay for us to exist. On a few call-ins Scottish people were asked how low Nicola’s ratings were going, and how much support for the SNP was dropping. The replies were an insight into how ill-informed people in Scotland are, but not once did Ferrari question a caller who said support for the SNP was in the 20%s and falling.

George Mylett
via email