Scottish Debt

How to pay for becoming independent

Stephen Richard — Thu, 28 Oct 2021 13:51:53 +0000

How to pay for becoming independent Stephen Richard Thu, 10/28/2021 - 14:51

Author or Creator

Common Weal

How much will becoming independent cost in total?

If you make sensible estimates of all the costs involved of becoming independent the total comes to about £25 billion pounds.

Isn't that a lot of money?

Well about £15 billion of that will be inherited from the UK in Scotland's share of UK assets so the real additional cost is in the order of £10 billion and obviously that is a one-off cost. It really isn't that much money when it comes to the budget of a nation state – for example, it is less than a fifth of what would have been Scotland's share of the 2008 bank bailout which was spent in one year.

How do we pay for it?

When the National Commission is set up it should be given the power to issue bonds to international investors with the guarantee that the value of these bonds will be transferred to and therefore assured by the government of Scotland once it is independent. This can then be used to pay for the costs of the tasks needed and simply added to Scotland's national debt at the end of the process.

What do we get for the money?

Well, apart from a properly-established country we get a foreign currency reserve of £25 billion pounds which can be invested and used in an emergency. And we would also get spending of at least a third of the money in the Scottish economy – that's a £3 billion boost to the Scottish economy in the early days of independence.

Keywords

Cost of independence

Scottish Debt

Funding Scottish independence

Stephen Richard — Mon, 18 Oct 2021 20:56:52 +0000

Funding Scottish independence Stephen Richard Mon, 10/18/2021 - 21:56

Author or Creator

Common Weal

There are three elements to the answer:

Initial debts
work to become independend
Continuing financial position

Initial debts will be a matter of negotiation with the UK government. The set up costs are estimated at £25 billion of which £15 billion as a share of assets being transferred. The continuing financial position is dependent on the strength of the economy.

Sources and Links

https://sil.e-infinitum.com/independence/what-are-the-cost-implications-of-sett…

Keywords

Cost of independence

Scottish Debt

What are the cost implications of setting up an independent Scotland?

Stephen Richard — Mon, 18 Oct 2021 21:11:08 +0000

What are the cost implications of setting up an independent Scotland?

Primary Author or Creator

Common Weal

Stephen Richard Mon, 10/18/2021 - 22:11

Alternative Published Date

2021

Category

Independence

Type of Resource

Briefing paper

Length (Pages, words, minutes etc...)

1pp

Fast Facts

Initial debts will be a matter of negotiation with the UK government. The set up costs are estimated at £25 billion of which £15 billion will be offset as a share of assets being transferred.

More details

What is the financial impact on Scotland of independence?

There are three aspects to this – the initial debts inherited, the cost of the work to become independent and the ongoing financial position of Scotland after independence. The last of these is not part of the process of establishing a new country and so has not been considered here.

So what is the debt aspect of this?

As was discussed under negotiations above, that is not something we can know until negotiations are complete, but there isn't really a scenario where Scotland's debt liability is any higher than it already is inside the UK and there are a number of scenarios where it could be less – and even significantly less. As we have seen through two periods of very large scale 'quantitative easing' right across Europe and indeed the wider world, debt size in comparison to the size of the economy when you are in charge of your own currency is not a major concern. The issue is the cost of servicing it which will not be higher than it currently is for Scotland.

But these questions reveal a lot of set-up costs do they not?

Yes, but this should be put into perspective. If you add up all of the above costs then the total comes to about £25 billion and this is not particularly large when we think about the bank bailout or the emergency Covid measures. And it is dominated by two major costs – the cost of setting up a Foreign Currency Reserve and cost of setting up a Scottish Defence Force. The first of these is a cost but it is also an asset (this is real money you can spend and invest) and the second would be spent over a decade and much of it would come from annual spending on defence which would actually be less than what we are spending at the moment as part of the UK. These are all one-off costs and in the end are no more than a small proportion of how much Scotland's share of the bank bailout cost.

So that is how much the national debt would rise by to become independent?

No, that is the total cost of the set-up and doesn't include Scotland's likely share of the UK's assets. About £15 billion of the £25 billion total would come to Scotland as a share of assets (or would be subtracted from debt). The additional cost to Scotland which would be borrowed is only £10 billion which, as a one-off, really isn't that substantial.

How would we pay for it?

To go back to the beginning, the National Commission would be given bond-issuing powers so would use this to borrow the money as it does its work. At the end this would be consolidated and added to the national debt.

What do we get for our money?

Well, our own country – and a giant economic stimulus. An awful lot of the money it would cost to set Scotland up as an independent country would be spent on goods, services and wages inside Scotland would would help to boost Scotland's economy.

And then?

What happens after all of this set-up is done?

Whatever we want. Then we will be a normal nation, nation number 196 – just like the other 195. The citizens of Scotland will vote for governments and whatever government we vote for will steer the nation until the next election. The possibilities are limited only by what we demand of our governments and we will have no-one else to blame for our decisions. In other words, we will be independent.

Keywords

Cost of independence

Scottish Debt

Language English

Response to latest Government Expenditure and Revenue Scotland (GERS) estimates

Stephen Richard — Mon, 13 Sep 2021 08:29:12 +0000

Response to latest Government Expenditure and Revenue Scotland (GERS) estimates

Primary Author or Creator

David Phillips

Stephen Richard Mon, 09/13/2021 - 09:29

Additional Author(s) / Creators

Institute for Fiscal Studies

Date Published

Wed, 08/18/2021 - 12:00

Category

Economy

Type of Resource

Assessment report

Fast Facts

The large debts shown by the 2020/1 GERS are temporary and not structural. They do not indicate that Scotland cannot afford to be inedpendent.

More details

Hasn’t the massive borrowing carried out by the UK government and other high-income country governments during the COVID-19 pandemic, and at very low borrowing costs to boot, shown that an independent Scotland need not be concerned about running a large budget deficit? It’s not clear that it does.

First, there is a difference between a temporary surge in borrowing like the UK’s – especially at a time when the household sector is massively boosting its saving – and the large structural deficit that an independent Scotland would start life with. And the UK government has announced a package of tax rises and cuts to previous spending plans which amount to 1.8% of GDP a year by 2025-26 in an attempt to bring the deficit down over time – although the spending totals will almost certainly be revised up in this autumn’s Spending Review.

Second, nearly all of the extra borrowing by the UK government since the pandemic began has effectively been financed by the Bank of England creating additional reserves on which interest is paid at Bank Rate – i.e. currently just 0.1%, as it expanded its programme of ‘quantitative easing’ to boost liquidity and support the economy during the pandemic. The US Federal Reserve and European Central Bank have also carried out similar operations to support their economies. If an independent Scotland were to use the pound informally, as is current SNP policy for the short-term, such monetary financing would unlikely be available to it on the same terms. On the other hand, a separate Scottish currency, the SNP’s preferred option for the longer-term, could come under pressure if Scotland’s public finances were seen as unsustainable by the financial markets, pushing up the cost of any sterling-denominated debt obligations of the Scottish Government, households and businesses. Indeed, one of the six tests the SNP say will guide the decision of when to move to a separate Scottish currency is that the Scottish Government has a “sufficiently strong and credible fiscal position in relation to [its] budget deficit and overall debt level”. Action to reduce Scotland’s deficit is therefore a key part of plans for a new currency that further down the road would give Scotland greater fiscal flexibility.

None of this means that Scotland cannot afford to be independent, nor that there aren’t a range of opportunities for better policy to improve performance and better address Scottish needs and preferences. If such policies can be developed and implemented, this might in the longer-term allow more to be spent on public services and more to be kept in Scottish people’s pockets.

Resource Address (URL)

https://ifs.org.uk/publications/15581

Keywords

Language English