Monday, 5 May 2014

Scotland and the Public Debt

Scotland’s Vote on Independence
Scotland is preparing to vote on separation from the rest of the current Union of Britain. If the majority chose independence from Westminster, would the Government of a depleted Union try to impose a share of the public (or national) debt on Scotland? The figure could amount to around £130 billion, which is 10% of the national debt. If so, Scotland would be bankrupted from the start.

Britain’s public debt is £1.3 trillion; that is one thousand three hundred billion pounds. One billion is one thousand million, so we have a picture of what our national debt looks like. Distributed among everyone resident in Britain, that would be around twenty thousand pounds per person, adult or child without exception.

Impossible to Pay the Public Debt
It is impossible to repay this sum, and indeed in 2014 Britain will pay around £60 billion alone on interest on the national debt. Since the Coalition came to power in May 2010, this debt has increased by 80%, and it is steadily going up. It is estimated that by May 2015, in time for the next general election, it will have doubled since 2010.

This debt bubble will burst when the Government - whichever government that be – decides to officially declare the State insolvent. This will mean that Britain will default on repayment of government bonds, which constitute the national debt. The reason is that further austerity to cut state spending would rapidly bring Britain into the situation Greece is in and even worse. And there is no bailout forthcoming as most countries in Europe are in a similar situation to Britain with an enormous national debt, as too is the United States of America, where the debt has surpassed the $17 trillion mark.

As the national debt rises, so too will the annual interest the State must pay. Government bonds earn nearly 5% a year on interest, which is almost three times higher than Britain’s current 2% rate of inflation.  

Scotland Would Gain Nothing
Will Scotland accept to take on a share of Westminster’s public debt sheet? To do so would be tantamount to bankrupting the Scottish Nation. To remain a part of the current Union implies bankruptcy anyway. So what is the point in breaking away if that means transferring to Scotland an immense burden that the Country could never pay off, a ball and chain the weight of which would increase exponentially, as it does anyway under Westminster’s governance? 
There would be no point in it!

If Scotland kept the English pound it would make the Country liable to the national debt that is attached to this currency. While in theory Scottish oil and gas revenues would no longer go directly to Westminster’s treasury, taking on a share of Britain’s national debt, however, would sponge away all these revenues and much more. In fact, a significant part of Scottish revenues would be needed to service Westminster’s public debt requirements. Alone the interest on a £130 billion Scottish share of the public debt would require Scotland handing over six and a half billion pounds a year to the British Treasury.

Written by D. Alexander

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