The ongoing row about currency and the economy seem likely to dominate the independence debate again this week . The UK government will meet in Scotland, where the Prime Minister will again press the economic case for the Union, but ahead of the visit the SNP is urging HM Treasury to think again over currency union.
Speaking ahead of this week’s Cabinet meeting in Scotland, the Prime Minister said: “Two weeks ago I gave a speech setting out why I believe Scotland should remain part of the UK. In that speech I spoke about our long-term economic plan to move from a country sinking under too much debt to one that is dynamic, innovative and creating thousands of jobs for people right across our country.
“The plan is working. Last year the economy grew by the fastest annual rate since the financial crisis, we have the highest number of UK businesses on record and we have cut taxes for 25 million people.
“And last week we saw that 1.3 million more people are now in jobs across the whole UK compared with 2010 – that’s 1.3 million more people with the security of a monthly pay packet and the peace of mind that brings.
“This week I will take the Cabinet to Scotland where we will set out how the UK government can maximise the benefit of North Sea oil and gas to the UK economy for decades into the future, giving a vital boost to local communities and families across Scotland.
“For the past 300 years, Britain has led the way in finding new sources of energy. It is the strength of the UK’s broad based economy, which can make the difference and ensure we can invest in our energy for the long-term future.
“I promise we will continue to use the UK’s broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race.”
While Mr Cameron emphasises the advantages of being better together – and his Chancellor has firmly ruled out a currency union – the Scottish Government maintains that, if Scotland does vote ‘yes’ in September, a currency union would be the best way forward for both Scotland and the rest of the UK. Scottish Finance Secretary John Swinney says any other settlement would have a ‘devastating impact of debt’ for the rest of the UK.
In the event if independence The Scottish Government will ‘negotiate with Westminster to agree a fair share of assets and liabilities that is fair, equitable and reflective of Scottish needs and those of the rest of the UK’.
However, following the warnings from academic Prof Christine Bell of Edinburgh University that “if the remainder of the UK keeps the name and status of the UK under international law it keeps its liabilities for the debt”, Mr Swinney has published an analysis of the implications such an approach by the UK Government would have for debt payments for the rest of the UK.
The paper shows that if the UK Government put itself in a position of having to accept all UK debts – which it has already accepted legal liability for – the rest of the UK would be responsible for:
- Up to an additional £130 billion of debt,
- between £4 billion and £5.5 billion a year in additional interest payments, equivalent to increasing the basic rate of income tax in the rest of the UK by one pence.
Finance Secretary John Swinney said: “The Scottish Government has consistently proposed that following a vote for independence we reach agreement with the rest of the UK on a fair share of assets and liabilities, including the Bank of England which holds a third of UK public sector debt.
“That is the fair, reasonable and responsible approach we continue to put forward. However, people in the rest of the UK deserve to know the logical consequences of the position the Westminster government are taking.
“The Treasury has claimed that the UK would be the continuing state with exclusive access to the role and responsibilities of the Bank of England. If you follow that argument to its logical conclusion then it is also responsible for the entire debt liability – which could mean the rest of the UK taking on additional debts of up to £130 billion.
“That would result in debt servicing costs of the rest of the United Kingdom increasing by between £4 billion and £5.5 billion each year – a devastating impact which would be the equivalent of increasing the basic rate of income tax by one pence.
“That would represent a significant and unnecessary cost to taxpayers in England, Wales and Northern Ireland when, as part of the proposals we have put forward, an independent Scotland would be quite happy to pay our fair share of UK debts as part of negotiated arrangements, which would include participation in a Sterling zone
“This is just one of the reasons, alongside the costs that rejecting a currency area would impose on business in the rest of the UK, that the Treasury will drop this bluff and bluster the minute the campaign is over.”
