The Mainstream Media, the Blogosphere and Twitter have been fixated on George Osborne today, to a lesser extent Edward Balls and, rightly, the pipsqueak Danny Alexander was ignored. They were merely the bit players. The BBC focussed on the wrong Old Etonian. It was relatively late in the day that the main man, Sir Nicholas Macpherson, Permanent Secretary at the Treasury piped up.
Before we get to the meat, let's consider what else happened today. Better Together and Alistair Carmichael were wholly ignored. Today was London's day. Osborne and Balls blew the self-styled Project Fear's strategy out of the water. Alistair Darling appeared on TV looking like he was suffering from facial palsy, he was twitching so much.
All their talk of Scotland having "A strong voice in a Strong United Kingdom" was blown out of the water. Any advice they (rightly) gave that such a power play as ruling out a currency union before the referendum and without any negotiation would be seen as Tory bullying North of the border was wholeheartedly ignored by their metropolitan masters. By sucking up to and siding with Osborne, Balls has effectively signed the death warrant of Scottish Labour and proved that ye cannae squeeze a fag paper between Tory and Labour nowadays.
Now to the meat. The Westminster politicians fulfilled their roles treading the boards today, reading the script prepared by Sir Nicholas Macpherson at the behest of his masters in the City.
Sir Nicholas likes to play power games.
When the Treasury said it would assume full responsibility for Britain’s debts in the event of Scottish independence, some viewed it as a needless concession to the SNP. But it was a clever precursor to ruling out a currency union, as Joseph Cotterill argues. Not that Sir Nicholas believes the SNP’s claim that the party would leave the rest of the UK “shouldering” Britain’s debt. In his letter to the chancellor, the permanent secretary writes [my emphasis]:
If you follow Treasury advice and this week rule out a currency union in the event of Scottish independence, you can expect the Scottish Government to threaten not to take on its share of the United Kingdom’s debt. I do not believe this is a credible threat. First, the sooner an independent Scotland established economic credibility, the better it would be for its economic performance. An extensive wrangle about its share of the debt would increase uncertainty and hence its funding costs. Secondly, the debt is one of a number of issues which would have to be settled post independence, where the new Scottish state would require the cooperation of the international community including the continuing UK.
One of the problems with being turned on by power and of getting used to it is the hubris that comes with such a position. Who says there would be an extensive wrangle about Scotland's share of the debt? As reported in
The Herald's round-up of international reaction to Osborne's speech:
"France's La Tribune: "Edinburgh," it concluded, "could declare the British currency as the only legal tender in Scotland." And London, it added, could do nothing about it."
If the gloves are to come off then there need be no protracted wrangle about debt. Scotland can easily tell London where to shove its debt. Scotland cannot "default" or "renege" on debt it doesn't owe. Indeed estimates of rUK's debt to GDP ratio without Scotland of 94% may be well short of the mark because of the
jiggery-pokery in allocation of debt and debt repayments thus far.
The money markets couldn't care a fig what has happened in the past. They are looking for safe bets and a return. Scotland in the black with zero debt, over £1.5Tn in oil reserves; waves, gales, turbines and tides of renewable energy assets and a a positive trade balance will be a far better bet than a UK drowning in debt and having to purchase energy from abroad (including Scotland).
Protracted wrangle over debt? Like Australia, New Zealand, South Africa and Ireland
et al before us, we can continue to use Sterling until we decide to do something different and there's nothing Osborne or Balls can do about it. We can also call Sir Nicholas' bluff and tell him in short order where to shove the UK's debt.
If the UK wants to play silly beggars about other things, I'm sure the good folk of Rosneath would enjoy the economic benefits of a shovel-ready causeway from Rhu.
