UK promises to guarentee Scotland's debt post independence

Graham_Devon

Alex Salmond has welcomed the announcement that Britain will guarantee Scotland’s debts if the country becomes independent, saying it strengthens his hand in negotiations.

The Treasury would continue to honour debts amassed by the UK if Scotland becomes independent, it was announced today.

Any new Scottish state would then be required to pay a “fair and proportionate share” of those liabilities to the UK.

It means if Scotland defaults, it will be taxpayers in the rest of the United Kingdom who will have to pay.

Glad we, in the UK, were consulted!

Means it's more likely that Scotland will also be able to continue to lean on the pound and the BOE as lender of last resort.

Let's face it, they could lean on the rest of the UK pretty heavily when they can threaten bankruptcy if they don't get what they want.

About time the rest of the UK got a voice, IMO. More needless resentment if we don't get a say but find ourselves with such responsibilities, again, IMHO.

Apparently, this announcement that the rest of the UK taxpayers will pay Scotland's debts if it defaults pacifies investors and helps keep interest rates (on UK debt) low.

http://www.telegraph.co.uk/news/uknews/scotland/scottish-politics/10568822/Salmonds-delight-as-UK-promises-to-pay-Scotlands-debts.html

moneyistooshorttomention

I wondered if I was actually reading that article awrong. It seemed to me that England was going to let Scotland have a chance to get away with not paying their share of UK national debt if they ranted enough/pleaded poverty enough.

I thought I must have got that wrong.

Errrr...I have haven't I???? Please tell me I read that wrong....

zagubov

Graham_Devon wrote: »

Glad we, in the UK, were consulted!

Means it's more likely that Scotland will also be able to continue to lean on the pound and the BOE as lender of last resort.

Let's face it, they could lean on the rest of the UK pretty heavily when they can threaten bankruptcy if they don't get what they want.

About time the rest of the UK got a voice, IMO. More needless resentment if we don't get a say but find ourselves with such responsibilities, again, IMHO.

Apparently, this announcement that the rest of the UK taxpayers will pay Scotland's debts if it defaults pacifies investors and helps keep interest rates (on UK debt) low.

http://www.telegraph.co.uk/news/uknews/scotland/scottish-politics/10568822/Salmonds-delight-as-UK-promises-to-pay-Scotlands-debts.html

Haven't a clue what the fuss is about. Sounds like the Treasury's acting in the UK's interests to secure low interest rates on UK debt.

Why would Scotland want to bankrupt its biggest customer, anyway? Why would the RUK want to damage its second biggest customer?

Don't kid me it'd be worth doing it for spite. They're modern democracies not spoilt brats having a playground spat.

lvader

He probably has it wrong, he has been wrong about most things.

Graham_Devon

zagubov wrote: »

Why would Scotland want to bankrupt its biggest customer, anyway? Why would the RUK want to damage its second biggest customer?

They wouldn't.

But they have a bloody good bargaining card.

And let's not pretend they (they being the SNP) haven't already exhibited the use of other similar cards. Let's just look at the "if you won't let us use the pound, we won't pay our share of the debt" threat.

chewmylegoff

The debt was all issued by the UK in the first place so we can't decide to suddenly hive off a load of our debt to the Scottish and tell the original lender that they can no longer rely on the UK Treasury to honour it's existing legal obligations.

So yes, if Scotland becomes independent and as part of the split agrees to take on 10% [figure for illustration only] of UK debt, the UK will still remain on the hook if the Scots default on that debt. (The only other way to do it would presumably be for rUK to keep all debt and for Scotland to agree to pay us X over the course of Y years, or for the rUK to keep some of the oil in Scottish waters).

This does not amount to rUK guaranteeing Scottish debt - it amounts to rUK honouring existing liabilities - any new debt issued after independence buy the newly independent Scotland will backed only by the Scottish government (and will probably be quite a bit more expensive for them to service).

wotsthat

Graham_Devon wrote: »

And let's not pretend they (they being the SNP) haven't already exhibited the use of other similar cards. Let's just look at the "if you won't let us use the pound, we won't pay our share of the debt" threat.

That's a minor consideration vs the concern that uncertainty that the UK might find it needs to pay more to borrow in the run up to the referendum. It's good to see that, on occasion, common sense trumps politics.

Of course the message "you will pay your share of the debts but if you don't we'll pay instead" strengthens any Scottish Government negotiating position but that rather assumes such negotiations will happen.

spacey2012

Whats the worst that could happen ? Iceland, where they threw the lying bankers in jail. ?

Generali

This seems like a pragmatic move to me. Presumably Scotland, as an unknown entity, would be viewed as a risky counterparty in the market. More risk means more interest to pay on Gilts.

If the British Government can keep interest rates down by doing this then it's no bad thing, especially if, as seems likely, Scots vote to remain in the Union.

chewmylegoff

I'm not sure it's so much a pragmatic move as stating a fact. The UK can't simply say to creditors that the terms and conditions have changed and that they'll now be repaid by Scotland and that if Scotland failed to pay it was tough luck. If I borrowed some cash from you and then I said that Wee Jimmy McSporran will be repaying you instead, if Wee Jimmy McSporran fails to pay because he spent all of his money on socialist bribes then you wouldn't sue him, you'd sue me because that's who you entered into a legal contract with.

HAMISH_MCTAVISH

Indeed.

This is a non-story.

It's a pragmatic step to confirm the legal reality anyway and avoid uncertainty in the markets.