UK promises to guarentee Scotland's debt post independence

purch

There appears to be a lot of confuzzlation within the OP as to what constitutes current UK Debt, and what constitutes current Scotland Debt.

Add to that the usual confusion as to what Scotland using the GBP means, and what role the Bank will play in this, and you have the recipe for a MSE Forum muddle.

Generali

purch wrote: »

There appears to be a lot of confuzzlation within the OP as to what constitutes current UK Debt, and what constitutes current Scotland Debt.

Add to that the usual confusion as to what Scotland using the GBP means, and what role the Bank will play in this, and you have the recipe for a MSE Forum muddle.

Muddles all round!

chewmylegoff

zagubov wrote: »

OK the banker's offering the you the debt, the oil, the gas and Glasgow. Deal or no deal?:D

Chuck in the stone of scone and Nessie and you've got a deal.

System

This isn't a new situation. It must have been faced dozens of times before as different countries in the Empire and Commonwealth achieved full independence, so I would imagine there is a well-worn precedent.

What happened to Australian debt in 1901? Indian debt in 1947?

Kenyan, Rhodesian, Canadian, etc etc up to Hong Kong?

Is the UK still guaranteeing the entire colonial debt of half the world?

Masomnia

As far as I understand it, its just saying that in the event that Scotland does vote for independence and for whatever reason won't take on any liabilities, or the negotiations stall, there won't be a default.

I guess in the event of Scotland becoming independent they will issue their own bonds and give the cash to the UK, which the UK would use to buy back gilts. Unless there's some other voluntary way of doing it that I don't know about!

IveSeenTheLight

Generali wrote: »

I worked out a couple of years ago that if you take the Scottish debt that the UK took on at inception (£300,000 from memory) and added compound interest at the BoE's base rate you got to roughly the UK's national debt!

Interesting paragraph, however did you factor any paying down of the debt over those years?

I'm also wondering how you calculated this to be roughly the UK National debt.
the UK National debt is approx £1,377 billion, whilst the Darien Scheme is cited to work out about £44 million in today's money

Seems to me that using RPI, Scotland initial debt would be far lower than today's UK nation debt.

System

Masomnia wrote: »

Unless there's some other voluntary way of doing it that I don't know about!

The BoE could simply write to every holder of government bonds resident in Scotland and tell them that their investment has been re-registered with the Scottish Central Bank.
It doesn't need to be voluntary. It's what LloydsTSB have just done. Depending on your postcode you are now with either Lloyds or TSB.

purch

Except there won't be a Scottish Central Bank

ruggedtoast

Apparently Alex Salmond is declaring that the financial markets stampede to avoid anything to do with Scottish borrowing two years before they can even become an independent country is - a great success for Nationalism.

I'm not really sure he understands why the UK treasury had to do this...

Generali

IveSeenTheLight wrote: »

Interesting paragraph, however did you factor any paying down of the debt over those years?

I'm also wondering how you calculated this to be roughly the UK National debt.
the UK National debt is approx £1,377 billion, whilst the Darien Scheme is cited to work out about £44 million in today's money

Seems to me that using RPI, Scotland initial debt would be far lower than today's UK nation debt.

I used the BoE base rate compounded on £300,000. The total came to about £1,000,000,000,000.

For a rough and ready calculation, £300,000 compounded at 5% for 310 years is £1,144,525,263,446.05. 5% is about the average base rate since the start of the BoE.