Scotland – The Beating Heart

Don't underestimate Alex Salmond, says Michael Wilson. He's got his finger not just on Scotland's pulse, but also on its beating emotional heart

With only four months left to go before the Scottish independence vote on 18th September, the gap between the Yes and No camps has narrowed as Scottish Nationalist leader Alex Salmond has stepped up his emotional rhetoric.

Much to the dismay of the No camp, which continues to insist that Edinburgh would be swanning its way blissfully to fiscal disaster if Salmond’s nationalists should win the day. The naysayers have an array of sober arguments, mainly centred on the prospect that Scotland’s thinning export revenues would look pretty inadequate against the weight of the debt burden that Scotland must surely take on after independence (about 8.5% of the UK’s debts, to be precise.) And that foreigners would be unlikely to trust a Scottish government that had no recent track record of managing its own debts – meaning that its servicing costs would be much higher than the combined UK is paying.

Donald, Where’s Your Troosers?

Yet the dry, lacklustre performance of the No campaigners is attracting criticism from within its own ranks. Why should it be, some ask, that the unionists have only rational arguments to offer while Salmond’s nationalists can draw on an emotional appeal that runs all the way from Rabbie Burns back to the proud warriors who even the Romans couldn’t subdue?

It is, as one of IFA Magazine’s friends observed, a bit like the badger cull. You can advance as many sensible arguments as you want to in favour of reducing badger numbers – assuming, of course, that that is indeed what you want to do – but you’ll never get past the fact that we all grew up with cuddly badgers who populated our bedtime stories. You’ll lose every time.

Moody Blues

Enter, then, the heavyweights. Moody’s rattled the bars of Salmond’s fiscal cage on 1st May with the shock announcement that an independent Scotland would only merit a measly A grade credit rating – a long way below the UK’s current Aa1, and really pretty far down the line from the AAA ratings that a top performer might expect.

As the BBC rather cattily noted, Poland, the Czech Republic and Mexico are three other countries that make a straight A rating. And they’re all paying over the odds for their debts even though A is still an ‘investment grade’ rating. (A sub-investment grade would very likely cause an implosion of a highly indebted economy.) 

But that didn't worry Salmond’s team, which had, in traditional style, got its retaliation in first with a quick resort to the nuclear option. How would it look, they asked the Scots, if their country simply abrogated its share of the UK’s debts when it turned independent? Or at least some part of them? Wouldn’t that make it look a lot more attractive to the outside world?

Indeed it would. If you don’t count the fact that defaulting on a debt obligation is never a particularly sensible thing to have on your credit record, and very likely to put people off the idea of advancing you any more money. But the shock of the proposal rang out like a blast bomb – more a matter of smoke and noise than anything else.

And suddenly we were in chaos and confusion, a situation which Mr Salmond is well skilled in exploiting.

Just Walk Away

But what really put the debt denial prospect on the agenda was a report published by the Glasgow-based Centre for Public Policy for Regions think-tank, which said that Scotland could save itself £5.5bn in servicing costs in 2016-17 – twice the sum expected from North Sea tax revenues. – if it simply walked away from its share of the UK’s debts.

Well, that was the headline. What it actually said was that Scotland’s ministers were crazy to be discussing such an idea, even though its fiscal attractions were undeniable. The bigger point, though, was that it had become politically possible to raise the subject at all.

“This report shows exactly how strong a hand Scotland will have in negotiations following a vote for independence”, said Scottish Finance Secretary Scottish Finance Secretary John Swinney. Not so, said the CPPR. “Any benefit arising to an independent Scotland from starting with zero historic debt would be heavily influenced by whether this was achieved via amicable negotiations or through Scotland's refusal to accept what the remainder of the UK (rUK) consider to be an appropriate share”

Quite so. 

This Week’s Most Read

Latest IFA Magazine Podcast Episodes

Keep updated on the most important financial events 

Make sure you are an informed

wealth professional..

Adblock Blocker

We have detected that you are using

adblocking plugin in your browser. 

IFA Magazine