Replied this morning to Alastair Darling’s post on the Better Together site
Thought I’d pop it onto the blog as well just in case some clumsy fingered BT web underling accidently deleted it.
I’ve copied Mr Darling’s post below and added my comments.
By Better Together leader and former Chancellor Alistair Darling
14 February 2014
Alex Salmond is now a man without a plan
He is offering Scots a future of uncertainty and instability. Threats of a debt default leaving Scotland and Scots with a bad credit rating. No idea what currency we would be transitioning.
Scotland has no debt therefore it cannot default. Servicing the UK debt, you are partly responsible for Mr Darling, accounts for approx half of Scotland’s deficit. As recently confirmed by the Treasury UK debt is its responsibility. No sharing of assets, no sharing of debt.That isn’t a threat that is common sense and fair. ‘’ If Scotland walks away from the UK, it walks away from the pound.” – George Osborne. That’s a threat, it’s our pound too.
By contrast if Scots want to know what the benefit of remaining in the UK, they need only reach into their pockets and pull out a pound coin. We have one of the most trusted, secure economies in the world. The pound means more jobs, smaller mortgage repayments, cheaper credit card bills and lower prices in the supermarket. Why would we gamble that for an unknown currency?
Wilson’s devaluation, the IMF bailout, black Wednesday, AAA rating lost. Not exactly an untarnished history. The pound means none of the things you infer. All our Nordic neighbours have AAA ratings. 10yr bond yield for Sterling 2.8%. 10yr bond yield for Euro 1.4%. So we are paying twice as much.
This morning’s interview with Alex Salmond on BBC Radio Scotland is instructive. Unable anymore to credibly claim that Scotland would keep the pound he kept falling back on the fact that his fiscal commission said there were “a range of options” for what currency Scotland would use. The penny has dropped for Alex Salmond – he knows he cannot promise the pound.
What a difference a day makes. 24 hours ago the SNP were saying that the fact that the UK parties had not ruled out the pound was proof that Scotland would keep the pound. Once the pound was comprehensively ruled out following advice from the Treasury’s top civil servant they claimed it was bluff. By this morning they were pointing out that there are a “range of options”.
What are the range of options? Another option not on the table is using the pound anyway, in the way Panama uses the Dollar. The Fiscal Commission ruled out ‘the Panama plan’ and they were right to do so because it would mean leaving Scotland without a financial back-up plan. If something like the collapse of RBS happened again a crisis would become a disaster.
If the UK is foolish enough to ignore YOUR OWN sage advice to have a currency union post a yes vote, there are indeed options. The Euro couldn’t be one of them for years, even if it was attractive, and you know that, don’t you? The Adam Smith Institute said “An independent Scotland would not need England’s permission to continue using the pound sterling, and in fact would be better off using the pound without such permission.’’ Most likely solution is a Scots pound pegged to Sterling.
Remind me who owns RBS? Ah yes, the UK government, so nothing to worry about there then.
So Alex Salmond is offering us one of two options: a rush to join the Euro or a separate unproven currency. Of course until a very recently the Euro was Alex Salmond’s preferred option. We have seen almost nightly on the news what it can be like for a small country in the Euro. Establishing a separate, unproven currency would likely mean higher interest rates as we would be starting from scratch with no credit history. Both currency options would be bad for jobs as every time we sold to our biggest customer, England, Scottish firms would need to pay the costs of changing currency.
‘’Scottish firms would need to pay the costs of changing currency.’’ Or alternatively Mr Darling, English firms would need to pay the costs of changing currency. Works both ways.
Who would you rather lend to. Country A with no debt, massive oil reserves and an oil exporter, Gas exporter, electricity exporter, food and drink exporter or country B which has just had its creditworthiness downgraded, its economy shrink 10%, increased its debt by £120bn making it one of the developed worlds most indebted, if not THE most indebted nation, added about £30bn to its already chronic trade deficit and is an oil importer, gas importer, electricity importer and food and drink importer. No brainer really isn’t it?