Can't Have It Both Ways

I was pleased to read this report from the BBC about the ongoing independence debate and the Yes campaign is quite right if you ask me, because the Westminster parties can't have it both ways.

So if the Tories, Labour and the Lib Dems all say that they will hold on to the UK's central bank (Bank of England) in the event of a Yes vote, without even any discussion with the Scottish Government, then the only fair thing to say is that they must also accept all the debt.

Because they ran the debt up, not the Scottish Government which can only spend the budget handed down to Holyrood from Westminster.   

Scottish independence: John Swinney says 'No currency, no debt'

Finance Secretary John Swinney said Scotland keeping the pound was the preferred option

Finance Secretary John Swinney has confirmed Scotland will not pay its share of the UK debt if it does not get a currency union after independence.

The Scottish government minister told a BBC referendum debate if the UK seized all the assets of the currency it must also take all the liabilities.

Scotland's share of UK debt would be in the region of £100bn.

Former Lib Dem leader Charles Kennedy said defaulting would hurt an independent Scotland from day one.

Labour, the Lib Dems and the Conservatives have ruled out a currency union but this has been dismissed as pre-referendum posturing by the SNP.

They insist Scotland will keep the pound with the backing of the Bank of England.

During Monday night's BBC referendum debate, Scotland's First Minister Alex Salmond said: "If you deny us the financial assets then the UK will get stuck with all the liabilities."

The panel for the referendum debate was Joyce MacMillan, Johann Lamont, John Swinney and Charles Kennedy

Asked on the latest BBC Scotland referendum debate if walking away from the debt was the "firm position" of the Scottish government, Mr Swinney said: "Alex Salmond said last night in the debate that our preferred option was a currency union in which we would take our fair share of the debt that has been built up over time.

"But if the UK is going to seize the assets then it is welcome to all the liabilities and we won't be having any of them if that is how the UK behaves."

During the debate at Leith Academy, Scottish Labour leader Johann Lamont said Scotland would be able to use the pound after independence but only on terms which are referred to as sterlingisation.

That would mean using the pound without the backing of a central bank.

Charles Kennedy warned against defaulting on debt

Ms Lamont told Mr Swinney she had previously said Scotland could not use the pound because: "I could not possibly conceive that anyone who was serious about protecting public services in Scotland would want to have sterlingisation."

Mr Kennedy agreed that Scotland could still use the pound after independence even if it did not have a formal union with the rest of the UK.

He said: "You can call it what you like so let's call it a pound. But it is pound that is not backed by a central bank. So if there is a run on the pound, unlike today, you are stuffed."

The former Lib Dem leader added: "Alex Salmond made clear if they don't give the union that his idea of negotiation we would not shoulder our bit of the debt.

"If you did not do that, on day one of an independent Scotland, never mind London and the terrible people down there, the international markets would have you for breakfast lunch and dinner."

Don't Play By Their Rules (12 August 2014)

Here's an interesting article from the New Statesman magazine in which David Scheffer argues that UK Government - or more precisely the rUK government - is not the only one that can cut up rough if Scotland votes for independence on 18 September 2014.

Now the New Statesman, in my view, is a traditional pro-Labour, pro-Union journal, but fair play to the magazine for publishing a reasoned case about the pros and the cons of the detailed negotiations that would follow a Yes vote in September. 

As I said in a previous post, the Westminster Government can't have it both ways - they can't seriously believe it's reasonable for Westminster politicians to divide up the national cake, then hand out the slices (big or small) according to 'rules' they've made up themselves and which they can change as they go along.   

Because that's not about partnership or being a good neighbour or playing fair - instead it's the behaviour of someone who's behaving like a school bully and trying to throw their weight around.

So, my advice is to the Yes campaign is to play hard ball right back and the first rule of the game is - don't play by their rules.  

The flaw in Osborne’s pre-emptive strike against a currency union

The Chancellor may think he is a realist playing hard politics. But these are tactics the Scottish government could also successfully employ.

BY DAVID SCHEFFER PUBLISHED 28 FEBRUARY, 2014 - 20:11

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George Osborne delivering his speech on Scotland and the pound at the Point Hotel on February 13, 2014 in Edinburgh. Photograph: Getty Images.

Recently, misleading presumptions about what international law requires and seeming indifference to the necessity of negotiations following a possible pro-independence vote in Scotland on 18 September have framed the referendum debate.  Politicians can always craft arguments around faulty presumptions and then make a dire outcome sound eminently plausible.  But the fate of Scotland cannot be so easily disposed of by George Osborne.

The Chancellor’s 13 February speech in Edinburgh, in which he rejected any currency union between Scotland and the remainder of the United Kingdom (rUK) in the event that Scotland’s voters approve independence, was partly based on the presumption that the rUK would be the “continuator” state of the existing United Kingdom.  This means that the United Kingdom would continue as essentially the country it currently is (shorn of Scottish territory), oblivious to any equitable claims by Scotland and dictating that Scotland start from scratch, or with a “clean slate”, to establish a resurrected independent nation. 

The alternative to the antiquated continuator argument would be to view both Scotland and the rUK as two co-equal successor states (even though the rUK is obviously the larger of the two) whose fates are tied to an amicably negotiated transition from one nation to two nations following a “yes” vote on the referendum. International law recognises that possibility of a negotiated outcome, one that can be easily embraced by both Holyrood and Westminster if their mutual intent is to facilitate a smooth transition, rather than one seeking to sabotage it.

By laying down the gauntlet of rejecting any currency union with Scotland even before any referendum vote has taken place, and promising to “punish” the Scottish people if they vote for independence, Osborne overlooked an inconvenient truth.  His entire argument rests on the presumption that no workable currency union is plausibly negotiable between Scotland and the rUK in the aftermath of a vote for independence. He simply assumes nothing can or would be negotiated in terms of the character or functioning of a currency union that would work to the benefit of both the rUK and Scotland. 

Yet there will be negotiations following a pro-independence vote. Otherwise, the rUK would have far too much to lose on other fronts that also require negotiations, talks London will be keen to take up but which the Scottish government, if it follows Osborne’s punitive example, could refuse to negotiate about at all.  Scotland need not negotiate sharing the UK debt and could simply let Westminster shoulder the entire estimated UK debt of £1.6trn in 2016/17. That is certainly the logic of the rUK being a continuator state.  Nothing in international law requires Scotland to pay one sterling pound of UK debt if the rUK is deemed the continuator state.  Nonetheless, the Scottish government has already  offered to accept the liability of an estimated £100-£130bn as an independent Scotland’s share of the overall UK debt, but only as the end point of post-referendum negotiations. 

Dire warnings that Scotland’s credibility in the markets would somehow nosedive if this transfer of debt were to happen overlook two simple facts. First, the UK Treasury already has agreed to cover all UK gilts in the event of independence, a point Osborne made in his speech.  So there is no default on the horizon to panic investors. Second, Scotland would start afresh as a debt-free nation with the apparent agreement, indeed blessing, of the rUK.  Perhaps Westminster really has decided to absorb completely the UK debt and thus not negotiate, but rUK taxpayers may wonder about the wisdom of such folly, particularly by a Conservative government.  Creditors and investors might view the Scottish position – one of willing to pay, in good faith, its fair share of the UK debt but reluctantly avoiding that financial burden if London insists on being a continuator state and rejecting negotiations – as a sign of financial strength and political acume,  rather than weakness or naivety in Edinburgh. 

If Osborne’s pre-emptive rejection of a currency union stands, Scotland could sit back in the aftermath of a pro-independence vote and watch the rUK potentially lose a permanent seat on the UN Security Council, impose extremely onerous conditions on removal of the entire British nuclear submarine fleet from Faslane by Independence Day, force the rUK into a much more difficult relationship with the European Union that may accelerate British withdrawal, and, perhaps most importantly, refuse to negotiate a reasonable division of UK assets in a manner that would hurt the rUK more than Scotland.

None of this silly face-off has to happen. The logical outcome of a pro-independence vote is negotiations to facilitate a smooth transition with the goal of advancing the best interests of the citizens of each nation. Indeed that is exactly what was indicated in Clause 30 of the Edinburgh Agreement signed in October 2012 and which is internationally admired as a model of consensual deal-making. 

Instead, Osborne launched a pre-emptive strike to kill post-referendum negotiations.  He may think he is a realist playing hard politics to bring Scotland to heel, but these are tactics the Scottish government could also successfully employ but smartly has rejected - at least for now.

David Scheffer is a law professor and director of the Center for International Human Rights at Northwestern University School of Law in Chicago.