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12 April 2013


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Angus McLellan

Counter-factual arguments relating to interest rates are likely to be weak, especially when dealing with a long period of time as with this data. After all, these GERS-world graphs purport to show "fiscally autonomous Scotland" with a sizable surplus in the 80s at a time when debt costs were high, both absolutely and as a proportion of government expenditure. It appears that UK debt today costs half as much to service, £ for £, as it did before Gordon Brown handed control over monetary policy to the BoE. Adjusted for inflation, that would seem to mean that £X of relative surplus in 1980 or 1990 is much more valuable than the same amount is today in an era of relatively cheap money.

And on that note, why don't Brown's defenders ever point up that simple, obvious "coincidence"? I don't put much faith in coincidences myself, especially not when it comes to breaking with a decades long habit. But perhaps there are other reasons?

Dick Winchester

I cannot agree that an independent Scotland with the benefit of oil revenues and other associated taxes plus a positive balance of trade supported by oil/gas supply side activity (hardware & services) is going to have higher borrowing costs than the UK.

In fact, the rUK's loss of oil revenues and its associated taxes plus the negative impact on its balance of trade could well drive its borrowing costs up and probably lead to another cut in its credit rating.

Why do you think the UK Govt suddenly came up recently with its own new oil and gas strategy? The industry is having a boom time again with increased production levels over the next few years and the Treasury wants those taxes!!


So all of this means, essentially that we might be a little bit worse off, or a little bit better off but Scotland is not too poor to look after itself? Am I getting this wrong? And for this reduction if it is so, we get to make most of our decisions (the EU of course makes many for the UK now as well)?

And if we are gong to be poorer we will have to make some savings, like Trident replacement, or ensuring we dont have nuclear and therefore avoiding the decommiisioning cost (this round is costing us £76 billion), or aircraft carriers that for a while we werent sure if one of them would have planes, or illegal wars etc.

David McDonald

Dick Winchester

It is worth bearing in mind that Norway has to pay 2.2% interest on money is borrows for 10 years, whereas the UK only pays 1.7%. (as at early April 2013).

In other words, to borrow £10 million for 10 years would cost Norway £220,000 - but only costs the UK £170,000.

Norway - as a small, oil rich country of a similar size to Scotland (and the Norwegian government is regarded as trustworthy) - is probably a good comparator for Scotland when looking at borrowing costs.

The size of a country matters a lot when it comes to borrowing money.

(Also this is partly down to the marketability of UK debt vs. Norwegian debt - there is more UK debt and it is traded more widely, so people are keener to buy it knowing that they can sell it.)

Final point - The rUK would only lose the tax from the sale of oil (NB - it would not 'lose' oil revenue - as it never had oil revenue - it only ever received the taxes). Given the overall scale of the UK economy, ther net overall impact is relatively small (bear in mind that the loss of 'Scottish' assets - like oil - will also be linked to the loss of 'Scottish' costs - such as a social welfare net etc).

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