The question of the UK’s considerable debt has been part of the ongoing debate in the lead up to the Independence Referendum later this year.
In its White Paper, the Scottish Government said that, if Scots vote for independence, then Scotland would be liable for a portion of the current national debt – exactly how much to be the subject of negotiation. It also may depend on whether the rest of the UK agree to let Scotland become part of a Sterling Zone; ministers in Edinburgh have already warned that an independent Scotland may not accept this liability so if Whitehall refuses to accept joint control of the pound.
Now, the Treasury has issued what it calls a “cast-iron guarantee” to honour UK government debt “in all circumstances” – currently standing at £1.4 trillion – issued up to the date of the referendum on Scottish independence. It said the move was aimed at removing the risk of default from any debt-sharing dispute between Scotland and the rest of the UK. However, it went on to stress that an independent Scotland would still be expected to pay its “fair share”.
Reacting to tne news, the First Minister, Alex Salmond, claimed that it put Scotland in “an extremely strong negotiating position to win a fair deal”. He added that sharing a currency, post-independence would be “common sense”.
By contracts, the former chancellor and leader of Better Together, Alistair Darling, insisted that the pound “is a monetary system underwritten entirely by the UK government. It’s not an asset to be shared like the CD collection after a divorce”. He added that markets had been “…unnerved by Alex Salmond’s threats. He is playing with fire with his irresponsible threats to default on Scotland’s debts if he doesn’t get his way on currency.” Nonetheless, he concluded today’s announcement was a “sensible move” by the Treasury.
Analysts believe that the announcement was made because the markets were becoming a little jittery over the status of the debt. They argue that, if left ambiguous, the UK’s cost of borrowing might be pushed up. But Mr Salmond puts any blame for such uncertainty squarely on the Westminster government’s refusal to discuss the terms of independence ahead of the referendum.