Think tank report claims independent Scotland could save billions in assets

Common Weal publishes first paper on creating a progressive independence settlement

A LEFTWING Scottish think tank has produced a report projecting potential savings of £2bn a year if Scotland rethinks its approach to negotiations with the UK state in the event of Scottish independence.

The report by the Common Weal think tank calls for Scotland to pursue a different approach to negotiating which assets and debts Scotland would inherit from the UK state.

At the heart of the report is the proposal of replacing a subtractive model of negotiations, discussed during the Scottish independence referendum of 2014, whereby the Scottish Government would subtract the value of public assets withheld by the UK state from the share of UK public debt it would be willing to take.

Instead of this approach, the report advocates an ‘additive’ model, whereby Scotland would accept debts up to the value of the assets it would receive.

The author of the report, Dr Craig Dalzell, said: “Over the course of the late 20th century many newly independent countries have grappled with the consequences of their creation, including the separation of assets and debts between themselves and their partners within the former state. Whilst few historical examples will provide an exact parallel of negotiations between a newly independent Scotland and the rest of the former United Kingdom, their experiences may greatly inform and deepen the understanding of our own situation.

“The reality of the situation is that Scotland has far more nuanced options available to it including only taking on a level of debt equal in value to the assets which Scotland actually requires to begin life as an independent country.” Dr Craig Dalzell

“The only model of separation openly discussed in the 2014 independence campaign was one in which Scotland either assumed a full percentage share of the UK's assets and debts or assuming absolutely nothing. The reality of the situation is that Scotland has far more nuanced options available to it including only taking on a level of debt equal in value to the assets which Scotland actually requires to begin life as an independent country.”

The report also points out that the position of negotiators would be unclear, as no full valuation of UK state assets has been made since 2007.

“It should be noted that for these negotiations to be successful, we must first know exactly what is already within Scotland's possession and what we may need but currently lack. For this reason, it is vital that a full register of assets be commissioned either by the UK or Scottish Government,” Dalzell added.

Jargon Buster: Debt, deficit and economics

During the independence referendum, the Yes movement campaigned on the basis that it would continue to share a currency with the  rest of the UK, and would therefore need to share fiscal policy with the UK through the Bank of England. The No campaign challenged that Scotland would not be able to cope economically with the share of debt it would have to receive in exchange for state assets.

The report also urges a move away from the view that Scotland’s negotiating position should be based upon it’s population size and contemporary economy and society. Instead the report argues that Scotland’s historic contribution to the UK should also be taken into account.

Common Weal Director Robin McAlpine said: “The issue of Scotland’s share of UK debt in the event of independence is sometimes talked about as if it is a law of nature like gravity. It is not. It is the legacy of a messy series of financial arrangements negotiated by a succession of different governments over a period of decades.

“If rather than just accepting the simplistic arguments put forward by those who oppose independence you actually delve into the legal and financial position and explore the options, you quickly realise that the simplistic headlines are wrong. Assuming that Scotland negotiates cleverly and refinances national debt sensibly, the smallest saving we should be looking for is £800m. That would take a very substantial chunk off the difference in the fiscal position of Scotland and England according to Gers. It would be a very significant contribution to the financial health of a newly independent Scotland.”

The debate over the state of Scotland’s finances has been inflamed recently by the publication of the governemnt expenditure and revenue Scotland (Gers) figures, which showed that Scotland mantains a public spending deficit of around £15bn pounds. The finding of the report are that this deficit could be partially repaired through the process of Scottish separation from the UK.

“The historical precedents clearly show that whatever move the UK Government seek to make in the negotiations, Scotland will be able to counter it, and will hold a crucial upper hand.” Ben Wray, CommonWeal

The report is the first in a series of detailed reports being published by the Common Weal think tank, in an effort to provide Scotland with a stronger position on technical and strategic questions in the event of a second referendum on Scottish independence.

Ben Wray, head of policy & research at Common Weal, said: “Whatever bluster the UK Government comes out with beforehand, they are perfectly well aware that in the event of a yes vote they will have to negotiate a share of assets and liabilities with an independent Scotland. This report outlines a number of options for the Scottish side of that negotiation, all of which would be highly beneficial in improving Scotland’s fiscal position.

“The historical precedents clearly show that whatever move the UK Government seek to make in the negotiations, Scotland will be able to counter it, and will hold a crucial upper hand – whereas the UK Government must honour all existing debts to creditors, including many where the rate of interest is far higher than currently, an independent Scottish Government would be creating new debt at current historically low interest rates. Therefore whichever negotiating position is arrived at, Scotland’s refinanced debts will likely be much cheaper than the UK’s, and cheaper than that currently attributed to them in Gers.”

The publication of the report coincides with the launching a nationwide listening campaign by the SNP. The campaign is designed to gather opinions on Scotland’s future from across the nation.

The full report can be read here.

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