Kate Forbes the Scottish Government Finance Secretary
has asked the British Treasury for the power to borrow an extra £500 million
this year. Scotland has already been bailed out by the Treasury’s furlough scheme
and increases to the Scottish budget owing to the UK’s increased spending due
to Covid. But Kate Twist wants some more.
I am of the view that each part of Britain should get
as much as it needs to deal with Covid. None of us are going to be asked to pay
back the wages that we received except through taxation and contributing the to
Britain’s economic growth in the years ahead. But here we immediately come up
with the issue.
The Treasury has been investing in all of Britain so
that our economy remained intact while we were stuck inside. But borrowing is
not free. Government’s borrow by issuing gilts (debt) to investors. The
Government pays interest on gilts and pension funds buy the gilts because they
are very safe investments. If a Government failed to pay back its debt none of
us would have pensions.
But the rate at which a Governments can borrow is not
the same all over the world. Britain can borrow at a low rate because we have an
historic record of paying back debt and because we have a sustainable deficit (the
extra we spend over what we earn from taxes etc) that markets believe will
allow us to continue repaying our debts in the future.
But the confidence of the markets in the British
economy would be undermined if Scotland became independent. English people
frequently maintain that they are indifferent to Scottish independence. Some
even welcome it supposing that it would save them money. But they forget that
the UK would cease to exist if Scotland became independent. It wouldn’t be
possible for British people to even continue to call themselves British, because
the north of Britain would have gone.
There is no guarantee that what was left would
maintain its seat on the Security Council, nor its soft power nor its reputation
as a safe place to invest. The UK would become a laughingstock the world over.
Who would respect a United Kingdom that could not remain united? The price of borrowing
would also increase as investors waited to see what consequences the breakup of
a three-hundred-year-old country had for debt repayment. Any English person who
thinks he would be better off by the departure of Scotland understands nothing
about economics.
Kate Twist is asking the Treasury for permission to borrow
because it is the Treasury that will be backing up the debt. Scotland on its
own with a 7% deficit could not issue debt on the open market without paying a
punitive interest rate. Twist therefore is in effect asking the Treasury to borrow
for her. But is Scotland a good risk?
Last year Scotland had 13.6 % higher spending per head
than the UK as a whole but collected 2.6% less per head than the UK average.
Scotland’s deficit is 7 times Britain’s and half of Britain’s deficit is due to
Scotland. This year the situation will be worse. The oil price has crashed so
that it costs more to dig it out of the North Sea that it is worth. Scottish tourism
has been destroyed by Covid and SNP mismanagement. How much more will we spend
than we earn this year Kate?
But worse than this Kate Twist only wishes to borrow
more because she doesn’t want Scotland to return to austerity. Scotland in fact
has not had any austerity, which means living with your means. We have for
years spent more than we earned. But how does Twist think we can repay debt if
we neither raise taxes nor reduce public spending?
So, in effect Kate Twist is asking for more even though
Scotland’s deficit, which was unsustainable last year, will this year be even worse.
She is doing this knowing that it will be Britain that incurs the risk, but
that she and the SNP plan to make it more difficult for Britain to borrow by
destroying not merely our country but our credit rating. She is asking for more
knowing that the last SNP plan for independence involved walking away without
paying Scotland’s share of the national debt. The minimum I would ask her for
her 10-year debt is a 10-year promise for the SNP not to campaign for
independence.
Kate Twist is going to the bank manager asking for a
mortgage telling him I spend 7% a year more than I earn and I’m planning to
leave the house without paying the debt and will burn it to the ground. Kate
knows all about flitting. Her degree is in Diaspora and Migration History. If
she asked me for more, I’d tell her to come back when she had read Economics
for Dummies.