I have been busily buying thermal underwear, fleece
lined tops and down filled trousers. My intention is to use the central heating
as little as possible. If I heat myself with clothing rather than heat the room
where I am sitting, I will save a fortune. But in fact, I will be able to have every
radiator in the house on full and walk around in short sleeves. The price of
energy is going to be capped. The Government will spend up to £150 billion to
subsidise our bills and my little burst of self-reliance will have turned out
to be pointless.
But I will stick to my plan regardless. If I can use less
heating it will benefit me. Think of the calories burned. It will benefit my
finances if I spend less than last year price cap or no.
I oppose price caps. Prices are set by the market by
the laws of supply and demand. Energy is in short supply, because we stopped
using coal, failed to build nuclear and didn’t exploit the North Sea to the
full. We tilted at windmills thinking they were giants who would keep the
lights on only to discover that they were midgets who went on strike warming
their hands round a brazier every time it was really cold.
I would prefer to spend the full price for a commodity
rather than have the Government pay it for me, because it then gives me the choice
to pay the price rather than have to pay it later. Because the subsidy we will
all receive whether we want it or not will not be free.
The Government borrowed £70 billion to pay for
furlough and now will borrow twice that two years later to pay our heating
bills. But the present crisis is in part the result of the Covid crisis, so if
we are not very careful the Government will have to borrow £300 Billion two
years from now to pay for the next crisis.
There comes a point when you realise that it would
have been better to tell people to continue working during the pandemic rather
than pay them to stay at home. It may have cost lives doing so, but it will
cost lives increasing Government debt to unsustainable levels, because we will
be unable to afford the things that save lives.
But I fear that just as lockdown was politically unavoidable,
so too is furlough two. The BBC would find a poor starving family shivering in
its hovel and accuse Liz Truss of mass murder if she did not cap energy prices.
Telling us all to wear thermals and jumpers rather than wandering around the
house in our underwear would certainly lose the Conservatives the next
election. British voters were delighted to be paid furlough to stay at home and
they will be delighted to have their energy capped. They will think of it as
free money and a bargain at that.
But there are long term consequences to continually
bailing out the public each time there is a crisis. It makes the political
situation in the UK where each part thinks it has the right to walk away
unsustainable.
At some point quite soon, Nicola Sturgeon is going to
have to admit that there will neither be an unofficial referendum next October
nor that the next General Election will be a de facto referendum on
independence. The reason for this is that we will be in the equivalent
financially of the pandemic. We will be spending twice as much as furlough and
Scottish voters must surely realise that just as they relied on the UK Treasury
for furlough so two years later, they will rely on the UK Treasury or else receive
heating bills they will most likely not be able to afford. Voting to be cold is
not a great slogan for the SNP.
Scotland has lots of renewable energy, but it would
remain intermittent even if we were independent, unless Sturgeon can control
the wind and make the sun always shine. If Scotland had voted for independence in
2014, we would have had to bail ourselves out in 2020 and in 2022. Small
countries can indeed do this, but Scotland at present spends considerably more
than we raise in taxes. We could of course change this by spending less and
working more, but there are no signs of the SNP doing so.
So Scottish voters must reflect that we have been
bailed out twice since 2020 and its not at all sure that the Government of an
independent Scotland could have borrowed at the same rate or even at all. Yes,
Denmark and Norway can borrow, but we are not in their position and independence
would not automatically make us like them. In time Scotland could become like Denmark,
but it would require the tough choices and economic realism that I have yet to
encounter from either the SNP or independence supporters in general.
But there is something perhaps more important that
Scottish commentators are missing. Government debt isn’t some abstract figure
that we then dismiss. It has to be paid back. The only reason the markets lend
to the UK Government is that they are certain to be repaid. The word for not
repaying is default.
When pension funds invest, they rely on Government
debt because it is reliable. So, the Government’s promise to repay its debt matters
to you individually. If it didn’t you might not receive as high a pension as
you expect. Government debt is therefore a promissory note against future tax
payers. But these tax payers the Government is assuming will live in Scotland
just as much as any other part of the UK.
But there comes a point then where future tax payers
cannot escape their obligation to contribute their taxes to paying back the
debt that was incurred for their benefit.
There would be legitimate fury in those parts of the
UK that pay the most taxes if Scotland were to walk away in 2023 or 2024 having
been bailed out in 2020 and 2022 by means of Government borrowing which was
borrowed on the assumption that Scottish taxpayers would pay it back because
they would be UK taxpayers.
But Scotland cannot afford to leave the UK with former
UK taxpayers furious with it. We require the cooperation of our fellow
citizens, we require the former UK to recognise Scotland and to encourage its
allies to do so.
Just as it is politically untenable for Truss to allow
the market to decide the price of heating, so too it is becoming politically
untenable for Scottish voters to demand their share of furlough and their share
of a price cap on heating, while demanding the right to walk away without repaying
any of that debt whenever they please.
The UK Government can certainly make Scottish independence
impossible, not merely by failing to allow a legal referendum, but by refusing
to negotiate with a Scottish Government that planned to go it alone
unilaterally. More importantly the UK Government can insist that the only way
Scotland can achieve independence legally is by accepting a population share of
the national debt, which means future Scottish taxpayers whether independent or
not accepting they pay back what was borrowed on their behalf.
This in itself makes Scottish independence impossible
until and unless UK national debt is reduced to a more manageable level. No
country could begin life with a debt ratio to GDP of more than 100%, it would
involve a default. If the UK insisted that it would view a failure to accept a
population share as a default, then it makes Scottish independence impossible at
least for decades.
The Scottish Government could alternatively say that it did not need furlough, does not want a price cap on heating bills no longer wants Barnett and would prefer that Scots freeze. After that you can by all means have your referendum.
