tc27 wrote: ↑Sun Oct 18, 2020 8:27 pm
Interesting interview with Andrew Wilson the 'brain' of Scottish nationalism who will probably write the economic strategy for the next white paper if and when it happens. This is the guy Tichtfield is talking about when he alludes to someone 'having a solution' to deal with various issues.
https://www.heraldscotland.com/news/188 ... ew-wilson/
Highlights are it looks like trying to unofficially use the £ will be the currency plan...an interesting choice with a deficit normally around 10% and predicted to be over double or triple that in the next few years and could very easily lead to a lance of payments crisis (limited ability to borrow in a foreign currency and no access to central bank bailouts). It also means the finance industry (Scotland biggest onshore source of tax revenue) will have to move to where it has a lender of last resort.
Secondly a road-map to independence that doesn't end until 2026.
The finally point he does not in discuss but is evidently true is that currency choice rules out EU membership.
Whilst I accept there are many who would vote for full sovereignty regardless of the costs I do not think this is a majority of Scottish voters - as soon as the SNP try and present a credible plan to grapple with the difficulties I think the case for Independence gets weaker.
There needs to be a radical reckoning on the economic facts if this ludicrous path is still being touted; had we gone down this currency route the previous time, the fiscal expenditure required by COVID would have put us perilously close to sovereign default (quite the banana republic club). Let's look at the objective facts if you're an investor: you have a country with (pre crisis) c86% debt to GDP (in reality this would most likely be higher due to likelihood of a recession following the 2016 independence date), a pre-crisis deficit of 10% (likely to be higher due to parts of the financial sector decamping) and no central bank. The repayment plan is assessed entirely on tax revenues as debt rollover could be too prohibitive, spreads over Gilts are looking at c400bps (akin to large EMs who have their own central bank and a good record on debt).
Then, you have an epic (almost instantaneous) crisis in which the state has to quickly deliver c25% of GDP in fiscal expenditure, this can be funded by: higher taxes, lower government spending or issuing debt. There is no central bank to provide monetary chicanery, the pre-crisis budgetary and debt position are dire, Scottish debt spreads blow out at the very time huge tranches of debt are to be issued, the deficit stands at something close to 25%. At that level, every bp of yield has a large and far reaching impact on future budgets, squeezing money out of services to meet on-going debt interest. It would be an absolute maelstrom of the proverbial.
On top of this, you add the competence of the SNP administration- the people in charge of this mess are Sturgeon and Forbes- as well as the competence of the Scottish civil service which would be woefully unprepared to deal with these policy challenges; specifically as it would be four years old and would have no great experience in debt issuance and monetary policy.
Questions which should be agreed between UK government and nationalist administration and released ahead of any plebiscite:
SNP to agree to take on pro-rata share of national debt and a repayment plan and publish what proportion of the estimated budget that would consume
SNP to publish their preferred method for closing the deficit: tax rises (for whom), spending cuts (where) or debt issuance (how and in what currency)
SNP to publish their currency choice (not a range of options) and specify how they're going move toward it (shadow sterling, new currency, Euro etc.) and what the risks and benefits are for each
SNP to publish their plans for monetary authorities
Trade arrangements to be published in context of SNP's plan to get back into EU (subject to substantial deficit reduction and potentially joining Euro- need that covered off)
An independent estimate on the estimated cost of issuing Scottish debt to markets (they'll need to issue c10% of GDP on day 1 to meet the deficit)
People are free to vote as they wish but certain facts should be established ahead of time so people can make their own choice with some awareness of the cost and issues.