Much has been written in the last 2 days about the Treasury’s confirmation to the markets that the UK Government will remain liable for the entire UK national debt regardless of the outcome of September’s independence referendum.
To read some of the coverage, Jock McPublic could be forgiven for concluding that this means an independent Scotland would come into being as a completely debt-free entity (the Scotsman’s report is among the exceptions, but whichever Telegraph sub-editor wrote this headline needs to read the story more closely). The position is of course much more complicated than that.
Essentially, the UK would remain legally liable for the debts already issued in its name, but Scotland would reimburse HM Treasury for whatever was agreed to be “our” share of those debts. While valuing the “fair share” would require demanding and potentially fraught post-referendum negotiations, the need to establish credibility with the markets in order to fund future borrowings would give Scotland little option but to take responsibility (de facto if not de jure) for some share of the debt.
On January 14, 2014