LDVideo: Danny Alexander explains decision to guarantee all UK debt up until Independence

It’s slightly annoying that the announcement by the Treasury pledging to honour all UK debt up till the date of Independence was made on the same day as Alistair Carmichael’s first keynote speech of the New Year, but there was little choice given ill-advised threats last week that an independent Scotland would default on its debts if it didn’t get its way on using the pound as part of a currency union. The markets were spooked. The Treasury had to act.


This doesn’t mean that Scotland would get off the hook. It just means that the UK Government would be the middleman. They’d pay it off, and Scotland would have to pay them.

Nice to see the mature, responsible manner in which our First Minister would conduct himself internationally. That’ll be a bit of a shock to the diplomatic community.

Danny Alexander explains it all to the BBC in the video above.

Willie Rennie didn’t mince his words when he commented, though. He compared Alex Salmond to a stroppy teenager not getting his own way at Monopoly. Actually, in my experience, teenagers don’t get stroppy if they don’t get Park Lane, they just cheat their way out of the situation, as I found out to my cost during one marathon late-night game over Christmas. That’s beside the point, though. Willie said:

This is a responsible and prudent decision taken by the UK Treasury to protect our borrowing costs from market speculation over Alex Salmond’s independence plans. This stands in stark contrast with the petty threats made by Alex Salmond to default on Scotland’s share of the UK debt if everything did not go his way in negotiations with the rest of the UK.

Alex Salmond is behaving like a stroppy teenager who flips up the Monopoly board if he doesn’t get Park Lane.

As part of the UK Scotland shares the rewards of decisions like these which keep our UK economic house in order. The nationalists have done little to square off the uncertainty around their independence plans on currency, pensions and mortgages. After a 670 page white paper, multiple speeches, papers and government might poured into the SNP’s independence cause, Alex Salmond continues to fail to provide answers to these most basic and important questions on his independence plans.

I also looked on today as Alistair Carmichael told the BBC’s Brian Taylor that if the first act of an independent Scotland was to default on money it owed, who would want to lend it money in the future? It’s a fair point.

Alex Salmond was characteristically bullish in his interview, but as George Eaton pointed out over at the New Statesman, it’s not really good news for the SNP:

The real significance of today’s announcement is that investors rightly believe that Scotland’s debt position would be weaker than that of the UK – and that is nothing for the SNP to celebrate.

And the inevitable consequence of that is that it will cost more for an independent Scotland to borrow money than it does within the UK at the moment. That means higher interest payments, our cash won’t go as far and there will be even more of a shortfall in our finances. It’s not the best start.

Update

In the Scotsman Danny Alexander has written in more detail about the implications for Scotland if it does go independent.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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