Treasury makes Scottish debt pledge

Written By Unknown on Senin, 13 Januari 2014 | 19.21

13 January 2014 Last updated at 07:16 ET

The UK Treasury says it will honour all UK government debt issued up to the date of the referendum on Scottish independence.

The move, announced on Monday, is aimed at removing the risk of default from any debt-sharing dispute between Scotland and the rest of the UK.

The Treasury said it will "in all circumstances" take responsibility for all UK government debt, should Scotland vote for independence in September.

The debt is currently £1.4 trillion.

However, the Treasury, in addition to its guarantee, added that an independent Scotland would still be expected to pay its "fair share".

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Bankers tell me that markets would probably force Scotland to pay up to 1.5 percentage points more to borrow, initially at least, than the UK currently pays"

End Quote

Scotland's first minister Alex Salmond said the debt pledge puts Scotland in "an extremely strong negotiating position".

Mr Salmond added that sharing a currency, post-independence would be "common sense".

In response, former chancellor and leader of Better Together, Alistair Darling, said it was a "sensible move" by the Treasury.

He also cautioned that the UK pound "is a monetary system underwritten entirely by the UK government. It's not an asset to be shared like the CD collection after a divorce".

Pledge

The move follows approaches from investors to the Treasury and the UK's Debt Management Office, said BBC Scotland business editor Douglas Fraser.

A perceived increase in the risk of default could push up borrowing costs in the run-up to the vote, he added.

The Treasury does not believe the pledge will weaken its negotiating position on the share of debt that a newly-independent Scotland would inherit. The Treasury has been clear in saying that no kind of restructuring of the £1.4trn UK debt is to happen.

The Scottish government anticipates taking on such a share, but it has warned that it may not do so if Whitehall refuses an alliance on joint control of the pound.

The Scottish government's White Paper on the issue says that in the event of independence, Scotland would be liable for some of the current national debt, and Mr Salmond would negotiate to pay the interest on a portion of debts. Essentially, Scotland would become a "debtor" to the Treasury in London.


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