That was a poor article, even by the Economist’s standards.
The first thing that you really wouldn’t think needs to be said is that the bank bailout has
already happened. It didn’t happen in an independent Scotland. There wasn’t an independent Scotland at the time, so there was no opportunity for Scotland to assist in the bailout. Furthermore, the responsibility in the UK for regulating and supervising the banks was the UK government’s.
So, that’s Time covered, but we also need to cover Geography. Some people get very confused about registered headquarters of companies, and names that may appear in company titles. Really, these companies are transnational.
To understand that, let’s see what happened with a bank that was bailed out and isn’t registered in Edinburgh. Barclays is registered in London. Wait, you say, but it didn’t receive a bailout! No, it actually received the biggest bailout of a UK headquartered bank. However, it wasn’t bailed out by the UK government, despite its headquarters being in London. Why was that? It’s because the activities that were primarily in trouble were in the US and Qatar. And those governments bailed out Barclays. £6billion came from Qatar, and £552.32 billion from the US Federal Reserve.
Odd, you might think. However, try looking at it this way. First we need to know a little about the Scottish banks. The vast majority of their staff, assets and liabilities are in England.
Imagine Scotland was independent decades ago. We’re in a period that the banks are supposedly doing well. More than 90% of their activity in these islands is in the rUK. Are we going to say that the revenues generated there will go to the Scottish exchequer? Of course not. The revenues will be payable to the rUK exchequer.
Now, let’s imagine we get to 2007/8 and the banks fail. This time, though, Scotland is independent. We’re assuming that the same failure to regulate and supervise has happened, but this time two governments have slipped up. Well, how do they bail the banks out between them? They do it in proportion to the extent of the activity in the respective countries. The cost of Scotland’s bailout would be roughly 10% of the actual bailout paid by the UK. Now that’s a little higher than Scotland’s share of the UK population (in 2012, Scotland accounted for 8.3% of the UK
http://www.bbc.co.uk/news/uk-scotland-24866266 ), so it’s a slightly larger liability per head, but perfectly manageable.
And this brings us to the second point. The SNP aren’t suggesting that Scotland should default on its share of UK liabilities. Indeed, they repeatedly say they want to shoulder their share of the burden. All they are saying is that it’s a very strange deal that is suggested if Scotland is to get all the liabilities but none of the assets.
Articles like this, and the “mortgage scare” that circulated yesterday, and based on getting tangled up in this notion of population share of assets and liabilities. Salmond is not threatening to “walk away from Britain’s national debt”. He is pointing out that there is another side to the balance sheet. And he's right; there is.
