“The UK as the successor state is obliged to hold on to all of the debt. We would be liberated from a population share of UK debt of £125bn.”
John Swinney, 23 April 2013
Chancellor George Osborne fired the latest broadside in the row over Scottish independence this morning.
The Treasury has published a new report casting doubt on the Scottish National Party’s (SNP) plans to hold on to the pound if Scots choose to break away from the UK in next year’s referendum.
The paper says a newly-independent Scotland would have to try to negotiate with the rest of the UK to create a euro-style currency zone – but the UK might well say no.
Scotland could continue to use the pound outside a formal agreement – much as Panama uses the US dollar – but that could be disastrous, with Holyrood unable to print money and left with little control over monetary policy.
The ruling SNP responded angrily, with Scottish Finance Secretary John Swinney accusing the chancellor of “playing with fire”.
Mr Swinney said: “What the Treasury paper is designed to do is to make things sound as difficult and as obstructive as possible. I don’t really think it is a particularly helpful contribution to the debate.
“He is arguing in his paper this morning that the UK would be the successor state, that it would hold on to the pound and we somehow couldn’t get access to that.
“If that’s his position, then the UK’s obliged as a successor state to hold on to all of the debt. We would be liberated from a population share of UK debt of £125 billion.”
It’s a simple idea: if you don’t let us keep the pound, we don’t have to pay our share of UK national debt. It might be fair. But is it true?
So much of the debate about Scottish independence hinges on unknowns. Splitting from the UK would be an unprecedented step and the legal, political and fiscal consequences are far from black and white.
Nationalists tend to assume that Scotland will get the lion’s share of the UK’s North Sea oil revenues after independence, because most of the oil is in “Scottish” waters.
Unionists tend to assume that Scots would have to shoulder a per capita share of UK debt, perhaps including the liabilities run up by bailing out Scottish banks.
But none of these things is a done deal. Everything is up for negotiation, and according to the chancellor, that includes the issue of currency.
The British government recently published this paper after seeking a legal opinion from two experts on international law, Oxford Professor James Crawford and Professor Alan Boyle of Edinburgh Law School.
The law professors think that if Scotland votes for independence, it will become an entirely new country in international law (a “successor state”), while the rest of the UK will continue to be the UK in the eyes of the world (a “continuator state”).
This is only an opinion, and there are other academics who dissent, like Dr Andrew Blick, a constitutional historian from King’s College, London, and US law professor David Scheffer, who think the UK would be dissolved and there would be two “successor states”.
But the UK government’s position is that the new Scotland would start with a clean slate and would have to renegotiate entry to the EU and countless other international agreements, while a smaller UK would carry on much as before.
So when Mr Swinney says that George Osborne “is arguing…that the UK would be the successor state”, this is completely wrong. The opposite is true: it’s Scotland who will be the successor state, according to Westminster.
Mr Swinney is either making a slip of the tongue here – getting his successors and continuators mixed up – or misrepresenting the UK government’s position.
Either way, his assertion that if Westminster is right “the UK…is obliged to hold on to all of the debt” doesn’t appear to have any basis in reality.
There’s no legal rule that says the UK as a continuator state would be obliged to hold on to all of its public debt: the transfer of liabilities would be up for negotiation along with everything else.
This is the view set out in the Vienna Conventions on Succession of States, which the SNP has often referred to in the past.
The convention that relates to property and debt says: “When part of the territory of a state is transferred by that state to another state, the passing of the state debt of the predecessor state to the successor state is to be settled by agreement between them.
“In the absence of such an agreement, the state debt of the predecessor state shall pass to the successor State in an equitable proportion…”
The only way this would not apply is if Scotland was treated as a former colony rather than a partner state in the United Kingdom. And in any event, the UK is not a signatory to the Vienna conventions.
Professor Boyle told us it was “nonsense” to suggest that his legal opinion implied that the rest of the UK would be “obliged to hold on to all of the debt”.
He told FactCheck: “Scotland would have to negotiate its share of the national debt. It is a negotiation and it will have to be a hard-headed one.”
Of course, the government of a newly independent Scotland could try to refuse to take any of the debt on board as a bargaining position, but the chancellor could be equally confrontational about dividing state-owned assets between the two countries.
The one thing we can say for sure about a “yes” vote is that there would have to be intense negotiations between Holyrood and Westminster. There are few certainties about the outcomes.
By Patrick Worrall