Darling in row with academics over Scottish bank claims

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by G.A.Ponsonby

Former Labour Chancellor of the Exchequer Alistair Darling was yesterday embroiled in a row with three respected academics who have insisted that an independent Scotland would not have had to foot the entire bill for the collapse of HBOS and RBS.

Mr Darling called claims by three independent professors, who each said that the rest of the UK would have been expected to foot up to 95% of the total cost of the bailout, as “wishful thinking”.

The former Labour Minister said that the banks were “global in life but national in death,” adding, “so when they get into trouble the buck stops with the home country.”

Mr Darling was speaking on Derek Bateman’s Newsweek Scotland programme when he was asked about the RBS and HBOS bank bailout.  Responding, the Labour MP argued that the crisis had been “made in the boardrooms of Edinburgh” and that Scotland would have had to shoulder responsibility as a result.

However when pressed that the City of London, where the banks did most of their UK trading, would have suffered if the banks had collapsed the Labour MP conceded that it would have been in the rest of the UK’s best interests for that not to happen.

Mr Darling also admitted that, contrary to long standing claims, no UK taxpayer’s money was used in the recent bailout of the two banks, and acknowledged that the UK had in fact borrowed the money from international markets.

The row erupted after professors George Walker and Andrew Campbell echoed remarks made last week by Professor Andrew Hughes-Hallett who had insisted that an independent Scotland would have been liable for only ten per cent of the total cost of the bailout and the rest of the UK would have shouldered ninety per cent.

George Walker, who is professor of financial regulation and policy at Glasgow University, said that Scotland would have assumed a proportionate share of “around possibly only 5% of the total costs concerned”, based on the locations of the bank’s subsidiaries and business operations around the UK.

Andrew Campbell, professor of international banking and finance law at Leeds University, said: “The reality is that the situation should never have been that Scotland, if it was independent, would have to foot the bill for the entire amount of rescuing RBS.

“The reasons for that would be that Scotland would have a separate bank regulator that would have been looking out  for the banking interests North of the border, whereas the English and Welsh, the rest of the UK regulator would have been regulating what was going on throughout the City of London.

“So it would be inconceivable that Edinburgh or Scotland as a whole could be held liable for that full bill.”

Referendum
Mr Darling also urged the Scottish government to ignore its pre-election pledge on the date of an independence referendum and to hold a ballot immediately.

The former Labour Minister demanded that the SNP ditch its promise to hold a referendum in the second half of their five year term and instead insisted it should be brought forward.

He confirmed that he would play an active part in the referendum campaign and claimed that Scotland’s interests were best served by keeping the nation in the Union.