Independent Scotland could have afforded bank bail out

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Andrew Hughes Hallettby G.A.Ponsonby

An independent Scotland would have been able to cope with the collapse of the Bank of Scotland and Royal Bank of Scotland a financial expert has claimed.

Professor Andrew Hughes-Hallet has said that existing convention shows that the cost to Scotland of the failure of both banks would have been closer to £1 billion and not the £27 billion that has been repeatedly claimed by Westminster governments.

Professor Hughes-Hallett explained that existing banking conventions meant that debts incurred by failed financial institutions fell proportionately on the jurisdictions within which those institutions traded.

This, said Professor Hughes-Hallet, meant that Scotland would have been liable for only 10 percent of the total liabilities and not 100 percent as some politicians have claimed. Far from being a crippling burden on an independent Scotland the cost could have been comfortably dealt with.

Speaking on Derek Bateman’s Newsweek Scotland, Hughes-Hallet pointed to the bail out of the Fortis and Dexia banks in 2008 – where France, Belgium and the Netherlands each took a proportion of the cost based on the amount of trading within their respective jurisdictions – as proof of the convention at work.

Professor Hughes-Hallet also explained that the US Federal Reserve contributed to the bale out of RBS and HBOS to the tune of $600 billion because the banks traded there.

He said: “By international convention, when banks which operate in more than one country get into these sort of conditions the bail out is shared in proportion to the area of activities of those banks.”

Professor Hughes Hallett added: “In the case of the RBS … roughly speaking, 90% of its operations are in England and 10% are in Scotland.

“The result being, by that convention, the rest of the UK would have to carry 90% of the liabilities of the RBS and Scotland 10%.”

Hughes-Hallet was responding to claims by successive Secretaries of State for Scotland that an independent Scotland would have been ‘crippled’ by the banking crisis.

Labour’s Jim Murphy and Lib Dem Michael Moore have both claimed in the House of Commons that the cost of a bail out to an independent Scotland would have been in the region of £27 billion.

The leading academic described these statements as “misleading” and suggested Michael Moore may well not have known the facts of the matter when he spoke.

The costs of the banking bail out and the implications of the banking crisis on an independent Scotland have featured prominently in Unionists arguments.

These latest claims by a leading and respected academic throws doubt on the figures presented by Unionist politicians and commentators. It also underlines the need for rigorous and objective examination of the fiscal argument as Scotland moves towards an independence referendum.