Osborne is ‘playing with fire’ over currency threats

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   By a Newsnet reporter

The SNP has warned UK Chancellor George Osborne that should he demand full control over UK assets, including the UK pound and the Bank of England, then he will also risk leaving England Wales and Northern Ireland to shoulder the UK’s massive debt burden.

Deputy First Minister Nicola Sturgeon and Finance Secretary John Swinney argue that the Bank of England and Sterling already belong in part to Scotland, depriving Scotland of its due assets would have a concommitant effect on the UK liabilities an independent Scotland would be expected to shoulder.

Despite its name, the Bank of England is the central bank for the United Kingdom.  Ms Sturgeon and Mr Swinney say that it does not belong in its entirety to England, Wales and Northern Ireland, and therefore these countries could not expect to retain sole possession of the UK central bank and cut an independent Scotland out without some form of compensation.

A similar argument applies to the Pound Sterling, which is the national currency of the whole of the UK as presently constituted, and is not solely the property of England Wales and Northern Ireland.

The Scottish Government is willing to accept that an independent Scotland would take on its due share of the UK’s liabilities, including its share of the UK national debt, however this willingness depends upon an independent Scotland receiving its due share of UK national assets.

The Scottish Government is accusing Mr Osborne of wanting Scotland to inherit the UK’s liabilities, but is refusing to allow Scotland its share of the UK’s assets. Speaking on Newsnight Scotland on Tuesday evening, Mr Swinney said that he was pointing out the logical conclusion of Mr Osborne’s argument.

Writing in her blog, Ms Sturgeon said:

“If the UK government sticks to the line that an independent Scotland has no right to a share of UK assets (after all, it is our pound and our central bank as much as it the rest of the UK’s), then the inescapable quid pro quo is that we won’t be liable for any of its debts either. Somehow, I don’t think that’s an outcome they would be happy with.”

Finance Secretary accused Mr Osborne of “playing with fire” over his – potentially illegal – threat to deprive Scotland of its due share of UK national assets.  Speaking earlier on Tuesday, he 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.”

In fact Mr Osborne is not insisting that England, Wales and Northern Ireland (EWNI) would be a successor state to the UK after independence, but rather that EWNI would continue as the UK, a continuator state rather than a successor state.

International law provides that newly independent states which are not recognised as successor states to the state from which they became independent do not inherit the debts or non-territorial assets of the continuator state.  However these provisions are included in the Vienna Accords, to which the UK is not a signatory. 

It is also noteworthy that Mr Osborne insists that an independent Scotland would become a “foreign country”.  According to the Ireland Act, passed by Westminster in 1948, the Irish Republic is deemed not to be a foreign state and its citizens are not foreign nationals for the purposes of any legislation passed in the UK.

The UK Government and the anti-independence campaign have failed to clarify why a newly independent Scotland would become a “foreign country”, yet the Republic of Ireland is not likewise classified.