UK’s balance of payments deficit would double without Scotland


By a Newsnet reporter

Figures published this week reveal that the Westminster Government depends on Scotland to keep the UK’s balance of payments deficit under control.  The figures show that the UK’s balance of payment deficit could double without Scotland’s major contributions to the Sterling Zone.

Mark McDonald, member of the Scottish Parliament’s Finance Committee, says this demonstrates the value an independent Scotland would have to a monetary union between Scotland and the rest of the UK in a Sterling area.

He added that the figures further undermine the already crumbling credibility of Chief Secretary to the Treasury, Lib Dem MP Danny Alexander.

In a recent speech to Glasgow Chambers of Commerce, Mr Alexander called into question the ability of an independent Scotland to maintain its financial credibility, claiming that the markets would see an independent Scotland as a greater financial risk than the UK.  

The Chief Secretary to the Treasury also claimed that mortgage interest rates would rise in an independent Scotland, forcing hard-pressed mortgage holders to pay more.

Mr Alexander’s comments were challenged by former Chairman of the Scottish Property Federation Dan MacDonald’s letter of 28th June to the Herald, pointing out the fallacy in Danny Alexander’s mortgage claims:

“Chief Secretary to the Treasury Danny Alexander warns us that mortgages will rise in an independent Scotland when, in fact, these are principally based on central bank interest rates which would remain the same across a sterling zone after independence.” wrote Mr MacDonald. 

In yet another blow to Mr Alexander’s claims, the industry association Oil and Gas UK has recently published figures which estimate that North Sea oil and gas production alone boosted the UK’s balance of payments by £32 billion in 2010, almost halving the UK’s deficit.  The industry also estimate that some 14-24bn barrels of oil remain in the North Sea, with a potential value of up to £1.5 trillion (in real terms).

On Tuesday, Mr Alexander attempted to cast doubt on an independent Scotland’s ability to create an oil-fund by claiming that taxes on the industry would increase after independence, discouraging companies from investing.  

However in April 2011, Mr Alexander was reported boasting to a London City audience that the £10 billion tax raid which the UK government imposed on the North Sea, and which the industry said threatened developments and jobs in Scotland, was “… my idea, which I proposed a few months ago.”

Mr Alexander later argued that the tax raid was “good for people in the north and north-east”.

Mr McDonald, SNP MSP for North East Scotland, said:

“Without Scotland’s major contributions to the Sterling Zone, including whisky and North Sea oil and gas, the UK’s balance of payments deficit would double.

“It makes sense for both Scotland and the UK to maintain a Sterling Zone in an independent Scotland.

“Danny Alexander must be feeling pretty embarrassed to be shown up so soon after his other economically illiterate claims on mortgages, oil taxation and regional pay.

“He has boasted that the Treasury’s oil tax grab was his idea – which has threatened thousands of jobs across Scotland and jeopardised major investments in the North Sea oil industry.

“How can the people of Scotland trust a man whose economic credibility is crumbling further and further each day?”

Mr McDonald added:

“Only today the Scottish Index of Manufactured Exports shows that export sales grew by 4.2 per cent in real terms over the year to March.

“This is an incredible figure in such a tough economic climate, demonstrating the SNP Government’s hard work through its enterprise agencies in strengthening Scotland’s economic links in overseas markets.

“We have a booming food and drink sector, and are seeing significant growth in textiles, transport equipment, chemicals and mechanical engineering.

““The rest of the UK has as much – if not more – to gain from a monetary union as an independent Scotland would.”