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Alex Salmond, Bank of England and independence, bank rescue. monetary union and independence, pandas, Philip Hammond, referendum, scare stories, Scotland. politics, Scottish banks, Scottish debt, Trident

Pandagate. Those independence scare stories in full.

But they will never take…our pandas! I don’t know where the Mirror got the story that, because they were gifts to the UK not Scotland, we would lose Sunshine and Sweetie if Scotland voted for independence. The paper cited government sources.   But apart from being straight wrong – the pandas were lent to Edinburgh Zoo, not the UK – it only drew attention to the First Minister’s quip that there are more giant pandas in Scotland than there are Tory MPs.
Pandagate provided an element of light relief among the increasingly bizarre scare stories that radiated across the media since January. The defence secretary, Philip Hammond, warned that, after independence, Scotland would have to pay “billions” for the cost of relocating Trident. This wasn’t quite in the same league as losing the pandas, but was equally daft. I don’t recall the Ukraine being required to build bases in Russia for the nuclear weapons it returned in 1994. Scotland never asked for weapons of mass destruction in the first place. Anyway, there’s a simple enough solution: Trident nuclear warheads are moved by road convoy every year from Coulport to Aldermaston near Reading. Maybe they could just make a one way trip in 2015. Scotland could pay for the diesel.
The UK government also turned its big guns onto Alex Salmond’s proposals for an independent Scottish defence force of one naval base, one aircraft base and a mobile brigade. “You can’t just break off bits of the army like a bar of chocolate” said Mr Hammond. Which is curious because that is exactly what the UK government has done under its defence review, which reduces Scotland’s bases to, er, one naval base, one aircraft base and a mobile brigade. This is a childish dispute because, Trident aside, it would be senseless for England and Scotland not to co-operate on defence, since we occupy one small island.
But divorce is a costly business. “An independent Scotland would be saddled with a crippling national debt of at least £140bn!” cried the Daily Mail, again citing “government sources” Shock! Horror! But, wait: this figure is arrived at by giving Scotland a 10% share of the UK national debt which is estimated to rise to £1.4 trillion by 2014. So, if Scotland is in the red, England would be even redder – and Scotland at least has the oil. I’m not sure who I’d put my money on in this particular race to the poorhouse. The truth is, as far as debt is concerned we really are in it together.

But not if George Osborne has his way, because Scotland, the Chancellor suggested, might not be allowed to keep the pound after independence. Nor, according to many unionists last week would Scotland be allowed to join the euro, or indeed, the European Union itself. The Scotsman actually ran a headline on Friday saying that “Scots would lose the right to travel in Europe”, according to an “expert” at Edinburgh University. So, Scots will become wretched stateless outcast, sporrans filled with inconvertible groats, barred even from going to Benidorm on holiday. Michty me, ye’ll no get me votin’ for that indypendence noo…
Except, as the former Liberal leader, Lord Steel, said last week, the people spreading these scares are only damaging the case for the UK. For a start, sterling is a convertible currency, which can be used throughout the world, so the idea that Scotland wouldn’t be allowed it is only marginally less ridiculous than saying that Scotland would be barred from joining the European Union. Scotland would remain a part of the EU because we are already in the EU, and subject to EU law. Moreover, Norwegian citizens have passport-free movement in the EU even though Norway isn’t in the EU. It is in the Schengen zone, which Britain isn’t.
The reason these silly stories annoy me is that there is a serious issue here about economic autonomy: is any country truly independent that submits either to the Bank of England’s  monetary policies, or to the dictates of the European Central Bank? The truth is that nowadays, where the economy is concerned, there are only degrees of dependence. Norway may not a member of the EU but it pays a lot of money to be in the European single market, and therefore has to obey EU laws, even though it has no say on how they are made.
In practical terms, Scotland and England would remain in the same monetary union after independence if only because families and companies have interests and businesses that straddle the border. Two of England’s biggest banks, RBS and HBOS, are nominally based in Edinburgh. The Royal Bank of Scotland long since ceased to be a purely Scottish bank.  At its height it had a balance sheet of nearly £2 trillion, more than the GDP of the UK.  Only a tiny proportion of this business comes from Scotland.  Halifax Bank of Scotland, in case anyone hadn’t noticed, had also become a big bad British bank long since, and is now part of the Lloyds group.   The idea that an English government, out of spite, would allow it to collapse or set up border posts to keep Scots and their money out of England, is so nonsensical that you have to wonder about the intelligence of those suggesting it.  Imagine of the Bank of England refused to be a lender of last resort to Lloyds, which has nearly a third of all UK bank deposits.  The ATM’s would close, English people would lose all their money,and the entired UK banking system would collapse. There are established protocols for rescuing banks that have activities that cross borders – look at the Benelux countries. 
Inevitably, Ireland and Greece, have been held up as warnings to Scotland of the dangers of going it alone. Funny they never mention Denmark, Holland, Norway or the many small nations of Europe who are doing pretty well despite the financial crisis. Even the distinguished Financial Times commentator, Martin Wolf, raised the spectre of Scottish sovereign debt , warning that the cost of Scottish borrowing would be so high after independence, that public spending would have to be massively cut. What he didn’t consider, however, is that the cost of English borrowing might also rise considerably if the UK broke up. The loss of a third of the UK mainland, plus the oil and renewables, might well be enough to cause England to lose its AAA credit rating, which some argue is already unwarranted given its massive debts. Wolf says Scottish banks might not get “lender of last resort” support from the bank of England. But since RBS is largely an English institution and most of its activities are in the City of London, this would an act of financial self-harm which, I suggest, no responsible central banker would contemplate for a second.
This latest round of constitutional argumentation, that began with the Prime Minister’s dramatic intervention on the referendum in January, has reminded me of the 1999 Scottish parliamentary election, when all the Scottish media seemed to gang up on the SNP at once. These arguments mostly date from then, even if the UK press has only discovered them.  But ask yourself: who got the last laugh?  
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