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February 19, 2014 6:41 pm
British taxpayers could be landed with an annual debt service bill of up to £5.5bn if London refuses to share the pound with an independent Scotland, a Scottish minister has warned.
John Swinney, Holyrood finance minister, told the Scottish parliament’s economy committee that it would cost the rest of the UK up to £130bn if Scotland refused to accept a share of UK debt in the event of separation.
Mr Swinney said: “If you follow the [Treasury’s] argument to its logical conclusion then the United Kingdom assumes entire responsibility for the liabilities of the United Kingdom. What that would mean is that the United Kingdom would be taking on an additional share of debt that could be supported by an independent Scotland, of up to £130bn.
“That would result in debt servicing costs of the rest of the United Kingdom increasing by between £4bn and £5.5bn each year, which would be the equivalent of increasing income tax by one pence in 2016-17.”
Mr Swinney’s words follow a warning from Alex Salmond, Scotland’s first minister, that Scotland would be under no legal obligation to take on liability for its part of the UK debt if London refused to allow it to share the pound after independence.
George Osborne, the chancellor, categorically ruled out a currency union in a speech last week, although the Scottish National party insists he is bluffing and will change position if there is a “yes” vote in September’s independence referendum.
Sir Nicholas Macpherson, the Treasury’s top civil servant, has called the Scottish government threat “not credible”, but Scottish ministers say the UK will be legally liable for its full debts as the continuing state in the event of independence.
While British ministers do not deny the UK would be legally liable for that debt – not least because the Treasury has already guaranteed it – they have warned that Scottish borrowing costs would rise if they refused to repay their portion.
Danny Alexander, the Treasury chief secretary, said on Wednesday such an increase could cost Scottish homeowners an extra £1,700 in mortgage repayments. Referring to research carried out by Jefferies, the investment bank, Mr Alexander said the Scottish government’s borrowing costs would rise 5 percentage points if ministers carried out their threat not to take on Scotland’s portion of UK national debt.
Mr Alexander said: “The expectation within the markets is that part of the proper process of independence is taking on a fair share of the debt, and in the end market credibility and confidence is based on the perception that a country is willing to take on its financial obligations.”
Earlier, Mr Alexander announced that the Scottish government would be able to issue bonds from 2015, even if voters reject independence at September’s referendum.
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