I am just storing this partial post here because it is too late for me to finish it tonight and I want to think it through some more before posting it on another board where it properly belongs. So it is not for this board at all and I apologise for this abuse of the thread.
@Xaracen
Business for Scotland paper estimates that Scotland will gain £80 billion immediately if it is not responsible for that debt: so let us go with that figure.It is not at all clear what that means, as I hope I made obvious in my post. But you are correct that the cost of servicing UK debt is nothing like as high as that would imply. In fact the cost of interest on that debt was about £43 billion in 2013. Scotland pays about £4 billion of that sum. A great deal of that debt is index linked so both the interest and the capital increase over time (interestingly it is index linked to the RPI and not the CPI, but that is an aside). But those figures are not really reliable because it depends on how the debt is measured and the ONS excludes some liabilities. Net public debt is, according to the ONS £1.3 trillion (see previous links. However that excludes eg, the money committed for the bank bailouts. When they are included net debt comes to £2.3 trillion
What is certainly true is that the cost of borrowing to the UK is very low, given the high level of the debt. And that is entirely due to the fact that the UK has a sovereign currency and so there is no liquidity crisis in prospect.
In my previous post I was really trying to show why foreign denominated debt is a bad idea and I apologise for the fact that I just took the business for scotland figure and did not go for real ones.
Ivan McKee presented some of the figures and this was linked in another thread: here it is again
VideoAs you see the Scottish government has income of about £57 billion at present and GDP is £151 billion. It pays £4 billion in debt interest, and that is a large part of the total Scottish deficit of around £7 billion. Arguably the income of the Scottish government post independence would be higher. Mckee estimates about £4.4 billion higher, so let us go with that: government income would be £61.4 billion.
Accepting 10% of the acknowledged debt means accepting £96 billion of foreign denominated debt, as outlined above. Scotland would therefore have a debt to GDP ratio of around 63.5% if all other liabilities were excluded. If they were included the debt share would be 10% of total net liabilities of £1347 billion: that is £134 billion: a debt to GDP ratio of 88%. So we would start with a very poor position if debt to GDP matters to you (it doesn't to me but this discussion is predicated on the mainstream view so we have to accept that for the sake of the argument)
All of that debt would be in a foreign currency. We would have to get sterling to pay it. Let us imagine that the debt service requires the same £4 billion it does at the moment. In 2011 Scotland exported nearly half of its GDP, so if that has continued this year it would export £75.5 billion, of which 60% would generate sterling: £45 billion in total. In 2011 Scotland imported 55% of GDP and 70% of that was from the rest of the UK.
https://www.gov.uk/government/uploads/syst...performance.pdf(Annex A)
So goods bought from the UK would cost £58 billion and those would be paid for in sterling. It follows that Scotland would have to find the difference plus the interest, that is £17 billion, all of which would have to be borrowed, or bought using currency acquired from exports to the rest of the world, if there was no currency union. Which is where the income of the Scottish government comes in.
