By Richard Johnstone | 13 January 2014
The government today said it will guarantee all UK public sector debt even if Scotland votes for independence. This assurance comes amid concerns that financial markets could start charging the Treasury more for borrowing due to uncertainty ahead of the September poll.
In a document released today, the Treasury said the continuing UK government would honour the contractual terms of the debt issued by the public sector ‘in all circumstances’.
An independent Scottish state would then become responsible for a negotiated ‘fair and proportionate share’ of the UK’s liabilities.
However, instead of a share of outstanding debt instruments being transferred to Scotland, a contract would be signed between the two government for payments to be made to the Treasury to cover the Scottish share. An independent Scottish government would need to raise funds in order to reimburse the rest of the UK, the paper added.
In the event of a vote for Scottish independence on September 18, all assets and liabilities – past, future and contingent – would need to be considered in negotiations between the UK and Scottish governments, the Treasury added.
At the end of 2012/13, UK public sector net debt stood at £1.18 trillion, or around 74% of gross domestic product. The Office for Budget Responsibility has predicted this will rise to 80% of GDP in 2016/17.
Scottish First Minister Alex Salmond said the paper showed ‘the Treasury are starting to come to terms with reality – they have issued the debt and therefore have the responsibility for it’.
He added: ‘This is a case of the London Treasury being hoist on their own petard as they have effectively endorsed the approach proposed by the [Scottish Government’s] Fiscal Commission a year ago and that we outlined in the Scotland's Future paper published last November.
‘These documents make clear that we remain prepared to negotiate taking responsibility for financing a fair share of the debts of the UK provided, of course Scotland secures a fair share of the assets, including the monetary assets.
‘Any market uncertainty in the gilts market has been caused by their own refusal to discuss the terms of independence before the referendum and it is their own insistence that Scotland would be a new state that lands them with the unambiguous legal title to the accumulated debts of the United Kingdom.’
