Scottish Financial Planning

The Joys of Optimistic Planning by Politicians.

The recent referendum in Scotland with regards to their political future has ended in the a narrow vote to remain part of the Union.

Part of the rosy independent future that was promulgated by the Scottish National Party (SNP) was that the vast oil revenues that was coming from the North Sea would provide for the secure financial future for an independent Scotland.

All of this was the vision based upon the rosy revenues being derived by the oil price being at $100+ per barrel.

However, within the space of 3 months, oil has dropped to below $60 per barrel.  We are seeing the deleterious effect that financial mismanagement is having on the Russian economy.  The lower price is affecting the oil companies who have advised that investing in the North Sea is unprofitable at this price level.

They are scaling back their investment and making redundancies.  http://www.bbc.co.uk/news/business-30525539.

How would have effected the financial position of the Scottish government ?  Surely this would have delayed or completely put on hold all of the financial promises made.

Are we as the electorate and poor benighted suffering public, not sufficiently fed up with the promises of the politicians of the rosy future we will all have in the Utopian Ideal they offer, but based completely on fairy dust mathematics.  They have been learning from the management skills of Fred Goodwin, previously chief executive of RBS, who despite raising £12 Billion from shareholders to put the bank on sound financial basis, then had to be bailed out by the UK government to the tune of £45.5 Billion.

So RBS estimated the amount of capital required, was a mere 20% of the eventual capital investment.  This is a good example of the elaborate flights of fancy that seems to emanate from the politicians of the SNP and the Labour Party under the inspiring leadership of Ed Milliband.

Despite these financial failing, no one in the previous Labour government have been held to account for the dire financial situation we were put in.  So the SNP and other politicians feel free to make elaborate promises of free services and the continuous expansion of these free services, based upon revenues which have always been assumed to be and have now been shown to be fickle in the extreme.

What would happen if Scotland had been unable to pay their national debts in the future, would they expect that England would bail them out again as they had been following the Darien Scheme in 1707.

Disentanglement

Whilst much is being made by some political elites of the wrongs, injustices and other failings that are being meted on a section of society by the other political elites.  They always paint a picture that under their “inspired” leadership things will be considerably rosier.

No politician ever wants to tell you all the truth about what would be required in order to achieve their vision of utopia, after all if they truly costed their vision properly and the practical impacts that would result from the disentanglement of countries, they would struggle to sell their vision.

At its simplest level, every single institution that current exist within your country would have to be reproduced once you choose to go “Independent”.  What are the implications?

Let’s start at the beginning

First of all – the country has decided to go independent, but what does that really mean?

• New Constitution
• Political Representation
• Political Parties
• Public Services / New Ministries / New Agencies
• International treaties
• Cross Border Agencies
• Setting Up A New Country
• National Administration
• Judicial Infrastructure
• Procurement
• Immigration
• Shared Contracts
• Negotiation for Separation
• Shared National Services

These are only the starting points for discussion.  Anyone wanting to add new topics or even an article please let me know.

Scottish Currency – Update

Yesterday during a debate at Leith Academy concerning the referendum on Scottish Independence, the current Scottish Finance Secretary John Swinney, confirmed that if Scotland does not get a currency union with the rest of the UK, Scotland will not take on any of their proportion of the National Debt.

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-28943041

Essentially they are having Conniption fit.

Let me pose some questions for those interested in the debate on Scottish Independence.

1. If Scotland does not take its share of the national debt – Scotland should be considered in default from day 1.  How will Scotland fund its government going forward?
2. As Scotland is not taking their national debt – Scotland will have NO asset. No Roads, No Schools, No Railways, No Air Traffic Control etc.
3. What reaction do they expect from the population in the rest of the UK to do if Scotland defaults?
4. Joining the EU, when you are defaulting – I can’t see the rest wanting a defaulter joining!
5. British Banks should be banned from trading with Scotland!
6. Setting up their armed services when you can’t pay your debt!  Is Scotland going to be satellite state of Russia?
7. Trade with Scotland by the rest of the UK represents only 10% of total trade. But Scotland’s trade with Rest of the UK is 70% of trade.  What happens to their business if severe import duty are imposed, in part to pay their proportion of the debt.
8. What currency is Scotland going to use – we still do not have any form of plan B.  If I were running a business in Scotland it would make planning very difficult.

Some of the likely reactions will be:

• No Dual Nationality
• Complete split of the pensions – Scottish National Pensions to be frozen from day 1 of independence
• Border controls
• No right of employment
• No payment of redundancy for government employees in Scotland by HMG Government – as a result of independence.
• Scottish MPs being emasculated in Westminster Parliament
• Scotland will be treated as a Foreign Country – There will be no prospects of an equivalent of the Government of Ireland Act of 1948

The other consideration for Scotland is what happens if the vote goes against independence.  I don’t think that Scotland can expect that things will stay exactly as they are.  I as a non-scot would expect that changes are made in the way the UK is run and the ability of Scottish MPs to vote on bill which do not impact on Scotland should be removed.

Based upon the pronouncements of the SNP during the debate I can see the following not happening / being in place once Scotland going independent:

• Membership of EU
• Membership of NATO
• Being a member of the UN
• Having its own currency
• Having its own passports

Other impacts for Scottish Nationals

• All embassies operating for the rest of UK government will not offer support to Scottish Passport holders
• Pensions for Scottish Nationals will be frozen on Scottish Independence Day
• Employment in the rest of the UK should now be subject to a Visa Requirements

In summary, how can Scotland honestly expect the other EU members to agree to Scotland’s membership when:

• Has no central bank
• Has no currency
• is defaulting on its national debt
• Scotland is acting like a spoilt child who not only wants the cake but also to eat, otherwise it will continually throw its toys out of the pram!.

The behaviour of the SNP is such they have never learnt the basic manners, and are so used to acting as the school yard bullies.  NOTE to Alec Salmond and co.  We are fed up of your bullying antics and time for Scotland to go totally independent.  When you go bust – you’re on your own.