Independence Referendum

[DungBeetle]

"I read through this thread and despair with the misinformation (albeit unknowingly) reproduced.

Scotland is an ancient nation, much like Ireland, England and Wales, Scotland more than pays its own way, As a result Scotland funds it's own free prescriptions, university education and so on from its own purse.  This is NOT subsidised from the rest of the UK taxpayer. If you don't believe me, feel free to research the figures, go back 100 years if you like, you will find Scotland has contributed a lot more than it's ever got back for at least that long. ( that's before oil!)"

You say you despair at misinformation, and then state categorically that Scotland is a net contributor.   

I think most people are pretty much agreed that whether Scotland contributes or not is dependent on what assumptions you make about oil share and oil price.  Whether Scotland will be better off alone relies on assumptions about both the oil and what level it can borrrow at, what currency it has and how much UK debt it takes on.

 You seem confident that Scotland creates a surplus for the UK even without oil.  However, the figures I have seen this don't agree with that.   There are lots of sources, but 2009 without oil numbers are attached (again these figure are open to assumptions).

My point is all calculations are subject to assumptions, so people posting that Scotland is either categorically a contributor, or categorically a recipient seems silly to me.

http://blogs.channel4.com/factcheck/factcheck-who-loses-if-scotland-goes-it-alone/6524

 

Point of order - if oil is ignored none of the home nations is currently a net contributor in the UK - hence the massive debt which is growing.

Correct.

[RED-DOG]

Unlike me, tikay can't come on here and say that he has never posted in this thread.

[Rod Paradise]

Various doom and gloom articles appearing in the press about the markets punishing rUK (and Scotland) in the event of a YES.

The irony is that this is all because the Unionist parties piped up about refusing a currency union and the effect this will have:

Throwing debt share into doubt as even paying interest on rUK debt will have a negative effect on the Scottish currency and substituting debt would be out of the question.  rUK will have its credit rating cut with associated negative effects.

Huge additional costs for businesses costing jobs.

Doubt over pension liability and currency of payment almost definitely leading to legal challenges.

All Scottish debt will be legally denominated in the new currency, so massive disruption in financial businesses.

A simple long term agreement on shared currency and govt debt raising limits eases all these issues.

This would possibly be true if the main UK parties hadn't categorically stated that there would be no currency union months ago.  So this fact has been known to the markets since then.  

There are many reasons that the rUK wouldn't want currency union, but you can now add that they wouldn't want currency union with a country whose main political party have stated that they are willing to walk away from paying their debts.  My personal opinion is having years of that hanging over sterling isn't going to be favourable for the currency.  In much the same way as having possible defaults in Southen European countries drags on the Euro.  

The indepence will clearly be damaging in the short term on both Scotland and rUK.  It seems obvious to me that the costs will be proportionately higher on Scotland, but that is just a red herring here.

Arguing about whether the rUK would be more adversely affected by currency union isn't really important here, rUK is going to be damaged by Independence regardless. Hence the markers will be spooked by a possible yes vote whatever the currency union plans would be.  Also markets hate uncertainty, so you'd expect a fall anyway even if it wasn't clear if Independence was good or bad for rUK.  Right now we have lots of uncertainty because none of the major economic plans set out by the SNP have been agreed on the other side of the border.  Whatever we may both think will happen in the long run, this uncertainty is clearly there.

If there was a currency union the debt agreement would need to be signed as well, we wouldn't see a currency union where Scotland could choose to walk away from the debt at any time, if Scotland did that would be a default. Scotland's opportunity to walk away from the debt is at the point of Independence, if we take a share then we are legally stuck with it unless we do an Iceland. I can't see how people don't get the concept of BOTH sides playing hardball, and want Scotland to play fair while rUK can pre-dictate the negotiations they said they wouldn't pre-negotiate.

Since some International banks have said the Currency Union makes sense, do you not think the ruling out of one would have them looking unfavourably at Sterling?

And as for leaders of all parties ruling out a currency union, they all ruled out more powers too....

[Rod Paradise]

"I read through this thread and despair with the misinformation (albeit unknowingly) reproduced.

Scotland is an ancient nation, much like Ireland, England and Wales, Scotland more than pays its own way, As a result Scotland funds it's own free prescriptions, university education and so on from its own purse.  This is NOT subsidised from the rest of the UK taxpayer. If you don't believe me, feel free to research the figures, go back 100 years if you like, you will find Scotland has contributed a lot more than it's ever got back for at least that long. ( that's before oil!)"

You say you despair at misinformation, and then state categorically that Scotland is a net contributor.    

I think most people are pretty much agreed that whether Scotland contributes or not is dependent on what assumptions you make about oil share and oil price.  Whether Scotland will be better off alone relies on assumptions about both the oil and what level it can borrrow at, what currency it has and how much UK debt it takes on.

 You seem confident that Scotland creates a surplus for the UK even without oil.  However, the figures I have seen this don't agree with that.   There are lots of sources, but 2009 without oil numbers are attached (again these figure are open to assumptions).

My point is all calculations are subject to assumptions, so people posting that Scotland is either categorically a contributor, or categorically a recipient seems silly to me.

http://blogs.channel4.com/factcheck/factcheck-who-loses-if-scotland-goes-it-alone/6524

 

Point of order - if oil is ignored none of the home nations is currently a net contributor in the UK - hence the massive debt which is growing.

Correct.

BUT with the oil every year for the past 32 Scotland has contributed more per head...

Click to see full-size image.

The one year we are in deficit is last year - with the effects of Osborne allowing tax rebates on oil investment showing through. If I didn't have a very low opinion of the man's abilities I'd think he'd done that deliberately. I don't see those oil investments not bringing a lot more into the coffers in later years....

There's also some income from Scotland that the GERs report misses - export taxes on Whisky (which ships from English ports), and VAT spent in sCotland in rUK registered businesses, ie ASDA, Tesco, etc etc


Without the oil we're approx £300 per head less in GDP than the UK average:

Click to see full-size image.

[TightEnd]

this made me chuckle

http://www.theguardian.com/commentisfree/2014/sep/08/scottish-independence-david-cameron-no-campaign-windows-8

[DungBeetle]

I've never argued against that if you include all oil in Scotland's numbers then they are a net contributor.   I've pointed out that if you want to work out if Scotland is a net contributor or more relevantly will be better off on it's one there are a lot of assumptions to be made.  One of which is what percentage of the oil the new independent nation takes.

[Doobs]

Various doom and gloom articles appearing in the press about the markets punishing rUK (and Scotland) in the event of a YES.

The irony is that this is all because the Unionist parties piped up about refusing a currency union and the effect this will have:

Throwing debt share into doubt as even paying interest on rUK debt will have a negative effect on the Scottish currency and substituting debt would be out of the question.  rUK will have its credit rating cut with associated negative effects.

Huge additional costs for businesses costing jobs.

Doubt over pension liability and currency of payment almost definitely leading to legal challenges.

All Scottish debt will be legally denominated in the new currency, so massive disruption in financial businesses.

A simple long term agreement on shared currency and govt debt raising limits eases all these issues.

This would possibly be true if the main UK parties hadn't categorically stated that there would be no currency union months ago.  So this fact has been known to the markets since then.  

There are many reasons that the rUK wouldn't want currency union, but you can now add that they wouldn't want currency union with a country whose main political party have stated that they are willing to walk away from paying their debts.  My personal opinion is having years of that hanging over sterling isn't going to be favourable for the currency.  In much the same way as having possible defaults in Southen European countries drags on the Euro.  

The indepence will clearly be damaging in the short term on both Scotland and rUK.  It seems obvious to me that the costs will be proportionately higher on Scotland, but that is just a red herring here.

Arguing about whether the rUK would be more adversely affected by currency union isn't really important here, rUK is going to be damaged by Independence regardless. Hence the markers will be spooked by a possible yes vote whatever the currency union plans would be.  Also markets hate uncertainty, so you'd expect a fall anyway even if it wasn't clear if Independence was good or bad for rUK.  Right now we have lots of uncertainty because none of the major economic plans set out by the SNP have been agreed on the other side of the border.  Whatever we may both think will happen in the long run, this uncertainty is clearly there.

If there was a currency union the debt agreement would need to be signed as well, we wouldn't see a currency union where Scotland could choose to walk away from the debt at any time, if Scotland did that would be a default. Scotland's opportunity to walk away from the debt is at the point of Independence, if we take a share then we are legally stuck with it unless we do an Iceland. I can't see how people don't get the concept of BOTH sides playing hardball, and want Scotland to play fair while rUK can pre-dictate the negotiations they said they wouldn't pre-negotiate.

Since some International banks have said the Currency Union makes sense, do you not think the ruling out of one would have them looking unfavourably at Sterling?

And as for leaders of all parties ruling out a currency union, they all ruled out more powers too....

As I said in my post, they did this months ago, so it had little effect yesterday.  Bit like the Syria situation, it has been known for months.  I guess you could speculate that the City now views currency union as 5% or so less likely than before the weekend, but that isn't going to make a big difference to yesterday's market.  You could also speculate that the City simultaneously collectively chose to write down the expected profits from Scottish related businesses and it was nothing to do with the polls too. 

I just think the likelihood of a yes vote is just a way more likely reason for yesterday's moves than any of the alternatives and it is absurd to argue otherwise. 

[Rod Paradise]

Various doom and gloom articles appearing in the press about the markets punishing rUK (and Scotland) in the event of a YES.

The irony is that this is all because the Unionist parties piped up about refusing a currency union and the effect this will have:

Throwing debt share into doubt as even paying interest on rUK debt will have a negative effect on the Scottish currency and substituting debt would be out of the question.  rUK will have its credit rating cut with associated negative effects.

Huge additional costs for businesses costing jobs.

Doubt over pension liability and currency of payment almost definitely leading to legal challenges.

All Scottish debt will be legally denominated in the new currency, so massive disruption in financial businesses.

A simple long term agreement on shared currency and govt debt raising limits eases all these issues.

This would possibly be true if the main UK parties hadn't categorically stated that there would be no currency union months ago.  So this fact has been known to the markets since then.  

There are many reasons that the rUK wouldn't want currency union, but you can now add that they wouldn't want currency union with a country whose main political party have stated that they are willing to walk away from paying their debts.  My personal opinion is having years of that hanging over sterling isn't going to be favourable for the currency.  In much the same way as having possible defaults in Southen European countries drags on the Euro.  

The indepence will clearly be damaging in the short term on both Scotland and rUK.  It seems obvious to me that the costs will be proportionately higher on Scotland, but that is just a red herring here.

Arguing about whether the rUK would be more adversely affected by currency union isn't really important here, rUK is going to be damaged by Independence regardless. Hence the markers will be spooked by a possible yes vote whatever the currency union plans would be.  Also markets hate uncertainty, so you'd expect a fall anyway even if it wasn't clear if Independence was good or bad for rUK.  Right now we have lots of uncertainty because none of the major economic plans set out by the SNP have been agreed on the other side of the border.  Whatever we may both think will happen in the long run, this uncertainty is clearly there.

If there was a currency union the debt agreement would need to be signed as well, we wouldn't see a currency union where Scotland could choose to walk away from the debt at any time, if Scotland did that would be a default. Scotland's opportunity to walk away from the debt is at the point of Independence, if we take a share then we are legally stuck with it unless we do an Iceland. I can't see how people don't get the concept of BOTH sides playing hardball, and want Scotland to play fair while rUK can pre-dictate the negotiations they said they wouldn't pre-negotiate.

Since some International banks have said the Currency Union makes sense, do you not think the ruling out of one would have them looking unfavourably at Sterling?

And as for leaders of all parties ruling out a currency union, they all ruled out more powers too....

As I said in my post, they did this months ago, so it had little effect yesterday.  Bit like the Syria situation, it has been known for months.  I guess you could speculate that the City now views currency union as 5% or so less likely than before the weekend, but that isn't going to make a big difference to yesterday's market.  You could also speculate that the City simultaneously collectively chose to write down the expected profits from Scottish related businesses and it was nothing to do with the polls too. 

I just think the likelihood of a yes vote is just a way more likely reason for yesterday's moves than any of the alternatives and it is absurd to argue otherwise. 

I don't think anyone (apart from the politician in OTB's video) thinks it's not the likelihood of a Yes vote, but what people are talking about is why Yes vote causes that downturn, especially in Sterling - if we're the subsidy junkies living off the rest of the UK then why does Sterling suffer if we leave?

[Rod Paradise]

I've never argued against that if you include all oil in Scotland's numbers then they are a net contributor.   I've pointed out that if you want to work out if Scotland is a net contributor or more relevantly will be better off on it's one there are a lot of assumptions to be made.  One of which is what percentage of the oil the new independent nation takes.

That one's easy - These matters are regulated by the UN Convention on the Law of the Sea, to which the UK is a signatory.

[DungBeetle]

I imagine it's because what will actually happen regarding sterling if the Yes vote happens hasn't been agreed by either side.  The two sides don't seem to be able to even discuss it rationally at the moment.  So the more likely a Yes vote appears, the more uncertainty there is, which results in sterling weakening?

[DungBeetle]

I've never argued against that if you include all oil in Scotland's numbers then they are a net contributor.   I've pointed out that if you want to work out if Scotland is a net contributor or more relevantly will be better off on it's one there are a lot of assumptions to be made.  One of which is what percentage of the oil the new independent nation takes.

That one's easy - These matters are regulated by the UN Convention on the Law of the Sea, to which the UK is a signatory.

I don't know how these matters work, but can't the UK argue that already discovered oil belongs to them?  (as suggested in this Bloomberg article)

http://www.bloombergview.com/articles/2014-05-02/if-scotland-secedes-who-gets-its-oil

[TightEnd]

good article in the guardian

"

The Scottish economy has grown on the back of whisky, tourism and financial services but by far the biggest potential money-spinner comes from resources still in the ground: oil.

The North Sea has always been seen as crucial, not only to employment and tax revenues, but to the whole viability of Scotland as a thriving and independent nation state.

It is not alone. Countries from Russia to Venezuela and as close as Norway have relied on oil and gas to create wealth to fund public spending programmes.

Greenland is desperately trying to encourage companies to drill in the Arctic. Why? Because it recognises it cannot rid itself of its political master, Denmark, without economic independence. And that cannot be built on seal skins.

Equally you have got to sell a lot of whisky to match the 866,000 barrels of oil a day – at more than $100 a barrel – produced from the UK North Sea in 2013, never mind the 36bn cubic metres of gas on top of that.

Most of that cash will go to the companies involved in the extraction but the tax take on these hydrocarbon riches goes at present to the Treasury in London to the tune of £4.7bn in 2013-14 and more than £6bn for the 12 months earlier.

It is assumed on both sides of the border that 91% of those tax revenues could be taken by Scotland on the basis of an internationally accepted median line drawn out between Scotland and England straight out into the sea.

Alex Salmond, a former oil economist and now first minister of Scotland and leader of the Scottish Nationalist party, has argued that a newly independent country could exploit the £54bn in tax taken from the North Sea in the six years up to 2016-17.

And he believes that there are 24bn barrels of oil equivalents (boe) of reserves – which includes gas – still lying under the seabed and waiting to be exploited.

Based on that number, Salmond has argued that there is £1.5tn worth of fuel to help create jobs, boost tax returns and add benefits for the people of Scotland.

Such figures have proved a major bone of contention. The Office for Budget Responsibility (OBR) has predicted recoverable reserves of 10bn boe and North Sea tax revenues of £61.6bn between now and 2040.

The Office for National Statistics put the worth of untapped reserves to the UK Treasury at closer to £120bn while Sir Ian Wood, a leading offshore oil industrialist in Aberdeen, put the figure at 15bn-16.5bn barrels.

Why the variation? A letter to explain the £61.6bn figure used by the OBR written by the chairman, Robert Chote, to the Scottish parliament explained

"Oil and gas receipts are one of the most volatile streams of revenue coming into the exchequer, which also makes them one of the most difficult to forecast. This reflects the number and the nature of the factors that determine these revenues: the levels of oil and gas production, global dollar prices, the sterling/dollar exchange rate, the scale of tax-deductible capital and operating expenditure, and the history of past profits and losses for each company in the industry that determine if and when they will pay tax on newly generated profits. Most of these individual determinants are difficult to predict in their own right, even over a very short time horizon."

Others go further, pointing out that to reach the 24bn figure the SNP is using "proven, probable and possible reserves ... as well as further exploration". The party has also admitted that its £1.5tn figure is dependent on oil prices staying above $100. Most industry experts would expect that but it cannot be guaranteed.

The reserve figure described by Salmond as "robust" is much more controversial. John Busby, an independent energy consultant, argues that the barrel of oil equivalent numbers used by the SNP and others are largely meaningless. "The only value is really attached to recoverable reserves – oil or gas that can definitely be got out economically. Those are the only numbers that are recognised [when assessing oil company values] by the securities and exchange commission in the US."

He points out that BP, in its respected annual statistical review of the global industry, puts the amount of recoverable reserves in Britain at 3bn barrels and says the fast rundown of oil and gas output suggests there is an energy and fiscal problem looming whoever owns the hydrocarbons.

Not discussed here but highlighted by the Guardian in the past is the fact that there are almost no truly indigenous oil or gas exploration and development companies in Scotland.

Does this matter? Some would say that the big – nominally – local companies such as BP and Shell have reduced their North Sea activities hugely over the last decade without any dramatic impact on the UK; oil money is highly mobile and the same companies that invest in the UK – or Scotland – are happy to work anywhere. And will.

If the tax regime is more attractive in a new up-and-coming area such as, say, Mexico – as opposed to a mature North Sea field where big finds are now deemed unlikely – then they are likely to switch investment there.

Small countries dependent on oil find it difficult to negotiate with massive international oil companies. Salmond must know an independent Scotland would have to give more lucrative tax treatment to Big Oil if he is going to encourage them to extract the 3bn barrels highlighted by BP or the 24bn that the first minister hopes for.

Oil & Gas UK, the industry lobby group, said last month: "We are clear that fundamental change is needed to change the way the industry is taxed and regulated, if the UK is to maximise economic recovery from the UK Continental Shelf (UKCS)."

The cost of operations has soared in recent years and drilling is currently at very low levels, with estimates that the North Sea could produce less than 800,000 barrels this year compared to the near 3m in 1999.

In the background lurks the row over whether or not any country should be drilling out reserves at all just as we need to move away from fossil fuels towards a low-carbon economy.

There is increasing talk by organisations with pension funds to divest from sectors which cause global warming in the light of a wider debate about "stranded assets" .

Salmond has rightly talked up the prospects of Scotland's windfarms and green economy but a much deeper prosperity based heavily on oil cannot be guaranteed by anyone. It depends on a range of factors; many not under his control."

[Doobs]

I imagine it's because what will actually happen regarding sterling if the Yes vote happens hasn't been agreed by either side.  The two sides don't seem to be able to even discuss it rationally at the moment.  So the more likely a Yes vote appears, the more uncertainty there is, which results in sterling weakening?

Uncertainty is definitely a factor, but there are bound to be costs on each side.  It will be lots of things most people don't even consider.    

Just as an example. In that article someone linked to this morning Alex Salmond blithely suggested they had made plans for pensions so there was nothing to worry about.  He may have made some kind of plans, but they won't nearly be enough.  The cost of separating English and Scottish pensioner for each life office will be horrendous.  The offices won't even know who is living in Scotland right now never mind their history.   There will be two separate regulators, there may be separate tac rules, they will need to be looked at differently, depending on Scotland's EU membership or not. People like me will be making hay from it all and rates for people like me aren't going to fall.  

These kind of things will be repeated in lots of rUK/Scottish businesses and as well as direct costs, people will cause them to devote less time to business as usual which will have a secondary effect on profits/growth.  

Even if these costs are going to be smaller for each person in rUK they won't be insignificant in total and are bound to be a drag on growth.

I assume Government both sides of the border is going to be excessively focussed on breaking up the Union, so other things so other business will suffer there too.

Overall there should definitely be an effect each side of the border which is beyond the currency union situation.

This is all nothing to do with the usual straw man arguments about subsidy junkies and wee countries been unable to govern themselves.  

[doubleup]

The veto on currency union was 100% a political ploy as it obviously causes enormous and unnecessary disruption on both sides of the border.  There are no disadvantages for Ruk in a correctly negotiated currency union.  The markets know that it is an idiotic position but can't see how Gidiot and Millifanny are going to get out of it. 

The large Scottish financial institutions are going to move their regulatory HQs south of the border anyway to prevent a loss of customers, so there is no issue over these and the threat to rUK economy. 

Also once and for all the Treasury is responsible for repaying all UK debt and let's face it they aren't actually going to be doing any repaying for a long time, so its obviously completely redic to expect Scotland to start repaying it.  And more than that it is obviously completely impractical to expect Scotland to raise borrowing in a foreign currency to make repayments.

A long term currency agreement where Scotland pays the interest on a portion of legacy debt and is allowed to raise its own bonds within pre-agreed limits linked to GDP to cover its own borrowing needs and a small amount to replace legacy debt is a straightforward solution.

 

[Rod Paradise]

I've never argued against that if you include all oil in Scotland's numbers then they are a net contributor.   I've pointed out that if you want to work out if Scotland is a net contributor or more relevantly will be better off on it's one there are a lot of assumptions to be made.  One of which is what percentage of the oil the new independent nation takes.

That one's easy - These matters are regulated by the UN Convention on the Law of the Sea, to which the UK is a signatory.

I don't know how these matters work, but can't the UK argue that already discovered oil belongs to them?  (as suggested in this Bloomberg article)

http://www.bloombergview.com/articles/2014-05-02/if-scotland-secedes-who-gets-its-oil

I think that seems a bit of creative writing, if there was such a legal precedent would it not have been used to knock the idea of Scottish Independence on the head for the last 30 odd years? Or to keep a portion of Australia's mining, Canada's oil, etc etc.

It's an opinion piece in the FT - who have done a lot of studies on the potential Economy of Scotland & they've never entertained the prospect. I can't say 100% it won't or couldn't happen, but I'm not going to lose sleep over it.