A matter of days to go before the Scots decide on their future, narrowing poles are understandably spooking financial markets. On Monday, the pound dropped to its weakest level since the end of 2013 versus the dollar. If this wasn’t enough to make the Scots choke on their battered mars bars, Lloyds shares fell by £1.7bn (3 per cent) yesterday. These events represent a snapshot of the economic meltdown to come should the ‘Yes’ campaign prove successful.
Scotland is a £146 billion pound economy. As confirmed by the Governor of the Bank of England (BofE), the country would need to get hold of over £100 billion additional capital reserves if it uses pond sterling without Westminster approval. In light of this, there are a number of straight forward economic questions that voters with a fetish for ‘Yes’ should be asking themselves. Firstly, where does Scotland get this additional money from? This may come as news to Alex Salmond, but it doesn’t grow on trees. The answer is the World Bank. What does this mean for the hardworking Scottish tax payer? Well, reduced public spending and an unimaginable number of years paying back an insane amount of interest through higher taxation.
With this in mind, how does an independent Scottish government pay for the public services that it so desperately desires? Answer, more and more borrowing, leading to more debt, leaving Scotland a far less attractive country for investors. One can understand why Scottish voters are falling for Salmond’s ‘Yes’ campaign. It is much easier to engage with patriotic messages over complex economic ones. Between now and September 18, some hard economic truths need to be told. Otherwise, Scotland faces a disconcerting financial future.
#bettertogether
Tim Focas is a financial consultant based in London
