Unionists banking on the financial crisis to fan the flames of fear over devolution are running out of support
A QUIET demolition has been taking place early on Saturday mornings. If you like to catch up on your sleep - or head out for a bracing weekend run at that time - you may have missed Newsweek Scotland's myth-busting in the last fortnight.
It all started rather inauspiciously, when Secretary of State for Scotland Michael Moore answered a backbench question that was both predictable and planted.
Philip Holloborne (Conservative, Kettering) suggested: "Isn't it the case that a separate Scotland simply wouldn't have been able to survive the global banking crisis on its own and, had it been separate, would now be heading the way of Ireland and Greece?
Moore replied in familiar fashion: "A very important point, because the scale of the financial disaster that befell both Royal Bank of Scotland and Halifax Bank of Scotland would have placed a crippling burden upon Scotland. By being part of the United Kingdom we shared the risks."
Unionist politicians have used the banking collapse to trash Scotland many times before now. Brown, Murphy, Cameron… they've all had a go so often, the assertion has become received wisdom. But they are wrong.
The Newsweek team on BBC Radio Scotland has for the last two programmes lined up experts to prove just how wrong. First was Andrew Hughes Hallett, Professor of Economics at St Andrews University who described Moore's answer as a nonsense.
"By international convention, when banks which operate in more than one country get into these sorts of conditions, the bailout is shared in proportion to the area of activities of those banks. In the case of the RBS … roughly speaking 90 per cent of its operations are in England and 10 per cent are in Scotland."
The Federal Reserve stepped in to bail out US operations linked to RBS and HBOS. In Europe the governments of France, Belgium The Netherlands and Luxembourg joined forces to help the Fortis and Dexia Banks operating across their borders.
George Walker, professor of international finance law at Queen Mary University, London, and also Glasgow University, supported this position. So did Andrew Campbell, professor of international and finance law at Leeds University.
Prof Walker said it was inconceivable that the Treasury would not have stepped in to save RBS's English operations, even if Scotland was independent. "This decision was not taken to protect either RBS or HBOS, nor specifically the Scottish markets, but to protect the financial stability of the UK financial system as a whole," he explained.
He went on: "Many of those (RBS] subsidiaries operate out of London and only out of London. I don't think you can, simply, look at it purely on the basis of where, as you point out, the brass plate of the holding company is."
Prof Campbell said HBOS's operational head quarters were in Halifax, Yorkshire, so there was even less reason to assume Scots would be responsible for its rescue. But the indisputably Scottish RBS ran up most of its losses in the City of London where it was regulated: "It would be inconceivable that Edinburgh or Scotland as a whole could be held liable for that full bill."
Moore refused to speak on the programme, so the government's position was defended by the former Labour chancellor, Alastair Darling. Despite presiding over the meltdown of the UK economy, Darling insisted that he knew better than the professors - or for that matter Sir George Mathewson who used to run RBS and who has made similar comments in the past.
As the facts become understood, the received wisdom about Scotland's banking shame looks as shaky as Darling's economic management. For example, the figure of 450 billion is sometimes quoted as the cost of saving the banks. But this completely misleading because it states the banks' entire liabilities. All banks have more out in lending than they reserve in capital so by this calculation all banks would be technically bankrupt all the time.
The bailout of RBS and HBOS actually cost 66bn in shares and loans. Given that Scottish GDP at the time was 145bn and our remaining oil reserves, using the American Energy Departments cost calculations, are valued at a trillion pounds, we'd have been well placed to negotiate a good deal on the international money markets - which was how the UK, and other national governments, financed the banking rescue. Indeed, given our valuable natural resources, we might have negotiated a better deal. Either way, it would come right in the end. The Office of Budget Responsibility calculate that the Treasury is set to make a profit of 3.4bn on the entire UK bailout, thanks to buying bank shares at the bottom of the market and getting a very attractive rate of return on its loans.
So an independent Scotland could easily have bailed out our banks, but we would not have had to, according to Professors Hughes Hallett, Campbell and Walker.
Having said that, the argument has always struck me as bizarrely hypothetical. How long would this independent Scotland have been in existence before the financial crisis? Long enough to accumulate the same oil fund as Norway? Long enough to swallow the billions of pounds worth of tax on the profits of RBS and HBOS (for if we are responsible for the bailout it follows that we must surely have been due the taxes on profits?) Long enough to establish an effective banking regulation system of our own, perhaps on the advice of our Nordic neighbours who rescued their own banks in the early 1990s?
There is a well established technique at work here.The term "Fear Uncertainty & Doubt" was first used in the computer hardware industry to describe the practise of spreading untruths about a rival product. Successive generations of political strategists have found the method useful too. It is a strand of "perception management", getting your message across by any means necessary, including mass deception.
Scotland has long been a battleground for Fear, Uncertainty & Doubt spread by political elites to preserve their own privileges. The May election result shows that the technique is beginning to fail as the country grows in confidence. The banking bailout myth was one of the last skirmishes in this conflict, because the complexity of international finance means that a crude falsehood is more easily assimilated than the inconvenient truth.
Now the vaults of dishonesty are breached, the last lie is exposed.