UK Plan B?

It seems that Chief Secretary to the Treasury Danny Alexander is back in our midst to spread the myth that in the event of a Yes vote in the referendum, none of the unionist parties will permit Scotland to participate in a currency union with the remainder of the UK.

While this position receives a great deal of publicity from the Scottish media, I have not actually seen either Mr Alexander or his Tory colleague at the Treasury, George Osborne, being subjected to any serious questioning by economic journalists about the implications which their policy would have for the remainder of the UK should Scotland vote Yes.

At present, the UK has a very wide trade gap with the rest of the world. Economists estimate the UK’s current trade gap at approximately 3.8 per cent of the country’s GDP.

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Only on four occasions since 1948 has the trade gap exceeded 3 per cent. The current trade deficit is therefore at a historically high level.

Scotland on its own, by contrast, is estimated to have a trade surplus. This of course includes North Sea oil and the rest of our very healthy exporting industries. At present, Scotland’s input to the UK contributes significantly to keeping the trade deficit manageable.

As a result of this, Scotland’s contribution towards supporting sterling is significant. It is estimated that if Scotland’s contribution towards UK exports is removed, the remainder of the UK would be operating at a massive deficit of 6.5 per cent of GDP.

On 19 September the international money markets will be forced to make a decision about whether a country with such a massive trade deficit – the remainder of the UK – can, without Scotland’s massive input, afford to support the pound sterling.

A further consideration of those markets will be whether the remainder of the UK can afford to shackle itself with a further £120 billion of debt as a result of their refusal to let independent Scotland operate within a sterling union.

That debt would also have to be serviced and repaid without any contribution from Scotland, including its North Sea oil revenues.

I am not an economist but I don’t think that you would need to be Adam Smith to work out that there will be a very high likelihood of a sterling crisis, which would make those of the 1970s and 80s seem trivial by comparison.

Messrs Osborne and Alexander are doing their best to stir up fear among the people of Scotland prior to the referendum. If I were a foreign investor on the international money markets I think that I would be rather more interested in Mr Osborne’s Plan B than that of Mr Salmond.

Gail Finlayson

Larch Tree Way

Banchory

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