Independence: ‘Scotland may need to self insure’

SCOTLAND may need to “insure” itself against the risks presented by its large banking and financial sector, the Treasury analysis of independence suggested yesterday.

The paper says that Scotland and the rest of the UK would have to agree terms on the way the Bank of England would be used to come to the aid of any of their big finance houses.

Either a banking union would be applied across the UK, it says, or Scotland could opt to “self-insure” against potential liabilities in its financial sector.

The paper says: “One option might be for Scotland to self-insure by pre-funding the risk, ie by lowering its public debt level. Alternatively, it could look to pay a fee to the UK government to provide this insurance.”

It adds: “Either would place a further significant fiscal constraint on an independent Scottish state in a sterling currency union.”