SCOTLAND may have to pay back its entire £126 billion share of UK debt under the SNP’s plan for full fiscal autonomy, according to Alistair Darling’s former right-hand man at the Treasury.
Dr Angus Armstrong said autonomy within the UK could create a “moral hazard” with Scottish spending decisions impacting on the credit worthiness of the rest of the UK, but its taxpayers would have no say in those decisions.
Dr Armstrong, director of macroeconomic research at the National Institute of Economic and Social Research and a former civil servant who steered the Treasury through the financial crisis, was giving evidence to Holyrood’s finance committee.
The Smith Commission on devolution proposed a solution to this by empowering Westminster to levy a new UK-wide tax to manage economic shocks.
But Dr Armstrong said this would be a recipe for “a 21st-century Boston Tea Party”, in reference to the backlash against an 18th-century tea tax which ultimately led to America’s independence from Britain with the phrase “no taxation without representation”.