During February 2014 the Conservative, Labour and LibDem parties all pledged not to enter into a currency union consisting of Scotland and the rest of the UK if there is a YES to independence in the coming referendum ( http://www.telegraph.co.uk/news/uknews/scotland/10657721/Scottish-independence-Alex-Salmond-reveals-currency-Plan-B.html). In response the SNP leader Alex Salmond threatened that Scotland would not take on a share of the UK national debt unless Scotland can share the Pound ( http://www.telegraph.co.uk/news/uknews/scotland/scottish-politics/10634697/Scottish-independence-SNP-retribution-plan-over-pound-would-cripple-economy.html).
The idea that Scotland can just walk away from the UK National Debt is a nonsense both legally and as a matter of realpolitik. Legally, the Union would have to be dissolved by an Act of Parliament because the Act of Union contains no provision for the Union to be dissolved, viz: “That the Two Kingdoms of Scotland and England shall upon the first day of May next ensuing the date hereof and forever after be United into One Kingdom by the Name of Great Britain …” (http://www.legislation.gov.uk/aosp/1707/7/section/I)
Consequently, the Act of Union would need to be repealed formally or a further Act granting independence to Scotland passed with the Act of Union falling on the doctrine of implied repeal. Until either of those things are done there can be no legal independence.
The passing of such legislation is entirely dependent on reaching terms. If terms are not reached then there is no obligation of Parliament to grant Scotland independence. Moreover, no Parliament can bind another. Consequently, if the next General Election is held in 2015 ( before Scotland is independent), there could be no bar to a new Parliament refusing to accept any or all of the terms agreed by the previous Parliament or of refusing to grant Scottish independence under any circumstances. Even if the previous Parliament had passed an Act granting Scotland independence on agreed terms, the incoming Parliament could repeal the legislation and nullify the independence.
A possible refusal of legal independence is both inherent within the situation and reasonable. The idea of holding a referendum to divide a state without agreeing first the conditions for separation means as a matter logic that independence is conditional on terms being agreed. If that were not so then Salmond could demand anything and could not be denied it because of the vote for indepenence.
That brings us to realpolitik. Its use is reasonable because what is called international law is no law at all. That is so because there is no supranational agency which, as a last resort, has the power to enforce breaches of such putative law by armed force.
The realpolitik blocks to Salmond’s position are many and powerful. For example, the punitive measures Westminster could deploy to force Scotland to accept their share of the debt include these: vetoing Scotland membership of the EU, setting up border controls, denying Scots the right to work in England and blocking the export of Scottish goods through the rest of the UK .
Salmon has made much of Article 30 of the Edinburgh Agreement:
30. The United Kingdom and Scottish Governments are committed, through the Memorandum of Understanding between them and others, to working together on matters of mutual interest and to the principles of good communication and mutual respect. The two governments have reached this agreement in that spirit. They look forward to a referendum that is legal and fair producing a decisive and respected outcome. The two governments are committed to continue to work together constructively in the light of the outcome, whatever it is, in the best interests of the people of Scotland and of the rest of the United Kingdom.
The Memorandum of Understanding has no legal standing, viz:
2. This Memorandum is a statement of political intent, and should not be interpreted as a binding agreement. It does not create legal obligations between the parties (para 2 of the introduction – http://tinyurl.com/Devolution-Memorandum ).
Consequently, the memorandum can be ignored with impunity as far as legality is concerned. Moreover, the language of Article 30 is woolly. There are clearly issues where the best interests of two parties cannot be served. The question of a currency union is one of them. Its creation would grossly disadvantage the remaining UK members and grossly benefit Scotland. The international markets would immediately downgrade the currency and the UK’s credit rating, both because of the uncertainty of what Scotland would do when it had control over its spending and as a result of the long shadow of the Bank of England’s standing as the lender of last resort for Scottish banks. Scotland would gain immensely because they would have the use of one of the most stable currencies in the world and the UK taxpayer (in reality the English taxpayer because Wales and Northern Ireland do not come close to meeting their public expenditure out of tax raised in their territories) would shoulder the risk of Scottish banks defaulting. Conversely, the refusal of a currency union would benefit the remainder of the UK and be very damaging to Scotland.
On the question of the Pound being a currency which is part owned by Scotland, the position is simple. Scotland only gained access to the Pound by the Union of 1707. The Pound Sterling before the Act of Union was the English currency. Sterling was pressed into service as the currency of first Great Britain. Article 16 of the Act of Union applies:
That from and after the Union the Coin shall be of the same standard and value throughout the United Kingdom as now in England . . .( http://www.legislation.gov.uk/aosp/1707/7/contents)
The Scottish Pound (worth only a few shillings Sterling in 1707) was abolished by the Act of Union. By leaving the Union Scotland loses the legal right to the Pound Sterling.
It is worth noting in all the huffing and puffing from the SNP that in the 307 years of Union Scotland has built up a massive debit balance between the taxes raised in Scotland and the public money spent there. Right from the off Scotland was given a much lighter tax burden than England through Article IX of the Act of Union, viz:
IX. THAT whenever the sum of One million nine hundred ninety seven thousand seven hundred and sixty three pounds eight shillings and four pence half penny, shall be enacted by the Parliament of Great Britain to be raised in that part of the United Kingdom now called England, on Land and other Things usually charged in Acts of Parliament there, for granting an Aid to the Crown by a Land Tax; that part of the United Kingdom now called Scotland, shall be charged by the same Act, with a further Sum of forty-eight thousand Pounds, free of all Charges, as the Quota of Scotland, to such Tax, and to proportionably for any greater or lesser Sum raised in England by any Tax on Land, and other Things usually charged together with the Land; and that such Quota for Scotland, in the Cases aforesaid, be raised and collected in the same Manner as the Cess now is in Scotland, but subject to such Regulations in the manner of collecting, as shall be made by the Parliament of Great Britain. (http://englandcalling.wordpress.com/the-act-of-union-1707/)
The population of Scotland in 1707 was about one fifth of England and Wales estimated six million or so. Had the taxation been the same in Scotland as in England , under clause IX Scotland would have paid around £400,000 not £48,000.
There is also the vexed question of how to ensure Scotland services the debt after independence., It is all too easy to see them defaulting. The only practical way would be for the UK to continue to administer all the debt with Scotland paying the money for their share to Westminster. The idea that Scotland could create a new currency and pay for it with that would be a non-starter because such a currency would have no international credibility for many years. I have addressed this subject in depth at http://englandcalling.wordpress.com/2011/06/02/the-wages-of-scottish-independence-public-debt/
Worryingly, not one Westminster politician has challenged Salmond or the SNP generally on the claim that Scotland could refuse to take on a share of the UK national debt. This suggests that either that no Westminster politician has considered the matter properly or that our political elite have already decided to sell England down the river in the event of a Yes vote by letting Scotland either have their currency union or to walk away from the UK without taking on any of the UK national debt.