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UK would assume the whole debt if Scotland gains independence

On 18 September this year there is a very important referendum in Scotland. It will be decided whether it will be an independent country in the UK or not. All were surprised by the decision of the United Kingdom to take all the British debt, though of course in the case of winning the referendum there would be launched bilateral negotiations to establish a proportional Scottish historical debt to pay to the UK.

Scottish Independence

Scottish Independence

In a normal independence the usual is that the breakaway territory assumes a debt of more territory. This debt can be calculated in many ways. In fact not long ago the calculations were made for the hypothetical independence of Catalonia from the rest of Spain. Why does the UK assume this complex scheme to assume all debt payments and then negotiate bilaterally from Scotland? It’s very simple. If the UK does not say that it assumes all debt the markets can unnerve. Imagine that the referendum is about and the UK and Scotland say nothing. Then there is a risk that no one wants to take on that debt, ie default risk and market demand which means more return to the British debt to take the extra risk of default.

UK and Scotland

UK and Scotland

It is not a risky strategy by the United Kingdom. Scotland could force long negotiations after the referendum and take a small part of the British debt as they know the previous commitment. But in fact the UK has other factors to negotiate. First, belonging, to the EU. The UK can veto it. Second, the assignment of certain British to Scottish heritage. Then there is the issue of the coin. Scotland does not seem to want to issue its own currency and the Bank of England would have to continue to maintain an appropriate monetary policy for the UK and Scotland. Finally, if UK assumed debt and Scotland no, perhaps the world would not trust markets in Scotland as a good payer.

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