Former prime minister Gordon Brown has warned that an independent Scotland risks becoming an “international outcast” if first minister Alex Salmond refuses to pay Scotland’s share of UK national debt.
The notion that Scotland could effectively walk away from its share of UK debt if the country becomes independent first emerged when chancellor George Osborne said the UK government could not agree to Salmond’s plan to share the pound in a formal currency union.
Salmond stated in response that the pound belonged to Scotland as much as anywhere else in the UK and argued that if Westminster was going to deny Scotland access to its own financial assets then the newly independent country could also refuse to pay its share of UK debt.
Brown became the latest expert to warn during the first in a series of speeches in Scotland that abandoning its debt would be considered a default something which could effectively see an independent Scotland ostracised from financial markets and key international relationships.
He said: “There is no hiding place in the international community for a country that reneges on their debts.”
Scotland’s particular reliance on foreign trade means that any default on debt would result in “dire consequences for our interest rates and our ability to raise funds”, according to Brown.
He added: “With a total of 1.4 million Scottish jobs linked to Scotland’s trade with the wider world, it is difficult to see how the SNP’s ‘stop the world, I want to get off’ posturing would help Scottish families. You need a coherent strategy for dealing with global capital, global financial markets and global institutions.
“Yet the SNP’s proposal to default on the debt would make Scotland an international outcast, with dire consequences for our interest rates and our ability to raise funds.”
The UK government has already sought to reassure markets that the UK would not risk its own default on debt if Scotland does become independent, stating that it will cover all of the UK’s debt in the event that Scotland does refuse to pay its share.
The Scottish government has since argued that because Westminster has accepted full liability of all UK debt then an independent Scotland cannot technically default following independence because it is no longer legally liable to pay a share of UK debt.