Scotland: What Could Have Been.

Scotland to decide … but which ever way it goes, there will be an extraordinary degree of disentanglement.

Over the past two weeks I have written to National Savings in Glasgow; been in contact with my tax office – an HMRC processing centre in The Lothians – and called British Gas which, again, was in Glasgow.

The finances of England, Wales and Scotland are so entwined the “divorce”, if it takes place, is likely to involve the most extraordinary degree of disentanglement.

In itself, that should be no barrier to Scots voting for independence. The Republic of Ireland shook off rule from Westminster in 1922 after centuries of entanglement (or, more accurately, oppression) and no one yearns for its return. It’s striking in the debate over the currency of an independent Scotland how rarely it is pointed out that Ireland shadowed sterling for 80 years, with British bank notes in circulation in the first five years of Home Rule, and the new Irish punt fixed to the British pound from 1927.

The punt went through the same devaluation as the pound in 1949 and 1967, and decimalised in 1971 at the same time as Britain. Interest rates in Ireland exactly matched those in the UK until 1979, when the country started its earliest preparations for monetary union with Europe.

Ireland managed its own fiscal policy (taxes and spending) but adopted British monetary policy (currency and interest rates) throughout the period. It’s nonsense to say that a Scottish pound couldn’t be hitched to the English pound for as long as the Scottish want.

But, similarly, it’s nonsensical to suggest that a whole raft of financial arrangements won’t become unstuck if, or when, Scotland becomes independent.

Will the English be happy about “their” National Savings being processed in a foreign country? (Oops, that’s nearly 700 jobs in Glasgow). Or their tax information run by HMRC staff based abroad? A spurned nation – in this case England – might react almost punitively and yes, probably unfairly, against its former partner, demanding repatriation of large numbers of jobs and assets.

A divorce would involve every aspect of personal finances. Here’s just a few:

• State pension.

There’s no question it will continue to be paid as now, on time and in full. Both the Scottish and Westminster governments have agreed that. But what about today’s 30- to 50-yearolds? They have built up bits of state pension entitlement and maybe some “additional” state pension (also known as S2P). What if they worked at times in England, and at times in Scotland? When it comes to retirement – many decades away – which government should be responsible for the bill?

• Company pension schemes.

These are private arrangements, so you might think Scottish independence would be of no consequence. But the new “pensions freedom” from annuities, and the “auto enrolment” regimes, are entirely political decisions. An independent Scotland is under no obligation to follow or match them, which opens up an entire new world of uncertainty. And what if a company goes bust? Who picks up the pieces? For the sake of example, let’s say oil company BP falls apart, with a giant hole discovered in its pension scheme. It is headquartered in London, but has vast operations in the North Sea. Would the English or Scottish taxpayers foot the bill for a pension rescue?

Mortgages.

If Scotland is somehow forced into a new currency (such as the euro), what happens to existing loans? Are they left in sterling, and their holders with the risk of a ballooning debt if the currency slides against the pound?

It is not beyond the wit of a nation as wealthy and proud as Scotland to overcome these issues. I may be the money editor, but nationhood is about far more than money. As someone with an Irish heritage, the scaremongering of the “better together” campaign, doesn’t wash. But when voting “yes” (I probably would), I wouldn’t be shutting my eyes to the financial consequences.