Project Fear is back – not that it ever went away.
The Sunday Times has printed an article (June 12th) that is half PR for an upcoming book and half project fear. Altogether it is a non-story.
Before we look at the “shock” headline figure here are some figures for context.
- Currently, global debt as defined and calculated by the IMF is 256% of Global GDP.
- The UK Government debt is 143% of GDP. So the shocking figure for Scotland is…….
- 110% of GDP.
The “debt” (although it really isn’t a debt) is the cumulative difference between what the UK releases into the economy and what it collects in tax each year.
According to Professor John Kay, Scotland with its GDP of around £166 billion pounds would be “saddled with” £180 billion of “debt”, around 110% of GDP after independence. According to the OECD, this figure is just above Austria and significantly below Belgium, Canada, Portugal, and Spain.
If Scotland was a member of the EU its “debt” would be similar to Cyprus:
Professor Kay is announcing that an independent Scotland would have a LOWER “debt” than a third of the OECD countries and a lower “debt” than the UK.
The fact that the Sunday Times would publish his figures and the surrounding narrative that Scotland would pay off “its share” of the current outstanding credits that are owed by the UK Treasury, without giving any kind of context, is the very definition of project fear. And we are likely to see much more of it.
The figure isn’t scary and in fact, neither the Sunday Times nor Professor Kay was saying it was. However, by removing any kind of context the article was pushing the idea that these *huge* figures were unusual and would be dangerous for an independent Scotland.
When Scotland is independent it will have to run a deficit and £20 billion per year might be the correct figure. Of course, it could be half or double that. Professor Key’s estimates are as good as yours of mine. What is certain though is that Scotland will NEED to run a deficit in order to totally decarbonise our economy. Almost every single country in the world will have to run deficits for years if not decades to facilitate a transition.
What is debt anyway?
There is a whole other discussion to be had about Government spending and investment and its role as a safe haven for people with excess cash (or as some people like to call that “debt”) and I will leave that to the Economist in the video below to explain.
Here is Australian-based half-English Economist Steven Hail to do that in this short seven-minute bite-size episode.
Corrects several mistakes published earlier today.