It is said that Alex Salmond was once an economist at RBS. Why then, asks EVAN WILLIAMS, are the SNP’s economics so dodgy?
Q.1: What is 90% of 84%?
It’s a nice simple question, with a nice simple answer, kind of reminiscent of the answer to the ultimate question, of life the universe and everything from ”The Hitchhikers Guide to the Galaxy.”
Do you remember how Michael Moore was ridiculed for suggesting that an independent Scotland would have struggled to bail-out RBS during the banking crisis? I hold no brief for Michael Moore, but the way the SNP set about explaining how stupid everyone else was for thinking it might have been an issue is a great illustration of Eck-onomics at work.
So here are the facts – and just so there can be no dispute that these are the facts they come from an unimpeachable Nationalist source understood to be close to the first minister; Joan McAlpine’s blog “Go Lassie Go” – you can check them here and you will see that Joan has helpfully labelled them as “the truth about the banking crisis. ”
- “The bail-out of RBS and HBOS actually cost £66bn in shares and loans.”
- Quoting Andrew Hughes Hallett, Professor of Economics at St. Andrew’s University “By international convention, when banks which operate in more than one country get into these sorts of conditions, the bailout is shared in proportion to the area of activities of those banks. In the case of the RBS…roughly speaking 90% of its operations are in England and 10% are in Scotland.”
Well that’s it then: an independent Scotland would only have had to find £6.6bn(i.e. 10% of Joan’s figure). In fact Joan goes further “So an independent Scotland could easily have bailed out our banks.”
Excellent! all sorted except, of course, to bash a few unionists for talking Scotland down and probably for being quite stupid into the bargain.
Except, mebby naw, there’s a wee bit mair going on here. In exchange for the bailout Wales, Northern Ireland Scotland and England (collectively as the UK Government) took possession of a good chunk of equity 84% in the case of RBS. If, in an independent Scotland, our neighbours in England coughed up 90% of the cost of the bail out wouldn’t they get 90% of the equity? Which is where the sum right at the start comes in. 90% of the 84% equity stake in RBS is of course equal to 75.6%.
This isn’t an argument that Scotland couldn’t survive as an Independent country, its not an argument that RBS couldn’t have been bailed out within an independent Scotland. All it is an illustration that by the SNP’s own analysis an independent Scotland would have seen a foreign power coming to own more than 75% of RBS. If that foreign power used its equity stake to relocate RBS to Cardiff, for example, and secure future tax receipts for their own treasury Scotland would in effect have spent £6.6bln bailing out foreign banks.
There is a theory which states that if ever anyone discovers exactly what the SNP want an Independent Scotland to be like and how it would be governed the arc of prosperity will instantly disappear and be replaced by something even more bizarre and inexplicable.
There is another theory which states that this has already happened. It’s called Eck-onomics.
Evan Williams is an environmental economist and lives in Paisley.