AN INDEPENDENT Scotland would face a debt repayment of £23 billion in its first year after leaving the UK, according to a new analysis of how Britain's assets and liabilities would be divided up following a Yes vote.
A study by the National Institute of Economic and Social Research suggests an independent Scotland would be able to issue an IOU to the rest of the UK and promise to pay its £143bn share of national debt over a number of years.
The paper, by economists Dr Angus Armstrong and Dr Monique Ebell, provoked a fresh row over an independent Scotland's economic prospects.
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It came as First Minister Alex Salmond responded to Labour leader Ed Miliband's promise of more powers for cities to make Glasgow, Edinburgh and Newcastle "economic powerhouses" to counter the growing domination of London.
The NIESR report, published yesterday, says an independent Scotland would have to make a first-year repayment of £23bn, based on UK debts due to be paid in 2016.
The repayment would be on top of the money a newly independent Scottish Government would have to borrow to plug the deficit in its day-to-day finances.
The report's authors argue an independent Scotland would not be able to pay off its share of the national debt in a "clean break option" immediately after independence. Instead they say an "IOU obligation would be created" which would push the rest of the UK deeper into debt than a newly independent Scotland.
Without Scotland's contribution to the Treasury, the UK's debts would soar to 102% of its GDP which, combined with the risk of Scotland failing to pay its IOU instalments, could damage the UK's credit rating and push up borrowing costs down south.
The arrangement would be a key reason why the rest of the UK would not agree to First Minister Alex Salmond's plan to share sterling in a formal currency zone, the economists say.
Chancellor George Osborne and his opposite numbers in Labour and the LibDems have ruled out a currency union. The Treasury has said it would remain responsible for the UK debts in the event of a Yes vote, though it would expect compensation from Scotland.
The economists warned: "The continuing UK would already have a £143bn IOU from an independent Scotland. It is hard to see why the government would increase this exposure by acting as lender of last resort to institutions in Scotland.
"A lack of sterling lender of last resort is likely to lead to financial institutions migrating south and higher borrowing costs as banks in Scotland compete with UK institutions for deposits."
They added: "Advocates of the currency union suggest these risks can all be managed by well designed cross-border fiscal agreements. History is less encouraging, not least because there can be no binding enforcement between sovereign states."
They also repeated previous warnings an independent Scotland would face higher borrowing costs and would need to impose deeper spending cuts or higher taxes to bring finances under control in the decade after a Yes vote.
Speaking to the Wall Street Journal, Mr Salmond insisted a currency union would be agreed in the event of a Yes vote, saying it would be "in the interests of both Scotland and the rest of the UK".
He also promised closer ties with England's northern regions, claiming they received the "worst deal" from Westminster.
His comments came as Labour leader Ed Miliband confirmed an election pledge to give cities new powers in a bid to counter the growing domination of London.
Scottish Labour's finance spokesman Iain Gray claimed the report showed independence would leave Scotland "worse off".
However, a Scottish Government spokeswoman said: "The people of Scotland already pay their share of UK debts through taxes every year and any debt repayments to be made by an independent Scotland will be agreed as part of a fair negotiation over assets and liabilities."