First, a question.
Why did the Treasury feel the need to issue a statement on Monday confirming that, as ever, the Government of the United Kingdom takes full responsibility for its debts?
There had been not a hint of movement in the cost of borrowing. Those legendary "jittery traders" had taken no action to price even the possibility of a Yes vote in September. Part of their job is to spot risk and respond accordingly. They were sitting, as they still sit, on their hands.
Loading article content
Equally, it is an unusual investor who needs to be reminded that the Government issuing debt has complete legal responsibility for that debt. The idea that an independent Scotland might "default" is a species of fiction. UK debt is UK debt. The trader who hasn't grasped that fact is in the wrong business.
What might yet be at issue is the potential failure of London and Edinburgh to reach an arrangement over debt, assets and - if Alex Salmond is doing the talking - sterling. For now, debt issued by the Treasury is, as ever, the Treasury's problem. Since the UK has never once in its history failed to settle debts or pay interest, a public reminder to the markets might have been deemed superfluous.
So where did the idea of a "separation surcharge" spring from? The phrase came from the mouth of Danny Alexander, Chief Secretary to the Treasury, but melodrama was only available to him after that institution had set the hare running. In reality, no trader was paying heed to the hypothetical debt issue until the Treasury planted the idea in the public domain.
Mr Alexander calls that responsible behaviour. Given that UK debt approaches £1.3 trillion, I'd call it risking the public finances for political gain. What happens if those markets take him at his word now, this morning, and push up the cost of borrowing? No doubt the Chief Secretary will blame Mr Salmond, but it would be a hellishly expensive - and hugely reckless - way to make a point.
If Scotland votes Yes, negotiations over these matters will commence. Each of the three main Westminster parties insists that there can be no discussions beforehand, apparently because this would amount to giving Mr Salmond what he wants. It seems that such a thing can never be allowed, even if the First Minister wants something sensible. Meanwhile, it is perfectly OK, apparently, for London departments to stake out all sorts of positions. The Treasury has made one move.
So on Monday a simple restatement of legal obligations became, from the likes of Mr Alexander, the tale of an independent Scotland toying with default the instant Mr Salmond failed to get his way over a currency union. Aside from raising a spectre for no useful reason, this ploy - by no accident - obscured the issue of assets. What has this Union been if Scotland is not entitled to a portion of those?
The SNP simply says that a Scottish share of debt will be shouldered along with assets accrued in the UK partnership. It identifies the Bank of England as one of those assets and thus proceeds to claim a share in sterling. By that logic, Mr Salmond achieves his currency union.
Despite all the bluster from Better Together politicians, London says only that such a thing is "unlikely". That's the official word. You might have thought a coalition government determined to deny Mr Salmond would come up with something a little more resolute. Instead, the scheme is not, in fact, ruled out and the issue of assets refuses to disappear. Short of dissolving and reconstituting the Bank of England on September 19, the UK Government will have to confront the complications it identifies.
For now, it prefers to talk about Mr Salmond threatening to "walk away" from debts that are, in law, an issue for those who hold power in Westminster. No-one has managed to find an instance of the First Minister making such a threat, but his efforts to spell out the legal position is depicted as blackmail, a reckless exercise in brinkmanship. It would be utterly irresponsible, we are told, for this leader to cause Scotland to renege on its obligations in the sacred matter of debt. If that was indeed the suggestion the point could be argued. Mr Salmond has not made the suggestion.
Into this mix an assertion is thrown. Whatever happens, say assorted think tankers, Scotland will be stuck with higher interest rates than a UK with £1.3 trillion in debts. Why? Crudely put - and it is crudely put - because the restored state would have no credit history. How could the markets insure themselves against the antics of a new Edinburgh government without a little extra on rates? So think of a number. This week an additional 1.5% emerged as a figure that would, it is alleged, satisfy the money markets.
The notion is supposed to be derived ultimately from projections produced by the Institute for Fiscal Studies (IFS). Boil those down and it comes to this: not enough oil revenue in the long term and too many older people. The IFS rejected the idea that immigration would solve the demographic problem, decided that a declining oil price is inevitable, and "built on" the work of the Office for Budget Responsibility, a body whose forecasting record has yet to impress anyone. Never mind. There, by a tortuous route, you have it: borrowing at 1.5% above anything paid by the UK.
With no account taken of the value of assets? With no recognition of the contribution made by oil to the UK's balance of payments? With no examination of the possibility that the UK's historically cheap borrowing will wither away if those markets begin to contemplate a state saddled with the thick end of £1.3 trillion? There are several details missing from the story told by Mr Alexander and others.
One big detail has to do with the nature of the UK's debt. It would be false to say that the government owes nothing to international investors, but the bigger picture is more interesting. Fully 70% of UK debt is owed to UK institutions. In large part, any argument over the issue is confined, for practical purposes, to these islands. Anyone liable to be jittery over Scotland's independence goes about their work in the City of London. Any damage caused by a row will be felt here and in the Square Mile. This has very little to do with how we might be viewed by "the world".
You might pause to wonder how a wrecked financial sector came to be holding a portion of £1.3 trillion that is far bigger than any debt Scotland could be expected to accept, but that's another story. The present argument is over Mr Salmond's determination to achieve currency union. That would require good faith on both sides. Given the Treasury's behaviour this week, there seems to be a shortage of that in London.
The risk for the economy of an independent country has been made clear by a manufactured controversy. Self-interest would trump co-operation every time. But that debate will have to keep until September 19.