An independent Scotland could enjoy “significant benefit” by walking away from its share of UK debt, according to respected economists.
Holyrood’s economy committee heard evidence from Professor Jo Armstrong, of the Centre for Public Policy and Regions at Glasgow University, and Paul Johnson, of the Institute for Fiscal Studies.
Both said it would be wise to lose the liabilities if there is a Yes vote in September.
First Minister Alex Salmond has threatened not to pay Scotland’s share the national debt unless Westminster accepts his plans for a currency union, something all three of the main UK parties have ruled out in the event of independence.
Mr Johnson told MSPs: “In one sense it would be very positive to start off with no debt. It is a rather good place to be.
“I think there is significant benefit to walking away with no debt.”
Professor Armstrong added: “Having no debt is always going to be the best position and the way that negotiations went about, that could be seen for Scotland as not only sensible but as having negotiated a very good deal.
“Having no debt as your opening would be a very good position to be in.
“You then don’t need to go to the markets to borrow money to pay off your debt. You can build up a track record and get decent interest rates.”
Although the Westminster Government has said Scotland must launch as a new country, burdened with 300 years of debt worth about £150 billion, the Treasury committed to remaining liable for all UK debts in a bid to calm market fears over independence.
Dr Angus Armstrong of the National Institute of Economic and Social Research ruled out reneging on the obligations, describing Chancellor George Osborne’s refusal to enter a so-called Sterling zone “entirely rational”.
Instead, he suggested Scotland should negotiate its oil wealth away to the UK in exchange for a lower debt.
He said: “Most people would expect to pay a reasonable and fair share of debt. To walk away from that would set a precedent for the rest of Europe that would be extraordinary.”
Dr Armstrong said the only option that allows full fiscal autonomy for an independent Scottish Government is for the country to have its own currency.
Mr Salmond has repeatedly rejected calls to set out a “plan B”, such as a new currency or carrying on with sterling in the style of Panama. Concerns have been raised that a new currency would create new transaction costs to cross-border trade.
Professor David Simpson, a Harvard-educated economist who has worked for the UN, World Bank and European Commission, told the committee that a currency union is likely.
And Crawford Beveridge, who chairs the Fiscal Commission Working Group which provides advice to the Scottish Government on the macroeconomic options for an independent Scotland, said he expected the group to reaffirm its position that a sterling monetary union is the best currency option for Scotland and the rest of the United Kingdom when it meets.