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Read John Jappy's blog here

Alex Salmond speaks to a packed conference

Political Briefing, Andrew Graeme, 12th July

Deluded, Scared and in Debt

 

Deluded

In a series of meetings chaired by Alistair Darling, the three main Westminster parties decided to make the coming 100 year celebrations for the start of The First World War in 2014, "A celebration of what we achieved and how we overcame adversity, when Britain pulled together."

The key words here are ‘overcoming adversity’ and of course ‘pulling together.’ These celebrations are going to be a thinly disguised extension of the Better Together campaign. And just to make sure that we get the message, the whole thing is taking place in Scotland and has been delayed from the beginning of The Great War on 28th July to the 4th August, 2014 "to enable Commonwealth heads of state to attend, the day after the closing ceremony of the Commonwealth Games in the city."

So the Commonwealth Games are to be tied to the Great War in a blatant effort to make Scots feel proud to be a part of the Union. It is my belief that this is a hand grenade, tied to a boomerang.

The First World War has been getting a bad press, ever since Wilfred Owen wrote "My friend, you would not tell with such high zest, to children ardent for some desperate glory, the Old Lie; Dulce et Decorum est, Pro patria mori."

And nowhere was WWI greeted with more derision than in Scotland, where casualties were grossly disproportionate. For example, at Arras, in April 1917, one third of the 159,000 British Expeditionary Force casualties were Scottish.

It was not just the Germans that killed our men. Stupidity and incompetence meant that hundreds of Scottish soldiers were even killed in Scotland. Britain’s worst train crash killed 227 people at Quintinshill, near Gretna, including 214 from the Leith-based 7th Battalion Royal Scots, Territorial Force, who were travelling to Liverpool, en route to Gallipoli. HMS Iolaire sank in January 1919, when it struck rocks off Stornoway with the loss of 205 men as it was carrying soldiers back to Lewis.

This stupidity and incompetence was not confined to Scotland. For example, during WWI, five ships of the Royal Navy were blown to smitherines with the loss of 3,000 lives, by the idiotic practice of keeping ammunition near the ships boilers. As for the war itself, it is a widely held belief that the men and junior officers were badly led by bilious buffoons who wasted their soldiers’ lives with incredible profligacy and condemned them to conditions that were hell on Earth, whilst failing to achieve useful results.

In other words, if The Great War is to be used as another shot in the locker of the Better Together campaign, they will be hard-pushed to avoid the epithet "Lions led by donkeys."

Are You Scared Yet?

Scare stories of how an independent Scotland would struggle without England to wipe its nose seem to have largely backfired. For example, the government issued a list of some 200 bodies that an independent Scotland would have to replicate. This list shows only how inefficient the UK public sector really is. About one-third of the list is rubbish like ‘The Advisory Panel on Public Sector Information’ and ‘The Royal Mint Advisory Committee on the design of coins, medals, seals and decorations.’

The list can be divided into three distinct groups -

1. Bodies that already exist separately in Scotland, such as the BBC, or the various parts of the NHS,

2. Bodies that we definitely don’t want and Westminster has already said that it will close,

3. Bodies, such as the DVLA, that an independent Scotland would indeed have to replicate.

In this third group, there are just 21 such organisations.

The next big scare story was that postal costs in an independent Scotland would have to be increased, because of the high costs of delivery to rural areas.

Quite the opposite is true, if a Scottish Postal Service is organised along the lines of similar postal services in small countries. Postal charges in an independent Scotland can easily be lower than those in England, by introducing two clear policies -

1. Reducing the frequency of deliveries to extremely rural areas. In today’s on-line World, almost no mail is truly time-sensitive. By reducing the delivery frequency to two or three deliveries a week, costs could be massively reduced.

2. By charging considerably less than England for a letter or parcel, an independent Scotland could encourage re-mailing companies and letter printing works to set up shop in Scotland, in much the same way as happened in Luxembourg and the Netherlands to undercut German and French postal costs for large companies such as insurance and banks that have to send out millions of letters every month. By charging far less than Germany and France, the Luxembourg Post Office makes a handsome profit, because all the costs are in the delivery, not in the collection of mail.

Debts and the Pressure Builds

As I have said before, we’re in debt. The sheer unbelievable scale of the debt burden we are facing is so vast, it beggars belief. The idea that we can somehow pay back our debts is illusory. It is now mathematically impossible.

Despite Cameron’s talk of austerity, he’s going to add an estimated 700 billion to the national debt in just five years in office. That’s more than Blair and Brown added to the national debt in eleven years. It’s more than every British government of the past 100 years put together. The fact is, when you look at our finances as a whole, the coalition isn’t cutting anything. State spending is going up - our national debt is going up - and our interest payments are going up.

All the coalition has achieved, is to slow the rate at which our debts are accelerating. By the next general election in 2015, our national debt is estimated to stand at almost 1.4 trillion.

UK public finances are in an enormous mess. But add in our financial, personal and private debts and an even darker picture emerges.

Compared to the size of our economy, Britain is now one of the most heavily indebted countries in the Western world. Our total debts stand at more than FIVE TIMES our GDP. Proportionally, that’s more debt than Italy, Portugal, Spain and almost twice as much debt as Greece. Those are four countries already in crisis. We’re the odd one out because we haven’t collapsed – yet.

But that isn’t the whole story. If we add all the other obligations that are debts by another name, such as public pension liabilities, PFIs, bonds issued by banks, etc., the figure is almost doubled. By the time of the next Westminster election, Britain’s total external debts will be ten times our GDP.

And the pressure builds.

Of course, interest rates are at record lows, so many observers will say that having a very high debt burden actually makes sense. Well, yes, if we had borrowed to invest at a higher rate. If we had borrowed at 2% and lent at 5%, or even just invested in money-earning infrastructure, such as targeted R&D, government sponsored oil exploration, or even science graduates, there might be some truth in that idea. But we spent the money having a good time, paying for wacky government IT schemes that crashed and burned. We over-loaded government departments with unneeded staff and generally had jam today and the devil take tomorrow.

In particular, we have created a Britain that is one of the most socially unjust nations on Earth. Vast wealth is concentrated in the hands of a few, whereas a huge swathe of the population has nothing and is not even economically active. This new underclass of single parents, chronically unemployed and the otherwise socially weak is living an ever-more miserable existence, with little hope for betterment and is being paid for by the middle classes.

It is this maintaining of an economically inactive underclass at the cost of the middle classes, who are already burdened with their own private debt, that is draining the public finances of the country.

But two thirds of the UK’s external debt is obligations by banks and their associates. Rather than allow the banks to go into receivership or have those debts converted into shares, successive Chancellors have taken the easy option of pumping money into the banks and by doing so, created a Damoclesian debt burden dangling over all our heads.

These futile attempts to restore the banking sector to health is like a man trying to levitate by standing in a bucket and pulling desperately on the handle. If we keep this up, the United Kingdom could end up following the Japanese example of bailing out zombie institutions to the point of economic implosion.

For the past 30 years, interest rates have been steadily falling. We now have interest rates at a record low and, unless central bank rates go into a minus (i.e. if you put your money into a bank, they will take a bit off every year!) they cannot go any lower. If rates did go into a minus, your money would be safer in a shoebox, than in a bank and there would be mass withdrawals of savings and company cash balances would be brought right down to a minimum. At best, there would be a slow-motion run on the bank. At worst, it would not be so slow-motion.

We are already seeing the first signs of an increase in interest rates, as the pressure continuous to build. This is hardly surprising, when you remember that most central banks and the Bank of England in particular, have been generating new money. At the moment, for the consumer, this upward pressure has been in the form of less generous terms and higher processing costs for mortgages, but the interest rates for corporate bonds have increased steadily over the past year. The writing is on the wall - from 1965 to 1975, interest rates went through a hockey-stick climb, driven by the blinding incompetence of successive governments. From 75 to 82, mortgage rates rattled about between 11% and 18%. House prices plummeted. Britain had the three-day week and was called The Sick Man of Europe.

But this time, it won’t be mortgage rates that you will have to fear, but the Westminster government.

It is already common wisdom that the next Westminster government will have to increase taxes by a significant amount, just to cover those ever-increasing debt payments and the rising tide of those social security costs incurred by a policy of austerity.

But an increase in taxes feeds directly into inflation.

The ‘magic’ answer to all these woes cannot be to allow the Pound to drift South, but all too often, politicians, blissfully ignorant of the facts, seem to think that if the Pound looses its value, our balance of trade will improve and therefore benefit out economy.

That may have been true once, a long time ago, but today the UK has lost so much of its basic bread-and-butter manufacturing, that there just is no home-grown alternative and no skills base to man such industries.

From wire to neon tubes, from CDs to clothes pegs, we have little or no UK based manufacturers any more. Our car manufacturing industry may be quite healthy, but it is largely composed of ‘screwdriver factories’ employing relatively few to assemble parts made elsewhere. Add to that, the fact that we have to import most timber, food-stuffs and other bulk goods and raw materials in particular and you begin to see that a falling Pound would do little to relocate supply to the UK, but do a great deal to add to the inflationary pressure.

So where is all this going to lead us, if Scotland stays in the union?

One hundred years ago, Argentina was (per capita) the richest nation on Earth. Since then, they have had little else, other than slow decline. Today, its middle classes are begging on the streets. In 2001, foreign currencies in banks were frozen and then converted into worthless government bonds. Pensions were confiscated, to be replaced by meagre state pensions.

Right now, UK interest rates are at an all-time low of 2%. If interest rates moved back towards the normal 5% level, our cost of borrowing would triple. If the government thought that debt repayments were going to triple, it would have to take drastic action – like abolishing the state pension.

Or privatising the NHS and the Post Office.

 

Sources

(Public debt and other obligations ratio to GDP) Haver Analytics; Morgan Stanley Research; Bank of England; Bank for International Settlements; McKinsey Global Institute;

(UK public debt history) ukpublicspending.co.uk;

(Historical UK gilt yields) gecodia.com

(Comparative European debt) Boomberg

Would an independent Scotland be financially sound?

(Before retiring, John Jappy was a senior civil servant in the Inland Revenue, working for the Accountant & Comptroller General's Branch based at Somerset House in London. His duties involved liaising closely with Treasury officials to prepare accounts and financial information for UK government ministers.)

As a civil servant in London, and being part of the establishment, I always accepted the general view that an independent Scotland would not be able to survive on its own without financial help from the London Exchequer.

However, when in 1968 I was able to examine the so-called "books" for the first time, I was shocked to find that the position was exactly the opposite and that Scotland contributed much more to the UK economy than its other partners.  This was, of course, before the oil boom.

I realised that the Treasury would wish to keep this a secret, as it might feed nationalistic tendencies north of the border, which at that time were very weak.  I took the decision to keep an eye on the situation to see how long it would take for the true facts to emerge, which I felt would only be a short time.  However, the Treasury and the Establishment did an excellent job, aided and abetted by the media, to keep the myth about Scotland alive.  

In fact it took another 30 years before the first chink in their armour started to appear.  This came unexpectedly on 13 January 1997 when, in reply to a series of questions put by SNP Leader in the Commons, Alex Salmond MP to the then Tory government, Treasury Minister William Waldegrave admitted that Scotland had paid a massive 27 billion more to the London Exchequer than it had received since the Tories came to power in 1979.  Statistically this works out at 5,400 for every Scot.   

There were no attempts to refute these figures, which caused much embarrassment to the Tory Government of the day.  However, the facts were quickly covered up by the Unionist controlled media.

Then a year later with a Labour government now in power came a further bombshell.  Following further promptings by the SNP, on 21 August 1998, Mr Salmond received a letter from the House of Commons Library (ref. 98/8/56 EP/rjt) which gave a table showing that based on Scotland's GDP per capita, Scotland would occupy 7th place in the world's wealth league.  The UK was at 17th Place.

When the Labour government came to power it announced a 1p cut in the standard rate of income tax.  From my detailed knowledge of income tax, I felt that this was the worst possible thing that they could do, as extra monies would be needed following on from the Thatcher era, if they were to fulfil even a fraction of their promises to the electorate.  I came to the conclusion, and I still feel that I was right, that this was done by Labour to prove to the voters of Middle England that they could match the Tories in tax cuts.   

Despite the disclosures of 1998, attempts to deceive the Scottish electorate did not end there.  In March 1999 a Labour Party leaflet appeared which said that if the SNP were to forego Gordon Brown's 1p cut in the standard rate of income tax, every family in Scotland would be 250 worse off.  This became the major topic of a TV debate between Alex Salmond and Donald Dewar.  Salmond tried to point out to Dewar that he was using the wrong figures.  Watching the debate, I saw Dewar's eyes roll in his head for a few moments but he carried on regardless.  

After the debate it took the Labour Party a whole week to admit that they were wrong.  There was in fact a whole chain of errors which the Labour Party tried to blame on "printing mistakes".  However Labour could not deny the fact that in their calculations the UK average figure, which included the high wage earners in the city of London and the booming economy in the South East corner of England (which if I may say so were the result of the selfish policies of Mrs Margaret Thatcher), the figure used was almost double those of the average Scottish wage which at that time stood at 17,000 per year.

Looking closely at the figures and taking the year 2006 as a benchmark, I found that Scotland had an annual relative surplus of 2,8 billion, which works out at 560 for every man, woman and child.  In contrast the UK had a deficit of 34.8 billion.  

In November 2006, the U.N. published its annual "Human Development Index".  For the sixth year running, oil rich Norway topped the list, and won on such factors as generous welfare payments, education, high income and a long life expectancy.  Norway wisely created an "oil fund" in 1995 which in 5 years reached a total of 250 billion, so that Norway sailed through the Credit Crunch.   

Who are the real subsidy junkies?

Any lingering doubt that Scotland more than pays its way, or survives on subsidies, was dispelled by a new report published in October 2007.  Whilst the Daily Mail, which by no stretch of the imagination could be described as a supporter of Scottish nationalism, devoted a whole page to the analysis of the report which was based on tax paid per capita as against spending, Northern Ireland received 4,212 more than it paid in tax, North East England 3,133, Wales 2,990, N.W. England 1732, South West England 978, West Midlands 931, East Midlands 185 and lastly Scotland 38.  Only the South East corner produced a small surplus due to tax paid on the high wages within the city of London at this time (pre-Credit Crunch).

Analysis

It is no longer refuted that Scotland exports more per capita than the rest of the UK.  In 1968 when I first discovered that Scotland was in surplus in relation to the rest of the UK, its exports could be broken down into whisky, meat, timber, fish, and of course tourism which is a huge hidden income.  Those exports are supported by a population of only 5,000,000 as against 45,000,000 for the rest of the UK, quite a substantial advantage.

With the oil boom, Scotland's economy was transformed.  Scottish oil has to date funded the Treasury with 300 billion, which has pushed Scotland up from 7th place in World Wealth rankings, had it been in control of its own resources, to 3rd place.  

On 29 May 2008, Labour Chancellor Alistair Darling admitted in a back-handed way, that Scotland's oil revenue had been underwriting the UK's failure to balance its books for decades.  There is still 30 years of oil supply left in the North Sea (some 150 million barrels) valued at 2008 prices at 1 trillion dollars.  This excludes the new fields being brought into production in deeper waters west of Shetland.

Meantime whisky exports, which I listed in 1968 as one of Scotland's top assets, have risen at a phenomenal rate.  For example, whisky exports to China amounted to 1 million in 2000/2001, by 2007 they had risen to 70 million.  They have continued to rise, although I don't have more recent statistics.

On the economies of Independence, Scotland has also 18 times its requirements in North Sea gas, which on current trading is more expensive than oil.  The country exports 24% of its surplus electricity south of the Border, with much of the back-up by Hydro Electric unused.

Even if nuclear is excluded, the future looks bright, the new Glen Doe hydro station on Loch Ness which was opened by Scotland's First Minister last year can produce enough electricity for 240,000 homes.  Further projects down the Loch which have now reached the planning stage will increase this to over 1,000,000 homes.  Wind and wave energy will also contribute significantly in the future.

No doubt as the time draws nearer to the referendum on Scottish Independence, politicians will do their best to distort the figures, but the truth is something that never varies.

It’s official: Scotland is the 7th Richest Nation

By John Jappy

 

Before each election, the Unionist parties, terrified of an SNP victory, turn out the old hoary statements that an independent Scotland would become bankrupt in a short space of time and that we are ‘subsidy-junkies’ as far as the UK is concerned.

 

Nothing could be farther from the truth.

 

I first became aware of the falseness of such statements back in 1967, when, whilst working in the City of London, I held the ledgers which contained the total of UK tax receipts and expenditure, yet it took a further 30 years before the truth began to emerge.  This came unexpectedly on the 13th January 1997, when in reply to a series of written questions by SNP leader Alex Salmond to the then Tory government; Treasury Minister William Waldergrave admitted that Scotland paid a massive 27 billion more to the London Exchequer than it received since the Tories came to power ion 1979.  That worked out to 5,400 for every Scot!

 

From the Government’s own figures produced at this time, it was easy to calculate that over the next five years, a further 12.5 billion more would go into the London Treasury than Scotland received.

 

There were no attempts to refute these figures, which caused extreme embarrassment to the Tory Government of the day.  However the facts were quickly covered up by the Unionist controlled media.  Then a year later with a Labour Government now in power came another bombshell.  Following further promptings by the SNP, on 21st August 1998, Mr. Alex Salmond received a letter from the House of Commons Library (ref 98/8/56 EP/rjt) which gave a table showing that based on Scotland’s GDP per capita, Scotland would occupy 7th place in the World’s wealth league, with the UK at 17th place out of 26 countries listed.

 

The top eleven countries are  

  1. Luxembourg
  2. USA
  3. Switzerland
  4. Norway
  5. Japan
  6. Iceland
  7. Scotland 
  8. Denmark
  9. Belgium
  10. Austria
  11. Germany

 Interestingly, seven of these are small countries, again destroying the myth that Scotland is too small to stand on its own two feet.

 

Attempts to deceive the Scottish electorate did not end there.  In March 1999, a Labour Party leaflet appeared which claimed that every family in Scotland would be 250 worse off if the SNP were to forego Gordon Brown’s proposed 1p cut in the standard rate of income tax.  (This cut was done to prove to voters in Middle England that Labour could match the Tories in tax cuts.)  The figures shown in the Labour leaflet became the subject of a TV debate between Labour’s Donald Dewar and Alex Salmond in March 1999.  Alex tried to point out to Donald that he was using the wrong figures.  Donald’s eyes rolled in his head for a few seconds, but he carried on regardless.  It took the Labour Party a whole week to yield to SNP pressure and admit they were wrong.  They even tried to blame the errors on ‘printing mistakes’ which everyone knew was nonsense. 

 

How could such serious ‘errors’ occur?  It is hard to believe, but taking one example, Labour used the UK average wage figure in their calculations which were almost twice those of the then Scottish average wage of 17,000 per year.  Even today, many Scots earn a great deal less than this 1999 figure.

 

So, if at any time you read of a ‘black hole’ in the budget of an independent Scotland, forget it.  You are being lied to.  The only black hole comes from the vast sums being taken out of the Scottish economy by the London Government.

 

Finally, what the media keeps very quiet about is that even excluding oil, Scotland exports more per head of population than the rest of the UK, hence the ‘balance of payments’ of an independent Scotland would be a lot better than South of the boarder.

John is at the back!

Scottish Oil by John Jappy

 

We suspected it. But now we know.  The secret documents released under the 30-year rule have revealed that Labour Prime Minister Harold Wilson was convinced that the ‘black gold’ in the North Sea could bring about what he feared most, that Scotland would seek and obtain its independence.  

 

Secret memos were passed around as to how the Scots could be bought off.  Whitehall required the revenue from Scottish oil to pay off its massive debts, so moves were set in motion to “weaken demands and buy time.”  But it was within Scotland itself that Whitehall’s worries were scuppered, Scots being notorious down the ages for fighting amongst themselves and pressing the self-destruct button.  The chief culprits in this were Scotland’s Labour MPs who dominated politics in central Scotland.  They began to see that their main job was at all costs not to give any credence to the SNP, or they might find themselves unemployed, with their seats at Westminster taken by Nationalists.  Labour’s control of power in Scotland eventually saw off the Nationalists and then the worst happened:  the Conservatives under Margaret Thatcher came to power.

 

In those decades, as revenues of 5 bn per annum poured into the Treasury, the S.E. corner of England became one of the wealthiest regions in the World.  Thatcher also saw the great opportunity of keeping herself in office for unlimited time, by enacting the Tory grail of cutting taxes; tax cut after tax cut put fortunes into the pockets of the already rich, whilst gradually the jobs created in Scotland by the oil boom evaporated, leaving behind a vacuum and no sustainable benefits.  Scotland had been robbed.

 

The repeated calls by the SNP to set up an oil fund were ignored.  Currently, Norway with a much smaller stake in the North Sea than Scotland has a fund of around 82bn.  In addition, Norway has massively improved its whole infrastructure making it the envy of most of Europe.  Even the IMF praised Norway for its foresight in using these funds wisely.  In contrast, Scotland still languishes at the bottom of the international table of European league standards, with Glasgow being singled out as having the worst child poverty in the UK.

 

The SNP has recently put forward detailed proposals for an ‘Oil Windfall Fund’ based on the successful scheme created by Norway.  There are at least 28 billion barrels of oil left under the North SeaScotland has its hands on the Lottery Jackpot!

 

With the current average price of oil at $45 per barrel and 30 years worth of oil and gas left to exploit, Scotland stands to benefit from our North Sea resources to the tune of one trillion dollars!

 

Whilst, unfortunately, we cannot turn the clock back, the opportunity still exists for Scots to grasp the opportunity and realise the massive benefits independence will bring.

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