During his brief visit to Edinburgh, George Osborne said that the pound is not a CD collection that can be divided up.
It was a bit misleading to talk about the pound when what he really meant was the Bank of England — what people commonly refer to as the pound is just the name of the currency it issues.
But why exactly can’t we divide up the Bank of England like a CD collection?
Let’s have a wee look at the BoE’s Annual Report from 2013 (PDF). On page 99 it states that the total assets are worth £58,022m (58 billion pounds), and the bank has put exactly the same amount into circulation as banknotes. This means that Scotland’s 8.3% population share last year was worth £4816m.
Now, obviously we can’t magically turn £4816m worth of banknotes into Scottish ones, so I guess what would happen is that the BoE would withdraw this amount of money from circulation and transfer the corresponding assets to a brand new Central Bank of Scotland, which would then be able to issue a corresponding amount of Pound Scots.
The amounts mentioned above don’t include the UK’s currency reserves (PDF), which belong to the Treasury (although they’re administered by the BoE). In August 2013 the gross currency reserves (including gold and all that) were worth $103,418m, and the net reserves had a value of $44,862m. I’m not an economist, but I presume it’s the latter that are of interest to us here. Scotland would in other words be due currency reserves (including gold) worth $3724m (or roughly £2232m).
Of course, it would hardly be great news for the stability of the Pound Sterling to lose such a great parts of the assets underpinning it from one day to the next, which is why it’s very likely the rUK politicians will start begging Scotland to accept a formal currency union soon after a Yes vote.
If the rUK politicians veto both a currency union and an asset transfer of Scotland’s share of the Bank of England’s assets and the currency reserves, then Scotland will definitely be entitled to refuse to accept any liabilities (in other words, Scotland will start out life as an independent country without a national debt).