Homeowners in Scotland will have to pay more for their mortgages if Alex Salmond goes ahead with his threat to default on Scotland’s debts, David Cameron said yesterday.
The Prime Minister’s warning on interest rates was also backed up by one of the world’s largest banks, which forecast that families would be faced with higher borrowing costs.
Goldman Sachs said yesterday that the whole of the UK could face a run on sterling after a “yes” vote owing to uncertainty over what currency a separate Scotland would use.
Mr Salmond has threatened to walk away from Scotland’s share of UK debt if he cannot secure a share of assets, including the currency. Mr Cameron described the ultimatum as “one of the most chilling things that has been said” in the whole referendum debate.
The prime minister said in the Commons yesterday that any country that defaulted on its debts would find it hugely difficult to borrow money on the international markets. Scotland would be seen as a bad risk and would face higher interest rates for any money it borrowed, interest rates which would spiral down to hit homeowners and businesses.
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Mr Cameron said: “I think it is one of the most chilling things that has been said in this referendum campaign, that a separate Scotland would consider defaulting on its debts. We all know what happens when you don’t pay your debts, no one will lend you any money unless you pay a punitive interest rate.”
He added: “We all know what that means for home owners — much higher mortgage rates: for businesses — crippling interest rates. Those are the consequences of what the separatists are proposing.”
His warning was reinforced by analysis from Goldman Sachs, which said that the UK could face a eurozone-style crisis if Scotland voted “yes”. Uncertainty over currency would prompt capital flight. The Wall Street bank warned that public services in Scotland would suffer “painful” cuts and that costs for families would go up as the country faced higher borrowing costs.
The potential costs of independence were also exposed yesterday by Iain McLean, a professor of politics at Oxford University.
Mr Salmond has claimed that Scots would be £500 a year better off after independence, because of a change in spending priorities by the Scottish government. But Professor McLean said that Scotland would be £2.5 billion a year worse off than it was now and, if the people of Scotland wanted to continue with present levels of public services they would need to pay an extra £480 in tax.
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“What is sheer magical thinking is that people will be better off on Independence Day, with more to spend on the NHS. On the latest available numbers, they will be worse off, with less to spend on the NHS unless they cut spending somewhere else,” he said.
However, the claims were rejected by John Swinney, Scotland’s finance secretary, who insisted that after independence the country would be £600 million a year better off.
Mr Swinney said: “The current Scottish government has identified savings of around £600 million a year by taking different decisions from Westminster.
“By getting rid of Westminster politicians we can save nearly £50 million alone. To put that in perspective, that’s around the same amount of money needed to mitigate the costs of Westminster’s bedroom tax, which has penalised thousands of disabled and other people,” he said.
“That means we won’t have to use taxpayers’ money to mitigate the impact of the cruel bedroom tax or pay a share of the obscene £100 billion cost of a new generation of nuclear weapons.”
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He added: “The sight of prime minister’s questions in the House of Commons is a stark reminder of what a “no” vote means — Tory-led governments people in Scotland don’t vote for, imposing policies we don’t support and charging us for the privilege.”