IT is one of the recurrent threats about a future independent Scotland – that this country would start with a huge national debt that would only get worse.
Small countries can’t handle debt, goes the theory, and those with a commitment to social welfare and a fairer society would run up national debts quicker than most.
So when it was announced last month that Denmark, our neighbour across the North Sea with a population similar to that of Scotland and similar social democratic values, had paid off all its national debt held by foreign institutions, there must have been some discomfiture in the ranks of the No camp. Though we can’t say that for certain as nobody knows who they are yet or whether they would understand positivity about small nations.
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It should be noted that Denmark did not pay off all its national debt, but took it all “in house” so that the debt is owned in Danish Krone to Danish institutions.
The best and fairest way to compare national debts is by explaining the figure as a percentage of Gross Domestic Product (GDP). Denmark’s national debt is now down to just 38 per cent of GDP, which compares to the UK’s debt figure of 85.4 per cent of GDP. And Denmark’s is going down, with the European Commission predicting Danish national debt to fall to 36 per cent of GDP, with no-one really knowing how high the UK’s debt will soar as a consequence of Brexit.
Dr Craig Dalzell, head of research at Common Weal Scotland, has taken a particular interest in Denmark’s remarkable ability to deal with its national debt over the years.
He explained to The National: “Denmark could well show the way forward for an independent Scotland to deal with this debt issue.
“One of the things they have been doing for many years to reduce their ratio of debt to GDP is invest in their country and its infrastructure, which is something that the UK Government is not very good at.
“Just after the Second World War the UK had a debt to GDP ratio of about 200 per cent, but governments built up the country and that that reduced the ratio only for it to rise again recently.”
That’s why an independent Scotland would need to control its economy, its investment and its debt. Dalzell said: “There are going to be limits to growth eventually and we cannot rely on infinite growth economics, but Scotland is a country which has seen significant under-investment for decades, so, like the Danes, there is something we could do to build up to where we should be.
“Under UK austerity policies, we do have a bad attitude to borrowing, especially when we are borrowing to invest, but these investments do have a return on them and an independent Scotland, like Denmark, should not be afraid of borrowing to invest.
“Governments grow economies, especially if they have their own currency as Denmark does, by investment. Yes, the Danish currency is pegged to the Euro, but that is their choice and in Scotland just now, we don’t have that choice.”