Letters / Basic economics
Congratulations to all candidates standing, raising many points of concern.
However none have alluded to Shetland’s finances or questioned why people could continue to live there.
First to consider is Shetland’s place in the world, her strengths and weaknesses, governed by money budgets, and resources such as fish, oil, gas, energy.
Since WW2 the Bretton Woods System has served the world well but now creaks at the seams.
The USA fiscal and external deficits have been mainly funded by Japanese surpluses buying US Treasuries (aka IOUs) but after years stagnation they have begun to repatriate funds to stimulate its own economy. Canada, China and others are likely to follow that trend obliging the US Treasury to further raise interest rates to support the US Dollar, and more so since the start of the Iranian conflict.
Why does that matter to Shetland?
It’s the ripple effect – UK Gilts/bonds normally trade about 0.5% above American Treasury rates, which in turn raises further the increased range and costs (of the interest rates) of Westminster, Holyrood and local authorities’ budgets.
The continual downward pressure on local authority budgets is evidence of that, and the SIC’s persistent yearly need to drawdown from its “oil acquired funds” is in effect a prerequisite by Holyrood.
Scotland imposes an effective “tax” on Shetland to balance the books – demanded by The Accounts Commission – and all the result of truncated funding from Holyrood.
Why put up with it?
Into this morass steps Mr Swinney, with “solutions”, whilst conveniently forgetting that Scotland already runs a twelve per cent deficit in comparison to the UK’s of six percent.
More recently the First Minister proposed issuing Scottish Bonds (Gilts aka “Kilts”) after the election, ostensibly to fund infrastructure, promoted as having the same risk factor to investors a UK Gilts.
The coupon (the interest rate) on the bond could (maybe?) be the same as UK Gilts, but buyers and traders on the secondary market (also lacking liquidity) now or in an independent Scotland could see the value fall to say below 90% to account for the additional risk factors, arriving at interest rates well over ten percent.
Recession depression permanent austerity courtesy of Mr Swinney’s Party’s economic plans.
If tunnels/ferries/hospitals/schools were financed via those methods the bonds would be subject to attack by hedge funds “shortening” them to the serious financial disadvantage of the ordinary punter in Shetland and ravage the SIC’s finances.
Shetland shouldn’t need to continually draw from its reserves to subsidise Holyrood’s budgets to spend elsewhere. They were never established for that purpose.
Should Shetland instead decide to borrow, why do so through Holyrood, whose brokers would demand from Shetland the much higher interest rates, but instead borrow directly from the Bank of England/UK Treasury’s Office of Debt Management?
Voters should take it all into consideration before casting their ballots – both for the first preference candidate and the regional list of hopefuls.
No amount of internet posts, manifestos, brochures, banners, flim-flam, marches, propaganda or wishful thinking can alter the basic economics referred to above.
Cecil Robertson
Inverness
