<p>The question of how UK assets and liabilities would be divided between an independent Scotland and the rest of the UK (“rUK”) following a yes vote in September's independence referendum is a highly sensitive and contentious issue, as one might expect in any separation or divorce proceedings. Following the recommendations of the Fiscal Commission Working Group,<xref ref-type="fn" rid="fn1"><sup>1</sup> </xref><fn id="fn1"><label>1</label> <p>Scottish Government, <italic>Fiscal Commission Working Group – First Report – Macroeconomic Framework</italic> (2013), available at <ext-link ext-link-type="uri" xlink:href="http://www.scotland.gov.uk/Publications/2013/02/301" xlink:type="simple"><italic>http://www.scotland.gov.uk/Publications/2013/02/301</italic> </ext-link>.</p>
</fn> the Scottish Government has promised that it would seek to retain sterling as the currency of an independent Scotland within a formal currency union with rUK, arguing in last year's White Paper that, “the pound is Scotland's currency just as much as it is the rest of the UK's.”<xref ref-type="fn" rid="fn2"><sup>2</sup>
</xref><fn id="fn2"><label>2</label>
<p>Scottish Government, <italic>Scotland's Future: Your guide to an independent Scotland</italic>, Scottish Government (2013) 7, available at <ext-link ext-link-type="uri" xlink:href="http://scotgov.publishingthefuture.info/publication/scotlands-future" xlink:type="simple"><italic>http://scotgov.publishingthefuture.info/publication/scotlands-future</italic> </ext-link>.</p>
</fn></p>
<p>The Scottish Government has also promised that independence would not mean significant additional public expenditure replicating a number of public bodies and government institutions in Scotland that are currently the preserve of the UK Government. An independent Scotland and rUK would, it says, continue to share certain public bodies and institutions such as the Bank of England and the Foreign and Commonwealth Office's network of overseas embassies and outposts.<xref ref-type="fn" rid="fn3"><sup>3</sup> </xref><fn id="fn3"><label>3</label> <p>In a paper published last year, the Scottish government acknowledged that it would not be practical or indeed possible to share some public bodies or institutions, in particular regulatory bodies, as European Union rules require members states to establish and be responsible for their own regulators in a number of sectors such as competition, communications, gas and electricity, rail and civil aviation, see Scottish Government, <italic>Economic and Competition Regulation in an Independent Scotland</italic> (2013).</p>
</fn></p>
<p>On a number of occasions, the First Minister, Alex Salmond, has suggested that sterling and the Bank of England are assets that an independent Scotland would be entitled to share with rUK and that if such assets were not shared, Scotland would have the right to off-set the value of such assets against the share of UK debt that it would be expected to inherit from rUK as part of the separation agreement.<xref ref-type="fn" rid="fn4"><sup>4</sup> </xref><fn id="fn4"><label>4</label> <p>Following the launch of the Scottish government paper, “Scotland's Economy: the case for independence”, Alex Salmond was quoted as saying: “The financial assets of the country include sterling and sterling reserves: they obviously do. We have made the point that sterling is our currency as well as the rest of the UK's, just as the Bank of England is our central bank as much as the rest of the UK's”, <italic>The Herald</italic>, 21 May 2013, available at <ext-link ext-link-type="uri" xlink:href="www.heraldscotland.com/politics/referendum-news/salmonds-threat-to-ditch-debt-in-sterling-struggle.21143494" xlink:type="simple"><italic>www.heraldscotland.com/politics/referendum-news/salmonds-threat-to-ditch-debt-in-sterling-struggle.21143494</italic> </ext-link>.</p>
</fn></p>
<p>However, the debate has been thrown into sharp focus, with the UK Government categorically ruling out the prospect of a currency union with an independent Scotland, stating that after independence Scotland would not have an automatic legal right to share sterling with rUK or to share in the benefit of functions provided by UK...</p>
