There’s a misleading article in the Scotsman today – I know, I was as shocked as you are – whose pro-Union spin has already been analysed over on Wings Over Scotland.
Sterling, as has been repeatedly pointed out by the BT crowd, is not a tangible asset. It cannot be divided and apportioned out. Therefore, by a leap of unfounded logic, the rump UK gets to keep it while indy Scotland will have to use cowry shells. Or clappy doo shells, since cowry shells are hard to come by on the beach at Rothesay – which might have palm trees but it’s not that tropical.
As a punter, you trot along to your local megastore, where you a new t-shirt. Some t-shirts cost more than others. But some punters are prepared to pay more for a posh t-shirt from a posh shop, because it looks far better with your trendy Russian czar beard and hornrimmed specs and has a certain social cachet that a cheapo t-shirt from the Barras just isn’t going to give you. At least if you’re someone like my nephew who’ll pay £65 for a t-shirt if it comes with the right designer name. £65, for a t-shirt. Insane. But there ye go. Still, at least he’s avoided the King George V beard.
Onieweys, the company producing and selling the £65 t-shirts is going to have a value that’s considerably greater than a company producing and selling a similar quantity of t-shirts that get flogged off in the Barras for a fiver for a pack of six. The difference in the value of the two companies is due to the fact that punters with more money than sense will cheerfully cough up lots more for the designer name because it increases their shagging chances when they go out for a night on the pull. Unless of course you have been known to find shagging partners in dark back rooms deep within less salubrious bars where no one is going to notice that you’re wearing an unfashionably cheapo t-shirt – but that’s probably Too Much Information. Still, at least I can console myself with the thought that my nephew has far higher standards than I ever did.
The difference in company value, if not the difference in standards of the company you find as pulling partners, is due to the designer t-shirt company’s customer goodwill and reputation. It’s not a tangible asset, but it still has a very real commercial value.
Sterling is the same. It has value as a freely tradable currency because of its reputation and the trust of its customers – the people with Sterling notes and coins in their pockets. That reputation and customer trust is as much a result of the efforts and resources of the people of Scotland as it is of the rest of the UK. The reputation and trust enjoyed by Sterling depends in part upon the contribution that Scotland has made to the Union over the past 307 years. It’s Sterling’s goodwill.
The M&A Dictionary of financial and commercial terms defines goodwill as:
“The amount paid for the company over the book value of the seller’s assets on the balance sheet. Goodwill accounts for the target firm’s intangible assets, such as brand equity, customer relationships, or intellectual property.”
Meanwhile a company dealing in the sale and purchase of commercial organisations, South Florida Business Brokers defines goodwill in the following terms:
“In the practical sense, when selling a business, goodwill is all the hard work and effort the seller has put into the business over the years. When acquiring a business, goodwill is the difference between the tangible assets and the purchase price.”
These definitions apply equally to Sterling as a currency. Sterling is an asset, even though it is an intangible asset, and its reputation does have value, even though that value may be difficult or impossible to quantify. So if Westminster is going to lay sole claim to a Scottish intangible asset, Westminster must compensate Scotland. No assets, no debt.
Otherwise we have a position comparable to two business partners who have jointly worked to build up a business, but later decide to go their own ways. Westminster is acting like the business partner who insists that the company’s debts will be apportioned equally, but they are going to hang onto the company name, reputation, and customer goodwill, only agreeing to a grudging division of tangible assets, while refusing to compensate the other partner for the intangible assets and goodwill they jointly built together. It’s like saying to Scotland, we will continue to supply t-shirts to posh shops, you lot can flog yours off in the Barras for a fiver for a pack of six.
In technical business parlance, this is known as “taking the piss”. And it’s a guaranteed means for Westminster to piss away what rapidly diminishing goodwill it’s got left with the people of Scotland. The asset in question may be an intangible one, but the effects of the debt are very tangible indeed. Perhaps Westminster ought to remember that.