The Self-Financing Nation-State and The Sovereign People

The Self-Financing Nation-State and The Sovereign People

By Neil Tye.

Statement:

“Conclusively the falsification and obfuscation of the UK Unionist’s educational literature concerning Scotland’s valid Constitution is a deliberate malpractice : Additionally, then so too is their educational literature and media commentary concerning ‘Scotland’s Macroeconomic potential’ as an Independent Nation-State.”

Preamble:

This article, ‘Scotland – The Self-Financing Nation-State and The Sovereign People,’ suitably follows three recent YFS papers, two from Prof. Alf Baird concerning, (The Colonisation of Scotland’s Universities), and (Nationalise Clydeport) and one more recent paper by Mary MacCallum Sullivan (A New Story for Scotland). All these papers are important reads particularly when one considers their educational value, and economic implications for the Scottish Economy. The common denominator within these three papers is that rebuilding of Scottish Industrial infrastructure (The Economy) will never happen unless Scotland is ‘Fully Independent’ and has the power to monetarise its own government’s  expenditure. Therefore, education is incredibly important, and this paper provides that knowledge and consequently, proposes very progressive and practical solutions that need to be considered and addressed regarding the:-

The power of ‘Scottish Peoples Sovereignty‘ over and above ‘Party Politics.’

Introduction:

This paper encompasses two powerful interconnected themes surrounding the singular development of the new ‘Nation-State of Scotland’:  

These two themes are: –

1. ‘Scotland – The Self-financing Nation-State’ – The power of our own currency:
2. ‘Scotland – The Sovereign People’ – The power of a People-Centric Community:

Theme 1. ‘Scotland – The Self-financing Nation-State’: describes the Government’s public sector mechanisms and protocols of a future independent Scottish Parliament and its legislative powers. The key body is the Treasury and Exchequer department  linked directly to its Scottish Central Bank (SCB), with its own currency, and the wider Government Banking Service. These are the entities within a ‘Scottish Accounting Model’ that will drive the economy with its own governmental expenditure and revenue collection programme. 

All expenditure will arise based on permanent or annually voted authorisation from the Scottish Parliament and the SCB will be legally obligated to issue the approved ‘Credit’ directly from the government’s ‘Consolidated Fund Account at the SCB to the Treasury Central Funds, namely the Consolidate Fund (CF). 

Central to this legal process is the consequential effects that only government expenditure into the economy, from the public purse, can deliver the necessary funding capable  restructuring and rebuilding of our Scottish economy and infrastructure. This would purposefully include the new construction and fully upgrading our shipping ports through direct government finance and management capable of delivering and receiving our international exports and imports. This will provide greater inhouse production (employment), and greater national wealth increasing the economic Gross Domestic Product (GDP). Freeports will not provide these developments, only corporate profit.

The ideal financial model, for an independent Scottish government, could be a replicated bespokeversion of the UK Government’s financial and legislative administration which is the oldest surviving institution of its type in the world with the key legislation being formed in the mid-19th century. As a financial institution, it has been copied by several politically independent nations, and thus for Scotland it is a fascinating proposition that would pave the road for Scotland as a ‘Self-Financing Nation-State’ with our own Scottish independent administration. It certainly merits attention for its resilience and the relative economic success it has bequeathed the UK for more than 237 years. 

Theme 2: ‘Scotland – The Sovereignty of the People’ describes the pivotal founding principles in the building of our independent Nation-State that is constitutionally managed as a bicameral Parliament (two distinct chambers). This parliamentary arrangement would be similar to the Swiss Federal system but with specific differences in that the power of the first chamber, (The People’s Chamber 1 would be ‘Sovereign’ and constitutionally superior to the political second chamber (Political Party’s Chamber 2).

The reality of our Scottish constitutional history validates this notion and transforms this philosophical principle as a practical translation of sovereignty into rights and duties of the people within Parliament and our nation’s territorial borders and legal maritime limits. 

With these principles in mind, it is time to question and deliver suitable resolutions because without these principles, such an entity has no existential legitimacy, and any development or theory must embrace these conditions unconditionally, consolidating the value of unity into, a ‘Citizenship with Collective Authority,’ over all other entities.

This political and governmental framework would reconstitute the valuable and meaningful status of ‘Democratic Governance’ that functions as a united entity for the people in contrast to our current singular parliamentary framework of ‘Party Politics’ only divides us.”  The objective here must be to eliminate the potential economic risk of institutional corruption infesting our new ‘Parliamentary System’  that is so evident at the Westminster Parliament and the current Holyrood Parliament. Political corruption is a deviation from the rational-legal moral values of a modern state, and the basic problem is the weak accountability between the governors and the governed.

The current formal legal framework is therefore insufficient as terms of reference to assess and judge the problem of corruption. Moral, normative, ethical, and indeed political benchmarks will have to be brought in to bare-down and erase the problem. 

The operations of the ‘UK Exchequer and Treasury Accounting Model :

(A Scottish bespoke replication for a Self-Financing Government):

The main contention of a new comprehensive six-year research study, concerning the accounting model of the UK Exchequer and Treasury, is that the source of UK ‘moneyness’ (credit) emanates from within the UK Government’s own central accounting unit, ‘The Consolidated Fund Account.’ It was established in 1787 and is now controlled by HM Treasury and is the primary account for the UK Government at the Bank of England (BoE). It is administered by the ‘Exchequer Funds and Accounts Team’ (EFA) department, not the Bank of England, as commonly believed.

“At the heart of the UK Government’s spending mechanism is its Consolidated Fund Account. This is best understood as a line of sovereign credit that the government, via permission from Parliament, draws on, backed solely by the ability to raise taxes in the future”: –  A. Prof. Josh Ryan-Collins (UCL) 2022:

“Your Taxes do not pay for UK Government Expenditure”

This new co-operative research study has been academically approved and verified by the University College of London (UCL) and thereafter discussed with the Bank of England (BoE). It is currently under evaluation by academic publications for international distribution.

Economically, it supports the ‘Chartalism‘ theory of ‘money’ proposed by German economist, Georg Knapp, in his 1905 paper, ‘The State Theory of Money’. This Chartalist viewpoint principally defines ‘Money’ as an abstract and unlimited unit of account defined and issued by a central authority, (in modern times, the UK State).

The clarification of this new knowledge exposes the impurities in academic literature and focuses on elaborating the missing links of mainstream political theory. It completes and rewrites the total synthesis of previously published and unpublished information, being the first fully detailed institutional analysis of the UK Government’s expenditure, debt issuance and revenue collection processes that have always been incomplete and never updated since 1985.

This omission is positively damning, but this new study goes further and notes that many of the macroeconomic mathematical accounting models, conceptualised by academia, politicians, and media, are contrary to the actual functions of the economic processes that are actually enshrined by the legal regulations and Acts of UK Parliament.

Bizarrely or purposely, it is also currently absent from academic literature within the economics profession itself. One would have thought that somebody should have questioned this omission and asked why they have not bothered to conduct their own study in the interests of public education! 

What this document implies is that UK Parliament has supreme authority over government spending and individual departments cannot spend autonomously, without parliamentary prior authorisation. In this way, UK Parliament effectively votes and legislates money into existence. 

Firstly, the UK Government conclusively manages the UK economy as a ‘Self-Financing’ entity and the legislation in place has been functioning for 158 years. The sample-part shown below, is the UK Government’s most important historical and current principal legislative ‘Act’.

It is known as the ‘Exchequer and Audit Departments Act 1866’

The important Sections 13, and 15 below, relate specifically to ‘Permanent Services’ and ‘Annual Supply Services’, respectively for all government departments. It is the legal procedural requisition mechanism of financial credit, as ‘Public Money. It legally affirms and constitutes the flow of financial ‘Credit’ to be appropriated from the BoE to the UK Treasury Fund without any exogenous conditions. This source of money for government expenditure is unequivocally approved by Parliament via its Supply votes.

Furthermore, the Treasury will then order the BoE to issue credit to the principal Department Accounts for spending into the UK economy. 

The HM Treasury is the sole shareholder of the BoE and as such retains a public interest and the power to appoint and give authoritative direction to the ‘Governor and Monetary Policy Committee’ of the Bank, when necessary. 

Since 1946, and subsequent Acts in 1998, 2008 and 2016, the Bank is not independent of UK Government and has only delegated responsibility for conducting ‘Monetary Policy’.

Secondly, within the UK, the Government supports the management of the entire UK monetary system, and the UK Government is only subject to the will of Parliament, not any external financial resource constraints, as often purported. 

The process is legally mandated and cannot be challenged by the BoE or any other government department. The BoE has no power to refuse and there is no legal mechanism by which a balance must be checked for available funds. The BoE must comply to the Treasury’s orders. It should also be made clear that when the UK Government spends newly issued money into the economy, it destroys money when it taxes.

“There is no such thing as ‘Taxpayers Money’ –  All money is ‘Government Money”

This is contrary to general mainstream debate and media rhetoric that all government expenditure is funded by taxation or borrowing from the private sector. The reality is that it is the reverse case, taxation is a consequence of government spending. In fact, all UK Tax revenues flow through to the Exchequer HM Treasury, Government Banking Service (GBS) accounts and deposited in the ‘HMRC Revenue Account’ at the Bank of England. 

Thus, within the framework of UK Parliamentary and Government protocols the UK government’s budget expenditure does not maintain specific balances from which expenditure is sourced. Logically therefore, expenditure is not constrained financially. 

Conversely, taxation and other receipts provide the crucial ledger function of offsetting the effect of government spending upon the circulation of money and demand for real resources within the economy. 

The study would be a suitable benchmark for a future independent Scottish Nation-State.

Theme 1. – Scotland – The Self-Financing Nation-State

The power of one’s own currency:

It is commonly and erroneously claimed, by antagonists of Scottish Independence, that a future independent Scottish government with its own fiat currency will be unable to finance its own economy with sufficient funds and therefore subject its economy and the population to huge public and private debt, or worse, bankruptcy and hyperinflation, because the only logical source of funds would  be obtained through expensive borrowing from financial lenders. 

This hostile nonsense, directed towards the hypothecated theory of self-monetary financing, uses false rhetoric, orchestrated by mainstream economists and commentators for the purpose of deception. It was also fuelled by the issuance of the Maastricht Treaty in 1992 by the EU that focused on the EURO-centric ‘Currency Union’, a separate Independent Bank, and fixed monetary growth rates. Many nations preferred to remain outside these financial controls by maintaining their own currency controls.  It is a system that will eventually fail because individual EU nations are financially constrained. 

This article will hopefully dispel some latent historical fears that have been festering in society for over 53 years caused by ‘Thatcher’s Pandora Box’ of evils, political propaganda, and commentary falsehoods that have endured and deliberately undermined the reality of government finance for the UK, and the shackled economy of Scotland. 

Also, it does not define, describe, or support any particular ‘Economic or Political ideology,’ but more precisely describes and offers a view through a ‘Looking Glass’ into the ‘Realities and Actualities’ of how most Sovereign Independent Nation’s financial systems, protocols, and mechanisms operate, by utilizing their own fiat currency.

The following paragraphs describe and graphically detail a proposal for a future Scottish Government’s ‘Accounting Base-Model’ that effectively could, with all the necessary Parliamentary protocols, enable the Scottish Treasury and Exchequer department to financially service and manage our own economy.

In fact, as the recent ‘Accounting Model’ study of the UK Government’s self-financing ability has demonstrated then, so too will a Scottish Government be able to replicate a similar model within its monetary system. This includes the creation and issuance of monetary instruments and guarantees that are approved through legislated protocols by Parliamentary votes. This will underpin the whole public and private monetary framework of the Scottish economy. 

However, the most important caveat, as shown in the graphic below is the inclusion of a Scottish Parliamentary Bicameral system. 

This Bicameral Parliament would provide and encompass the additional entity of ‘Sovereignty’ into the parliamentary structure, based purely in the hands of the ‘People’. The UK parliament has sovereignty in Westminster, but Holyrood is void of sovereignty.  

It is the best option to ensure that there is a regulatory and authoritarian body that could enforce political levels of policy approval and political accountability within the Scottish Parliamentary system. This needs to be in place in order to eliminate the damaging effects of autocratic leadership and their cabals. This reflects recent events with respect to the SNP political party debacle, financial expenditure misappropriation and infrastructure policy errors, not mention corruption at both Holyrood and Westminster.  

Political and Corporate corruption that is one of greatest challenges of the contemporary world. It undermines good government, fundamentally distorts public policy, leads to misallocation of resources, harms the private sector, its development, and vulnerable people. 

The Scottish government’s process of financing the economy will be the responsibility of     Scottish Treasury and Exchequer department which will sit at the head of the government’s administration. It will have the responsibility of steering the process that          will govern public expenditure into the government’s Consolidated Fund Account and eventually the future revenues of taxation that flow back into the Scottish Revenue Account.

The role of Scotland’s Parliament will be broadly one of governance within the finance system. It will be shown that a Scottish Treasury (Government) does not have to seek, retain, or accumulate surplus revenues to spend. The source of (credit) money for the Scottish government expenditure will be unequivocally approved by the Scottish Independent Parliament via its supply votes and the legislative Acts of the Scottish Parliament and legislature.

The reality and value of how the mechanics of government economics functions and able to deliver good social outcomes has an overwhelming importance to the overall well-being of the Scottish economy. Additionally, this knowledge would be instrumental as an educational tool for our own ‘SALVO – Liberation Movement’ and other dormant advocates of Scottish Independence. 

This knowledge will empower our people and add strength to their arguments countering false political rhetoric and complicit supportive mainstream media misconceptions with respect to the realities of financial economic potential.

Theme 2. ‘Scotland – The Sovereign People’ – The power of a people-centric community:

It is time for thoughtful consideration and applicable change within the confines of Scottish Politics and the ‘Peoples’ position within society. The need for change in the position of the people, from mere objects of the governments to people who see themselves as subjects and owners of their sovereignty. That ownership brings tangible responsibilities that must be grasped, earnestly. 

The Scottish Parliamentary system detailed graphically above would accommodate two separate chambers: ‘The Sovereign Peoples Chamber 1’ (Apolitical) and The Political Party’s Chamber 2 (Political). This constitutionally correct arrangement is akin to the Swiss Federal (Sovereign People) regional (cantons) model. 

As of now, our Scottish Parliament is complicit in maintaining a subordinate ideological relationship with a corrupt Westminster government which has a ‘state-centric sovereignty’ perspective. That authority and the policy power will always remain with the UK state until rebellion alters the course of history for the better. 

What exacerbates our people’s inability for democratic change is that politicians argue that our democratic rights are permanently available to us every four or five years as electors. Within those four or five years our democratic rights vanish, and all politicians become unaccountable. The people therefore become the vassals of the state, not the recipients.

As long as citizens take a ‘wait and see’ position, the nation-state of Scotland will end in a self-fulfilling prophecy of failure. We need education and an active engagement of our communities by the ‘sovereign people’ to build our own society. Our government and its institutions alone will not win this uphill battle.

Sovereignty of the People creates Unity  :  Party Politics creates Division

MY COMMENTS

Neil highlights the great problem of Party Politics…it is built on division and leads to rancour much more often than cooperation. It is a great weakness, not just in economic terms, but also in achieving the Independence our nation desperately requires. I welcome this type of article because it indicates vision and ambition. Two vital ingredients in short supply sadly within Scottish politics at the moment. As a country we used to be admired worldwide for our invention, education, productivity and industry. Our obvious colonial status these days is detrimental in effect. It is time we raised our game.

I am, as always

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