Why did the banks become Scottish only after they failed?

Here's one for you. What do Andy Murray, HBOS and RBS have in common? Answer: it can appear to a cynic that whether they're Scottish or British depends on how well they're doing at the time. With Andy, listening to the BBC from time to time can be a bit irritiating but it's more amusing than anything else. But the banks? That's a more serious issue altogether.

The banks were wholly regulated from London. 90% of RBS and HBoS UK employees were based outwith Scotland. 90% of employers' income tax was paid to Westminster, and not counted as Scottish or Scottish Government revenue. 90% of the banks' national insurance contributions were paid to Westminster and not counted as Scottish. 80% of the losses of RBS were generated from the bank's London based operations. RBS paid £16 billion in corporate taxes to the UK government from 1998 to 2007. None of this was counted as Scottish Government revenue.

So if all the Government revenues associated with the banking operations in the boom years were added to the UK balance sheet, why should all the losses in the bust years suddenly become only Scotland's problem?

Bailouts are not matters of altruism but reflect the harm that will be done to a country (loss of employment and so on) if an enterprise fails. The location of headquarters has nothing to do with it. The name of a company or its historic origins have even less to do with it. Barclays was bailed out to the tune of £552.32bn (at backdated exchange rates) by the US Federal Reserve and £6bn by the Qatari Government. Or to put it another way, foreign governments bailed out Barclays to the tune of more than twelve times more money than the UK Government’s capital support for RBS (£45bn).

As an independent country, our contribution to bailing out the banks would have been roughly the same amount as we paid as part of the UK – about 10%.
 
For more, see the Business for Scotland analysis here and here.