Expert and political views of the currency question.
Keeping it simple makes sense
by Crawford Beveridge, Chairman of the Scottish Government’s Fiscal Commission
Scotland has the clear potential to be a successful independent nation. The job of the Fiscal Commission Working Group over the last 18 months has been to set out a framework for Scotland’s economy the rules and structures that we recommend an independent Scotland puts in place to secure that success. As part of that we considered a range of credible currency and monetary models for a country of Scotland’s size and economic strength.
Our conclusion is that while all currency options were perfectly viable, the best outcome for Scotland and the rest of the UK would be to continue to use the pound as part of a currency union.
A shared currency helps promote a genuine single market and efficient supply chains, something of benefit to both businesses and consumers, wherever they are in the monetary union. Sharing a currency promotes mobility of labour and capital which have economic and social benefits, ensuring that the UK and Scotland’s economies remain highly integrated.
A clear practical advantage from retaining sterling is the positive benefits it would have for managing the transition to independence. Existing contracts and business arrangements would continue as they are now and the integrated financial sector would continue to operate. For example, the UK has said it will retain ownership of all existing debts. Continuing to share a currency means the Scottish Government would make any payments they need to in the same currency.
The view of the Fiscal Commission Working Group is that the macroeconomic characteristics of Scotland and the UK provide a solid platform for the benefits of a currency union to be realised, and we remain of the view that this is the best and most likely option in the event of Scottish independence.
This is an option that could clearly work in practice. We remain convinced that following a vote for independence a currency union will be in the best interests of both Scotland and the rest of the UK.
Future of the pound is a hot potato
by Fiona Woolf, Lord Mayor of the City of London
Uncertainty is the enemy of businesses based on both sides of the Border. That is why it is important to face up to the many questions that the prospect of Scottish independence raises even if they cannot be answered definitively at this stage. One of the most important issues is currency union.
Clearly there are very different views in Holyrood and Westminster on what arrangements could be struck on the use of sterling in the event of a Yes vote. Regardless of what the politicians say, however, it is important to recognise that this is a complicated situation that could take many months or even years to resolve.
A recent Populus poll found that 68% of people in England and 59% of people in Wales would oppose a currency union with an independent Scotland. This presents a clear challenge to any quick and easy settlement, which makes it more likely that there would need to be a big reform and legislative programme.
Having visited Edinburgh where I was born and raised and Aberdeen earlier this year, it is obvious that there are many vibrant, successful businesses based here. Indeed, as a proud Scottish Lord Mayor of the City of London, I have been banging the drum for Scottish exporters right across the world from Brazil to Bahrain. In a number of industries these firms are world leaders.
Financial services is one such area and it accounts for 11% of the Scottish economy, employing nearly 180,000 people. Many of these businesses headquartered in Scotland have operations in London or other parts of the UK and vice versa. These businesses know what the current currency arrangements mean for them but the alternative is far less clear.
Change no easy option
by Ed Balls, Shadow Chancellor of the Exchequer
Scotland faces a momentous decision about its economic future this September. And there is no more important economic decision than what currency to use. That’s why it’s vital this debate is based on facts rather than false promises.
Alex Salmond desperately claims Scotland can leave the UK, but somehow keep the pound and the Bank of England. But if Scotland votes to leave the UK, it will be voting to leave the UK currency union and dismantling the shared fiscal and banking policies which underpin the shared currency.
In those circumstances trying to put a currency union back together simply wouldn’t work. It would be bad for Scotland and the rest of the UK, which is why as Chancellor I couldn’t agree to it. Nor do I think any other UK Chancellor would.
I’ve thought long and hard about the economics of this. The reason why I cannot support a currency union between an independent Scotland and the rest of the UK is the same as the reason why I opposed us joining the euro a decade ago. The lesson of the eurozone crisis is that a single currency between separate countries can only work if there are common policies on spending and tax and each country has agreed to stand behind banks that get into trouble in another country. But if Scotland leaves the UK it would, by definition, be leaving the very fiscal union, banking union and burden sharing that is essential for a common currency to work.
The nationalists need to stop blustering and finally tell people what their plan B is. Will Scotland have to join the euro, as Alex Salmond used to say? Or will there be a separate Scottish currency, as the chairman of the Yes campaign has argued for? People in Scotland deserve to know what they are voting for.
Scare tactics don’t add up
by Stewart Hosie MP SNP Treasury spokesman
One of the strange questions about Scotland’s independence referendum campaign is why the No campaign ever thought it would be even a remotely good idea to tell the Scottish people that on Independence, we couldn’t carry on using our own currency sterling.
An even bigger question is what bright spark in the No camp came up with the daft idea of sending a deeply unpopular Tory Chancellor, George Osborne, to deliver the negative message in person?
The truth about sterling is that it is Scotland’s currency as much as it is the rest of the UK’s (rUK) and there is absolutely nothing to stop Scotland from using it, particularly when most sensible people know that continuing to share a currency is in the best interests of both Scotland AND rUK.
An independent Scotland will be one of the world’s top 35 exporting nations with £100bn of goods and services sold globally every year. Imagine the damage to the sterling balance-of-trade and to the rUK if £100bn of Scottish exports were forced to be receipted in a ‘foreign currency’.
Should Scotland be forced, impossibly, into using another currency then it is estimated that the transaction costs which would be applied to £60bn of English trade would result in the loss of around 700,000 English jobs.
No unionist politician in their right mind would seriously suggest shredding their currency and destroying the best part of one million English jobs just to score a political point. That is why the No campaign’s scaremongering over currency makes no sense. This is just bluff and bluster designed to frighten people.
It is also why carefully thought-out plans to keep sterling our currency too are a surefire winner for the Yes campaign.
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