Chancellor's currency threat to Scotland seen as 'posturing'

By staff writers
February 12, 2014

A currency agreement with the remaining UK would be in the "overwhelming economic interest" of all parties if Scotland becomes an independent country, business analysts maintain.

The Business for Scotland network is arguing that expert and financial opinion will have the last say over political posturing, as Chancellor George Osborne prepares to make a speech in which he will apparently "rule out" such a deal in order to try to persuade Scottish voters to swing to a 'No' vote on independence.

Whatever Mr Osborne claims, if Scotland votes 'Yes', a deal will need to be struck on purely pragmatic terms, critics of the UK government's threats say.

Professor Andrew Hughes-Hallett, an expert in economics and public policy at George Mason University in the US and a Professor at the University of St Andrew’s, together with financial experts at Deutsche Bank and CitiGroup, are among those who have backed the Scottish Government’s currency proposals for cooperation and a sterling zone.

A recent Financial Times survey also pointed to the major economic strengths that Scotland would bring to a scenario where it had full economic powers.

But the large Westminster parties are heavily invested in what the No campaign has itself described as its 'Project Fear' efforts to frighten people in Scotland away from backing independence.

Some argue that, since the rUK cannot actually prevent Scotland (or any other country) from using sterling, which is a 'traceable currency' on international markets, the issue of a formal sterling zone is not fundamental.

Sam Bowman from the Adam Smith Institute said today: "An independent Scotland would not need England’s permission to continue using the pound sterling, and in fact would be better off using the pound without such permission.

"There is very little that an English government would actually be able to do to stop Scottish people from continuing to use the pound sterling if they wanted to.

"Scotland’s position would be closer to that of countries like Panama, Ecuador and El Salvador, which use the US Dollar without American 'permission', and, according to research by the Federal Reserve of Atlanta, consequentially have far more prudent and stable financial systems than if they were part of a formal currency union."

The Scottish Greens have also dismissed as "campaign bluster" the latest position from the Chancellor on currency, but are also renewing calls for other options to be kept open by the Scottish Government.

The BBC has reported 'government sources' as saying that the Chancellor will now attempt to "rule out" the prospect of an independent Scotland sharing the pound following a 'Yes' vote in September's referendum.

It has also been suggested that a Liberal Democrat Treasury minister and Labour's shadow chancellor will echo these comments.

The Scottish Green Party, which has two MSPs at Holyrood, says it believes that sharing the pound may be the best starting point for a self-governing nation, but that over time, as Scotland takes different economic choices, it would need the option of using its own currency. Greens

They have urged Scottish ministers to study and prepare for this scenario.

Patrick Harvie MSP, Co-convener of the Scottish Greens, commented: "This latest campaign bluster from Mr Osborne is quite silly. The truth is that discussions over currency are for post-Yes negotiations, and nobody even knows who'll be in Government at Westminster from 2015. Osborne's position today is a shallow campaign threat, and one which I suspect will backfire.

"The currency that Scotland uses can only be negotiated after a Yes vote, and it will be in the interests of both Governments to agree a smooth and rational transition. But just as Osborne can't know that a deal won't be done, Alex Salmond can't know that it will.

"It seems that Scotland must keep open the option of our own independent currency, in case we need it sooner rather than later."

New reports published recently by the National Institute of Economic and Social Research (NIESR) have re-emphasied Scotland’s key economic strengths and the potential to improve Scotland’s economy with the full powers provided by independence.

* Business for Scotland on currency issues:

* Green proposals on currency (*.PDF Adobe Acrobat document):

* More on Scottish independence from Ekklesia:


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