Unresolved issues over currency union
FORMER Chancellor of the Exchequer Alistair Darling is correct to express severe doubts about the SNP’s ill-based plans to form a currency union with the rest of the UK following independence (your report, 21 June).
There is a further aspect to which he did not refer: the adverse impact upon the note issues of Scottish banks.
The latest humbug from the SNP about its post-independence plans for the currency within Scotland will threaten the existence of what Alex Salmond once called “a proud tradition in Scotland and hugely popular with the Scottish public”.
If an independent Scotland expects to be a party to a currency union, answers to a number of questions need addressed and resolved.
Will the Bank of England be prepared to continue in its role of overseeing and prudentially safeguarding the notes issues of the banks (and consequently the protection of the general public holding those notes) in what will then be a foreign country and, if so, at what cost?
Will the Scottish Government allow the Scottish banks to continue to place the cover for their note issues with the Bank of England, or will it legislate for those funds to be held by the new Scottish Treasury with the intention of keeping to itself the significant seigniorage earnings on those deposits?
Will the Scottish Government permit the Scottish banks to continue to issue their own notes, or will they seek to insist that Scottish banknotes are issued only by the Scottish Treasury?
Will the public have faith in the competence and ability of the Scottish Treasury adequately to fulfil this governance responsibility and to honour the “promise to pay on demand” commitment on banknotes?
Will the Scottish banks find the new control procedures overly complex and potentially financially insecure, and consequently decide to discontinue their note issues?
A “currency union” has severe implications for Scottish banknotes, the likely result being their demise.
The only currency that could then circulate in Scotland would be Bank of England notes, a result that would daily, and most visibly, expose the fallacy of so-called “independence”.
(Prof) J Robin Browning
Former general manager Bank of Scotland
Alistair Darling, the discredited ex-Chancellor on whose watch the worst financial crisis in living memory occurred, pontificates that an independent Scotland using sterling would be more like “serfdom than freedom”.
How does he know, as the role of the UK’s reserve bank (the Bank of England) would only be decided in post-referendum negotiations?
In any case, such a situation is not unlike the status quo where priority is given to the South-east in any fiscal decision making. In 1989, the then governor of the Bank of England was honest enough to state that job losses in the North were “a price worth paying to dampen inflation in the south”.
Michael N Crosby
Professor John Kay (your report, 20 June) is right in saying that Scotland will face a period of uncertainty after a Yes vote in 2014, but David Watt of the Institute of Directors is also right in saying that most of the turbulence will come from other sources – the ongoing crisis in the eurozone, etc.
This turbulence will afflict the UK whether Scotland becomes independent or not.
Two years ago Labour, despite having presided over a massive economic crisis, asked for Scots votes to avoid a Tory government. Many Scots switched to Labour, and all the Scots MPs except the solitary Tory were willing to back a Labour-led coalition, but Labour was not able to build one in the face of the Tory vote in England. Now Mr Darling and other Scottish Labour figures are leading a coalition to keep Scotland under Tory rule until England decides to change!
The Tories may well win an outright majority in 2015, leading to a spell of government as long as the Thatcher/Major one, whereas in an independent Scotland the SNP and Labour would probably alternate in power, or share it with others in coalition.
An independent Scotland will not be a one-party state. As a committed Nationalist I hope and believe the SNP will form the first independent Scottish Government, but all other parties will set out their case, and the electorate will decide.
Owen Kelly, of Scottish Financial Enterprise stated that it will be incumbent on all concerned to try by negotiation to reduce the uncertainties as quickly as possible. This is sound advice. It is in the interest of Scotland and the rest of the UK that the other prospers.
Scotland, by virtue of geography, will be England’s closest ally in defence, even when we have the power to opt out of rash overseas adventures.
By virtue of the fact that the rest of the UK will want Scotland to accept a substantial share of the UK national debt, we will be closely tied up with the Bank of England.
Instead of raising every issue as an argument against independence, it would pay Unionists to consider how, if Scots vote for it, obstacles could be overcome and a smooth transition achieved.
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Wednesday 19 June 2013
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