THE head of the UK’s most influential financial compensation body warned last night that thousands of bank account deposits would be at risk in an independent Scotland unless a new government set up its own guarantee scheme.
Mark Neale, the chief executive of the UK’s Financial Services Compensation Scheme (FSCS), which offers compensation of up to £85,000 per saver in the event of a banking collapse, said EU member states would require their own schemes under European law.
He also revealed that his organisation had had no discussions with Scottish ministers about establishing a similar scheme north of the Border in the event of a Yes vote.
Neale’s remarks came at the end of a bruising week for the Yes campaign, which began with a Treasury paper claiming that banks would be safer within the UK and suggesting that millions of pounds of savings and pensions would be put at risk by independence.
“It is the case that member states of the European Union are required to have their own deposit guarantee schemes,” he said. “Applying that European law, were Scotland to become independent and were it to join the European Union, it would be required by European law to have its own deposit protection arrangement within its own jurisdiction.”
The directives are clear that member states “must be able to finance those arrangements”, he added.
Last night, the Better Together pro-Union campaign claimed that Neale’s comments were further evidence of the financial challenges facing an independent Scotland.
Meanwhile, Lord O’Donnell, the former head of the UK civil service, claimed First Minister Alex Salmond may already have damaged the country’s “credibility” by suggesting last week that an independent Scotland may not pick up its share of UK debt. The First Minister made the suggestion in response to Monday’s Treasury paper, which stated that an independent Scotland could have “significant difficulties” providing protection for savers.
In addition to the reservations expressed about matching the £85,000 protection per saver, the document warned that Scottish savers would not longer qualify for UK tax relief on their Individual Savings Accounts (ISAs).
On personal savings, Neale added: “It is clearly an important issue to be addressed as part of the debate about Scottish independence and the document published earlier this week opens up many of these issues for public discussion.”
However, the Scottish Government insisted yesterday that an independent Scotland would set up its own protection scheme. A spokeswoman for the Scottish Government said: “An independent Scotland will have a deposit guarantee scheme not just because it is sensible, but because it is a requirement of EU law, and the full range of financial products will continue to be available in an independent Scotland whether it is insurance or ISAs.”
However a spokesman for the Better Together campaign said Neale had highlighted a further financial challenge an independent Scotland would face.
He said: “This is just the latest example of the expensive consequences of separation. The nationalists want us to spend vasts amounts of money to try and recreate everything that we already have. Are Scots really wanting to pay through the nose just to satisfy the SNP’s dreams? All the evidence suggests that we are not.”
It was Salmond’s response to the Treasury paper, which concerned O’Donnell, who was also the UK’s executive on the International Monetary Fund (IMF).
Salmond suggested that an independent Scotland would not take on a portion of the UK’s trillion-pound national debt unless Westminster agreed to a Sterling currency union post independence.
O’Donnell, who was also chief civil servant in the Treasury, said that international precedent showed that the UK debt would have to be shared out in some form between the two separating nations.
Asked by Scotland on Sunday whether the threat not to pick it up would already have impacted on the credibility of an independent Scotland, he said: “Yes. The level at which you borrow money is based on the underlying economy and on people’s views about the government and its credibility. It takes a long time to build credibility and a very short time to lose it.”
A spokesperson for the Nicola Sturgeon Deputy First Minister said: “Lord O’Donnell has been misinformed. The Scottish Government’s position has been set out by the Fiscal Commission which has set out reasonable and fair approaches to sharing debt after independence. Scotland’s financial strength is actually the reason why, the day after a yes vote, the UK Government will be only too keen to strike a deal giving a fair share of both assets and liabilities.”