currency

Alex Salmond claims “a responsible position” when he says sterling is an asset of the Bank of England which should be “shared” as a quid pro quo for sharing the UK national debt. Yet, as he must surely know, both the premise and the linkage are wholly spurious.

Firstly, sterling is not an asset of the Bank of England nor of the UK government. “Sterling notes and coins” in fact show as a liability, not an asset, in the Bank of England’s balance sheet.

There is no sterling currency “asset” to be shared between governments. Sterling notes and coins belong to the people who have them in their pockets and wallets and the businesses that have them in their safes and tills.

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(As an aside, notes issued by Scottish commercial banks are acceptable as sterling currency only because they are matched with Bank of England notes lodged by Scottish banks in London.)

Of course, most sterling is not in the form of notes and coins but credit balances at commercial banks, the bank accounts of individuals and organisations of all sorts.

These credit balances are liabilities in commercial bank balance sheets, balanced by assets mostly in the form of mortgages and other personal loans and business loans.

Banks lodge a small percentage of these balances with the Bank of England as reserves: these are assets in commercial bank balance sheets, liabilities in the Bank of England balance sheet. The money belongs to the people: there is no Government or Bank of England asset to be shared.

Secondly, UK gilts are loans to government from pension funds, insurance companies and investors all over the world, repayable over many decades.

The government increased borrowing on behalf of all of us, including the population of the Scotland to offset the decline in tax revenue because of the global recession.

Had it not done so, there would have been less public sector capital and current expenditure and even more austerity.

It is therefore morally indefensible to renege on a debt incurred by our government in our name. It is also commercial folly for a brand new state to broadcast to investors worldwide that it cannot be trusted.

The cost of that folly would be increased borrowing costs both for a Scottish government and for Scottish residents.

Alex Salmond is either woefully ignorant or deliberately obfuscatory. In either case, his irresponsibility is yet another sound reason for No Thanks.

Robert Stephens

Morningside Park

Edinburgh