Independence currency plan ‘could prompt bank run’

Picture: Jon Savage
Picture: Jon Savage
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A MOVE to a separate Scottish currency could see Scottish-based savers and depositors rushing for the Border to ensure their cash stays in sterling, a leading economist has warned.

After pro-independence supporters criticised Alex Salmond’s “keep the pound” policy, a major conference in Edinburgh heard that, while a switch to a new Scottish currency was feasible, it could trigger turmoil in high-street banks.

Dr Angus Armstrong, the director of macroeconomic research at the National Institute of Economic and Social Research, said people in Scotland – especially firms and individuals with substantial savings – would ask themselves: “Do you think the Scottish pound would be lower than the UK pound?”

Speaking at the event organised by the Economic and Social Research Council, he added: “If you think the answer to that is yes, then the smart move is to put your savings on the other side of the Border.”

His comments come after leading pro-independence figures, including the chair of the YesScotland campaign, Denis Canavan, voiced support for a new Scottish currency, saying it would give the independent country more flexibility to tax and spend as it pleases.

The debate follows a Treasury paper last week, which suggested that even if the UK agreed to a new pound-sharing deal with Scotland, it would impose major conditions limiting a Scottish chancellor’s rooms for manoeuvre.

The question of the currency arose again during First Minister’s Questions yesterday, as Mr Salmond repeated his backing for the retaining the pound.

He has insisted it would be the best option for the new country, ensuring that mortages, savings and pensions would all remain denominated in pounds.

Dr Armstrong, a former Treasury economist, also warned that, under a separate currency, exchange rates between England and Scotland would be implemented, adding further costs to consumers and firms on either side of the Border as they paid commission.

‘Complete shambles’

Another speaker at the conference, Paul Johnson, director of the Institute of Fiscal Studies, said he agreed that Scotland in a sterling zone could decide, if it wished, to have higher taxes and spending so long as its overall deficit did not increase.

However, he said the UK would want to ensure that there were close controls over “borrowing and debt levels”.

Other speakers also warned that the fiscal position facing the UK over the coming years meant that, whether people voted Yes or No to independence, a lengthy period of austerity awaited.

At FMQs, Labour leader Johann Lamont claimed Mr Salmond was taking a “gamble” with the country’s future.

“The FM says we will keep the pound, the chair of the Yes campaign says we should have a separate Scottish currency. To put it at its kindness, this is a complete shambles.”

Mr Salmond replied: “The Scottish Government has put forward the policy we believe is in the best interest of Scotland and the rest of the UK.”

‘Many single parents finding work won’t pay after reforms’

WELFARE reforms introduced by the UK government mean work will not pay for many single parents, MSPs have been warned.

The benefits changes also threaten the viability of childcare services, Holyrood’s equal opportunities committee heard yesterday.

Changes to childcare tax credits mean that the amount parents are able to recoup for childcare costs has been reduced.

Satwat Rehman, director of One Parent Families Scotland, told the committee the reforms had created a “confused picture” for parents.

She said: “We have found the change from 80 per cent of costs being met to 70 per cent has made work not pay for many of the parents we are working with.

“It has made childcare even less affordable than it was before for them.”

The committee was taking evidence from a range of organisations in its inquiry into women and work.

Maggie Simpson, chief executive of the Scottish Childminding Association, said reductions in childcare benefits meant that more parents were defaulting on their payments.

SEE ALSO: Scottish independence: What are the currency options?