Scottish independence: Isle of Man currency model

ALEX Salmond will today cite the Isle of Man as an example of why an independent Scotland can retain the pound, in a major speech on the island.

Alex Salmond will seek to prove that an independent Scotland can retain the pound by citing the Isle of Man. Picture: PA
Alex Salmond will seek to prove that an independent Scotland can retain the pound by citing the Isle of Man. Picture: PA

Chancellor George Osborne has said that the SNP’s preferred option of a formal sterling zone is “unlikely”, meaning that Scotland would not have the Bank of England as a lender of last resort after independence.

And CBI Scotland has said that businesses fear the Scottish economy would be seriously destabilised if the nation could not formally keep the pound.

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However, the First Minister will point out that the Isle of Man uses sterling for convenience but is not in a formal currency union, yet still has a better credit rating than the UK.

Mr Salmond will also say that the tax haven, unlike Scotland, had access to a share of oil revenues until 1995, which earned the Manx government millions of pounds.

He will tell his audience: “You don’t have a formal sterling union. Instead, notes issued in the Isle of Man are backed by your own currency fund.

“This arrangement has brought exchange rate stability and has facilitated trade with the UK.

“For Scotland – a larger economy – we will retain the pound. We would use our sovereignty to negotiate for a formal currency union with the rest of the United Kingdom. Scottish bank notes would remain in the same way they do now.”

Despite keeping sterling, Mr Salmond will say that a Scottish Government would have access to full fiscal powers, giving it control over oil and gas taxation, excise duty, VAT, Air Passenger Duty, capital borrowing, welfare and social security, corporation tax, public sector pay and pensions, capital gains tax, and rural and environmental taxation.

He will add that when the United Kingdom’s credit rating was downgraded earlier this year, the Isle of Man’s triple-A status was kept intact by ratings agency Moody’s.

He will also attack the UK government and the pro-Union Better Together campaign over their tactics in the referendum campaign.

The First Minister will joke that while the Better Together campaign has been dubbed “project fear” it would be better called “project Dracula since all its claims disintegrate in the light of day”.

Mr Salmond will say: “The UK government claimed that mobile phone charges would go up in an independent Scotland – the day before the European Commission set about abolishing roaming charges.

“They said that UK embassies would no longer promote whisky, oblivious to the fact that they already charge for such receptions.

“Last week, the MoD was musing that they could annex the nuclear base at Faslane as a crown territory if the pesky Scots voted for independence.”

But the First Minister’s claims were dismissed by his opponents. A spokesman for Better Together said: “Yesterday he announced that his plans for separation would be written by a fiction writer. Now he is looking at an island with a population the size of Paisley as an example for a nation of five million.

“The Isle of Man is a Crown Dependency and is not in a currency union with the UK. It has no central bank and no lender of last resort. Is he honestly trying to tell the people of Scotland that it is a good idea to have no-one standing behind our banks and to have no say in how our mortgage or savings rates are set?

“The one thing that he will find matches his plans for independence is the Isle of Man’s status as a tax haven. The SNP want big companies like Starbucks, Google and Amazon to pay less tax and it would be ordinary Scots left paying for it through our personal taxes.”

A Treasury spokesman said: “Any currency comparison with the Isle of Man is misleading and wrong.”

The Manx government surrendered its share of the UK’s oil and gas revenues in the 90s in return for control of its territorial waters to harness the area’s renewable energy potential.