Currency union 'the best route'

First Minister Alex Salmond has been under pressure to explain his Plan B

First Minister Alex Salmond has been under pressure to explain his Plan B

First published in National News © by

A formal currency union with the rest of the UK would be the "best route" for an independent Scotland, the chair of an expert group which advises Alex Salmond's Government has insisted.

Crawford Beveridge, chair of the Fiscal Commission Working Group, said their "clear recommendation" was for such an agreement to be reached if there is a Yes vote in next month's referendum.

A formal currency union, if such a deal could be agreed, would allow Scotland to continue to use the pound and have the Bank of England as its lender of last resort if it left the UK.

But the three main parties at Westminster have dismissed this, with Chancellor George Osborne, Labour shadow chancellor Ed Balls and Liberal Democrat Chief Secretary to the Treasury Danny Alexander all stating they would not sign up to it.

Now with just under a month to the vote on independence, those campaigning for the Union have sought to put pressure on the nationalists to set out their "plan B".

Mr Beveridge, who will set out the Fiscal Commission's views on the economic foundations of an independent Scotland in a lecture tonight, said the group had devoted a "considerable body of work" to such issues.

He said: " Since the First Minister established the Fiscal Commission Working Group in 2012, it has been a privilege to work with this group of eminent economists and experts - professors James Mirrlees, Joseph Stiglitz, Frances Ruane and Andrew Hughes Hallett - in setting out the macroeconomic framework that we believe would be in the best interests of an independent Scotland.

"As we approach the referendum this is an opportunity to bring that considerable body of work together, including our consideration of currency options for Scotland.

"Our clear recommendation is that a formal currency union is the best route for both Scotland and the rest of the United Kingdom in the event of an independent Scotland.

"The design of our framework includes flexibility over fiscal and economic levers within an overall position of fiscal sustainability."

Jack Perry, a former chief executive of Scottish Enterprise, insisted that a currency union "would not work for Scotland" and there would be "serious consequences" if the country used the pound without a formal agreement after a Yes vote.

Mr Perry, Sir Brian Stewart, former chairman of Standard Life, Professor Ronald MacDonald and Professor Adam Tomkins from Glasgow University, and Stuart Patrick, chief executive of Glasgow Chamber of Commerce, are all due to take part in a roundtable event focusing on currency organised by the pro-UK Better Together campaign.

Speaking ahead of that, Mr Perry said: " A currency union would not work for Scotland. From day one, Scotland's economy would start to diverge from the UK's, and the currency link would collapse.

"That's why the nationalists need a plan B, and we need to know what it is.

"If it is just to use the pound anyway without a currency union, as they hint at, there would be serious consequences for Scotland's public services.

"Scotland would have to run a fiscal surplus - cutting spending and increasing taxes - to have the cash to make that plan work. Our scope to borrow on the international markets would be very severely limited.

"Instead the nationalists promise taxes would go down and spending would go up, and we would borrow more. This is not remotely credible. Their plan would be disastrous for our economy and catastrophic for our public services - including our NHS."

Comments (3)

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7:02am Tue 19 Aug 14

davecook says...

The UK has nothing to do with the Scottish referendum, we have been told so quite specifically in no uncertain terms. It is their referendum, and nobody outside Scotland is entitled to show any opinion in public. I have no problem with that, as long as it isn't rammed down out throats on BBC or any other media at every opportunity. And as long as once they have set themselves free, they do not want to use the pound which is backed by the Bank of England. No reason why they cannot have the Scottish Pound, their own currency, and if they can, no reason why it cannot be linked to the UK pound with a fixed exchange rate, with several provisos. The main problem with an economy reliant on something as volatile as oil (until it runs out) being formally linked, is something undesirable for the UK. It is obvious that after a yes vote, the currency of Scotland on the first few days, months, or even possibly longer, would be the Pound Sterling, but the only right to print Sterling would lie in Westminster. And the whole point of independence is surely to break away from Westminster. The problem that the Yes campaigners have is that they are working on the principle that once they get a yes vote, everything will change, and that everybody who currently says there cannot be a currency union will suddenly turn round and change their position. That is a very dangerous assumption, and a very naive way to start a new country. And if that is Plan B, I hope for the sake of Scotland that they vote no (now I have gone and expressed an opinion, so I'll sit back and wait to get shot down like the Australian PM).........
The UK has nothing to do with the Scottish referendum, we have been told so quite specifically in no uncertain terms. It is their referendum, and nobody outside Scotland is entitled to show any opinion in public. I have no problem with that, as long as it isn't rammed down out throats on BBC or any other media at every opportunity. And as long as once they have set themselves free, they do not want to use the pound which is backed by the Bank of England. No reason why they cannot have the Scottish Pound, their own currency, and if they can, no reason why it cannot be linked to the UK pound with a fixed exchange rate, with several provisos. The main problem with an economy reliant on something as volatile as oil (until it runs out) being formally linked, is something undesirable for the UK. It is obvious that after a yes vote, the currency of Scotland on the first few days, months, or even possibly longer, would be the Pound Sterling, but the only right to print Sterling would lie in Westminster. And the whole point of independence is surely to break away from Westminster. The problem that the Yes campaigners have is that they are working on the principle that once they get a yes vote, everything will change, and that everybody who currently says there cannot be a currency union will suddenly turn round and change their position. That is a very dangerous assumption, and a very naive way to start a new country. And if that is Plan B, I hope for the sake of Scotland that they vote no (now I have gone and expressed an opinion, so I'll sit back and wait to get shot down like the Australian PM)......... davecook
  • Score: 1

9:31am Tue 19 Aug 14

RM says...

I am neithrr for nor against Scottish independence & am quite happy to leave it to Scottish voters to decide. However, IMO if they vote for independence then they should have their own currency -the Scottish £ if that is what they want but it should NOT be linked to the pound sterling in any way. We will have no say over how the Scottish manage their economy so why should our currency be affected by it? The troubles with the euro a year or two back highlighted the risk of using a shared currency.
I am neithrr for nor against Scottish independence & am quite happy to leave it to Scottish voters to decide. However, IMO if they vote for independence then they should have their own currency -the Scottish £ if that is what they want but it should NOT be linked to the pound sterling in any way. We will have no say over how the Scottish manage their economy so why should our currency be affected by it? The troubles with the euro a year or two back highlighted the risk of using a shared currency. RM
  • Score: 1

7:10pm Tue 19 Aug 14

Shropshirelad says...

Why should the rest of the "union" allow Scotland to use the pound if there is a "yes" vote. If this is allowed and the Bank of England is a lender of last resort, it is the rest of the "union" who will be picking up the tab if any of the Scottish economic/financial institutions go to the wall. Look at RBS as an example, if this had happened after independence and the Scots had been allowed to keep the pound, we, England, N. Ireland and Wales would have paid through the nose to save a Scottish Bank and the Scots themselves would have been let off "Scot free". No thanks. If a "yes" vote comes about then Scotland should sink or swim on her own without any access to our pound or any other interpretation of currency tied to it.
Why should the rest of the "union" allow Scotland to use the pound if there is a "yes" vote. If this is allowed and the Bank of England is a lender of last resort, it is the rest of the "union" who will be picking up the tab if any of the Scottish economic/financial institutions go to the wall. Look at RBS as an example, if this had happened after independence and the Scots had been allowed to keep the pound, we, England, N. Ireland and Wales would have paid through the nose to save a Scottish Bank and the Scots themselves would have been let off "Scot free". No thanks. If a "yes" vote comes about then Scotland should sink or swim on her own without any access to our pound or any other interpretation of currency tied to it. Shropshirelad
  • Score: 0
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