13 Feb 2014

What has changed for Scottish sterling currency union?

Professor John Curtice’s question at the Chancellor’s “gloves off” speech on the pound looked like it slightly wrong-footed George Osborne. If you’re telling us this bit of your negotiating stance in a post-yes vote scenario, why not tell us some others too … like whether Scotland would keep the BBC and how the rest of the UK would treat Scotland’s application for separate EU membership? George Osborne said he didn’t want to get into “pre-negotiation” but that’s exactly what he jumped into feet first today.

He won’t lose sleep about that though. Nor will Mr Osborne worry that he’s suddenly gone a lot further than he did as recently as last April. Back then he said of a sterling currency union; “frankly it’s unlikely.” Now he is completely ruling it out. What changed?

Ah, say the Treasury. We didn’t have the Governor of the Bank of England’s advice  – “Dr Mark Carney” to you, the Chancellor emphasised. Well, the Bank of England fed into the original April 2013 Treasury analysis, as you would expect. It concluded back then that “currency union could … place constraints on the efficiency of the fiscal policy lever. and the scope for fiscal stabilisation available to an independent Scottish state.” Not exactly a thunderclap.

Shuttle forward 10 months to today’s document and there’s a categorical “HM Treasury would advise the UK government against entering into a currency union.”

Three things have certainly changed. We now have all three main Westminster parties signed up to saying a categorcial “no” to currency union, a consensus which a sceptic might say a civil servant would be wise not to challenge. One other thing that’s changed is the date. We’re nearer the referendum and the temperature is hotting up. You don’t start a campaign for a union of nations by slipping on your knuckle-duster. The third thing? The polling.

The lead for the “No” camp looks like it is, as its senior figures always predicted it would, narrowing. And the Better Together camp know the leads not as formidable now as it needs to be. Drill into the numbers, factor in independence enthusiasts voting in greater numbers than apathetic status quo supporters – differential turnout – and peer into the minds of the waverers and you see a victory for the “Yes” camp is still possible and a healthy 45 per cent or so result for them is far from out of the question. That, the Better Together camp, desperately wants to avoid.

So the gloves have come off. The three main Westminster parties have gone for the kill. Their polling tells them the Achilles heel of the independence cause is the pound in the pocket. They want to convert a worry into a deep fear. The “Yes” camp is saying it’s typical “bullying” by the “Westminster” three-headed hydra. But their whole strategy has been to de-risk independence and this must add some risk.

The “No” campaign has been accused by some of lacking a strategy, of being too reactive. It’s got a strategy now and a pretty ruthless one. The Prime Minister stood in the Olympic velodrome only last week saying “please stay – we love you” (I paraphrase). Today the Chancellor stood in Edinburgh added the PS: ‘if you do go we’ll cut you off without a penny.’

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13 reader comments

  1. Robert Taggart says:

    What has changed ? – England no longer wants Scotland !

  2. stephen says:

    Lets hope that we don’t get the pound in Scotland. I think that it would be crazy to continue with the pound in an independent Scotland. This is a chance to go it alone with a fresh start. Lets hope that RBS keep their promise and follow the pound over the boarder with the pound.

  3. Eugene Cairns says:

    NO Chancellor will cut off Scotland from the pound, because it would be political suicide if they did.
    Hundreds of thousands of jobs would be lost in the remaining uk, as this would ruin milllions and ,millions fo trade lost becuase London won’t share a currency.

    It’s nuts, it’s NOT going to happen.

    Westminster WILL share the pound, no question

    1. Andrew Dundas says:

      Of course you’re correct. Sterling is a fully convertible currency. Anyone can use it.

      Right now, I’m in the USA. I use the USDollar. Later this year I’ll visit France and will use the Euro. And then in the autumn I’m booked to re-visit my childhood home in Singapore and will use Singapore Dollars.

      So you’re absolutely correct: Scots will be able to continue using the GBP. But a Currency Union between 5 million people and 58 millions? As unbalanced and improbable as the numbers tell us clearly.

      Moreover, Scotland would not be an acceptable member of the EU if we don’t sincerely agree to adopt the Euro sometime soon. The Euro is a sound currency and the Irish found it useful.

  4. Russell Smith says:

    If there is a yes vote Alex Salmond will play the trump card and trade Trident to get everything else he wants.

  5. Elizabeth gray says:
  6. Mark. Enslow says:

    Anyone who has tried to spend Scottish money in England and know what it feels like to have it refused already know we have a separate currency to the rest of the UK

  7. david leaver says:

    Hopefully this will backfire, not only on the chancellor but on the other rresentatives of political parties. We will not be cowed by this. Trying to infer Scotland would not accept part of the national debt is a very underhand tactic, but if that’s what the Southern government wants – no pound, no debt then bring it on. What a great start for a new country!!

  8. ANDY NIMMO says:

    So Mrs Scotland is a victim of Domestic Abuse after all. No. Then examine the characteristics of abuse.
    1. The historical abuse- Too many too list but for example the waste of your loved one’s finances, the continual belittling of your partner – you’re too small, too stupid, too poor, too defenceless to survive.

    2. The honeymoon period – We love you dearly Mrs Scotland. We’re sorry if we frightened you and we don’t want you to go. (Thank you Westminster’s David Jekyll Cameron)

    3. The abuse continues – If you go we’re going to make things as tough as possible for you. You won’t get any help from me. (Thank you Westminster’s Gideon Hyde Osborne), ably assisted by his neo-liberal cronies.

    Like most cases of abuse, the abuser will eventually be found out while the abused makes a successful new life free from the shackles.

  9. Philip Edwards says:


    If the Better Together camp want to persuade the Jocks to stay in the Union they better demonstrate a sea change in the Lahndan attitude of Westminster, Whitehall and its gang of one dimensional civil servants.

    I want the the Jocks stay in because I really do believe we are better together in the long run, though a revolution is needed. A split opposition suits neocons down to the ground, as does maintenance of the status quo.

    The currency, of course, is crucial – but it is not absolutely essential to have a weird kind of monetary union with sterling. The substantial problem for an independent Scotland is what takes its place. Whichever alternative they would choose – and there are several – it would take years for it to settle down, during which the Scottish people would suffer badly. And no sensible citizen wants to see that.

    If Scotland does leave the Union (and if that’s what the Scottish people want, then they must have it) the blame can be laid squarely on the gang of spivs and liars who run London. In the end it would be a tragedy for all of us.

  10. FedsUp says:

    Osborne may have crippled the Indy currency union plans, but did he kill the Union in doing so? The Chancellor says we cannot keep the pound and the PM won’t come to Scotland to debate why we are better together. Would you try to keep staff or customers like this? It’s not making me feel ”better together”.

  11. Andrew Dundas says:

    It’s not about vote calculations at all. It’s about the SNP election manifesto taxpayers in Scotland are paying for. It’s packed with deceptions.
    The SNP manifesto deceives that Scotland is entitled to a share in the decision making of the Bank of England. Moreover, SNP spokespersons falsely claim that the UK would remain responsible if one of Scotland’s very own banks buys under-performing assets and becomes bankrupt. Salmond threatened the FT that his government would default on its debts if the UK didn’t agree with his demands. [which might impress the credit-ratings agencies].
    So there we have it. Salmond is insisting that 5 million Scottish residents should hold sway over 58 millions of UK citizens. Otherwise his government would deliberately default on its debts.
    So it’s entirely necessary that folks who believe those SNP manifesto claims are preposterous and dishonest should come together to declare that they’re out of the question.
    Of course most currencies these days are fully convertible and are often used by non-nationals.
    Scotland could well simply use the Euro, Sterling, the US or Canadian dollar or even the Yen. Each is an internationally traded currency and in sufficient issue to enable Scots to use them for their transactions. But have no say whatever over those currencies Monetary policies.
    A brand new State of Scotland could not hope to be part of any currency and banking unions with the rest of the UK if the SNP is sincerely interested in an “independent” economic policy.
    Or is the true Salmond plan just to provoke quarrels so that he’s generates the claim he’s “the only one standing up for Scotland” ?

  12. Alison Bourne says:

    My understanding is not that Scotland would be “cut off without a penny” but that she would be entitled to a fair share of whatever financial reserves exist, eg, Sterling, gold, etc.

    After that, the government of the rest of the UK would naturally be obliged to represent the rest of the UK’s interests alone and minimise risk to its economy. It has set out now a clear view that the risks to the UK economy would be unacceptably high if Scotland were to formally retain the £.

    What surprises me is that anybody could ever have thought the UK stance would be different and it is disappointing that the pro-independence spokespeople are choosing to construe this as “bullying” rather than as a statement which raises issues of potentially very serious financial risk to the Scottish economy which the Scottish independence groups must now address.

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