Scottish Independence: Treasury claims banks 'safer in UK'
- 19 May 2013
- From the section Scotland
The latest UK government paper on the impact of Scottish independence will claim the UK is better placed to manage the risk of a financial crisis.
The Treasury will publish its analysis of financial services on Monday.
It will say an independent Scotland would have an exceptionally large banking sector compared to the size of its economy, making it more vulnerable.
Scotland's Finance Secretary John Swinney said that the document lacked credibility.
The Treasury paper is due to be launched by Scottish Secretary Michael Moore and economic secretary to the Treasury, Sajid Javid, in Edinburgh on Monday.
The following day, the Scottish government will publish a paper setting out Scotland's financial strength and the opportunities which independence would bring to its principal economic sectors.
The UK government's analysis will claim that the scale of the UK economy, relative to the size of its banks, allows it to maintain financial stability during a crisis, such as the near-collapse of Royal Bank of Scotland (RBS) and Halifax Bank of Scotland (HBoS) in 2008.
It will say Scotland currently enjoys a "best of both worlds position" - maintaining a large financial sector headquartered in Scotland and also benefitting from being based within the UK regulatory system that manages financial stability risks.
The Treasury will say that the scale of the Scottish banking assets compared to GDP would be larger than Iceland's was when its banks were deemed "too big for the Iceland government to rescue".
In February, the Scottish government and its Fiscal Commission published proposals for an independent Scotland to maintain the pound Sterling as its currency and the Bank of England as its central bank, with special arrangements in place to share the risk of another financial crisis.
The Treasury analysis said "such arrangements would be significantly more complex than those that currently exist, and would not effectively recreate the existing advantageous position".
It concluded: "Overall, these alternative approaches to managing financial risk are likely to be unappealing to both parties in the longer term, even if in practice they are deliverable, which is uncertain given the significant additional complexity they would entail."
Speaking for the Scottish government, Mr Swinney said the Treasury document was a "feeble attempt to undermine confidence in Scotland's ability to be a successful independent country".
Mr Swinney added: "The Treasury, true to form, will outline what is in its own best interests, not what is in the best economic interests of the people of Scotland."