Scottish independence: Currency debate explained

Bank of England money The debate continues over whether a post "yes" Scotland would continue to use sterling as its currency

What currency would Scotland have in the event of independence? It's become one of the big issues, ahead of September's referendum.

On one side, the UK coalition government, made up of the Tories and the Lib Dems, and the Labour Party, say they have ruled out a currency union with an independent Scotland.

On the other, the Scottish government says that following a "Yes" vote, it's in everyone's interests to share the pound and retain the services of the Bank of England.

It's a debate which has sparked discussion on all sides, from politicians to businesses and the financial industry itself.

Here's what you should know about the post "Yes" currency debate.

line break
The case for a currency union...

In its White Paper blueprint for independence, the Scottish government says a currency union is vital to let companies go about their business, otherwise there could be a damaging effect in the rest of the UK.

It's also argued sterling would benefit from Scotland's continued involvement given assets like North Sea oil and gas.

SNP ministers also say monetary unions still leave room for significant differences in fiscal and economic policies.

They point to Luxembourg and Belgium, which have been in currency unions for decades but have different tax policies.

line break
The case against a currency union...

The Westminster government says Scotland already has a working currency arrangement with the rest of the UK - and it's called the Union.

It says an independent Scotland would face having to agree to (negotiated) constraints on economic policy with the rest of the country.

The UK government also asks why the rest of the UK should enter into a sterling union with Scotland, when recent experience in the euro area has shown how difficult these agreements are to maintain.

They also raise a further scenario. If Scotland failed to make a formal deal on currency, it would be free to unilaterally adopt sterling - a situation under which the Bank of England may simply continue on without taking account of Scottish conditions.

line break
Who is saying what?

Former banking bosses....

Bank of England building
  • John Nugée, former Bank of England senior manager: "The first minister [Alex Salmond] has stated firmly that he hopes to conclude a common monetary area with the continuing UK, enabling an independent Scotland to retain the pound, the services of the Bank of England and the financial underpinning of the UK treasury for Scottish financial institutions. It is indeed almost certainly in Scotland's interest to conclude such an agreement. But it is not in Alex Salmond's power to do so single-handedly. It requires the agreement and consent of the continuing UK government, and it is nothing like as clear that, viewed from England, Wales and Northern Ireland, a common monetary area with an independent Scotland is desirable."
  • Brian Quinn, former executive director, Bank of England: "By choosing to announce its preference to retain sterling as the currency of an independent Scotland, the current Scottish Government has effectively surrendered its freedom to determine monetary policy and severely circumscribed its freedom of action in the area of public finance. Choosing to rely on the Bank of England to supervise its banks - and other financial institutions - may prove to be an empty choice if it proves necessary to establish its own supervisory institutions in accordance with what is understood to be EU statutes."

Economists and academics....

Economists look at a bank of screens
  • Jim and Margaret Cuthbert, economists: "Scotland has to be very careful that, in negotiating its relations with bodies like the rest of the UK and the EU, it does not make concessions which will impose constraints which ultimately prove to be crippling. Any choices, for example about forming a sterling currency union with the rest of the UK would have to be viewed very carefully in this respect. An independent Scotland is going to have the will and courage to deal with the other constraints it will face."
  • Dr Jim Walker, founder and chief economist, Asianomics Limited: "Is the British government contemplating the reintroduction of capital controls in which sterling cannot be moved around freely? I ask this in all seriousness given some politicians' and bureaucrats' reactions to the proposition that an independent Scotland would seek to enter a formal currency union with the rest of the UK, a suggestion made in the interests of friendship, continuity and mutual benefit. If capital controls are not being contemplated, then there is no question about Scotland being able to continue using sterling, and clearly therefore a formal currency union would suit both partners best."
  • Prof David Blanchflower, former external member, Monetary Policy Committee: "Should the people of Scotland choose independence in next year's referendum it would make sense for Scotland to enter a formal monetary union with the rest of the UK with the Bank of England operating as central bank for the common monetary area. Independence within a currency union would represent a substantial increase in the economic responsibilities of the Scottish Parliament. A currency union would provide the full flexibility to vary tax and spending decisions to target key opportunities and challenges in Scotland - powers that are currently unavailable to the Scottish Parliament."
  • Prof John Kay, former member, Scottish government's council of economic advisers and visiting professor, London School of Economics: "The currency issue is crucial - Scotland would be right to seek agreement on monetary union with the remaining United Kingdom, but it would be difficult to negotiate an agreement that would be consistent with the fiscal freedom sought through independence.
  • Prof Andrew Hughes-Hallett, economics and public policy, George Mason University, United States: There's nothing which the Bank of England or the British government could do to stop Scotland using the pound if she so wished. It might not be very desirable, as opposed to a jointly-run, that's to say a multi-bilateral arrangement, by agreement between the two countries."

Bankers and business....

Triple As, symbolic of triple A rating
  • Fitch, credit rating agency: "The monetary arrangement following Scottish independence could become a source of uncertainty even if Scotland remained in the sterling currency zone. As the intensification of the eurozone crisis showed in 2012, a monetary union without fiscal and banking union is unstable and the prospect of an exit from a monetary union could lead to high volatility and market turbulence, potentially detrimental to all members."
  • Jim McColl, founder of Clyde Blowers, co-signatory in a letter to the Scotsman: "It is in the interests of Scotland and the rest of the UK - the financial firms, wider business community and the people - to maintain the same currency. Many Scottish firms have the vast majority of their customers south of the Border, and Scotland is the second largest export market for English business. The strength of sterling in part relies on Scotland's North Sea oil and gas reserves."
  • Oliver Harvey, strategist, Deutsche Bank: "Scotland fits an optimum currency area with the rest of the UK very well."
  • Rod MacLeod and Hamish Patrick, banking and finance lawyers, Tods Murray: "If an independent Scotland keeps the pound, there needs to be an appreciation that, at best, Scotland will have limited control over monetary policy as the junior partner in any currency union or even less influence if a currency pact is rejected."

Politicians and campaigners....

Notes of sterling
  • Alistair Darling, leader of Better Together and former UK chancellor: "We are being asked to take a huge leap into the unknown. When Alex Salmond can't even tell us what currency we will have in our pocket it's little wonder people aren't willing to take the risk."
  • Blair Jenkins, chief executive, Yes Scotland: "The pound belongs as much to Scotland as it does to the rest of the UK. There is no question of an independent Scotland not being able to use sterling because that would be in the best interest of everybody in these islands."
  • Sir John Major, former UK Prime Minister and chancellor: "A currency union, which the SNP assume is negotiable, would require the UK to underwrite Scottish debts. That cannot, will not, happen if Scotland leaves the Union. There can be no halfway house, no quasi-independence underpinned by UK institutions."
  • John Swinney, Scottish finance secretary: "Scotland will continue to use the pound, just as we do today because, in Alistair Darling's own words, that is the 'logical' and 'desirable' arrangement for an independent Scotland and the rest of the UK."
  • Carwyn Jones, Welsh first minister: "I just don't know how this works. If you have a currency union, who decides on monetary policy? You've got two governments potentially with a view on that. "It's a very messy system from Wales's point of view. I'd be very, very worried about any currency system that involved the need to get agreement from different governments."

More on This Story

More Scotland politics stories

RSS

Scotland Live

  1.  
    Refunds for Games fans 12:24:

    People who missed Commonwealth Games events due to transport problems in and around Glasgow at the weekend have been told they can apply for refunds.

    Crowds around Hampden for Glasgow 2014

    Organiser Glasgow 2014 said spectators affected should keep their tickets and apply via email, with requests being considered on a case-by-case basis.

     
  2.  
    Update from the Games 12:13:

    In the lawn bowls, Scotland's Open Triples team make it two wins out of two matches following their victory over Wales. Their next match is against England between 15:45 and 18:00 BST.

    At the Barry Buddon Shooting Centre, Scotland's Jon Hammond and Neil Stirton have both qualified for the final of the 50m rifle 3 position. The final starts at 15:30 BST.

    In the wrestling, Brian Harper was defeated by Shane Parker in the round of 16.

    Daniel Wallace

    Daniel Wallace won his 200m individual medley heat and has gone through to tonight's final at 19:47 BST. Scotland's women finished third in their 4x100m medley relay heat and qualified for the final tonight, which will take place around 21:00 BST.

    Gillian Edwards lost 4-2 to Guernsey's Alice Loveridge in her women's singles table tennis, while Meggan Dawson-Farrell finished fourth in her T54 1500m heat and will have to wait and see if she qualifies for the final.

     
  3.  
    Wallace monumental 12:01: Via Twitter BBC Sport Scotland

    tweets: #2014swimming - @danwallace_ wins his 200m individual medley heat.

    Wallace wins race at Glasgow 2014
     
  4.  
    Badminton mishap 11:56:

    Badminton can be a dangerous game, it seems.

    Watch as official Jim Gauld is hit in the face by a shuttlecock following a miss-hit shot by Kenya's Joseph Matheri Githitu.

    Jim Gauld hit in face with shuttlecock

    Thankfully Gauld saw the funny side.

     
  5.  
    On today's show 11:50: John Beattie BBC Scotland

    Today, we will be discussing tourism and the Commonwealth Games. Is Glasgow 2014 the best tourism advert for Scotland ever?

    We've also been Kiwi House to find out how they've liked the city and how they've claimed a bit of Scotland as their own.

    We will also be live at Cathkin Braes for the mountain biking. Join us from noon on BBC Radio Scotland or listen online.

     
  6.  
    House price rise 11:30:

    Average house prices in Scotland have risen by 5.9%, according to the latest figures from Registers of Scotland.

    It said the average cost of a home, in the three months to June, now stood at just over £162,000.

     
  7.  
    Nigerian athlete fails drugs test 11:21: Via Twitter Chris McLaughlin Commonwealth Games reporter, BBC Sport

    tweets: Nigerian weightlifter Chika Amalaha becomes the first athlete to fail a drugs test during #Glasgow2014 Games.

     
  8.  
    Harry photobomb 11:07:

    Following the Queen's unexpected photobomb of the Aussie team last week, it seems Prince Harry wants a piece of the action too.

    Prince Harry photobomb

    The prince gave a cheeky thumbs up to Glasgow 2014 after finding his way in to this Commonwealth Games Federation picture.

    Have you been photobombed by a royal? Or an athlete? Tweet us your pics using #ScotlandLive, or email them here.

     
  9.  
    Highlights from day five 10:48:

    BBC Scotland's Andy Burke rounds up yesterday's Commonwealth Games highlights for the host nation.

    Libby Clegg

    His video features Libby Clegg, Laura Muir, Ross Murdoch, Joe Ham, lawn bowls, shooting and gymnastics.

     
  10.  
    The germ-spreading handshake - your views 10:43: Via SMS

    Norrie: If folk would just wash their hands there would be no problems. What next? Ban kissing and rubbing noses!!

    Helen in Cumbernauld: Get a life, what about our exposure and handling of coins, money, keyboards, mobile phones and chopping boards in our kitchens? They probably contain more bacteria. Good hand washing and building immunity would b better.

    Jim Robb: This is getting silly. Wash your hands at the appropriate time and live a little!

     
  11.  
    Wrestling action 10:33: Via Twitter BBC Sport Scotland

    tweets: Watch live wrestling featuring Scots Ross McFarlane, Brian Harper, and Donna and Fiona Robertson.

     
  12.  
    Spectacular stunts 10:22:

    Stunt rider Danny MacAskill will perform some spectacular tricks as part of the BBC at the Quay entertainment festival from 11.00.

    Danny MacAskill

    If you're a classical music lover, the Royal Scottish National Orchestra will be playing scores from Hollywood movies such as ET, Superman and Jurassic Park at Glasgow Green between 14:00 and 15:00.

    There will also be a Prom concert featuring folk singer Rachel Sermanni from 18:30.

     
  13.  
    Stop and search - your views 10:08: Via SMS

    H in Edinburgh: Just let police do their job. We can't do without them. If you have nothing to hide then nothing to fear.

    Al in Edinburgh: The new police state Police Scotland imposing Strathclyde policies on a one-fits-all basis is alienating the public.

    Mags: I have no problems with stop and search. It's just like CCTV, if you have nothing to hide then what's the problem? Some people talk about CCTV being an infringement on our rights but how many criminals, sex attackers etc have been caught on camera?

     
  14.  
    Murder charge 09:55:

    Police Scotland say the attack on Edinburgh pensioner Eleanor Whitelaw in her Morningside home is now being treated as murder.

    Robert Buczek, 23, was initially charged with attempted murder and assault to severe injury and danger of life when he appeared at Edinburgh Sheriff Court on Monday.

    Mrs Whitelaw, 85, was taken to hospital two weeks ago, but it was announced earlier this morning that she had died.

     
  15.  
    A lasting legacy? 09:41:

    Last week we asked you to help us track down pupils from Glasgow's St Mungo's Academy in Bridgeton, who spoke to the BBC in 2007, just minutes before the city found out its bid to host the Commonwealth Games had been successful.

    With your help we found them.

    Sean Bell and Hayley Mitchell

    They were the east end's new generation, who could be in line to benefit from promises of jobs, homes and new opportunities - if the Games came to Glasgow.

    So, did the Games deliver? Find out here.

     
  16.  
    Pensioner found injured dies 09:30:

    An 85-year-old woman who was found seriously injured in her Edinburgh home has died.

    Eleanor Whitelaw was taken to hospital two weeks ago after being found in her Morningside home.

    The morningside home of Eleanor Whitelaw

    Robert Buczek, 23, was charged with attempted murder and assault to severe injury and danger of life when he appeared at Edinburgh Sheriff Court on Monday.

    He made no plea or declaration and was remanded in custody.

     
  17.  
    Legia Warsaw 'step up' 09:25:

    Celtic's assistant manager John Collins has told BBC Scotland Legia Warsaw will be a "step up" from KR Reykjavik.

    Speaking at Glasgow Airport as the team flew out to Poland for tomorrow night's Champions League qualifier, Collins said: "There's no doubt it's going to be a tough match.

    John Collins

    "We watched them last week in Dublin. Good team - they scored four goals so at this stage of the tournament you're not going to play against any mugs. There's no doubt it's a step up in quality from Reykjavik.

    "It's better to play them away from home first then get them back to Murrayfield. But we're going to have to play well - they're organised, they're quite quick and they score goals."

    Celtic's match tomorrow kicks off at 19:45, with the return leg in Edinburgh on 6 August.

     
  18.  
    Morning Call 09:18: Louise White Presenter, Morning Call

    This morning we're taking your views on stop and search - does the system affect your trust in the police?

    We're also going to talking about curbing the spread of germs - is it time to end the handshake?

    Lines are open now. Call 0500 92 95 00, text 80295 or email morningcallscotland@bbc.co.uk

    You can listen live to the debate here.

     
  19.  
    Newspaper review 09:14:

    Scotland's record-equalling haul of medals at Glasgow 2014 dominates the front pages on most of the country's newspapers this morning.

    Front pages 29 July
     
  20.  
    Footie gossip 09:01:

    Away from the Games, Celtic look to add to the signing of Inge Berget with a Haitian midfielder, while Rangers fans are angry at an apparent secret plan to sell Murray Park.

    Murray Park

    Read all your Scottish football gossip here.

     
  21.  
    More medal hopes 08:46:

    Shooting, athletics, swimming, cycling and gymnastics... could Scotland win one more medal to make it our best ever Commonwealth Games?

    Daniel Purvis in action at Glasgow 2014

    Find out what's on when today for Scots athletes.

     
  22.  
    Gary and Libby 08:39:

    Scots gold medal winner Libby Clegg is currently chatting with Good Morning Scotland's Gary Robertson.

    Gary Robertson and Libby Clegg

    Listen live here.

     
  23.  
    Golden moments 08:35:

    It has been a memorable week for Scotland with medals galore at the Commonwealth Games.

    Kimberley and Louise Renicks

    Re-live some of those special moments in our picture gallery.

     
  24.  
    Cathkin Braes travel 08:24: Via Twitter Games Travel 2014

    tweets: Shuttles buses for #Cathkin Braes ticket holders will run from Cowcaddens Rd behind Buchanan Bus Station from 08:00.

     
  25.  
    Driver killed in crash 08:24:

    A driver has been killed in a two-car road crash on the A87 at Druim nan Cleochd on the Isle of Skye.

    The collision took place at about 16:20 on Monday.

     
  26.  
    Travel round-up 08:11:

    If you are coming to Glasgow by train, Central, Argyle Street, Queen Street, Exhibition Centre and Mount Florida stations are all going to be extremely busy.

    And don't forget it takes about 15 minutes - probably longer given the crowds - to walk to Hampden from the Battlefield area where the railway station is.

    You can also get to the athletics at Hampden by shuttle bus from Shield Road subway station and Buchanan Bus Station, or take the scheduled services 4, 5, 6 or 7.

    Cathkin Braes Country Park is hosting the mountain biking competition from this afternoon, with shuttle buses dropping off and picking up on the south-bound Carmunnock Road where one lane will be closed. Factor in about 40 minutes or so to get to the spectator plaza.

    Drivers on the M8, M77 and M74 should also expect very busy morning and afternoon peaks with J15 and J19 on the M8, the M8/M74 interchange and M74 at J1A expected to be particularly busy.

     
  27.  
    08:06: Via Twitter BBC Breakfast

    tweets: Lord Smith of Kelvin tells us #glasgow2014 will arrange compensation for people who missed CWG events due to travel problems. Apply online.

     
  28.  
    Anything you can do, I can do better 08:00:

    Yesterday on Scotland Live, we enjoyed a 41-shot rally in the table tennis tournament at Glasgow 2014 between Nigeria's Segun Toriola and Singapore's Ning Gao.

    The badminton stars went one better - well, 18 better in fact.

    Mixed team final between Malaysia and England in badminton at Glasgow 2014

    Enjoy this 59-shot rally at the mixed team final between Malaysia and England.

     
  29.  
    Royal seal of approval 07:47:

    The Duke and Duchess of Cambridge and Prince Harry were among the spectators enjoying the action in Glasgow yesterday.

    Prince Harry, Duke and Duchess of Cambridge

    The Royal trio were spotted at various venues in the city including the Hydro, Tollcross Pool and the National Hockey Centre at Glasgow Green.

     
  30.  
    Bring it on 07:37: Via Twitter Team Scotland

    tweets: 13 Gold. 8 Silver. 12 Bronze. Bring on Day 6! #GoScotland

     
  31.  
    Medal table 07:32:

    Scotland are still in third place in the Commonwealth Games medal table following yesterday's successes.

    Australia lead the way, with England in second.

    Medal table, July 28

    Wales are now in 8th, with Northern Ireland (16th) and Isle of Man (17th) also tasting success.

     
  32.  
    Last night at the Games 07:22: Graham Fraser BBC Scotland

    Last night, Libby Clegg experienced the Hampden roar with a gold medal in the T12 100m final.

    Her success meant Scotland has equalled its best total medal haul at any Commonwealth Games ever, with 33 medals.

    Libby Clegg wins gold at Glasgow 2014

    Earlier, Team Scotland set a new national record for Commonwealth gold medals following lawn bowls success for Alex Marshall and Paul Foster. That win in the men's pairs event took them to the 12-gold mark, surpassing the tally at Melbourne in 2006.

    So today could be a very special day for Team Scotland. Any more medal success, of any colour, for the men and women in blue and white will make Glasgow 2014 that extra bit special for everyone in the team.

     
  33.  
    Coming up... 07:17: BBC Radio Scotland

    Following a fantastic night of athletics at Hampden, Scotland's gold-winning para sprinter Libby Clegg will be chatting with Gary Robertson on Good Morning Scotland just after 08:00.

    Libby, who is visually impaired, took the gold with guide runner Mikail Huggins in the T11/12 100m in 12.20 seconds.

    You can listen live here.

     
  34.  
    Weather outlook 07:00: Christopher Blanchett BBC Weather presenter

    It'll be a cloudy start for most, with any early sunshine confined to the east coast. Through the morning this brighter weather fades as cloud rolls in from the west. There'll be some very light outbreaks of rain or drizzle initially for the spine of Scotland and further west - but most will have a dry and cloudy morning.

    Through the day it improves, brightening up with sunny spells developing across central and eastern Scotland, though always staying that bit more cloudy for western parts with showers on the west coast and through the Hebrides.

    A brisk westerly breeze adding to a fresher feel compared with yesterday. Highs of 18C in the west and 21C in the east under sunnier skies.

    For a full forecast go to the BBC Weather website.

     
  35.  
    Latest updates
  36.  
    Welcome 06:52: Marianne Taylor BBC Scotland news

    Good morning and welcome to BBC Scotland Live, your minute-by-minute guide to all the latest action and atmosphere from day six of the Glasgow 2014 Commonwealth Games.

    We will, of course, also be bringing you the latest news, sport, weather and travel from across the country.

    Keep in touch with all your comments and pictures throughout the the day - you can tweet us using #ScotlandLive, email us here or text using 80295.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.