Keeping the UK Pound
As part of the UK we have the certainty of the UK pound, one of the most
secure, trusted currencies in the world. If we leave the UK we leave the UK
pound.
The UK pound is one of the oldest, strongest and most successful currencies in the world. Using the UK
pound has meant we have been protected from the worst of the Eurozone crisis. In these economically
uncertain times, Scotland has the absolute reassurance that comes from the financial back-up of being
part of the UK. Independence would be a huge risk for Scotland and would mean taking an
irresponsible gamble on the pound; mortgage and interest rates; jobs and pensions.
The nationalists can’t even tell us what money we would have in our pockets. The cross-party
announcement from all three of the candidates to be the next Chancellor makes clear that the
nationalists plan for a Eurozone-style currency union is off the table because such an agreement would
not be in the interests of Scotland or the continuing UK.
Alex Salmond now needs to tell us his Plan B for what would replace the UK Pound. Would we rush to
adopt the Euro or set up an unproven separate currency? A clear pattern is emerging, on one side you
have the Nobel Laureate, the economic experts, the business leaders, the trades unions and even his
own Fiscal Commission. On the other side you have Alex Salmond who says that everybody else is
wrong and only he can be trusted. It simply isn’t credible.
Leaving the UK means leaving the security of the UK pound. None of the options open to an
independent Scotland would be as good as we have just now.
The Euro:
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This was until recently the SNP’s plan – but just as it is not suitable for the UK’s economy it is
unlikely to work for Scotland.
Joining the Euro may require constraints on public spending and borrowing, limiting our ability to
pursue the best policies, particularly when the economy is bad.
Using the Euro would mean transaction costs for businesses and individuals along with uncertainty
about the exchange rate – introducing new risks and costing jobs.
An unproven separate currency:
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Setting up a new separate currency is far from simple and managing the transition in such a short
time could be very difficult.
The greatest challenge will be for this unproven currency to win the confidence not only of people
here in Scotland, but of the international money markets, so that we may borrow money at the
favourable rates we currently do to finance our deficit and government debt. However, with a
brand new currency, that would be unlikely.
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Scotland would inevitably be charged higher interest rates than the UK to finance existing debts
and the new borrowing which would be required. This means we would all pay more on our loans,
mortgages and store card bills.
The Panama Plan:
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Using the pound without agreement has been hinted at by the nationalists including Alex Salmond.
This Panama plan, sometimes called sterlingisation, has been ruled out by the SNP’s own advisors
on their Fiscal Commission. This is because it means having no central bank and nobody standing
behind our savings, our pensions, or our businesses.
There would be no lender of last resort to protect individuals’ savings and mortgages. It would also
threaten the success of our financial services industry and the almost 200,000 jobs it supports.
Being part of the UK and using the UK Pound means cheaper car loans, lower mortgage repayments
and cheaper credit card bills for people here in Scotland. Why would we want to trade that for the risk
and uncertainty of independence?
It is worth remember that it was not long ago Alex Salmond was saying sterling was “sinking like a
stone” and a “millstone round Scotland's neck”, advocating we joined the Euro instead.
What is clear is that the only way to keep the pound is to vote to remain within the United Kingdom.
The 5 things you need to know
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NO PLAN – Alex Salmond cannot even tell us what money we would have in our pockets. With a
currency union now formally ruled out and the White Paper’s currency plans blown apart, the SNP
must urgently tell us what currency Scotland would use if we left the UK.
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DEFAULT = DISASTER – Salmond’s irresponsible threat to default on our debt is a recipe for
economic crisis and political conflict. People know that refusing to pay your debts means a bad
credit rating and that makes everything more expensive. If Scotland became a pariah on the
international money markets then is all of us who would pay with higher interest costs on
mortgages, credit cards and store cards.
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PANAMA PLAN – The SNP have hinted that now a currency union has been ruled out they will use
the pound regardless without formal permission. This would mean we would have no one
guaranteeing our mortgages and savings and would inevitably force Scotland’s leading financial
services industry to look elsewhere.
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NATIONALIST CURRENCY CHAOS – The parties that make up the Yes Campaign are hopelessly split
on the issue. The Chair of Yes Scotland wants us to adopt the Euro, while others want to set up an
entirely new Scottish currency altogether.
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THE EURO AND AN UNPROVEN SEPARATE CURRENCY – If we did as the Chair of the Yes campaign
wants us to and either joined the Euro or set up a new currency it would be devastating for Scottish
business. They would have to worry about exchange rates when selling to their biggest market –
the UK. It would also mean we would have to change currency at the border.
What the experts say
On the Panama Plan:
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Alex Salmond’s own Fiscal Commission: “Advanced economies of a significant scale tend not to
operate such a monetary framework … it is not likely to be a long-term solution … The two clear
options for Scotland are therefore to seek to join a formal monetary union with Sterling or the
Euro.”
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Nobel Prize winning economist Paul Krugman: “what [they have] said on that crucial subject
seems deeply muddle-headed. What the independence movement says is that there’s no problem
— Scotland will simply stay on the pound. That is, however, much more problematic than they seem
to realize.”
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Professor Angus Armstrong, Director of Macroeconomic Research at the National Institute of
Economic and Social Research:"Sterlingisation is not a reasonable option given the dependence of
Scottish banks on the UK payment system. My view is that [Scottish banks] would pretty soon move
most of their operations south of the border.”
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Professor Ronald MacDonald at the University of Glasgow Adam Smith Business School: “a form
of sterlingization along the lines of the system run in the Isle of Man seems to suggest that the
Scottish Government have rather lost the plot in terms of the currency debate.”
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Martin Wolf, chief economics commentator at the Financial Times: “Neither its financial
institutions nor its government would enjoy a lender of last resort, with lethal consequences in a
crisis – as we have seen in the Eurozone.”
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Standard & Poor's, one of the big three global ratings agencies which determines countries credit
rating: “A decision by a sovereign Scotland to issue its own new and untested currency or to
unilaterally adopt the currency of another sovereign -- without gaining access to that currency's
lender of last resort -- could pose some initial risks to external financing, in our opinion."
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A House of Commons Library briefing note: "This policy is often used by countries which have a
poor economic record…This policy would create problems for Scotland’s large financial services
sector as it would mean no access to central bank services, such as lender of last resort. For these
reasons, this option does not seem particularly relevant to Scotland."