Why would an independent Scotland expect a currency union with the UK?

(192 Posts)
JapaneseMargaret Fri 14-Feb-14 07:46:44

I mean, I can see why they would, but doesn't that just totally undermine their desire for independence?

Am I missing something blindingly obvious...?

Euphemia Fri 14-Feb-14 08:32:17

We would be on too shaky ground economically to set up our own currency, at least initially. Perhaps in time.

A Scottish Government working group stated: "From the perspective of the UK - if there is a vote for independence - the Working Group believe that this framework would be to their benefit. It would, for example, provide a consistent and transparent framework to manage the transition process. The UK would also retain an integrated market with a key trading partner. As approximately 10% of the existing UK economy (roughly the size of the entire financial services industry in the UK), Scotland would remain one of the largest trading partners of the UK economy. There would be particular advantages for the UK in areas such as energy and financial services.

“Moreover, the model proposed for monetary policy, financial stability and fiscal policy offers fully engineered frameworks in key areas of interest to the UK. For example, the proposals for financial stability would ensure that major financial institutions based in Scotland and operating in the rest of the UK would be subject to similar levels of oversight and scrutiny (and vice versa).

"Additionally, Scotland’s continued use of the pound would make a massive positive contribution to the Sterling Zone’s balance of payments. For example, Oil and Gas UK estimate that North Sea oil and gas exports, the vast majority of which originate from Scottish waters, boosted the UK’s balance of payments by £40 billion 2011-12."

JapaneseMargaret Fri 14-Feb-14 08:52:37

Britain didn't enter into the Euro because it - arguably quite rightly, in hindsight - didn't want to be responsible for financially bailing out other countries' political mistakes.

Why would it all of a sudden want to enter into such an alliance with Scotland? How would a political-non-union-but-monetary-union benefit the UK? What's in it for them?

I mean, I can see that oil and gas exports have contributed to the coffers, but it doesn't quite cut the mustard...

I'm Antipodean, for the record. No axe to grind.

MoreBeta Fri 14-Feb-14 09:07:19

Many countries in the world have their own currency but are in fact 'dollarised' in that locals do not hold their local currency as saving as they do not trust it but only use it for immediate transactions. They hold US Dollars as a safer store of wealth.

I visited Argentina in the 1990s when 1 Argentine Peso was by law equal to 1 US Dollar. The law decreed that currency equivalence to give people confidence in the local Argentine Peso currency but in practice as tourists we only took US Dollars with is and all the shops and especially taxi drivers accepted the US Dollar eagerly but always gave you change in Argentine Peso which we also spent as quickly as we could. In fact everyone was trying to get rid of Peso as quickly as possible as no one really trusted the local currency at all. Everyone was so desperate to sell, spend or convert Argentine Peso so quickly that its value fell relative to the US Dollar in the black market and even when we were there it was only really worth 95 US cents. A few years later the peg to the US Dollar was broken and the Peso devalued rapidly as currency equivalence was unsustainable.

This is likely to happen to Scotland. It may issue its own currency, it may call it the Scottish Pound. It may be decreed that by law it is worth £1 Sterling but in reality the Scottish economy will rapidly become Sterling or Euro currency based and only small local transactions will be carried out in the local Scottish currency.

In truth the Bank of England and Treasury cannot do anything to stop Scottish people using Sterling as their preferred currency. People can use whatever currency they like - see the rise of Bitcoin. Very wealthy people often use gold and Swiss Francs as their preferred store of wealth but use the US Dollar for every day transactions because of its universal acceptance and liquidity around the world.

In my opinion Scotland should adopt the Euro if it wants to be part of currency union - but that is a whole other political question.

CogitoErgoSometimes Fri 14-Feb-14 10:40:17

The independence campaign is throwing up quite a lot of contradictory assumptions. Not least that, if they go their separate way, Westminster would still treat Scotland as an honorary de facto member of the UK rather than a complete other regime like Belgium.

Euphemia Fri 14-Feb-14 12:43:09

Nicola Sturgeon speaks very clearly about this: here she is last November.

niceguy2 Fri 14-Feb-14 12:55:28

We would be on too shaky ground economically to set up our own currency, at least initially. Perhaps in time.

Doesn't that pretty much tell you everything though?

Pro-independence are busy saying "Look everything will be rosy. We're gonna be fabulous. We've got all this oil. It's jam today and jam tomorrow."

But at the same time they want to desperately keep the pound because the economy isn't able to support their own currency.......Let's face it, no-one honestly believes the Scottish economy on it's own could bail out it's banks like the UK did.

In truth the Bank of England and Treasury cannot do anything to stop Scottish people using Sterling as their preferred currency.

Absolutely. But what happens is that the BoE and the government will make decisions based on the best interests on rUK and not Scotland. So then you have this bizarre situation where you have your independence but all the financial decisions are made in England where you now have ZERO influence whereas right now Scotland has MP's in Westminster.

ItsAllGoingToBeFine Fri 14-Feb-14 13:01:05

But in today's international world currency never operates on a vacuum. It is very naive to suggest that eg as Britain is not in the Euro it is not affected by the Euro.

Reasons currency union would be good for rUK:

Scotland would take on a share of the debt
All of England's exports to Scotland would continue unimpeded (ie without additional cost)
All of England's imports from Scotland would do the same ( imports eg electricity, oil etc)
The currency would continue to have oil backing it

Im sure there is more.

Doesn't really matter though, currency union isn't a deal breaker for anyone.

niceguy2 Fri 14-Feb-14 13:23:05

I really don't believe the doom & gloom over trade with Scotland if they had their own currency. There'd be some exchange issues but no different to how we trade with the rest of the world including Eurozone countries.

So I think I read somewhere that 10% of rUK trade is with Scotland. How much of that would continue? Personally I think pretty much all of it. It'll just cost slightly more to trade. No different than if the company was selling to France/Germany/US etc

And the key thing here is the Scotland refuse to commit long term to Sterling. In which case the idea that oil is backing it is a bit meaningless. That could disappear at any time that suits Scotland....but not England.

anothernumberone Fri 14-Feb-14 13:24:55

Lots of countries have currency agreements. It does not always undermine sovereignty although some South American countries linked to the US dollar might disagree.

flatpackhamster Fri 14-Feb-14 13:30:06

ItsAllGoingToBeFine

But in today's international world currency never operates on a vacuum. It is very naive to suggest that eg as Britain is not in the Euro it is not affected by the Euro.

I don't think that has been suggested.

Reasons currency union would be good for rUK:

Scotland would take on a share of the debt

Scotland should take it on anyway.

All of England's exports to Scotland would continue unimpeded (ie without additional cost)

All of England's imports from Scotland would do the same ( imports eg electricity, oil etc)

If Scotland wants to price itself out of its export markets, then I don't see why anyone would object.

The currency would continue to have oil backing it

Mmm, that helps.

Doesn't really matter though, currency union isn't a deal breaker for anyone.

It ought to be. Currency union destroyed Spain, Portugal, Greece and Italy because they were in the wrong one. It speaks volumes to me at the lack of critical thinking on this issue that you wave it away as an irrelevance.

Ubik1 Fri 14-Feb-14 13:36:01

I don't really understand why Westminster wouldn't allow Scotland to keep the pound.

I suppose if Westminster is determined to not have currency union, Scotland could tell them to shove the national debt and walk away.

ItsAllGoingToBeFine Fri 14-Feb-14 13:38:13

*Scotland would take on a share of the debt

Scotland should take it on anyway*

Why would Scotland take on the liabilities with no assets?

Ubik1 Fri 14-Feb-14 13:41:22
ItsAllGoingToBeFine Fri 14-Feb-14 13:44:10

ubik yes I saw that. I was ignoring it in the hope it will be swiftly refuted. If the Scots vote for independence the one thing not up for negotiation is independence itself. To suggest otherwise is ridiculous and no doubt against all sort of international law (and the Edinburgh Agreement).

flatpackhamster Fri 14-Feb-14 13:44:20

ItsAllGoingToBeFine

Why would Scotland take on the liabilities with no assets?

BECAUSE IT'S SCOTLAND'S DEBT TOO.

Jesus wept.

ItsAllGoingToBeFine Fri 14-Feb-14 13:55:30

But it is Scotland's currency too...

Mojang Fri 14-Feb-14 14:02:13

Erm , are they not wanting to take on the land and the oil then? They are intending to take assets.

It's not Scotland's currency, it's the UK's currency, you know the one some of them they want to be independent from.

niceguy2 Fri 14-Feb-14 14:03:22

I don't really understand why Westminster wouldn't allow Scotland to keep the pound.

I don't understand why Scotland WANTS to keep the pound.

Why fight for independence then throw your toys out your pram because England doesn't want to let you use his money.

You are either independent....or you're not. It's like getting a divorce but still demanding to use the joint bank account. Ultimately are you truly independent?

ItsAllGoingToBeFine Fri 14-Feb-14 14:08:53

Fair division of stuff?

Natural resources: along country boundaries ( though maritime may need a wee bit of negotiation as it has moved a fair bit in recent years)

Built assets:buildings, bases etc , by country boundaries

Moveable assets/assets outside UK boundaries: currency, embassies etc split by population share eg Scotland gets about 10%

Liabilities : eg the debt again Scotland takes a population share?

What is not fair/realistic is for Westminster to take an asset/asset share off the table without also removing some corresponding liability.

Alibabaandthe40nappies Fri 14-Feb-14 14:11:56

I was ignoring it in the hope it will be swiftly refuted. If the Scots vote for independence the one thing not up for negotiation is independence itself.

Well of course it is up for negotiation. If the UK government in Westminister don't agree to the ridiculous demands of Salmond then the whole thing is dead in the water.

mistlethrush Fri 14-Feb-14 14:11:58

If its so essential to have monetary union with someone, why doesn't Scotland get the Euro. Then at least they can moan about France and Germany making all the decisions rather than London.

Alibabaandthe40nappies Fri 14-Feb-14 14:14:26

ItsAll I think Osbourne has suggested that it would be better for the UK to keep all the debt rather than currency share and asset share with an independent Scotland.

Alibabaandthe40nappies Fri 14-Feb-14 14:15:39

mistle Scotland cannot assume that they will be allowed to use the Euro. Spain have said they will veto automatic entry, so Scotland will have to apply as a new member, which could take decades before they meet the terms for currency union.

SirChenjin Fri 14-Feb-14 14:15:45

Because Alex Salmond is a complete and utter arse. He outarses the worst of the worst PMs this country has ever had, and wants the security of the currency of another country as he knows full well that he is not up to governing.

The sooner we get a 'no' vote in September the sooner (hopefully) he will fuck off to the far side of fuck, taking Wee Nikki with him. God I loathe the SNP - fucking loathe them.

<breathes furiously into paper bag>

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