For those of you who think im talking shite about what im saying there you go ! 1. THEY SAY: ‘The pound is Scotlands currency just as much as it is the rest of the UKs’ THE FACTS: • A vote to leave the UK, we leave the UK pound. That’s part of the choice people in Scotland are being asked to make. • The UK pound isnt an asset to be divided up between the two countries like a record collection after a break-up. • The value of the UK pound is not the notes and coins in circulation, but that it is backed by the Bank of England, which in turn is backed by the strength of the taxes paid by the 60 million people living across the whole of the UK. • To use the UK pound after independence would need an agreement to set up a Eurozone-style arrangement something which experts have said is unlikely to be agreed. • An independent Scotland cannot insist that taxpayers in a country that it would have just voted to leave would continue to back its currency or stand behind its banks as a lender of last resort in the event of another collapse. 2. THEY SAY: ‘A currency union is in the overwhelming economic interests of both Scotland and the rest of the UK.’ THE FACTS: Not true. A Eurozone-style currency union would not be in Scotland OR the UK’s interests because: • As the Governor of the Bank of England and leading experts have made clear: currency unions don’t work without close political and fiscal integration. Independence is about disintegration, not integration. • The lesson of the Eurozone crisis is clear – currency unions are very difficult without fiscal and political union, and can expose all their members to significant risks. Eurozone countries are moving towards closer political and fiscal integration to address these challenges. But the SNP want the exact opposite – currency union without fiscal or political union. • The economies of an independent Scotland and the UK would diverge as different policy decisions are taken. Scotland in particular would be far more dependent on North Sea oil which is volatile and will run out. Sudden changes in oil prices would affect Scotland far more and therefore the same interest rate would not suit both countries. A Eurozone-style currency union would not be in an independent Scotland’s interests because: • Even if it could be agreed, a formal Eurozone-style currency union would severely limit an independent Scotland’s economic freedom. As the Governor of the Bank of England has said: “tight fiscal rules” would be required, adding that “It is no coincidence that effective currency unions tend to have centralised fiscal authorities whose spending is a sizeable share of GDP – averaging over a quarter of GDP”. • To ensure the risks to the rest of the UK were managed properly an independent Scotland would not be able to set its own interest rates and would have to accept the rest of the UK having oversight of its tax and spending plans as is the case in the euro area. As the Governor of the Bank of England has said: “a durable, successful currency union requires some ceding of national sovereignty.” • If financial markets sensed that the Bank of England’s monetary policy did not suit Scottish circumstances they might doubt Scotland’s commitment to the currency union. • Financial market speculation could lead to capital flight and higher interest rates. Ultimately, if markets weren’t calmed, Scotland might have to adopt its own separate currency in a time of crisis. A Eurozone-style currency union would not be in the rest of the UK’s interests because: • The Governor of the Bank of England has said: “a durable, successful currency union requires some ceding of national sovereignty.” Joining a currency union with another state would therefore involve the UK giving up some of its control over in monetary and fiscal policy. Why would it agree to this? • The continuing UK would comprise around 90% of total GDP in a sterling currency union, with Scotland as 10%. The continuing UK would therefore bear much more risk of having to bail out an independent Scotland if it got into fiscal difficulties. • As Martin Wolf, chief economics commentator for the Financial Times, has said: “it is doubtful whether a union would be in the interests of the rest of the UK. The gains from the shared currency would certainly be far smaller for the rest of UK than for Scotland, since the latter represents a 10th of the shared market.” • Why take the risk? Negotiating a Eurozone-style currency union would be far more important for an independent Scotland than for the continuing UK. The rest of the UK accounts for 70% of Scotland’s total trade, whereas Scotland accounts for 10% of the UK’s trade. • As Carwyn Jones, the First Minister of Wales, has asked, what gain is there to the rest of the UK from having an independent country share its currency, other than uncertainty leading to higher interest rates and higher borrowing costs for Scotland and all parts of the union, making everyone worse off? Mr Jones has made clear he is “not convinced” that a shared currency would work.
Posted on: Tue, 16 Sep 2014 18:45:46 +0000