Scotland can support and expand the financial services sector using the powers of independence to attract new businesses and new entrants to the market. So says Sir George Mathewson, former Chairman of the Royal Bank of Scotland, in a fascinating bit of debunking in the Financial Times yesterday: As the debate over Scottish independence enters its final stage, careful analysis is giving the lie to the unionists’ scaremongering about the consequences of independence. For Scotland’s financial sector, this is an opportunity, not a threat. The location of a brass plate bearing the name of a bank may determine where the institution formally resides. But it does not tell you which government is primarily responsible for overseeing the bank or for limiting the damage if things go wrong. That depends principally on where the bank’s economic assets are located – which is, after all, the place most at risk from contagion in the event of a banking crisis. In the case of RBS and Lloyds, which have substantial operations throughout the UK, the answer is clear. The UK government already owns significant chunks of both institutions; 80 per cent, in the case of RBS. That is the legacy of a rescue package principally designed to protect the global financial system from the consequences of losses in London-based investment banks. Independence will bring new opportunities for Scotland’s financial sector – which is one of the country’s strengths, though it is neglected by the Westminster government and its London-centric policy. Scotland can support and expand the financial services sector using the powers of independence to attract new businesses and new entrants to the market. It will build on successes such as Virgin Money and Tesco Bank, both of which have operations in Scotland. A competitive and efficient tax system would help Scotland compete with other European financial capitals. Independence would enable Scotland to invest more in skills, and to attract and retain more top talent, especially in the growth area of asset management. All of this can and should be achieved in a currency union with the UK, under a common regulatory framework. Those who argue that this is impossible ignore the interconnected nature of our financial systems. Some point to the troubles of the eurozone, but they neglect major differences. Whereas an economic gulf separates high-productivity Germany and the countries of the periphery, labour productivity in Scotland is about the same as in the UK as a whole. Critics also ignore the case of Luxembourg, whose thriving financial sector has functioned perfectly well within a currency union. London and Edinburgh have a mutual interest in taking a joined-up approach to regulating the financial sector. This will not change if Scotland votes Yes on September 18. The proposed 18-month period of negotiations ensures that a robust system can be put in place. As Danny Alexander, British chief secretary to the Treasury, said last month, in the event of a Yes vote there would be “plenty of time for all of those issues to be resolved”. The Scottish government’s proposals for the economic governance of an independent Scotland are undoubtedly the best on the table. They offer a bright future for Scottish financial services and the wider economy. The alternative claims of those with a political interest in Scotland voting No should be taken with a bucket of salt.
Posted on: Tue, 05 Aug 2014 17:04:29 +0000
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