Scottish banknotes at risk under Yes vote, warns Treasury
by FUDmonger General Magnus Gardham Monday 22 April 2013
SCOTLAND'S historic banknotes could be lost if the country opts for independence, the Treasury will warn tomorrow.
A paper to be published by Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander will question whether commercial Scottish banks would be allowed to print sterling notes even under the SNP's plan for a monetary union between an independent Scotland and the rest of the UK.
It will say Scotland's notes represent a "rare example" of different cash being permitted across a single-currency area.
However. the Treasury will say Bank of England would review its role guaranteeing Scottish-issued notes if Scotland becomes independent. It will argue its UK-wide remit would be "fundamentally transformed" by serving two separate countries as their central bank.
The paper will say there are no guarantees Bank of England would continue to regulate Scottish notes and ensure they remained of the same value as its own. It will say acceptability and confidence in Scottish notes could be damaged.
Details of the paper emerged as the Chancellor and Chief Secretary claimed the SNP proposal to keep the pound by entering a currency union with the UK "simply doesn't add up".
In an article on the Treasury website they warned Scotland would lose influence over key economic decisions including setting interest rates.
"Scottish Government ministers have made it clear they want an independent Scotland to keep the pound, the Bank of England and to enter a formal currency union with the rest of the UK.
"So if Scotland does vote yes on September 18, 2014, they say they want to hand to what would become a foreign government key decisions over the Scottish economy. This is one of the big contradictions in their whole economic approach.
"Campaigning to 'bring powers home' with one hand, while giving them away with the other. Calling for 'full fiscal freedom' with one breath, but calling for a 'full fiscal pact' with the next. It simply doesn't add up."
Last week, economist Jim Cuthbert, frequently cited by the SNP, said in a report the Scottish Government should develop plans to create a new currency. He said meaningful independence was impossible in a currency union with the UK.
Former SNP deputy leader Jim Sillars has also called on the Scottish Government to keep the option of a separate currency open, and Professor John Kay, a former adviser to First Minister Alex Salmond, has said a new currency would be the "most likely outcome" of Scotland leaving the UK.
But a Scottish Government spokesman said: "The existing situation relating to Scottish banknotes will remain within a post-independence currency union. An independent Scotland will retain the pound.
"The UK Government has stated there is no legal bar to an independent Scotland having sterling as its currency and the evidence, including the views of world-leading economist Joseph Stiglitz, shows it is in the best interests of both an independent Scotland and the rest of the UK to have a sterling zone."