Scotland Plans to Retain Sterling

There has been much media attention today about Scottish plans to retain the Pound should they gain a yes vote in September 2014. The result of this media attention is that many people are jumping behind battle walls and screaming out rhetoric of all types.

The truth of the matter is that in the short term of independence this is to be expected at least. Should a YES vote occur in Scottish independence, it will take a lot of time to sort out all the buearocracy surrounding setting up and governing the country. Longer term we are not so sure of the impacts to the UK and to Scotland. We are still awaiting further detail and analysis on how this would serve both the UK and Scotland should Scotland retain Sterling as a currency.

On the face of it, one could say that for the Scottish it has a negative. The negative being that the Bank of England would be the sole bearer of decisions affecting the currency and Scotland would therefore still have their currency governed by an outside influence. Some from the Scottish camp feel they would have some form of power in say on the BoE. My understanding is that Scotland would lose some of its current powers around the Sterling currency and therefore would have less say than they currently have should they be independent.

The positives for Scotland include the fact it would continue as it currently does with a currency it knows well and can plan a longer term exit should it wish. You only have to look at Ireland to see how it worked as Ireland retained Sterling for a few decades after breaking away from the United Kingdom.

Overall the resulting arguments from both sides stir many more questions than answers because we need further fiscal explanation to have a clearer view on the impacts to both Scotland and the UK should Scotland retain Sterling. It also begs the question on whether citizens of the UK should have a say on whether an independent Scotland has the right to use Sterling and what impact it has on them if George Osborne’s view is correct about economic policy as stated below.

Scottish Finance Secretary John Swinney view:

"What the Treasury's paper is designed to do is to make things sound as difficult and obstructive as possible and I don't really think it is a helpful contribution to the debate.

"We invited a number of leading international economists, including Joseph Stiglitz and Prof James Mirrlees, to advise us on the macro-economic framework that we have put forward and I have accepted their recommendations in relation to currency.

"I think they put forward a very rational and considered case for the establishment of a sterling zone that can work in the interests of Scotland just as much as it operates in the interests of the United Kingdom."

Chancellor George Osborne on the other hand says:

"The fundamental political question this analysis provokes is this - why would 58 million citizens give away some of their sovereignty over monetary and potentially other economic policy to five million people in another state?"

"The rest of the UK, as the larger economy, would be much more exposed to the risk of an independent Scotland running into fiscal and financial difficulties.

"Let's be clear - abandoning current arrangements would represent a very deep dive indeed into uncharted waters.

"Would a newly independent Scottish state be prepared to accept significant limits on its economic sovereignty? To submit its economic plans to Westminster before Holyrood?"