No doubt: no currency union, says Scottish Affairs Committee
21 July 2014
In a report released today, Parliament’s Scottish Affairs Committee finally extinguishes the idea of any possibility of a currency union between the United Kingdom and a separate Scotland.
- Report: The Referendum on Separation for Scotland: no doubt - no currency union
- Report: The Referendum on Separation for Scotland: no doubt - no currency union (PDF, 315 KB)
- Inquiry: The Referendum on Separation for Scotland
- Scottish Affairs Committee
The Committee has taken extensive evidence on this issue and is convinced that no present or future Chancellor or Government could enter into a currency union without totally destroying both their political and economic credibility. This would apply not only in the period between the referendum and the General Election but also after the General Election.
The Committee also believes that such clarity is necessary: not only because a joint currency would be against the best interests of both the continuing United Kingdom and a separate Scotland, but also because the people of Scotland deserve to know, before the referendum, what the true consequence of their vote might be.
A single currency works today because of the integrated nature of the UK economy and, more importantly, because the nations of the United Kingdom have fiscal, banking and political union.
Currency union
A separate Scotland entering into a currency union with the continuing UK would mean the Scottish Government handing over control of its monetary policy, including interest rates, and much of its economic policy to a country in which it had no representation. This is politically infeasible.
Similarly, it is difficult to see any benefit to the United Kingdom of accepting the burden of risk of any default by Scottish banks and neither side is likely to accept sharing control of their tax and spending policies with what would, by then, be a foreign government.
The inevitable ending of the currency union in the event of separation would have far reaching consequences throughout Scotland but nowhere more so than for Scotland’s financial services industry. The Committee says the Scottish Government must move quickly to provide information as to how it intends to protect the thousands of jobs dependent upon this vital part of the Scottish economy.
Chair's Comments
Ian Davidson MP, Chair of the Committee, said:
"There will be no currency union between a separate Scotland and the continuing United Kingdom. No currency union of any kind: no ifs, no buts, no fudges, no deals. We have had complete clarity and openness on this from George Osborne, Ed Balls and Danny Alexander: from the leadership of the three main political parties in the United Kingdom. There is no shadow of doubt. All were unequivocal.
The Scottish Government tries to give the impression that a currency union is still a possibility. It is not. This parrot is dead.
Now voters urgently need to be told what the Scottish Government has as a Plan B.
The Scottish Government must now explain how it can keep all its other promises; on defence, jobs, pensions and everything else, while financing them with some kind of new untried currency in an uncertain economic and political environment.
No one will be more concerned about this than the financial services sector in Scotland, which is a major part of Scotland’s economy, and a major provider of jobs in Scotland. If the Scottish Government won’t be honest about the economic and financial future of a separate Scotland I am glad we have been able to put these facts finally into the public domain."