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Referendum White Paper: Currency in an independent Scotland

Nationalists believe that an independent Scotland will be able to negotiate a currency union with the remainder of the UK.

Ten pound notes, generic money shot.

What would be the currency of an independent Scotland?

Background

The Nationalists believe that an independent Scotland will be able to negotiate a currency union with the remainder of the UK. By retaining the pound sterling, the Scottish Government argues, Scotland would have "a workable currency from day one of independence" and it would allow the two governments "to use the economic levers of independence to secure growth for their respective countries". It would also boost trade and competition between the two countries, they say.

Under the SNP's proposals, the Bank of England would continue to set interest rates as the central bank, sharing ownership and governance to reflect Scotland's share of the assets. Monetary policy would be set to benefit all members of the Sterlingzone and the Scottish Government would have input into appointments to the monetary policy committee, which sets the direction of the Bank.

The Unionist side has cast doubt on whether a currency union between an independent Scotland and the UK would be feasible. Chancellor George Osborne warns that a currency union could force Scotland to “submit its economic plans to Westminster before Holyrood” while Secretary of State for Scotland Alistair Carmichael claims a Sterlingzone "wouldn't work for Scotland, it wouldn't work for the rest of the United Kingdom".

Professor Brian Quinn, an expert on monetary policy, has argued that a currency union between two countries going in different fiscal directions would be unworkable. He wrote in an August report: “If Scotland were to become a separate sovereign state, it is difficult to see how the supervisors employed by the Bank of England could be held accountable to the taxpayers (or their elected representatives) of another state. There is no precedent for such a dual role.”

However, former chairman of RBS Sir George Mathewson says "economically it makes sense" for the UK to agree to a currency union with an independent Scotland, adding: "We've got large oil revenues, we've got whisky and other exports. It seems a sterling zone would not wish to lose these things."

Other pro-independence campaigners contend that sterling could be a stepping stone rather than an end point. "Keeping the Bank of England, and the pound sterling, still gives us a choice to launch our own currency in the future should that be the right decision," proposes Business for Scotland's Gordon MacIntyre-Kemp.

What the White Paper says:

"The pound is Scotland’s currency just as much as it is the rest of the UK’s.

"The expert Fiscal Commission Working Group concluded that retaining Sterling as part of a formal Sterling Area with the UK would be the best option for an independent Scotland and the rest of the UK.

"The Scottish Government agrees with that view. Using Sterling will provide continuity and certainty for business and individuals, and an independent Scotland will make a substantial contribution to a Sterling Area. We will therefore retain the pound in an independent Scotland."

What the White Paper says:

"Independent countries around the world share currencies. Countries like France, Germany, and the Netherlands do not have their own currency but are clearly independent, and control their own resources.

"This approach makes sense for Scotland and the rest of the UK, because it will make it easier for us to trade with each other and will also mean that our mortgages and pensions continue to be in pounds and pence, just as they are today."

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