Opinion

Scotch wise, pound foolish?

TANYA THOMAS | Updated on February 19, 2014 Published on February 19, 2014

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This has got to be about Scotland, right?

Yes, the Scottish bid for freedom from the UK. The referendum is set for September 18, when citizens resident in Scotland aged over 16 years and registered to vote will say ‘yes’ or ‘no’ to the question: Should Scotland be an independent country?

And how many voters need to agree to this?

No such rule. A simple majority of however many turn up to vote decides the fate of Scotland.

Obviously, the rest of the UK doesn’t like the idea.

The Better Together campaign, which is crusading to keep the union in one piece, tried appealing to patriotic sensibilities. In a speech he made earlier this month, Prime Minister David Cameron said: “Our human connections — our friendships, relationships, business partnerships — they are underpinned because we are all in the same United Kingdom, and that is number one reason why we are stronger together.”

I hear a but coming…

That was till George Osborne, Chancellor of the Exchequer, playing bad cop to Cameron’s good one, said, “There’s no legal reason why the rest of the UK would need to share its currency with Scotland... If Scotland walks away from the UK, it walks away from the UK pound.”

And the Scots rebutted?

You bet they did, through Alex Salmond, current head of the Scottish government, leader of the Scottish Nationalist Party and captain of the secessionist Yes Scotland campaign. He said, “If there is no legal basis for Scotland having a share of the public assets of the Bank of England, then there is equally no legal basis for Scotland accepting a share of the public liability of the national debt.” At last count, that debt weighed in at £1.4 trillion.

Is this likely to happen?

The Yes Campaign’s website says it still believes that independent Scotland will continue to use the pound and that the rest of the UK will sign a formal currency agreement with them. Salmond has dismissed Osborne’s threats as campaign rhetoric, even though all three major political parties in the UK have said that such an agreement is impossible. Not sharing the pound would lead to new cross-border transaction costs during trade, something businesses on both sides may not be willing to accept.

On the other hand, if a currency union is indeed created, Scotland may well be asked to hand over some fiscal control to London so they can avoid EU-style bailouts in the future.

Aren’t there other options?

Scotland could choose use the pound unilaterally, without the UK’s permission, like how some South American countries use the US dollar. It could instead introduce its own currency or (and the most likely alternative) skip over England and join the Euro Zone which , by the way, is a move the UK is equipped to veto.

How much of a deal-breaker is the pound issue for the Scots?

A few surveys seem to suggest that the Scots are worried more about continuing to get their pensions and welfare after independence than about which currency they will be getting them in or whether they’re still part of Europe. Conversely, you could argue that concerns about the economy and standards of living are inherently tied to currency and stability.

Can Scotland make it on its own?

Most believe it can. Besides housing a considerably large banking industry (but with customers in England), Scotland has a booty in North Sea oil reserves. And whisky.

Published on February 19, 2014
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