Scotland and currencies

The Governor of the Bank of England’s speech yesterday was well researched and well phrased. He leaves the issue of Scotland’s future to the Scottish people. He accepts that were Scotland to vote for Out of the UK, the question of the currency would be a major issue for the political negotiation that would follow between the two governments.

His research reveals, however, that an independent Scotland would have a much larger banking sector relative to the size of the economy than the Uk currently enjoys. This opens the question of could Scotland have afforded to stand behind HBOS and RBS in the way the UK did, during the crisis? Any agreement on a common currency would need to make it clear that Scotland would have to stand behind Scotland’s banks. But would that work? What would happen if Scotland was unable to stand behind them? Would Scotland agree that a common currency must mean common banking supervision? How would the rest of the UK be sure we would not be expected to mount an expensive rescue? How could Scotland be sure the full currency union and the Bank of England always stood behind her banks?

He also points out that if Scotland keeps all the oil the Scottish economy is materially different from the rest of the UK. Scotland’s output per head and tax revenue would be very affected by the oil price, and by the likely secular decline in the Scottish oil province, which is now well past its peak output. The more diverse two countries in a union are, the more the pain of adjustment without the mechanism of the exchange rate to take some of the strain.

I am not myself a Scottish nationalist, but if I were I would want my country to have its own currency. You cannot be independent, with your own economic and tax policy, if you belong to a currency union. Members of the Eurozone are discovering this as the Euro crisis rolls on. Belonging to a currency union, you are forced into internal devaluation – cuts in wages – if you cease to be competitive at the common exchange rate. Greece and Spain could warn Scotland about that. You are forced into increasing tax and benefit transfers around the union. The Rest of the Uk and Scotland would need clear and fair rules about the extent of these transfers and the limits on mutual financial assistance.

Today the sterling currency union works because there are very large transfers of money from the richer to the poorer parts of the union. The labour market works fairly well, with common levels of benefit payments and pay top ups from the state, and similar wage levels. A so called independent Scotland would need to mirror much of the rest of the UK’s approach to benefits, wages and fiscal policy for the continuing currency union to succeed.

From the point of view of the rest of the UK it would be easier if Scotland did decide to quit the UK if she left the currency union at the same time. Political union and currency union are two sides of the same coin. Take one away, and the other collapses or buckles under the new strains.


  1. Gary
    January 30, 2014

    “This opens the
    question of could Scotland have
    afforded to stand behind HBOS
    and RBS in the way the UK did,
    during the crisis?”

    This business of the govt standing behind private companies that are too useless, too incapable, to exist in the market on their own is an abomination and the reason why nothing has been solved financially since 2008. In fact, it has become worse.

    That this is implied as a virtue is unbelievable. The sacking and looting if the prudent to bail out the reckless and the feckless is something that Scotland should aspire to? The inmates are running the asylum.

    1. Arschloch
      January 30, 2014

      Here is something to contemplate just to show how screwed up (or beholden to others) the political class is. The man responsible for the BIGGEST INSOLVENCY IN THE UK EVER is allowed to continue to draw pension of around £300k p.a. from an institution that is mostly owned by you and me. That is on top of the millions he is allowed to keep from his salary and bonuses from when he was running the bank into the ground and getting involved in practices that have continued to draw censure from the FSA and FCA. RBS “insiders” recently told the DT that when they are eventually privatised, the taxpayer will only have lost £10 billion (and the rest). Can someone (words left out ed) reply below and tell me as to why I should stop “banker bashing”?

      1. bigneil
        January 31, 2014

        errrrrrrrrrrrrrrrrrrrrrrrr – – – -no.

      2. Edward2
        January 31, 2014

        I have no great desire to defend the person you mention as the failure he presided over was huge.
        But your wish for a revenge attack could set precedents.
        For example who would want to become a Chairperson or a non executive Director if after a failure of the company you could easily end in prison and be destitute?
        Who would want to set up in business here form another country faced with those kind of impacts if they failed?
        There are already a huge number of laws appertaining to the conduct of Directors in the UK and they carry big penalties.
        So why are none of these existing laws brought to bear?
        One must assume it is because there were no real cases to bring or that there was no enthusiasm to proscecute by the establishment, strange that this might sound.

        There are others one can point the finger at, apart from the bankers, as being involved in the crash of 2008.
        What about Bill Clinton and his desire to see the big mortgage companies in the USA relax their lending criteria?
        What about the Chairman of the Federal Reserve who did not act quick enough?
        What about our own Government, Treasury and Bank of England Governor at the time, who did not act soon enough?
        Should we start rounding them all up?

        1. Bazman
          January 31, 2014

          This is why bankers should not be paid or recognised as entrepreneurs. They have no personal risk and are just managers with executive powers which is never a good thing.

          1. Edward2
            February 1, 2014

            I didn’t realise they were ever “recognised as entrepreneurs”
            Like most Directors, Non execs and even managers they stand to lose big sums if the shares they own become worthless.

          2. Bazman
            February 2, 2014

            They demanded entrepreneurs levels of pay for mangers work. Often these where paid in shares, but how many lost money due the banking crash? None for sure.

      3. APL
        January 31, 2014

        Arschloch: “and tell me as to why I should stop “banker bashing”?”

        The answer is in your post.

        “how screwed up (or beholden to others) the political class is”


        I suggest you leven your banker bashing, with a generous dollop of Politician bashing. They claim to be in control after all.

    2. waramess
      January 30, 2014

      That the transfer of wealth from one region to another should also be seen as a perceived virtue is also shocking.

      The act of transfer means that neither region will be working efficiently: the region from which wealth is taken for obvious reasons, and the receiving region because it should be left to find other economically beneficial things to do or be left to die and its resources, including labour, be allowed to migrate to other areas.

      But then, the inmates have been running the asylum for quite a long time as can be seen from the state of the economy

      1. Bazman
        January 31, 2014

        Interesting idea of where all these peole would live assuming they could find a job that paid enough to cover the rent and why would happen to those who could not move? It can also be argued that many companies are London based and sucking money out of the regions.

    3. Ralph Musgrave
      January 30, 2014

      True, but the problem is that as soon as anyone suggests removing bank subsidies or improved bank regulations, banks just mutter stuff about economic growth being hit in consequence. And regulators and politicians swallow it hook line and sinker. And you can tell that bankers are to be trusted by the fact that they launder tens of billions for drug cartels and rip British households off to the tune of billions with mis-sold PPI and other dodgy stuff.

      Of course any hit to economic growth that does stem from tighter bank regulations can be made good by standard stimulatory measures (monetary and/or fiscal) as the average street sweeper will tell you. But the latter point is too complicated for our elite to grasp.

      1. APL
        January 31, 2014

        Ralph Musgrave: “British households off to the tune of billions with mis-sold PPI and other dodgy stuff”

        Who has called their bank call centre to make a transaction or check the balance, only toward the end of the call to find themselves in the midst of a sales pitch for the latest credit card, or bank loan?

        They have learned nothing from the PPI scandal, and are doing much the same thing over again right now.

    4. sm
      January 31, 2014

      How is Iceland doing?

      Websearch ‘Let banks fail is Iceland Mantra as 2% joblessness in sight bloomberg’

  2. Mike Stallard
    January 30, 2014

    People go into politics to make a difference. That means they have to have power. That means that the more power they have, the more difference they think they make. That opens the door to complete autonomy – or indeed Scottish independence. So I see this as a power grab by some second rank, greedy-for-power politicians.

    But from our English point of view, Scottish independence is becoming really attractive. We would, as you say, lose the two Scottish banks. We would lose a part of the UK which is quite often mired in dependency and squalor (not always!) We would solve the Mid Lothian question. We would gain a perpetual Conservative majority in the rump parliament that was left behind in London. Perhaps we could even begin fracking and getting out of the ghastly EU!

    At the moment, Scotland is part of our country. I like that. But if they bite the hand that feeds, then – goodnight!

    1. margaret brandreth-j
      January 30, 2014

      I wonder what would happen to our flag..’I’m all right Jack?’ Is this half right standing on the right, without a union or a flagship ,or simply b…..s to you?

    2. uanime5
      January 30, 2014

      We would lose a part of the UK which is quite often mired in dependency and squalor (not always!)

      Given that Scotland has the third highest GVA in the UK (second highest if you consider their oil and gas revenues) I wouldn’t call it dependent.

      We would solve the Mid Lothian question.

      The West Lothian question wouldn’t be solved because Welsh and Irish MPs could still vote on English only issues.

      We would gain a perpetual Conservative majority in the rump parliament that was left behind in London.

      I doubt that reducing the number of MPs by 59 will have much effect on a Parliament that currently has 650 MPs. Blair wouldn’t have lost any of the elections without the Scottish MPs.

      1. Edward2
        January 31, 2014

        You are certainly wrong on your last point Uni.
        You compare 59 to 650 without considering the splits into the various parties as well as how they vote on different issues.
        The 59 MP’s, all Labour, would have a huge effect on many close votes in the House Of Commons over the last decade and would have swung the last general election to a Conservative victory.

    3. bigneil
      January 31, 2014

      If people here have bank accounts in RBS or HBOS, then Scotland goes it alone, do all the English account holders get classed as having “overseas accounts”?

      Could Scotland become an (onshore) tax haven?

      Could be fun for the HMRC.

      1. lifelogic
        January 31, 2014

        The whole of the UK is a excellent tax haven, but only for rich non doms, so might the rich Scottish then become non doms in England and the English become non doms in Scotland?

  3. Patryk
    January 30, 2014

    Hello John, this is off topic and I asked you this question on Tiwtter but never got a reply. On Monday I attended a meeting about Heathrow with one of Heathrow reps present. We discussed the attitude of local politicians and we weren’t sure about your stance. Some suggested you were for and some that you were against. Any chance of a reply, or preferably a blog on this matter? Thank you,
    Patryk Malinski, Conservative candidate for Hounslow Council

    Reply My view is I will read the final report of the Commission and then give my view, as it is clear the political parties will not make a decision before it.

  4. Denis Cooper
    January 30, 2014

    “I am not myself a Scottish nationalist, but if I were I would want my country to have its own currency. You cannot be independent, with your own economic and tax policy, if you belong to a currency union.”

    Well, basically the SNP is seeking to temporarily maximise support for a “yes” vote on the referendum polling day by tailoring its independence prospectus to suit whatever they think most voters want on different issues, trying to mislead the Scots into believing that they will be able to have their cake and eat it just as they please.

    And there would be nothing terribly wrong with that general approach provided that it had some grounding in reality, but on the matter of the currency it has now become a false prospectus, and hopefully its falsity will be apparent to the Scots.

    And also one that the SNP would probably abandon within years rather than decades of Scotland becoming independent, if they had a free hand; and for precisely the reason you state, JR, that Scotland could not be truly independent without its own currency under its own control.

    Moreover they might be forced to abandon the idea of keeping a permanent currency union with the rest of the UK even before Scotland finally became independent, because a commitment to join the euro would obviously be part of the price demanded to get all the existing EU member states to agree to Scotland becoming a new member state in its own sovereign right, rather than just being part of a member state as now.

    As I have argued before, the negotiations on Scotland’s relationship with the EU could not be left until after Scotland had actually become independent; instead shortly after a “yes” vote in the referendum Cameron would be taking a trip to Brussels with Salmond in tow, and both would be begging the governments of the other EU member states for the required treaty to amend the present EU treaties, and there is little doubt that they would get that amending treaty, but also little doubt that it would come at a price.

    I expect that there will be comments from angry Englishmen about this, and they are right to be angry insofar as unlike the Scots and the Welsh and the Northern Irish they are never asked what they want, except on that one occasion in 2004 when the English in the north east were asked in a referendum whether they wanted to start the process of breaking up England into EU regions.

    Of course if Cameron announced now that there would have to be a referendum across the rest of the UK to decide whether we wanted to continue to share a currency with an independent Scotland then that would really put the cat among the SNP’s pigeons; but that is highly unlikely to happen because it is simply not part of Cameron’s belief system that the dreadful English should ever be asked what they think about anything, whether it’s about a devolved Parliament for England or it’s about continuing to share a currency with an independent Scotland.

    1. Alan Wheatley
      January 30, 2014

      Here, here, Denis. See my post at 10:20AM.

    2. Jennifer A
      January 30, 2014

      We English asked what we think ?

      Heaven forfend !

      (The most vicious lies are routinely told about us – in politics and fictional media – and so we cannot be trusted. The Scots simply wouldn’t have put up with what the English have, least of all the misrepresentation.)

      1. Jennifer A
        January 30, 2014

        Why is Alex Salmond not classed as a nutter and yet Nigel Farage is ?

        Reply I do not class either as nutters. Mr Salmond probably gets more respect because he has won a lot of seats in the Scottish Parliament and is First Minister, whereas Mr Farage came third in Buckingham in the last GE.

    3. waramess
      January 30, 2014

      There is of course absolutely nothing the UK could do if all an independent Scotland wished to have sterling as its own currency, provided that was all that was wanted.

      The UK could not for example prevent Tasmania from doing so or prevent Scotland from printing notes that would track sterling.

      Of course it would not last for very long because with both economies being different it would either at some point need to devalue/revalue, or operate with a different interest rate, or suffer high unemployment.

      Surely the obsession as to whether or not to allow them to do so becomes redundant, if that is all there is to it?

    4. Mark B
      January 30, 2014

      Thank you, Denis.

  5. Andyvan
    January 30, 2014

    Why is it only a question for Scottish voters? Surely if they vote to be independent then English and Welsh voters should have a say on whether they get to use Sterling and whether we would continue to have to subsidise and bail them out. If they want to be independent they should not expect us to pay their bills.

    1. behindthefrogs
      January 30, 2014

      One survey about a year ago concluded that while the Scots probably wouldn’t vote for independence if the English had a vote they would vote for Scots independence.

      Bring it on, too many of our failing politicians are Scots or of Scots ancestry. Lets get rid of them and have a parliament that concentrates on English interests.

    2. Richard1
      January 30, 2014

      MPs of all parties at Westminster should insist on one thing: if Scotland votes for independence and then wants a currency union with the UK, voters in rUK must be given a referendum, just as we would be for a currency union with the Euro. Since there is no chance of such a referendum agreeing to a currency union with Scotland the question is entirely academic.

    3. StevenL
      January 30, 2014

      Ultimately it would be up to English MP’s in Westminster to vote on any UK law, post referendum recognising Scottish independence. The Scots could unilaterally declare independence, but without overwhelming public support in Scotland this is a non-option.

      I reckon that if say 80% of Scots turn out, and 52% vote ‘yes’ the establishment will say that this doesn’t add up to a clear mandate from the Scots people and refuse to legislate. Much like the EU does, Westminster will make them vote again until they return the right answer.

  6. Gina Dean
    January 30, 2014

    It is not something that should be considered if they go independent its all or nothing. Why should the UK pick up the bill, at the moment they give free this and that. Would the perks be able to be still be given out. If their banks get into difficultly as a whole unit of the UK its manageable, Scotland could not cover this on their own.
    Alex Salmond seems to want it all independance with all the perks. With the safety net of the rest of the UK to pick up the pieces if it goes wrong.
    Also he seems to expect the government to negotiate on his behalf on so many things on the EU, International law, Nato.

  7. margaret brandreth-j
    January 30, 2014

    Yes and of course the sterling continuum is analogous to the Euro problems we are facing.
    Mr Carney was thoughtful also through his open questions and limited his answers in line with his job, therefore not speculating on the markets interpretation, yet commenting that there was an interpretation.

  8. Lifelogic
    January 30, 2014

    Indeed, but there is not just the currency issue and the large banking sector to be sorted & agreed. We have the large government debt to be split and the assets, their relationship with the EU if any to be agreed, how schools and universities will deal with cross border students. Cross border water, power, sewage, health care issues. Bank deposits, government deposit guarantee and regulation issues and endless other matters.

    If they vote to spit (I do no expect they will) then a huge negotiation must surely ensue and then they would need to vote again give the full terms agreed.

    An independent Scotland using the pound, but within the EU is surely an absurd botch. If they want independence they should go for it fully, leave the pound and the EU and become like Norway. If I were living in Scotland I might well go for that option just to get out of the EU and set a sensible example for England.

    The Botch currently proposed is surely absurd. Still at least we will lose all those lefty Scottish MPs from Parliament. Huge damage to England and a vast distortion of democracy has been done by Scottish & Welsh MPs over the years.

    1. ian wragg
      January 30, 2014

      Coming from a background of power generation, I am interested how when Scotland is 100% renewable through useless windmills –
      a) Does Salmond think the greater UK is going to purchase all the output at £100 – 150 per MW.
      b) Does he think he can buy base load when the windmill stops at £45 MW
      Maybe he should be addressing these problems as industry will quickly relocate when there is rolling blackouts due to weather patterns.

      1. Lifelogic
        January 30, 2014

        Indeed any Scottish separation should kill that absurd buying in of wind electricity at 4 time plus the true market rate. Indeed kill it for the UK too please.

        They can pay 4 time the rate for their own electricity if they are daft enough to.

      2. behindthefrogs
        January 30, 2014

        Scotland already has a large hydroelectric generation capacity with potential for more together with wave and tidal generation.

        1. lifelogic
          January 31, 2014

          Fine if it is cost effective do it, if not (as is usually the case) don’t do it.

      3. bigneil
        January 30, 2014

        if the power is on-off-on-off -wouldn’t the main problem for the scots be – having to drink bottled when the power is off -as the beer pumps wouldn’t be working ( joke for all those fine handsome Scottish drinkers )

        1. lifelogic
          January 31, 2014

          I thought they still had hand pumps!

    2. Lifelogic
      January 30, 2014

      Surely if the Scots do vote to leave they should have to issue new Scottish bonds in their new currency. This to repay the UK for their share of the £1.26 Trillion national debt. This assuming they can find any willing lenders (given the lefty anti business nature of most Scottish politics). It should be rather more than on a per head basis given the absurdly incompetent rescue of RBS/Natwest by Gordon Brown with UK taxes. Where are the modern Adam Smiths in Scotland?

    3. Alan Wheatley
      January 30, 2014

      I have heard it argued in recent days on Radio 4 that Scotland would fit very nicely in Scandinavia!

    4. lifelogic
      January 30, 2014

      Excellent piece by Dellingpole today.

      I particularly liked the exchange:

      Was Lindzen suggesting, asked Tim Yeo at this point, that scientists in the field of climate were academically inferior.
      “Oh yeah,” said Lindzen. “I don’t think there’s any question that the brightest minds went into physics, math, chemistry…”

      Can be have Prof Lindzen, Freeman Dyson, Richard Feynman types to replace our “BBC think” chief scientist (and a medical man) Mark Walpole asap please?
      He is still pushing the absurd exaggeration at vast & pointless expense, surely IT is now obvious to all after 17 years of no warming that AGW is at least a huge exaggeration?

      1. Edward2
        January 31, 2014

        You must stop using the abbreviation AGW its not PC anymore.
        They now demand we to call it climate change.
        So all weather, be it hot or cold, wet or dry, will be said to have been caused by climate change.
        Global warming is being quietly reduced to the back of the room just as the word catastrophic was dropped some years ago.

        1. lifelogic
          January 31, 2014

          I shall call it A.C.G.W. then.

    5. lifelogic
      January 30, 2014

      Why for Cameron is it – referendum first for Scotland & much negotiate later – and yet with the EU it is – negotiate first then a referendum long after he has left office? Everyone knows why, ratter Cameron simply cannot be trusted.

  9. Ralph Musgrave
    January 30, 2014

    There is a very simple solution to large banks which threaten to bring down countries (i.e. the TBTF problem). The solution was set out by Milton Friedman and is currently being pushed by Lawrence Kotlikoff (economics prof. in Boston) and various organisations like Positive Money in the UK and Monetative in Germany. Under a “Friedman / Positive Money” system, banks just cannot suddenly collapse (though that can dwindle to nothing over a period of time).

    That is achieved by ensuring that bank lending is funded only by shareholders or other loss absorbers, rather than depositors. That way, if a bank makes silly loans all that happens is that the value of the shares decline.

    As to money which depositors want to be 100% safe, that money is not loaned on or invested: it’s just lodged at the central bank. So that money cannot be lost.

    Sudden bank failures become impossible, plus the TBTF subsidy disappears. For a brief description of Kotlikoff’s version of this system, see:

    Reply THis is what modern regulators are trying to achieve by demanding more capital and living wills.

    1. Ralph Musgrave
      January 30, 2014

      Re “This is what modern regulators are trying to achieve by demanding more capital and living wills…..

      First, regulators attempts in that regard have proved near futile: banks have run rings round regulators and politicians and have almost completely neutered the allegedly “improved” bank regulations as explained by a recent Financial Times article and an article by Robert Schiller, recent Nobel Laureate. Second, the increased capital requirements being imposed (or not) by Basel regulations are MINUTE compared to what Martin Wolf and others think is necessary.

      Third, re living wills, under the Milton Friedman / Lawrence Kotlikoff system banks just CAN’T suddenly collapse, so living wills become obsolete. Given problems, the value of a bank’s shares just fall. That’s it. Insolvency just doesn’t happen.

      Fourth, the Friedman / Kotlikoff / Positive Money system envisages ALL LOANS made by banks being funded by shareholders or other loss absorbers (as distinct from about 25% as per Martin Wolf, or about 4% as per Basel). The advantage of the 100% ratio is that it hugely constrains banks’ ability to print money and lend it out like there’s no tomorrow, as they did prior to the crisis.

    2. lifelogic
      January 30, 2014

      Whatever modern regulators are doing it is making the UK banks behavior very bizarre, very long winded and very anti business at the moment. By the time you get a decision you have often lost the deal or just lost the will to live.

      For example some banks will not lend to a UK company even secured on a UK property solely because one of the British directors lives outside the UK. Or they want hugely higher margins if the security is a partly commercial property or partly development plot, rather than a pure residential unit (even when the circumstances give them a huge level of comfort and they would never have to call on the security anyway). The tend to restrict many commercial loans to 5 years maximum too. Or want absurdly rapid repayments.

      They sometimes will not lend in order to raise fund for investments or business, but oddly will lend for you to do up the kitchen, buy a holiday or waste it on a flashy car.

      Almost no one will lend at sensible rates on second charges, so you might have a property worth £400K have a main mortgage of £40K yet you cannot get a further 5oK from a new lender on sensible terms. They are just bonkers very expensive and very slow too.

      They often will not give mortgages to people who own businesses making large profits, due to the fact have historically not drawn a large income (for tax reasons) but will lend to one of the same company’s employees who started working a month ago.

      No wonder these people lost so much money. Cut out the middle men rip off buffoons if you possibly can.

  10. acorn
    January 30, 2014

    Agreed JR, what is the point of wanting to be an independent “Nation State” and being the USER of someone else’s currency, rather than ISSUE your own. As you say, the Eurozone is a classic example of diverse nations, USING another currency, without a federal Treasury, that has a common tax, spend and transfer structure. Currency USERS have to sell stuff to earn some, or you beg or borrow it at an interest rate you can’t control.

    There is a dozen or more currency unions of which the Stirling Area is now, alas, one of the smallest, mostly colonial overseas territories that USE the Pound. But we have sovereign bases in Cyprus that use the Euro and our best tax haven, BVI, uses the US dollar along with the T & C Islands. Scotland would be better off with its own currency and then apply to join the Euro. They may have to soft peg to the Euro if they can afford it.

    Anyway, how come we English don’t get a say in this. We don’t get to vote on kicking Scotland out of the Union. We don’t get to vote on kicking them out of our currency. We don’t even get a vote on English devolution.

    Where is the English Devolution Party. Preferably one that doesn’t have neo-liberal, neo-con tendencies. That’s the one I will vote for. I am fed up with the English paying for everything and always getting the sh**ty end of the stick!

    1. The PrangWizard
      January 30, 2014

      ‘Acorn’. The party is the English Democrats. Campaigning for an English Parliament, and an independent England.

    2. JoolsB
      January 30, 2014

      UKIP are proposing an English Parliament acorn, the only main party to do so. The Tories, who owe their very existence to England, have proved they care no more about the rotten deal England is getting post devolution than Labour and the Lib Dums.

      Scotland will vote no in September, so the question of currency is hypothetical anyway. Why should they vote to leave a union when they’ve already got their own government which enables them to be virtually independent already without the worry of where the money comes from to pay for their free tuition fees, free prescriptions, free personal care for the elderly etc., things denied to the people of England on grounds of cost and the fact much less is spent on them thanks to the skewed Barnett formula, something else the Tories refuse to do anything about. Cameron has already promised them (and Wales) even more powers at England’s expense if they vote no, which they will. They’re already bribing the Scots with EU money intended for the poorer regions of England being diverted to Scotland instead and the end of shipbuilding at Portsmouth in Scotland’s favour is just a start of what is to come. Osborne has even guaranteed the debt but who consults or speaks for England in all the negotiations – absolutely no-one, that’s who. Not one of the 650 UK MPs can even say the word England let alone stand up for it.

      England needs it’s own First Minister, it’s own Secretary of State and it’s own parliament. The Tories are dead outside of England and yet the idiots still continue to ignore the English Question and the undemocratic and discriminatory manner in which England is governed both politically and financially.

      The Tories have treated England with contempt and they wonder why we are all turning to UKIP.

  11. JM
    January 30, 2014

    The Scots are welcome to independence provided that they take their banks back with all the debt attached to them and provided that their share of the national debt is calculated on the Barnet Formula, i.e. that per head they get disproportionately more – just as they have for all the public spending, which has contributed to the debt over the years. As for the oil I believe that the Shetlands and Orkneys want to remain part of the UK!

    1. acorn
      January 30, 2014

      JM, there is another way the Scots will try and rip us off, the oil and gas. The UK Continental Shelf (UKCS) oil and gas resources income is classed as “extra-regio”, that is, it is not attributed to any region / country of the UK. The Scots don’t like it cos they can’t headline it as “English stealing our oil”.

      To get around this they quote economic data in three modes. For instance, nominal (cash) GDP was £127 billion for 2012, without any UKCS income. Including a Scottish population share of UKCS it is £130 billion. But including the Scottish geographic area share of UKCS it is £150 billion.

      So I say we allocate Scotlands share of the national debt on a geographic basis. As a going away present, they can have the State Pension, and all other liabilities capitalised on a population basis.

  12. Old Albion
    January 30, 2014

    I’m tired of the McCake and eat it attitude of the SNP. Salmond has got the vote he wants. When it happens i hope the Scots vote to leave. If they do, then they must leave the (dis)UK lock, stock and barrel. No currency union, let them join the Euro if they want a currency union.
    Actually i don’t think they will vote to leave. The Scots aren’t stupid they know who funds the largesse in which they indulge.
    This outcome would mean Westminster invoking ‘Devo Max’ Which of course will continue the creep towards independence, without any of the responsibilities of independence.
    Whatever the outcome, it’s time Westminster asked the English want we want. You never have, despite asking the Welsh, Scottish and N.Irish several times.

  13. Bert Young
    January 30, 2014

    The breakaway of Scotland is purely and simply short term political posturing . Alec Salmond is on a very sticky wicket and wishes to boost the image of the SNP . If the situation in Scotland was deeply entrenched in its desire for independence , it would have reared its head in various forms a long time ago . Salmond knows very well that keeping the pound and obtaining independence is not something the British voter would agree to , it is inevitable that the voters in the whole of the UK will decide one way or the other , it cannot be left in the hands of a few politicians . Salmond will soon get a bloody nose from those north of the border in any event .

  14. oldtimer
    January 30, 2014

    If Scotland votes for independence I, as a UK taxpayer, do not wish to be liable for the Scottish banking system.

    If Scotland votes for independence and initiates negotiations for a currency union, what say will I, as a taxpaying voter, have in whether the Government of the day should even be permitted to enter into such negotiations? Should this not be an issue for a referendum of the rest of the UK?

    My vote would be against joining a currency union with an independent Scotland. The Scots are indeed fortunate in being able to vote in a referendum about their future constitutional status. If they decide to become independent, then they must live with the consequences. It is not for Mr Salmond to take my acceptance of a currency union, or that of any of my fellow voters and taxpayers, for granted.

  15. John E
    January 30, 2014

    Well put.
    Although the Governor has to be careful in his words, perhaps the rest of us can be clearer and state that Independence for Scotland means independence for the rest of the UK from Scotland as well. The links are cut – they choose their road and we choose ours.
    Obviously we would prefer they stay – but then England has never voted Labour…

  16. James Matthews
    January 30, 2014

    If the Scots vote for independence I will cease to have the slightest interest in what Scotland wants and I trust the same will be true of whoever governs the remainder of the UK. I will, however care about England’s interests and it is very clear that these are inimical to a currency union. However, I am still concerned that these discussions took place at all. If the were authorised by the treasury George Osborne should own up, and stop pretending there will be no “pre-negotiation”. If they were not, the Governor needs to be curbed.

  17. Douglas Carter
    January 30, 2014

    Whilst Carney’s comments were unsurprising but welcome, they was also an uncanny deja-vu about his comments. The follow-up comments by some senior politicians I heard speak – in particular some from members of Blair’s Single Currency-favouring Cabinet were the icing on the cake.

    Their adoption of the doom-and-gloom aspect of a shared currency were precisely the same debating points made more than twenty years ago from no lesser figures than yourself Mr. Redwood. Only then when you and your allies made the points with regard to a currency union, the debate you were putting forward remained unacknowledged, and you were collectively held as extremists and xenophobes?

    Gratifying and bizarre in equal measure as this matter is, I look on it as the final victory of those warning against Euro membership, in that for it to work, it has to be within the carapace of a single administrative entity. A single European Government. Wholly denied twenty years ago, and only then by those who remained polite enough to acknowledge the argument presented.

    Who are the xenophobes now…..?….

  18. Brian Tomkinson
    January 30, 2014

    Salmond proffers independence and simultaneously declares that he wants his newly independent country to be subservient to the EU. Furthermore he now wants to have a common currency with the UK which he is at such pains to leave. That’s not my idea of independence.

  19. Leslie Singleton
    January 30, 2014

    Is there any question, then, of Scotland getting all the oil? How can that be? I remember thinking, and writing here, that it was as if the only thing that counted is a line of latitude starting at Aberdeen or wherever; but this would be ridiculous as a glance at a Globe makes clear. As well use a line of longitude when England would get it all–Yes I do realise that lines of latitude and longitude are very differently based but you may get my point which is of course that it is not a good idea to concede any negotiation before it starts. I suppose nobody looks at a Globe any more, which doesn’t help. In any event I doubt too many Scots were involved in the initial investment in North Sea oil.

    1. Denis Cooper
      January 30, 2014

      Well, there is an international convention and under those rules almost all the oil would be in Scottish territorial waters, and as I recall that was long ago accepted by the UK government when drawing the maritime border and would not really be up for re-negotiation.

      1. Leslie Singleton
        January 31, 2014

        Denis–I’m not sure you are right on this. I just looked in you-know-where and the first site was:

        ……..which says any number of things including:

        The issue of who owns the oil and gas in the waters off Scotland’s coast will be one which is sure to play a big role during the campaign ahead on the referendum in autumn 2014.

      2. DBarry
        January 31, 2014

        Not an expert, but isn’t is the Continental Shelf Act 1964 that allocates most of the oil to Scotland?

  20. Alan Wheatley
    January 30, 2014

    Agreed, to which I add the following.

    I accept that whether or not the Scots want to leave the UK is a matter for them. But I feel very strongly that if their attitude is that they are not prepared to work with the rest of us in the UK then they can not expect cooperation and favours outside the UK (other than normal international arrangements). They can sort out their own defence, currency etc.

    The other thing I feel very strongly about is that Scottish independence affects everyone in the UK, but politicians are acting as if the not-Scots do not exist, are not relevant and are of no consequence. I accept that should Scots vote for independence the international consequences would be issues “for the political negotiation that would follow between the two governments”, as are all international agreements. But this government is doing absolutely nothing to consult its electorate as to what the not-Scots think.

    1. Sebastian Weetabix
      January 30, 2014

      The border would actually continue out to sea from north of Berwick. Since this angles roughly north east, IIRC a third of the reserves would actually belong to the rest of the UK in the event my fellow Scots are stupid enough to fall for Salmond’s ridiculous posturing. Given that we won’t vote for them they like to annoy the English, with predictable fury being generate

      The SNP are a nasty authoritarian outfit,(etc ed). They may pose as liberal minded democrats; don’t you believe it. The only party I’ve ever seen with such discipline is the Communists. Please be assured we aren’t all like them.

      1. DBarry
        January 31, 2014

        Please see my comment above. I believe the Continental Shelf Act 1964 overrides the convention you refer to, effectively flattening the divide along the 55th parallel.

  21. Leslie Singleton
    January 30, 2014

    Why do we not hear more about what happened when the Republic of Ireland seceded? This is another of the many subjects that I find I know little about but my impression (and that’s all it is) is that at least the currency aspect was handled well, or at least as well as could be expected. Are there no lessons to be learnt from that? Forgetting the late-coming EU were the Irish better or worse off afterwards?

    Repyl They stayed with sterling but later set up their own currency.

    1. Leslie Singleton
      January 30, 2014

      Reply to Reply–Thanks but I do not see much if any difference between (part of) Ireland seceding and Scotland doing so; except perhaps that the Southern Irish hated us even more than the Scots do. What did the then Governor say or do about the need for banking unions and all the rest? Still do not see why no reference to this, anywhere, at least that I have seen. Am I missing something??

      1. Leslie Singleton
        January 30, 2014

        Postscript–I ought to say that I do see that the positions re banking are vastly different, but even so……….

  22. alan jutson
    January 30, 2014


    Perhaps I am missing something here, or perhaps I am rather dim.

    I thought any business was owned by its shareholders, in the case of the two Banks you mention, that means every taxpayer in the UK.
    How would the Scottish Government if it came to into force, automatically be the owner of these two banks, without some sort of payment to its shareholders/taxpayers in the whole of the UK.

    Who actually owns North sea oil at present if it is not taxpayers.

    How much of the UK debt is Scotland going to take on, or do they hope to escape Scot Free.

    I can certainly understand them setting tax revenues for businesses operating within Scotland and indeed their own population, but how do these so called transfers of assets and liabilities work without payment or future debt payments.

    I am sure someone has an answer as these things, as they are so basic, but so far I have neither heard or seen anything published which outlines any of this.

    Is it all up for grabs ?

    Is anyone going to be advised BEFORE THEY VOTE.

    All this seems about as pie in the sky as us getting a list of powers back from the EU.

    Reply Yes, of course the negotiations would have to handle who took over the RBS shares and on what financial basis.

    1. alan jutson
      January 30, 2014


      Thank you.

      So perhaps someone should mention to the Scottish population load and clear, that they will need to put their hands in their pockets FIRST before they can walk away from debt obligations, and take over businesses.

      So when is someone going to make this point, before or after a vote ?

      1. alan jutson
        January 30, 2014


        should be, loud and clear.

      2. APL
        February 1, 2014

        Alan Jutson: “So perhaps someone should mention to the Scottish population load and clear, ”

        Perhaps you might expect their representitives to do so, who knows maybe even the MP for Kirkcaldy, if he can find the time to visit Parliament.

  23. Atlas
    January 30, 2014

    Aren’t there quite a few countries around the world that use the US dollar? I presume if they ‘fail’ then the US Treasury does not bail them out. Wouldn’t it be the same for Scotland if it used Sterling – that is, the English Treasury would not bail out Scotland under those circumstances?

    Reply The issue is who stands behind the commercial banks, as the Central bank should be the lender of last resort.

    1. formula57
      January 30, 2014

      Any lending by a CB as lender of last resort is supposed only to be to solvent (if illiquid) banks. The Bank of England could so act but perhaps with a counter-indemnity from the Scottish Government, made tangible by a floating charge over all future oil revenues?

      The Scots will, however, not prove themselves worthy of Alex’s leadership and the result in fact of the referendum will just be renewed whinging but with more intensity as demands for extra privilege become more strident, the free prescriptions and tuition fees not being enough.

  24. Mike Wilson
    January 30, 2014

    I bank with NatWest – personal and business accounts. Have done for over 40 years.

    If Scotland vote for Independence, I’ll have to move my accounts to an English bank. In preparation for this, I am winding down the amount I keep in NatWest.

    1. lifelogic
      January 31, 2014

      Why keep money in a bank devaluing and earning little interest. Banks are surely for borrowing from.

  25. Graham
    January 30, 2014

    Unfortunately I have no faith that the current occupant of No 10 will actually bat for England in any discussions. More likely that he will give it all away.

    1. backofanenvelope
      January 30, 2014

      It is not just Mr Cameron – none of the pro-Union politicians can be trusted to get a decent settlement for England.

    2. alan jutson
      January 30, 2014


      “More likely he will give it all away”

      My fear as well !

      Track record in negotiation is not good is it !

    3. James Matthews
      January 30, 2014
    4. Richard
      January 31, 2014


      In fact, as an Englishman, this is the most frightening aspect of the whole Independence for Scotland referendum.

      Which ever way the vote goes I am worried that the rUK politicians and/or civil servants will ensure that England gets a rotten deal either through incompetence or willfulness.

      By the way, I do not think Mr. Salmond is too worried by which currency Scotland adopts as he is certain that the rUK will bail him out should anything go wrong, just as we have bailed out the Republic of Ireland.

  26. yulwaymartyn
    January 30, 2014

    JR – off message I know.

    Would you support a move to cut the top rate of tax to 40 per cent? If so would you do it in this parliament or the next?

    Reply I have been a long advocate of lower tax rates, and a supporter of setting a higher Income Tax rate that maximises revenue.

    1. yulwaymartyn
      January 30, 2014

      JR – thank you.

    2. lifelogic
      January 31, 2014

      We do not want “Maximum Revenue” for the government to waste (perhaps about 40% of GDP in expenditure tax+borrowings) we want maximum good for the maximum number of voters (more like 20% of GDP).

  27. Neil Craig
    January 30, 2014

    The SNP’s “independence” is a bit of a pretence.
    They promise England will still stand behind our currency.
    They promise England will permanently elect a government willing to subsidise Scottish windmill electricity.
    They want the BBC, which would then be the propaganda broadcaster of a foreign government, to still effectively run Scottish broadcasting.
    And, though the EU makes75% of our laws, they are opposed to Scots getting a referendum on independence from it (even in the event of Scotland having to re-apply for membership. Making the SNP the only “independence movement” in the world utterly opposed to the people getting a choice because they fear we would choose independence from the EU.

    On the issue of government standing behind banks – an alternative would be for the Scottish government to say that next time they will not bail out banks (beyond the guarantee to account holders already in place). Let the market operate. The UK could do the same.

    With our dependence on oil the massive variations on price (in recent years between $30 & $150 a barrel) the income fluctuates as well – in fact moreso because there is a fixed extraction cost. That means a Scottish government would expect to borrow above the UK rate at some times and to have a larger surplus at others. It seems highly unlikely that a Scots government & Bank of England would agree about a prudent borrowing level when the oil price was low.

  28. behindthefrogs
    January 30, 2014

    What seems to have been missed is that any country joining the EU under current rules must adopt the Euro. It would thus seem that this debate is redundant as Scotland will have little choice.

  29. Iain Gill
    January 30, 2014

    When they are independent I presume English students will be treated exactly the same as students from anywhere else in Europe and will be entitled to significantly reduced course fees in Scotland? The SNP seem to think otherwise and that their (bias ed) against the English can continue…

    What does John think?

  30. Roy Grainger
    January 30, 2014

    As far as I can see Scotland’s position in UK is analogous to UK’s position in EU. We should support a referendum and support the outcome. I fear though in each case the result will to be maintain the status quo so the debate on the exit arangements is purely hypothetical.

  31. A.Sedgwick
    January 30, 2014

    I thought Mr.Carney did a tricky job well. Although it is probably more appropriate for the Chancellor to give Scots voters the facts it seems sensible to keep senior English Ministers out of the limelight, certainly for the time being. I would agree that if you didn’t have your own currency your country would hardly feel independent. Many have theorised that this whole exercise is about obtaining devo max and it will be revealing if Cameron makes concessions in this direction later in the campaign or holds his nerve. The switching of London for Brussels and applying to join the EU as a new entrant with perhaps Euro and Schengen commitments are daunting prospects and the last possibility would need serious border controls for England. In the late stages of the campaign I would imagine that such matters would be prominent.

  32. forthurst
    January 30, 2014

    “What would happen if Scotland was unable to stand behind [the Scottish Banks]?”

    How about bailing in their English account holders? Scotland would be in the same position as Iceland, except the Scottish banksters having created their own oversized banking sector prior to independence

    Currently RBS, 81% taxpayer owned, is HQed in Edinburgh, as is Lloyds Banking Group and its wholly-owned oxymoronic subsidiary, HBOS plc.
    How is this a good arragement post independence?

    Meanwhile the Treasury Select committe have heard further allegations against the taxpayer owned RBS in its treatment of English entrepreneurs.

  33. Qubus
    January 30, 2014

    Like or dislike Mr Salmond, he is a clever politician and I for one cannot believe that he really thinks that he will succeed with Scotttish independence, the Scots aren’t that stupid. What Mr Salmond is really after is more devolution, more concessions, and I expect that he will get them.
    Perhaps someone should start taking bets; there is money to be made there.

  34. Mark B
    January 30, 2014

    ” . . . the question of the currency would be a major issue for the political negotiation that would follow between the two governments.”

    Yes, but I would like the final say via a referendum. The Scottish people are having their say over independence, which is right. All I ask is, whether I wish to agree with any deal struck by the UK Government. That is not much to ask is it ?

    “Any agreement on a common currency would need to make it clear that Scotland would have to stand behind Scotland’s banks”

    I seem to remember Iceland not standing by its banks and UK and Dutch depositors. So do not trust the Scots to do the same here in England. Essentially, what is being offered here is, the Scots get the assurance of a larger partner (UK) so mitigate their risks, and yet, get to keep the profits from them. While the UK picks up the tab if it all goes wrong. Its a bit like when everybody though that Germany and the rest of the EU would pick up the bill for Greece etc. Only this time, the lender of last resort (UK), will actually have to deliver on this notion.

    The Scots do not need to be apart of our currency, should they go for independence. They can just as easily have their own and peg the Scottish Pound against UK Sterling much the same way as Switzerland does and we did in the 90’s. The thing is, the Sottish Government would be 100% responsible for anything that went wrong and could not blame anyone but themselves.

    Many believe that the SNP just want devo-max. And whilst this is no bad aim, it is not what is being offered to the people of Scotland. Let us remind ourselves what is being offered here. The Scottish people are being offered ‘Independence’. To me that means both politically, economically and fiscally responsible for their own affairs. I leave out the EU and their desire to remain for clarity and the fact that is makes a mockery of this belief they have of independence.

    I shall repeat myself from above, I want a say in any new deal. Whether the Scots decide to leave or, remain but request new terms. I, WANT, A, SAY !!!!!

  35. Chris S
    January 30, 2014

    The English Point of View :

    If Scottish citizens vote for independence :

    1. The Citizens of England do not want responsibility for Scottish banks. Period.

    2. We would want a return of the bail out money ( £46Bn I believe )

    3. We would not want to accept RBS or HBOS moving to England and becoming UK
    Banks with the Bank Of England, the Treasury ( ie us ) having to guarantee them.

    4. We do not want a currency union with a Socialist administration, whether it be run by
    Labour or SNP. Both are wedded to a big state and very high public spending.

    5. Whatever half baked promises they make, which we know they won’t keep to, we
    still won’t accept a currency union with Scotland

    If the Scots vote to remain in the UK :

    1. The Barnett Formula must be changed to equalise spending per head of population
    between the different countries within the Union. How they split the total spending
    within their individual Country will then be up to them alone.

    2. Devolution, whether it remains unaltered or is extended further, has to be made
    exactly equal for all countries within the Union with English MPs acting as the
    English Parliament. NB : England alone, not combined with Wales.

    3. No Country within the Union will bale out any other if they overspend.

    4. The disgusting discrimination against English students in Scotland has to stop
    immediately. Either all UK students pay fees in Scotland or none pay fees.

    Nothing less will be acceptable.

  36. Martin
    January 31, 2014

    Can I ask a similar question who stands behind Santander a Spanish bank that is big on the high street? The Spanish government, ECB, BofE, UK government? A similar question can be asked of HSBC (Honk Kong SAR, Mainland China etc).

  37. Steve Cox
    January 31, 2014

    I found Mr. Carney’s comments on the size of the banking sector to be interesting. I can’t recall the exact numbers and can’t find the article, but it said that the UK’s banking sector has liabilities equivalent to around 4 or 5 times its GDP, which we already know to our enormous cost is a dangerously high level, but that an independent Scotland would have a banking sector around 12 or 13 times the size of its GDP. That would be sheer madness would it not, and utterly unsustainable? One small glitch that the UK could have accommodated and Scotland would be bankrupt.

    On top of that, the bulk of the deposits in RBS and HBOS belong to non-Scottish savers. In the event of independence, or even a serious threat that the vote may go that way, would they be happy to leave their money in ‘foreign’ banks, or would they want to bring it home to English ones? I suspect that many people would want to take the latter route, and in short order both RBS and HBOS will be facing a serious run unless the UK government (i.e. taxpayer) was to step in with yet more massive financial support. All I see is a recipe for disaster.

    And what happens to all those non-Scottish savers who have Sterling pension funds in Scottish institutions such as Standard Life and Scottish Widows? Surely before any break-up is allowed the British government must take serious measures to protect people in that position?

    1. Steve Cox
      January 31, 2014

      One other point I wish to make, and that is that in the event of Scottish independence the rest of the UK would be left with a banking sector that is much smaller relative to its GDP than is currently the situation. that would mean less risk to the economy as a whole, while because the bulk of their operations would still have to be based south of the border most of the benefits of well-paid employment would remain where they are today. In other words, the kind Scottish taxpayer shoulders much of the risk assumed today by the far more numerous non-Scottish taxpayers, but gets few of the rewards. That sounds positive from a southern viewpoint, but also completely untenable in the long term.

  38. Ron Sturrock
    February 1, 2014

    Scenario, Scotland votes yes and makes formal application for a currency union.

    Can the government
    (a) immediately reject the proposal without recourse to Parliament, or
    (b) would it have to be discussed in the chamber leading to a vote pending reports from the treasury, BoE etc?
    (c) how long would you estimate it would take to have a definitive answer?

    Reply The government could indeed tell Scotland it could not join the currency union, but such a statement could be challenged in Parliament and would only be upheld if the government had a majority for their view.

    1. Monty
      February 1, 2014

      Response to John’s reply:

      “…but such a statement could be challenged in Parliament and would only be upheld if the government had a majority…”

      Would the Scottish MPs be barred from participating in that parliamentary vote? In fact, what would their status be post referendum?

      Reply The same as before until changed by them or by Parliament.

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