Why does George Osborne think he’ll get to dictate Scottish currency?

This is genuinely confusing.

Scotland, right now, is part of the United Kingdom. If after autumn 2014 Scots vote for devomax or status quo, Scotland will still be a part of the United Kingdom. As part of the United Kingdom, Scotland uses the same currency as England, Wales, and Northern Ireland, but different banknotes – under licence from the Treasury, the Bank of Scotland, the Royal Bank of Scotland, and the Clydesdale Bank, and four banks in Northern Ireland, get to print banknotes.

If Scotland votes for independence, then among many other decisions that will have to be made, will be about the currency. There seems no reason why we wouldn’t go on using Scottish pound notes and decimal currency, the familiar patterns of £2, £1, 50p, 20p, and even the newstyle thatchers and majors for 10p and 5p: whether the pre-independence coins and banknotes will be honoured or if we’ll all have to trade in our cash in hand for newly-minted Scottish notes and coins – that’ll be all part of the long complicated process of separating Scotland from the rest of the UK. And that’s just the visible part of the currency change – the rest of the banking and currency iceberg will be a lot larger. Scotland inherits 8% of the UK’s total debt. All of that will need to get worked out.

Sp what on earth does Osborne think he’s talking about when he says:

As politicians on both sides of the Border focused on the detail of the debate, Mr Osborne refused to confirm whether an independent Scotland would be allowed to continue to use the pound officially as its currency. In subsequent briefings, the Treasury confirmed that, while it could not block Scotland from using the currency, it could be reduced to a situation where it had no say in fiscal policy, was prevented from printing its own money and was locked out of any valuation decisions. Treasury officials confirmed this would mean Scottish banks, which are licensed by the Bank of England to print their own notes, would be barred from doing so in the event of independence.

This leader in the Financial Times doesn’t clarify things either. The presumption seems to be that Scotland has no alternative but to keep using English currency or to join the euro:

Mr Osborne refused to say whether the rest of the UK would agree to a currency union with an independent Scotland, telling ITV News: “All these issues are going to be fleshed out now and flushed out. The SNP is going to have to explain what its plans are for the currency of Scotland.”
The SNP’s longstanding support for an independent Scotland in the European Union has implied euro membership, which is a prerequisite for new EU members, subject to a referendum. Mr Osborne said last night that Scots would ask themselves “is that a currency you want to be joining at the moment?”

I really don’t get it – is there something obvious I’m missing, or are they? Just as the referendum should have three options – status quo, devomax, or independence – so an independent Scotland has three options – keep using Treasury sterling, establish Scottish pounds and pence, or join the euro. (And note: Scotland is not a new member of the EU.)

Why would Osborne think it was up to him to decide this? Does Malachi Malagrowther need to write some more letters?

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Filed under Currency, Economics, European politics, Scottish Politics

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