Currency in Scotland after 2014

Iain McKenzie Excerpts

Wednesday 12th February 2014 Westminster Hall

[Mr Iain McKenzie (Inverclyde) (Lab)]

It is a pleasure to serve under your chairmanship today, Mrs Riordan. I congratulate my hon. Friend the Member for Edinburgh South (Ian Murray) on securing this important debate. The choice of which currency to use is perhaps the single most important economic decision a country can take. That is why Scotland is asking, as we close in on the independence referendum in September, why the yes campaign does not seem to know what currency it wants. We hear that the SNP wants and favours a currency union with the rest of the UK, keeping the pound. However, the other members of the yes campaign want either the euro or a new currency altogether. This leaves us in Scotland very confused and worried. What currency does the yes campaign want for Scotland?

The people of Scotland want a straight answer about the currency from those who support separation, with a guarantee of which currency we would use if a yes vote should transpire in September. But today all we have on currency from the nationalists is a wish list at best, wrapped up and qualified with ifs, buts and maybes. We now know that keeping the pound in a currency union would require the agreement of the rest of the UK; but what if agreement could not be reached on that? What is plan B? Even if a separate Scotland wanted to continue to use the pound, and agreement was reached with the rest of the UK, it would mean that there was no control over our interest rates and how much Scotland could tax and spend. I do not believe that even the nationalists would accept that as independence.

[Mr Nigel Dodds (Belfast North) (DsUP)]

Is not the bottom line the fact that there is a fundamental contradiction at the heart of the yes campaign—that on one hand the SNP and the yes campaign want national sovereignty to be transferred to Edinburgh, but on the other hand they want to give it away almost immediately in a currency union?

[Mr McKenzie]

The right hon. Gentleman makes the point clearly and we have been highlighting that throughout the debate on Scotland’s future.

If Scotland carried on using the pound regardless, we would have no control over our economy and we could lose our central bank, which acts as the lender of last resort. The nationalists are now suggesting that Scotland should default if they do not get their way on a currency union; the Deputy First Minister has said that Scotland might not take its share of national debt if it is not agreed. That is wildly irresponsible and would jeopardise an independent Scotland’s creditworthiness. The people of Scotland have every right to worry about the future of the money in their pocket, when they hear bullying threats, such as the threat of reneging on our share of the debt. What tone would that bring to other negotiations about separation? It is hardly the way to make friends and impress people.

[David Mowat]

The hon. Gentleman is right to say that the Scottish Government cannot default on the debt, but can only refuse in the negotiation to take their share; the debt is already underwritten by the UK Treasury. What I do not understand about that position is that all the cash collection systems operating in the UK—Her Majesty’s Revenue and Customs, benefit systems and all the rest—will continue to be operated centrally. It is a mess.

[Mr McKenzie]

The hon. Gentleman makes some good points; but the main thing is that the Scottish Government believe they can do anything they want.

Losing the pound would mean a higher cost of living, with higher mortgage repayments, higher credit card and store card bills and more costly loans, because Scotland would start out as a separate state with no credit rating. There would also be an unnecessary threat to jobs: what would the exchange rate be? The cost of changing money every time Scottish firms were to buy from or sell to our biggest customer—the rest of the United Kingdom—would be an issue. There would be deeper cuts or higher taxes as the Scottish Government paid more to borrow money, leading to more debt and lower public spending. There would be risks to benefits and pensions as payments were converted into a different currency. Many people worry about what currency they will be paid in and what their savings will be worth.

There would also be risks to the economy. Without the back-up of the rest of the UK following the world banking crisis, Scottish banks would have gone under and families and businesses would have lost everything. Let us remember that billions were pumped into our banks following the world banking crisis. In my constituency alone, more than 400 jobs were saved. Time is running out for those who want a separate Scotland to give an answer and provide an assurance on currency. The Scottish people cannot be expected to go on any longer with “Don’t worry—it will be all right on the night.” It is not scaremongering to want a direct answer from the nationalists, incorporating a guarantee on currency in Scotland after 2014.

[Jim Shannon (Strangford) (DUP)]

Members representing constituencies in Northern Ireland, which borders another country with a different currency, can attest to the difficulties with prices and services. Does the hon. Gentleman agree that retention of the pound sterling is essential for the continuation of trade, but also for the continuation of the United Kingdom of Great Britain and Northern Ireland?

[Mr McKenzie]

I fully agree. What is scary is the attitude of the nationalists and the yes campaign—an attitude of casually and arrogantly waving off any challenge to their supposed plans. Those plans do not stand up to scrutiny—as we find now on the matter of currency; they would deliver not so much independence as isolation.

The question to the nationalists is simple, but the options are limited. Can they deliver a currency union? All the indications are that the answer is no. Will they go it alone and just use the pound, with the result that they will have no control over the economy? Will they go for a new currency, and will that be pegged or floating? The Scottish nationalists are keen to get closer to the Nordic regions, nations of a comparable size; they always cite Norway, Finland and Sweden, or anywhere in that supposed arc of success, as it fluctuates. In the past 10 years, Norway’s currency, which was pegged against the euro, has fluctuated, and there has been a high degree of movement, and cost implications, as a result. Alternatively, will the nationalists adopt the euro—if and when Scotland can gain entry to the EU?

Those questions are as yet unanswered. Scotland needs to know from the yes campaign what currency—guaranteed—would be used after 2014. We who want to remain part of the UK can guarantee Scotland’s currency after 2014; it will be the pound, and all that is necessary for that to happen is to vote no in September.