Currency in Scotland after 2014

Debate between Ian Murray and Graeme Morrice

Wednesday 12th February 2014 Westminster Hall

[Ian Murray (Edinburgh South) (Lab)]

It is a great pleasure to serve under your chairmanship for the first time, Mrs Riordan, for a very important debate. Over the past couple of weeks, we have seen a watershed in the referendum debate in Scotland. The Governor of the Bank of England’s non-partisan and technical intervention on the currency has been critical in debunking the false assertions that the Scottish National party has been peddling about keeping and using the pound. I will come back to those revelations later and to some of the latest news on that issue.

We can sum up the Governor’s intervention by reflecting on a quote from renowned economist Keynes:

“He who controls the currency controls the country”.

And which eminent economist said that a country without its own currency is a country not only without a steering wheel, but also without brakes? No, it was not Keynes, Adam Smith, or even Marx, but the lesser-known SNP Education Secretary, Mike Russell. There is little doubt that the Governor was saying exactly that when he stated:

“It is no coincidence that effective currency unions tend to have centralised fiscal authorities whose spending is a sizeable share of GDP.”

He went on to say:

“In short, a durable, successful currency union requires some ceding of national sovereignty.”

The central message of the Governor’s speech, of course, was that currency union requires fiscal, economic and political union to avoid financial crisis.

[Graeme Morrice (Livingston) (Lab)]

I congratulate my hon. Friend on securing this important debate. As he will know, the Select Committee on Scottish Affairs, of which I am a member, has conducted an inquiry into the consequences of Scottish separatism. Last week, we were taking evidence from a number of eminent academics. One in particular, Professor MacDonald of the university of Glasgow, who is an expert in economics, said, in the context of price shocks regarding Scottish oil production:

“If you had a separate currency, your exchange rate would take up the adjustment, but, of course, if you are part of a monetary union, you won’t have that…That, for me, is one of the key deciding issues as to why, whatever we want to call it, a currency union or a monetary union would not work.”

Does my hon. Friend agree with that assessment?

[Ian Murray]

I do, and I think that is the assessment that many economists, academics and politicians have been making over the past few weeks. The Governor of the Bank of England made the very same assessment, and the Scottish Affairs Committee deserves great credit for the amount of work they are putting in on the issue.

Let me go back to the central message of the Governor’s speech. He said that currency union requires fiscal, economic and political union to avoid financial crisis. It is precisely that fiscal, economic and political union that the SNP seeks to dismantle with its obsession with independence. When the First Minister met the Governor of the Bank of England a few weeks ago, there was one person in that room who would control Scotland’s fiscal, monetary and spending policies in a currency union after independence, and it was not the First Minister.

A key test that the Governor set for any currency union is that a centralised fiscal authority would need to control about 25% of that fiscal union’s GDP. That is about 50% of the spending in Scotland. The SNP immediately responded by saying that they would have 100% control over taxes and spending in an independent Scotland, so by default, it is the SNP that has ruled out a currency union by completely ignoring the central warning of the Governor’s full analysis.

We do not have to look too far back into history to see that the Governor was correct. The euro created sovereign debt crises, financial fragmentation and large divergences in economic performance. That clearly illustrates the risks and challenges of creating and maintaining a formal currency union across different states with differing economies.

BBC Funding (CSR)

Debate between Ian Murray and Graeme Morrice

Wednesday 10th November 2010 Commons Chamber

[Ian Murray]

I think the BBC has a lot to learn on those principles. However, I will talk shortly about what the Government have done by not including licence fee payers in the comprehensive spending review and the future of the BBC.

The BBC is a globally respected brand, which is why the House should be concerned for its future, and it has been described as a national treasure, which is why Labour Members will always stand up for it as a friend, although a critical friend. I must state clearly at the outset that the BBC should not be immune from reform or cuts at a time when we are all supposed to be in this together, but that reform process has to be done through negotiation and with respect for what the BBC delivers and the people—its staff—who deliver the service on behalf of us all.

The outcome for the BBC from the CSR has shown contempt for the corporation, and the opportunity has been lost truly to change the organisation in the context of a new digital age, changing and fast-moving markets and, significantly, shrinking budgets across the sector in programme making.

The BBC also has a responsibility to consolidate its own activities within the continual pursuit of excellence alongside an honest examination of the role of both the BBC and, more importantly, public sector broadcasting. The final settlement for the BBC through the comprehensive spending review is yet another example of the Government’s undue haste. We have seen that with the dangerous too-deep, too-soon, too-quick cuts that will harm jobs, harm growth and threaten the already fragile UK economy.

The CSR deal for the BBC was put together in 72 hours. It was a dubious deal, with Ministers embarking on a strategy to intimidate the BBC into accepting whatever came its way. Why? Because the outrageous proposal that the BBC take responsibility for free TV licences for the over-75s hung over it like a guillotine. What would be next? The licence fee paying for the winter fuel allowance, child benefit or perhaps even the Prime Minister’s new personal photographer?

That threat ensured that the BBC would grab the deal given to it through the CSR quickly and with both hands. Let us look at the settlement it was given. It includes a freeze in the licence fee for the remainder of the charter period and the BBC taking on funding for the BBC World Service, BBC Monitoring and the Welsh language channel S4C. In addition, the BBC will be supporting the Secretary of State’s pet project, the new City TV, through a £25 million ring-fenced partnership fund. It will also be given responsibility for delivering broadband services. All in all, there is a £340 million bill alongside a 16% real-terms reduction in licence fee income over the period.

This “delicious” deal, as the Prime Minister described it, was so hastily contrived that it prevented proper consultation and debate with licence payers, stakeholders and, most importantly, BBC staff themselves to the extent that we are left with no real way of knowing the true impact on the BBC. Will it affect the quality of programming? Will it mean the BBC stopping services? Will it mean significant job cuts? Will it damage the independence of the BBC and the BBC World Service? Will the board of S4C take the Government to court, due to it not being consulted about its funding being transferred to the BBC?

Conversely, this rushed deal has also restricted the opportunity to keep the pressure on the BBC to continue on its programme of reform in terms of bureaucracy and excessive executive pay.

[Graeme Morrice (Livingston) (Lab)]

I am grateful to my hon. Friend for giving way. Has he, like me, received many representations from constituents arguing against any freezing of, or indeed cuts in, the licence fee and supporting its retention so that a quality service can continue to be provided by the BBC?

[Ian Murray]

I welcome the intervention from my hon. Friend, who raises an important point. Many Members, I am sure, will have received dozens, if not hundreds, of e-mails, letters and telephone calls from people who are concerned about the BBC, cuts to it and what it delivers. Constituents have raised that point with me on numerous occasions.

To go back to the missed opportunity, the BBC was entering into a new culture of transparency and accountability—a programme that was, on its own measurement, to save £2 billion by 2014. I want to ask the Minister some questions about the future of the BBC. Is this deal on top of the BBC’s current strategy to save £2 billion by 2014? What criteria will be applied to where the cuts will fall? Will there be job losses and a reduction in quality? What impact will the cuts have on the move to the media city in Salford and the programming being transferred to the regions—50% by 2016, I think? Who is now responsible for the roll-out of broadband—the Department for Culture, Media and Sport, the Department for Business, Innovation and Skills or indeed the BBC? What will the future hold for the BBC World Service? What budget protection will the World Service have? Will that critical service have to compete with other parts of the BBC budget in due course?