Currency in Scotland after 2014

Mark Lazarowicz Excerpts

Wednesday 12th February 2014 Westminster Hall

[Ian Murray]

My hon. Friend makes that point rather well. Let me go on to talk about something that has been mentioned already. Scotland’s relationship with the rest of the United Kingdom, in terms of having a currency union in the way that the SNP envisages, would be exactly the same relationship as the Greek Government currently have with Germany, but it is not just an issue for Scotland.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

rose—

[Mel Stride (Central Devon) (Con)]

rose—

--- Later in debate ---

[Ian Murray]

I could not have put it better myself. I look back to 2008, when hundreds of billions of pounds were poured into Scottish banks to keep the economy afloat, and to keep my constituents, many thousands of whom work in such banks in Edinburgh, in jobs. Without such action, the whole financial structure would have collapsed.

[Mark Lazarowicz]

Will my hon. Friend give way?

[Ian Murray]

I will give way one last time.

[Mark Lazarowicz]

I see that the Scottish Government’s White Paper on independence asked the question:

“What about bank bail-outs if there is another financial crisis?”

The Scottish Government responded:

“If in the future wider support from governments is required to stabilise the financial system, this would be coordinated through the governance arrangements agreed between the governments of the Sterling Area.”

In other words, they would have to rely on negotiations with the rest of the UK Government. Contrast that with the situation in the recent financial crisis when, as part of the UK, the Scottish banks were able to call on the resources of the UK.

[Ian Murray]

That is precisely the argument about pooling and sharing, and it is why the UK is such a powerful political, social and economic union. The larger and more stable economy of the UK can deal with such shocks.

Experts such as Professor MacDonald and Professor Armstrong are clear that defaulting on debt would be a reckless move with negative consequences for the people of Scotland for many years to come. That threat shows that the SNP accepts that Scotland cannot keep the pound if it leaves the UK. Defaulting on our debts as a nation has the same impact as if someone defaults on their debts as an individual, and I have already mentioned what happens if someone does not pay their bills. Our credit rating would be terrible, and we would have to pay more for absolutely everything, which would be a disaster for ordinary individuals and families up and down Scotland. Any Scot who borrows money or who has a mortgage, a credit card or catalogue payments will have to pay more. That is not scaremongering, but basic economics.

The SNP has said in its fantasy White Paper that Scotland would have to rely on the rest of the UK to collect our taxes and to pay our pensions and benefits for many years after independence until it sorted out its own systems. The SNP cannot threaten to dump the debt one minute and ask to share everything else the next. That is a recipe for crisis and disaster. How would those UK institutional systems work with a separate currency? Can the Minister tell us whether the systems used by the Department for Work and Pensions and Her Majesty’s Revenue and Customs are capable of working in a currency other than sterling? I doubt it. The White Paper is underpinned by and predicated on the pound. Perhaps it will turn into an actual white paper when it has been so heavily Tipp-exed that it contains nothing but Tipp-ex.

Scots have an international reputation for being prudent and thrifty. To default on its debts would irreparably damage Scotland. Even to threaten to default on debts has significant consequences for interest rates, borrowing and international reputation, which the National Institute of Economic and Social Research put at a minimum of 1.5%.