Stewart Hosie
Main Page: Stewart Hosie (Scottish National Party - Dundee East)Department Debates - View all Stewart Hosie's debates with the HM Treasury
(10 years, 10 months ago)
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Stewart Hosie (Dundee East) (SNP)
It is slightly disappointing that we cannot have a longer, more detailed debate on this issue. There is a great deal to say to answer the points that have been raised.
I congratulate the hon. Member for Edinburgh South (Ian Murray) on securing this debate, although from what we have heard so far, it is less of a debate on currency and more of a quick canter through some of the no campaign’s scaremongering. I would like to address one or two of the points that he made. He suggested that the Scottish economy would be run on ginger bottles—that is, old lemonade bottles. What a patronising and insulting way to look at a modern, productive economy.
Stewart Hosie
No. I have only five minutes.
The hon. Member for Edinburgh South suggested that so much money had been put into Scottish banks. I draw his attention to chapter 1, paragraph 1 of the report by the Parliamentary Commission on Banking Standards. The cash cost at peak is reported to be £133 billion—that was £47 billion to Royal Bank of Scotland in return for 82% of the stock, around £25 million into Lloyds, and smaller amounts to the Icelandic and other financial institutions. Where taxpayers are still on the hook is the near £50 billion owed to them from Northern Rock and Bradford and Bingley, which may be many things, but they are not Scottish banks. The notion that the argument was ever about Scottish banks bad, English banks good, must be knocked on the head.
The old chestnut about Scotland in a sterling currency zone being like Greece was also raised. Greece’s problem had nothing to do with being in a currency union and everything to do with appalling productivity. As we know, Scottish productivity is nigh on identical to that of the rest of the UK. That would avoid such problems entirely.
Stewart Hosie
No. I do not have time.
The hon. Member for Edinburgh South rightly and understandably prayed in aid Dr Carney’s recent speech, which he said did not pass judgment on the relative merits of the different currency options for Scotland, but instead drew attention to the key issues. However, Dr Carney did point out that any arrangement would be negotiated and that the Bank of England would implement whatever monetary arrangements were put in place. That is to be welcomed, not just by me, but by the 71% of people in the rest of the UK who support the continued use of sterling after Scottish independence. The same proportion—71%—of Labour voters in Scotland also support the continued use of sterling after independence.
The hon. Member for Edinburgh South and the no campaign seem to fail to understand what Scotland brings to the table. Of course we recognise the constraints—I will come on to them—but we bring export revenue receipted in sterling. The impact on the sterling balance of trade would be immediate and significant were Scotland somehow—impossibly—forced not to be able to use sterling. The same applies to trade—the rest of the UK sells £60 billion into Scotland. If we were forced to use a foreign currency and transaction costs were applied, that would imply a catastrophic loss to English businesses: additional costs that the no campaign never mentioned.
Let us put the matter into context. In 2012, the rest of the UK sold into Scotland more than it did into Brazil, South Africa, Turkey, Russia, India, South Korea, China, and Japan combined, yet we hear from the no campaign that they do not want us to use sterling, even though that is impossible, which would imply massive transaction costs and the loss of jobs in the rest of the UK. I am sure that is not something they intend to do.
Stewart Hosie
No, I do not have time. So where would independence while keeping sterling leave us? It would not imply a foreign currency controlling our economy, because the central bank does not control the economy. It works to a single 2% inflation target, which we think is sensible.
Stewart Hosie
No, I do not have time. It would effectively leave us in Scotland in the same place as the rest of the UK, accepting the discipline of an independent Monetary Policy Committee, while leaving Scotland, along with the rest of the UK, in complete control of the rest of its social and economic levers. We would have parity.
Stewart Hosie
I do not have time. I have barely a few seconds left. I do not even have time to comment on the Chancellor’s supposed intervention tomorrow. However, if a Tory toff Chancellor goes to Scotland to bully and to scaremonger, it will be looked on very badly indeed by the Scottish people.
Cathy Jamieson
Again, my hon. Friend makes an important point. Perhaps the Minister will shed light on whether there has been any discussion on these issues. The SNP’s current argument seems to be that, in an independent Scotland, it will not take any of the difficult decisions that go along with that. It is not entirely clear yet what will happen to all the benefits and pensions arrangements, and all the rest of it, for some time into the distance. The idea that it will be all right on the night is simply not good enough, as was said earlier.
People have lined up to criticise the SNP’s scenario, including Brian Quinn, former executive director of the Bank of England, Owen Kelly of Scottish Financial Enterprise, Iain McMillan, director of CBI Scotland, the chair of political economy at the university of Glasgow, and the chief European financial economist, who is from a key financial institution. All those people—I do not have time to quote them—have criticised it.
I was told, although I did not hear it personally and will look closely at the transcript, that the Deputy First Minister implied, on “Good Morning Scotland”, that if an independent Scotland did not get its own way on the currency union, it would simply default or walk away from a debt. My hon. Friend the Member for North Ayrshire and Arran said that she never thought that she would see a referendum in her lifetime. In all the years I was in the Scottish Parliament, during some of which time I served as a Minister, I never thought I would hear a Deputy First Minister of Scotland shirk responsibility and say that they would walk away from a debt and put Scotland’s economy at risk. I hope that that report from this morning is not entirely accurate. If it is, I hope that the Deputy First Minister now regrets those remarks and looks again at them.
Stewart Hosie
One of the few who is fair. In relation to the assertion that the hon. Lady and many of her colleagues have made about the Deputy First Minister—who, of course, cannot defend herself here—I am sure that the hon. Lady would agree that, if we are talking about negotiating a share of assets, which includes the central bank, we need to talk about negotiating a share of the liabilities, so we can take our responsibility for them. The UK Government and their allies cannot have it both ways. They cannot expect Scotland to take on a share of the liabilities while refusing even to negotiate on a share of the assets. Surely, as a reasonable person, the hon. Lady would agree that that makes no sense.
Cathy Jamieson
I have listened closely to what the hon. Gentleman says. Again, I gently suggest that if it is so important to have those parts of the United Kingdom that the SNP seems to want to retain, why on earth are we looking to break it up in the first place? Why are the Scottish Government and the Scottish Parliament not spending more time looking after the issues for which they have responsibility? Only at the weekend, there were reports about what was happening in the health service in Scotland; about the justice system—we have a proud record of a different legal system in Scotland—being dismantled, bit by bit, by the Scottish Government; and about a range of issues to do with social justice that are simply not being tackled by that Government. It would be better for the hon. Gentleman to reflect on that.
We have had an important debate. There has not been enough time, perhaps, to consider all the issues in detail, as we would have liked. I am sure that there will be further opportunities to do so. I wish to hear what the Minister has to say on this occasion; I am sure that I am more likely to agree with some of it than on other occasions, when I would be looking to put him under the kind of scrutiny that the hon. Member for Dundee East should be under today.
Sajid Javid
That goes to show that the SNP is not interested in a serious debate on one of the most important issues facing the Scottish and British people. That speaks for itself.
The Government have consistently stated throughout the debate that the current economic arrangement—one currency in one United Kingdom—is in the best interest of everyone. We have also consistently stated that it is highly unlikely that a currency union between an independent Scotland and a continuing UK could be made to work. I will use the remaining time to remind hon. Members of our analysis, which explains why that is the case.
First, the lessons of the eurozone crisis are there for us to see. Currency unions do not work without close political and fiscal integration. As a result of the crisis, those countries that use the euro are moving towards ever greater integration to address the challenges that they face. Scottish independence, though, is all about disintegration and would inevitably mean that the continuing UK and Scotland move further apart. The Scottish Government’s proposal for a currency union without fiscal or political integration lacks any credibility and makes one wonder whether the Scottish Government actually understand what the word “independence” means.
Secondly, we know that the economies of an independent Scotland and a continuing UK would be very different and would diverge over time as a result of different laws, different regulations and different industries. One industry that we know would be important for Scotland is North sea oil. A significant portion of an independent Scotland’s economy would depend on oil revenues. Were a change in oil price to affect the two countries differently, a one-size monetary policy with one currency for two separate nations would simply not be suitable.
Thirdly, despite the Scottish Government’s claim, we do not believe that a currency union would be in the interest of an independent Scotland. Such a union would inevitably constrain Scotland’s own economic policies because the remaining UK, to manage the risks of the union, would need to set interest rates and maintain oversight of an independent Scotland’s tax and spending plans. Indeed, a currency union would also be likely to undermine an independent Scotland’s economic resilience and credibility. If, for example, the financial markets sensed that the Bank of England’s monetary policy did not suit Scottish circumstances, they might doubt Scotland’s commitment to the currency union, which would, in turn, lead to financial market speculation. In such circumstances, if markets were not calmed, there would be a very real possibility that Scotland would be forced to adopt its own currency in a time of crisis. One is reminded of the recent situation in Cyprus when there was plenty of talk of the country potentially leaving the euro. Members will know that that was prevented only after a huge bail out from other eurozone members, which came at a significant cost to Cypriots, many of whom lost up to 40% of their deposits in domestic banks.
Fourthly, just as a currency union is not in Scotland’s interest, it is hard to see how it could be in the interest of the remaining United Kingdom. Such a union would involve the remaining United Kingdom giving up an element of its economic sovereignty, as we have heard from many hon. Members today. The public would feel very strongly about that. It would increase the risk of having to bail out Scottish banks, and the idea of putting the remaining United Kingdom’s economy at risk because of another country’s banks just as we are getting our own banks in order would make no sense.
Before I come to an end, I will address some of the questions that have been raised. I listened carefully to the speech of the hon. Member for Dundee East (Stewart Hosie) and what he has to say on this issue is very important. I agree with the shadow Minister that he is an intelligent person who makes valuable contributions in the House, but from what I have heard today, he does not seem to want facts to get in the way of a good argument.
The hon. Gentleman and other hon. Members mentioned the banking bail outs of 2008. I remind him that the cost of recapitalising the Royal Bank of Scotland was £45 billion, which is the largest banking bail out the world has ever seen, plus an additional £275 billion of state support through guarantee and funding commitments. That sum is more than 200% of an independent Scotland’s GDP.
Stewart Hosie
Presumably, the Minister does not disagree with the Banking Commission that the total cash cost of the entire financial bail out of all the systems was £133 billion. Of the other figures that he talks about, £220 billion was made up of the asset protection scheme, which was a paid-for insurance guarantee. The scheme made the taxpayer a profit and was never called upon; it has since been shut down. Will the Minister confirm that that is correct?
Sajid Javid
Again, that is a good demonstration of how the hon. Gentleman would like to twist the facts. Just because a guarantee is not called upon does not mean that it has not done its job. The guarantee provided confidence and ensured that the banking system did not collapse. Our analysis shows that Scottish banks, even when we focus only on their assets in Scotland, would have assets equal to 10 times the GDP of an independent Scotland. That shows that it would be difficult for an independent Scotland to give depositors confidence in its domestic banking system.
The hon. Gentleman also mentioned trade between the UK and Scotland. The UK accounts for 70% of Scotland’s total trade, whereas Scotland accounts for 10% of the UK’s trade. Scottish trade is important to the UK economy, but it is not clear that it is important enough to risk recreating in the British isles the problems that we have seen in the euro area.
In conclusion, a fiscal and currency union pursued by two diverging nations would put significant limits on an independent Scotland’s economic freedom, and it would put an independent Scotland at severe risk of losing economic resilience and credibility. Such a union would undermine a continuing UK’s sovereignty and would increase the risk of bank bail outs. That is why we have consistently said that it is highly unlikely that a currency union would be agreed and that it is highly unlikely that a currency union could be made to work.