Monday, 17 February 2014

A Sterling Area the sensible option – for everyone

A currency union is the sensible option for all

A currency union is the sensible option for all - with Scotland and remaining UK continuing to use the £ within an agreed framework of shared input into cooperative financial supervision, and agreed fiscal rules.   

The right choice for Scotland and for the remaining UK

The proposals for a formal currency union came from internationally renowned economists including Sir James Mirrlees.  Sir James won the Nobel Prize for economics in 1996.  You can read the full proposals of Sir James and his colleagues in the Fiscal Commission’s First Report here.  On 13th February 2014 Sir James confirms in the Scotsman that a currency union is the right choice for Scotland AND for remaining UK.  

It is surely the most logical option

Sir James explains:  “Political debate will take place on the issue of a currency union. Technical discussions will continue.  A continuation of sterling in its present area, which would be a benefit for all parts of the UK, is surely the most logical option. Politics may cloud that view as the referendum approaches”.

And people across the UK agree

A poll from December 2013 shows that 71% of people in the rest of the UK supported a formal currency union after Scotland votes Yes.  The Scottish Social Attitudes Survey in 2013 found 79% of Scotland’s people thought Scotland should retain the pound after Yes.  

Why a currency union would be “a benefit for all parts of the UK”

  • A different currency would increase the costs for UK companies exporting to Scotland
The remaining part of the UK exports almost £60 billion of goods and services each year to Scotland. Even straightforward currency transaction costs would take £500 million per year from businesses in England and endanger thousands of jobs.
  • Maintaining a ‘level playing field’
Businesses on either side of the border will compete on a level playing field as neither will benefit from gaining an artificial advantage from currency devaluation.  
  • Price transparency helps competition – lowering prices and boosting productivity in both countries
Consumers are better placed to compare similar goods on both sides of the border, boosting competition and choice
  • Both Treasuries will benefit from keeping trade easier and cost free
Because it’s good for the economy, currency union is also good for BOTH treasuries
  • Shared Sterling supports an integrated labour market across the Sterling Area
Using the same currency eases movement throughout – for workers and indeed tourists and other visitors.
  • Oil and gas make a massive £30 billion contribution to the Sterling balance of payments.

We can use the £ anyway

And what some fail to remember is that Scotland cannot be stopped from using the £ anyway.  As a fully tradable currency we don’t need George Osborne’s permission to carry on using it.  However, as explained above, the currency union has added advantages of shared input into cooperative financial supervision, and agreed fiscal rules.   

Has Osborne even read the Fiscal Commission Report?

As we know, the Bank of England has been in technical discussions with the Scottish Government as it draws up its proposals.  The UK Treasury has refused to take part in any such discussions – no wonder parts of his speech suggest that Mr Osborne hasn’t even read the Fiscal Commission proposals.  

And his analysis in some areas is factually wrong – for example, the contribution of Scotland’s financial services to our national wealth is grossly overstated by the chancellor. It’s actually not significantly different to the UK.

Issues such as financial stability, lender of last resort facilities, deposit protection schemes and fiscal sustainability have all been addressed in the Fiscal Commission proposals.  In short, everything that Osborne has queried has already been addressed.  

Why we know Osborne’s doing this for political reasons alone

A currency union works for all, and is wanted by all.  That’s why we know Osborne’s doing this for political reasons alone.  

Former Labour First Minister Henry McLeish has called Osborne’s bluff and said Scots "shouldn't be fooled" by the suggestion that a currency union could not be worked out.  
He told BBC Scotland: "This is entirely political and of course consistent with the unionist campaign. This is negative, it is about spreading fears and scare stories.  What we require from the unionist parties is a bit of statesmanship and quite frankly their behaviour so far falls well short of that."