Scottish independence: 5 reasons a currency union wouldn't work
13 May 2014 03:04 PM
Experts warn that a
currency union between an independent Scotland and the rest of the UK would be
impossible.
Recently the British Chambers of Commerce published a
survey showing the vast majority of businesses want Scotland to remain
part of the UK, and only 35 per cent believe a formal currency union would
work.
Meanwhile the National Institute for Economic and Social
Research released a
report also saying a currency union would not work.
Here are 5 reasons why not.
1.
Size of the economies
The
difference in size between the economies of Scotland and the rest of the UK
makes it a completely one-sided deal. The economy of the continuing UK would be
10 times the size of the Scottish economy after independence. So while
UK’s taxpayers might have to bail out the Scottish Government, the
reverse would not be remotely possible.
2.
Size of the banking sectors
Because the banking sector is proportionally so much
bigger in Scotland than in the rest of the UK, the financial sector risks
between Scotland and the rest of the UK are hugely imbalanced. This means that
a currency union could only work alongside a banking union, yet there are no
workable proposals as to how such a banking union would work.
3.
Banking union needs fiscal union
A
banking union would not work without a fiscal union. And with a fiscal union an
independent Scotland wouldn’t be able to decide for itself how to raise
and spend money.
4.
No guarantees about the future
Currency unions never work without cast-iron assurances
that they are forever. But the Scottish Government white paper on independence
says it would “be open to people in Scotland to choose a different
arrangement in the future”.
5.
Scotland would be out of control
A
currency union would mean Scotland couldn’t set its own interest rates,
tax and spending levels. Whereas if Scotland was to embark on becoming an
independent country it would want all the control it could get over its own
future.