Currency Economics of Independence

No economic or moral grounds for rejection of currency union


1) The UK Treasury’s rationale for rejecting currency union has been torn apart by one of the world’s leading economists (and one without an axe to grind).

2) There are no moral and ethical grounds for denying the people of Scotland access to their own currency.

Pressure is mounting on the Chancellor George Osborne MP to admit his assertions against a currency union following a Yes vote are based more on political posturing than sound economics.

Professor Leslie Young, Beijing

Professor Leslie Young, Beijing

Leading Scottish businessman and philanthropist Sir Tom Hunter has commissioned research into the Chancellor’s stated reasons for “rejecting” the currency union suggested by the independent Fiscal Commission Working Group, which includes leading finance and economic thinkers and two Nobel laureate economists.

The work was carried out by Professor Leslie Young of the Cheung Kong Graduate School of Business in Beijing. Young has served  a record breaking four terms on the editorial board of the American Economic Review and his library of work is praised by the Chairman of the Nobel Committee.

This latest analysis included the following statements:

  • The UK Government was relying on a “lurid collage of fact, conjecture and fantasy” in making its argument.
  • The evidence cited by Permanent Secretary to the Treasury Sir Nicholas MacPherson used by the UK government to justify its decision on a currency union is fundamentally flawed.
  • Its claim that Scotland’s financial system is “far too big”, and would therefore expose UK taxpayers to heavy burdens, is unsubstantiated.
  • Its claim that the likely misalignment of the fiscal policies of the UK and an independent Scotland would put “intolerable pressure” on the currency union is evasive — and unsubstantiated.
  • Currency union would not bring on the tensions that drove the Eurozone crisis. Were a financial crisis to arise, the two governments and the central bank could quickly agree to head off any downward economic spiral with decisive action, given their shared values and culture, virtually identical business, financial and fiscal systems, and the familiarity, goodwill and respect that obtain between their electorates.
  • The Treasury claims are invalidated, not by errors of fact, but by errors of logic. These errors are subtle and difficult to disentangle. But only subtle logical error could have led Treasury to claim, in effect, that past risky behaviour by investment bankers in London, inadequately supervised by the Bank of England, somehow disqualifies an independent Scotland to be a currency union partner of England.

When asked on BBC Radio Scotland’s GMS program, Monday 24 March, if he was concerned about potential difficulties that may arise in light of UK Treasury claims that fiscal policy between Scotland and rUK would become increasingly misaligned in the medium term, Professor Leslie Young denied it would create difficulties. He said:

“The basic reason is that they’re building on what the current Scottish Government is doing. A future Scottish Government that is independent would be accountable to the international bond markets and so the international bond markets would swiftly analyse any unrealistic plans and that would be the constraint on the Scottish Government.

“It wouldn’t be any attack on the UK Government that would constrain the union, it would be international bond markets that would give the constraint.”

He went on to say what was being put forward was an entirely false argument.

When asked if he believed the No supporting parties had closed the door on a currency union Professor Young said,

“The basis of them saying that is the Treasury letter which I have gone through paragraph by paragraph and rebutted every argument”.

Missing Considerations

Young criticises the advice for refusing to consider the impact on the rest of the UK (rUK) should a currency union not be continued. At no point does he suggest any fiscal rules for a currency union imply specific limits to individual tax rates.

The Moral and Ethical Position.

The Vienna Convention on Succession of States in respect of State Property, Achieves and Debts (1983) sets out a guiding principle in Article 40 that says both countries should take on a fair share of the assets and of the liabilities.  The ability to trade in Sterling both internationally and within the UK common market following Scottish independence is undoubtedly an asset to companies trading both internationally and between the nations of the UK and one the Westminster Government does not have a moral right to deny the Scottish people or Scottish business.

The strength and reputation of Sterling has been built up over generations,  largely supported by Scottish exports, manufacturing and heavy engineering in the past and now by oil and food and drink exports.

The over-performance of the Scottish economy in terms of tax per head has helped keep Sterling afloat. Previous Business for Scotland research has proven the people of Scotland have subsidised debt generated in the rest of the UK to around £72 thousand million pounds.

Sterling is not only an asset that belongs to Scotland as much as to anyone in any other part of the UK, but without Scotland’s contribution to the strength of Sterling since the 1970s the currency would have been in trouble long ago.

To attempt to justify the denial of the right of the Scottish people to a share in the assets of the UK including its currency Westminster would have to argue that Scotland had no part in building the value of those assets.  The arguments are not just economics based;  the descendants and relatives of the hundreds of thousands of Scots who fought, and all too often died,  in two word wars have a right to the assets of the country we have built up for generations.

The pound sterling is Scotland’s currency as much as it is anyone else’s and that does not change just because Westminster says so.  The very idea that the people of Scotland don’t have the right to access their own currency demonstrates graphically that Westminster does not have Scotland’s interests at heart.

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About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.


  • This article needs to be cut and pasted onto all the BT websites and media sites, it is clear and easy to understand unlike the drivel that the Scotsman, Telegraph and BBC publish.
    Excellent article thankyou.

  • I really don’t understand this argument about the currency. By law, the currency of the United Kingdom is the pound which has been developed and used by those countries in the political union of the UK. If one country leaves that union then surely they relinquish the right to have any control over that currency. Otherwise surely using your argument then the UK has a right to a more proportionate share of North Sea oil as it was the UK that put in the the investment and the research and development to get those fields operational. Why do we have to relinquish our share of that if we are still in essence underpinning the Scottish Economy.

  • Professor Young’s paper gives some important warnings which should not be ignored: Here are some direct quotes from the paper:
    “The current Scottish Government has every incentive to paint a rosy picture and to dangle fiscal carrots before Scots deciding whether to vote for independence. The Scottish government statement on currency union reveals naive economics and / or disingenuous politics. First Minister Alex Salmond has been thrown on the defensive by the question – what is your plan B? He has a duty to Scotland’s citizens to answer that question in detail. The Scottish government was presumably trying to maximise the yes vote by trying to straddle two positions – that an independent Scotland would enjoy the stability of a currency union yet keep open the possibility of exiting it later. It was right and proper for the Treasury to point out that these two positions cannot really be straddled, for successful currency unions are based on the near universal belief that they are irreversible”.

    “if contrary to Treasury advice, RUK accepted a currency union with a tight banking union and tight fiscal rules, then Scottish registered banks might vanish altogether”.

  • Big thanks to Business for Scotland. To those of us who are economic illiterates (that would be me), you’re a breath of fresh air when it comes to unravelling the mysteries of the business world. Translating business speak is an essential task right now. It really takes the fear out of suits on telly and newsprint.

    Great article and most importantly, easy to understand.

  • Mr. MacIntyre-Kemp,

    Great article and one that needs to be better publicised to the wider audience in Scotland to nullify Project Fear and the prats who espouse the untruths and also to show the Scottish people that financially, we can be sound, stable nation and a society whose aim is, with all the people’s input, to be so much better after September 2014.

    Kind regards,


  • […] Summary 1) The UK Treasury's rationale for rejecting currency union has been torn apart by one of the world’s leading economists (and one without an axe to grind). 2) There are no moral and ethical grounds for denying the people of Scotland access to their own currency. Pressure is mounting on the  […]

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