The Staggers

The New Statesman’s rolling politics blog

Osborne asks the right questions about Scotland's currency

How would Scotland combine monetary union with fiscal independence? Don't ask the SNP.

By George Eaton Published 07 September 2012 9:02

Chancellor George Osborne. Photograph: Getty Images.

Chancellor George Osborne addresses the CBI Scotland annual dinner in Glasgow. Photograph: Getty Images.

Fortunately, and contrary to some reports, George Osborne did not claim in his speech last night that Scotland would lose the pound if it became independent. It is not within the Chancellor's gift to determine what currency Alex Salmond's country uses - that power resides with the Bank of England. Nor would an independent Scotland be forced to join the euro, as is sometimes said. The UK, Denmark and Sweden have all remained in the EU despite retaining their own currencies.

What Osborne did point out (and rightly so) is that if the SNP wants a monetary union with the rest of the UK (Salmond having abandoned his promise to take Scotland into the euro) it becomes much harder for it to argue for fiscal and political independence. The existence of monetary union without complementary fiscal union being the principal cause of the eurozone imbroglio. Osborne said:

In a world in which a separate, independent Scotland wished to pursue divergent economic policies, what mechanism could there be for the Bank of England to set monetary policy, as it does now, to suit conditions in both Scotland and the rest of the UK?

As Chancellor of the Exchequer, I have seen no such credible mechanisms proposed by those advocating independence.

I am not clear they exist.

If the SNP Scottish Government cannot provide answers to these basic questions about Scotland’s currency then the Scottish people are entitled to ask this basic question in return: what path is the Scottish Government leading them down?

A spokesman for the Scottish Finance Secretary John Swinney replied that Scotland needed "no lessons from a Tory chancellor whose disastrous economic policies are threatening jobs and investment across this country. The cast-iron position is that an independent Scotland will keep the pound — a position that the Scottish Secretary, Michael Moore, has agreed with."

None of the above is wrong (one questions the wisdom of Osborne, the Chancellor who has presided over a second UK recession, leading the charge against independence) but, as you will have noticed, the SNP answered a charge that Osborne did not make - that an independent Scotland would lose the pound -, whilst ignoring one he did make - that monetary union and fiscal autonomy are inherently incompatible. Until it does otherwise, it will have no credibility on this point.

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Tags: Scotland Scottish independence George Osborne SNP

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23 comments

Sun, 2012-09-09 02:15 — Cofuin (not verified)

Why is an Englishman going to Scotland to fight, and against the Treaty.

Beware Scotsmen, I smell a decayed fish between Osborne's legs.

Tell him to 4K off and get on with your own lives, without this poxed Goon playing the part of the Dark Master.

Sat, 2012-09-08 08:14 — Stuart Eels (not verified)

Barecheek Prince, oh dear did you take your white pointy hat with you when you went north?

Come on the DYMERS give us your justify your comment and show us that you have a clue.

Sun, 2012-09-09 01:26 — Barecheek Prince (not verified)

Sorry I do not have them in my household, nor know where they are bought.

On the other hand you seem to have control of the Coven where they prance about as dark soulless ones.

Enjoy your Sabbath.

Sun, 2012-09-09 01:32 — Barecheek Prince (not verified)

DYMERS was unavailable to comment!

Saw a tweet where he said "tell the Bishop of Lees to eff off!", "That parasitic scvm bag parasitic Bishop of ColostomyBag -Upon- Doomsbury"

Fri, 2012-09-07 20:19 — DMyers

Oh George (both Eaton and Osborne). You just don't have a clue, but need to justify why you are paid.

Fri, 2012-09-07 18:51 — Barecheek Prince (not verified)

Many rich English have estates in Scotland, many retired armed forces from England in bungalows and town houses too whom have seen their income drop as enhancer move next door and get £2 million pound houses for free with all support to invite all their families to do the same. So they see the melting pot of England and note that in Scotland there is better health provision.

Seems in Scotland if you have worked twenty five years in the forces that you do not have the right for your house to be taken off you when hospital enhancers get the treatment wrong and you lose your home, that you have worked for, and have fallen ill in old age.

If the English, as I am, let their idiots at the top throw money at drug suppliers and afford them houses more than the English that have worked for all their lives and paid for by the State, and a check never done to see where their sports cars and frequent holidays come from.. and often have many wives, even cousins they claim for as married.

All I can say is power to Scotland and share with those that have worked and have pensions, even if English and respectable.

Do not let it become a distasteful melting pot like England where they feed the bandit and rob the stage coach passenger.

Fri, 2012-09-07 16:13 — Stuart Eels (not verified)

I was going to congradulate Will Podmore on his excellent post and then I read his last sentence-"Breaking up Britain will be bad for all of us but especially Scotland."

I can see the insults lining up to take a potshot at him now if previous articles about Scotland and Scottish Independence are anything to go by. We will get the ridiulous foaming at the mouth statements about Scotland Carrying the wicked English, how the English have robbed them blind for hundreds of years, how their brave boys have been sent to fight by the terrible English, how they mustn't take their fair share of UK debt even when RBS and HBOS caused most of the recession.

The English have carried the Scots ever since the Union was formed to rescue them after their little Darian Adventure on through the Goschen Formula 1888 to 1970 and the Barnett Formula to date. The last three Premiers have all been Scots and gleefully taken us into wars that are none of our business.

I'm not the only Englishman that's happy to see you go your own way, in the last Opinion Poll over 60% of the English want the Scots to be independent! WE poor old English, it seems are more willing to risk impoveriskment than our brave cousins north of the border.

Sun, 2012-09-09 01:53 — High Heels (not verified)

Excuse me Mr Merchant Banker, aka Jelloid supposiTory-Eels:

Both Luxembourg and Switzerland are small countries, both have a better pension provision and have no oil, nor natural fuel sources in their lands.

Mind you they do not have a rotten government in each country with politicians feathering their nest.

There are a lot in the North that are neglected by the South, indeed since Lancaster went against the middle-ages Royalty that was corrupt. maybe you will find most, if given opportunities would align with an independent Scotland.

Now eat your mince!

Sun, 2012-09-09 01:43 — Dumpton Observer (not verified)

Mr Lees, maybe you ought go North and get an education before spouting your University of Cabbage Patch ramblings.

Mind you most good Scottish have fought for Great Britain.

All you fight for are your pink glasses and the chance to have the radical snip, so you can be a real man, Enjoy your hormone replacement as it costs more than cancer treatment, and is free to those that show they like women's clothes , as long as Magaret Scratcher has used them first, underneath her suits.

Sniff on, breath deep, nebulise on the stench - and enjoy your fantasies of being an hairy woman.

Sat, 2012-09-08 14:11 — Benjamin Rae (not verified)

Quite why certain people feel the need to come on and insult a country by spouting slanted , biased nonsense is beyond me. Far more insults get directed to Scotland as a whole than vice versa.
Those who support independence take exception to a corrupt , rotten political system that
governs in the interests of the few. It's not an attack on England as whole.
The anti Scottish prejudice from some on here really is quite tiresome

Sat, 2012-09-08 10:34 — Charles Patrick O'Brien (not verified)

Hey laddie any idea why your Westminster mob are fighting so desperately to keep us Scots? probably not as you never checked your facts on the Darian story!or checked on any facts.Scotland is the only part of the UK that is self-sufficient in food and power (not counting North Sea oil)

Fri, 2012-09-07 14:09 — Will Podmore (not verified)

George Eaton wrote, "Monetary union and fiscal autonomy are inherently incompatible ."
This is true whoever says it; it's true even if George Osborne says it.
As George Eaton observed, "The existence of monetary union without complementary fiscal union being the principal cause of the eurozone imbroglio."
Isn't this true?
The EU Commission (unelected) wants to force the EU into fiscal union, which means political union, all to save the doomed euro.
The SNP now wants monetary union, which, if it is to work, would require fiscal union, which means political union. So the SNP, not unexpectedly, is in a muddle.
When the Czech Republic and Slovakia split, both countries suffered. Unemployment in Slovakia rose from 14 per cent in 1998 to 18 per cent in 1999. From 1999-2005, there was 9 per cent unemployment in the Czech Republic.
Breaking up Britain would be bad for all of us, but especially for Scotland.

Sat, 2012-09-08 10:30 — Charles Patrick O'Brien (not verified)

Monetary union was done with several countries in many places,too many to mention all of them ,and it does not NOT need fiscal or political union.
The YES campaign is not about party politics its about either being a nation or being Scotlandshire,and an appendix of Westminster.

Fri, 2012-09-07 11:47 — Barrie J (not verified)

1. There doesn't appear to be any evidence that George Osborne knows much about anything.
2. Based on its handling of the economy over the last 15 years even Somalia might think twice before getting involved with the Bank of England.
3. Could an independent Scotland make a bigger mess than Westminster has managed?

Sun, 2012-09-09 02:01 — High Heels (not verified)

The Lebanon during its warring years and civil war infighting, actually done much better with all their economy than both Labour, and the Tory-Liberal-Labour Pact have done since 1973.

Mind you they have given the pension rights to foreigners and maintained their own personal income at the same time.

Seems they wanted to reward all those that do nothing for the economy and human rights ...and the pensioners/workers future of today monies they have stolen by theft from the state purse for their own use.

Fri, 2012-09-07 11:25 — Benjamin Rae (not verified)

When you find yourself on the same side as Osborne on anything it's time to ask a few questions.

Sun, 2012-09-09 02:07 — Mr Jellied Eels (not verified)

Mr Cameron sent her/him there - "he said free coke and plenty of Edinburgh men and women, all free as you do pay for in Manchester". "On the National budget and no receipts needed. Do not worry as we have sent tax advisers free on the House to maintain your vast farm at Tatton, whilst you do the work for me, as I cannot be seen to be involved as are a stand-in Prime Minister as not one has been elected by a legal majority since John Major won his last election".

Fri, 2012-09-07 11:19 — Cheshire exile (not verified)

Wasn't aware that BoE set monetary policy to suit Scotland or any part of the UK outside the bankers' quarter of London. Can George provide any evidence of Scottish interests being taken account of?

Fri, 2012-09-07 11:18 — Cheshire exile (not verified)

Wasn't aware that BoE set monetary policy to suit Scotland or any part of the UK outside the bankers' quarter of London. Can George provide any evidence of Scottish interests being taken account of?

Fri, 2012-09-07 11:15 — Cath (not verified)

Nice of the Tories to finally join the YES campaign by sending Osborne up to argue against independence. A guy who gets booed even at the Olympics in London and is running the UK economy into the ground.

Fri, 2012-09-07 10:05 — saltyseadog1

Scotland already has its own currency ie Scottish Pounds which certain English establishments have been known to refuse to accept as legal tender from time to time. Or are you trying to say that England has a patent on the word pound in a monetary sense?. Also since the gold standard has been done away with and now all nations use a giant Ponzi scheme as currency why is it so difficult to accept that Scotland will just do the same.

Fri, 2012-09-07 09:46 — James BH (not verified)

Is this the radical politics that New Statesman is famed for ? This piece sounds like it came straight from Downing street. Are you now a mouthpiece for the establishment?

Fri, 2012-09-07 09:36 — Peter A Bell (not verified)

Monetary union and fiscal autonomy only become incompatible when economies diverge significantly. Is Osborne saying that the economies of Scotland and RUK already differ to the extent that the Bank of England cannot serve both?

Or is he saying that this divergence would be an inevitable consequence of independence as Scotland pursues policies radically different from his own?

And isn't this precisely what we want?

It nay not be wise for British nationalists to argue quite so vehemently against a post-independence monetary union that the RUK may need rather more than Scotland does.