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Home Publications Blogs Beat the Press Are English Conservatives Threatening War Against an Independent Scotland?

Are English Conservatives Threatening War Against an Independent Scotland?

Friday, 14 February 2014 08:56

That's what people must be wondering after reading a Post piece reporting Chancellor of the Exchequer George Osborne's threat that an independent Scotland would not be able to use the pound. The Post quotes Osborne as saying that the pound is not something that you can divide like a CD collection.

It is difficult to understand the possible meaning of this threat. It could mean that England would not negotiate the terms of a monetary union with an independent Scotland, however it is hard to see why an independent Scotland would want to have a monetary union with an England run by the conservatives. Their policies have helped to give the UK a downturn that is worse than what it experienced in the Great Depression. Presumably breaking free from these policies is one of the main motivations for seeking independence.

Of course if Scotland chose to use the pound as its national currency, as countries like Panama and Ecuador have adopted the dollar as their currencies, it is difficult to see what England could do to stop them, short of going to war. In other words, it's not clear what Osborne was threatening.

Comments (7)Add Comment
scotland is wealthier...tired of subsidizing England...
written by pete, February 14, 2014 8:52
That's really the issue. Think oil. And salmon. And scotch. Seccession was mentioned in the US wealth state of TX too. Rick Perry even wanted to bring UT's gold holdings (they took delivery on futures contracts) to Texas. Optimal currency area is an interesting issue. When a country adopts another's as its currency, it is similar to going on a gold standard, since they forfeit the ability to actively manipulate real prices.
written by John, February 14, 2014 10:09
Breaking up is always a hard thing to do. We have other member states with separatist ideas. Here in Belgium, Flanders has a separatist party that won a majority during the last two voting cycles. They've made it clear they want to co-federalize the country -- code for separation. To put pressure on them, the EC stated there is no binding treaty for Flanders, Scotland or Catalonia if they separate. The implied message is they would have to start from scratch. It is scare talk.

Like pete stated, it is about dollars and cents or in this case, euros and cents. Much of the wealth for Belgium comes out of Flanders. Walloon and Brussels receive more tax money than Flanders.

The big problem for the separatists is what to do about pension distribution. The central governments have a tight grip on that part of the budget making it difficult for 'divorcees' to head for the exit. Kind of like TX with their crazy talk.
written by joe, February 14, 2014 11:14
You're not a truly free and sovereign country if you don't have your own currency. How'd it turn out of countries in the eurozone when they gave up their sovereignty? Without your own currency policy space is highly restricted. Govt need to run deficits so their private sectors can run surpluses. Without your own currency, you need to be an exporter to do that. But everyone can't be an exporter... Exports are bad in real terms anyways
Scotland wants not only the pound but also influence on the British central bank
written by Peter T, February 14, 2014 4:55
England can't stop Scotland from using the pound, but, when setting the policy of the British central bank, they can exclude the Scottish economy and focus solely on the English economy and its needs (and the Welsh and Northern Irish). The Federal Reserve doesn't look at the Ecuadorian economy when setting rates and buying bonds.

The Scots, understandably, would likle to have some influence on central bank policies, like France wanted influence on German monetary policy and demanded a Europaen central bank. The English opened their negotiation by rejecting Scottish influence in case of a secession, and the Scots have initially said that they won't take any of the British debt in this case. The negotiations continue.
Conservatives vs. conservatives
written by Stuart, February 14, 2014 5:38
It would be better to make clear to readers that you mean Conservatives (capital C for the party in Government) rather than conservatives (as in a political philosophy or ideology).
written by KS, February 15, 2014 12:25
Dean's right that if Scotland wants to use the pound it can, in currency board situation, but I think the Scots want a more formal currency union. In any event this is a non-story. The same day the UK treasury released a mammoth report concluding that being in EU brings net benefits to UK, a finding that is anathema to the Tory right (and their competitors on the right, UKIP), so the gov tried to bury that story with this stuff on Scotland and the pound.
written by dax, February 17, 2014 7:58
Yes Peter T. is right. The Scots aren't asking to use the pound; they're asking to use a pound over which they have some control.

I think the real sleeper issue is EU membership. The EU will not simply let the Scots back in; so ironically the most pro-EU part of the UK will find itself outside, while England (at least for the moment) finds itself inside. This means both countries will need to build customs checkpoints at the border. Not going to fly, I think.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.