UK Treasury Disagrees to the Idea of Independent Scottish State in the Fear of Economic Imbalance

The long wait of UK treasury’s position over the currency union was cleared last week when its Chancellor of the Exchequer George Osborne indicated the treaty to be out of question. The clarification was inspired by the consensus of UK’s three major parties who disregarded the proposal to form a currency union with Scotland.

However, the decision was taken after considering several points regarding the UK’s potential economic affects if, in case, the treaty is made. A report called “Scotland Analysis: Assessment of a sterling currency union” was also presented by the Chief Secretary of the Treasury Danny Alexander to the UK Parliament, which thoroughly discussed certain risks that could lead to an instable sterling currency union upon a effective treaty with the Scotland. Excerpt:

“Within a sterling currency union, an independent Scottish state would find it more difficult to adjust to the effects of economic challenges, such as a fall in the global oil price, than Scotland currently does as part of the UK. The continuing UK would become unilaterally exposed to a greater fiscal and financial risk from a separate state. Greater fiscal risk would come from UK taxpayers being asked to support the wider economy of another state and also financial risk were banks from that state to fail.”

**relatedarticle**

The report also referred to the HM Treasury’s Assessment of Euro Membership in 2003 that advised the UK government not to join Economic and Monetary Union, the effect of which got proved eventually in the euro area during the financial crisis, when the government came face-to-face with the economic reality of the HM Treasury’s Assessment.

Earlier, Scottish Government’s Fiscal Commission released a statement mentioning “the pound is Scotland’s currency just as rest much as it is the rest of the UK’s”. It was further supported by the nation’s cabinet secretary for finance John Swinney MSP, who even argued that UK parties are trying to “bully” voters in the wake of a referendum to be conducted on September 18th.

But the points raised by the Scottish side continues to lag behind the ones made by the UK treasury as they fail to justify the scenarios of potential economic imbalances that may simply affect the British pound rates in international circuits. The Scotland Analysis report too highlighted the flawed analysis made by the member of Scottish Government, that how the Scottish state is hardly able to take any liabilities of the UK pound.

Read the full report here.

To contact the reporter of this story: Jonathan Millet at john@forexminute.com