What Money would an independent Scotland have?

Scotland is a country that does not have a legal national currency. The Scottish banks issue its money. When the UK legislation was introduced in 1983 to get rid of the English one pound note, Scotland was not included. Consequently, though the Scottish banks issue different notes that are ultimately backed by the Bank of England, Scottish banknotes are not legal tender because national law says that a pound does not have to be accepted as a paper money payment.

This is all very well and good, you may say. But here's a point. If Scotland became independent, and the banks still owned the money--because they issued the paper--how would Scotland back its national currency? What would interest rates actually apply to? And would an independent Scotland have to nationalise all its banks? If it did so without compensating them, it would run very foul of European human rights law and EC law, should it choose to apply it, unless the Scottish banks were bankrupt.

There must be a flaw in this reasoning somewhere. It's late, and I'm just in from the Middle Temple Christmas Revels (which were fantastic, by the way, and the stuff of dreams with bangers and mash, good wine, and a very funny revue) so I can't think of one. Of course, the reality may be that the SNP's schemes are not completely coherent and would if implemented take far longer and cost far more than they are representing. Surely not....

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