This Morning Robert Peston on the Today show (08:10) made a highly political statement on behalf of the Yes campaign in Scotland….and considering the fact that Peston admits that not having a currency union would be ‘the greatest blow to Mr Salmond’s separatist ambitions‘ you have to wonder at the careless, or not so careless choice of phrase.
He told us that the reason RBS and Lloyds might relocate their HQs to England was simply because of the refusal of the Westminster politicians to countenance a currency union.….it all flows from that refusal to countenance that union he told us.
John Swinney, the SNP’s finance minister, in a following interview, immediately leapt upon that claim saying the uncertainty was there because of the Westminster politicians…‘as Robert Peston said’.
But the truth is that the uncertainty is created by the SNP’s refusal to countenance an independent Scotland with its own currency and the SNP’s continual and blinkered claim that upon a yes vote there will be a currency union. The SNP has consistently refused to discuss the currency issue candidly and has no ‘Plan B’ should there be no currency union.
The phrasing of Peston’s claim makes it sound as if the position of the three parties, which he keeps referring to as ‘Westminster’ or ‘London politicians’, all good SNP language, was one of pure intransigence and not based on economic and political realities.
The reality is, as the Governor of the Bank of England has just stated, that it is not possible….as this report from the BBC a mere 9 minutes ago states:
Bank of England governor Mark Carney has told trade unions that currency union in the event of Scottish independence would be “incompatible with sovereignty”.
Mr Carney told the TUC conference that a currency required a centralised bank and shared banking regulations. Common taxation and spending were also needed, he said.
Why would an independent Scotland want to then have its finances under another country’s governance and why would that other country take on the risks of another country’s debt?
The European Union shows why the currency union wouldn’t work. The EU has a currency union but no overriding political and financial union, it is made up of sovereign states all making their own decisions with economies of vastly differing sizes and efficiencies.
Peston himself admits it doesn’t work in his book How Do We Fix This Mess?: The Economic Price of Having it all:
A gamble on the prosperity of an entire continent…devastating consequences for the prosperity of Europe…..wonder what the message is there about currency union without political and full financial union…taxing, spending and borrowing determined centrally?
Here Peston again suggests that their position is one based on mere stubbornness and ill-will…..suggesting they were ‘thrilled’ when they later discovered their intransigent, and apparently ‘hypocritical and inconsistent’, position was actually based on real economics and constitutional politics:
BBC economics editor Robert Peston said that the coalition parties and Labour feared that an independent Scotland in a currency union could “live dangerously beyond its means and borrow on a scale that degraded sterling”.
He added: “There was no way that the Tories, Labour and LibDems could allow full budget-making freedom to Scotland even as part of the UK, because to do so would make their argument against monetary union with an independent Scotland look inconsistent and hypocritical.
“They were therefore thrilled today when the governor of the Bank of England agreed with them that a currency union would be incompatible with Scotland being an independent sovereign state,” he said.
Looking through some of Peston’s articles it is a stance and language he has adopted consistently:
It is this refusal of the political establishment in London to countenance formal monetary union with Scotland which is seen by many to have dealt the greatest blow to Mr Salmond’s separatist ambitions.
If anything, Standard Life may have reinforced the intransigent stance of Labour, the Tories and the Lib Dems against forming a partnership with an independent Scotland on stewardship of money and finance.
…their seemingly implacable opposition to monetary union. Though, for what it’s worth, I do not see any sign of government, civil service, Labour or Bank of England lessening their opposition to currency union by even a scintilla.
It looks like Peston works in a similar fashion to the SNP….having all the facts at their finger tips, knowing and understanding the issues, and yet their final conclusions are at total odds with those facts when they come to sum it all up.
Peston frequently explains the issues and the reasons for not having a currency union and for businesses to flee South…and yet he still portrays the decision not to have a currency union as intransigence, implaccable stubbornness, hypocrisy and inconsistency.
In March Robert Peston told us this: EU law may force RBS and Lloyds to become English
If Scotland were to vote for independence, both Royal Bank of Scotland and Lloyds may be forced to move their registered offices or legal homes to London under European Union law, I have learned.
What matters is that the Treasury – and the cross party troika of George Osborne, Danny Alexander and Ed Balls – have cited these apparently unaffordable potential bail-out costs when explaining why they reject the demand of the Scottish government for a formal monetary union between an autonomous Scotland and the rest of the UK.
They say that it would be to trample on the interests of taxpayers in England, Wales and Northern Ireland to enter into a monetary pact with Scotland, which left these taxpayers implicitly exposed to the risks of rescuing two big banks, when regulators in London would not have been in a position to keep them prudent and healthy.
And it is this refusal of the political establishment in London to countenance formal monetary union with Scotland which is seen by many to have dealt the greatest blow to Mr Salmond’s separatist ambitions.
Here Peston tells us Standard Life would relocate because of the risks of a Scottish economy too heavily reliant on the financial sector and exposed to the consequent risks….he goes on to explain why RBS and Lloyds would leave..because most of their customers in are not in Scotland….
This about Standard Life’s reasons for relocating:
Our initial observation is that the Scottish financial sector is unusually large, with total assets estimated at 12.5x GDP [or more than 12 times Scotland’s annual output].
“We would therefore likely view the financial sector as a significant contingent risk to the state. At the same time, a large part of this activity could be re-domiciled to the UK.”
Or to put it another way, S&P thinks there is a pretty good chance that Lloyds and Royal Bank of Scotland, both of which have their legal homes in Scotland, would also relocate to England.
Why?
In the case of the big banks, it would be even more complicated and potentially nerve-racking for their customers, than for Standard Life’s, if their regulator after independence was a yet-to-be created Scottish financial authority, rather than London’s Prudential Regulation Authority and the Financial Conduct Authority.
How so?
Well, like Standard Life, the vast majority of their millions of UK customers are in England, Wales and Northern Ireland, not Scotland.
Here again he points out that uncertainty is an issue…But it is uncertainty created by the SNP…The UK stance of no currency union is certain…it is the SNP’s ‘intransigent’ refusal to accept reality that creates the uncertainty…..
The point is that lenders to banks, including ordinary depositors, have a choice about where to place their money. And many of them will take the view that there is no point leaving cash in RBS when there is a greater than average degree of uncertainty about that bank’s long term prospects.
It is not that independence would definitely be bad for RBS. It is simply that creditors don’t like uncertainty.
So RBS will knock that uncertainty on the head by turning itself into a rest-of-UK financial institution rather than a Scottish one.
And here he points out that Scotland wouldn’t be able to bail out all the customers of its financial institutions….
Would English savers fear that the Scottish government and state might not have deep enough pockets to underwrite an effective insurance scheme for their savings?
To be clear, in an independent Scotland, English, Welsh and Northern Irish customers would be the equivalent of English customers of the Swedish bank Handelsbanken.
This statement on Handelsbanken UK’s website probably says all you need to know (it says Handelsbanken’s UK customers are protected by the Swedish deposit protection scheme, not the UK’s).
On independence it would be the Scottish government’s responsibility to protect deposits of foreign investors and depositors….and they haven’t got the deep pockets, or a big enough sporran, to do that.
So ‘all the facts’ point to currency union being a non-starter for good economic and constitutional reasons….why then does Peston insist on wording that makes it seem that currency union is possible if only it weren’t for the intransigent and unreasonable stance taken by the hated ‘Westminster’?
That’s a very, very political claim to keep making especially days from the referendum vote.



















