Osborne currency threat is ‘subterfuge or confused economics’ says academic


  By G.A.Ponsonby

Threats by the UK Government to block a currency union with a newly independent Scotland are either confused logic and inadequate economics, or a subterfuge to frighten Scottish citizens into voting No, an academic has said.

According to Professor Leslie Young, of the Cheung Kong Graduate School of Business in Beijing, if a Westminster Government blocked a currency agreement such a move would damage the economy in the rest of the UK.

In his latest analysis of post-independence currency options, Professor Young says a currency union is the best option for both governments in the event of a Yes vote.

Explaining his reasoning, the academic added: “[A currency union] offers microeconomic advantages to both economies that are likely to outweigh any macroeconomic advantages from the other currency options; it better insulates both economies from international disturbances; and it minimizes the massive legal issues that both economies would face immediately if Scotland switched to a new currency.”

However he was scathing of claims by the Westminster Government that it would block any currency agreement.

He wrote: “The analysis of this paper thus leaves only two explanations for this stance by the UK Government, which has shaped the current debate on Scotland’s currency: either confused logic and inadequate economics, or a subterfuge to frighten Scottish citizens to vote against independence by raising the spectre of economic chaos immediately afterwards.”

The report also said that although costs to businesses could be substantial that these could be minimised through cooperation between both governments.

“The resulting costs are difficult to forecast because independence would transform the economic, political and administrative framework of business.  However, the costs could be minimized by prudent policies by the Scottish Government and rational cooperation between the two governments acting in the long-term interests of their citizens.”

Professor Young was equally scathing of comments from Scottish Secretary Alistair Carmichael who recently said:

“The UK government has listened to the views of the Governor of the Bank of England and the independent advice of the Permanent Secretary to the Treasury that a currency [union] would be damaging for all the United Kingdom… That’s why a currency union simply will not happen.”

The Lib Dem MP made the statement in response to revelations by the Guardian newspaper that a senior coalition minister had admitted there would indeed be a currency union, and that threats to block an agreement were mere campaign tactics.

Responding, Professor Young commented: “In the land of David Hume, it would be a tragedy – and a farce – if the constitutional debate on Scottish independence were misled by the logical confusion in the Scottish Secretary’s response, which was repeated in statements by Chancellor George Osborne and Treasury Chief Secretary Danny Alexander and which, indeed, vitiated the cited ‘independent advice’ by the Permanent Secretary to the Treasury.”

The academic’s conclusion followed analysis carried out on behalf of entrepreneur Sir Tom Hunter as part of the businessman’s attempt to bring clarity and information to the independence debate.

Commenting on the analysis, Sir Tom who established Scotlandseptember18.com to provide definitive analysis on the key issues in relation to the vote in order to inform debate noted;

“Professor Young’s analysis on this one narrow line of inquiry highlights the status quo as the best option for business. A currency union or any other form of currency solution should Scotland vote for independence creates uncertainty, risk and risk creates cost for business. This can and will impact upon capital deployment decisions going forward.

“However the currency question is only one aspect to our ability in business to take the right decision on independence and Professor Young has highlighted some downsides, what we now need to understand are the upsides so we can appropriately assess risk and reward.

“He also highlights precisely why both for Scotland and rUK that in the event of a vote for independence a currency union is by far the best option. Given the political manoeuvring around this subject I think he underscores the point that the independence vote is way too important to be left to the politicians alone…

“To be 100% clear Professor Young’s paper highlights some serious issues for all concerned and we remain committed to continuing to analyse the myriad issues that all add up to taking a decision based on facts, evidence and greater granularity of data to make as informed a decision we possibly can come the 18th of September, as of now I personally remain resolutely undecided.”