Treasury civil servant defends publishing currency advice, but fails to address criticisms


  By a Newsnet reporter
The Treasury’s most senior civil servant has justified his decision to publish advice to UK Government ministers on a currency union with an independent Scotland –rejecting suggestions that it was the result of political pressure.
Permanent secretary to the Treasury, Sir Nicholas Macpherson, said making public his recommendation to Chancellor George Osborne was ‘vital to the national interest’.  Osborne cited Macpherson’s advice when he publically ruled out a shared currency in the event of a Yes vote in September’s referendum.

Macpherson appeared before MPs at the Public Administration Committee today to discuss the impartiality of the civil service and referendums.  He told the committee that the nationalists had been ‘casting aspersions on the UK Government’s integrity’ by suggesting his advice came a result of political pressure and insisted the Chancellor had not instructed him to write a letter spurning SNP proposals for a currency union.

“I am quite certain that if I had said that I did not want to publish this advice he [Osborne] would not have pressed me. I thought it was the right thing to do in exceptional circumstances,” Macpherson told the committee. “My view in this case – and it’s a very exceptional case – is that if publishing advice could strengthen the credibility of the Government’s position, then it was my duty to do it.

However, Macpherson, the longest-serving current head of government department, did not respond to criticism of his advice by academics such as Leslie Young, economics professor at the Cheung Kong Graduate School of Business in Beijing.

Professor Young had previously said that, although there may have been valid reasons for the rest of the UK to reject a currency union should Scotland gain independence, none of those could be seen in the counsel given to the Chancellor by Macpherson.  Young also questioned why the Treasury letter was being used by Westminster Government as the ‘key justification’ for its stance.

In his critique of Macpherson’s letter, Young condemned the analysis as ‘loose’ and said it was rife with ‘inconsistent assumptions’ before concluding that it did not actually address the question of whether a currency union would be in the interests of the UK or not.

“The Treasury claims are invalidated, not by errors of fact, but by errors of logic. These errors are subtle and difficult to disentangle,” he added. “Only subtle logical error could have led the Treasury to claim, in effect, that past risky behaviour by investment bankers in London – inadequately supervised by the Bank of England – somehow disqualifies an independent Scotland to be a currency union partner of England.”

Sir Nicholas Macpherson’s appearance before the Public Administration Committee followed revelations reported by the Guardian newspaper that a minister in the UK Government had admitted Osborne’s threats of no currency deal were merely a campaign tactic.  According to the newspaper, the un-named minister said a currency union would follow a Yes vote.

Responding to Sir Nicholas’s comments, SNP MSP Kenneth Gibson, convener of the Scottish Parliament’s Finance Committee, said: “Westminster’s currency bluff has completely crumbled.

“Regardless of the Treasury’s actions we know the real position of the UK government, as an unnamed government minister admitted last week that ‘there will be a currency union… everything would change in the negotiations if there were a Yes vote’.

“Even Alistair Darling himself has said that a shared sterling area is ‘desirable’ and ‘logical’. It’s time for the No campaign to stop the foolish bluffing, put its money where its mouth is and back sharing the pound.”

On Friday it also emerged that the Scottish Affairs Committee has invited the Tory Chancellor and his counterpart in the Labour party, Ed Balls, to appear in front of MPs to talk about their joint opposition to a currency Union.

Commenting, Labour MP Ian Davidson, who chairs the all-Unionist committee said: “The Conservative, Labour and Liberal Democratic parties have all said no to a currency union in the event of separation. The Scottish First Minister says they are all ‘bluffing’, which presumably is a euphemism for ‘lying’.
“Are they all lying? Or are there sound and defensible economic and political reasons why a future UK Government, without Scotland, would want to avoid a currency union?”

The Labour MP added: “On such a vital question, the people of Scotland need to know what currency they will be using, not just in any transitional period, but over the longer term.  Hopefully, the Scottish Affairs Committee will be able to clarify the strength and logic behind the present positions.”