Scotland ‘Yes’ vote could see financial chaos

Douglas Flint warned that a Yes vote in next month’s referendum could leave Scotland’s financial system in a “parlous state”.

Mr Flint, who describes himself as an exiled Scot, said the sterling currency union was an “anchor of financial stability” for Scotland.

Writing for a national newspaper, he said: “The alternatives to a currency union include a completely independent currency, passive acceptance of a monetary policy designed in London for the rest of the UK, or, assuming Scotland rejoins the European Union, eventual membership of the euro.

“In all these circumstances, the transition from the existing currency union would be complex and fraught with danger.

“At the extreme, uncertainty over Scotland’s currency arrangements could prompt capital flight from the country, leaving its financial system in a parlous state.

“This could, in turn, place enormous pressure on Scotland’s future fiscal policies. Scotland would give up the benefits of being part of a larger fiscal union with the stability that offers in terms of scale, diversification and fiscal transfers.”

Mr Flint said Scotland would face “an enormous challenge” to introduce its own currency, while an informal use of the pound, or “sterlingisation”, would put “enormous pressure” on fiscal policy.

He said: “Monetary policy itself would be imported from the rest of the UK; Scotland would be faced with monetary policy implementation without representation – a very odd form of independence.”

The three main parties at Westminster have all ruled out the Scottish Government’s preferred option of a formal currency union between an independent Scotland and rest of the UK.

Mr Flint said: “That decision is wholly consistent with the actions that have been taken in the aftermath of the financial crisis to minimise the risks to UK taxpayers from financial sector shocks arising in overseas and wholesale banking operations.

“It is also consistent with the knowledge gained from recent events in the eurozone, which have highlighted the challenges inherent in managing a currency union without political and fiscal union.”

A spokeswoman for HSBC told The Yorkshire Post that Mr Flint was speaking in a personal capacity.

The businessman donated £25,000 to the Better Together campaign last year.

The question of whether Scotland could keep the pound if it voted on September 18 to leave the UK has hampered independence campaigners.

The Bank of England Governor Mark Carney has also warned of difficulties in monetary union.

But Ian McDougall, spokesman for the Business for Scotland campaign group, said: “Given that he is a No campaign donor, Mr Flint’s political views are hardly surprising.

“But impartial experts such as Professor Anton Muscatelli, economist and Principal of Glasgow University, have made clear a currency union between an independent Scotland and the rest of the UK is in the interests of both.

“Voters in Scotland have seen through Westminster’s bluff and bluster over the currency union, especially after a Westminster government minister let the cat out of the bag by saying ‘of course’ there will be one.

“After a Yes vote, the economics will trump the self-destructive Westminster politics because we are the rest of the UK’s second biggest export market, and no currency union means no share of the UK’s debt for Scotland.

“The reality is a currency union between the two independent countries is in both our interests, and that is what will happen.”