HSBC boss warns of 'very odd form of independence' for Scotland without currency union

The Yes Campaign faces a tough final stretch as business voices murmur against independence.

by Adam Gale
Last Updated: 28 Aug 2014

HSBC’s chairman Douglas Flint - a Scot based in London - has become the latest and most senior business leader to challenge the economic case for Scottish independence.

Writing in the  Telegraph today, Mr Flint praised the currency union as the ‘anchor’ of Scottish financial stability and warned of the costs of giving it up.

Describing all the alternatives to currency union as ‘complex and fraught with danger’, the chairman of Britain’s largest bank reserved particular concerns for the rather painful-sounding strategy of ‘sterlingisation’ – Scotland cheekily continuing to use the pound without permission. This would mean that the Bank of England would not operate as the lender of last resort in an independent Scotland.

‘This would place enormous pressure on Scotland’s future fiscal policies,’ Flint wrote. ‘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.’

‘Sterlingisation’ is Alex Salmond’s Plan B should the country-formerly-known-as-the-UK reject full currency union with an independent Scotland, as all the major Westminster parties have indicated they would.

However, Flint’s criticism of the strategy comes only one day after free market think tank Adam Smith Institute issued a report claiming such an informal arrangement would actually be better for Scotland than currency union.

The think tank claims that not having a lender of last resort would lead to less risk-taking by Scottish banks, if coupled with institutional reforms.

Unfortunately for voters seeking a clearer picture, these competing claims over the economic case for independence are likely to be used as ammunition in the latest round of pantomime-style exchanges between the two campaigns (‘Scottish public finances will be better under independence’...‘oh no they won’t!’).

The Better Together campaign continues to lead in polls ahead of the second televised debate between Alex Salmond and Alistair Darling on Monday evening.

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