Wee Blue Book: Currency/Pensions

In this third installment from the Wee Blue Book, the two main targets of Project Fear are debunked. Clearly the use of a stable currency is vital to any country’s prosperity but it is equally clear that Westminster has created this straw man for their own purpose. As the security of pensions is a vital issue to people as they age, sowing uncertainty about their future is a similar bid for the normally reliable pensioner vote.


The No campaign’s most repeated scare story is that an independent Scotland wouldn’t be able to keep the UK pound. This is a categorical lie. Sterling is what’s known as a “fully-tradeable” international currency, which means that any country can use it if it wants to, without requiring the UK government’s permission.

So even if the threats made by George Osborne (and backed by Ed Balls and Danny Alexander) that Westminster would refuse a formal currency union were to turn out to be true, nothing could stop Scotland from continuing to use the pound.

Many economic experts actually believe that using Sterling “unofficially” would be a BETTER plan for Scotland. In February this year Sam Bowman, research director of the world-renowned Adam Smith Institute, said:

“An independent Scotland would not need England’s permission to continue using the pound sterling, and in fact would be better off using the pound without such permission. An independent Scotland that used the pound as its base currency without the English government’s permission would probably have a more stable financial system and economy than England itself.”

Professor Lawrence White of the Institute of Economic Affairs agreed, noting that while informal use would leave Scotland without a national central bank, such an arrangement can actually be a positive:

“The possibility of banking panic justifies having a central bank only if it can be shown that panics are more frequent and severe in countries without central banking than in countries with central banking.”

The evidence actually points the other way.

An official lender of last resort can unintentionally worsen the problem of banking panics if it makes explicit or implicit bailout guarantees that encourage banks to take undue risks”

In any event, most experts agree that the Unionist parties’ position is a bluff. In March 2014 Janan Ganesh of the Financial Times (and formerly of The Economist), who also wrote a biography of George Osborne in 2012, told the BBC’s Sunday Politics that:

“If the Scots vote for independence, of course a deal will be done on the currency, because it’s not in London’s interests to have a rancorous relationship with Edinburgh.”

He was commenting after an unnamed UK government minister told the Guardian:

“Of course there would be a currency union”

A few days later the University of Glasgow’s professor of economics Anton Muscatelli – a former consultant to the World Bank and the European Commission, a current adviser to the House of Commons Treasury Select Committee on monetary policy, and former chair of an independent expert group for the Calman Commission on devolution – also said the UK government was bluffing, in a piece for the Financial Times explaining why refusing a currency union would be a reckless and irresponsible move:

“A successful currency union would actually be in the interest of both sides – and especially the rest of the UK. The most damaging prospect to the rest of the UK from rejecting a sterling currency union is what it will do to its own trade and business activity. Whatever the political tactics involved, it would be tantamount to economic vandalism.”

No matter what happens after a Yes vote, whether the UK government agrees to a currency union or not (although the overwhelming likelihood is that it will), Scotland WILL keep the pound. Because of the nature of Sterling, this is one of the few aspects of the debate which can be absolutely, unequivocally guaranteed.


Pensions are a matter of great concern to many Scots, and as a result the No campaign spends a considerable amount of its time trying to frighten people into believing independence represents a threat to their pension. Yet as with currency, pensions are one of the few aspects of the independence debate about which it IS possible to state the position with certainty.

For example, Labour MP Ian Davidson, chair of the Scottish Affairs Select Committee, made these comments in the House Of Commons in May 2014:

“The state pension of any individual in Scotland, in the event of separation, would not be adversely affected […] they would continue to get the level of state pension, the same as everyone else in the UK… people themselves can be assured that their pensions are secure.”

Mr Davidson was reflecting a statement to the committee by UK government pensions minister Steve Webb, which was reported in the Scotsman the same day:

“State pensions would still be paid after independence, a UK minister has told MPs, despite concerns raised by the Better Together campaign.”

Giving evidence to the Scottish Affairs Select Committee, Lib Dem pensions minister Steve Webb said that anybody who had paid UK national insurance would be entitled to their state pension whatever the outcome of the referendum.

The intervention contradicts concerns raised by former Labour Chancellor Alistair Darling, the leader of the Better Together campaign.”

And in any event the facts had been well established long before then, with the Department for Work and Pensions having made a similar statement in January 2013:

“If Scotland does become independent this will have no effect on your State Pension, you will continue to receive it just as you do at present. Anyone who is in receipt or entitled to claim State Pension can still receive this when they live abroad. If this is a European country or a country where Britain has a reciprocal agreement they will continue to receive annual increases as if they stayed in Britain.”

Public sector pensions will be equally safe. In May this year Neil Walsh, the Irish-born pensions officer for the Prospect trade union (which is neutral on independence), conducted a conference call for union members to explain the ramifications of a Yes vote to the union’s members, and others in a similar position.

“If you [are] a member of a public service pension scheme that’s already delivered by a Scottish administration – and that includes the NHS, teachers’ pension scheme, fire authority, local government pensions – then literally I can’t imagine what would be very different under independence because you’re already having your occupational pension delivered by a Scottish administrator.

“The responsibility for each and every one of those schemes, NHS, teachers, police, fire and local government, would be taken over by an independent Scotland and continue to be delivered in precisely the same way that you’ve always been used to.”

On the subject of UK-wide public sector pensions, such as those applying to the armed forces and civil service, Walsh noted that negotiation would be required between governments, but that nobody should worry and members wouldn’t notice any change:

“The Scottish Government says the most appropriate way to divide up responsibility is for them on independence to take responsibility for the state and public service pension of anybody who lives in an independent Scotland at that time, the UK Government says that that might not be the most appropriate way.”

But I don’t think anybody says no-one will become responsible for your public sector pension after independence. It would be a matter for negotiation behind the scenes, and actually you as a member should just continue on paying your contributions seamlessly if you are an active member or receiving your benefits seamlessly if you’re a pensioner member.”

Private workplace pensions are the only area of uncertainty. EU rules impose funding requirements on pensions operating across national borders, which would apply to any UK-wide scheme.

However, there are numerous options available to circumvent this problem, the simplest of which is for the firms operating the scheme to set up a Scottish office and handle the Scottish and rUK sides separately. The decision as to which solution to adopt will be one for each company to make individually. Unfortunately it’s simply not possible to answer generically or in advance.

(In previous cases affected by these rules, such as between the UK and Ireland, the governments concerned have been able to make transitional arrangements while matters were sorted out. Unfortunately, the Westminster government refuses to discuss such arrangements before the referendum.)

But perhaps more to the point, staying in the UK doesn’t guarantee anything about pensions.

  • Gordon Brown’s infamous “pension raid” shortly after he became Chancellor in 1997 has so far cost UK pensioners £118 billion, or about £12,000 each, and will continue to cost them money every year until the day they die.
  • the UK plans to increase the state pension age to 70 for both men and women. Some people, particularly women, have already seen the age they expected to start receiving their pension increase by five years under changes by both Labour and Tory governments.
  • in June 2013, a report from the National Pensioners’ Convention revealed just how badly-served the UK’s pensioners have been by Westminster:“According to the latest figures from the Office for National Statistics, British pensioners are among Europe’s poorest, with more than two million older people at risk of poverty.

    The UK was ranked fourth from bottom out of 27 European countries, with more than one in five (21.4 %) of older British people classed as being at risk of poverty in 2010; significantly higher than the EU average of 15.9%.

    The main reason for this situation stems from the UK’s inadequate state pension system. According to the latest EU comparisons, the adequacy of the UK state pension in relation to the country’s average wage ranks it at the bottom in a list of 25 European countries.

    For the average earner, the UK replacement rate of 17% is far below the EU average of 57%.”

The idea that a No vote provides either security or certainty over pensions is simply a myth. Nobody can say what the next government England elects will do.

About davidsberry

Local ex-councillor, tour guide and database designer. Keen on wildlife, history, boats and music. Retired in 2017.
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