Due to the need for an independent Scottish currency, Vince Cable has insisted the Royal Bank of Scotland (RBS) would “inevitably” move to London in the event of an independent Scotland.
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Scotland is holding a referendum in September this year to decide whether to end its 307-year union with England.
Currently, polls show 42% of the Scottish population plan to vote against independence – with 29% in favour.
The business secretary told the committee of MPs that, in the event of a yes vote, Edinburgh-based RBS would probably move its headquarters to London due to greater stability and protection within the UK.
RBS has repeatedly declined to comment on the issue.
The difficulties creating a workable sterling currency union between the UK and Scotland would also be “so difficult, so tricky, that it would almost certainly prove to be in Scotland’s interests – and indeed the rest of the UK – that Scotland did have its own currency,” Cable stated.
He stated his belief that Scottish first minister Alex Salmond would therefore need to create a “Plan B” to use a new or different currency.
“The plan B is a fully separate currency,” Cable told a House of Commons Business, Innovations and Skills committee hearing, that would have “all the advantages and disadvantages attached to it.”
Cable’s warnings signal a hardening of the UK Government’s stance on the proposal, and come after similar statements from the Governor of the Bank of England Mark Carney, Chancellor George Osborne, and the chief executive of oil group BP Bob Dudley, on the difficulties of creating a new currency union for an independent Scotland.
Britain pumped GBP 45 billion pounds into RBS – a pillar of Scotland’s financial industry – during the 2008 financial crisis.
This left taxpayers with an 81% shareholding in what, thanks to expansion from former chief executive Fred Goodwin, was briefly the world’s largest bank.
By 2016, the expected year that Scotland would declare independence after a yes vote, RBS would likely be privately owned.
Therefore the RBS board was be given far greater independence on these kind of key business decisions.
“If you were managing RBS,” Cable stated, “I think you would almost certainly want to be in a domicile where your bank is protected against the risk of collapse.”
RBS already has a “substantial amount of their management in London and I would have thought, inevitably, they would become a London bank.”
Citing the billions of pounds of trade over the border, and the UK’s dependence on North Sea oil and gas reserves, Scottish Prime Minister Salmond has vigorously disputed claims a currency union would not be in the UK’s best interests.
In addition, the Scottish National Party has stated it would be “absurd” for the UK to fight against a currency union; and to damage its trading links with a Scotland.
A spokesman for John Swinney, the Scottish finance secretary, said: “The pound is as much Scotland’s as it is the rest of the UK’s, and the [Scottish government’s] fiscal commission working group … have concluded that it’s in the interests of both Scotland and the UK to continue to retain sterling in a formal monetary union.”
Whilst this echoes the Scottish Government’s economic advisers, who have constantly pushed the need for a sterling pact, other economists maintain that the burdensome currency union terms imposed on Scotland would, in effect, mean Scotland would not be fiscally independent.
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