Rod MacLeod

Rod MacLeod on First Minister’s Isle of Man address

Commenting after the First Minister Alex Salmond’s address to the annual Chief Minister’s International Lecture on the Isle of Man, in which he restated his intention for an independent Scotland retaining the pound, Tods Murray’s Banking & Finance Partner, Rod MacLeod, said:

“The First Minister’s praise for the Isle of Man currency model is justified to a certain extent, although the more you look at it, the more it looks like a mixed message.”

“Let’s be clear about one thing.  The First Minister isn’t suggesting that an independent Scotland replicates the Isle of Man currency model which is based on a combination of “dollarization” or “sterlingisation” – adopting sterling without any formal currency agreement with the UK – and issuing its own currency, the Manx pound, which is pegged to the value of sterling.  The First Minister has re-affirmed that retaining sterling with a formal currency union between Scotland and the rest of the UK is still the preferred option for the Scottish government.”

“So why compare the two currency models if it’s not a case of like for like?  Well, if I was the First Minister I would certainly be emphasising the benefit of retaining a common currency with our closest neighbour in order to promote exchange rate stability and, in turn, facilitate and reduce the cost of cross-border trade for businesses and consumers.”

“However, leaving aside the appropriateness of comparing Scotland (population circa 5 million) and the Isle of Man (population circa 84,000) or their respective economic strengths and weaknesses, the First Minister is walking on thin ice by making parallels with Scotland and the Isle of Man.”

“In February this year, the Manx Treasury Minister, Eddie Teare, warned that a rise in inflation in the Isle of Man could be triggered by the downgrade of the UK’s credit rating from AAA to AA, with a fall in the value of sterling producing inflationary pressure on the island.  Formal currency union or not, an independent Scotland’s fortunes would be inextricably linked with those of the UK if Scotland opted to keep the pound.”

“And whilst pointing out that the Manx AAA credit rating from Moody’s has remained intact whilst the UK’s credit rating was downgraded to AA earlier this year, the First Minister is conveniently ignoring the Isle of Man’s downgrade to AA status by Standard & Poor’s at the end of 2011 – which still remains in place today.”

Tods Murray’s Banking & Finance Team is actively involved in the independence debate through its client base in London and has played a leading role in encouraging discussion in The City.

- Read our view on the implications on mortgages and insurance policy payments should Scotland become independent by clicking here

- View our recent presentation at the University of Glasgow event on the future of Scotland’s financial services industry in light of possible independence by clicking here.

- Watch Rod MacLeod as he appeared on BBC Scotland’s Newsnight discussing Scottish independence by clicking here

- Read our analysis of the recent HM Treasury paper regarding regulation in an independent Scotland by clicking here

- View our comments on HM Treasury’s analysis on currency union in the event of Scotland voting for independence in 2014. To read please click here

- Watch Dr Hamish Patrick, Partner in the Banking team, speak to STV on Scottish independence and keeping the pound by clicking here

- Listen to Rod MacLeod speak to BBC Radio Scotland about currency union between an independent Scotland the rest of the UK by clicking here

- Read Rod MacLeod and Hamish Patrick’s co-authored article “Scottish independence: the Bank of England (and Wales, Northern Ireland and Scotland)” which appeared in the March edition of Law and Financial Markets Review (Volume 7, Number 2), by clicking here

- Read Rod MacLeod’s article on the implications of an independent Scotland keeping the pound by clicking here

- Watch the video from the Tods Murray ‘Economics of Independence’ debate at the British Bankers Association Video by clicking here

- To contact either Rod or Hamish, or any other member of the Banking and Finance team then please click here

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