Ditching sterling would slash household incomes
Ditching sterling in favour of a Scottish pound would cost the average household 20% of their income, it has been estimated.
The SNP government announced last month that following a vote for independence it plans to introduce a new currency.
Analysis suggests it would be quickly devalued against sterling by as much a 20-30%, immediately taking money out of household pockets and raising the cost of doing business.
The claim is published today on ourmoney.scot, a new website founded by currency specialist Prof Ronnie MacDonald in association with the pro-union group Scottish Business UK (SBUK).
The website provides visitors with a tool to discover exactly how much they would be affected according to their income.
It sets out how it believes the introduction of a new Scottish currency would hike the cost of imports, increase debt costs and lead to higher interest rates. Households which a current net income of £35,000 a year – the Scottish average – would see their spending power slashed by the equivalent of £7,300.
It says that only those at the very top end of the income bracket would have more spending power than under the Union.
Existing sterling-denominated debts would overnight become more expensive to repay, to the tune of around £1,500 a year. Expected interest rate rises would be in the region of £1,500 a year.
The SNP says the new currency would be met only after a series of tests have been met. But Prof MacDonald – who is professor of macroeconomics at the Adam Smith Business School at Glasgow University – warns that Scotland would be forced to adopt a new independent currency immediately after independence.
Prof MacDonald said: “You’re talking in my view of a devaluation of between 20% to 30%. These are big numbers and they will affect peoples’ wages and they will affect peoples’ mortgages.”
“The key thing the SNP is not telling people is that financial markets bring events forward. The crisis will be brought forward to day one of independence. It’s obvious why they don’t want to talk about what will happen on day one of independence.”
SBUK’s Founder and Chairman Robert Kilgour said Prof MacDonald’s work “sheds light on economic plans that carry real risk not just for individual households but for businesses across Scotland.”