NEWS
Dr Eamonn Butler's Letter to The Herald: Post-Yes, an informal currency union should be plan A, not B
The Director of the Adam Smith Institute, Dr Eamonn Butler, wrote a letter to The Herald arguing that if Scotland votes for independence, there is nothing to stop them from continuing to use the pound:
I HAVE no wish to argue for or against independence, but as an economist I would like to separate the economic realities of the currency issue from the political bluster that obscures them.The Chancellor has ruled out a formal currency union, though some say this is just negotiating bluff. Either way, there is nothing to stop Scots continuing to use the pound if they choose. A Westminster government with no jurisdiction over an independent Scotland has no power to stop them.
Several independent countries, including Panama, use the US dollar, without seeking the permission of America's central bank, the Federal Reserve. In the absence of a formal currency union agreement, Panama has no say in the Federal Reserve's monetary policy, which is conducted solely for the benefit of America. Some argue, by analogy, that if an independent Scotland continued using the pound without a formal currency union, Scotland would have no say in Bank of England policy, which could be potentially damaging for Scotland's economy.
Nevertheless, as a result of using the dollar, Panama - a country comparable in population to Scotland - has one of the world's most stable banking sectors. And the economic interdependence between Scotland and the other countries of the present United Kingdom is so deep that the Bank of England would, in reality, have to take Scotland's welfare into account when setting monetary policy. Not to do so would risk damaging the other UK countries just as much as Scotland.
Another suggestion, from Jim Sillars, is that Scotland should print its own currency and tie it to the pound. There is no substantive difference between this idea and using the pound. As the two are pegged, the only difference is the design on the currency. And why (apart from national pride) go to the expense of printing Scottish notes, exactly equivalent to the pound - but which people south of the Border might be reluctant to accept?
The other option, switching to some other currency such as the euro, would be even more costly and difficult, and would raise huge, business-damaging uncertainties. It would also leave Scotland subject to the monetary policy of a country or agency with a very distant interest, if any, in Scotland's welfare.
The easiest solution, therefore, would be for Scotland to continue using the pound, with or without a currency union, safe in the knowledge that, as an important part of the sterling economy, the Bank of England would have to take Scotland's interests into full account when setting policy. The currency problem just isn't a problem.
Eamonn Butler,
Director, Adam Smith Institute,
23 Great Smith Street,
London.
ASI Senior Fellow writes for Forbes - Of Course We Should Abolish The Corporation Tax
ASI Senior Fellow, Tim Worstall, argues that the United States should abolish corporation tax in Forbes.
Corporation tax, or the corporate income tax for the US, is one of the more inefficient taxes that we impose upon economic activity. As all should know it’s not actually the companies that pay the tax as companies are not real live human beings. And it’s a standard point that any and every tax lightens the wallet of one or other live human being. Thus it cannot be the companies carrying that burden of this specific, or any other, tax. We also know that the corporate income tax is expensive. All taxes have deadweight costs, the economic activity that does not happen simply as a result of the existence of the tax. Different taxes have different deadweight costs and capital and corporate taxes have higher costs than do income, consumption or property taxes. That is, for the same revenue collected we destroy more economic activity (which is the same statement as “make ourselves poorer”) than if we used property, consumption or income taxes to raise the necessary money for government.
Read the full article here.
The ASI is featured in The Herald's article on Salmond's proposed currency union
The Director of the Adam Smith Institute, Dr Eamonn Butler, was quoted in The Herald, arguing that an independent Scotland should informally keep the pound. Read the article here.
Research Director writes for Conservative Home - Scotland could use sterling, without a central bank
The Research Director of the Adam Smith Institute, Sam Bowman, wrote an op-ed for Conservative Home. He argued that if Scotland were to become independent, it should keep using the pound, with or without permission from Westminster.
In practical terms, there’s virtually nothing stopping any country in the world from using any other country’s currency as its own. Indeed, some countries already do this – notably, the ‘dollarized’ economies of Panama, Ecuador and El Salvador.So Scotland could keep using the pound with or without a currency union. The difference would be that a ‘currency union’ would force the Bank of England to consider Scottish interests when making decisions about things like setting interest rates, and – crucially – acting as a lender of last resort to Scottish banks, lending to them when they were illiquid.
Read the op-ed here.
Sam Bowman's comments on the currency union are featured in City AM
The Research Director of the Adam Smith Institute, Sam Bowman, was quoted in a City Am article discussing a potential currency union between Scotland and the rest of the UK.
However, there seems little doubt that an independent Scotland would be within its rights to declare sterling sole legal tender and borrowing it on the financial markets to hold in reserve."Everyone says Mr Salmond needs a Plan B if the UK does not agree to a currency union with Scotland. But unilateral adoption should be Plan A, making Scotland’s economy more stable and secure. The UK’s obstinacy would be Scotland’s opportunity," said Sam Bowman, research director of the Adam Smith Institute on Wednesday.
Read the article here.
Sam Bowman's comments on an independent Scotland's use of the pound are featured on The Guardian's live blog
The Adam Smith Institute's Research Director, Sam Bowman, was quoted on The Guardian live blog, arguing that an independent Scotland should unilaterally adopt the pound, with or without the permission of the rest of the UK.
During the debate Salmond refused to name a ‘Plan B’ currency for Scotland if the chancellor continues to oppose a currency union. Sam Bowman, research director of the Adam Smith Institute, has a couple of ideas.An independent Scotland could flourish either by using the pound sterling without the permission of the rUK* (or by setting up a “ScotPound” pegged to sterling through a currency board, which would achieve a similar end).
(1) Because Scottish banks would not have access to a currency-printing lender of last resort, they would have to make their own provisions for illiquidity, and would necessarily act more prudently.
Scotland actually had this system of ‘free banking’ during the 18th and 19th centuries, during which time its economy boomed relative to England’s and its banks were remarkably secure. And Panama, which uses the US Dollar in this way, has the seventh most stable financial system in the world.
(2) Everyone says Mr Salmond needs a Plan B if the rUK does not agree to a currency union with Scotland. But unilateral adoption should be Plan A, making Scotland’s economy more stable and secure. The UK’s obstinacy would be Scotland’s opportunity.
Read The Guardian's live blog here.
Charlotte Bowyer argues that Bitcoin could become integral to UK commerce in the City AM Forum
The Adam Smith Institute's Head of Digital Policy, Charlotte Bowyer, argues that Bitcoin could become an integral part of UK commerce as the chancellor embraces the digital currency:
As the chancellor embraces Bitcoin, could it soon be integral to commerce in the UK?
Charlotte Bowyer, digital policy researcher at the Adam Smith Institute, says Yes.
Given the right conditions, digital currencies could revolutionise payments processing and become an integral part of UK commerce.
Paying online with Bitcoin could become a serious alternative to using Visa or PayPal – if they don’t adopt the technology themselves...
Read both sides of the debate here.
Press Release: An independent Scotland should keep the pound without rUK's permission
Commenting on Alex Salmond's refusal to name a 'Plan B' currency for Scotland if the Chancellor were to continue to oppose a currency union, Research Director of the Adam Smith Institute, Sam Bowman, said: “An independent Scotland could flourish either by using the pound sterling without the permission of the rUK (or by setting up a “ScotPound” pegged to sterling through a currency board, which would achieve a similar end). This ‘sterlingization’ would emulate a number of Latin American countries that use the US Dollar without an official agreement with the US government. Because Scottish banks would not have access to a currency-printing lender of last resort, they would have to make their own provisions for illiquidity, and would necessarily act more prudently.
“Scotland actually had this system of ‘free banking’ during the 18th and 19th centuries, during which time its economy boomed relative to England’s and its banks were remarkably secure. And Panama, which uses the US Dollar in this way, has the seventh most stable financial system in the world.
“Everyone says Mr Salmond needs a Plan B if the rUK does not agree to a currency union with Scotland. But unilateral adoption should be Plan A, making Scotland's economy more stable and secure. The UK’s obstinacy would be Scotland’s opportunity.”
For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@adamsmith.org / 07584 778207.
The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.
ASI Fellow is quoted in The Telegraph on Bitcoin's recent decrease in value and volume
Adam Smith Institute Fellow Preston Byrne was quoted in The Telegraph, discussing the historically high price of Bitcoin and its recent decrease in value and volume.
Preston Byrne, a fellow of the Adam Smith Institute and a commercial lawyer specialising in securitisation and cryptocurrency in the City of London, says that speculative investment in the currency has pushed up its price......Mr Byrne suggests that while lower than a year ago, historically elevated prices and equivalently high fees have been enough to put off many new buyers. As such, daily transaction volumes have slumped, falling to levels typical for 2012 - when Bitcoin was relatively unknown.
Read the full article here.
New 'Incentive to Invest?' report is featured in The Times Educational Supplement
The Adam Smith Institute's new education report "Incentive to Invest: how education affects economic growth" was featured in The Times Educational Supplement journal.
Increase private education to boost GDP, study says:Sending more children to private schools would add billions to the British economy, according to research released this week. GDP per capita int he UK could have been more than 5,000 higher in 2007 if access to private education had been opened up using taxpayer-funded vouchers, the report claims. This is because greater competition between private schools promotes better quality education, thus improving the economy, it argues. In the UK, 7 per cent of students attend private schools. But the study by right-wing think thank the Adam Smith Institute claims that if between 1960 and 2007 the attendance level had matched that of the Netherlands, where two-thirds of students are independently educated, the UK's annual growth rate would have been nearly 1 percentage point higher.
The report, “Incentive to Invest: How education affects economic growth”, reveals that Britain could add billions of pounds to its long-term economic growth by increasing access to private education.
Read the report here.
Media contact:
emily@adamsmith.org
Media phone: 07584778207
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