Why I’m for No in the Scottish referendum

I have written before about how it is a waste of time to offer personal finance classes in schools. There is no point in teaching anyone about different types of mortgage 20 years before they take one out. Better to teach them maths properly so that they have the tools to manage when the time comes.

However, I do wish that basic economics was compulsory in schools. Why? Because I can’t see how anyone can be a rational voter without some grasp of how economies work. This has been brought home to me by the miserably low level of debate about the Scottish referendum.

Very few people seem to know the difference between the pound and the Bank of England. The UK government hasn’t said that Scotland can’t use the pound. Anyone can use the pound. What it has said is that Scotland can’t use the pound and, outside a formal currency union, use the Bank of England as a lender of last resort and to set monetary policy.

This key point appears to have passed many voters by. So have the mechanisms by which interest rates are set; the difference between government deficits and government debts; and the way countries raise money in the international markets.

This means that far too many people will be voting on something hugely important on 18 September without the tools to understand the implications.

Our cover story this week looks at the implications of a Yes vote. It seems to us they aren’t that good. Take the currency.

Right now, Scotland and the rest of the UK (rUK) are in a currency union. On 19 September they still will be. Alex Salmond insists this will still be the case 18 months later and then, following the conclusion of the negotiations, the case for many prosperous years to come.

This is highly unlikely. Depositors are a skittish lot. They have their money in cash rather than the markets, because they value its utility very highly (that surely goes double for those who have kept cash regardless of today’s super-low interest rates).

So, the very idea that there is a risk of a new currency or a system without a respectable lender of last resort will be enough to make them move their money sharpish. Many will have done so already – why take unnecessary risks?

That should break up thoughts of a currency union pretty quickly (as UBS analysts note, every monetary union that broke up in the 20th century was “preceded by major deposit shifts in the banking system”).

Then what? The key point here is that you can make almost anything sound fine in a manifesto (particularly if you rename it a white paper), but the chaotic, antagonistic reality is likely to be very different.

The UK isn’t perfect. Far from it. But Scotland doesn’t have to choose between Scotland and England. With devolution it can have both. Why would it choose what one analyst calls “unfathomable” uncertainty and chaos over that? I suspect if everyone had studied basic economics, it wouldn’t.