Price of independence: Scots warned breaking away from UK may mean 20 per cent cut in income

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The independence debate has picked up again in Scotland in recent months

Crashing out of the Pound Sterling in the wake of an independence vote would cost the average Scottish household 20 per cent of their income, according to new analysis published today. 

The findings set out how the introduction of a new Scottish currency would hike the cost of imports, increase debt costs and lead to higher interest rates. 

Households which currently take home £35,000 a year – the Scottish average – would see their spending power slashed by the equivalent of £7,300, according to the data, published today on ourmoney.scot, a new website founded by leading currency expert Prof Ronnie MacDonald in association with Scottish Business UK (SBUK),

New Scottish currency

Last month the SNP government announced it plans to introduce a new Scottish currency after a series of tests have been met, and would keep using the pound on Day One. 

However, Prof MacDonald – who is professor of macroeconomics at the Adam Smith Business School at Glasgow University – warned today that Scotland would be forced to adopt a new independent currency immediately after independence. 

A new currency worth 20-30 per cent less than the pound would have a drastic impact on household incomes. 

The analysis found that, for an average household, imported goods would cost the equivalent of £4,300 extra. 

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. 

“You’re talking in my view of a devaluation of between 20 per cent to 30 per cent. These are big numbers and they will affect peoples’ wages and they will affect peoples’ mortgages,” Prof MacDonald said.

“The key thing the SNP is not telling people is that financial markets bring events forward.”

Prof MacDonald

“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,” he added.

SBUK’s Founder and Chairman Robert Kilgour added that: “SBUK has been delighted to support Prof MacDonald’s important work because it sheds light on economic plans that carry real risk not just for individual households but for businesses across Scotland.”