IN this and future articles, the Scottish Currency Group outlines how an independent Scottish Government with its own currency-issuing powers and central bank will have policy options not available to the devolved government, which has to use sterling, controlled by the Bank of England.

The article reflects SCG views on the policies which the group believes should be adopted in the future.

Will it be compulsory to use the Scottish Pound?

No, but after Currency Day the Scottish Pound will be the legal currency of Scotland instead of the present pound sterling. This means payments by and taxes due to the Scottish Government will be made in Scottish Pounds and most people will find it convenient to have a bank account in the new currency.

You can keep your savings in sterling, but you will need Scottish currency for day-to-day use in Scotland.

Once the new currency is introduced, sterling notes and coins will rapidly disappear from circulation. That is because when you withdraw cash at an ATM in Scotland, it will dispense Scottish notes.

The banks will also remove sterling notes and coins from any money paid in, for example by shops, and will send it to the Scottish Central Bank. Shops, pubs, supermarkets etc will charge in the new currency, but they will also accept sterling for a transitional period.

Can I keep my sterling account(s) and have new Scottish Pound accounts?

Yes. If you travel to the rUK or place orders with rUK shops often, then it would be quite sensible to keep your existing sterling account and debit card. That will save you foreign exchange fees in the future.

Will I still be able to use my existing debit card/credit card/iPhone when I’m in England?

Yes. You will also be able to use any sterling cards in Scotland and elsewhere around the world just as you do now. Your bank will charge you a foreign exchange fee whenever you use a sterling card outside rUK, just as they do now when you are abroad.

Will my new Scottish Pound account and cards be the same as my existing ones?

No. Your existing sterling account has a UK sort code, contains sterling and is ultimately under the control of the Bank of England. That can’t be changed so you will need a completely new account with a new Scottish sort code that can contain Scottish Pounds, and which is ultimately under the control of the Scottish Central Bank.

Can I just carry-on using sterling for all my purchases?

Yes, but after an initial exchange period this will start to cost you foreign exchange fees – the same as when you presently use sterling in Spain or other foreign countries.

The exchange period is the first couple of months when the Scottish Central Bank will keep the two currencies fixed at one to one and with no charges for changing between them.

After that the Scottish Pound will start to float on the currency market and the banks will charge a foreign currency fee on sterling transactions. Shops may decide to stop accepting sterling bank notes and coins.

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The transition to floating will involve slowly widening the bands within which the S£ is permitted to move, so that the transition is controlled, and the Central Bank can ensure it is without any sudden or large movements.

It may take a year or more for the managed bands to be fully released.

Isn’t this all very difficult for businesses that buy or sell in the rUK?

Not really. Most businesses will probably keep their sterling accounts, credit card machines and the like and use those when buying or selling in rUK.

They will use their new Scottish accounts and credit card machines for their dealings within Scotland. Some card terminals can work in multiple currencies already.

I’m a businessman who has English customers. Will I need two card readers and two sets of bank accounts?

Your bank will facilitate whatever you choose for your business. You can either operate in S£ and convert any sterling payments into S£ immediately, or you can also keep a sterling bank account and run S£ and sterling accounts in parallel and occasionally move funds between them.

What happens if you are abroad or in the rUK in future?

You do not need to change your existing bank account or any other financial items to Scottish Pounds if you do not wish to do so.

At present, when you are abroad and use your current bank card to withdraw euros at an ATM the banking system does the work and the machine pays you in euros, while charging your account in GB£.

After the S£ comes into use, if you are abroad then using either an S£ card or a sterling card will work the same way, and both will be charged a foreign exchange fee. If you use a sterling card in rUK there will be no fee, and likewise if you use an S£ card in Scotland. Using a sterling card in Scotland will be charged a fee.