Economic Woman

Econometrics, gender, equity and more.

The financial crisis and Scottish money

with 5 comments

I’m visiting with my partner’s family in London and then Edinburgh this month, and last night at dinner I discovered an interesting little currency puzzle.

To understand it, you need some background. It won’t surprise you to hear that Scotland andEngland, both being part of the UK, use the same currency – pounds sterling. But if you haven’t visited Scotland, you might be surprised to see Scottish money. While paper money in England is issued by the Bank of England, in Scotland three large banks issue notes, complete with their logos: the Royal Bank of Scotland, the Bank of Scotland, and Clydesdale Bank.

By my entirely unscientifics survey of the dinner table, it is becoming increasingly difficult to use Scottish bank notes in England. When I last lived in Edinburgh and visited London, in 2006 and 2007, the odd ornery English shopkeeper would refuse to take Scottish money. But now the practice has apparently become so widespread that Scots are in the odd position of having to change their Scottish money into English money before travelling anywhere in England.

It turns out that Scottish bills are not legal tender. No one is compelled by law to accept them. Instead, they are promissory notes, literally a commitment by the issuing bank to pay a debt. Wikipedia gets into the specifics of this, which is confusing – the Bank of England’s notes are legal tender in England only, but not Scotland or Wales, though they are accepted anywhere.

So why is it so difficult to spend Scottish notes? I see three possible explanations:

  1. Irrational anti-Scottish prejudice.
  2. The belief that Scottish bank notes are easier to counterfeit than those issued by the Bank of England. (This is something usually offered as explanation by aforementioned ornery English shopkeepers, but it may or may not be a variation on #1.)
  3. Lack of confidence in the Scottish banks issuing promissory notes.

Any of these are plausible, but the one most likely to have changed since I last lived here is #3 – Scottish banks have been hit hard by the financial crisis. Really, what we may have here is two currencies pegged together but not moving together. At least one hotel in Hong Kong has come to the same conclusion, offering a different exchange rate for Scottish and English notes. Since that practice is preposterous in the UK – Scottish bank notes deposited into a Scottish bank could be withdrawn as English notes at any bank machine in England – the only option is to refuse to accept them.

What I cannot determine, this fine drizzly morning, is what would have happened to all those Scottish notes issued by RBS if that bank had not been bailed out. Commenters?


Written by Allison

15 July 2009 at 3:46 am

5 Responses

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  1. As I recall, it’s always been a bit of a problem getting rid of Scottish notes in England.

    But another factor may be that, in London at least, lots of people working customer service jobs are fairly recent arrivals in the UK. They’ve never heard of Scottish notes, have no way of telling fake notes from real ones, and find the whole concept of different regional notes for the same currency rather bizarre and implausible.


    15 July 2009 at 4:43 am

  2. That is very strange. As for explanations, I vote #1, but I’m not economics-savvy enough to answer your question.

    On a bit of a tangent, are you familiar with the stereotype that Scots are cheap?

    Hilary Barlow

    15 July 2009 at 8:24 am

  3. same thing happens to northern irish bank notes in england. airports in belfast dispense english bank notes and have big signs telling you so. but that has been the same as long as i can remember.
    not sure if northern irish notes are not technically legal tender – in fact i have never heard of this technicality before. as far as i know, the notes do indicate that they are in pounds sterling.


    15 July 2009 at 4:22 pm

  4. Being Scottish and living in London, I find that often I have my Scottish bank notes refused, mainly in smaller, independent shops in the capital. I find this practise infuriating and quite offensive and I put it down to the complete ignorance of the person behind the till. I say the Scots should simply stop accepting English notes.


    22 July 2009 at 7:21 am

  5. #3 with a bit of “It’s probably a hassle to switch the notes” on the side.

    Mike Haddad

    28 July 2009 at 11:01 am

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