Independence ‘would push up finance costs’
MORTGAGES, pensions and insurance are likely to become more expensive for Scots consumers if the country opts to leave the UK, a Treasury report warned.
The paper, published yesterday, also said some UK financial products – such as tax-free ISAs – would no longer be attractive, or even available, to Scots in the event of independence.
Scots consumers would lose out, it argued, as financial service providers faced higher costs tailoring products for a separate and relatively small market. The report said a 1% increase in mortgage rates would add £1590 to the annual cost of the average 90% home loan in Scotland.
Motor insurance, life cover and pensions would also be likely to rise in price, it warned, while free banking could be replaced by quarterly fees and charges for using cash dispensers.
The paper, the third in the UK Government’s Scotland Analysis series, is designed to highlight the benefits of Scotland being part of Britain.
It was launched in Edinburgh by Scottish Secretary Michael Moore and Economic Secretary to the Treasury Sajid Javid.
Mr Moore said: “If you put a border in the middle of the financial services market... it’s wishful thinking to think it’s not going to have any effect.”
He said a separate Scottish system of financial regulation, required under EU law, combined with the loss of economies of scale, would push up costs for providers.
He added: “You don’t have to be a genius to work out that it would be you and me who bear those costs.”
A section of the report trailed over the weekend warned that an independent Scottish Government would find it “difficult and expensive” to match UK schemes to protect savings and pensions. It also said an independent Scotland’s financial services industry would control assets worth 12 times the country’s GDP, leaving it more vulnerable, in the event of a crash, than either Iceland or Cyprus.
It warned: “Where large firms are faced with greater concentration of risk, they may look to diversify or restructure themselves for example so they were no longer headquartered in Scotland. If this were to happen it could undermine Scotland’s current status as an important financial centre.”
The SNP has claimed that a system of financial regulation would be shared by an independent Scotland the UK, keeping the market for products and services largely intact. However, the Treasury said EU rules requiring separate regulation and differences in tax regimes would split the market.
Finance Secretary John Swinney dismissed the report, saying: “When it comes to everyday financial services it is simply irresponsible to scaremonger over people’s savings.”