Would Wales welcome a Welsh banknote?

Apr 8 2008 by Martin Shipton, Western Mail

THE reintroduction of Welsh banknotes would provide a national morale boost and help kick-start the expansion of a home-grown financial sector, according to a Plaid Cymru parliamentary candidate.

Steffan Lewis, who will be standing in Islwyn at the next general election, says bringing back Welsh notes after a gap of 100 years would provide a further reason for pride after the rugby Grand Slam and Cardiff City’s success in reaching the FA Cup final.

The last Welsh banknotes were withdrawn in 1908 when the North & South Wales Bank was taken over by Midland Bank (now HSBC).

Yet Scotland still has its own notes issued by three separate banks, while in Northern Ireland four banks, including some with headquarters in the Republic of Ireland, put out their own paper currency.

Mr Lewis said: “A strong Welsh economy will rely very much on a flourishing financial sector in Wales. At the moment there is only one independent commercial bank based in Wales {the Julian Hodge Bank}. Meanwhile, in Scotland, Edinburgh is home to Europe’s fourth largest banking sector and many economists predict Scotland may avoid the worst of the current sub-prime market crisis due to its robust financial base.”

On the issue of Welsh banknotes, Mr Lewis argued their reintroduction could be feasible if the future of Northern Irish and Scottish notes are guaranteed following current UK Treasury consultation on the British banking sector.

He said: “The Treasury currently proposes moves that could force Scottish banknotes out of existence. But given the strength of feeling among ordinary Scots, such proposals are unlikely to be realised. This would be a golden opportunity to amend current legislation and allow the issuing of Welsh banknotes.

“A strong economy is built on consumer confidence, including confidence in currency. It would be a matter of great pride for the people of Wales to spend Welsh banknotes and could act as a stimulus for increased economic activity during difficult times. Indeed, as well as being an issue of national pride, having our own banknotes could well lead to broader financial benefits.

“The Scottish economy is more dynamic than ours, largely because Scotland has its own financial sector.

“If Wales had a thriving financial sector of its own, there would be more Welsh money circulating in the economy. That would help to develop our indigenous business sector, something that is desperately needed if we are to spread prosperity across Wales. Issuing Welsh banknotes is not the only answer, but it would greatly increase our national pride and self-confidence.”

Although the National Assembly has no powers over banking matters, Mr Lewis will be giving evidence to Plaid’s Commission on Work, Wealth and Pensions. He will also be informing Deputy First Minister Ieuan Wyn Jones, who is also the Economy Minister, of his proposals.

The Bank Charter Act 1844 prohibited the issuing of new banknotes in England and Wales and further legislated that any bank subject to takeover would lose its note-issuing right. In 1908 the North & South Wales Bank was acquired by Midland Bank, and its banknotes were consequently withdrawn from circulation.

The future of Scottish and Northern Ireland banknotes has been placed in jeopardy by a Treasury consultation that could result in changes to existing financial arrangements.

Under current laws, Clydesdale Bank, Royal Bank of Scotland and Bank of Scotland have to lodge funds with the Bank of England to cover the value of their notes, but only for three days of the week – the other four days they can be invested elsewhere, gaining millions of pounds in interest. However, the new proposals would require funds to be lodged with the Bank of England for the entire week.

Alex Salmond, the Scottish First Minister, has voiced fears over the move, claiming the changes pose the “biggest threat” to Scottish notes in more than 160 years. But Mr Lewis said: “It is inconceivable that the Treasury would engineer the abolition of Scottish banknotes. With an appropriate change in the law, it could be possible for one of the big banks operating in Wales to issue Welsh banknotes.”